February 2016

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Well, once again we have a big rally in the markets, but the VIX is only down a paltry 5%, which suggests there are many who don't really believe in this rally

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While markets are partying, meanwhile, in Italy:

Italy, the eurozone's third-largest economy, is in a full-blown banking crisis. Four small banks were rescued late last year. The big ones are teetering. Their stocks have crashed. They're saddled with nonperforming loans (defined as in default or approaching default). We're not sure that the full extent of these NPLs is even known. The number officially tossed around is 201 billion euros. But even the ECB seems to doubt that number. Its new bank regulator, the Single Supervisory Mechanism, is now seeking additional information about NPLs to get a handle on them. Other numbers tossed around are over 300 billion euros, or 18% of total loans outstanding. The International Monetary Fund shed an even harsher light on this fiasco. It reported last year that over 80% of the NPLs were corporate loans. Of all corporate loans, 30% were nonperforming, with large regional differences, ranging from 17% in some of the northern regions to over 50% in some of the southern regions.

Italy facing a full-blown banking crisis - Business Insider

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And then there is this:

Greece’s inflation has turned negative again, with consumer prices falling an annual 0.1 percent in January, according to data on Wednesday. That reversed the December gain, which was the first positive reading since early 2013, driven by new sales taxes introduced as part of the country’s third bailout in August.

Greece Begins 2016 With Return to Falling Consumer Prices: Chart - Bloomberg Business

Hmm, deflation, now what would that do to Greek debt dynamics? Especially if one combines it with negative growth..

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Massive 100+ points rally in the S&P, as if the world suddenly is whole again//

Then we sit on ELLI which we think is now getting ahead of itself just under $80.. (charts are self-updating) and wondering whether we have to say goodbye at least for a while..

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In less than a week that's a 30%+ rally in ELLI. Yes, the earnings were very good, but the stock really is getting expensive and overbought..

[admin]

Markets going crazy on Iran having some positive comments on oil, apart from the fact that they didn't commit to any freezing of production, let alone declines. Never mind, everything is great:

Non-oil domestic exports (NODX) tumbled 9.9 percent in January from a year earlier, trade agency International Enterprise Singapore said in a statement on Wednesday, missing the median forecast of a 7.4 percent contraction in a Reuters poll. In December, annual exports fell 7.2 percent. Exports to China, Singapore's top overseas market, declined sharply by 25.2 percent in January from a year earlier, compared with a 18.7 percent slide in December.

Tumble in Singapore exports adds to expectations of more monetary easing | Reuters

According to Japan’s Ministry of Finance, exports fell by 12.9% in the 12 months to January, a result that was below the 8.0% contraction seen in December and expectations for a decline of 11.3%. To put that decline into perspective, it was the steepest annual contraction in exports since October 2009. By destination, exports to Asia plummeted by 17.8% from a year earlier, with those to China falling by 17.5%. In comparison, exports to the US fell by just 5.3%. Like exports, the news on imports was equally unnerving. From January 2015 they tumbled by 18.0%, unchanged from the drop registered in December, although the figure missed expectations for a decline of 18.0%.

Japanese exports crater | Business Insider

China's exports fell 11.2 percent on-year in January, while imports declined 18.8 percent, clocking far bigger slides than expected by analysts. Analysts polled by Reuters had expected a 1.9 percent drop in January exports, and a 0.8 percent drop in imports, after China's exports fell 1.4 percent in December from a year earlier and imports slid 7.6 percent

China releases trade data for January: yuan denominated and US dollar imports and exports

Industrial output fell by 1.2 percent on the month, the strongest decline since August 2014, data from the Economy Ministry showed. The figure fell short of the consensus forecast in a Reuters poll for a 0.4 percent increase... Separate data from the Federal Statistics Office showed that seasonally-adjusted exports fell by 1.6 percent in December while imports were also down by 1.6 percent, narrowing the trade surplus to 18.8 billion euros.

German Industrial Production And Exports Slump In December | David Stockman's Contra Corner

Germany's Bundesbank slashed its forecast for inflation on Monday, a signal that the same will happen across the wider euro zone, increasing pressure on the European Central Bank to loosen money supply. The German central bank said that the tumbling price of oil meant that price inflation would hover close to zero this year, at 0.25 percent, compared to its earlier prediction of 1.1 percent.

Bundesbank cuts German inflation forecast after oil dip | Reuters

South Korea's exports plunged at the fastest pace in six and a half years last month as global demand was hit hard by persistent low oil prices and a slowdown in China, customs data showed Tuesday. The country's outbound shipments stood at 36.6 billion dollars in January, down 18.8 percent from a year earlier, extending the losing streak to 13 months, according to data compiled by the Korea Customs Service. The January figure marked the biggest on-year drop since August 2009 when exports nosedived 20.9 percent on-year in the aftermath of the financial crisis. Imports, meanwhile, sank 20 percent on-year to 31.4 billion dollars in January, with the trade surplus reaching 5.2 billion dollars.

S. Korea's exports tumble 18.8 pct in Jan.

[admin]

Actually there was already such a list with bad economic figures, and where else than on the 'Economic Collapse' blog (reposted on ZeroHedge). While these blogs tend to only gives you the bad news (as they have an agenda), in this case it's handy:

#1 Chinese exports fell by 11.2 percent year over year in January.

#2 Chinese imports were even worse in January.  On a year over year basis, they declined a whopping 18.8 percent.

#3 It may be hard to believe, but Chinese imports have now plunged for 15 months in a row.

#4 In India, exports were down 13.6 percent on a year over year basis in January.

#5 In Japan, exports declined 8 percent in December on a year over year basis, while imports plummeted 18 percent.

#6 For the sixth time in six years, Japanese GDP growth has gone negative.

#7 In the United States, exports were down 7 percenton a year over year basis in December.

#8 U.S. factory orders have fallen for 14 months in a row.

#9 The Restaurant Performance Index in the United States has dropped to the lowest level that we have seen since 2008.

#10 This month the Baltic Dry Index fell below 300 for the first time ever.

#11 It is now cheaper to rent a 1,100 foot merchant vessel than it is to rent a Ferrari.

#12 Orders for Class 8 trucks in the United States dropped by 48 percent on a year over year basis in January.

#13 Due to a lack of demand for trucks, Daimler just laid off 1,250 U.S. workers.

#14 Even though Saudi Arabia and Russia have agreed to freeze oil production at current levels, the price of U.S. oil has still fallen below 30 dollars a barrel.

#15 It is being reported that 35 percent of all oil and gas companies around the world are at risk of falling into bankruptcy.

#16 According to CNN, 67 oil and gas companies in the United States filed for bankruptcy during 2015.

#17 The number of job cuts in the United States skyrocketed 218 percent during the month of January according to Challenger, Gray & Christmas.

#18 All over America, retail stores are shutting down at a stunning pace.  The following list of store closures comes from one of my previous articles…

-Wal-Mart is closing 269 stores, including 154 inside the United States.

-K-Mart is closing down more than two dozen storesover the next several months.

-J.C. Penney will be permanently shutting down 47 more stores after closing a total of 40 stores in 2015.

-Macy’s has decided that it needs to shutter 36 storesand lay off approximately 2,500 employees.

-The Gap is in the process of closing 175 stores in North America.

-Aeropostale is in the process of closing 84 stores all across America.

-Finish Line has announced that 150 stores will be shutting down over the next few years.

-Sears has shut down about 600 stores over the past year or so, but sales at the stores that remain open continue to fall precipitously.

#19 The price of gold is enjoying its best quarterly performance in 30 years.

#20 Global stocks have fallen into bear market territory, which means that about one-fifth of all global stock market wealth has already been wiped out.

#21 Unfortunately for global central banks, they have pretty much run out of ammunition.  Since March 2008, central banks have cut interest rates 637 times and they have purchased a staggering 12.3 trillion dollars worth of assets.  There is not much more that they can do, and now the next great crisis is upon us.

[admin]

Ray Dalio noticed something about the big three day rally:

The one trait of the market’s biggest winners from that session? “They’re all stocks that have been kicked in the teeth recently,” notes Guenthner. “What we have on our hands is a garbage rally. Heavily shorted losers are getting their day in the sun,” he says. If the market hopes to build on recent gains, some “true market leaders need to emerge to see the rally gain more traction.” The full blog is here.

There’s a cold central-bank wind coming, warns Ray Dalio - MarketWatch

While rising 30%, the rise in ELLI doesn't mean it's qualified as garbage, but nevertheless we think Dalio has a point.

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We can only hope this isn't true, but in effect, nobody knows for sure..

Daiwa Capital Markets, which predicted the outflow risks back in 2014, says less than half of the $3 trillion of dollar debt that ended up in China has been repaid. Commerzbank AG said record new yuan loans in January showed companies are raising money to repay more debt abroad. Corporate bond sales onshore have more than doubled this year, as offshore issuance in the greenback dropped about 30 percent. Goldman Sachs says there have been $550 billion of outflows in the second half of 2015, and that every 1 percent yuan weakening risks $100 billion more.

China Bears Say the Capital Outflow Is Just Beginning - Bloomberg Business

“We’re less than halfway done” in terms of carry trade unwinding, said Kevin Lai, chief economist for Asia excluding Japan at Daiwa. “My main focus is not about unwinding, but the reverse carry trade. People are taking fresh positions to sell the yuan. We’re talking about a massive deflationary scenario now, which is very bad for the market, economy, for everything.”

China Bears Say the Capital Outflow Is Just Beginning - Bloomberg Business

[admin]

Maybe we worry too much and the stock exchange always has to climb a wall of worry, but the situation in many emerging markets really is worrying, see the whole report:

High government ownership in key sectors such as oil and gas, and financials will likely keep EM corporate credit from weakening as dramatically as that seen in US HY near term. 2. However, weak earnings, negative credit impulse, and tightening primary markets will likely hit EM corporates with a lag. Corporate fundamentals will hurt the sovereign that is backstopping them just as the sovereign’s fiscal credentials are already being questioned, leading to higher spreads and higher local yields. This should mean that the problems of one sector infect the broader economy in EM much more than it has in the US.

Path to emerging-markets meltdown - Business Insider