Business

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If the risk-on euphoria of punters borrowing billions of dollars in margin debt doesn't materialize, stocks could languish for years after falling 50%.

The financial service industry's Prime Directive is to exploit humanity's core drives of Greed and Fear. Financial service companies promise high returns (fulfilling our greed) that are low-risk, i.e. "safe" (placating our fear of losing our nest-egg).

Some interesting observations by the Goldman sales and trading desk:

Every sector closed positive today with the biggest theme being the reversal in Momentum (SPX +1.4% vs our Momentum pair -2.3%) driven by outperformance of the Short Momentum basket (Long Momentum +99bps vs Short Momentum +3.3%). This is the momentum pair’s largest underperformance YTD and the 5th largest underperformance over the past  2 years. Below shows 1D, YTD and 12M performance of S&P Level 1 sectors.

In case you were under the impression that oil was stabilizing, we thought this chart might help clarify just how "different" it is this time in the energy complex...

U.S. crude inventories are at levels last seen when President Herbert Hoover was battling the Great Depression.

After this week's build - Crude stockpiles climbed 8.38 million barrels to 494.9 million in the week ended Jan. 22, the highest since November 1930, according to weekly and monthly data from the Energy Information Administration.

Following last night's huge 11.4mm barrel inventory build forecast from API (the largest since 1996), DOE reports an 8.4mm build (against analysts estimates of +4mm). It seems the blowback from the huge gasoline and inventory builds is flowing back upstream to crude but there is some good news as Cushing saw a 771k draw after 11 weeks of builds (and production dropped very modestly). On the demand side, it's just as ugly with Gasoline demand -2.5% YoY and Distillate demand down a stunning 14.8% YoY.

Moments ago Caterpillar reported its latest monthly retail sales statistics and the numbers have never been worse.