While the Achilles heel to the endless "economic data" BS coming out of China may be its electric production and demand, both of which show a vastly different picture than what the Beijing politburo's very wide brush strokes paint, the US itself is not immune from indicators that confirm that anything the BEA dishes out should be taken with a grain of salt. One data set that we showed recently that paints a drastically different (read slowing) picture of the US economy which we noted recently is railcar loading of waste and scrap for the simple reason that "The more we demand, the more waste is generated by that production." Of course, the propaganda manipulation machinery only focuses on the "entrance" of production, and completely ignore the "exit." But an even far more important metric of the general health of the US economy may be none other than broad energy demand, in the form of petroleum deliveries and gasoline demand. If this is indeed the relevant metric to observe, then things are about to get far, far worse. As Dow Jones notes: "U.S. petroleum deliveries, a measure of demand, fell by 2.7% in July from a year earlier to the lowest level in any month since September 2008, the American Petroleum Institute, an industry group, said Friday." It gets worse: "Demand in the world's biggest oil consumer, at 18.062 million barrels a day, was the weakest for the month of July since 1995, the API said. Year-to-date demand is down 2.3% from the same period in 2011."
QE-on or QE-off; Growth or No-Growth; Cleanest 'Dirty' Shirt or Un-Decoupling; none of that matters. There are divergences everywhere - intraday and long-term - but none of that matters. What matters is hope, faith, and a little Central Bank charity. That is, of course, until someone drops the bowl of global Kool-Aid (Merkel 'nein'; Bernanke 'no'; Xiaochaun 'bu') or markets believe they want Romney/Ryan. With the equity markets in general making new 2012 highs today (as we noted earlier), on a day with better-than-recent volumes and heavy average trade-size at the highs, we can do nothing but stand back and admire the year-to-date performance of bonds, stocks, commodities, and verbal diarrhea.
There was a time when retail stock outflows were considered a bullish catalyst: after all, retail was always considered the dumb money (not "two and twenty" hedge funds which continue to underperform the stock market, and have done so for the past five years), and would pull money at the bottom and add money at the top. This is no longer the case for the simple reason that while persistent outflows from domestic equity funds continue (and as the recent shuttering of levered ETFs by Direxion shows the infatuation with synthetic mutual fund replacements is now over), for the inverse to be true there have to be inflows, which are now non-existent. In the past two years, or 106 weeks of market data, there here been 17 weeks of inflows, or 16% of the total, amounting to $31 billion. The remainder? Outflows for a total of $300 billion. In the 32 weeks of YTD 2012 money flows, there have been 5 weeks of inflows for a total of $3.6 billion (which was also equal to the outflow in the last week alone) none of which coincided with market tops, and in fact the biggest outflows occurred just as the market hit interim highs. The most recent inflow, as tiny as it may have been, curious occurred during the May lows, proving retail is if anything, the smart money now. In other words, those looking for hints about the market based on retail flows are advised to look elsewhere. What this data does show is that no matter what happens in the stock market, the outflows will persist and are unlikely to reverse direction. Because if the S&P at fresh 2012 (and multi-year) highs is unable to draw retail out of hibernation, nothing will. Where is the money flowing? Why into fixed income of course, proving that as far as the now extinct investor class is concerned, return of capital is the only thing that matters, while HFTs and prop trading desks can fight over all the return on capital scraps provided courtesy of the Chairman. Curious where the volume has gone? Now you know.
One of the reasons that Europe is so difficult to assess is the tremendous amount of jargon and hype that comes pouring out from all across the Continent. Each separate nation sends out stuff and then Brussels sends out their fluff and then the ECB makes proclamations and there is no harmonization as each group has its own distinct platform. We are bombarded daily with national interests, Federal interests and finally an ECB that supposedly is beholden to no one but is, in fact, beholden to everyone and especially Germany as the paymaster. Almost every day there is a new bandwagon to jump on and a new disappointment to be found some days later as one plan after another does not come to fruition. So to make sense of it all you have to stop, come to a full halt and give due consideration to the totality of what is happening in Europe.
Up until now we were a lone voice in the wilderness, with our "dry-humored" Transatlantic colleagues, working for a newspaper funded with Goldman Sachs advertisements, periodically mocking our "misunderstanding" of credit and money creation. We are now delighted that none other than one of the foremost opinions on all topics "shadow" stood up this week, and admitted that indeed, it is Zero Hedge whose view on money creation is the correct one. Behold several absolutely critical observations by Citi's Matt King. The same Matt King who a week before the collapse of Lehman wrote "Are The Brokers Broken" and explained to all those who had heretofore been reading and basing their understanding of finance on the above-mentioned Transatlantic newspaper, why everything they know about the modern financial system is wrong. Lehman filed for bankruptcy 12 days later. Unless and until this $3.8 trillion 'shadow banking' hole is plugged, one thing is certain: risk is not going anywhere.
For once the squid is actually 100% correct, with or without the usual dose of dodecatuple reverse psychology.
Metaboring: it’s getting boring to make the comment that equities are again boring. Or maybe that’s called boring-squared. Here’s to hoping tomorrow is boring-cubed. To reinforce the point that nothing much is moving, our US portfolio strategy team has 20 ‘thematic baskets’ (that I can see on BBG anyways), and not a single one moved more than 1% today. None of the 8 ‘macro baskets’ moved more than 50bps.
And there you have it. What is unsaid is that unless vol, and volume, pick up as we cross the half way mark of Q3, bank earnings for the quarter ended September 30 are going to be absolutely horrific. So get ready: the Goldmans of the world want to inject some major vol (and volume) into the market. And what Goldman wants, Goldman gets.
Dedicated to Charles Hugh Smith, Cog Dis, Banzai and All of the Other ZH Writers Fighting to Make the World a Tad Wiser ...
"Personally, I look at the Americans and I see a people who have been very effectively brainwashed, or who simply have given in to the entirely human tendency to shuffle unquestioningly onto the path of least resistance and let themselves go. I see a people who, on a wholesale basis, have consciously or unconsciously decided to trade the idea of America for the false security of a totalitarian state."
And the hard reality is that the vast majority would raise their hands in favor of the current system that has the state deeply involved in pretty much every aspect of the economy and society at large. The level of support for the very same tangled body of state-controlled handouts, regulations and central economic planning now choking the last gasps of life out of the body politic is obvious and overwhelming. The champions of liberty are fighting against a very entrenched and increasingly dangerous public mindset. Today the enemy (of true freedom) is within. In fact, the nation is overrun by them... they dominate in most every community, in most businesses and even in most families.
Fisker, whose Karma superburningcar made headlines two days ago for being the latest addition to America's New Spontaneously Combusting Green Normal, has decided to double down on that elusive spark, and has released the incendiary news that it has hired as CEO none other than head of that other hot selling eco-car, the Chevy Volt. From Reuters: "Fisker Automotive named the former head of General Motors Co's (GM.N) Chevrolet Volt program as chief executive on Tuesday, marking the second time the troubled, government-funded start-up has replaced its top executive this year. Tony Posawatz, who oversaw the development of the Chevy Volt plug-in hybrid for six years before he left GM this summer, will replace outgoing CEO Tom LaSorda. "I've been recruiting him for quite a while and certainly had some people assist me in giving him the full story," LaSorda said during a conference call with reporters. "He's come in with eyes wide open."" Hopefully he's also come in with a fire extinguisher.
As Industrial Production falls -0.6% in Europe and as the economy shrinks -0.2% there is once again a good reason to pause to consider the ramifications for this going forward. When you sit back and take a hard look at the last two years you begin to learn a few things. If you just stick to the actual data and forget the rhetoric that surrounds it the picture becomes clearer. Each and every projection for Greece, Spain and Italy that has been forecast by the EU and the IMF has been wrong; dead wrong. Europe is getting worse and not better. Whether you turn your attention to Greece, Spain, Italy, Portugal or even Ireland; it is getting worse. Nowhere on the Continent are things improving and even in France and Germany the financial strains are beginning to show. It is not a question of Euro-bear or Euro-bull; it is just the numbers as they come rolling out month after month. It is the banks, it is the sovereigns and grand visions must, in the end, give way to the facts.
Conjuring images of Jack Nicholson in 'A Few Good Men', Alan Simpson laid out the sad and terrible truth that none of us or our politicians can handle in a very direct and sincere interview with Bloomberg TV's Deirdre Bolton. "Medicare costs stand to squeeze out the rest of domestic government spending," Simpson said, "it is on automatic pilot. It will use up every resource in the government." Simpson also said that the current path of debt, deficit and interest is “totally unsustainable” confirming once again the facade that his 18 years in Washington proved to him that he "never saw any projection of any economist ever come true." From Paul Ryan's plan to the 'simple math' of CBO budget projections, and whether older Americans should be afraid, Simpson pulls no punches as he sums up American society thus: "we don't care about our money, all we want is more money for our money."
Last week was a scratch in terms of events, if not in terms of multiple expansion, as 2012 forward EPS continued contraction even as the market continued rising and is on the verge of taking out 2012 highs - surely an immediate catalyst for the New QE it is pricing in. This week promises to be just as boring with few events on the global docket as Europe continues to bask in mid-August vacation, and prepare for the September event crunch. Via DB, In Europe, apart from GDP tomorrow we will also get inflation data from the UK, Spain and France as well as the German ZEW survey. Greece will also auction EU3.125bn in 12-week T-bills to help repay a EU3.2bn bond due 20 August held by the ECB. Elsewhere will get Spanish trade balance and euroland inflation data on Thursday, German PPI and the Euroland trade balance on Friday. In the US we will get PPI, retail sales and business inventories tomorrow. On Wednesday we get US CPI, industrial production, NY Fed manufacturing, and the NAHB housing index. Building permits/Housing starts and Philly Fed survey are the highlights for Thursday before the preliminary UofM consumer sentiment survey on Friday.
The debt levels of advanced economies remains unsustainably high - bringing with it the considerable risk of renewed crisis - and while strong growth is the best way to deleverage, this solution appears out of reach for most (if not all) economies. Financial repression, austerity, inflation, or default are the remaining options - all of which come with considerable costs to economic growth and employment. While 'muddling-through' appears to be heralded as a positive by many market-savants currently, SocGen notes that the line between a virtuous (expansionary fiscal contraction) and vicious austerity trap comes down largely to policy confidence. Most (if not all) advanced economy politicians entirely lack the public's or market's confidence in credible policy direction (and in fact we are seeing policy uncertainty at extremes) which leads to SocGen's conclusion that the muddle-through strategy (which comes with a high price tag economically and socially) is too high a burden politically and will inevitably lead to spillover to core-Europe and the global financial system.
Several months ago it seemed that not a day could pass without someone, somewhere making fun of GM's biggest post-bankruptcy flaming failure to date: the Chevy Volt (gross and net of channel stuffing). Of course, since it was all in the name of ecological progress and carbon footprint reduction, most media observers let it go as merely one of the peculiar hurdles on the way to an utopian future in which America would no longer rely on crude imports from evil petroleum cartels. The time has come to redirect ridicule to that other $102,00+ MSRP object of electric aspiration, and henceforth - mockery: the Fisker Karma supercar.
Mitt Romney is set to announce his choice for running mate tomorrow morning according to Bloomberg news. The wires are alive with multiple sources confirming it will be none other than Paul 'budget-bill' Ryan - which appears to be a more aggressive choice than the safer options as Rubio, Portman, and Pawlenty are all bridesmaids and not the bride. Ryan-ney? Rom-an? R-Squared? Ro-Ry?