“When the fear of losing money overcomes the fear of looking stupid . . . that’s a bottom!” — Arthur Cashin

1. China GDP Growth Sinks to 25-Year Low — China’s Q4 gross domestic product eased to 6.8% from a year earlier, while full-year growth slipped to 6.9%, adding to the troubling economic picture that’s unsettling traders around the world. Experts expect Beijing may do more to stimulate its economy.
2. Iranian Sanctions Come to An End — July’s nuclear deal between Iran and six world powers came into effect, triggering an end to years of sweeping sanctions on Tehran. $100B worth of Iranian assets are set to be unfrozen and many global companies will now be permitted to do business with the Islamic Republic. Iran has also said it plans to scale up oil production and exports by 500K bpd – a move that comes as crude prices languish below $30/bbl and amid deteriorating relations with Saudi Arabia.
3. Saudi Arabia Warns Banks Against Riyal Speculation — the Saudi Arabian central bank has warned commercial banks against betting on depreciation of the riyal as tumbling oil prices put pressure on the Saudi currency. Banks and hedge funds are also speculating that low oil prices might eventually prompt Riyadh to scrap its peg to the U.S. dollar (which has been linked since 1986). Bets for a devaluation of the riyal reached their highest in almost two decades this month, driving 12-month forward contracts to their highest since at least December 1996.
4. Russia Ruble’s Dramatic Plunge Continues — Russia’s ruble fell more than 5% late last week, to hit a new record low of 85.97 per dollar amid a global crash in crude prices. The country is suffering considerably from the oil slump, which has sparked widespread predictions of a second straight year of recession.
5. Venezuela Fears of Default Grows — the plunge in the price of oil is causing more investors to bet that Venezuela will default on its $120B pile of foreign debt, an event that would trigger a messy battle over the country’s oil shipments and deepen its economic and political crisis. Oil accounts for 96% of Venezuela’s export earnings.
6. AAII Bullish Sentiment Ticks Higher — according to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment increased from last week’s depressed reading of 17.9% up to 21.52%. Even at that level, though, sentiment remains extremely bearish.

The week ahead — Economic data from Econoday.com:

“In bear markets, stocks usually open strong and close weak. In bull markets, they tend to open weak and close strong.” – William J. O’Neill

1. China Auto Sales Slowest Pace Since 2012 — auto sales in China rose 4.7% to 24.6M units last year to mark the slowest pace of sales growth since 2012, according to data from the China Association of Automobile Manufacturers. A sizable tax cut from Beijing during the last quarter wasn’t enough to help lift sales past the growth rate seen in the bustling U.S. auto market. General Motors (NYSE:GM) and Ford (NYSE:F) outpaced major domestic automakers in China through their local joint ventures.
2. Amazon’s Chinese Unit Gets License to Provide Ocean Freight Services — Amazon supplies its own trucks, drones and maybe some planes, but ships are now seen as the next horizon. The company’s China subsidiary has received a license in the U.S. to operate as an ocean freight forwarder – an entity that organizes the shipment of goods from a supplier or factory in one region to a company or customer somewhere else. UPS might be hurt by Amazon new strategy of providing its own transportation services.
3. Berkshire Hathaway (BRK.A, BRK.B) Bought an Additional 5.1M shares of Phillips 66 (NYSE:PSX) — according to regulatory filings, Berkshire Hathaway (BRK.A, BRK.B) bought an additional 5.1M shares of Phillips 66 (NYSE:PSX) between Jan. 4 to Jan. 11. The purchases boost Berkshire’s Phillips 66 investment to 65.68M shares, or about 12.3% of those outstanding. Buffett fans, and perhaps some crude oil watchers, likely are wondering if he is calling a bottom in the oil price rout.
4. Brent Briefly Slips Below $30 — brent oil prices briefly dipped below $30/bbl, hitting a new 12-year low and putting the benchmark at a discount to U.S. crude. Prices have already tanked 20% this year and analysts vary greatly over the level and when the commodity will hit a bottom.

The week ahead — Economic data from Econoday.com:

“As goes January, so goes the market” — Trader Almanac
“The December Low Indicator” — “Forget all the noise you hear about the January Barometer; pay much more attention to the December low. That would be the lowest closing price for the Dow Jones Industrial Average during the month of December. If that low is violated during the first quarter of the New Year, watch out!” “— Lucien Hooper

1. First U.S. Crude Export Leaves Texas — the first oil tanker of freely traded American crude oil launched from the Port of Corpus Christi, marking the end of a long-standing U.S. ban put in place in the 1970s. ConocoPhillips (NYSE:COP) and NuStar Energy (NYSE:NS) loaded the tanker with crude pumped from Eagle Ford, skipping ahead of Enterprise Products Partners (NYSE:EPD). The buyer is Dutch oil-trading powerhouse Vitol Group. The company has a subsidiary that owns a refinery in Switzerland.
2. US Files Civil Suit Vs VW(OTCPK:VLKAY) — the U.S. Justice Department has finally filed a civil lawsuit against the automaker for allegedly violating the Clean Air Act by installing illegal defeat devices in nearly 600K vehicles. The German auto giant faces fines in excess of $90 bil or up to $37,500 per vehicle.
3. European Banks Poised for More Job Cuts In Asia — European banks are set to cut back equities trading and research teams in Asia, as global cost-cutting reaches a region where a drop in Chinese trading volumes and local competition have hit profits. Bankers and headhunters told Reuters that BNP Paribas (OTCQX:BNPQF), Deutsche Bank (NYSE:DB) and Barclays (NYSE:BCS) are among lenders likely to slash their workforce, setting the tone for a tough 2016. Ten of Europe’s largest banks already announced 130K job cuts since last June.
4. Pershing Square Leads Hedge Fund Industry Losses in 2015 — Bill Ackman’s Pershing Square ended 2015 with a major 20.5% loss, the worst year in its 11-year history, following a knockout 40% return in 2014. That put the closely watched activist investor into the same league as rival billionaire hedge fund manager David Einhorn, whose Greenlight Capital finished the year with a 20% drop.
5. U.S. Adds 292,000 New Jobs in December — the United States labor market gained almost 300,000 new jobs in December, capping off the fifth straight year in which employment grew by at least 2 million to power a steadily growing economy. Traders who bet on rate hikes using fed funds futures contracts now project greater-than-even odds of a March rate hike, according to CME FedWatch.

The week ahead — Economic data from Econoday.com:

Happy New Year…

1. Verizon Offering Consumers Up to $650 to Switch — Verizon (NYSE:VZ) is now offering mobile users up to $650 per line to switch from another carrier. Consumers who trade in their current smartphone and buy one on a Verizon payment plan get up to $650 (through a prepaid card) to cover remaining installment balances with another carrier.
2. Buffett Faces Worst Stock Market Year Since 2009 — the Oracle of Omaha is headed for his worst year relative to the rest of the U.S. stock market since 2009, with shares in Berkshire Hathaway (BRK.A, BRK.B) down 12% YTD. While the company doesn’t have oil and gas subsidiaries, its railroad business transports oil, coal and agricultural products, and its manufacturing arm sells products to the shrinking oil industry. Berkshire has also been hit by big declines in two of its largest investments: American Express (-24%) and IBM (-13%) YTD.
3. Puerto Rico Partly Defaulting on Bonds due on Jan 4 2016 — Puerto Rico won’t be making two of its thirteen debt payments due tomorrow – a $35.9M payment on the territory’s Infrastructure Financing Authority and a $1.4M payment to its Public Finance Corporation. The rest of the nearly $1B in payments will be made, including one to general obligation bondholders (in which half of the payment comes from revenues clawed back from other bonds). Monoline insurers Ambac (NASDAQ:AMBC), MBIA (NYSE:MBI), and Assured Guaranty (NYSE:AGO), each of which have Puerto Rican exposure, are in focus.
4. Crude Heads for Second Annual Decline — Oil is set for its first back-to-back annual loss since 1998 after record U.S. inventories data last Wednesday reinforced worries about a global supply glut. Crude stocks rose by 2.6M barrels last week, the U.S. Energy Information Administration said, raising additional concerns after OPEC effectively abandoned output limits at a meeting earlier this month. WTI has tumbled over 30% in 2015 to under $37/bbl.
5. Market Action Suggests Yet Another Downside Test of the S&P’s 1990 to 2000 Support Zone.

The week ahead — Economic data from Econoday.com: