Chipotle Jumps Ahead Of Earnings As CDC Expected To Say Epidemic Is “Over”

Great timing for a short-squeeze rumor? With Chipotle due to report what is likely to be ugly earnings after the bell today, CNBC reports (citing Dow Jones) that the CDS may declare an end to the E.Coli outbreak today.

 

This, as we suggested last night, has ripped stocks 4-5% higher (to one-week highs) squeezing shorts.

 

 

BREAKING: CDC expected to declare end to Chipotle e.coli outbreak as soon as Monday, but cause of e.coli contamination inconclusive – DJ

 

One week highs – not exactly a confidence-inspiring move.


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Colorado Man Had Charges Dismissed for Two Separate Bank Robberies, Refiled After He Complained, Plus More Charges Because Fuck You That’s Why

A real police horror story out of Colorado.

KDVR reports:

Steven Talley said he’s living a nightmare after being arrested not once but twice for the same bank robbery despite the star witness saying he’s not the guy.

A Denver judge released the 45-year-old from jail after the witness stunned prosecutors during a preliminary hearing. U.S. Bank teller Bonita Shipp testified that Steven Talley, the man charged with aggravated robbery, was not the same man who held her up in September 2014.

Talley was arrested in September 2014 for two bank robberies: At a U.S. Bank on Colfax Avenue in May 2014 and at a U.S. Bank on South Colorado Boulevard in September 2014.

Talley said he had an alibi for the first robbery—he was working. His wife identified him based on surveillance camera, but Talley’s lawyer pointed out the man in the video has a mole on his face but Talley didn’t.

Talley also alleged brutality during his arrest, a sort of nut punch:

Talley said he was beaten by members of the Denver SWAT team during his arrest. He said one officer swung a baton at his groin.

“I have what’s called a fractured penis. I didn’t even think you could break a penis,” he said.

According to Talley, the second case was reopened after being dismissed as retaliation for Talley complaining about his treatment:

“I’m going to throw your ass back in jail, we’re going to refile,” is the threat Talley accused [Det. Jeffrey] Hart of making.

In December 2015, Talley was rearrested for the second bank robbery. He was living at a homeless shelter at the time after he said he lost everything because of the first arrest.

“Had a family, had a career and the worst part is I haven’t seen my kids in like 17 months,” Talley said.

Talley’s story aired last Wednesday. On Thursday he faced new charges—an arrest warrant was issued accusing him of trying to influence a public servant.

In the last year and a half, since people started “waking up” on police brutality, there are still pernicious, if not malicious, misconceptions. Perhaps none is more dangerous than that the problem of police violence is merely a problem with individual cops. Such an attitude can be comforting—if we can only get better people onto the police force, the problems would go away. But “top men” never solved anything.

The racist cop as an individual has certainly become the most visible and covered aspect of the story of police brutality. If it’s not an unarmed black man shot by a white cop, the mainstream media appears uninterested—as if black men did not have a right to be armed without being killed and as if police of all races weren’t capable of killing people of all races.

But police violence is actually a systemic problem. That should, actually, be more comforting than the alternative. Humans create systems and humans can reform them. The rules that protect bad actions by cops, thus ensuring more bad action, are all man-made. The Law Enforcement Officers’ Bill of Rights (LEOBR) laws, for example, is an invention of the 1970s. Maryland was the first state to pass it, and through lobbying by police unions and other police apologists, the set of laws propagated across all 50 states.

The reforms can start the same way. The most powerful motivator in any employment is job security. I’ve seen the threat of firing, if it’s real, yield some tremendous results in the private world. The public sector could use the same. Because stories like this about bad-acting individuals are stories about broken systems.

 (h/t Stanton S.)

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How Ted Cruz Turned His Back on Drug War Prisoners: New at Reason

Sen. Ted Cruz was once a leading Republican advocate of sentencing reform. But as Senior Editor Jacob Sullum observes, presidential candidate Cruz seems to have abandoned the cause and turned his back on drug war prisoners:

Unlike every other major-party candidate, Cruz joined [Rand] Paul in opposing the Renewable Fuel Standard on free-market grounds, a principled stand that could have cost both men votes in Iowa, where that mandate benefits corn farmers and ethanol producers. It’s too bad that Cruz, who describes his supporters as “courageous conservatives,” did not have the guts to join Paul in advocating a more enlightened approach to criminal justice.

View this article.

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Gold And Gold Stocks – A Meaningful Reversal?

Submitted by Pater Tenebrarum via Acting-Man.com,

A Negated Breakdown

There have been remarkable gyrations in the gold sector lately. The typical rebound out of a November/December low (typical in recent years after the end of the tax loss selling period) was initially cut short in January in the course of the global stock market decline. This was a bit surprising, because it was widely held that the recovery in the gold price was a result of said stock market decline.

 

goldmine-700x360

 

 

We suspect that in it was initially still widely expected that stock market weakness was just a fluke and that the downtrend in the gold price would therefore soon resume. Moreover, base metal mining stocks were pounded mercilessly and as we have previously discussed, there is a completely illogical short term correlation between this sector and gold mining stocks, likely due to various tracking products and the mindless automatic buying and selling associated with them. From a technical perspective the action has created quite an interesting situation though:

 

1-XAU-HUI breakdown and reversal

XAU and HUI daily. After initially beginning to recover from November, resp. December lows, both indexes sold off sharply after the first trading week in January, and in the process broke below a previous support level that has been tested many times and has up to that point always held. It looked like yet another breakdown in the long-lasting bear market was underway – but the indexes quickly reversed back above the broken support line – click to enlarge.

 

As the chart annotation indicates, the recent reversal is definitely positive. Both false breakouts and false breakdowns often turn out to be reliable trend change signals. An additional bonus in this case was that the initial breakdown has induced widespread capitulation (judging from anecdotal evidence).

 

Advance in Gold Characterized by Caution

What looks encouraging as well is the recent saucer-shaped bottom in gold – usually this kind of formation leads to a fairly decent rally:

 

2-Gold saucer

Gold begins to rise out of a saucer-formation – click to enlarge.

 

Contrary to the immediately preceding rally attempt, the current one has been a “scared rally” so far. There has been fairly little speculative buying in COMEX futures, and small speculators have actually remained net short up until last week, when their net position turned roughly neutral.

 

3-Gold CoT-1

Speculative buying in COMEX gold futures has so far been far more subdued than during previous rallies – click to enlarge.

 

The mainstream financial press is still busy penning obituaries on gold, which is generally a good sign as well. A playable rally should be widely disbelieved in its early stages. According to the article we have linked to “many still don’t see a bottom”, but in terms of major non-dollar currencies it has of course occurred a few years ago already. In numerous EM currencies gold has in fact attained new all time highs, but even priced in major developed market currencies the performance of the gold price continues to diverge significantly from that in USD terms.

 

4-Gold in yen and euro

Gold in yen and euro. There wasn’t even a bear market in yen terms, merely a correction – and it bottomed in mid 2013. In euro terms the gold price has bottomed in late 2014 and appears to have put in its third consecutive higher low recently. If it manages to exceed its early 2015 interim high, it will be legitimate to speak of a new bull market – click to enlarge.

 

In developed market commodity currencies like the Canadian dollar and the Australian dollar, gold has bottomed in mid 2013 as well and has gained significant ground since then.

As we have remarked in a previous update on the sector, we don’t like it when gold rises for a “reason”, and we found it a bit unsettling that a consensus seemed to have emerged that the gold rally was primarily considered a result of the stock market sell-off.

However, so far it has continued to hold up quite well, in spite of a not overly dovish sounding FOMC statement and a rebound in stocks, so perhaps the gold market is actually beginning to look beyond these presumed correlations. It is a bit too early to judge though – a further short term rally in stocks or in the US dollar may well derail it again.

 

An Update on Divergences

There is one technical development that on the face of it argues for caution. Below is an update of the divergences between the HUI-gold ratio, the HUI and gold. Readers may recall that the last divergence that was put in seemed quite encouraging, as the HUI had failed to confirm a new low in gold. Now a third consecutive divergence has occurred – this time, the above discussed brief breakdown in XAU and HUI was not confirmed by the gold price. However, neither have the two indexes managed to confirm gold’s recent move to an interim high.

 

5-HUI-gold divergences

The HUI-gold ratio, the HUI and the USD gold price – the series of non-confirmations continues, with the most recent one (illustrated by the red line) normally considered negative – click to enlarge.

 

As we have pointed out in “How to Recognize an Emerging Bull Market”,   usually major turning points are first signaled by strength in gold stocks and only later confirmed by a rising gold price. However, given the strange correlation between gold stocks and base metal mining stocks which has developed in recent years, one should perhaps not be too fixated on the indexes, especially as there are large disparities within the sector – numerous stocks are notably lagging and underperforming, while others are performing quite well.

If one looks at the two gold stocks with the biggest market cap and the greatest liquidity, one actually sees a perfect example of how things should be. Both ABX and NEM have begun to rally well before gold made its low and have built quite decent looking bottoming patterns in the process. Both have not confirmed the new lows in XAU and HUI in mid January. ABX looks especially strong:

 

6-ABX and NEM vs Gold

ABX, NEM and the gold price – this is a classic bullish divergence – click to enlarge.

 

On the other hand, GG and RGLD are examples of large cap gold stocks with a fairly strong institutional following that have performed very poorly, so on the whole it is a mixed bag.

 

7-GG and RGLD

GG and RGLD – two major gold stocks that have performed very poorly – click to enlarge.

 

As we have stressed late last year, bottoming processes in the sector are always tricky (see 1992-93 as a pertinent example). It could well be that things are simply especially tricky this time around. Naturally, we can by no means rule out yet that the rebound is just another flash in the pan – that will only be possible once the HUI actually overcomes its 200 dma and manages to hold above it.

 

South African Gold Stocks vs. the Rest of the Sector

We have discussed Harmony Gold in early December after the company had suddenly paid down a hefty chunk of its debt, and the rand gold price broke out to new highs. We revisited South African gold stocks and the rand gold price again in early January (see “The Canary in the Gold Mine” for details). In the meantime, gold in Rand has surged even further, as the rand up until recently weakened quite a bit more in concert with other EM currencies. As a result this sub-sector has delivered an excellent performance – as the combination of fundamental developments and chart patterns a few weeks ago indicated it would.

 

8-South African Gold Stocks

The three South African gold miners that have benefited the most from the weaker ZAR, as most or all their producing assets are located in SA – click to enlarge.

 

However, it seems to us that the time is ripe for at least a short term correction or a consolidation in these particular stocks. If last week’s rebound in oil prices/ industrial commodities and stock markets continues for a while longer, EM currencies are bound to strengthen. As you can see below, the Rand has in fact turned up against the USD last week from extremely oversold levels (shown as “overbought” in USD/ZAR), and the Rand gold price has begun to correct accordingly:

 

9-Rand gold price vs USDZAR

The Rand gold price and USD/ZAR – click to enlarge.

 

Keep in mind though that these stocks have historically tended to add to their gains after such an initial correction, even if gold in Rand only proceeded to move sideways in a new, higher range. This may be because some investors only react once the first earnings results reflecting the move in the Rand gold price have been released. So it seems worth keeping an eye on these stocks.

In the meantime, it could well be that certain laggards in the sector are actually poised to do something analogous to what these stocks have done. Consider for instance the ratio of Canadian gold mining form Kinross (KGC) to HMY. It certainly argues in favor of mean reversion. The chart of KGC by itself looks awful – but so did that of HMY when it approached its low. Another important similarity is that the market fails to reflect a number of positive fundamental developments in KGC’s case as well at present (we will discuss this particular stock in more detail in a separate post).

 

10-KGC-HMY ratio

The ratio of KGC to HMY has moved from one extreme to another – perhaps the time for a mean-reversion has now come? Many Canadian gold stocks have been extreme laggards, and in a number of cases it is not quite clear why – click to enlarge.

 

In short, there may be a few opportunities to redeploy funds from one group of stocks within the sector to another group that still appears to have catch-up potential. As an aside, many silver stocks have also been beaten down a lot and may therefore have bounce potential, but as long as economic confidence is weakening, gold should continue to outperform silver, even though silver is historically cheap relative to gold.

 

Conclusion

In spite of the sector continuing to try the patience of investors, a number of positive things have happened lately – but as so often, it is a mixed bag, as a few short term technical warning signs are in evidence as well (see the discussion of divergences above). Whether a sector-wide trend change is in fact beginning remains of course uncertain until certain technical preconditions have been met (such as overcoming lateral resistance levels and the 200 dma).

However, as we have previously argued, even short term rebounds that are subsequently surrendered again are worth playing in this sector due to its enormous volatility (consider e.g. that HMY has rallied nearly 300% between late November and late January; not too many stocks manage to do this in just two months). At some point there will be a sector-wide rally that will turn out to be the “real McCoy” and we will certainly comment if/when that happens. Note as an aside that the fundamental macro backdrop for gold itself has improved of late.


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Rand Paul’s Iowa Chances

“We must be brave enough to believe that ideas are powerful, maybe even stronger than armies,” said Sen. Rand Paul (R-Ky.), speaking before a crowd at the private Drake University in Des Moines, Iowa, last week.

Throughout the half hour he talked, he was mostly calm, offering sometimes long-winded libertarian truths, getting big cheer lines from an often-rowdy crowd for everything from how we will soon run out of other people’s money, and how we must fight Big Brother; how he will “never ignore the human costs of war” (which triggered a wave of “President Paul!” shouts) and that “we must be the party of justice and justice begins when the war on drugs ends,” while also stressing that we must stop IRS harassment.

Not much he said made him seem like he was fighting on the same ground as any of his opponents, except when he slammed Donald Trump for his practice of eminent domain and Ted Cruz for his hunger for government to swallow up our phone records.

Paul opened with a curiously spiritual rap prefaced with “What victory is faith if we are not free to choose it?” and assured the students that he was the candidate who wanted to build a bigger, broader party, “with more walks of life, with tattoos and without, with earrings and without, in overalls and in suits, a bigger more diverse party because, as my dad always said, ‘liberty brings people together.'” 

Liberty needs to bring a lot of people together for Rand Paul in Iowa’s caucuses tonight for his campaign to have much life left.

Paul’s been doing many similar talks before students and other groups of Iowans over the past week, sometimes drawing over 1,000. Last night, he did a rare dual appearance with his father, former Texas congressman Ron Paul, who won the caucus votes of over 21 percent of Iowans four years ago. (Rand tells reporters he has reason to believe that some extant polling in Iowa seems to be missing a lot of that group.)

He’s been defending a foreign policy opposed to regime change in the Middle East to the last, as USA Today reports:

“You want somebody that’s going to be the commander in chief who has some temperament. That really isn’t eager to pull the trigger,” he said. “I want a foreign policy that defends America. That makes us strong again. But I don’t want a foreign policy that thinks that regime change in the Middle East is going to work.”

The national optics for Paul going into the caucus are as good as can be expected for a candidate who suffers both crummy poll numbers and a general sense that his quasi-libertarian approach seems the last thing GOP voters want in an age of Trump.

Those problems combined have relegated him to “who cares?” status to most media and possibly most voters. He was even denied a seat in the Jan. 14 Fox Business News main debate, an insult that Paul turned into a good earned media opportunity.

As his presentation at Drake indicates, to the extent Paul does do well tonight, sticking to mostly libertarian bonafides will be why. (Even to non-libertarians, Paul’s stances can seem like refreshing common sense compared to his opponents.) But it seems clear that the currently Trump-Cruz dominated party base isn’t libertarian dominated. Even if he shocks the world tonight, Paul will still at best be leading a rump revolution within the Party, not its ruling faction.

Poll numbers in Iowa on the rise got him got him back into the last pre-caucus debate on Thursday (he was 5th in the lastest Des Moines Register poll), his last chance to potentially reach voters across the state who didn’t leave their house to see him.

Paul had a good night. He skillfully, if not necessarily passionately, hit his unique libertarian-ish bonafides over surveillance and privacy, criminal justice reform, and foreign intervention. (He might have whiffed on abortion, from whatever side you approach the matter.) The Washington Post declared Paul the top winner of the debate though also confident it’s still “too little too late” for him. Data journalism superstar Nate Silver at his FiveThirtyEight site also called Rand the winner, as did James Poulos at The Week, praising Paul’s “brilliant combination of high dudgeon and medium chill.”

But what has to happen for him to win even a perception victory in Iowa? As Stephanie Slade wrote here last week, it is going to be about turnout, and Rand had both a campaign and an unaffiliated SuperPac, Concerned American Voters (CAV) working Iowa on that. Paul’s people are confident their get-out-the-vote (GOTV) operation will deliver 10,000 students to caucus for Paul, which in and of itself would amount to over 8 percent of the 2012 caucus turnout.

Cliff Maloney, who’s running the youth operation for the campaign in Iowa, answered some questions about the operation via email. He says they will have made 1.2 million phone calls by the time everything is over today, and currently have 150 active volunteers at their Iowa HQ. While Ted Cruz is also reported to have a very impressive ground and phone operation, Maloney is “confident that Team Rand has the top ground game in Iowa.”

The key to student appeal, Maloney says, is that “every student we speak with loves that Rand is consistent and authentic. Students love that he is an every-day Joe, an eye surgeon from Bowling Green. The more we talk about privacy, a sober foreign policy, and his consistent stance for the principles of liberty, the more we find students joining our SFR [Students for Rand] chapters.”

Matt Kibbe of CAV says that while they have not had a specifically student-focus like the campaign, they are confident they’ve identified and are communicating well with over 30,000 Rand-identified potential caucusers, and are helping house squads of door-knockers for Paul in these last 48 hours.

Paul’s appeal isn’t single issue, says Steve Grubbs, a veteran of earlier Steve Forbes and Herman Cain (among other) GOP campaigns, who has been helming the Paul campaign’s Iowa operations. “With Forbes it was all the flat tax, with Herman Cain it was 999, but with Rand Paul it’s the overall liberty message and how it applies to all issues, but particularly peace through strength, audit the Fed, civil justice reform.”

Grubbs says as of late last week that they had around 1,025 precinct captains for the state’s 1,681 precincts, who are important as folk handling the most granular GOTV efforts, making sure local committeds show up to the polls, and also for handling the vital task of convincing, in short speeches before their neighbors at the caucus meeting, why they should vote for Rand Paul.

Grubbs says that “a significant number” of Iowans don’t really finally settle their decision til after they’ve heard what their neighbors caucusing for the various candidates have to say at the meeting itself. Grubbs says their precinct captains will be giving out lapel stickers to supporters that push three issues: term limits, peace through strength, and flat tax.

I spoke to a handful of Concerned American Voters canvassers, some who’d worked in Iowa and some who are working in Nevada. (The Paul campaign itself holds its volunteers to a non-disclosure agreement, and even ones I reached out to informally over social networking held to it. While I understand message discipline, as with the Ron Paul campaign, a potentially inspirational story of youth and grassroots activism that could be grand for general media optics is there to be told, though the campaign seem to insist it can’t be told, at least not on their watch.)

Adam Sullivan, who was in college in Iowa during the 2012 Ron Paul campaign and who did activism work later with the Paulist Young Americans for Liberty, was a field director for CAV in Iowa this campaign. He says for Rand fans, the “outside, the anti-establishment thing” was hot, and he didn’t think a majority of Rand supporters would necessarily self-identify as “libertarian.”

That said, even among the constitutionalists or conservatives, “I didn’t hear anyone saying we definitely need to keep pot illegal, keep filling the prisons” and he is sure progress on that “is a credit to Ron and Rand Paul.” Despite what current polls might indicate, Sullivan thinks the idea that a vast majority of Ron voters are turned off this year by some perceived softness in Rand’s small-government bonafides is a myth.

Evangelicals are a big thing in Iowa, and Sullivan thinks most of them at least like Rand fine, even if he’s not their first choice. Of the big “values” issues in Iowa, they are far more concerned with pro-life than gay marriage these days. Sullivan, and other CAV canvassers in Nevada, acknowledge that some GOP voters see Paul as “insufficiently aggro” or “too dovish” when it comes to foreign policy. The most likely voter to be hostile to Paul is the Trump voter.

A profile of CAV’s digital video ad strategy in Rare says they’ve found “topics that performed well were Paul’s correct predictions about the perils of arming jihadists, and strong condemnations of politicians for getting us into $18 trillion in debt.”

CAV has spent around a million on such ads, and the PAC’s operator Jeff Frazee told Rare that “Everything [CAV] has done has been very data driven. We’ve made sure to check our own intuitions and opinions at the door, and let the data tell us what messaging is strongest and what’s resonating with voters.”

Kibbe of CAV says that, even though foreign policy might be understood to be a weak point for Paul with the imagined modal GOP primary voter, “his stance on foreign interventions is a key issue for us.” That makes sense since it has been a major way he’s “differentiated himself from a crowded field” in which you need motivated folk to actually show up and wait through Iowa’s long and complicated caucus process. That involves sitting through long meetings and literally standing up in public for your candidate; it’s not like going into a booth, pulling a lever, and heading home. 

Kibbe is confident enough the polls are wrong about Paul that he calls a top-three showing for his man tonight, and vows regardless that CAV is “in it til the day he’s sworn in office” and already has active operations in groundwork in Nevada and social media work in New Hampshire.

CAV has pulled in six-figure donations from a handful of wealthy libertarians, including Whole Foods co-founder and co-CEO John Mackey. Overall, the three SuperPACs dedicated to Rand took in $4.6 million in the second half of 2015, spending $5.9 million in the same period but still holding $4.4 million in reserve.

Paul campaigns believe in phone calls, and plenty of them. As with Ron Paul in Iowa in 2012 I’ve seen some signs that some people are annoyed and frustrated at how many times Rand Paul makes their telephone ring. National Journal reported that your Cruzes and Bushes are also making over 10K calls a day using sophisticated computer data systems, but Trump’s voter identification or GOTV efforts are a black box and may be non-existent.

If that is true, and a huge chunk of those polling now for Trump don’t actually trouble themselves to go caucus for him today, Rand Paul’s hopeful declaration in a press conference last week that polls may be not just 5 but 15 percent off could have some bearing.

The idea that Trump may have picked up a portion of the old Ron Paul coalition just on the basis of being the most convincing “radical outsider” (independent of actual ideas) rings true with some, but not all, Paul watchers. One longtime Paul fan admits that to some in 2012 Ron was not necessarily the libertarian candidate but just the radically anti-Washington “drain the swamps” guy and Trump plays the same role for many now. That same analyst thinks that libertarians, and the GOP establishment, both underestimate how strong in Iowa is the desire to just see “every illegal immigrant sent back home, no matter how many buses it takes.”

Kibbe says from his years of tending the Tea Party grassroots via his previous work with FreedomWorks that the GOP powers-that-be underestimated exactly how much they had pissed off and disenfranchised many of their voters. Many of them now see Trump as “a convenient wrecking ball to take out the Republican Party and start over” which given his character and ideas is a “dangerous game” that Kibbe still hope Paul can block.

Something to ensure Trump doesn’t do as well in Iowa or down the road as currently seems likely is key to the campaign’s or the PAC’s hope. 

Paul is definitely selling a very different spirit than Trump, for those who still want to hear it. While rock n’ roll as the language of rebellion may be an outmoded concept, it still warms this libertarian’s heart seeing Paul take the idea of liberty past just specific things government may be doing, from taxing to spying, that make our lives harder, to a more idealistic and cosmic sense of individual possibility, by quoting that most cosmic of classic rock bands, Pink Floyd.

At his talk last night, as reported in the Des Moines Register, Paul:

elicited the help of Pink Floyd’s infamous “Shine on You Crazy Diamond” to drive home his point that free ideas are the most powerful weapon.

“For the crazy diamonds to shine, government must get out of the way,” he said. “The leave-me-alone generation is a generation that believes they can conquer the world and solve any problems if left free to follow their dreams. You are the leave-me-alone-generation, and I want you to shine, shine on.”

If Iowa doesn’t work out impressively for Paul, what then?

Paul is famously not thrilled with campaigning as a way of life. Will he just chalk up any failure in 2016 to Trump, or the times, and try again in 2020 to proceed further with what’s already been built? One anonymous observer close to the campaign who has spent time with the candidate doesn’t think so. “I personally don’t think he will run again. He just doesn’t enjoy the process. The redeeming thing about Rand Paul is that he’s a family guy, he’s really isn’t fond of D.C. and he’d really just like term limits to get rid of all the rotten people in D.C. I think he wants to return to his family and his eye practice.” 

But that same observer doesn’t think tonight is going to be the end, no matter what happens. He does feel Paul has a sense that it would be “a disservice to the antiwar people and the liberty minded people if Rand doesn’t allow them a place to cast their vote” even if he doesn’t seem on a path to win. But then that observer makes it sound more like hope than expectation. “I hope he stays in, or at worst just suspends active campaigning [if he’s doing poorly in early states], but totally ending it would take away a place for liberty people to vote.”

Paul and his campaign don’t want to speculate about a bad outcome right now. “We’re going to surprise a lot of people on Monday,” Paul said at his campaign speech this weekend. It might be his last chance to do so.

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Snow Expected for Iowa Caucuses, Iran Awards Medals Over Captured US Soldiers, Israel Permits Non-Orthodox Jews to Pray at Western Wall: A.M. Links

  • Snow is expected tonight for the Iowa caucuses.
  • Super PACs in support of Jeb Bush raised a lot less money in the last quarter of 2015.
  • Thousands of people in San Diego were without power and at least one person is dead after a Pacific storm hit southern California.
  • ISIS claimed responsibility for bombings in Damascus that killed at least 45 while John Kerry was in Geneva calling for peace in Syria. Meanwhile in Kabul, at least nine people were killed in a suicide bombing.
  • Iran awarded medals to the navy commanders responsible for capturing U.S. sailors who strayed into its territorial waters last month.
  • Burma’s newly elected parliament convened for the first time, with former political prisoner Aung San Suu Kyi heading the largest party.
  • The government of Israel will open up the Western Wall to prayer by non-Orthodox Jews.

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Savings Rate Surges To Highest Since 2012 As Spending Disappoints

The Keynesians will not be pleased. Despite the holiday season, December spending disappointed with no change MoM (0.0% vs +0.1% exp). This is further sentiment-destructivbe as income data rose more than expected MoM (+0.3% vs +0.2% exp) even as income growth YoY slipped to its weakest in 9 months.

Perhaps most sadly of all, 42% of December Personal Income gains came from Government Social Benefits, mostly Social Security and Medicare. Vive le recovery.

Spending on Goods, both durable and non-durable, tumbled by $34.6 billion offset by $33.9 billion jump in spending on services.

Widening the gap…

 

This of course means the personal savings rate rose, pushing to 5.5% – the highest since 2012.

Not what the PhDs in The Eccles Building are demanding or their textbooks are predicting.

 

Charts: Bloomberg


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Key Events In The Coming “Payrolls” Week

After last week’s relatively quiet, on macro data if not central bank news, week the newsflow picks up with the usual global PMI survey to start, and end the week with the US January payrolls report.

Here is a closer look at what to expect via DB:

  • We’ve got a busy day of data kicking off on Monday in Europe with the final revisions to the manufacturing PMI’s (January) for the Euro area, Germany and France. UK money supply and credit aggregates data is also due this morning. Over in the US we’ll get the December core and deflator PCE data along with personal income and spending, manufacturing PMI, construction spending and the important ISM manufacturing and prices paid.
  • It’s a quieter session on Tuesday with just Euro area PPI and German unemployment data in the morning, before we get vehicle sales data and the IBD/TIPP economic optimism print in the US.
  • Wednesday starts in China where we’ll get the Caixin services and composite PMI prints. We’ll also get the non-official readings for Japan before we get the final revisions for the services and composite prints for the Euro area, Germany and France along with readings for UK, Italy and Spain. Euro area retail sales is also due. Over in the US on Wednesday the ADP employment change print for last month will be closely followed for clues ahead of Friday. The ISM non-manufacturing print is the other big release along with the final services and composite PMI’s.
  • The main focus during the morning session on Thursday will be on the UK where the BoE rate decision is due. Over in the US we’ll get final revisions to those soft December durable and capital goods orders data, along with initial jobless claims, nonfarm productivity, unit labour costs and December factory orders.
  • The only data of note on Friday in Europe will be German factory orders. Over in the US the main event will of course be the January employment report where we’ll get payrolls, unemployment, participation rate and weekly earnings data. If that wasn’t enough we’ll also get the December trade balance and consumer credit data.

And some more detail from Goldman on what to expect:

Monday, February 1

08:30 AM Personal income, December (GS +0.3% consensus +0.2%, last +0.3%)

  • Personal spending, December (GS flat, consensus +0.1%, last +0.3%)
  • PCE price index, December (GS flat, consensus flat, last flat)
  • Core PCE price index, December (GS +0.11%, consensus +0.1%, last +0.1%)
  • PCE price index (yoy), December (GS +0.6%, consensus +0.6%, last +0.4%)
  • Core PCE price index (yoy), December (GS +1.42%, consensus +1.4%, last +1.33%)

We forecast personal income grew by a modest 0.3% in December. Payroll growth was strong in December, although wage growth was modest. Personal spending was probably flat in December, in line with the weak December retail sales report and some modest deceleration in services expenditures reported in last week’s Q4 GDP report. We expect core PCE prices to increase by 0.11% in December but the gain in the quarterly core PCE price series from Friday’s GDP suggests some upside risk to this forecast. The core PCE price index likely rose 1.4% over the past year with the possibility that the year over year rate rounds to 1.5%.

10:00 AM ISM manufacturing, January (GS 48.4, consensus 48.5, last 48.2)

Manufacturing surveys were mixed, with all but the Richmond Fed and Chicago PMI pointing to contracting activity. The Philly index rose by 6.7pt to -3.5 and the Chicago PMI was up 12.7pt to 55.6. The Empire State index declined (-13.2pt to -19.4), as did the Richmond Fed (-4pt to 2) and the Dallas index (-13.0pt to -34.6) while Kansas City was flat at -9. On net, our manufacturing survey tracker – which is scaled to the ISM index – rose 0.8pt to 49.2. We find that that weak net exports – probably caused by continued dollar appreciation and weak foreign demand- play the most important role in the manufacturing’s sector recent difficulties (in addition to reduced orders from the energy sector), and are likely to contribute to a contractionary read on ISM manufacturing for January.

10:00 AM Construction spending, December (GS +0.6%, consensus +0.6%, last -0.4%)

We expect construction spending rose in December, reflecting continued strength in private residential investment. Construction spending unexpectedly declined 0.4% in November, but remains 10.5% higher over the last year.

01:00 PM Vice Chairman Stanley Fischer (FOMC voter) speaks

Vice Chairman Fischer will discuss recent developments in the U.S. economy and monetary policy at a Council on Foreign Relations event in New York. We will be looking for indications about the weight Vice Chairman Fischer puts on the recent tightening in financial conditions in the outlook for monetary policy.

Tuesday, February 2

01:00 PM Kansas Fed President Esther George (FOMC voter) speaks

Federal Reserve Bank of Kansas City President Esther George will speak about the U.S. economic outlook and monetary policy in Kansas City at the Central Exchange, a group that promotes leadership development for women. President George is a voting FOMC member this year.

04:00 PM Total vehicle sales, January (GS 17.3mn, consensus 17.4mn, last 17.2mn)

Domestic vehicle sales, January (GS 14.0mn, consensus 13.7mn, last 13.5mn)

Our auto analysts expect total vehicle sales to accelerate slightly from December to 17.3mn.

Wednesday, February 3

08:15 AM ADP, January (GS +185k, consensus +190k, last +257k)

Based on our understanding of how ADP filters its own proprietary data with other publicly-available information, we expect a 185k gain in ADP payroll employment in December.

10:00 AM ISM non-manufacturing, January (GS 55.0, consensus 55.2, last 55.8)

Among service sector surveys, the Dallas Fed index (-12.7pt to -10.4) and the Philly Fed (-21.6pt to 5.1) declined. The NY Fed increased by 2.0pt +4.0. (The New York survey is a relatively new and seasonally-not adjusted series). The Richmond Fed also rose (revenues +10pt to 10, employment flat at +18), while the Markit PMI was flat. The ISM non-manufacturing index fell by 0.8pt last month.

Thursday, February 4

08:30 AM Nonfarm productivity, Q4 preliminary (GS -1.2%, consensus -2.0%, last +2.2%)

Unit labor costs, Q4 preliminary (GS +4.4%, consensus +4.0%, last +1.8%)

Nonfarm business output growth was close to flat in Q4, while hours worked likely rose at a roughly 1.2 % rate, implying a roughly 1.2% decline in productivity. Unit labor costs—compensation per hour divided by output per hour—likely rose at about 4.4%.

08:30 AM Initial jobless claims, week ended January 30 (last 278k)

Continuing jobless claims, week ended January 23 (last 2,268k)

08:30 AM Dallas Fed President Robert Kaplan (FOMC non-voter) speaks

Federal Reserve Bank of Dallas President Robert Kaplan will speak on global economic conditions in Dallas.

10:00 AM Factory orders, December (GS -3.1%, consensus -2.8%, last -0.2%)

Factory orders likely declined markedly in December, reflecting the already-reported weak December durable goods orders.

Friday, February 5

08:30 AM Trade balance, December (GS -$43.0bn, consensus -$43.2bn, last -$42.4bn)

The new advance report on trade showed a slightly wider goods deficit in December (-$61.5bn from -$60.5bn), reflecting a widening trade balance across most sub-categories. We expect the services balance to be little changed in December. Overall, we expect the total trade deficit to be at -$43.0bn, and for the deficit to continue acting as a drag on GDP growth in the coming quarters.

8:30 AM Nonfarm payroll employment, January (GS +190k, consensus +190k, last +292k)

  • Private payroll employment, January (GS +180k, consensus +180k, last +275k)
  • Average hourly earnings (mom), January (GS +0.3%, consensus +0.3%, last +0.0%)
  • Average hourly earnings (yoy), January (GS +2.2%, consensus +2.2%, last +2.5%)
  • Unemployment rate, January (GS 5.0%, consensus 5.0%, last 5.0%)

Data have been broadly softer this month, including the higher claims data. In addition, we expect to see some payback from the warm weather-induced boost to payroll growth at the end of last year. We expect a December payroll gain of 190k after the strong December 292k print and an upwardly revised 252k read for November, which resulted in the firm Q4 2015 average of 284k. We also expect the unemployment rate to be unchanged at 5.0%, and average hourly earnings to increase 0.3%.

* * *

Finally, in table format courtesy of SocGen:

Source: DB, GS


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Rates Are “Screaming” That Investors Are In Panic Mode, Trader Warns

Haruhiko Kuroda’s move to NIRP and Mario Draghi’s implicit promise to ramp up PSPP in March underscore the extent to which Janet Yellen has made a policy mistake by hiking at a time when the US economy (not to mention the global economy) looks to be decelerating and the disinflationary impulse looks to be gathering steam.

January marked a rather inauspicious start to the new year with wild swings in Chinese markets fueling volatility across the globe and crude carnage taking its toll on investors’ collective psyche. Oil managed to ramp but China is still a (big) problem, as we explained this morning in the overnight wrap. 

With Beijing set to export its deflation to the rest of the world and with central bankers in panic mode, investors are piling into core paper like there’s no tomorrow. Below, find some insightful commentary from former FX trader Mark Cudmore.

From Bloomberg

For all the January focus on oil and China, and both have certainly provided much of the volatility, the largest asset shift so far in 2016 has been in core sovereign bonds.
  • Friday’s surprise move to negative rates by Japan may have provided the ceremonial flourish, sending Japanese yields to record lows. But that’s far less noteable than moves elsewhere. Japan’s two-year rate has dropped 14 basis points this year, which is dwarfed by other sovereigns
  • Mario Draghi’s commitment that the European Central Bank will soon ease further has seen German two-year yields also hit record negative levels; the drop there has been 14 basis points as well
  • However, both pale in comparison to what is happening in the equivalent paper in the U.S. and U.K. The former has seen a 28 basis point plunge, while U.K. two-year yields are currently trading at the lowest level in over a year after plummeting 32 basis points
  • A year ago, we were debating whether the U.K. might even raise rates before the U.S. -– now markets are indicating the Bank of England’s next move is more likely to be a cut
  • Rates are either screaming out that the deflation battle is far from over or they’re implying that investors are so worried about 2016 that they’d prefer to pay the German government 0.5% per year to keep their cash “safe.” In other words they see deflation in financial assets, if not in consumer prices
  • With that in mind, Brent crude’s rebound of more than 30% from the January 20 intraday low, prompts two thoughts
  • The first is that the risk of headline consumer-price deflation is much less than it was two weeks ago, which suggests that fear is indeed the dominant driver of rates markets
  • The second is that when one of the world’s key economic inputs, oil prices, can rally 30% but still be down on the month, then investors may have a valid reason to be scared


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