Business

It appears the complete decoupling from economic reality of the so-called US equity 'market', combined with the collapse in a data-dependent Fed's credibility - topics we have extensively covered - has reached the mainstream. Barron's always-insightful Randy Forsyth exposes the ugly reality that this is a "Bullard" market and we are just living in it as the flip-flopping Fed head is "the most visible telltale of the shifting winds of Fed expectations.

Back in October when we first looked at ground zero of the commodity price collapse, we found something striking: as of the end of 2014, one half of China's commodity companies with corporate debt were totally insolvent - based on Macquarie data they were unable to cover even one interest payment (let along debt maturity) with existing cash creation.

Following the examples of Canada, Finland, New Zealand and the Netherlands, Japan is considering giving free money in the form of ‘vouchers’ to poor young people. Surveys showed that under-34s in Japan have cut their spending and the government could stimulate economic activity by injecting free money into the system which will pay for itself in time by expanding the economy while maintaining social cohesion among the classes.

While the US manufacturing sector has been in a clear recession for the past year as a result of the collapsing commodity complex, so far the stable growth in low-paying service jobs - at least according to the BLS' statistical assumptions - such as those of waiters and bartenders have kept the broader service economy out of contraction (even though recent Service PMI data has been downright scary). 

This is now changing: as we showed a month ago, according to the lagged effect of the collapse of the Restaurant Performance Index, that party is over:

USDJPY just had its best week in 2 months, funding bullish momentum and carry trades around the world in the midst of dismal economic data everywhere and tumbling earnings expectations. This "bullish" Yen strength, however, amid China's biggest weekly devaluation in almost 3 months, was ironically driven by drastic investment outflows - record sales of Japanese stocks by foreigners (sell JPY), and record purchases of foreign bonds by Japanese investors (sell JPY).