Month: December 2014

• DAX’s ‘Brilliant’ Run Sends Red Flag as German Index Tops Record (BBG)
• U.S. military warned of possible Islamic State attacks at home: report (Reuters)
• Russia Faces First Recession Since 2009 as Banks Add to Oil Pain (BBG)
• Dodgy Home Appraisals Are Making a Comeback (WSJ)
• U.S. Corporate Bond Sales Pass $1.5 Trillion for Annual Record (BBG)
• Basic Costs Squeeze Families (WSJ)
• China Orders Stricter Checks on Local Debt as Sales Surge (BBG)
• Draghi Powerless on ECB Path Toward QE Without Reforms (BBG)
• FTW: Fischer, Dudley See Oil Slump Spurring U.S. Consumers to Spend (BBG)
• European Banks Seen Afflicted by $82 Billion Capital Gap (BBG)
• China’s fourth-richest man seeks expansion with $6 billion IPO of Dalian Wanda property unit (Reuters)
• Lebanon detains wife of Islamic State leader (Reuters)
• Medtronic Sells $17 Billion of Bonds for Covidien Deal, biggest offering of 2014 (BBG)
• U.S. to discuss possible new Russia sanctions with European allies (Reuters)
• Design flaws led to 2013 lithium-ion battery fire in Boeing 787: U.S. NTSB (BBG)
• Pound Drops Against Dollar as Construction Adds to Slowdown Sign (BBG)

 

 

Overnight Media Digest

WSJ

* The Supreme Court appears to be searching for a compromise approach for evaluating when threats made in the age of social media rise to the level of criminal conduct. The Supreme Court on Monday waded into the question of when a social-media posting rises to the level of a criminal threat, in a case examining a Pennsylvania man’s conviction following comments he made to his estranged wife and others on Facebook. (http://on.wsj.com/1A9OIds)

* Home appraisers are inflating the value of some properties they assess, often at the behest of loan officers and real-estate agents, in what industry executives say is a return to practices seen before the financial crisis. (http://on.wsj.com/1ybmYXT)

* General Electric Co is a surprising experimenter with new media, Instagraming pictures of its machinery, pinning photos on Pinterest, blogging on Tumblr and posting six-second videos on Vine, among other things. (http://on.wsj.com/1B7ID4h)

* The American middle class has absorbed a steep increase in the cost of health care and other necessities as incomes have stagnated, forcing families to cut back spending on things from like clothing and restaurants. (http://on.wsj.com/1yFcajk)

* Investors and the German government cheered E.ON’s plan to split into two, betting that gains at the business focusing on green energy will offset problems at the spinoff focused on traditional energy sources. (http://on.wsj.com/1wgqnE4)

* A group of cyber thieves may be attempting to gain an edge on Wall Street by targeting chief financial officers, advisory firms and others involved in mergers, acquisitions and other market-moving events, according to computer security firm FireEye. (http://on.wsj.com/1zbA70i)

* Medical-device maker Medtronic Inc on Monday offered to sell $17 billion in corporate bonds to finance its acquisition of Ireland’s Covidien Plc. (http://on.wsj.com/1HTAMZZ)

* Hewlett-Packard Co, as it prepares to split in two, is unveiling on Tuesday a plan to help retain important customers by allowing them to leave behind a processor technology that has found few takers besides HP. (http://on.wsj.com/1txPhsO)

 

FT

* Sky Plc has hired investment bank Lazard to evaluate options for taking part in the wider consolidation in the UK telecommunications sector. Sky has hired advisers to identify potential deals as talks between its rival BT Group Plc and mobile operators EE and O2 began.

* Chinese conglomerate Fosun International Ltd on Monday sweetened its bid for Club Mediterranee SA. The 23.50 euros ($29) per share offer is 0.50 euro higher than Italian entrepreneur Andrea Bonomi’s and values the group at 897 million euros.

* Tesco Plc, the British grocer, announced a new management structure that will see new group Chief Executive Dave Lewis take over the day to day leadership of its main UK operation.

* Britain’s financial regulator has imposed stricter rules on companies that help people to find a loan, saying some credit brokers were treating customers in a “blatantly unfair” way and causing serious harm.

 

NYT

* Flaws in manufacturing, insufficient testing and a poor understanding of an innovative battery all contributed to the grounding of Boeing Co’s 787 fleet last year after a fire in a jet at Boston’s airport and another incident in Japan, according to a report released Monday by regulators. (http://nyti.ms/11MbMmq)

* In the new topsy-turvy law school world, students are increasingly in control as nearly all of the 204 accredited law schools battle for the students with the best academic credentials. Gone are the days when legal educators bestowed admittance and college graduates gratefully accepted, certain that they were on the path to a highly paid, respectable career. (http://nyti.ms/12j5Baq)

* A report released Monday morning by FireEye Inc, a Silicon Valley security company, shed light on a new breed of criminals intent on using their hacking skills to gain a market edge in the pharmaceutical industry, where news of clinical trials, regulatory decisions or safety or legal issues can significantly affect a company’s stock price. (http://nyti.ms/1txL7kG)

* President Vladimir Putin of Russia said South Stream, a major project to deliver natural gas to Europe, would be redirected through Turkey after pressure from the European Union. (http://nyti.ms/1tGlI7s)

* Lending Club shot to prominence nearly eight years ago by helping borrowers and lenders avoid big banks and find each other directly through the Internet. Now, the lending platform is hoping that Wall Street investors will flock to buy into its forthcoming initial public offering. (http://nyti.ms/1vDScVv)

* As the Supreme Court on Monday tried to puzzle out what threats may be prosecuted as crimes, Chief Justice John Roberts Jr. cited an unlikely source: the rapper Eminem. Treading gingerly, the chief justice quoted vivid lyrics from ” ’97 Bonnie and Clyde,” in which Eminem seems to threaten to drown his wife. (http://nyti.ms/1tGmcum)

* Microsoft Corp said it had acquired Acompli, a young start-up that makes an email application for iOS and Android mobile devices. Microsoft is paying around $200 million for the company, according to someone briefed on the deal, who asked for anonymity because terms of the agreement were private. (http://nyti.ms/12kmXmp)

 

Canada

THE GLOBE AND MAIL

** Many Canadian companies are unprepared to deal with cybersecurity attacks against new and expanding computer technologies such as cloud-based computing, a new study says. The poll, sponsored by computer technology firm Cisco Canada and released Tuesday, found that only 40 percent of about 500 firms surveyed had security strategies that take into account new technology such as the “Internet of things,” where a wide range of everyday objects are connected together in networks. (http://bit.ly/1zcHEvJ)

** The Central Bank of Russia waded into currency markets Monday as the ruble plunged to levels not seen since the 1998 financial crisis that triggered a devaluation and government debt default. Like the Canadian dollar and the Norwegian krone, the Russian currency has been under extreme pressure amid the collapse in oil prices. (http://bit.ly/1vaD39e)

** For years, business luncheons in the oilsands have been scenes of unbridled exuberance. Yet at the Sawridge Inn off Highway 63 on Monday, Fort McMurray’s businessmen and women had something unpalatable to chew over with their roast pork and lasagna – oil selling at less than $70, and dropping fast. (http://bit.ly/1FJecPW)

NATIONAL POST

** Low oil prices and tight capital markets are making it difficult for oilsands producer Connacher Oil and Gas Ltd to survive, as analysts say the struggling bitumen player won’t make enough money to cover its debt payments next year. On Monday, heavily indebted Connacher became the latest in a line of smaller oilsands companies to launch a review of its costs, capital and liquidity options in recent months. (http://bit.ly/12kERX2)

** TransCanada Corp is facing mounting challenges to its C$12 billion ($10.57 billion) Energy East project in Quebec as growing concerns over its impact on beluga whales in the St. Lawrence threaten to derail its proposed export terminal there. The Calgary-based pipeline company said Monday that it is suspending operations at the Cacouna, Quebec site while it assesses a scientific report that recommends the belugas be declared an endangered species with full protection of its habitat. (http://bit.ly/1yBbFpE)

** With the launch of a new video-on-demand service dubbed Cravetv, Bell Media hopes to take on Internet streaming giants while still keeping one foot firmly planted on the side of its traditional television business. The media division of BCE Inc will host an event in Toronto on Wednesday to unveil the features of the new service that will launch by the end of the year. (http://bit.ly/1y9TdSr)

 

China

CHINA SECURITIES JOURNAL

– China is expected to move toward a looser monetary stance next year as the government may revise down its GDP growth forecast at the upcoming annual Central Economic Work Conference this month, said Li Huiyong, an economist at Shenyin and Wanguo Securities.

– The government is considering eight major reform areas as well as 34 other supporting measures to improve the management at state-owned enterprises, according to unidentified government sources.

SHANGHAI SECURITIES NEWS

– The relevant authorities are still looking into the Shenzhen and Hong Kong stock connect plan and there are no concrete measures yet, said Li Xiaojia, Chief Executive of Hong Kong Stock Exchange.

CHINA DAILY

– There is growing public concern over the quality of water in China, with more than 75 percent of urban residents now saying they are willing to pay more for safe water, according to a report published on Monday.

SHANGHAI DAILY

– New home purchases in Shanghai remained above 1 million square metres for the second straight month in November as home seekers took advantage of an interest rate cut by China’s central bank.

Britain

The Times

PPP sale could spell break-up for Balfour

Britain’s biggest construction company could be broken up after receiving a 1 billion pound ($1.57 billion) offer for its public private partnerships investment division. Balfour Beatty Plc confirmed that John Laing Infrastructure Fund had tabled an offer. (http://thetim.es/1yy0e1Q)

EY wins right to offer legal services

Ernst & Young LLP has won the right to set up shop in Britain’s legal services market after the “big four” auditor was granted a licence to operate. EY said it had recruited three legal partners and planned to recruit a further 30 people to build a law practice in England and Wales in the next six months. (http://thetim.es/1ybcQyg)

The Guardian

Bank of England investigating risk of ‘carbon bubble’

The Bank of England is to conduct an enquiry into the risk of fossil fuel companies causing a major economic crash if future climate change rules render their coal, oil and gas assets worthless. The concept of a “carbon bubble” is being taken increasingly seriously by some major financial companies including Citi, HSBC and Moody’s Corp, but the Bank’s enquiry is the most significant endorsement yet from a regulator. (http://bit.ly/1rPdikl)

Northern Ireland corporation tax cut announcement expected on Wednesday

The chancellor of the Exchequer, George Osborne, is expected in Wednesday’s autumn statement to allow Stormont to cut the corporate tax rate to 12.5 percent in an attempt to compete with Dublin for inward investment. As Stormont politicians await word, a think tank has warned the move could cost the region 400 million pounds in public spending cuts. (http://bit.ly/1HT2BBN)

The Telegraph

Suspended Tesco executive to return as Dave Lewis overhauls team

Dave Lewis has put himself in charge of Tesco Plc struggling UK business after four of the executives suspended due to an accounting scandal left the company. Lewis, the chief executive of Tesco, has overhauled the senior management of Britain’s biggest retailer in one of his first major strategic moves. (http://bit.ly/1yxQPHR)

Vodafone ‘could beat competition concerns’ to seal 80 bln pounds Liberty Global deal

Vodafone could overcome stringent German competition rules to complete an 80 billion pounds-plus takeover of Liberty Global, the cable group that owns Virgin Media, according to senior City legal sources. (http://bit.ly/1ybaWxA)

Sky News

UK’s new warships will be built in Scotland

The UK’s new warships will be built on the Clyde, it has been confirmed, after fears were raised over the possibility of the contract going abroad. Defence Secretary Michael Fallon said there should be “no confusion” over where the new generation of Type 26 frigates will be constructed. (http://bit.ly/1v7gZvX)

Watchdog to deliver fresh blow to Royal Mail

Regulators will say on Tuesday that they disagree with Royal Mail Plc’s view of competition in the postal sector. Sky News said Ofcom made the conclusion following an assessment that Royal Mail’s ability to meet its universal service obligation is not being impeded by competition in the end-to-end delivery market. (http://bit.ly/1yaXcDf)

The Independent

BG scraps new boss Helge Lund controversial remuneration package amid investor fury

Energy giant BG Group Plc has bowed to shareholder pressure and slashed a controversial “golden hello” planned for incoming boss Helge Lund. Lund, who will join BG in March, previously worked at Norway’s Statoil, where he is credited with turning around its fortunes. (http://ind.pn/1zJCffF)

Starbucks completes 20 million pound tax payment as coffee chain seeks to put scandal behind

Starbucks Corp has made its final 5 million pounds payment to the taxman after it was exposed for paying virtually no corporate tax in the United Kingdom since its launch 16 years ago. The coffee chain said it wants to put the scandal behind it and will turn a profit in the UK within three years and start paying taxes regularly. (http://ind.pn/1tFr9np)

 

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
ISM New York for November at 9:45–consensus 55.0
Construction spending for October at 10:00–consensus up 0.5%

ANALYST RESEARCH

Upgrades

Cypress Semiconductor (CY) upgraded to Buy from Hold at Topeka
Dycom (DY) upgraded to Outperform from Market Perform at Wells Fargo
HD Supply (HDS) upgraded to Buy from Sell at Goldman
ITT Corp. (ITT) upgraded to Buy from Neutral at Goldman
Mellanox (MLNX) upgraded to Overweight from Equal Weight at Barclays
Nanometrics (NANO) upgraded to Buy from Hold at Stifel
SVB Financial (SIVB) upgraded to Buy from Hold at Jefferies
Xcel Energy (XEL) upgraded to Neutral from Underweight at JPMorgan

Downgrades

Agios Pharmaceuticals (AGIO) downgraded to Neutral from Overweight at JPMorgan
American Tower (AMT) downgraded to Outperform from Strong Buy at Raymond James
Apache (APA) downgraded to Neutral from Buy at Mizuho
Bellatrix downgraded to Market Perform from Outperform at BMO Capital
Bill Barrett (BBG) downgraded to Neutral from Buy at Mizuho
Covanta (CVA) downgraded to Equal Weight from Overweight at Barclays
Crown Castle (CCI) downgraded to Market Perform from Outperform at Raymond James
Cubic (CUB) downgraded to Neutral from Overweight at JPMorgan
Dover (DOV) downgraded to Neutral from Buy at Global Hunter
Dover (DOV) downgraded to Sell from Neutral at Goldman
Kennametal (KMT) downgraded to Accumulate from Buy at Global Hunter
Laredo Petroleum (LPI) downgraded to Neutral from Buy at Mizuho
MRC Global (MRC) downgraded to Accumulate from Buy at Global Hunter
Parker-Hannifin (PH) downgraded to Neutral from Buy at Goldman
PerkinElmer (PKI) downgraded to Neutral from Conviction Buy at Goldman
Priceline (PCLN) downgraded to Market Perform from Outperform at FBR Capital

Initiations

Callon Petroleum (CPE) initiated with a Buy at Roth Capital
Clayton Williams (CWEI) initiated with a Buy at Roth Capital
Coherus Biosciences (CHRS) initiated with an Overweight at JPMorgan
comScore (SCOR) initiated with a Buy at SunTrust
Diamondback Energy (FANG) coverage transferred with a Buy at Roth Capital
Dyax (DYAX) coverage assumed with an Outperform at Wedbush
FS Investment (FSIC) initiated with a Neutral at JPMorgan
Freshpet (FRPT) initiated with a Buy at Canaccord
Freshpet (FRPT) initiated with a Buy at Goldman
Freshpet (FRPT) initiated with a Buy at Stifel
Freshpet (FRPT) initiated with a Buy at Stifel
Freshpet (FRPT) initiated with an Outperform at RW Baird
HubSpot (HUBS) assumed with a Neutral at JPMorgan
Hyperion Therapeutics (HPTX) initiated with an Outperform at Wedbush
INC Research (INCR) initiated with a Buy at Goldman
Marketo (MKTO) initiated with an Overweight at JPMorgan
Microsoft (MSFT) initiated with an Overweight at JPMorgan
NetSuite (N) initiated with an Overweight at JPMorgan
Norwegian Cruise Line (NCLH) reinstated with an Overweight at Barclays
PS Business Parks (PSB) initiated with a Market Perform at Wells Fargo
Paycom (PAYC) assumed with an Overweight at JPMorgan
RSP Permian (RSPP) initiated with a Buy at Roth Capital
Ring Energy (REI) initiated with a Buy at Roth Capital
Salesforce.com (CRM) initiated with an Overweight at JPMorgan
Splunk (SPLK) initiated with a Neutral at JPMorgan
Tableau (DATA) initiated with an Overweight at Barclays
Tableau (DATA) initiated with an Overweight at JPMorgan
Theravance Biopharma (TBPH) initiated with an Outperform at Leerink
Triumph Bancorp (TBK) initiated with a Market Perform at Keefe Bruyette
Ultimate Software (ULTI) initiated with an Overweight at JPMorgan
VMware (VMW) initiated with a Neutral at JPMorgan

COMPANY NEWS

Cypress (CY), Spansion (CODE) to merge in $4B all-stock deal. The merger is expected to achieve more than $135M in cost synergies on an annualized
basis within three years and to be accretive to non-GAAP earnings within the first full year after the transaction closes
NTELOS (NTLS) decided to focus its business operations exclusively in its Western Markets and exit Eastern Markets. The company expects to incur
costs of $55M to complete the wind-down process
Royal Caribbean (RCL) to replace Bemis (BMS) in S&P 500 as of 12/4 close
Wal-Mart (WMT) said Cyber Monday was the biggest online day in history for orders
Avanir (AVNR) said it will be acquired by Otsuka Pharmaceutical for $3.5B
Blackstone announced that funds affiliated with Blackstone Real Estate Partners VI & VII agreed to sell their wholly-owned U.S. industrial platform, IndCor Properties, to affiliates of GIC, Singapore’s sovereign wealth fund, for $8.1B

EARNINGS
Companies that beat consensus earnings expectations last night and today include:
Vince Holding (VNCE), Shoe Carnival (SCVL)

Companies that missed consensus earnings expectations include:
Qunar (QUNR), Thor Industries (THO)

UnitedHealth (UNH) sees FY15 EPS $6.00-$6.25, consensus $6.13
UnitedHealth (UNH) backs FY14 EPS view $5.60-$5.65, consensus $5.64
Envivio (ENVI) reports Q3 adjusted EPS (15c), one estimate (8c)
Mattress Firm (MFRM) backs FY14 EPS view of $2.03-$2.13, consensus $2.10
Shoe Carnival (SCVL) sees Q4 EPS 6c-10c, consensus 9c
Vince Holding (VNCE) sees FY14 adjusted EPS 90c-94c, consensus 94c

NEWSPAPERS/WEBSITES

Wal-Mart (WMT) planning 250 job cuts in China division, WSJ reports
Samsung to sell fibre optics operations to Corning, Reuters reports
Vale (VALE) considers IPO for part of base metals business, Reuters reports
New York Times (NYT) may cut jobs after falling short of buyout goals, NY Post reports
GM (GM) recalls 316K vehicles for faulty low-beam headlights, Reuters reports
DreamWorks Animation (DWA) looks expensive, Barron’s says

SYNDICATE
Advanced Drainage (WMS) files to sell 10M shares for holders
AerCap (AER) files to sell 14.92M ordinary shares for holders 
National Health Investors (NHI) files to sell 3.5M shares of common stock
Strategic Hotels (BEE) files to sell 20M shares of common stock

via Zero Hedge http://ift.tt/1yC2mWt Tyler Durden

A few days of near-record crude volatility (which the CME is scrambling to reduce following 2 crude margin hikes in the past week) is giving way to the New Normal default thinking: that central banks will soon take care of everything.

And sure enough, just an hour earlier, US equity futures had jumped 8 points on virtually zero volume, wiping out all of yesterday’s losses, driven higher by that new “old favorite”, the USDJPY, which has once again resumed its climb higher, briefly rising above 119.00 once again and sending the Nikkei and the Topix to fresh 7 year highs, perfectly oblivious to both yesterday’s Moody’s downgrade and now open warnings from both Eisuke Sakakibara and Goldman Sachs that further declines in the Yen will accelerate the collapse of the Japanese economy. And, since there is also zero liquidity in the market, that entire gain was also just as promptly wiped out with futures now practically unchanged from yesterday’s close.

With everyone focused on crude, it is worth noting that both Brent and WTI have resumed their downward trend, down a little over 1% each, following yesterday’s mad short-covering scramble which may have been all the dead cat bounce we will get this time around as Saudi appears perfectly happy to send Brent to $60 or even lower.

The other thing everyone appears to be focused on these days is Russia, which earlier announced its economy would shrink 0.8% next year on oil price drop, sanctions. The immediate result was a sharp reversal in the Ruble, which wiped away all gains and tumbled to another day of record lows against western currencies, sliding 2.3% against the dollar. Comments from VTB Chairman Dubinin who said there was “some panic” in the Russian bank system did not help the mood. The Ruble has now declined 30% since the end of September. Russia’s 5yr CDS widened a further 26bps yesterday to 344bps whilst the 10y government bond yield finished 15bps higher at 10.76%. The moves also come on the back of an announcement by the Finance Minister Siluanov last week that capital flight may reach $130bn in 2014 – the most since 2009.

This morning’s European session initially kicked off on a positive note with the DAX breaking above 10,000 for the first time since June 2014 after tripping stops at the handle, although the index has since come off best levels on concerns over Russian. On a sector specific basis, basic materials and energy names led the way higher for European equities following on from yesterday’s gains in the commodities complex, which subsequently saw some mild outperformance for the FTSE 100. However, gains for oil services names have been limited by news that Russia are to abandon their Southstream pipeline plans. Furthermore, financials are also seen higher in a continuation of the trend seen overnight on the expectation that the PBoC may implement further easing policies. Elsewhere, Bunds have crept higher throughout the European session helped with the decline in equities and thus paring some of yesterday’s fixed income-related losses following positive US ISM manufacturing and rate lock selling due to a large corporate bond issuance.

Switching focus to Asia, the Japan Topix is modestly stronger (+0.49%) and shrugging off Moody’s sovereign rating cut yesterday (to A1/stable from Aa3). For the record, Japan’s foreign currency rating is still AA-/Neg by S&P and A+/Neg by Fitch. The Moody’s action comes just before Prime Minister Abe commences his campaign today ahead of the election later this month. Just on the subject, the Nikkei QUICK monthly bond survey yesterday showed that respondents saw a 79.9% probability that the LDP/Komeito ruling coalition would do better than its stated victory of 270 seats. Away from Japan, with the exception of Korea, major bourses are largely trading in the green. The Hang Seng (+0.74%), Shanghai Composite (+1.80%) and ASX 200 (+1.41%) are all trading firmer. On the latter, the RBA has kept its benchmark rate unchanged at 2.50% (as expected by most) overnight but it is worth noting that our Australian economist now expects a cumulative 50bps cut by the RBA in 2015 citing a forecasts of rising unemployment, nascent signs of moderation in house price growth and ongoing commodity price declines. This is a non-consensus call by DB so we’ll see if the street follows from here.

Looking at today’s calendar, In the US this afternoon we’ve got the ISM NY due with the market expecting a slight uptick to 55.0 (from 54.8). Shortly after, we get the construction spending print which is expected to increase – residential construction in particular is expected to show a decent gain given the improvements in housing permits. We round today off with November vehicle sales data in the US. In terms of Fedspeak, early this afternoon both Fischer and Yellen will be talking in Washington so watch out headlines here.

 

Bulletin Headline Summary from Bloomberg and Ransquawk

• With the lack of any tier 1 economic data and lingering concerns over Russia, equities have edged lower (Eurostoxx50 -0.1%), Bunds have retraced some of yesterday’s losses and commodities are on the back foot with WTI trading marginally below USD 68 and Gold below USD 1200.
• Treasuries mixed, curve spreads flatten as U.S. investment-grade calendar builds, with AMZN 5- part likely to price today after MDT sold $17b yesterday in year’s largest deal.
• Europe’s latest bank stress test was flawed, and dozens of the region’s lenders, including Deutsche Bank and BNP Paribas, aren’t sufficiently capitalized to improve the economy’s anemic growth or withstand a repeat of the 2008 financial crisis
• The EU faces a rebuke from global regulators for shortcomings in its implementation of bank capital rules, according to two people with knowledge of the matter
• Russia is entering its first recession since 2009 as sanctions over the Ukraine conflict combine with plunging oil prices and the weakening ruble to hammer the economy and force the government to prop up banks
• China is tightening checks on local bond sales in its latest bid to reduce risks as debt loads surge to a record amid slowing economic growth
• Prime Minister Shinzo Abe took his economic message to Japan’s regions today, starting his campaign for re-election with the country in recession
• The 3Q contraction that tipped Japan into recession may not be as sharp as first thought, with economists revising gross domestic product forecasts
• Greece needs a debt haircut and easier servicing costs, Greek opposition Alexis Tsipras said at a conference today; also said Syriza will be at forefront of radical progressive change in Europe
• Sovereign yields rise. Asian stocks gain; European stocks, U.S. equity-index futures rise. Brent crude and gold fall, copper rises
• Looking ahead, attention turns to ISM New York and API Crude Inventories
  and any comments from Fed’s Fischer, Yellen and Brainard.

US Event Calendar

• 9:45am: ISM New York, Nov. est. 55 (prior 54.8)
• 10:00am: Construction Spending, Oct., est. 0.6% (prior -0.4%)
• TBA: Wards Total Vehicle Sales, Nov., est. 16.6m (prior 16.35m)
• Wards Domestic Vehicle Sales, Nov., est. 13.30m (prior 13.12m)

Central Banks

• 8:10am: Fed’s Fischer speaks in Washington
• 8:30am: Fed’s Yellen speaks in Washington
• 12:00: Fed’s Brainard speaks via video to conference in Los Angeles

FX

The USD remains broadly stronger alongside the recovery in US yield, which has subsequently seen USD/JPY ebb higher back towards the 119.00 handle amid favourable interest differential flows. Elsewhere, AUD was seen higher overnight following a less-dovish than anticipated RBA despite the recent slump in commodity prices, however, this upside has since been pared following the movements in the USD-index with RANsquawk sources also reporting Middle-Eastern selling in the pair. Elsewhere, heading into the North American crossover, the RUB is once again seen weaker as concerns over the Russia economy remain at the forefront with the Russian Finance Ministry warning of a potential recession in Q1 2015.

COMMODITIES

In terms of precious metals, gold has ebbed lower breaking back below USD 1,200.00 after retracing around 38.25% of the move, furthermore, on a geopolitical front tensions appear to be easing between Ukraine and Russia amid reports that the Ukraine and Russian rebels could reach a truce following the recent fighting around Donetsk airport. In the energy complex oil is trading in negative territory and is trading around the USD 68.00 level in what has been a relatively choppy morning with price movements largely led by USD fluctuations. Nonetheless, expectations for tomorrow’s DoE inventories are looking for yet another build for the headline figure and thus due to further increase the global glut of supply in oil markets

DB’s Jim Reid Completes the overnight Event Summary

The falling oil price continues to dominate the agenda at the moment although we did see some respite yesterday. Both WTI (+4.31%) and Brent (+3.41%) finished the NY session off the morning session lows to close at around $69 and $72 respectively although they are somewhat softer in the overnight Asian session (more below). The rebound in Oil yesterday also coincided with what was generally a firmer day across the commodity complex. After falling to a three week low on the back of the SNB vote over the weekend, Gold was +3.83% stronger yesterday at $1212.10 whilst Silver traded +6.53% to close at $16.46/oz. For equities it was a fairly weak day for the S&P 500 (-0.68%) despite the rebound of Energy stocks (+0.7%) as the market was weighed down by losses in 8 out of the ten major sector groups. Industrials (-1.29%), IT (-1.11%) and Consumer Discretionary (-1.09%) were main decliners at the end of play which to some degree probably reflects the sluggishness of the retail numbers coming out from the Thanksgiving weekend.

Away from the strength in commodities and the weakness in equities, the move in Treasuries was another big theme yesterday. The 10yr benchmark reversed Friday’s gains to close 7bp wider at 2.235%. Some hawkish comments from the Fed’s Dudley probably didn’t help matters after the NY Fed President suggested that a mid-2015 rate hike still seemed reasonable. To be fair though he did highlight the need for patience over rate hikes but the market seemed to zoom in on Dudley’s comments that an increase would be a ‘welcome development’ and signal that the economy has healed enough to warrant ‘somewhat less accommodative’ policy, even if we see a bump or two in financial markets. Highlighting the moves in the oil price, Dudley also noted that the recent drop in prices was a clear positive for the US economy and that it could spur more expansive monetary policy in other countries by pulling down inflation. Elsewhere, the Fed’s Fisher was quoted on Reuters downplaying the dis-inflationary effect of the fall in the oil price – commenting specifically that it would be a ‘temporary’ drag on inflation and ultimately lower energy costs would help growth in the US.

Away from Fed speak and Oil, the ISM reading yesterday was also a notable release for markets. November’s manufacturing ISM survey (58.7 vs. 58.0) came in a touch above consensus. Whilst this is a tad lower than the 59 print in October it was still the third highest reading for the current business cycle. Prices paid fell nine points to 44.5 in November (lowest reading since July 2012) which was largely driven by the sharp decline in energy prices.

Taking a look at developments on the other side of the Atlantic we saw the Stoxx 600 close -0.46% lower and Xover widen 10bps on the day probably not supported by what was seen to be a generally soft set of data. The final November manufacturing PMI for the Euro-area printed at 50.1, down from the 50.4 flash estimate and 50.6 October reading. DB’s Peter Sidorov notes that the details in the report were not particularly encouraging either. With new orders falling by 0.8pts and new export orders unchanged it suggests that the weakness in manufacturing cannot be explained simply by external weakness.

Regionally across Europe, the German manufacturing PMI disappointed 49.5 (revised down 0.5pts from the flash estimate) and is now at its weakest level since June 2013. The French reading was revised up (to 48.4) but declined 0.1pts relative to the October print whilst the Italian reading was unchanged at 49. Spain was a relative standout registering a 2.1pt rise to 54.7 marking a new post-2007 high. Peripheral bonds performed well yesterday as 10y benchmark yields in Spain (-6bps), Italy (-2bps) and Portugal (-2bps) fell to around 1.83%, 2.01% and 2.81% respectively.

Briefly back to the Oil theme, the effect of the recent slump continues to have a negative impact on the Russian Rouble. The currency was down as much as 6.6% yesterday versus the dollar before paring back some of those intra-day losses to close around 4.5% lower on the day (at 51.65). The currency has now declined 30% since the end of September. Russia’s 5yr CDS widened a further 26bps yesterday to 344bps whilst the 10y government bond yield finished 15bps higher at 10.76%. The moves also come on the back of an announcement by the Finance Minister Siluanov last week that capital flight may reach $130bn in 2014 – the most since 2009.

Switching focus to Asia, the Japan Topix is modestly stronger (+0.49%) and shrugging off Moody’s sovereign rating cut yesterday (to A1/stable from Aa3). For the record, Japan’s foreign currency rating is still AA-/Neg by S&P and A+/Neg by Fitch. The Moody’s action comes just before Prime Minister Abe commences his campaign today ahead of the election later this month. Just on the subject, the Nikkei QUICK monthly bond survey yesterday showed that respondents saw a 79.9% probability that the LDP/Komeito ruling coalition would do better than its stated victory of 270 seats. Away from Japan, with the exception of Korea, major bourses are largely trading in the green. The Hang Seng (+0.74%), Shanghai Composite (+1.80%) and ASX 200 (+1.41%) are all trading firmer. On the latter, the RBA has kept its benchmark rate unchanged at 2.50% (as expected by most) overnight but it is worth noting that our Australian economist now expects a cumulative 50bps cut by the RBA in 2015 citing a forecasts of rising unemployment, nascent signs of moderation in house price growth and ongoing commodity price declines. This is a non-consensus call by DB so we’ll see if the street follows from here.

Looking at today’s calendar, we’re fairly light on data prints today with just unemployment data in Spain to look forward to as well as PPI for the Euro-area. In the US this afternoon we’ve got the ISM NY due with the market expecting a slight uptick to 55.0 (from 54.8). Shortly after, we get the construction spending print which is expected to increase – residential construction in particular is expected to show a decent gain given the improvements in housing permits. We round today off with November vehicle sales data in the US. In terms of Fedspeak, early this afternoon both Fischer and Yellen will be talking in Washington so watch out headlines here.

via Zero Hedge http://ift.tt/1tHD6ZN Tyler Durden

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

“I am young, I am twenty years old; yet I know nothing of life but despair, death, fear, and fatuous superficiality cast over an abyss of sorrow. I see how peoples are set against one another, and in silence, unknowingly, foolishly, obediently, innocently slay one another.”

 

– Erich Maria Remarque, All Quiet on the Western Front

Despite an interest in geopolitics, I haven’t really written anything on the concerning and worsening tension between the government of the United States and the government of Russia. I intentionally wrote government twice in order to emphasize the fact that 99.9% of Americans do not have real grievances with actual Russian people, and vice versa. This is a high-level conflict between powerful “leaders” playing a game of Risk with average citizen as pawns. This is how it’s always been. As human beings, we should never lose sight of this so the mistakes we make in the future aren’t nearly as tragic as those made by our ancestors.

One disconcerting thing I have noticed amongst some “liberty-minded” people I follow, is a knee-jerk tendency to pick a side in this affair. When it comes to powerful men running centralized nation-states with nuclear weapons, there are no church boys involved. I have noticed a desire to defend Russia every step of the way in what appears to be a simple-minded emotional reflex birthed in justifiable disgust with what they see happening in their home nations (the U.S. and UK in particular).

This behavior has always made me uncomfortable, and reminds me very much of how people get upset with one fake political party and then vote for the other guy simply because they are not a Democrat or a Republican. The best choice is to accept they are both useless and not vigorously defend either party. I take the same tact when it comes to battles between nation-states. Just because I am disgusted and horrified with what is happening in these United States, doesn’t mean I need to slavishly defend Russia, Vladimir Putin or pick any sides in a conflict in which the primary losers will always be powerless civilians.

I’ve never been to Russia, thus my opinion of the country is basically worthless. Nevertheless, based on what I have read and observed, I’d still much rather live in the U.S. than Russia despite all of our society’s failings and decay in recent decades. While this view could certainly change as time and events unfold, that is how I strongly feel at the moment. Putin is by all accounts an authoritarian cult-like leader who wants to ban Bitcoin, journalism can be a deadly affair, and oligarchs continue to run free (as long as you are friends with Putin). Recall my recent post: American Upper Middle Class Share of Wealth is Worse than Every Country Besides Russia and Indonesia. Yes, “besides Russia and Indonesia.” Russia is no economic utopia.

Nevertheless, this piece isn’t meant to be a pointless debate about which overly-centralized, archaic and corrupt nation-state is better than the other. Neither place has a political or economic structure that even comes close to providing a fertile environment in which human existence can reach its highest potential. Rather, both nation-states are controlled by a small group of ambitious, authoritarian and, when necessary, ruthless and violent men and women. That said, there are two reasons I think the following remarks by Russian Foreign Minister Sergey Lavrov are so important.

First, as someone who spends much of his time analyzing and critiquing the many destructive policy decisions made by American “leaders,” I was shocked to find how accurate his description of the U.S. power structure’s mindset seems to be. He gets it, and he is more or less trying to warn the world that America’s leaders are basically power-drunk children. I concur.

Second, Lavrov also describes the negative impact that this behavior has had on the Russian psyche generally. He expresses dismay that the U.S. status quo sees the world as unipolar, and attempts to tackle every problem from the perspective that might is right. In no uncertain terms, Lavrov makes it clear that Russia will not stand for this. I don’t think the Russians are bluffing, so this is a very dangerous situation.

If there was actually someone in the U.S. State Department capable of such introspective and clear thinking, we might actually diffuse this situation. Don’t hold your breath.

Here are some excerpts from Mr. Lavrov’s remarks at the XXII Assembly of the Council on Foreign and Defence Policy in Moscow on November 22, 2014. The whole thing can be found here, which I strongly suggesting reading in full.

I’m happy to be at this annual Assembly of the Council on Foreign and Defence Policy (Russian abbreviation SVOP). It is always a great pleasure for me to meet people and feel the intellectual potential, which enables the Council, its leaders and representatives to respond to global developments and analyse them. Their analysis is always free from any hysteria, and its members offer well-grounded and solid arguments, taking a step back, since those caught in the midst of events can hardly adopt an unbiased perspective. We are inevitably influenced by the developments, which makes your observations, analysis, discourse and suggestions even more valuable to us.

 

Naturally, I will start with Ukraine. Long before the country was plunged into the crisis, there was a feeling in the air that Russia’s relations with the EU and with the West were about to reach their moment of truth. It was clear that we could no longer continue to put issues in our relations on the back burner and that a choice had to be made between a genuine partnership or, as the saying goes, “breaking pots.” It goes without saying that Russia opted for the former alternative, while unfortunately our Western partners settled for the latter, whether consciously or not. In fact, they went all out in Ukraine and supported extremists, thereby giving up their own principles of democratic regime change. What came out of it was an attempt to play chicken with Russia, to see who blinks first. As bullies say, they wanted to Russia to “chicken out” (I can’t find a better word for it), to force us to swallow the humiliation of Russians and native speakers of Russian in Ukraine.

 

Honourable Leslie Gelb, whom you know all too well, wrote that Ukraine’s Association Agreement with the EU had nothing to do with inviting Ukraine to join the EU and was aimed in the short term at preventing it from joining the Customs Union. This is what an impartial and unbiased person said. When they deliberately decided to go down the path of escalation in Ukraine, they forgot many things, and had a clear understanding of how such moves would be viewed in Russia. They forgot the advice of, say, Otto von Bismarck, who had said that disparaging the millions-strong great Russian people would be the biggest political mistake.

 

President Vladimir Putin said the other day that no one in history has yet managed to subjugate Russia to its influence. This is not an assessment, but a statement of fact. Yet such an attempt has been made to quench the thirst for expanding the geopolitical space under Western control, out of a mercantile fear to lose the spoils of what they across the Atlantic had persuaded themselves was the victory in the Cold War.

 

The plus of today’s situation is that everything has clicked into its place and the calculus behind the West’s actions has been revealed despite its professed readiness to build a security community, a common European home. To quote (singer/song-writer) Bulat Okudzhava, “The past is getting clearer and clearer.” The clarity is becoming more tangible. Today our task is not only to sort out the past (although that must be done), but most importantly, to think about the future.

 

Talks about Russia’s isolation do not merit serious discussion. I need hardly dwell on this before this audience. Of course, one can damage our economy, and damage is being done, but only by doing harm to those who are taking corresponding measures and, equally important, destroying the system of international economic relations, the principles on which it is based. Formerly, when sanctions were applied (I worked at the Russian mission to the UN at the time) our Western partners, when discussing the DPRK, Iran or other states, said that it was necessary to formulate the restrictions in such a way as to keep within humanitarian limits and not to cause damage to the social sphere and the economy, and to selectively target only the elite. Today everything is the other way around: Western leaders are publicly declaring that the sanctions should destroy the economy and trigger popular protests. So, as regards the conceptual approach to the use of coercive measures the West unequivocally demonstrates that it does not merely seek to change Russian policy (which in itself is illusory), but it seeks to change the regime — and practically nobody denies this.

 

We hear the daily repeated mantra that Washington is aware of its own exclusiveness and its duty to bear this burden, to lead the rest of the world. Rudyard Kipling spoke about “the white man’s burden.” I hope that this is not what drives Americans. The world today is not white or black, but multi-coloured and heterogeneous. Leadership in this world can be assured not by persuading oneself of one’ exclusiveness and God-given duty to be responsible for everyone, but only by the ability and craft in forming a consensus. If the US partners committed their power to this goal, this would be priceless, and Russia would be actively helping them.

 

However, so far, US administrative resources still work only in the NATO framework, and then with substantial reservations, and its writ does not reach beyond the North Atlantic Alliance. One proof of this is the results of US attempts to make the world community follow its line in connection with the anti-Russian sanctions and principles. I have spoken about it more than once and we have ample proof of the fact that American ambassadors and envoys across the world seek meetings at the highest level to argue that the corresponding countries are obliged to punish Russia together with them or else face the consequences. This is done with regard to all countries, including our closest allies (this speaks volumes about the kind of analysts Washington has). An overwhelming majority of the states with which we have a continuing dialogue without any restrictions and isolation, as you see, value Russia’s independent role in the international arena. Not because they like it when somebody challenges the Americans, but because they realize that the world order will not be stable if nobody is allowed to speak his mind (although privately the overwhelming majority do express their opinion, but they do not want to do so publicly for fear of Washington’s reprisals).

 

Many reasonable analysts understand that there is a widening gap between the global ambitions of the US Administration and the country’s real potential. The world is changing and, as has always happened in history, at some point somebody’s influence and power reach their peak and then somebody begins to develop still faster and more effectively. One should study history and proceed from realities. The seven developing economies headed by BRICS already have a bigger GDP than the Western G7. One should proceed from the facts of life, and not from a misconceived sense of one’s own grandeur.

 

In attempting to establish their pre-eminence at a time when new economic, financial and political power centers are emerging, the Americans provoke counteraction in keeping with Newton’s third law and contribute to the emergence of structures, mechanisms, and movements that seek alternatives to the American recipes for solving the pressing problems. I am not referring to anti-Americanism, still less about forming coalitions spearheaded against the United States, but only about the natural wish of a growing number of countries to secure their vital interests and do it the way they think right, and not what they are told “from across the pond.” Nobody is going to play anti-US games just to spite the United States. We face attempts and facts of extra-territorial use of US legislation, the kidnapping of our citizens in spite of existing treaties with Washington whereby these issues are to be resolved through law enforcement and judicial bodies.

 

According to its doctrine of national security, the United States has the right to use force anywhere, anytime without necessarily asking the UN Security Council for approval. A coalition against the Islamic State was formed unbeknownst to the Security Council. I asked Secretary of State John Kerry why have not they gone to the UN Security Council for this.

 

Francis Fukuyama recently wrote the book, Political Order and Political Decay, in which he argues that the efficiency of public administration in the United States is declining and the traditions of democratic governance are gradually being replaced with feudal fiefdom ruling methods. This is part of the discussion about someone who lives in a glass house and throws stones.

Indeed, describing, lamenting and suggesting remedies for the above is basically what Liberty Blitzkrieg is all about. Don’t forget, an academic study from Princeton and Northwestern already proved the U.S. is nothing more than an oligarchy. See: New Report from Princeton and Northwestern Proves It: The U.S. is an Oligarchy.

So far, those who are not guided by real problems, but rather by a desire to quickly grab things from freshly turned up ground. It is deplorable. Exporting revolutions – be they democratic, communist or others – never brings any good.

 

I can’t fail to mention Russia’s comprehensive partnership with China. Important bilateral decisions have been taken, paving the way to an energy alliance between Russia and China. But there’s more to it. We can now even talk about the emerging technology alliance between the two countries. Russia’s tandem with Beijing is a crucial factor for ensuring international stability and at least some balance in international affairs, as well as ensuring the rule of international law. We will make full use of our relations with India and Vietnam, Russia’s strategic partners, as well as the ASEAN countries. We are also open to expanding cooperation with Japan, if our Japanese neighbours can look at their national interests and stop looking back at some overseas powers.

 

There is no doubt that the European Union is our largest collective partner. No one intends to “shoot himself in the foot” by renouncing cooperation with Europe, although it is now clear that business as usual is no longer an option. This is what our European partners are telling us, but neither do we want to operate the old way. They believed that Russia owed them something, while we want to be on an equal footing. For this reason, things will never be the same again. That said, I’m confident that we will be able to overcome this period, lessons will be learned and a new foundation for our relations will emerge.

The similarities to the period just before WWI are indeed striking, as Niall Ferguson noted in an excellent Op-Ed in August. Hopefully we can be smarter this go around.

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

"This is a golden time window to acquire more strategic oil at lower costs," notes one Hong-Kong based analyst, as Bloomberg confirms what we have noted here and here, that China is emerging as the winner from OPEC’s battle with rival oil producers as the world’s biggest energy consumer stockpiles crude.

84 tankers remain en route to Chinese destinations…

 

As Bloomberg reports,

The dwindling number of investors still betting on a rebound in prices can at least count on Chinese demand. OPEC decided to maintain output targets even as a shale boom boosts U.S. production to the highest in more than three decades and causes a global supply glut. As crude extends its slump to the lowest level in more than four years, China is seeking to build a strategic petroleum reserve.

 

“This is a golden time window to acquire more strategic oil stockpiles at lower costs,” Gordon Kwan, the Hong Kong-based head of regional oil and gas research at Nomura Holdings Inc., wrote in an e-mail Nov. 28. China will be “a big beneficiary” from the OPEC decision, he said.

 

…

 

The nation’s efforts to boost reserves may increase its imports by as much as 700,000 barrels a day in 2015, according to London-based Energy Aspects Ltd. That’s more than half the global glut forecast by Citigroup Inc. after the Organization of Petroleum Exporting Countries refrained from cutting output at its meeting last week.

 

…

 

China boosted imports by 8.3 percent, or 460,000 barrels a day, in the first nine months of this year, the fastest pace since 2010, customs data show. The country will overtake the U.S. as the world’s biggest oil consumer within two decades, according to the International Energy Agency in Paris.

 

…

 

While China currently holds reserves equivalent to about 30 days of imports, the government is seeking to boost that level to 100 days by 2020, according to China Petrochemical Corp., Asia’s biggest refiner. That would be the equivalent of about 570 million barrels, based on the most recent monthly imports.

 

“We know that China has already been taking advantage of lower prices to fill the SPR,” Simon Powell, the head of Asian oil and gas research at CLSA Ltd. in Hong Kong, wrote in an e-mail Nov. 28. “They still have a long way to go.”

 

The world’s second-biggest economy consumed the largest volume of oil on record in October, according to data compiled by Bloomberg.

*  *  *

As we concluded previously, just like Chinese gold imports rise when the price of gold drops; so China does the logical thing with other commodities, (i.e. oil) when prices tumble and instead of selling into the paper rout, it buys all the physical it can get its hands on.

via Zero Hedge http://ift.tt/1rR8YeL Tyler Durden

Once again the cyclical patterns in US macro data are re-emerging as extrapolated hopes fade into mean-reverting credit-impulse-hangover-driven realities. Despite all the hopes and dreams of escape velocity, cleanest-dirty-shirt-wearing economic enthusiasts, year-to-date performance of Citi's US Macro Surprise index is at its lowest level since 2008.

 

The worst performing US Macro data since 2008…

 

Whether this is absolute weakness or relative weakness (versus yet more over-enthusiastic expectations) is unclear though, the Midterm election results and NFR Black Friday spending data may be a hint.

 

Charts: Bloomberg

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

Submitted by Simon Black via Sovereign Man blog,

Over four centuries ago, the Dutch East India Company made history as the world’s first IPO.

 

Known as VOC in the Netherlands, the company was one of the most successful ventures in the last several hundred years.

 

When adjusted for inflation, its highest market capitalization would be worth over $7 TRILLION today (i.e. ten times the size of Apple).

 

More importantly, it completely dominated the Asian trade in the 17thand 18th centuries.

 

While the British East India Company is usually more famous nowadays, VOC had almost twice as many ships and moved five times more cargo than its British rivals.

 

The company was so successful over the long-term that it paid an astonishing 18% annual dividend to its shareholders for almost 200 years.

*  *  *

Given their long tradition of being financially savvy, when the Dutch do something dramatic in the financial markets, it’s important to take notice.

Which is why when the Dutch Central Bank recently announced they had just moved 122.5 tons of gold, worth $5 billion, from storage in New York back to Amsterdam everyone’s alarm bells should be ringing.

The Central Bank’s official statement itself said “this may also contribute to a positive confidence effect with the public.”

Translation: The US is not to be trusted anymore with the custody of our gold.

It’s becoming so obvious where things are headed.

It’s easy to dismiss gold repatriation when “foes” like Venezuela were doing it.

But when your own allies think you’re not to be trusted as a custodian of their gold—that’s the end of your credibility.

What does this mean to you?

The whole system that’s based on the dominance of the US dollar and the US financial institutions is in clear decline.

Governments and businesses are screaming for alternatives and some are actively pursuing them.

The US has spent the last several years debasing its currency. The Fed’s balance sheet has exploded by 529% since 2008.

The US federal government is now just hours away from hitting $18 trillion in debt.

Yet they continue to run up huge deficits, blowing their tax revenue on more bombs, drones, wars, and body scanners.

They slam foreign businesses with enormous fines (up to $9 billion) for doing business in countries the US doesn’t like.

Meanwhile they brazenly and arrogantly spy on their ‘allies’, let alone their own citizens.

Is it any wonder they have lost credibility?

Bear in mind that the US government’s power – and the dollar’s prominence – are based almost exclusively on US credibility.

Where do you think the trend for the dollar is headed when America’s own allies no longer trust the government?

via Zero Hedge http://ift.tt/1pK5ijh Tyler Durden

From Slope of Hope: Good evening, Slopers. I was going to bombard you with ETF charts, to assuage my utterly misplaced blogger’s guilt, but I landed on the first one – DBC – and figured it was enough. Allow me to share this with you, augmented with some embellishments:

You will note something quite interesting: up until October 2011, commodities and equities had an awfully strong positive correlation. In retrospect, the rise from March 2009 until the summer of 2011 was pretty much justified, given the terrible beating-down that had taken place with equities.

However, after the last meaningful drop in equities (over three long years ago……..) the Federal Reserve went full ‘tard and made clear their utter and unwavering commitment to enslave future generations of taxpayers so that present-day billionaires could get billionaire-y-er. The cyan bar I’ve placed on the chart delineates these two eras.

It’s pretty sad to think that the insanity of TARP and QE1 seem relatively sensible in retrospect, but honestly, until October 2011, we were still on the sensible side of the looking glass. Since then, as you can plainly see, what is representative of the true economy (by way of the commodity ETF, symbol DBC) and the fantasy-land Yellen pipe-dream (the SPY) have drifted farther and farther apart.

The spread now, tinted in green, is as wide as Oprah’s elastic waistband. Take heed. If these two even think about shrinking their chasm-like gap, even by a modest amount, equities are going to get their cojones kicked in.

via Zero Hedge http://ift.tt/1pK5kr9 Tim Knight from Slope of Hope