Too much mal-invested, Fed-fueled, hope-driven "if we build it, they will buy it" inventory… and not enough actual demand. This has never, ever, ended well in the past – so why is this time different?
At 1.32x, the December inventories/sales ratio is drasticallyhigher than at year-end 2014 and is back at levels that have always coincided with recessions…
And just in case you needed more convincing that all is not well – the current spread between sales and inventories is now at a record absolute high…
As Sales tumble and inventories continue to rise…
And all because The Fed (ZIRP) and Government (Subsidies) are breathing life into Zombies when they should be dead and gone.
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Yesterday on Facebook, celebrity Second Amendment fan Ted Nugent posted photos of a dozen gun control supporters, all of them Jews, as indicated by the little Israeli flags over their faces. The headline: “So who is really behind gun control?” The captions on some of the photos mention additional offenses, such as “ISRAEL FIRSTER” (Alan Dershowitz), “gave Russian Jew immigrants your tax money” (Frank Lautenberg), “served in Israel’s army during Gulf War” (Rahm Emanuel), and “Nanny State troublemaker and 911 Israeli agent” (Michael Bloomberg). According to the Anti-Defamation League (ADL), the grid of 12 anti-gun Jews “was apparently not created by Nugent, but has appeared in the past on anti-Semitic web sites.” The bow-hunting rock ‘n’ roller added this commentary:
Know these punks. They hate freedom, they hate good over evil, they would deny us the basic human right to self defense & to KEEP & BEAR ARMS while many of them have tax paid hired ARMED security! Know them well. Tell every1 you know how evil they are. Let us raise maximum hell to shut them down!
In response to the predictable flood of criticism from both supporters and opponents of gun control, Nugent professed to be utterly flabbergasted that anyone thought the array of gun-controlling Jews was anti-Semitic. His point, he insists, was that Bloomberg et al. are betraying their own people by seeking to disarm them:
Just when you hope that mankind couldnt possibly get any dumber or more dishonest, superFreaks rise to the occasion. What sort of racist prejudiced POS could possibly not know that Jews for guncontrol are nazis in disguise? “NEVER AGAIN!” Anyone? Anyone?? RUFKM! The founder of Jews For the Preservation of Firearms Ownership called me his 2nd Amendment/Freedom hero. The NEVER AGAIN battlecry was universally embraced by all good people who will make sure another Holocaust never happens again. Freaks have plummeted to whole new low. Plummet on punks. Plummet on. Meanwhile I adjust my yamika at my barmitzva playing my kosher guitar. My dad killed nazis & saved Jews in WWII. Eat me.
Nugent followed that up with a photo of Nazis rounding up Jews whom he identified as “soulless sheep to slaughter.” Or as he put it in a separate comment: “NEVER AGAIN mthrfkrs!”
Ted Nugent has a long history of being an equal opportunity offender. But his latest share on Facebook, making the outrageous suggestion that Jews are behind gun control, is nothing short of conspiratorial anti-Semitism. Regardless of one’s views on gun control, this kind of scapegoating of an entire religious group is completely unacceptable and completely divorced from reality.
It should go without saying that anti-Semitism has no place in the gun control debate. Nugent should be ashamed for promoting anti-Semitic content, and we hope that good people on both sides of the gun control debate will reject his tactics and his message. We hope that Nugent will have the good sense to remove this share immediately so that it does not spread virally across the internet.
Former Klansman David Duke sprang to Nugent’s defense, noting that the ADL supports gun control. “If Jews have a problem with the truth,” Duke wrote, “then the truth is…AntiSemitic!” While some of Nugent’s defenders claimed they perceived no anti-Semitism in the original post, others seemed to especially like that aspect of it.
Back in November, for the convenience of those “who can’t wait to take the other side of Goldman’s clients, and thus the same side of Goldman’s prop desk” we previewed Goldman’s “Top 6 Trades” for 2016. Naturally, we explicitly stated that the “the best trades for 2016 will be to… do the opposite of the Top 6 trade recos.“
It’s time for an update, because just 40 full days into 2016, not only has Goldman been closed out on its Top Trade for 2016, namely being long the USD vs both the Yen and the Euro, but virtually all of its other trades: according to a just released update, Goldman has just been stopped out – with a loss – on 5 of its 6 top trades for 2016.
From Goldman:
Close long USD against an equally weighted basket of EUR and JPY on 9 February 2016, opened on 19 November 2015 at 100, with a potential loss of around 5%.
Close long 10-year US break-even inflation (USGGBE10 Index) on January 18, opened on 10 November 2015 at 1.60%, with a target 2.0% and a stop on a close below 1.40%, with a potential loss of 21bp.
Close long an equally-weighted basket of MXN and RUB versus short an equally-weighted basket of ZAR and CLP on 21 January 2016, opened on 19 November 2015 an entry level of 100, with a potential loss of 6.6% including carry.
Close long 5-year 5-year forward Italian sovereign yields vs short 5-year 5-year forward German yields on 9 February 2016, opened on 19 November 2015 with an entry level of 160bp and a stop loss of 190bp. The spread is currently at 219bp. The potential loss is 49bp.
Close long large cap US banks through the BKX Index relative to the S&P500 on 11 January 2016, opened on 19 November 2015 at 100, with a potential loss of 5.4%.
Stay long a basket of 48 non-commodity exporters (GSEMEXTD Index) and short a basket of 50 EM banks stocks (GSEMBNKS Index), opened on 19 November 2015 at 1.12. We will monitor this trade as the ratio between the two indices, with a target of 1.30 and a stop-loss of 1.04, currently at 1.17.
And just like that anyone who followed our suggestion to do the opposite of Goldman’s trade recommendations can take the rest of the year ago.
The relatively few leaders (aka, “generals”) that had been propping up the indexes are being systematically taken out.
“The way we see it is that the 6-year bull market is running out of steam, the steam being the number of stocks contributing to its advance. This occurs at the end of cyclical bull markets, ala 1999 and 2007. Once the relatively few stocks that are still propping up the market roll over, there is no foundation of support left to prevent a significant decline. This isn’t doom and gloom propaganda. It’s just part of the market cycle and should be something to monitor closely as we enter 2016.” – Conclusion from our final 2015 post (and perhaps a dozen other posts).
The point of our statement above – and all of the warnings we issued regarding the deterioration of the market’s internals over the past year – was that eventually the few stocks that were propping up the major indexes were going to collapse under the weight of that burden. And at that point, there will be no foundation left across the broad market to continue to buoy the averages. Well, since the start of the year, and in particular over the past week, that inevitable reckoning has been unfolding. Those few leaders left standing at the end of 2016, aka the “generals”, have finally succumbed to the selling pressure that preceded them in the rest of the market.
This includes one of the last men standing: the internet sector. The unraveling of the internet stocks is a relatively recent development – and a swift one at that. This is what happens when there are very few areas attracting almost all of the money flow. Once that avenue too is shut off, the reversal can be powerful as all of the inflows attempt to exit at once. Such has been the case with the internet sector. Just 4 days ago, we posted an chart intraday of the Dow Jones U.S. Internet Index, noting the fact that the index was hitting an all-time high. Well, the index gave up its gains of early that day and has been plunging ever since as the selling has finally reached this sector as well.
Coupled with that selloff has been the decline – and loss of key support – by one of the popular internet ETF’s, the First Trust Dow Jones Internet Index ETF (ticker, FDN). On Friday, FDN closed below what we determined to be quintuple support around the $62 level, as represented by the following:
The 23.6% Fibonacci Retracement of the 2009-2015 rally
The 38.2% Fibonacci Retracement of the 2012-2015 rally
The 61.8% Fibonacci Retracement of the 2014-2015 rally
The post-2012 Up trendline
The 500-day simple moving average
In our view, this development sticks a fork in the leadership of the internet stocks, at least as it involves propping up the major averages. It very well may be that it is curtains for the internet bull market as well, but that remains to be seen. The next level of importance on the FDN comes in around $52 (see below) and mirrors the support listed above at $62. Failure to hold there would almost cinch the end of the post-2009 bull market for this fund.
The 38.2% Fibonacci Retracement of the 2009-2015 rally
The 61.8% Fibonacci Retracement of the 2012-2015 rally
The 2015 breakout level
The post-2009 Up trendline
The 1000-day simple moving average
For now, the evidence is pretty clear. We have been offering warning after warning regarding the deteriorating breadth trend and how it was leading to vulnerability to a serious decline in the stock market. The major averages could only resist the selling pressure for so long on the backs of the mega-cap generals. Eventually, the generals would be taken out as well. They are now being taken out.
Just ten days ago, in the aftermath of the BOJ’s -0.1% NIRP announcement, we reported that after more than one year after the ECB unleashed NIRP, the total number of government bonds with negative yields to a staggering $3 trillion, a number which nearly doubled overnight to $5.5 trillion.
Overnight in a historic event, the latest consequence of the BOJ losing control, the yield on Japan’s 10Y JGB dropped below zero for the first time, in the process joining Switzerland as the only other country (for now) with a NIRPing benchmark 10Y treasury.
And, as Bloomberg calculates, this means that as of this moment, $7 trillion or about 30% of all sovereign bonds, are yielding negative rates, implying “investors” have to pay governments for the privilege of holding their money. It also means that in the past 10 days a record $1.5 trillion in global treasurys have gone from having a plus to a minus sign in front of their yield.
As we reported yesterday, in one of the most surprising developments involving the Syrian proxy war, Saudi Arabia and U.S. presence on the ground, the latest twist is that both Turkey and Saudi Arabia are now mulling a full-scale invasion while Russia and the Syrian government continue their progress in wiping out the US and Saudi-funded rebellion. To be sure, there was confusion when CNN Arabia reported first that the Saudis may send as much as 150,000 troops into Saudi Arabia, by way of Turkey, something which Anadolu news promptly denied.
However, the denial itself was softly denied by the Saudi Press Agency, which further stirred the water earlier today when it reported that not only is Saudi Arabia ready to send a special force to fight in Syria, but that this deployment was proposed by the US, which would oversee the Saudi troops as part of the US-led coalition in Syria. To wit:
AL JUBEIR SAYS U.S. PROPOSED GROUND FORCE DEPLOYMENT: SPA
SAUDI FORCE WOULD FIGHT AS PART OF U.S.-LED COALITION: SPA
SAUDI MINISTER SAYS SENDING GROUND FORCE UNDER DISCUSSION: SPA
SAUDI ARABIA READY TO SEND SPECIAL FORCE TO FIGHT IS IN SYRIA
And so, what was until recently purely an air campaign involving all the major global powers (except China, for for the time being), is about to become a full-blown land war, involving not only Suunis and Shi’ites (especially once Iran joins the fray), but also Russian troops on one side and US and Saudis on the other.
Most notably, oil has refused to budge even an inch on what is rapidly shaping up as a precursor to World War III.
No candidate, Republican or Democrat, had to date attacked Iowa’s beloved ethanol subsidies and lived to tell thetale. The two biggest subsidy boosters in living memory are arguably President Obama and Donald Trump. But Ted Cruz treaded where thugs and fools (because politicians are one or the other or both) had feared to tread and won.
How did he pull it off?
Essentially, by putting together a shrewd electoral strategy that thwarted the “public choice” dynamic that has been keeping the ethanol cartel in business while transferring $10 billion annually to its pocket from that of the drivers—not to mention gumming up their cars, says Reason Foundation Senior Analyst Shikha Dalmia.
With Deutsche Bank credit risk exploding and stock price collapsing to record lows, despite the CEO’s “rock solid” affirmations, there is only one way to know just how real a crisis this is… when government officials issue ‘denials’.
German Finance Minister Wolfgang Schaeuble says he isn’t worried about Deutsche Bank.
“No, I have no concerns about Deutsche Bank,” Schaeuble says
Schaeuble comments to Bloomberg Television after press conference in Paris.
We suspect this is Schaeuble’s “Contained” moment as markets – the ultimate arbiter of truth – tell a very different story…