All Eyes On The Fed: Key Events In The Coming Central Bank-Dominated Week

Last week it was all about the ECB, which disappointed on hopes of further rate cuts (leading to the Thursday selloff) but delivered on the delayed realization that the ECB is now greenlighting a tsunami in buybacks (leading to the Friday market surge). This week it is once again all about central banks, only this time instead of stimulus, the risk is to the downside, with the BOJ expected to do nothing at all after the January NIRP fiasco, while the “data dependent” Fed will – if anything – hint at further hawkishness now that the S&P is back over 2,000.
Here are the key upcoming events, summarized by DB’s Jim Reid:
It’s a quiet start to the week today with the only data of note the Euro area industrial production print for January where following the regional readings we saw last week, expectations are for a robust rise. Tuesday kicks off in Japan where we’ll get the important BoJ meeting first thing (no change expected), with Kuroda due to speak after. The European session consists of the final February CPI print for France along with Q4 employment data for the Euro area. The US calendar finally kicks into gear tomorrow after a bit of a lull of late, with February retail sales (expected to be -0.1% mom at the headline, 0.2% mom at the core), February PPI (-0.1% mom headline decline expected), empire manufacturing, NAHB housing market index and January business inventories data all out.

This post was published at Zero Hedge on 03/14/2016.

“It’s The Q2 2015 Rally All Over Again” – Morgan Stanley Warns Big Oil Drop Imminent Due To “Rampant Hedging”

One week ago, the market was disappointed when Goldman’s head commodity strategist, Jeffrey Currie pointed out the obvious, namely that the higher the price of oil rises, the greater the probability it will tumble shortly, as a result of recently shut off production going back online. To wit:
Last year commodity prices were driven lower by deflation, divergence and deleveraging which were reinforcing through a negative feedback loop. Deflationary pressures from excess commodity supply reinforced divergence in US growth and a stronger US dollar which in turn exacerbated EM funding costs and the need for EMs to de-lever though lower investment and hence commodity demand. While we believe that these dynamics likely ran their course last year resulting in signs of rebalancing, the force of their reversal has created a new trend in market positioning that could run further. However, the longer they run, the more destabilizing they become to the nascent rebalancing they are trying to price. This follows our extended discussion of record storage not only in Cushing but PADD2 in general, as well as PADD3 and now, PADD1: it is now only a matter of time before US storage is “operationally full” and no more oil can be accepted for storage leading to a dramatic plunge in its price.
Then over the weekend, we showed why according to Credit Suisse, among the many skeptics of this furious oil short squeeze rally, the most notable sellers into strength were the entities that know the oil market better than anyone: producers themselves, who are rapidly selling the long-end to hedge prices around $40/barrel.

This post was published at Zero Hedge on 03/14/2016.

Physical Gold Demand Strong In Emerging Markets and Limited Supply Leading To Higher Gold

Consumers are lapping up gold at a time supply is declining, helping underpin a rally in the precious metal.
Demand from emerging markets in particular is strong as currencies such as the Indonesian rupiah, the Malaysian ringgit and the Vietnamese dong has fallen sharply in the last 12 to 18 months against the U. S. dollar, prompting consumers in these markets to buy physical gold, which is seen as a haven in times of tumult according to CNBC.

This post was published at Gold Core on March 14, 2016.

Assets and Liabilities…

We live in a world where the difference between assets and liabilities has been blurred. In the old days, an asset was something you “owned” while a liability was something you “owed”. Over the years as everything became securitized, someone else’s liability is now routinely someone’s asset but ONLY thought of as an asset. It has always been this way but in the past what used to be seen as “someone’s liability” is now ONLY seen as “someone’s asset”.
In an article peened by Doug Short last week we can see how far this anomaly has gone. Looking at the asset side of federal government “total financial assets” we can see how crazy this concept has become. THE LARGEST financial asset held by the federal government is “student loans” making up 45% of the pie. I am sure you see the problem with this but I think it needs to be spelled out because it is the core of how far down the rabbit hole we have gone!
I would ask, how is this an asset? We are talking about a $1 trillion yoke around the necks of our youth. Can this generation pay it off? College kids are getting out of school (with or without a degree) and entering a labor market where jobs are simply not available. I would contend this student loan bubble is no “asset” at all, it is a liability to those who owe it and a liability to the government at the same time. It will be seen as a liability to the government when they are forced to “foreclose”. Written into law now is the fact that this debt cannot be discharged in bankruptcy. The only way this can be seen as an asset is the “control” it will afford over the future lives of an entire generation!
Stocks (equities) have always been seen as an asset. It turns out now however that the ONLYbuyer of significance recently have been the corporations themselves. Corporate America has gone on a borrowing binge, ruined their balance sheets (again) and used this debt to purchase their own shares. This has been the “support”. Once this process slows (or stops), will corporations be able to pay this debt back by selling their shares? We already know GAAP earnings per share are shrinking even with less float outstanding combined with bloated balance sheets, will these truly be seen an asset in a bear market?

This post was published at GoldSeek on 14 March 2016.

Caught On Tape: “Enormous Crowds” Of Unemployed Chinese Miners Take To The Streets, Clash With Riot Police

In early November, we said that far from the traditional risk factors affecting China’s economy, including the slowing economy, the stock market (and now housing 2.0) bubble, the soaring NPLs, and record debt, the most under-reported risk facing China is the “breakdown in recent “agreeable” labor conditions, wage cuts and rising unemployment, leading to labor strikes and in some cases, violence.”
Some recent articles probing the severity of China’s collapsing labor market were the following:
The “Hard-Landing” Has Arrived: Chinese Coal Company Fires 100,000 Thousands Of Angry Unpaid Chinese Workers Protest Shocking Bankruptcy Of Major Telecom Supplier. 600 Hungry, Angry Chinese Workers “Sleep On The Street” After CEO Disappears With Their Wages A clear indication of this was the exponential rise in labor strikes on the mainland as tracked by the China Labor Bulletin:

While so far most Chinese worker strikes had been largely peaceful, two weeks ago we said it was only a matter of time before these turned violent after Reuters reported that “China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution.”

This post was published at Zero Hedge on 03/14/2016.

From “Ugly-Stepchild” To “Beauty Queen” – Gold ETF Holdings Surge To 18-Month Highs

Despite Goldman Sachs “short gold” recommendation – which came within pennies of being stopped out last week – traders, investors, and safe-haven seekers continue to push into the precious metals. Gold has “seen some exceptional flows after quite a few years of being the ugly redheaded stepchild, but it’s not moved into sort of beauty-queen territory,” notes one commodity strategist as hedge fund net-long positionsare the highest since Feb 2015 and gold holdings in ETPs has soared to 18 month highs (amid the longest stretch of gains since 2012) squeezing the likes of Blackrock (in search of physical gold to meet ETF demand).

This post was published at Zero Hedge on 03/14/2016.

Disgusted With Government

Ever wonder why citizens are disgusted with government? The simple answer is that government can no longer accomplish anything! Furthermore, it has diminished the private sector’s ability to produce what is necessary to sustain the standard of living this country has grown accustomed to.
If you are disgusted with government it is likely because you feel you are getting less for what it demands from you and paying more for it. The debt piled up represents obligations beyond those paid for. The output from the ruling class has never been less and never cost more.

This post was published at Economic Noise on March 7, 2016.

“We’re One Hawkish Fed Statement Away” From A “Sharp Re-Pricing,” Deutsche Bank Warns

On Sunday evening we brought you the latest from Goldman’s chief equity strategist David Kostin who explained that sharp swings in crude prices have created pronounced (and in fact historic) momentum swings, catching those who had piled into ‘popular investment themes’ to be caught flat-footed. Here’s what Kostin said:
The correlation between major macro trends has caught many popular investment themes in the momentum spin cycle. In 2015 and the first weeks of this year, lower oil prices were accompanied by lower Treasury yields and downward revisions to US growth expectations, boosting the performance of popular growth stocks and defensive equities while weighing on banks. At the same time, the US dollar, which carries a strong negative correlation with oil, strengthened by nearly 15% and presented another headwind to the US economy. The combination of growth concerns and low oil prices widened credit spreads to recessionary levels and benefitted the performance of stocks with strong balance sheets. All of these trends have reversed sharply in recent weeks.
But as we wrote, Kostin is far from bullish. Instead, he says the market may be underestimating (or else just plain ignoring) the ‘largest current macro risk’: a hawkish Fed and consequently, a stronger USD. The result, another sharp reversal as stocks with strong balance sheets are once again in vogue versus momo plays, energy, and anything with nosebleed leverage.

This post was published at Zero Hedge on 03/14/2016.

Bloomberg Stumbles On The “Only One Buyer Keeping The Bull Market Alive”

Last week, when Bloomberg was celebrating the 7 year anniversary of the third longest, most central bank-supported, and thus “most hated” bull market in history, it said that “investors are awash in angst, showing little faith the run can continue. They worry about contracting corporate earnings, slowing Chinese growth and uncertainty over interest rates. And they’re walking the talk by pulling cash from stocks at almost the fastest rate on record. It’s not unwarranted – the S&P 500 has gained just 0.5 percent in the last 18 months.”
***
While confused by this unprecedented equity outflow, it then promptly spun the “bullish angle”and noted that just because the rally is the “most hated in history”, it probably will continue:
[W]hen people withdraw money, stocks inversely tend to rise later, according to data since 1984. In the 12 instances when funds experienced monthly outflows that were at least 2 standard deviations from the historic mean, the S&P 500 rose an average 7.1 percent six months later, compared with a normal return of 3.9 percent, data compiled by Bloomberg and Investment Company Institute show.
[Once] things start to turn around, bears will be forced to buy. From Feb. 11 through Monday, a Goldman Sachs Group Inc. index
of the most-shorted companies outperformed the S&P 500 by almost 16 percentage points, the most in data going back to 2008.

This post was published at Zero Hedge on 03/14/2016.

The Economy And Stocks: Someone Is Smoking Crack

Privately compiled and reported economic indicators started rolling over in 2012, which is why the Fed continued to ‘re-up’ its money printing. With most S&P 500 companies having now reported Q4 2015 earnings, there’s been four consecutive of declining net income – both GAAP and ‘non-GAAP.’ If I had told you two years ago that the S&P 500 revenues and earnings would decline but that stock prices would continue higher, you would have asked me if I was smoking crack. – Short Seller’s Journal
A big driver of the economy for the last four years has been the auto and housing markets. While it may not be evident in some areas yet, both sectors of the economy are starting to seize up.
Auto sales in February missed analysts’ forecasts and were down from January. Not mentioned in the still-bullish reports was the fact that GM’s and VW’s sales declined, while Ford’s jump in sales was driven by a big bulge in rental fleet sales. Note to crackheads: rental fleet sales are not the best measure of the demand for autos. At the same time, new car inventories at dealers soared to a 14-year high. With subprime auto loan delinquencies beginning to spike up, along with repo rates, on whom will the dealer/lending syndicate unload all this inventory?
Similarly, the housing market in previously red-hot areas is starting to fizzle, led by a rapid escalation in listings in the higher end of the market. Housing market expert Mark Hanson describes the popping bubble in Silicon Valley: Tech-Head Housing Cities Seizing Up. This article describes the collapsing Houston housing market: Oil crash is crushing Houston’s housing market. The virus popping Houston’s real estate bubble is now spreading throughout Texas. Miami’s market was white hot for a few years. Of course, as is par for the course, Miami is now perilously overbuilt: Miami’s Epic Condo Boom Turns Into Glut. That same market condition is hitting the southwest coast of Florida, as a flood of existing home listings are helping the continuous ‘price reduced’ notices chase the market lower.

This post was published at Investment Research Dynamics on March 14, 2016.

Oil Plunges Back To Draghi Lows

Just as we saw with the stock market following Draghi’s December disappointment dead-cat-bounce, WTI Crude has collapsed back topost-Draghi lows, erasing all the WTF bounce from Friday. The driver – aside from the fact that there was no driver of the ramp – appears to be comments from Emirates Bank on the resilience of US shale (and the surprising lack of production drops for now).
US shale-oil producers could decide to stay in the game with prices currently hovering around $40/barrel, according to Edward Bell at Dubai-based bank Emirates NBD.
Market participants expected some shale producers to be pushed out as they struggled to compete in the low-price environment, and while US production is falling, it’s not been happening at a rapid rate. With prices well off their recent lows, shale producers could decide to weather the storm and try to keep output high. US production has dropped around 120K/day so far this year, but still remains above 9M barrels.

This post was published at Zero Hedge on 03/14/2016.

China Ocean Freight Indices Plunge to Record Lows

There’s simply no respite. Money is leaving China in myriad ways, chasing after overseas assets in near-panic mode. So Anbang Insurance Group, after having already acquired the Waldorf Astoria in Manhattan a year ago for a record $1.95 billion from Hilton Worldwide Holdings, at the time majority-owned by Blackstone, and after having acquired office buildings in New York and Canada, has struck out again.
It agreed to acquire Strategic Hotels & Resorts from Blackstone for a $6.5 billion. The trick? According to Bloomberg’s ‘people with knowledge of the matter,’ Anbang paid $450 million more than Blackstone had paid for it three months ago!
Other Chinese companies have pursued targets in the US, Canada, Europe, and elsewhere with similar disregard for price, after seven years of central-bank driven asset price inflation [read… Desperate ‘Dumb Money’ from China Arrives in the US].
As exports of money from China is flourishing at a stunning pace, exports of goods are deteriorating at an equally stunning pace. February’s 25% plunge in exports was the 11th month of year-over-year declines in 12 months, as global demand for Chinese goods is waning.

This post was published at Wolf Street on March 14, 2016.

Central Bank Rally Fizzles: Equity Futures Lower As Attention Turns To “Hawkish Fed” Risk

The biggest macro development over the weekend was China’s latest “gloomy” economic update, in which industrial production, retail sales and lending figures all missed estimates, however now that we are back to central bank bailout mode, bad news is once again good news, and the Shanghai Comp soared 1.7% among the best performers in Asia on calls for further central bank stimulus while the new CSRC chief also vowed to intervene in stock markets if necessary. In other words, the worse the data in China, the better.
The same of course as true in Europe, where just as Draghi admitted that the 2016 inflation forecast plunged (as we warned in December) and the ECB would not hit its 2.0% inflation target by 2019….

This post was published at Zero Hedge on 03/14/2016.

Chinese Insurance Company Which Bought Waldorf Astoria Submits “Hostel Bid” For Marriott Hotels

The “hostel takeover” saga for Starwood Hotels took another unexpected turn this morning, when the company’s stock price soared following news that the hotel chain had received an unsolicited $76/share non-binding proposal (8% premium to the Friday close) from an investor group led by China’s Anbang Insurance Group, in a deal that seeks to scuttle its planned combination with Marriott International. The proposed deal values Starwood, one of the world’s largest hotel companies which includes such brands as Westin, Sheraton, The Luxury Collection, W Hotels, St. Regis, Le Meridien and many others, at $12.8 billion.
Early on Monday Marriott issued a press release announcing it was still committed to the proposed tie-up with Starwood, said the consortium was led by Anbang, which in October of 2014 struck a deal to buy Hilton Worldwide Holdings Inc.’s flagship hotel, the historic Waldorf Astoria in Manhattan, for $1.95 billion. To wit:
On March 11, 2016 Starwood notified Marriott that it had received an unsolicited indication of interest in purchasing Starwood from a consortium of potential investors, led by Anbang Insurance Group. Marriott notes that this unsolicited indication of interest is highly conditional and non-binding. Marriott granted Starwood a waiver to expedite its evaluation of the letter from the interested consortium.

This post was published at Zero Hedge on 03/14/2016.

Into Thin Air

Yet another timid opening tonight (Sunday) belies the violence, fear and greed raging just below the surface. At the closing bell on Friday, DaBoyz had a vise grip on bears’ cahones. Even so, the Masters of the Universe will need some sort of news, any news, to jack stocks higher in the days ahead. Last week it was the increasingly ridiculous story concerning ECB ‘stimulus’ that had the markets jazzed. By now, no one could possibly believe that offering 0.4% negative rates on big deposits could in any way improve the dire outlook for Europe’s economy. But if ‘investors’ had any misgivings about this, they were nowhere apparent by Friday. Both the German DAX and the Dow Industrials were back in bullish gear, continuing a rally that looks determined to blow out every bear still hanging on before trapping bulls at heights where hubris is bound to be as thick as the air is thin.

This post was published at Rick Ackerman on March 14, 2016.

Muslim Immigrants Want Swiss to Change the Flag Because it is a Christian Symbol

Muslim Immigrants will petition for a referendum in Switzerland to change the national flag. They argue it is a Christian symbol and the flag should represent the separation between church and state.
Well what about the Swiss Guard who protect the Pope? Less than 40% of Swiss are Catholic? This too would then offend the majority somehow. OOPS!

This post was published at Armstrong Economics on Mar 13, 2016.