Business

In an odd coincidence, just as we were preparing an article showing how China is becoming increasingly more like Japan and hot to trade this convergence, we happened to glance at the slide that Jeff Gundlach was talking about at that exact same moment during his afternoon presentation, and lo and behold, the "new bond king" was discussing why, among the reasons why "China may not bounce back", is that China is increasingly becoming a Japanese demographic doppelganger...

... in a slide that was sourced from, of all places, Zero Hedge.

Having apparently taken the day off from selling US Treasuries and buying Offshore Yuan (following yesterday's "murderous" short-squeeze"), completing a 40 handle round trip in the "stable" currency year-to-date, PBOC decided to hold Yuan flat for the 4th day but make a statement that they would "give policy support to exports" - in other words devalue more.

How can it be that automaker stock prices are tumbling given that auto sales (if one listens to CNBC) are surging, that (if one listens to the CEOs) everything is awesome for automakers, and (if one listens to Phil LeBeau) there is no bubble in auto credit? The answer is simple... (you just don't want to admit it)

Two words - channel-stuffing!

In fact, as IceFarm Capital's Michael Green details, the credit-fueled over-productiuon has historically been disastrous for the global auto sector...

With the seasonally drawdown-prone December completed, we begin seasonally build-prone January with expectations for a 2mm barrel build. However, according to API, both total and Cushing inventory levels tumbled (-3.9mm and 300k respectively). Great news - so why is crude tumbling? Simple - massive builds in end-products again with Gasoline up a massive 7mm barrels and Distillates up 3.6mm barrels. Having ramped off sub-$30 levels aftwr NYMEX closed, and lifted by the Iran-US news, WTI is sliding back rapidly.

The largest 2-week Gasoline invenrtiory build ever...

The Royal Bank of Scotland (RBS) are advising investors to brace themselves for a “cataclysmic year”, warning that stock markets are likely to crash and oil prices will dip to $16 USD per barrel.  The banks credit team have warned clients that the markets appear to be flashing similar “stress alerts” that preceded the Lehman crisis in 2008, advising clients to “sell everything”. “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” the bank told clients.