trout ice cream

Apparently Manufacturers Didn’t Get The Memo Re: Renaissance

Consumer prices are now falling across the euro zone.  Inflation turned negative in December, with prices down by 0.2% on their level in December 2013…As was the case in 2009, the slide into deflation has been caused by the oil-price slump as it feeds through to energy prices.  ‘Core’ inflation (which excludes energy, food, alcohol and tobacco), actually edged up in December to 0.8% from 0.7% in November.”  Pretty much everyone is expecting full blown QE to be announced at the ECB’s next meeting (January 22nd).  “So far, [expectations for] QE has made Europe a good trade for bond managers.”  One might also argue that Europe has made Europe a good trade for bond managers.  Either way, demand for bonds appears to be “challenging the notion that we are going to see robust and constant growth.” Meanwhile, US Steel says “the collapse in global oil prices” has forced the company to shut down part of their “tubular division” in Ohio.  “The company has suddenly lost a great deal of business because of the recent downturn in the oil industry.”  Which pairs really nicely with this: Bank of America says the S&P 500 has been selling off recently because cheaper oil = less capex.  “Projects by companies in fields such as in fracking, drilling and rigs have ramped up in the last five years and now account for about 40 percent of all capital spending.”  Also, “American oil and gas companies have gone heavily into debt during the energy boom, increasing their borrowings by 55% since 2010, to almost $200 billion.  Their need to service that debt (alt) helps explain why U.S. producers plan to continue pumping oil even as crude trades for less than $50 a barrel, down 55% since last June…The industry is also expecting a wave of asset sales and consolidations, though it may not gain momentum until the price of oil stabilizes and values become clearer.”  Speaking of which, some people see the price of oil stabilizing below the marginal costs of American shale companies (~$40-$50), while Mohamed El-Erian says “the plunge in oil price reflects a fundamental shift in supply, with no one playing the role of the swing producer…The absence of an actor that can balance out prices will have major consequences.”  Also, while everyone is interested in debating the shift in oil supply, nobody seems all that interested in entertaining the demand question: global growth “has now slowed for five successive months, down to a level with global GDP rising at a subdued annual rate of just less than 2.0%.”  But here’s something else to consider: “The developed world continued to outperform the emerging markets, but with growth picking up in the latter to the fastest since September while the developed countries collectively recorded the weakest expansion since October 2013.”  Emerging markets are widely recognized as the drivers of growth in oil demand in the future.  Also, no more trout ice cream for awhile you guys…


WM: Shiller Says “No Bubble” In Bonds

“It doesn’t seem to be enthusiastic.  It doesn’t seem to be built on expectations of rapid increases in bond prices…In the unlikely event you meet anyone at the proverbial cocktail party talking about bond funds, he’s probably complaining about the lousy yields, not talking about the killing he expects to make.”  However, he says “there are theories (example, example) that have been amplified by the price performance.”


EU: Terrorist Attack In France This Morning; 12 Dead


USA: Boeing Is #Winning The Drop In Oil Prices


USA: Retailers Have No Excuse Not To Be Perfect


What: Oh The Sweet, Cruel Irony


WaitWhat: Turns Out “Wet Seal” Wasn’t A Winner


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