ISM Has Biggest Miss On Record, New Orders Plunge Most Since 1980

The downward revision to last month’s recent record high appears to have been the warning flag but this is a disaster. ISM Manufacturing dropped by its most since 2008; missed by its most on record; and new orders collapse at the fastest pace since 1980. The employment sub-index also tubled from 55.8 to 52.3. “Poor weather” was blamed by some respondents and still hangovers from the government shutdown but these numbers are simply unprecedented as the data came in at a 6-sigma miss to “economist” expectations.

Biggest miss on record…

 

6-Sima from smart people’s expectations…

 

And New orders dropped by the most sicne 1980…

 

The full component breakdown with New Orders highlighted:

Charts: Bloomberg


    



via Zero Hedge http://ift.tt/1bjVkZk Tyler Durden

Ford, GM Car Sales Tumble: Weather Blamed As Usual

Once again we learn that not a single sell-side analyst could have predicted the unprecedented “snow in the winter” weather shock that everyone knew about a month or so ago. In the latest example of just how confused “analysts” were when it comes to analyzing weather patterns, we just got both Ford and GM January car sales which tumbled by 7.5% and 12% respectively, on expectations for a decline of only 2.3% and 2.5% for the two US carmakers. And confirming that automaker executives continue the trend we have seen with all other sellers of goods and services, namely that when it is snowing in the winter, nobody buys anything, it was all the weather’s fault.

  • FORD: WEATHER HAD EFFECT ON TIMING OF SOME FLEET DELIVERIES
  • GM SAYS EXTREME WEATHER DEPRESSED CO., INDUSTRY SALES

Perhaps they are referring to the abnormally dry weather in California?

Maybe not. Here is the detail from GM:

Historically, January is the industry’s lowest sales month of the year. Extreme winter weather in the South, Midwest and Northeast this January further depressed GM and industry sales. The seasonally adjusted annual selling rate (SAAR) for light vehicles is expected to be an estimated 15.3 million units, down from 15.6 million in December.

And from Ford:

Given the difficult weather in our largest sales regions, we are fortunate to have held in at retail as well as we did,” said John Felice, Ford vice president, U.S. marketing, sales and service. “In areas where the weather was good, such as in the West, sales were up. The poor weather also had an impact on the timing of some of our fleet deliveries. A bright spot is Lincoln, which had its strongest sales in four years.”

Of course, it could be the weather – one doesn’t know since the geographic sales breakdown is not provided. Or perhaps, it just may be that the Uncle Sam car loan-funded car purchase bubble has also finally burst.


    



via Zero Hedge http://ift.tt/1gGvw1d Tyler Durden

Introducing the UltraCoin Cryptocurrency Composite Index

Cryptocurrencies have been on a tear over the last 2 years, both in terms of mindshare and returns. This is particularly true of the last year, in which Bitcoin (the de facto proxy for cryptocurrencies) has heaved from $13 to $950, making a pit stop at $1200 along the way. This 7,308% return looks to be outrageously delectable to many a speculator and has even caught the eye of an institutional fund or two. The problem is, and what many novice investors have a problem conceptualizing, that astute institutional “investment” funds actually have a problem dipping their toes in the wilding appreciative yet hyper-volatile world that is cryptocurrencies.

The reason is because “investment funds” as opposed to beta chasing “trading” or “hedge” funds seek a measured return on investment. The raw returns that you see spouted for Bitcoin and the various alt.coins are actually not what the smart institutional money is looking for.

 

Put another way, you tend to get what you pay for. Risk is the price of reward, with risk being defined as deviation from expected return. You nearly never get a reward without bearing some risk to attain said reward. On the flip side, you should always demand a commensurate reward for the risk that you take. Measuring reward without taking into consideration the risk paid to attain such reward is akin to jumping out of the top floor of a 50 story building to revel in the exhilaration of the drop without taking into consideration what happens when you reach ground level. All in all, it tends to end ugly.

My clients are told that if you assumed $1 of risk to reap $1 of reward, then you effectively made nothing from an economic, risk adjusted reward perspective. This is difficult for the layperson to understand since those who reaped said dollar are left holding one dollar of nominal returns which looks, smells and spends like a dollar. They don’t seem to get it until that third or fourth go around when they get 30 cents back for the dollar they invested (versus an amount over a dollar, hence a negative return). You see, probabilistically, you can reap more than you sow over the short term simply out of dumb luck. Realistically, the law of averages will catch up to you and eventually (and most likely close to immediately) you will reap what you sow, or… you get what you pay for!

Similarly, if bitcoin investors/traders believed they are doing well when bitcoin jumps from $13 to $950, they may be mistaken. The reason? Bitcoin has a modified beta of roughly 673! That means that it is volatile. Very volatile! More volatile than practically any basket of currencies or stocks you can think of. This volatility means that in a short period of time it’s just as easy to be on the losing side of the trade of this asset as it is to be on the winning side. So, you’re lucky if you bought at $500 and rode it to $950, but you could have just as easily bought at $1,200 and rode it down to $500.

With these concepts in mind, you should always adjust for risk before attempting to measure reward. By doing that you will find that you can compare disparate assets, ventures and opportunities that have different reward propositions and even different horizons by measuring the risk (or the economic cost) of the investments and then adjusting the actual or expected reward desired to compensate for said risk commensurately.

Notice how, if one were to take this approach, one can see the different risk adjusted returns between the top two cryptocurrencies by market value. Bitcoin is the most popular, but Litecoin is the most profitable – even when fully adjusted for risk.

ridk reward

The UltraCoin team has run these calculations, among many other currencies, on every cryptocurrency with a market value over $1 million. In addition, these currencies have been aggregated to form what we have coined as the “UltraCoin Cryptocurrency Composite Index” – a basket of cryptocurrencies upon which our custom UltraCoin derivatives can trade, hedge, invest and speculate.

These indices and calculations (not to mention a bevy of other calculations to assist in trading) are part and parcel of the UltraCoin client.

CryptoCurrencyComposite Index

The graph below depicts the outrageous raw returns had by holders of bitcoin. It also denotes the extreme volatility experienced therein, particularly from late 2013 onward.CryptoCurrencyComposite Index graphIf one were to place a hurdle rate of required return to compensate for said volatility, the return curve will look somewhat different.CryptoCurrencyComposite Index graph - adjusted

As you can see, all that glitters is not necessarily gold! I will be pushing for the beta release of the UltraCoin client quite soon, quite possibly at the Berlin Bicoin conference. In the meantime, for those of you who have not had a chance to play with the software, here are a few screen shots.

currency transalation errortest See http://ultra-coin.com/ to access the client when it becomes available.


    



via Zero Hedge http://ift.tt/1gGvsOP Reggie Middleton

UK Think Tank Proposes Law to Restrict Foreign Oligarch Real Estate Speculation

When people ask how there can be no inflation with Central Banks printing so much money, all one has to do is look at what I refer to as “oligarch assets” and you’ll see massive inflation. The reason for this is that the only people getting access to the newly created money at 0% interest or through crony deals are oligarchs and well connected figures within the global plutocracy. While there is also plenty of inflation for consumer goods (often times hidden in smaller package sizes and phony components), it is nothing like the tremendous price gains in assets oligarchs covet.

As most of my readers know by now, one such asset is high-end London real estate. In fact, oligarchs and cronies are scooping up London real estate at such a frantic pace that the regular peasants are being forced out of their own city. Even worse, many of these “investment properties” sit unfurnished and empty, merely another trophy home to top off the oligarch portfolio.

I’ve covered this oligarch buying trend on several occasions in the past (it’s also happening in the U.S.), and I believe it is only a matter of time before the public because angry enough to put a stop to it. We may be witnessing the start of such a trend at this time with the publication of the report Finding Shelter by think tank Civitas. While this is just a proposal and far from law, I do expect such laws ultimately to be passed globally in various jurisdictions in which the oligarchs are distorting prices and making every day life unaffordable and miserable.

Some key points from the report are:

  • 85% of prime London property purchases in 2012 were made with overseas money.
  • Problem is not confined to the top end of the market. Over the past two years only 27% of new homes in central London went to UK buyers, while more than half were sold to residents of Singapore, Hong Kong, China, Malaysia and Russia.
  • Two-thirds of homes bought by people from overseas were not purchased for owner-occupation but as investments.

From the Guardian:

Radical plans to stop rich overseas residents who live outside the EU buying British houses – as well as tight restrictions on them acquiring “newbuild” properties as investments – will be published in a report by a leading rightwing thinktank on Monday.

Free-market organisation Civitas castigates government ministers for allowing wealthy foreign investors to stoke a property boom that it says is driving up prices and locking millions of UK citizens out of the housing market.

The plans would prevent the likes of Roman Abramovich, owner of Chelsea football club, or other Russian oligarchs from adding to their multimillion-pound UK portfolios. They also aim to stem a flood of investment from countries such as China, Malaysia and Singapore.

Concerned that many middle and lower earners are being forced to pay high rents in London because they can’t afford to buy, Civitas calls on ministers to adopt a scheme similar to one operating in Australia, which ensures that no sale can take place to overseas buyers unless they can show that their investment will add to existing housing stock.

Such a system would mean that no existing home could be sold to a buyer from outside the EU, and that such buyers could acquire newbuild homes only if their investment led to one or more additional properties being built.

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Greece Is (Officially) The Most Corrupt European Nation

With the Greeks facing up to their third (or 4th or 5th, who’s counting anymoe anyway) bailout, proclaiming growth is just around the corner, that the crisis is behind them, and that slavery will solve European youth unemployment; we thought it both ironic and sad that, as Bloomberg’s Niraj Shah notes, the European Commission today publishes its first anti-corruption report and finds Greece has the most corrupt public sector, according to Transparency International’s Corruption Perceptions Index.

In chart form…

 

and table…

 

As a gentle reminder,  Greece’s shadow economy was equivalent to 24 percent of GDP in 2012, the Institute of Economic Affairs estimates.

 

But Afghanistan and Somalia top the world’s corruption index…

(click image for large legible version)

 

The Corruption Perceptions Index 2013 serves as a reminder that the abuse of power, secret dealings and bribery continue to ravage societies around the world.  The Index scores 177 countries and territories on a scale from 0 (highly corrupt) to 100 (very clean). No country has a perfect score, and two-thirds of countries score below 50. This indicates a serious, worldwide corruption problem.


    



via Zero Hedge http://ift.tt/1kEtL2G Tyler Durden

Deutsche Bank: "We've Created A Global Debt Monster"

Two observations on the latest thoughts by Jim Reid (DB’s best strategist by orders of magnitude):

  1. He is far more concerned by what is going on in China than any of the other noise around the world. And rightfully so. As we first showed a few months ago, the money creation in China puts what all the other global central banks do to shame. Any slowdown in this credit creation and the wheels have no choice but to fall off, which also explains why even the tiniest default in this $9 trillion economy will be bailed out as it would risk an outright “flow” collapse.

  2. The Fed came, saw, and after realizing the mess it created with tapering – which can never be priced in now that the market is terminally addicted to the Fed’s liquidity injections – will soon do what we have said since the May 2013 “taper tantrum” would happen – untaper, and resume bailing out everyone.

Full note from Reid:

From all the stories that broke while I was away the most fascinating surely revolves around the Chinese Trust product that in the end wasn’t allowed to be at the mercy of market forces. For me it’s a microcosm of the fragility still present in global financial markets that a $9.0 trillion dollar economy – that will be the biggest in the world within the time frame of most of our careers – struggles to allow a $500 million investment product to default without there being market fears of it igniting panic in financial markets. This has now been a theme for the best part of 10-15 years in global financial markets particularly in the developed world but more recently the EM world since the GFC. We’ve created a global debt monster that’s now so big and so crucial to the workings of the financial system and economy that defaults have been increasingly minimised by uber aggressive policy responses. It’s arguably too late to change course now without huge consequences. This cycle perhaps started with very easy policy after the 97/98 EM crises thus kick starting the exponential rise in leverage across the globe. Since then we saw big corporates saved in the early 00s, financials towards the end of the decade and most recently Sovereigns bailed out. It’s been many, many years since free markets decided the fate of debt markets and bail-outs have generally had to get bigger and bigger.

 

This sounds negative but the reality is that for us it means that central banks have little option but to keep high levels of support for markets for as far as the eye can see and defaults will stay artificially low. As such we remain bullish for 2014. However it’s largely because we think the authorities are trapped for now rather than because the global financial system is healing rapidly. So as well as EM being very important for 2014, we continue to think the Fed taper pace is also very important. If the US economy was the only one in the world then maybe they could slowly taper without major consequences. However the world is fixated with US monetary policy and huge flows have traded off the back of QE and ZIRP so it does matter. We have suspicions that the Fed may have to be appreciative of the global beast they’ve helped create as the year progresses.

In other words: bullish… because the system will continue to collapse and need more bailouts. The Bizarro world Bernanke created truly is an exciting place.


    



via Zero Hedge http://ift.tt/1cN7YUS Tyler Durden

Deutsche Bank: “We’ve Created A Global Debt Monster”

Two observations on the latest thoughts by Jim Reid (DB’s best strategist by orders of magnitude):

  1. He is far more concerned by what is going on in China than any of the other noise around the world. And rightfully so. As we first showed a few months ago, the money creation in China puts what all the other global central banks do to shame. Any slowdown in this credit creation and the wheels have no choice but to fall off, which also explains why even the tiniest default in this $9 trillion economy will be bailed out as it would risk an outright “flow” collapse.

  2. The Fed came, saw, and after realizing the mess it created with tapering – which can never be priced in now that the market is terminally addicted to the Fed’s liquidity injections – will soon do what we have said since the May 2013 “taper tantrum” would happen – untaper, and resume bailing out everyone.

Full note from Reid:

From all the stories that broke while I was away the most fascinating surely revolves around the Chinese Trust product that in the end wasn’t allowed to be at the mercy of market forces. For me it’s a microcosm of the fragility still present in global financial markets that a $9.0 trillion dollar economy – that will be the biggest in the world within the time frame of most of our careers – struggles to allow a $500 million investment product to default without there being market fears of it igniting panic in financial markets. This has now been a theme for the best part of 10-15 years in global financial markets particularly in the developed world but more recently the EM world since the GFC. We’ve created a global debt monster that’s now so big and so crucial to the workings of the financial system and economy that defaults have been increasingly minimised by uber aggressive policy responses. It’s arguably too late to change course now without huge consequences. This cycle perhaps started with very easy policy after the 97/98 EM crises thus kick starting the exponential rise in leverage across the globe. Since then we saw big corporates saved in the early 00s, financials towards the end of the decade and most recently Sovereigns bailed out. It’s been many, many years since free markets decided the fate of debt markets and bail-outs have generally had to get bigger and bigger.

 

This sounds negative but the reality is that for us it means that central banks have little option but to keep high levels of support for markets for as far as the eye can see and defaults will stay artificially low. As such we remain bullish for 2014. However it’s largely because we think the authorities are trapped for now rather than because the global financial system is healing rapidly. So as well as EM being very important for 2014, we continue to think the Fed taper pace is also very important. If the US economy was the only one in the world then maybe they could slowly taper without major consequences. However the world is fixated with US monetary policy and huge flows have traded off the back of QE and ZIRP so it does matter. We have suspicions that the Fed may have to be appreciative of the global beast they’ve helped create as the year progresses.

In other words: bullish… because the system will continue to collapse and need more bailouts. The Bizarro world Bernanke created truly is an exciting place.


    



via Zero Hedge http://ift.tt/1cN7YUS Tyler Durden

New Winter Storm Provides February's First Weak Economic Data Excuse

Winter storm warnings and advisories stretched from Utah to Pennsylvania this morning. As Bloomberg reports, hundreds of flights across the US are being canceled as the threat of snow, ice, and sleet (and up to 8 inches of snow in New York City) “impact the morning commute.” The storm will move across the central U.S., bringing showers and thunderstorms to the Central Gulf Coast tomorrow morning and expanding northward into the Tennessee Valley by Tuesday evening, the weather service said. In other words, we have our first good excuse for a crimped consumer not spending once again in February – the weather.

 

Ironically, this fresh winter storm – Nika – is named for the Greek Goddess of Victory.

 

Via Bloomberg,

Hundreds of flights across the U.S. are being canceled as a winter storm threatens to drop snow, ice and sleet from Utah to Pennsylvania, including as much as 8 inches (20 centimeters) in New York City.

 

Light snow began falling in New York before 5 a.m. local time. The storm will have its greatest impact through mid-day, almost certainly tying up flights and making it hard for people to reach work, Bill Goodman, a National Weather Service meteorologist in Upton, New York said yesterday.

 

 

Winter storm warnings and advisories stretched from Utah to Pennsylvania this morning. The storm was also expected to drop as much as 8 inches on Ohio. As much as two inches an hour of snow may fall in New Jersey after 8 a.m., the Weather Service said.

 

Washington may get as much as 8 inches after 4 p.m., and Boston less than 0.5 inch as the storm focuses more on the corridor from Philadelphia to New York.

 

 

The storm will move across the central U.S., bringing showers and thunderstorms to the Central Gulf Coast tomorrow morning and expanding northward into the Tennessee Valley by Tuesday evening, the weather service said.

 

Stock bulls can only hope this negative (or USDJPY 102) does not impact what is perhaps the best day of the year for equities. The last time we had a decline of more than 0.1% on this day was back in 2002.


    



via Zero Hedge http://ift.tt/1dY5VsG Tyler Durden

New Winter Storm Provides February’s First Weak Economic Data Excuse

Winter storm warnings and advisories stretched from Utah to Pennsylvania this morning. As Bloomberg reports, hundreds of flights across the US are being canceled as the threat of snow, ice, and sleet (and up to 8 inches of snow in New York City) “impact the morning commute.” The storm will move across the central U.S., bringing showers and thunderstorms to the Central Gulf Coast tomorrow morning and expanding northward into the Tennessee Valley by Tuesday evening, the weather service said. In other words, we have our first good excuse for a crimped consumer not spending once again in February – the weather.

 

Ironically, this fresh winter storm – Nika – is named for the Greek Goddess of Victory.

 

Via Bloomberg,

Hundreds of flights across the U.S. are being canceled as a winter storm threatens to drop snow, ice and sleet from Utah to Pennsylvania, including as much as 8 inches (20 centimeters) in New York City.

 

Light snow began falling in New York before 5 a.m. local time. The storm will have its greatest impact through mid-day, almost certainly tying up flights and making it hard for people to reach work, Bill Goodman, a National Weather Service meteorologist in Upton, New York said yesterday.

 

 

Winter storm warnings and advisories stretched from Utah to Pennsylvania this morning. The storm was also expected to drop as much as 8 inches on Ohio. As much as two inches an hour of snow may fall in New Jersey after 8 a.m., the Weather Service said.

 

Washington may get as much as 8 inches after 4 p.m., and Boston less than 0.5 inch as the storm focuses more on the corridor from Philadelphia to New York.

 

 

The storm will move across the central U.S., bringing showers and thunderstorms to the Central Gulf Coast tomorrow morning and expanding northward into the Tennessee Valley by Tuesday evening, the weather service said.

 

Stock bulls can only hope this negative (or USDJPY 102) does not impact what is perhaps the best day of the year for equities. The last time we had a decline of more than 0.1% on this day was back in 2002.


    



via Zero Hedge http://ift.tt/1dY5VsG Tyler Durden

These Were The Best And Worst Performing Assets In January

The first in 2013 – namely the Nikkei, because oddly enough everyone ignores that hyperinflation “success story” that is the Caracas stock market, was last in January. And vice versa: the best performing asset last month was the barbarous relic which every Keynesian “expert” once again left for dead in the last year, roundly ignoring that it has been the best performing asset class since the Lehman collapse.

Some additional commentary from Deutsche Bank:

It’s been a turbulent start to the year as EM developments as well as arguably softer global economic data have seen risk sentiment turn negative. The clear outperformers have been DM fixed income and European peripheral equities, whilst it has been a very tough month for other DM equities as well as most EM assets. The performance of commodities has been somewhat mixed.

 

A difficult 2013 for EM has continued into the start of 2014. Key equity indices have seen notable falls with the MSCI EM index down -6.6%. Bonds have also come under pressure with overall government bond returns of -3.5% led largely by performance of EMEA bonds (-6.3%). The most notable negatives in EM have come in FX. In Figure 1 we show the performance of a number of key EM currencies in January. They have all declined vs. the Dollar with the Argentinean Peso the obvious underperformer falling nearly 19%. There has also been significant weakness in RUB, HUF, TRL and ZAR, which have all fallen by more than 5% against the Dollar.

 

It has also been a tough month for DM equities. Despite a decent start to the month in Europe, where the DJ Stoxx 600 had returned as much as +2.5% to the 22nd Jan, the negative EM developments saw a notable swing in sentiment and the index eventually ended the month down -1.6%. In the US the S&P 500 has only briefly touched its end of year high and has returned -3.5% on the month. Asian indices have probably seen the worst of the performance with the Nikkei and Hang Seng returning -8.4% and -5.5% respectively. The only real bright spot for DM equities has come from the periphery of Europe where returns have still generally been positive with Ireland (+2.5%), Portugal (+2.5%) and Italy (+2.4%) seeing the best of the performance.

 

In contrast to the performance of DM equities, DM fixed income has had a solid start to the year as core government bond yields have generally fallen. Despite the fact that the Fed has started to taper QE, the 10 year Treasury yield has fallen 38bps, which has helped the Treasury index return +1.6% in January. Similarly the 10 year Bund and Gilt yields have fallen 27bps and 32bps respectively with the indices returning +2.2% and +2.1% respectively. Spanish government bonds (+2.8%) have seen the best of the performance. The move in government bonds has also helped corporate credit to produce positive returns despite indices generally widening in spread terms. IG has outperformed HY in the sell-off but credit has held in reasonably well considering the issues elsewhere. In USD credit IG non-financials (+1.9%) have seen the best of the performance while in GBP it has been financials (senior +2.3% and sub +1.9%).

Subordinated financials (+1.7%) have seen the best of the performance in EUR credit after a strong start. Interestingly none of the sub credit components in our performance review have seen negative total returns.

 

Finally commodities, which have had a mixed month. Overall the CRB index rose +1.1% helped by gains in gold (+3.2%) and corn (+2.8%) while other key commodities were generally down on the month including wheat (-8.2%), copper (-5.9%) and sugar (-5.2%). All the returns above are in local currency. We chart the returns in both local currency and Dollar terms in the pdf.


    



via Zero Hedge http://ift.tt/1k3q2hl Tyler Durden