Authored by Francesco Filia of Fasanara Capital,
“Learn how to see. Realize that everything connects to everything else.” – Leonardo da Vinci
A Dangerous Market Structure is More Worrying than Expensive Asset Valuations and Record Debt Levels
With WTI at its highest since July 2015, vol at 8mo lows, and the front-end flipped into backwardation for the first time since Nov 2014, it appears a lot of hope is priced into continued equlilibration (and OPEC). Last night's API (crude draw) provided some more confirmation but this morning's DOE data disappointed with a smaller than expected crude draw, and production rose once again to a new record high.
Having hit the highest level since Jan 2004 in October, November's final print shows the University of Michigan Consumer Sentiment index fell from 100.7 to 98.5, as both hope and current conditions slipped.
Expewctations for inflation dipped. Consumers saw inflation rate in the next year at 2.5 percent after 2.4 percent the prior month. Inflation rate over next five to 10 years seen at 2.4 percent, lowest since May, after 2.5 percent in October
Authored by David Stockman via The Daily Reckoning,
The Wall Street Journal published a superb example of hopium recently in a sunny-side-up story entitled “U. S. Manufacturing Rides Rising Tide, Buoyed by Global Growth, Optimism.”
Indeed, this lazy cheerleading excuse for journalism captured the sum and substance of why the punters keep buying the dips despite troubles gathering all around.
After rebounding from its July jolt, Durable Goods New Orders dramaticaly missed expectations in October (dropping 1.2% vs expectations of a 0.3% rise). Perhaps even more concerning is the drop in Core Capital Goods Orders (-0.5% MoM vs expectations of a 0.5% rise) - the biggest drop in 13 months.
The June/July swing (Boeing orders) and storm bounce has gone and October's preliminary print suggests a slowdown...
Aircraft orders tumbled:
Nondefense aircraft orders -18.6%
Defense aircraft orders -11.3%