by Zero Hedge - February 23rd, 2017 3:03 pm
Two weeks ago, we reported that when Goldman observed the latest gasoline demand data, it said that either something must be wrong with the data, or the US is in a recession: as the firm’s commodity analyst Damien Courvalin put it, such a steep drop in in US gasoline demand “would require a US recession.” He added that “implied demand data points to US gasoline demand in January declining 460 kb/d or 5.2% year-on-year. In the absence of a base effect, such a decline has only occurred in four periods since 1960 during which time PCE contracted.”
Bloomberg’s Liam Denning confirms that “big dips in U.S. gasoline demand, especially of 5 percent or more, are almost unheard of outside of a recession or oil crisis.” Goldman then adds that “to achieve the 5.9% decline suggested by the weekly data, our model requires PCE to contract 6%, in other words, a recession.”
At this point Goldman – which naturally was aghast at the possibility that there is an under the radar consumer recession taking place at a time when the bank was predicting three rate hikes – quickly pivoted and explained that a far more likely explanation is that the latest weekly report was an aberration, and that there was simply something wrong with the data.
Our analysis identifies weekly yield and exports as systematically deviating from their final values and such biases suggest that demand could be revised higher by 190 kb/d. The EIA’s real-time export data still includes estimates and we see potential for the recent shifts in the Mexican gasoline market to exacerbate the overstatement of US exports by an additional 185 kb/d given (1) lower PEMEX refinery turnarounds, and seasonally lower demand exacerbated by the January 16% hike in prices. Adjusting for these lower exports points to US gasoline demand declining only 85 kb/d yoy in January, in line with our macro model.
After chosing to ignore the data, Goldman then reiterated its fudged, rosy outlook based on its own fudged data:
Looking forward, we reiterate our outlook for strong global demand growth in 2017 and view the recent US gasoline builds as reflective of transient regional shifts in gasoline supply instead. Given our
by Zero Hedge - February 23rd, 2017 2:46 pm
On May 23, 1719, one of the greatest financial bubbles in the history of the world kicked off when the Compagnie Perpetuelle des Indes was granted a monopoly by the French monarchy over all the trading rights of all French colonies worldwide.
The company’s stock price quickly soared, from 300 livres per share to more than 1,000 just a few months later.
It was quite a jump. But the enthusiasm continued for more than 18-months.
In fact there was such a frenzy to buy shares that it wasn’t uncommon for the stock price to double in a single day.
By November, share price had surpassed 10,000.
Based on modern-day calculations, a share price of 10,000 livres would have valued the company at more than the entire GDP of France at the time.
That would be like Google or Amazon having a $20 TRILLION stock market capitalization today. Insane.
As with all bubbles throughout history, that one burst as well… quickly and violently.
Call it ‘reversion to the mean’. Stein’s Law. Or just plain old common sense.
It’s pretty simple– there are certain anomalies that are too absurd to last. And nature always finds a way to correct them.
While it’s nowhere near as extreme as the Compagnie Perpetuelle des Indes, the market today is also in a completely unsustainable position.
I’ll show you what I mean–
Take a look at Exxon Mobil; it’s one of the largest companies in the world and a favorite among investors due to its 3.7% dividend yield.
Quarter after quarter, Exxon Mobile has been paying dividends to its shareholders without fail for decades, even at the peak of the financial crisis.
Not only that, but the company has generally increased its dividend each year as well.
To stock investors, that kind of consistency is a gold mine. But there’s a small problem.
For the last several years, Exxon has been borrowing money in order to maintain its dividend payments.
Last month, for example, the company reported $26.4 billion in cashflow from its business operations during 2016.
But in order to maintain the business, the company had to spend $16.7 billion on what’s known in finance as “capital expenditures” or “capex”.
Capex is critical to a big business like Exxon Mobil; every year they have to
by Zero Hedge - February 23rd, 2017 2:31 pm
Shortly after taking center stage at CPAC, Steve Bannon once again unleashed on the media, quickly calling the press the “opposition party” as he did in his infamous NYT interview, during his conversation with Reince Priebus.
“If you look at the opposition party, how they portrayed the campaign, how they portrayed the transition, how they portray the administration, it’s always wrong,” Bannon said. “If you remember, the campaign, by the media’s description, was the most chaotic, the most disorganized, most unprofessional, had no idea what they were doing. And then you saw [the media] all crying and weeping” on election night.
“It’s not gonna get better, it’s gonna get worse,” Bannon said.
“They are corporatist globalist media who are diametrically opposed to the economic nationalist agenda that President Trump presents. “[Trump] is going to continue to press his agenda as economic conditions get better, as jobs get better, they are going to continue to fight. If they think they are going to give you your country back without a fight, you are mistaken. Every day, it is going to be a fight.”“
“It’s not only not going to get better, it’s going to get worse everyday… they’re corporatist, globalist media,” Steve Bannon says pic.twitter.com/mhIz32h1xn
— CBS News (@CBSNews) February 23, 2017
The Trump administration has taken center stage at this year’s Conservative Political Action Conference (CPAC) which infamously kicked out Milo Yiannopoulos earlier this week, leading to the rapid fall from grace for the outspoken conservative.
Moments ago Trump’s two right hand men, chief strategist Steve Bannon, and chief of staff, Reince Priebus, started speaking at CPAC. Later in the day, VP Mike Pence will give a major address at 7:30 pm.
Earlier in the day, far right-winger Richard Spencer was escorted out of the Conservative Political Action Conference.
Spencer reportedly spoke with reporters in the lobby of the conference for nearly 45 minutes before he was kicked out.
Some reporters tweeted that Spencer was escorted out by security while still speaking with journalists.
A spokesman for CPAC told NBC that Spencer was removed because the organization finds his views “repugnant.”
According to The Hill, American Conservative Union Chairman Matt Schlapp attempted to distance the conference from Spencer, who
by Zero Hedge - February 23rd, 2017 2:27 pm
Earlier this week “fake news” CNN, citing White House ‘sources’, reported that Kellyanne Conway had been “benched” from making TV appearances after she gave an interview last week in which she said that Genereal Michael Flynn enjoyed the “full confidence” of President Trump just hours before he was dismissed from his post.
But, appearing on the Hannity TV show last night (which would be difficult if she were actually banned from TV appearances) Conway blasted the CNN reports saying simply that “somebody’s trying to start up trouble.” Per The Hill:
“I’m not,” she said when asked on Fox News’s “Hannity” if she had been benched. “I mean, somebody’s trying to start up trouble.”
“About 5 percent of what I’m being asked to do in this White House counselor role is TV,” Conway told host Sean Hannity. “And I think that’s about right.”
“I’ve also gobbled up a lot of TV opportunities, so there’s some resentment there on the outside, I believe, and folks trying to use me for clickbait and headlines.”
“We don’t need to be out there all the time,” she said of administration officials. “I don’t think I have to explain myself if I’m not going to go on TV for a week.”
Here is the full interview with Conway (forward to the 17:30 mark for the relevant exchange):
Of course, the questioning from Hannity followed reports from CNN that Conway had been benched for being “off message” and that “having Kellyanne off television” was helping the Trump administration. Per The Hill:
Conway, who was recently a regular fixture on TV news, hasn’t appeared for an on-air interview since early last week. That Monday, she argued that then-national security adviser Michael Flynn had the “full confidence” of President Trump.
Flynn resigned from his post later that day amid revelations that he misled Vice President Pence about the nature of his conversations with the Russian ambassador.
Conway was “off message,” a White House source told CNN.
“Clearly they’re having much more of a drama-free week,” CNN quoted the source as saying. “Having Kellyanne off television is helping them.”
And here is the original clip from MSNBC in which Conway confirmed that
by Zero Hedge - February 23rd, 2017 1:43 pm
Yesterday we noted that, after nearly a year of continuous protests, eviction day had finally come for the last remaining members of the Standing Rock Sioux Tribe protesting the Dakota Access Pipeline in North Dakota.
That said, and quite unsurprisingly we might add, a number of Standing Rock protesters apparently decided that the North Dakota Governor’s eviction notice, which went in effect yesterday at 2pm, was merely a suggestion and overstayed their welcome on federal lands. As such, riot police and Humvees have now been called in to facilitate their immediate departure.
Of course, as most are acutely aware at this point, the standoff in North Dakota revolves around Native American opposition to the Dakota Access Pipeline (DAPL), a project the Standing Rock tribe said crosses over land that belongs to them pursuant to the Treaty of Fort Laramie from 1868.
According to RT, roughly 100 protesters remained in camp this morning as riot police moved in to clear the grounds.
Live-streams from across the Cannon Ball River showed police, including state troopers from Wisconsin, and what looked like National Guard troops entering the mostly abandoned encampment on Thursday morning, accompanied with armored vehicles and construction equipment.
About 100 protesters remained in the camp on Wednesday, defying the deadline for evacuation ordered by North Dakota’s governor.
Here is a live feed of today’s festivities:
* * *
For those who missed it, here are scenes from yesterday as the Governor’s eviction notice took effect.
After nearly a year of conflict, today may mark the last stand at Standing Rock as authorities’ begin their final eviction of protesters, also known as water protectors, from their camps.
The standoff in North Dakota revolves around Native American opposition to the Dakota Access Pipeline (DAPL), a controversial initiative the Standing Rock tribe says crosses over land that belongs to them pursuant to the Treaty of Fort Laramie from 1868.
The #NoDAPL movement gained widespread attention in 2016 after videos and reports emerged showing law enforcement’s brutal militaristic crackdown on protests. Hundreds of water protectors have been arrested and injured — some critically.
The eviction, expected imminently today, stems from an executive order signed by Governor Burgum.
by Zero Hedge - February 23rd, 2017 1:39 pm
The Banks Will Not Be Denied Franchises and are Buying Into Exchanges
The US Government has essentially declared war on the OTC markets. This is the banking industry life blood. Banks are not going to go down easily. We have said so here in the past. Since the US government has essentially declared it wants exchanges to be the depositories for risk instead of Banks, the Banks are going to start buying exchanges. What ICE, (originally formed by Goldman and other banks) did for oil, EOS intends to do for Gold. That is ensure that if banks are disintermediated, at least they will own their replacement. ICE is the second largest oil exchange behind the CME now. And ICE is no longer bank owned. Hence the banks are creating a new vehicle to capture lost business, this one is in Gold. And its goal is to get in the middle of every Gold deal being bought in the East. And they are smart to do it.From a previous post, the problem for banks can be easily seen. Banks know this and are not going down without a fight.
by Zero Hedge - February 23rd, 2017 1:19 pm
Amid all the sound and fury of the Trump news cycle, hardly anyone noticed. There is a specter haunting this economy. It is the specter of inflation…
See, if you want to whip inflation now, you don’t need to do any of the really difficult things, such as printing less money… or God forbid, return to honest, market-chosen money (shudder!). All you need is intelligent nutrition!
Bloomberg has the report:
The U.S. cost of living increased in January by the most since February 2013, led by higher costs for gasoline and other goods and services that indicate inflation is gathering momentum. The consumer-price index rose a larger-than-forecast 0.6% after a 0.3% gain in December, Labor Department figures showed Wednesday. Compared with the same month last year, costs paid by Americans for goods and services rose 2.5%, the most since March 2012.
French investment bank Natixis makes a related observation:
The return of inflation in the euro zone with the rise in the oil price will drive the European Central Bank to give up QE […] Our estimate is that an end to QE would raise interest rates by 110 basis points.
Wait – inflation is what the Fed has been looking for. And the latest numbers reveal it may have already reached the Fed’s target of 2%. If you’ll recall, the Fed set itself two targets: Unemployment would have to fall below 5%. And inflation would have to rise above 2%. Reaching those two targets would prove that the economy was healthy enough to allow the Fed to raise rates.
Higher rates of inflation – higher prices – signal more consumer demand. And more labor demand, too. It suggests there are more people with more money ready to spend it. How could that ever be a bad thing? And now, with the Fed’s key targets hit, we’re ready to return to the good ol’ days, right? Oh, dear, dear reader – if it were only that simple!
Year-on-year change rates of TMS-2 (broad true US money supply, black line), M1 (red line), CPI (blue line)
by Zero Hedge - February 23rd, 2017 1:13 pm
If Tuesday’s 2Year auction surprised to the upside thanks to trading rather special in repo, and yesterday’s 5Y auction was poorly received with no repo tightness, then today’s 7Y auction of $28 billion in Treasuries was set to be the most disappointing of all, after it was trading at a generous +0.50% in the repo market.
And, predictably, when today’s 7Y printed at 2.197%, the lowest yield since October (if above the previous six auction average of 1.883%) it tailed the WI of 2.196% by 0.1bp, as once again there were few overhanging shorts to squeeze.
The internals were average at best, with the Bid to Cover printing at 2.49, above last month’s 2.45 but below the 6MMA of 2.50. Indirect demand dipped, with foreign official buyers taking down 63.8%, below the 72.8% in January, and the lowest since October; it was however in line with the 6 month average of 64.8%. Like yesterday, the Direct Bid picked up, and was left with 11.4% of the allottment. As a result, Dealers were left holding 24.9% of the auction, the most since October.
Overall, a mediocre auction, which however was fractionally better than its tailing headline would suggest.
by Zero Hedge - February 23rd, 2017 12:50 pm
Perhaps eager for a complete “change of scenery” after years of moribund returns, some of America’s most prominent hedge fund managers are taking the metaphorical knife to their personal lives, and wives.
According to the Post, David Einhorn is separating from his wife of 24 years, Cheryl Strauss Einhorn, and the pair is heading for divorce. The billionaire Greenlight Capital founder, whose stock picks have moved markets, if perhaps a little less in recent months, has separated from Cheryl, whom he married in 1993 before he made his fortune, now estimated at $1.55 billion.
Among the possessions at stake in the upcoming divorce is the 10,000-square-foot home in Rye, NY, and supposedly Einhorn’s rumored vault of gold stashed at a secret location in New York City. He has said the gold is used by his fund as a hedge against inflation.
Cheryl, with whom David has three children, is an award-winning financial reporter and media consultant who has also taught at Columbia University Graduate School of Journalism and Columbia Business School. According to the Post, she is also credited with coming up with the name “Greenlight” when he launched his fund in 1996. The couple is well-known in New York for their philanthropic work. In 2002, they established the Einhorn Family Charitable Trust, “with the vision of building a more peaceful and harmonious society,” according to its website, which features numerous photos of Cheryl and David.
He also serves on the boards of City Year, the Michael J. Fox Foundation for Parkinson’s Research, and as chair of the Robin Hood Foundation’s board of directors.
It is not clear what precipitated the split.
In other Greenlight-related news, Bloomberg reports that along with his newly found personal freedom, Eimhorn is also redoing his portfolio, and has joined numerous other hedge fund managers, among which Kyle Bass and Jeff Gundlach in betting on declines in government debt, as well as a rebound in gold to protect against the risk of inflation under Trump.
“We made several changes to the macro portfolio in response to the election,” Einhorn said Thursday in a conference call discussing results for Greenlight Capital Re Ltd., the Cayman Islands-based reinsurer
by Zero Hedge - February 23rd, 2017 12:30 pm
As a direct result of Sweden’s tax laws in conjunction with negative interest rates by the central bank, Sweden’s citizens now purposely overpay their tax bills in record amounts as a savings vehicle.
Here’s the peculiar result: The Swedish Government Complains it Collects Too Much Tax.
Data released on Wednesday showed Sweden’s government generated a budget surplus of SKr85bn ($9.5bn) in 2016, with approximately SKr40bn coming from tax overpayments. The government will have to repay more than £3.5bn to businesses and individuals who purposely paid too much tax in 2016.
The government wants to discourage further overpayments but the national debt office has admitted its efforts will probably not be enough.
While bank interest rates plummeted, Swedish tax rules meant that excess deposits in taxpayers’ payment accounts continued to earn a minimum of 0.56 percent annual interest, leading many people to use them like makeshift bank accounts.
Most governments would be pleased with an annual budget surplus more than twice the forecast size. But Stockholm has complained that this “involuntary borrowing” from residents will cost it around SKr800m more over 2016 and 2017 than if they had borrowed the money at market rates.
Unfortunately for the debt office, there is little chance that the problem will go away anytime soon. At its latest policy meeting last week the central bank said it was more likely to cut rates further into negative territory than increase them in the short term.
Given negative interest rates, even if Sweden paid zero percent on overpayments, the Swedish government would lose money vs. borrowing from the central bank.
I suppose the government could charge money for excess payments, but officials might be worried about voter backlash.