Global Manufacturing Rolling Over: Over 70% Of Global PMIs Decline In February

Moments ago we got the two latest monthly US manufacturing surveys in the form of the downbeat Markit PMI, according to which “the February data add to signs of distress in the US manufacturing economy“, offset by the traditionally more optimistic ISM, whose chair Bradley Holcombe went so far as to say “US manufacturing may have found a bottom.” Then overnight we also received the latest Markit manufacturing sentiment update from around the globe. Suffice it to say, it did not support Holcombe’s cheerful “bottom hunting” outlook.

As the below table shows, 28 regions have reported so far. Seven saw improvements in their manufacturing sectors in February, twenty recorded a weakening, and India was unchanged. This means that over 70% of the world saw manufacturing sentiment deteriorate in February compared to January.

In terms of actual expansion, there were 21 countries in positive territory and 7 in negative. In particular, Greece moved from neutral to contraction territory, while Taiwan dropped below breakeven from expansion.

The biggest wildcard remains China where economists note that the fall in headline PMI was mainly driven by declining production and new orders, while inventory of raw materials improved. The government ascribed the deterioration in the manufacturing PMI to celebrations surrounding the Lunar New Year, however as BofA notes, “growth momentum of industrial activities could have further weakened in February.”

Ultimately, the only relevant question is whether China can stabilize its economy, and lead to a recovery in global manufacturing which for the past 7 years has ultimately been a downstream function of how well China is doing. For now the answer remains nebulous at best.

via Zero Hedge Tyler Durden

Could Donald Trump Be A New Kind Of Transactional President?

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

The possibility that Trump would step on favored political toes and act pragmatically to rein in Imperial over-reach terrifies the bloated Imperial city of Washington D.C.

Political scientist and theoretician Joseph Nye, Jr. differentiates between transformational presidents and transactional presidents: transformational presidents consciously set out to radically transform America and/or America's role in the world, while transactional presidents are pragmatists who focus on managing crises and responding with caution rather than taking bold and dangerous bets.

Nye explains the difference in Do Presidents Really Steer Foreign Policy?: George H. W. Bush was a (successful) transactional president, George W. Bush was a (failed) transformational president.

Other historians have drawn distinctions between ideologically driven presidencies (Reagan and Carter, for example) and those who practiced realpolitik–making decisions based on realities and circumstances on the ground rather than on an overarching moral or ideological framework. Richard Nixon is widely seen as a realpolitik president, as were Harry Truman and Dwight Eisenhower.

You see the overlap, right? Ideological presidents are transformational, as the world inevitably fails to match up to their ideals and goals. Realpolitik presidents are transactional, making decisions based on context, risk, and the situation on the ground. These presidents are often criticized for not "saving the world," i.e. intervening to "right" some morally reprehensible crisis, or for not "defending America's interests" more aggressively.

Obviously, every president has a mix of ideological underpinnings and pragmatic skills.

As I pointed out in Sorry, "Feel the Bern" Fans: President Sanders Won't Change Anything, very little of the Imperial machinery is under the direct control of the President, and Congress and the Supreme Court can block a variety of presidential aims.

The mainstream hysteria about President Trump (and to a lesser degree, about President Sanders) is misplaced: rather than be the ruin of the nation, either president would face a number of limits on his power.

Playing devil's advocate here–perhaps Trump would be an extremely transactional/ pragmatist president who would decide everything on a case by case basis. The two political parties and the Status Quo of institutions and Imperial agencies like predictability; everyone likes knowing politicos can be bought off or compromised, and they like ideological presidents because their choices are fairly predictable.

Trump upsets the Establishment precisely because he maintains a freewheeling lack of predictability and vulnerability to the usual blandishments of money and power. Not only can't he be bought, he doesn't toe any ideological line.

Here's a sample test for an effective president: can he/she cancel a big, costly, failed "but it creates jobs" weapons system like the F-35? The political pressure to maintain spending billions on a DOA weapons system like the F-35–$200 billion each, underpowered, buggy and unable to best the aircraft it replaces in unrigged air-to-air combat, even after decades of development and years of "fixes"–is immense.

Hillary Clinton would never cancel such a politically powerful weapons system, even though when speaking privately, every unbiased military advisor would admit it's a complete catastrophe. (Could the Skunkworks design and mock up a better, cheaper aircraft at a third of the cost of the failed F-35? Why not let them try? They did so with the F-16.)

Could President Trump (or President Sanders) take the political heat and cancel the F-35 in favor of a faster, better cheaper replacement that doesn't try to be everything to every service?

The possibility that Trump would step on favored political toes and act pragmatically to rein in Imperial over-reach terrifies the bloated Imperial city of Washington D.C. This is why he is painted as the Devil Incarnate by the mainstream (i.e. bought and paid for) media and both political parties.

A transactional president who would make pragmatic decisions that gutted Imperial over-reach and eliminated failed programs because they are unaffordable and ineffective is dangerous to the Status Quo because he can't be bribed or swayed by the usual siren songs of ideology or party politics.

Taking the other side of the argument: suppose Trump ends up caving in to the usual Imperial pressures. How would that any different from electing Goldman Sachs Hillary? Wouldn't it still be more entertaining and less dreary than four years of completely predictable Imperial over-reach and the protection of privileged financial elites with Goldman Sachs Hillary?

Why Trump and Sanders Were Inevitable: It was only a matter of time before we had a populist backlash to 30 years of flawed globalization policies that both parties embraced.

via Zero Hedge Tyler Durden

Growing “Signs Of Distress” In US Manufacturing Data Demolish Decoupling Dream

Following the weakness in global PMIs, and yesterday's Chicago PMI collapse, US Markit Manufacturing PMI dropped to cycle lows at 51.3 from 52.5 (very slightly better than expectations of 51.2) with job growth at 5-month lows, production at slowest in 28 months, and work backlogs tumbling to the lowest since Sept 2009. Then ISM Manufacturing hit, hovering at its weakest in 7 years rose modestly to 49.5 but remains in contraction for the 5th month in a row (longest streak since 2009). As Markit concludes, "the February data add to signs of distress in the US manufacturing economy."

Remember the "America is an island and the rest of the world's economic collapse doesn't matter" meme… well that is over!! Cycle lows for Manufacturing PMI and 5th month of contraction for ISM Manufacturing


As Output plunges to cycle lows…

While ISM data showed a modest rise, New Orders were unchanged as Import and Export Orders fell.

ISM Respondents show a mixed bag:

  • "Low oil prices and reduced activity continue affecting our business." (Petroleum & Coal Products)
  • "U.S. business demand is solid; international demand is soft." (Chemical Products)
  • "Mobility spend is up." (Computer & Electronic Products)
  • "Business has to get better. And it appears it is. Healthy backlog for 2016." (Fabricated Metal Products)
  • "Very strong demand for product. Material availability very good and commodity pricing continues to be depressed." (Machinery)
  • "Airlines are still ordering planes and spare parts for plane galleys." (Transportation Equipment)
  • "Market is beginning to trend up with spring season on its way." (Wood Products)
  • "Not seeing impact from global economic volatility or oil prices. Business is strong and growth projections remain the same." (Miscellaneous Manufacturing)
  • "Orders are coming in stronger than expected." (Furniture & Related Products)
  • "Still a bit sluggish." (Food, Beverage & Tobacco Products)

Commenting on the February manufacturing data, Chris Williamson, chief economist at Markit said:

“The February data add to signs of distress in the US manufacturing economy. Production and order book growth continues to worsen, led by falling exports. Jobs are being added at a slower pace and output prices are dropping at a rate not seen since mid-2012.


“The deterioration in the manufacturing sector’s performance since mid-2014 has broadly tracked the dollar’s rise, which makes US goods more expensive in overseas markets and leads US consumers to favour cheaper imported goods.


“With other headwinds including the downturn in the oil sector, heightened uncertainty due to financial market volatility, global growth worries and growing concerns about the presidential election, it’s no surprise that the manufacturing sector is facing its toughest period since the global financial crisis.

Charts: Bloomberg

via Zero Hedge Tyler Durden

Buffett’s Fallacy – 2% Growth & Future Prosperity

Submitted by Lance Roberts via,

Warren Buffett, in his latest annual letter to shareholders, took aim at the idea that 2% real economic growth wasn’t sufficient to create economic prosperity for future generations was wrong.

Via Myles Udland from Business Insider:

“Some commentators bemoan our current 2% per year growth in real GDP – and, yes, we would all like to see a higher rate. But let’s do some simple math using the much-lamented 2% figure. That rate, we will see, delivers astounding gains.

Here is the math Buffett uses to reach his conclusion:

“America’s population is growing about .8% per year (.5% from births minus deaths and .3% from net migration). Thus 2% of overall growth produces about 1.2% of per capita growth. That may not sound impressive. But in a single generation of, say, 25 years, that rate of growth leads to a gain of 34.4% in real GDP per capita. (Compounding’s effects produce the excess over the percentage that would result by simply multiplying 25 x 1.2%.) In turn, that 34.4% gain will produce a staggering $19,000 increase in real GDP per capita for the next generation. Were that to be distributed equally, the gain would be $76,000 annually for a family of four. Today’s politicians need not shed tears for tomorrow’s children.”

On the surface, such a bit of “back of the napkin” calculation would seem completely logical. Unfortunately, it hasn’t actually worked that way.

The first chart below shows the annual growth rates of both total U.S. population, including armed services personnel overseas, and real, inflation-adjusted, growth of GDP.


First, with population growth at its lowest levels since 1900, currently at .77% annually, this single factor alone will continue to weigh on future economic growth.

As I have discussed repeatedly in the past, the current rate of employment growth has been less than the rate of population growth since the end of the financial crisis. As the population increases, the incremental demand in consumption leads to demand for employment increases. Unfortunately, companies have hired only enough to keep pace with current demand which is why the labor force participation remains an issue as the excess growth in the population remains unemployed.


Secondly, if I project out 2% real economic growth and .77% population growth, the resultant prosperity increase is only marginal at best. (This also assumes NO RECESSION over the next decade which would drastically lower this forecast.)


If we look back throughout that the entire history of the economy, we find that Buffett’s outlook is even a bit more depressing as the rate of current and projected economic growth/capita is only slightly above that of the 1900’s and far below that seen even during the “Great Depression.” 


If Buffett’s math was correct, growth rates of organic economic prosperity should have soared during the 80’s and 90’s. But, as discussed in detail previously, the only thing that “boomed” during that period was debt as the gap between wage growth and the standard of living needed to be filled.


With consumer’s having reached the limits of leverage, it is of little wonder why recent survey’s continue to show a large majority of American’s living paycheck-to-paycheck.

Furthermore, productivity increases due to advances in technology, communications, and outsourcing will continue to weigh on wage growth in the future.

It is also worth noting there is a massive difference between economic growth per capita and an individual’s actual living standards. Real GDP per capita does not directly translate to increases in personal wealth. If it did, economic prosperity would have lifted the entirety of America to a higher living standard over the last several years rather than creating a massive surge in wealth inequality. 

While the young people today certainly enjoy a higher level “stuff” than their parents, such does not lead to the one important aspect that Warren Buffett overlooked, the fulfillment of the “American Dream.”

The foundation of the “American Dream” is NOT acquiring a home, buying a load of useless crap we don’t really need using debt, or investing in the stock market. The “American Dream” is the ability to start with nothing and build a business which creates future prosperity which leads, eventually, to the ownership of property. The very bedrock of this nation is the story of people like Thomas Edison, Henry Ford and many others who started with nothing and built an empire through entrepreneurship.

Unfortunately, entrepreneurship in America has been sharply on the decline in recent years. Increases in regulation, slow economic growth and increased costs of employment, healthcare and benefits have made starting a business much less accessible in recent years as shown by a recent Federal Reserve study.


Today’s politicians do need to “shed tears for tomorrow’s children.” The accumulation of debt will continue to weigh on both future economic growth and personal prosperity until that trend is reversed.

While it may be a mistake to “bet against America,” and I am certainly not suggesting you should, the “golden goose” that laid the egg allowing Warren Buffett to build his empire was served for dinner beginning in the early 80’s.

America’s social security promises will be honored, but not without a negative impact to future generations. Our kids today may have access to more technology, better healthcare, and the greatest access to information ever in history, but if they do not have the ability to utilize that information, or manifest those benefits into entrepreneurship, the end result will be disappointing.

While I certainly appreciate Warren’s optimistic view of the future, ignoring the facts will only delay the inevitable need for reforms needed to allow future generations to become “the next great generation.” 

via Zero Hedge Tyler Durden

Crude Tumbles Into Red After Putin Comments

With overnight weakness in data sparking hype that moar stimulus is coming, and therefore juicing demand for oil, crude prices spurted above $34.50 this morning (after the NYMEX close banging yesterday). However, the last few minutes have seen the machine slam WTI back into the red after Putin said he would ask Russian oil producers if they will freeze production (at record levels).


We presume the market was pricing in this as a done deal…


Or simply did the math that freezing production at record levels in a world beset by slumping growth is not a positive.

via Zero Hedge Tyler Durden

Super Tuesday Preview: Trump, Clinton On Collision Course

Well, Super Tuesday is upon us and we’re about to find out whether Donald Trump and Hillary Clinton will run the table on rivals and lock up their respective party nominations.

“About half of the delegates needed for a Republican candidate to win the nomination are at stake, plus about a third for Democrats,” Bloomberg notes. “In roughly a dozen state races, Republican front-runner Donald Trump and Democratic leader Hillary Clinton seem poised to win in landslides that could render them nearly inevitable.”

In other words, this is it for Marco Rubio, Ted Cruz, and the incomparable Bernie Sanders. Either they pull off a miracle today or we’re about to witness a billionaire reality TV host square off against a former Secretary of State who is being investigated by the FBI with the keys to The White House on the line.

It’s not winner-take-all, delegate wise, on the GOP side, so conceivably, Rubio and Cruz could “win” even if they lose (so to speak), but the outlook isn’t good on the Republican side if your name isn’t Donald Trump.

Bloomberg is out with a preview of six separate predictions for today’s polls. You can read the full breakdown here, but the following two tables do a nice job of summarizing the outlook:

Meanwhile, a new CNN/ORC poll suggests that both Hillary Clinton and Bernie Sanders would beat Trump handily in the national election. “In the scenario that appears most likely to emerge from the primary contests, Clinton tops Trump 52% to 44% among registered voters,” CNN says. “That result has tilted in Clinton’s favor since the last CNN/ORC Poll on the match-up in January.”

According to the poll, Clinton faces a tougher battle against Cruz or Rubio. In fact, in a head-to-head battle, Rubio or Cruz would win, according to the same poll.

Frankly, we’re incredulous. The idea that Clinton would lose to Ted Cruz or Marco Rubio but would beat Trump handily seems dubious at best given what we’ve seen in New Hampshire, Nevada, and South Carolina. Cruz is flagging and Rubio, although polished, comes across as nervous and inexperienced under fire. Trump is.. well.. just Trump. Nothing sticks in the way of criticism. 

“Nearly 600 delegates are up for grabs on Super Tuesday — the most for any day of the 2016 primary season,” WaPo notes. “The bulk of them come from seven Southern contests, including the day’s biggest prize: Texas.” Here’s the visual breakdown:

And here’s a look ahead:

“Voters’ choices broken out by party provide an interesting window into areas where Trump might hold cross-party appeal,” CNN says. “Though the share of leaned Republicans choosing Clinton on any of the tested issues tops out at 8% on health care, Trump is the most trusted for 15% of leaned Democrats on terrorism, 14% on the economy and 13% on immigration.”

Still, there’s significant push back against the GOP frontrunner. Indeed, some say many Republicans would vote for Hillary rather than watch Trump steamroll his way into the White House. But according to some polls, it’s far too close to call:

Of course after Tuesday, the argument will no longer be relegated to the realm of the hypothetical. 

If things go as planned today, we’re going to get to watch the Hillary versus Trump battle play out in real life, which will inevitably provide all types of entertainment value. And if that’s not a good enough reason to root for the billionaire and the former First Lady on Super Tuesday, we don’t know what is.

via Zero Hedge Tyler Durden

Congratulations To Prominent Anti-HFT Crusader Eric Hunsader For Winning $750,000 Whistleblower Award

It has been nearly six years since Zero Hedge proudly began collaborating with Nanex and Eric Hunsader (recall first from June 2010: “How HFT Quote Stuffing Caused The Market Crash Of May 6, And Threatens To Destroy The Entire Market At Any Moment“) who has been one of the most vocal critics of everything this website has also stood against: rigged, manipulated markets, and corrupt and captured regulators and government officials.

Over those years we have posted hundreds of examples using Nanex data which have demonstrated without any doubt instances of one-time or wholesale manipulation, involving virtually every asset class, from stocks, to bonds, to oil, to nat gas, and of course gold, having exposed numerous spoofers and manipulators in the process.

Nanex’s and Hunsader’s persistence in exposing market manipulation won it numerous “tin foil hat” jeers from participants (many of whom criminals themselves) of the very same rigged industry which he had set out to expose.

Which is why we are delighted to report that after many years, Nanex has finally been vindicated, and is the first whistleblower eligible under the Dodd-Drank Wall Street Reform and Consumer Protection Act of 2010 meant “to reward an independent third party for analysis of a potential securities law violation.”

His reward: $750,000.

The actual SEC announcement actually took place some six weeks ago, in an SEC press release in which it announced that the “SEC Awards Whistleblower More Than $700,000 for Detailed Analysis” however at the time the SEC did not disclose the individual receiving the award:

The Securities and Exchange Commission today announced a whistleblower award of more than $700,000 to a company outsider who conducted a detailed analysis that led to a successful SEC enforcement action.


“The voluntary submission of high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders,” said Andrew Ceresney, Director of the SEC’s Enforcement Division.  “We will continue to leverage all forms of information and analysis we receive from whistleblowers to help better detect and prosecute federal securities law violations.”


Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower, added, “This award demonstrates the Commission’s commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge of securities law violations to the agency.  We welcome analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation.”

The full reward, according to Francine McKenna amounts to $750,000 and it is being awarded to Hunsader for his exposure of violations that led to a $5 million fine for the New York Stock Exchange in 2012. As McKenna reports, “Hunsader showed MarketWatch a letter from the SEC that confirmed the approval of his award and told MarketWatch he was the recipient of a pending award for the tip that led to the NYSE fine. By law, the SEC does not publicly identify the whistleblower’s name or the company that was subject to the order. The notice to Hunsader on Monday also said the time period for all other potential claimants to appeal the SEC decision on the same issue had expired.”

Hunsader noted he gave the information to the SEC and published it on his site before a whistleblower award rule was even in effect.


“The office wasn’t even set up but the Dodd-Frank law passed the day before. I gave it to them on July 22 and the whistleblower office opened up a year later,” he said.


He also said he told the NYSE directly, but they told him he was not a member.


A spokeswoman from the New York Stock Exchange declined to comment on whether Hunsader brought the issue to them first.

As MarketWatch adds, Hunsader has some advice to would-be whistleblowers, especially other outsiders trying to tell regulators about an issue based on their own original analysis.

It doesn’t matter if an algorithm is ripping off the market, for example, you have to prove intent. You better be absolutely sure you can prove intent. The SEC had a good piece of evidence to go confidently to the NYSE ,” said Hunsader. “You could not refute it. It only took three charts. I told them, ‘There’s nothing more you need from me.’”

Hunsader also praised Markopolos, who unsuccessfully tried to report the activities of Bernie Madoff to the SEC.

When asked what he’ll do with the windfall, he laughed out loud. “I have four daughters! It’s going towards college tuition, of course.”

As for his side of the story, Hunsader has a blog post recapping his original work which led to the award, titled simply “Vindicated.”

* * *

Our sincere congratulations to Hunsader for this well-deserved recognition of his ongoing fight against the Goliaths of a market so rigged that only a wholesale crash and reset can ever restore it to some semblance of normalcy and fairness.

via Zero Hedge Tyler Durden

The Scariest Chart For NatGas Bulls

With analysts calling NatGas's glut even bigger than crude's, the following 'chart' has just become the scariest in the world for the energy complex. As Bloomberg warns, if you live in the eastern U.S., it’s almost time to put that snow shovel away and get out the gardening tools, as March temperatures are expected to be considerably higher than expected across the entire US (except Florida, sorry).

As Bloomberg continues, after a slight hiccup later this week — which could bring a little sleet and even a few snowflakes — the warmth that has dried out the West Coast and drought-stricken California during most of February will shift east.

Temperatures may reach 8 degrees Fahrenheit (4 Celsius) above normal by mid-month from the Midwest to the Atlantic, and even higher across the Great Lakes and parts of Ontario and Quebec, said Commodity Weather Group LLC in Bethesda, Maryland.


“The pattern is going to change,” said Rob Carolan, owner of Hometown Forecast Services Inc. in Nashua, New Hampshire.

March is expected to be considerably hotter than expected everywhere (except Florida)

New York City could see 64 next week, according to MDA Weather Services in Gaithersburg, Maryland. Boston may make the 60s, too, along with Cincinnati, Chicago and Minneapolis. Washington, Philadelphia and St. Louis might reach the 70s, MDA said.

That’s enough to put a garden stake through the heart of winter. Not that winter has had much of a bite, especially along the East Coast. New York’s Central Park had 11 days above 50 in February and four at 60 or better. While the snowfall total is higher than normal for the season, it was 5.2 inches (13 centimeters) below average since Feb. 1, according to the National Weather Service.

Almost all of New York’s snow, 26.6 inches out of 31.2, came from a Jan. 23 storm.

The rest of the Northeast has done pretty well this season, too, unless you like to ski.

“Boston is closing in on at least its second-mildest winter on record,” Carolan said.

Which explains why Nattie is plumbinmg new record lows…


As this morning's hope crashes…

via Zero Hedge Tyler Durden

The Best And Worst Performing Assets Of February And 2016

After attempting a valeant, pardon the poor pun, Leap Day surge to close green for the month, a bout of late day selling resulted in the S&P500 closing just red for the month following a dramatically turbulent January, a continuation of the disappointing post Fed hike price action; indeed as noted earlier for global equities, February was the 4th consecutive month in which stocks declined and in many cases continued their presence in bear market territory.

So while many assets failed to work, some did. Below we present the full breakdown of the best and worst performing assets of both February and 2016 YTD in local currency terms and in USD terms.

Here is DB’s Jim Reid with the full breakdown:

Having been through one of the worst Januarys in the post-Lehman era, February offered some stability in selected asset classes although for most parts risky assets in DM are still down on the month. Oil was largely flat in February and has been mostly trading inside the $30-$35/bbl range for the past month. That perhaps gave the EM complex some breathing space with the likes of Bovespa and EM bonds actually up on the month. Against the backdrop of lower DM equities, February was again another positive month for core rates whilst credit total returns were mostly flat to small down with weakness led by higher-beta parts of the market. Net net year to date performances are still negative for most key risk benchmarks while core rates and precious metals are some of the standout performers to date.

Taking a closer look at the month and starting with equities, the DAX and Stoxx 600 were 2-3% lower on a total returns basis whereas the S&P 500 finished the month basically unchanged. In EM, the MSCI EM equity benchmark is also flat on the month. Chinese equities was down almost 2% in February (after a late month reversal) which was still relatively speaking a much better showing versus the 23% decline in January.

The Shanghai Composite remains one of the biggest YTD underperformer in our selected sample of global asset classes.

In terms of fixed income, Treasuries, Gilts and Bunds were up around 1.0-1.5% in Feb which takes their total returns to date to low-to-mid single digits. Impressive given the low starting yield. Credit performance is somewhat more mixed but generally total returns for higher quality segments benefitted from the rates rally.

In Commodities Gold (+11%), Sugar (+11%) and Silver (+5%) were the top performers. In currencies JPY rallied nearly 8% against the Dollar on the back of safe-haven flows but generally the Dollar index is 1.4% lower on the month. Please refer to the PDF for our usual table and charts.

Below are the best performing assets in local currency…

… and USD terms.


And the same for 2016 YTD local currency:

And rebased into US Dollars.

via Zero Hedge Tyler Durden

Gold Retests $1250 After Dismal Global Data Dump

From decoupled American to deteriorating China, PMIs (and plenty of other data) is rapidly descending into the ugly reality that every mainstream economist is in denial about. Of course, this terrible news is terrific news for stocks (moar stimulus) but it is Gold that appears to be benefitting most as the inevitability of the next extreme monetary policy makeover looms ever closer


via Zero Hedge Tyler Durden