Chartapalooza: Complex Recovery Paths And Will It Ever Be The Same?

Major central bank activism and some sporadically good economic data in the U.S. have lifted equity markets and also helped the credit markets continue their rally. Central bank policy has been focused on an emergency bailout footing to stave off sudden panic and is also is aimed at stimulating economic activity. This has involved incentivizing households and businesses to expand and take some more risk. But no new policy initiative is perfect – not in implementation nor is it precise in its impact. Some in the markets and even in the Fed itself worry that the massive and unprecedented easing could be causing its own distortions and perverse side effects. It has clearly triggered a chancy search for yield that may yet lead to new asset bubbles and financial instability. There are numerous examples as Abraham Gulkowitz's PunchLine (chart extravaganza) shows. While the liquidity provided by key central banks -- including the move by the Bank of Japan to initiate massive monetary easing -- will likely continue suppressing yields, there is a serious argument to be made that the rallies have moved beyond fundamentals... This increases the likelihood of more surprises, not less...

The Holder - Issa Smackdown

This was not your grandfather's hearing. The air was thick with partisanship already but when Darrell Issa began by playing audio of Thomas Perez, assistant attorney general for civil rights and President Barack Obama's nominee to become the next Secretary of Labor, in which he confirms that he is arranging for details relating to the St. Paul case not to be disclosed. "Do you think it's appropriate for someone to -- at a federal level -- to try to keep information out in order to disguise what's actually going on?" Issa asked. "There are a whole variety of reasons why people, why we as a government and Justice Department, decide not to become involved in qui tam cases," Holder replied. Holder and Issa went back and forth until Holder lost it... "It is inappropriate and too consistent with the way in which you conduct yourself as a member of Congress," Holder said. "It is unacceptable. It is shameful."

Obama Makes Statement On "Situation Regarding The IRS" - Live Webcast

With the president so busy with teleprompted appearances, one is almost reminded of the presidential campaign when this was an hourly event, although since that is not the case and since the president is engaged in now seemingly endless damage control, one wonders if Ben Bernanke is able to govern the country entirely on his own. So far so good, if the country is just the Stalingrad & Poor 500 of course. As for Obama, he will next speak, following a customary delay, on the "situation regarding the internal  [and less than impartial] revenue service." Let's listen in.

Third Point Q1 Holdings Update: Reduces YHOO, AIG Stakes, Adds New Stakes In Virgin Media, Tiffany And B/E Aerospace

With Paulson's star long gone down, there are few remaining "new generation" hedge fund wunderkinds, especially in a world in which the best performing hedge fund is Federal Reserve Capital LLC - Onshore Fund. One among them is Third Point's Dan Loeb, who continues to be one of the best performing hedge fund managers for the 4th year in a row. He just filed his Q1 13F, amounting to $5.3 billion in disclosed long equity positions, which are summarized below. Of note are the following changes:

• New stakes in Virgin Media ($538MM), Tiffany ($188MM), Anadarko ($105MM), Thermo Fisher ($99MM), Cabot Oil and Gas ($84MM), Hess ($72MM) and others. Some of these overlap with the initiations of David Tepper and David Einhorn especially Hess: did some "idea dinners" take place in Q1 we were not aware of?
• Fully exited stakes in Tesoro, Morgan Stanley, Nexen, Symantec, Herbalife, Illumina, Coke, PVH, Abbott Labs and others.
• Reduced positions in Yahoo, AIG, New Corp, Murphy Oil, Delphi, Lyondell and others
• Added to stakes in International Paper, Abbvie, Dollar General, Constellation, and Ariad

Tesla Announces Offering Of Common Stock, Convertible Notes

Several moments ago, TSLA (hardly) surprised the world when it filed an open-ended S-3 (Shelf) statement, as many had expected it was only a matter of time before the company used the recent surge in its stock price to sell shares. Then, a few moments later, TSLA once again (hardly) surprised the world when it announced a joint $450 million convertible bond and 2.7 million share common stock offering. And because a dilution is not a dilution if the founder is participating in the common offering (buying his own equity at an unprecedented price to "anchor" it as a benchmark- sure why not - after all he is making much on all the other equity he has in the firm that he is not buying, as a result), the stock is trading up after hours.

Subprime 2.0 - Auto Loan Deliquency Balances Rise 24% YoY

As we warned six weeks ago, the Fed's ZIRP side-effects have driven auto-lenders to scrape the bottom of the subprime-lending barrel once again (loans to subprime borrowers +18% YoY). It seems, based on the Fed's latest data, that this over-exuberant lending is coming back to bite once again as delinquent balances surge 23.9% year-over-year (though optimistically Experian reflects "obviously, we never want to see a rise in delinquencies or repossessions, but... they are still lower than the recession-level rates,"). As Experian also notes today, repossessions rose 16.9% year-over-year. All this as lending volumes overall rose 9.6% to $726 billion in Q1 2013 but average charge-off amounts rose by 9.8% to $7,401 on each defaulted loan - and the worse is yet to come, as "we continue to move forward, we should start to see more increases as some of the subprime loans coming onto the books begin to deteriorate." This will end well.

Guest Post: The Brewing Generational Conflict

The promises made to the 76 million baby Boomers cannot be met. It's really very simple: promises made when the economy was growing by 4% a year and the next generation was roughly double the size of the generation entering retirement cannot be fulfilled in an economy growing 1.5% a year (and only growing at all as the result of massive expansions of public and private debt) in which the generation after the cohort entering retirement is significantly smaller. We desperately need an adult discussion focused on reality rather than resentment. The solution will require dismantling open-ended, everyone-deserves-everything Medicare, which will bankrupt the nation itself. The solution is currently "impossible". What nobody dares say is that if the 76 million Boomers press their claims to the point the nation is bankrupted, then the next generations (X and Y) will have to wrest political power from the retirees, not for their own sake but for the sake of the nation and for the generations behind them.