Sorry Vlad!
Putin played the Game of Thrones this year in Ukraine and, like many in the TV show, he's lost it all in his grab for power. As you can see from the RSX chart on the right, the Russian market (which Vlad had about $50Bn tied up in) is down 10% in two days and heading off another cliff today in what we, at PSW, refer to as a Homer Simpson Sell-Off.
Russia is, of course, an oil-based economy and Mr. Putin's holdings are very much tied up in the oil and gas sector with a 4.5% stake in Gazprom, 37% of Sturgutneftegas and 75% of oil trading firm, Gunvor, which is facing massive losses as oil has collapsed from the FAKE top at $107 we called for you on June 20th all the way down to $63.72 this morning. Following our suggestion to short them there (in our Live Member Chat Room that morning) would have put you up $43,000 per contract at this point – not bad for 6 month's "work"!
Of course, we have been in and out of oil shorts over and over and over again in the interim but always with a bearish bias until we hit our $80 prediction and, since then, we've gotten more cautious and even made some LONG-term bullish bets but the bottom seems to be lower than even I predicted back in June ($70) though it may just be an over-reaction to the OPEC meeting – we'll have to see.
Meanwhile, there's no good news on the demand front as China's PMI kicked off the Global slump this morning with a 50.3 reading, down from 50.8 in October and the lowest since March while the private HSBC reading put them at 50 – not expanding at all. That was followed by Moody's downgrading Japan's (we're short) Credit Rating and that is a REALLY BIG DEAL for a country that is 260% of their GDP in debt.
When you are 260% of your GDP in debt, a 1% rise in your borrowing costs means you need 2.6% MORE of your GDP just to service your current debt – think about it!
Asia isn't alone in slumping this morning. The WSJ's headline sums it up, saying "Eurozone's Manufacturing Expansion Grinds to a Halt – Activity in the Single Currency Area’s Three-Largest Economies Fell for First Time Since Mid-2013." Things are so bad in Europe that Germany, who had been strong, is now contracting at 49.5, the lowest reading in 17 months.
Even worse for the Global Economy, US Retail Sales (we're short XRT) are off 11% this Thanksgiving weekend vs forecasts of being up 3.8% ahead of the weekend – a HUGE miss! On top of that, retailers, have been discounting by 40 to 70 percent this year compared with 30 to 50 percent in the recent past, ShopperTrak founder Bill Martin told Reuters.
"I think what we are seeing is those early promotions coupled with some pretty deep discounts," he said. Martin said he had expected a 0.5 to 1 percent sales gain.
Martin cautioned against taking the two days' figures as sign of slack holiday demand. He noted that Thanksgiving and Black Friday combined for just 1 percent growth last year, underperforming growth of 3.1 percent during the entire season spanning the months of November and December.
Online sales are a bright spot, tracking up 25% from last year but on-line was only $3.73Bn on Thursday and Friday vs $24.64Bn spent at conventional retailers so the 25% gain on-line was $746M, nowhere near enough to make up for the $2.7Bn lost off-line.
We went into this weekend very Cashy and very CAUTIOUS and, so far, we have no regrets as the Futures are looking very weak and the data certainly isn't anything to get bullish over. We'll just have to see how irrational this exuberance can remain and for how long but, until then – be careful out there!
