iftttwall

Similar to UMich's confidence measure soaring by the most in 4 years, the Conference Board's confidence measure beat expectations and jumped the most in 6 months (though remains below the year's highs). This is the best beat in 4 months. The improvement is all based on "expectations" which soared the most in 6 months. Confidence is critical (as we noted below) especially since the massive majority of actual investors are already bullish…(and definitely not bearish)…

 

 

 

 

Of course, what is critical is the continuation of the confidence bubble…

As a gentle reminder, as we have noted previously – this move in confidence is key…

But, it's all about confidence… investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable… And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels…

 

 

 

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

• Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
• Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
• Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence…

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

 

For now the mid-year highs are holding as confidence cannot escape its secular downturn.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/7TcxiGtL0mA/story01.htm Tyler Durden

Similar to UMich's confidence measure soaring by the most in 4 years, the Conference Board's confidence measure beat expectations and jumped the most in 6 months (though remains below the year's highs). This is the best beat in 4 months. The improvement is all based on "expectations" which soared the most in 6 months. Confidence is critical (as we noted below) especially since the massive majority of actual investors are already bullish…(and definitely not bearish)…

 

 

 

 

Of course, what is critical is the continuation of the confidence bubble…

As a gentle reminder, as we have noted previously – this move in confidence is key…

But, it's all about confidence… investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable… And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels…

 

 

 

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

• Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
• Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
• Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence…

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

 

For now the mid-year highs are holding as confidence cannot escape its secular downturn.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/7TcxiGtL0mA/story01.htm Tyler Durden

Stocks dropped and bonds rallied modestly as the early subscribers received the Chicago PMI which missed expectations significantly. Seemingly, with taper in place, bad news is bad news as the 59.1 print (vs a 60.8 exp) is the biggest miss in 6 months. Under the covers things are even worse with the lowest employment index since April. Inventories also collapsed (by the most since 1977) which is a problem since New orders and production also plunged suggesting the post-government shutdown ‘surprise’ GDP-enhancing inventory-build is entirely a one-off event (as we noted here).

Biggest miss in 6 months…

 

Inventories collapsed the most since 1977…

 

and employment dumps…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MTL9JIFd97s/story01.htm Tyler Durden

Earlier this week, in “Why The Turkish Government May Be The Casualty Of A $119 Billion PetroDollar Loophole” we said “dare to mess with the Petrodollar and the wrath of the US government will hunt you down… sooner or later.” Sure enough, after resulting in a Turkish government scandal, punishing its stock market and sending the Lira reeling, the blowback has reached Iran where billionaire Babak Zanjani was arrested yesterday on corruption charges, although in reality his chief transgression was allowing the Petrogold system to show that the Petrodollar is now longer irreplaceable.

Iran’s PressTV reported that the Monday arrest comes after 12 Iranian lawmakers accused Babak Zanjani of corruption, calling for an inquiry into his financial activities in a letter to the heads of the three branches of the Iranian government. “Experts say Babak Zanjani’s estimated net worth is around USD 13.8 billion. The corporate mogul, aged nearly 40, owns and operates many holdings and companies, including the UAE-based Sorinet group, Qeshm Airlines and Rah Ahan Football Club in Iran.” According to Head of Iran’s Supreme Audit Court Amin-Hossein Rahimi, Zanjani’s role in the course of transferring the country’s oil revenues involved breach of law.

“After sanctions were imposed against the National Iranian Oil Company, Iran had to export oil and they gave Babak Zanjani the task of exporting some of this oil worth around USD 3.0003 billion. The problem is that they were supposed to get collateral from him by law and this was not done. This is a violation,” Rahimi said in a press conference.  Some other lawmakers believe Zanjani is part of a mafia that makes financial benefits out of the sanctions imposed against Iran. “Zanjani is not alone. There is a network of individuals. They are getting rich out of people’s misery caused by sanctions. There is corruption here,” said Iranian legislator Mohammad Reza Tabesh.

So, Zanjani was tasked to circumvent oil sanctions which he did for over a year, but now, for some inexplicable reason, he is arrested for not “getting collateral”?

Of course, that, however, is only half the story. For the full version we go to Turkey’s Cumhuriyet newspaper which last week explained the full extent of Zanjani’s “transgressions”, the bulk of which involved allowing Iran to avoid the Petrodollar and promoting Petrogold.

This is how the real story goes as explained by Bloomberg:

• Babak Zanjani, an Iranian blacklisted by the U.S. Treasury for evading Iran sanctions, denies Turkish media reports saying he was involved in illegal trade with people implicated in the country’s corruption probe, Turkey’s Cumhuriyet newspaper reports citing a letter from Zanjani.
• Zanjani, who was used by Iranian govt to finance sales of Iranian oil, according to the U.S. Treasury, says he was involved in gold trade with Turkey
• Zanjani says has a minor business relationship with Riza Sarraf, formerly Reza Zarrab, an Iranian-Azeri businessman who was arrested in the corruption probe. As a reminder, Sarraf was arrested two weeks ago along with children of two Turkish cabinet ministers, other senior bureucrats as part of a probe into accusations of graft, money laundering.
• Zanjani says annual trade volume of his group of companies is around 7 billion euros; trade with Sarraf makes up a fraction of it
• Zanjani says he made investments in Turkey due to “his confidence in Prime Minister Recep Tayyip Erdogan’s leadership”

And seeing how Erdogan’s government is on the edge, and may fall any minute, that confidence appears misplaced, with the result being Zanjani’s arrest. What is unknown is whether his detention was merely Iran no longer needing his assistance to promote the usage of petrogold as a bypass of the petrodollar system now that the Iranian sanctions have been lifted. The only question we have is how much of Zanjani’s arrest was due to behind the scenes US influence making it clear that the Iranian detente will only take place – nuclear enrichment strawman forgotten – only if all those who made Petrogold possible are quitely put behind bars…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0c1sdoPPNPs/story01.htm Tyler Durden

Earlier this week, in “Why The Turkish Government May Be The Casualty Of A $119 Billion PetroDollar Loophole” we said “dare to mess with the Petrodollar and the wrath of the US government will hunt you down… sooner or later.” Sure enough, after resulting in a Turkish government scandal, punishing its stock market and sending the Lira reeling, the blowback has reached Iran where billionaire Babak Zanjani was arrested yesterday on corruption charges, although in reality his chief transgression was allowing the Petrogold system to show that the Petrodollar is now longer irreplaceable.

Iran’s PressTV reported that the Monday arrest comes after 12 Iranian lawmakers accused Babak Zanjani of corruption, calling for an inquiry into his financial activities in a letter to the heads of the three branches of the Iranian government. “Experts say Babak Zanjani’s estimated net worth is around USD 13.8 billion. The corporate mogul, aged nearly 40, owns and operates many holdings and companies, including the UAE-based Sorinet group, Qeshm Airlines and Rah Ahan Football Club in Iran.” According to Head of Iran’s Supreme Audit Court Amin-Hossein Rahimi, Zanjani’s role in the course of transferring the country’s oil revenues involved breach of law.

“After sanctions were imposed against the National Iranian Oil Company, Iran had to export oil and they gave Babak Zanjani the task of exporting some of this oil worth around USD 3.0003 billion. The problem is that they were supposed to get collateral from him by law and this was not done. This is a violation,” Rahimi said in a press conference.  Some other lawmakers believe Zanjani is part of a mafia that makes financial benefits out of the sanctions imposed against Iran. “Zanjani is not alone. There is a network of individuals. They are getting rich out of people’s misery caused by sanctions. There is corruption here,” said Iranian legislator Mohammad Reza Tabesh.

So, Zanjani was tasked to circumvent oil sanctions which he did for over a year, but now, for some inexplicable reason, he is arrested for not “getting collateral”?

Of course, that, however, is only half the story. For the full version we go to Turkey’s Cumhuriyet newspaper which last week explained the full extent of Zanjani’s “transgressions”, the bulk of which involved allowing Iran to avoid the Petrodollar and promoting Petrogold.

This is how the real story goes as explained by Bloomberg:

• Babak Zanjani, an Iranian blacklisted by the U.S. Treasury for evading Iran sanctions, denies Turkish media reports saying he was involved in illegal trade with people implicated in the country’s corruption probe, Turkey’s Cumhuriyet newspaper reports citing a letter from Zanjani.
• Zanjani, who was used by Iranian govt to finance sales of Iranian oil, according to the U.S. Treasury, says he was involved in gold trade with Turkey
• Zanjani says has a minor business relationship with Riza Sarraf, formerly Reza Zarrab, an Iranian-Azeri businessman who was arrested in the corruption probe. As a reminder, Sarraf was arrested two weeks ago along with children of two Turkish cabinet ministers, other senior bureucrats as part of a probe into accusations of graft, money laundering.
• Zanjani says annual trade volume of his group of companies is around 7 billion euros; trade with Sarraf makes up a fraction of it
• Zanjani says he made investments in Turkey due to “his confidence in Prime Minister Recep Tayyip Erdogan’s leadership”

And seeing how Erdogan’s government is on the edge, and may fall any minute, that confidence appears misplaced, with the result being Zanjani’s arrest. What is unknown is whether his detention was merely Iran no longer needing his assistance to promote the usage of petrogold as a bypass of the petrodollar system now that the Iranian sanctions have been lifted. The only question we have is how much of Zanjani’s arrest was due to behind the scenes US influence making it clear that the Iranian detente will only take place – nuclear enrichment strawman forgotten – only if all those who made Petrogold possible are quitely put behind bars…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0c1sdoPPNPs/story01.htm Tyler Durden

Moments ago the October Case Shiller home price index was released which came largely as expected: the seasonally adjusted number rose by 1.05% in the month, which despite the collapse in mortgage applications, shows that cash still rules everything, as average home prices across the Composite 20 cities increased at a 13.63% annual clip, the highest since February 2006. Both were a fraction higher than the expected 0.95% and 13.50% M/M and Y/Y increases. On the more relevant NSA basis (according to the authors) however, the October increase was 0.18%, the lowest since January and an indication that the institutional “all cash” buying wave is finally fading.

Indeed, as can be seen on the chart below, the actual home price gains over the past three months have plateaued and absent another major push in early 2014 facilitating Wall Street’s purchases of US real estate, it is very likely that this chart will once again resume trending lower.

And to show specifically just what the Case Shiller index tracks, here – once again – is an update on the housing market of bankrupt Detroit. In October prices rose 0.9% for the 8th consecutive monthly increase, and rose 17.3% from a year earlier. All is obviously well.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nUm6ze1byTc/story01.htm Tyler Durden

As the US session starts, despite a dearth of news and actvity in other markets, the precious metals complex is being smashed lower (on heavy volume). Gold just hit 2013 lows at $1182 and Silver at $18.837 is near its 2013 lows also.

 

 

It seems someone wants the status-quo-defying precious metals going out at their lows as central-planning-supporting stocks go out at their highs…

 

on heavy volume…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/I_5u0ThUs04/story01.htm Tyler Durden