• Monetary Metals
    01/28/2015 - 00:28
    It’s terrifying how fast the whole Swiss yield curve sank under the waterline of zero. Now even the 15-year bond has negative interest. The franc has reached the end.

Auto Sales

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Consumer Prices Soar By Most Since June 2009, Retail Sales Ex-Autos And Gas Expose Lethargic Consumer





Following yesterday's producer price shock, when PPI soared by the most since June 2009, today's CPI follows suit, with the largest jump in over 2 years, printing up 0.6%, in line with expectations, up from an unchanged print in July. In other words, the food inflation which is already spreading through the economy courtesy of the record drought, is about to be supported by some brand new Fed-generated inflation. Luckily, as yesterday, nobody uses gas or food. And in other news, retail sales posted yet another very disappointing print, when despite a better than expected headline print of 0.9% in August advance retail sales, a number which included gas and auto sales, retail sales excluding these very volatile components, rose by only 0.1%, on expectations of a 0.4% rise, and a downward revision from 0.9% to 0.8%. This was the 5th miss in 6 months, and ugly all around. In other words, the US consumer, revised consumer credit data notwithstanding, is levering up and not generating any real new sales. Expect yet another round of GDP revisions. However, in light of yesterday's Bernanke announcement, it is pretty obvious that no macro economic data for public consumption does the disaster that is the economy in the Fed's eyes, justice, and makes us wonder just how ugly the underlying reality must be. All that said: with inflation spiking, and consumers lethargic, it certainly appears that Bernanke picked the perfect time for more monetary paper dilution.

 
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Goldman On The Fed: Perception Over Substance





Perhaps never a more truthful 'lifting-the-veil' paragraph has been written by the squid as the following discussion of just what NEW QE will consist of and what it will achieve; sad that our economy market has come to this.

"The form of any return to QE is less clear. The issue is not so much whether the Fed buys Treasuries or agency mortgage-backed securities; we are pretty sure that any new program would be primarily focused on agency MBS purchases. These should have a somewhat bigger per-dollar effect on private-sector demand and are probably less controversial with the public than Treasury purchases. They can be framed as help for homebuyers to achieve the American Dream, which sounds better than help for the government to run large budget deficits."

 
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Subprime Auto Nation





Have you heard the news? Auto sales are booming. Total sales for the month of August were 1,285,202 vehicles, according to Autodata Corp, the highest monthly sales figure for any August since 2007, when 1.47 million autos were sold in the United States. Year to date auto sales have totaled 9.7 million and are on track to reach 14.5 million. Between 2006 and 2007, auto sales ranged between 16 million and 18 million. They crashed below 10 million in 2009. The Keynesians running our government have pulled out all the stops to restart this engine of consumer spending. First they wasted $3 billion of taxpayer funds on the Cash for Clunkers debacle. Almost 700,000 perfectly good cars were destroyed in order to keep union workers happy.  This Keynesian brain fart distorted the used car market for two years, raising prices for cars needed by the working poor. After that miserable failure, they realized the true secret to selling vehicles is to give them away to anyone that can scratch an X on a loan document, with 0% interest for 60 months, financed by Federal government controlled banking interests. Add in some massive channel stuffing and presto!!! – You’ve got an auto sales boom.... This is America, land of the delusional and home of the vain. The appearance of success is more important than actual success.

 
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Here Come The Praises For The "Stronger Than Expected" Retail Sales From Bank of America And Goldman





Instead of actually doing the work to figure out what is going on behind the headlines, both Goldman (which also hiked its Q3 forecast GDP to 2.3% as a result) and Bank of America rushed to come to market with their congratulatory notes praising the "far stronger than expected" retail sales number. And as a result clients of these two banks will be promptly skewered as happens now virtually all the time on belief that the "rebound" in the economy is real instead of an ARIMA driven seasonal adjustment abortion.

 
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Frontrunning: August 2





  • What's wrong with this headline: Obama authorizes secret support for Syrian rebels (Reuters)
  • Hilsenrath promptly dusts off ashes of sheer propaganda failure, tries again: Fed Gives Stronger Signals of Action (WSJ)
  • Fed Hints at Fresh Action on Economy (FT)
  • Fed Poised to Step Up Stimulus Unless Economy Strengthens (Bloomberg)
  • IMF Chief Lagarde Praises Greece, Spain for Efforts (Bloomberg) - efforts to beg as loud as possible?
  • US sanctions against bank 'target' China (China Daily)
  • Trimming China's Financial Hedges (WSJ)
  • ganda central bank cuts key lending rate to 17 pct (Reuters)
  • Greece Agrees €11.5bn Spending Cuts (FT) - Agrees? Or does what a good debt slave is told to do
  • Germany Retains Stable AAA Outlook at S&P After Moody’s Cut (Bloomberg)
  • Spain’s Bond Auction Beats Target as Borrowing Costs Rise (Bloomberg)
 
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Frontrunning: July 31





  • Hilsenrath: Heat Rises on Central Banks (WSJ)
  • Some at Fed Are Urging Pre-Emptive Stimulus (NYT)
  • Obama Warns of Headwinds in Europe; Urges European Leaders to Take Decisive Action on Euro (WSJ) - also needs reelection
  • ECB thinks the unthinkable, action likely weeks away (Reuters)
  • Games Turn London Into ‘Ghost Town.’ (FT)
  • Greek Leaders Seek to Defer Austerity Cuts (FT)
  • Hong Kong Builders Unload Properties to Raise Cash for Land Rush (Bloomberg)
  • North India Crippled by Power Cuts (FT)
  • Euro-Area Unemployment Rate Reaches Record 11.2% on Crisis (Bloomberg)
  • Italy's Monti sees hope of end to euro crisis (Reuters)
 
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Mapping The Real Chinese Economy From The Bottom-Up





Our earlier discussion of the rapid slowdown in Asia trade volumes and the anecdotal evidence of growthiness issues across many industries brings up the seemingly dichotomous relationship between top-down 'data' such as GDP or PMI and bottom-up sector-level activity. As BofAML points out, there has been a significant improvement in data collection in this activity data which enables 'outsiders' to cross-check macro data and potentially obtain leading information. As markets have become skeptical of China's macro data, so the effort to search for alternative measures such as power output, container throughput, and rail transport seems worthwhile. Though not perfect by any means, the higher frequency data mapping flowchart below and a comprehension of the upstream vs downstream activity flows seems to go a long way towards building a credible view on the real state of the Chinese economy - for better or for worse.

 
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Guest Post: Consumers Flash Warning Signal





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While bad news may be good news for the market hoping that it will spur more stimulative measures from the Fed to boost asset prices - for Main Street America bad news is just bad news.  More importantly, the decline in consumer confidence continues to perpetuate the virtual economic spiral.  As the consumer retrenches the decline in aggregate end demand puts businesses on the defensive who in turn reduces employment.  The reduction in employment, and further stagnation of wages, puts the consumer further onto the defensive leading to more declines in demand.  It is a difficult cycle to break.

 
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From Q2 Macro Weakness To H2 Earnings Slump





June macro data is giving a 'cleaner' picture of the economic state of our great nation. With seasonal affectations (unusually warm weather and the rebound in auto production) out of the way, June macro data has very much surprised consensus to the downside as BofAML's economics team notes that 14 of the last 20 June indicators has come in below expectations. Over the next several weeks we will get more 'hard' data for June. The most important will be retail sales, industrial production and the durable goods orders report. Retail sales look likely to disappoint as weak chain store sales offset the modest tick higher in auto sales. And given the collapse in the ISM, we expect manufacturing production and durable goods orders to be soft. This data will determine if the FOMC has enough ammo to ease aggressively on August 1st (or wait til September 13th) which we expect to only be an extension of forward rate guidance to mid-2015 from late-2014 (and not the panacea of NEW QE). BofAML remains more concerned with the consensus outlook for H2 - particularly Q4 (with 14% YoY EPS growth expected despite just a 1% GDP growth rate) - as the recession in Europe and high level of uncertainty ahead of the US fiscal cliff will likely lead to slowing growth in H2. And for those hanging their hats on the housing recovery, it will not be enough to save the rest of the economy - Housing construction is now only 2.3% of GDP compared to more than 6% prior to the crisis. This means we need a decisive turn to significantly matter for GDP growth. In addition, we believe it would take a sustained period of price increases to reverse the negative wealth and confidence effects of the housing collapse. Households remain skeptical about the home as a store of wealth or an investment.

 
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Weekly Bull/Bear Recap





Your one stop summary of all the notable bullish and bearish events in the past week.

 
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Frontrunning: June 25





  • Merkel Backs Debt Sharing in Germany Amid Closer EU Push (Bloomberg)
  • With a ruling as early as today, here are four health care questions the Supreme Court is asking (CBS)
  • George Soros - Germany’s Reticence to Agree Threatens European Stability (FT)
  • China Stocks Drop to Five-Month Low (Bloomberg)
  • The New Republic of Porn (Bloomberg)
  • That's a costly detached retina: Greek Lenders Postpone Mission to Athens (FT)
  • Spain Asks for Aid as EU Fights Debt Crisis (FT)
  • Wolfgang Münchau - Why Mario Monti Needs to Speak Truth to Power (FT)
  • U.S. Banks Aren’t Nearly Ready for Coming European Crisis (Bloomberg)
  • MPC Member Wants £50bn Easing (FT)
  • India Boosts Foreign Debt Ceiling by $5 Billion to Defend Rupee (Bloomberg)
 
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Overnight Sentiment: Bath Salty





Just about an hour before the US non-farm payroll number is expected to print, and finally resolve the lingering question whether the Chairman will print in 3 weeks, things in Europe have gone from horrible to zombie.  A series of horrendous economic reports out of Europe including record Eurozone unemployment, a confirmation of the final European PMI plunge including the second largest monthly decline on record in UK manufacturing, and various soundbites from Syriza's Tsipras, have pushed the EUR to fresh two year lows, Spanish CDS to new all time wides German 2 Year bonds joining Switzerland in negative terriroty, and finally, Bloomberg, as noted earlier, to be "testing" a placeholder for a post-Euro Drachma.  As BBG summarizes: "European markets fall, led by consumer & tech stocks with the German market underperforming. The euro falls against the dollar and German 2-yr yields drop into negative territory. Chinese manufacturing PMI data below expectations, though above the 50 level; European manufacturing PMI in line with expectations, below 50. Euro-zone unemployment met expectations and seems likely Irish voters endorsed the EU fiscal treaty. Commodities fall, led by oil & natural gas. U.S. nonfarm payrolls, unemployment data due later." In summary - all data today fits with Raoul Pal's less than optimistic presentation from yesterday.

 
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