Financial systems that seem robust are more often than not inherently fragile - China is no exception!
A running theme here has been the great rotation of bubble-blowing credit from subprime housing to subprime auto-loans. Amid government probes of underwriting standards and soaring delinquencies, it appears when the least-creditworthy Americans are cut off from debt servitude, bad things happen in car sales... FORD FEB. U.S. LIGHT-VEHICLE SALES FALL 2.0%, EST. UP 5.8% (miss!). Worst Still - US Domestic Vehicle Sales Worst Start To The Year Since 2010. Of course, the real blame - as we will be told - is the weather... It seems Obama's new American Dream of a brand new Ford or GM (or Maserati) in every driveway may be another broken promise.
With little newsflow out of Europe, and just as little on deck out of the US (just NY ISM and auto sales later today), the main overnight events were out of Asia where first the RBA decided to leave rates unchanged but not before the announcement was leaked up to a minute early. In China, the rate-cut euphoria lasted just one day, and after a feeble 0.8% bounce on Monday, the SHCOMP was down 2.2% this morning over fears the PBOC is doing too little, too late to halt what is now perceived by many as a massive "tightening" capital flight out of China. Finally, Japan made the newsflow, after it JGBs continued to slide following a weak auction, fears that the BOJ is done easing after Abe advisor Etsuro Honda warned against overheating, and after the biggest jump in base pay in over a decade led some to think the BOJ may soon have to halt easing altogether, especially if real wages proceed to rise
Under normal circumstances, after 2008's conflagration of the calamitous collateralizations, we shouldn’t have seen such irrational, reckless, greedy behavior from Wall Street for another generation. But, Wall Street didn’t have to accept the consequences of their actions. They were bailed out and further enriched by their puppets at the Federal Reserve, the lackey politicians they installed in Washington D.C., and on the backs of honest, hard-working, tax paying Americans. The lesson they learned was they could continue to take excessive, reckless, unregulated risks without concern for losses, downside, or consequences.
The "conundrum" between lower gasoline prices and retail sales is not really one at all. Furthermore, the real story behind the weakness in retail sales also suggest that something is "amiss" within the broader economic backdrop. When combined with the deterioration in earnings, the risk of a "gotcha" moment in the market has risen markedly.
Market Wrap: Equity Futures Subdued On Oil, Energy Profit Taking Following Latest Crude Inventory SurgeSubmitted by Tyler Durden on 02/04/2015 07:54 -0400
Following the torrid surge in crude in the past 4 days, overnight oil price have taken a step back - if only until the "newer normal" 2:30pm ramp into the Nymex close - with both Brent and WTI down nearly 3%, with yesterday's latest API inventory data showing another massive crude build when it was released after the close, which in turn is pressuing futures modestly if decidedly, and not even the surprise PBOC RRR-cut (which many had seen as likely if only in advance of the liquidity sapping Chinese New Year) which hit the tape an hour ago managed to push ES into the green, at least for now. Curiously, not even the now standard low volume levitation in the USDJPY in recent trading has had any impact on US futures, which appear to have found a new correlation regime for the time being, one which tracks what oil does more than any other asset class.
All day mainstream media has been crowing about Auto sales being mind-blowing... record-breaking... colossal... so we have a simple question... when Ward's released its US Domestic Auto Sales (SAAR) data this afternoon... why did it miss expectations and show a 2nd monthly drop in a row? January printed 13.31 million cars SAAR, missing expectations of 13.5 million and dropping from December's 13.46 million SAAR. Paging Phil LeBeau?
The rally that was sparked by yesterday's late-day FT report had all but fizzled overnight, replaced by more concerns about the state of the global economy when Austrialia's central bank surprised the world (just 9 of 29 analysts had expected this move) by becoming the 15th in a row to ease in 2015 (the list: Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and now Australia), cutting the cash rate to an all-time low of 2.25%, and sparking more concerns about a global currency war or rather USD war against every other currency, when the USDJPY algos woke up again, and did everything they could to re-defend the critical 117.20 level in the USDJPY which has proven critical in supporting the market in recent weeks, once again using the Greek "softening tone" story as the basis for the ramp as Europe woke up, which in turn sent the DAX promptly to new all time highs, while the Athens stock market surged by 9% at last check.
A straight forward discussion of the factors driving the US dollar.
Extended-term loans are "stupid not just for us, but for the industry," exclaimed Honda's US sales chief John Mendel, adding that competitors are doing "stupid thing" to boost auto sales. With delinquency rates surging, it appears he is right to worry, as Bloomberg reports, more than one in four new-car loans in October and November had terms of 73 to 84 months long (more than double that of the previous 08 peak). Honda has said it will avoid longer-term loans even if competitors do note as one economist ranted, "we've seen this movie before, we know how it ends, and it’s not pretty."
There is overwhelming evidence that the rampant money printing of the past decade or two has done nothing to generate sustainable growth in mainstream living standards and real wealth. Yet the monkeys keep rattling the cage, promising and demanding more ZIRP(and now N-ZIRP) and more fraudulent purchase of government debt with fiat credit congered by their printing presses. Consider some striking proof of failure...
Assume the news for next week has not already been written, What should investors, or those monitoring the international political economy be watching? Here is my list.
The investment climate is being shaped by four forces:
1. De-synchronized business cycle with the US ahead of the pack
2. The prospects of sovereign bond purchases by the ECB, amid political uncertainty sparked by Geece's snap election
3. The continued drop in energy prices is a stimuluative writ large but poses challenges for oil producers and the leveraged eco-system that has been built on the premise of high oil prices forever.
Today we update where China stands on its path to a very hard landing. As the charts below show, what has been so far a controlled descent is rapidly sliding out of control.
Sometimes I wish I could just passively accept what my government monarchs and their mainstream media mouthpieces feed me on a daily basis. Why do I have to question everything I’m told? Life would be much simpler and I could concentrate on more important things like the size of Kim Kardashian’s ass... The willfully ignorant masses, dumbed down by government education, lured into obesity by corporate toxic packaged sludge disguised as food products, manipulated, controlled and molded by an unseen governing class of rich men, and kept docile through never ending corporate media propaganda, are nothing but pawns to the arrogant sociopathic pricks pulling the wires in this corporate fascist empire of debt.