Netflix headlines may appear rosy as top and bottom lines were a beat but guidance on revenues and subrscriber adds perhaps rings the death knell on this mythical beast...
*NETFLIX SEES 2Q NET ADDS BELOW THOSE OF 2010 :NFLX US
*NETFLIX SEES 2Q REV. ABOUT $873M-$895M; EST. $893.4M :NFLX US
We can only hope that AAPL does not miss in any way on any metric ever as NFLX is now down 18% from Friday's close...
In a little over a month, the risk of the 30 most systemically important global banks has jumped an impressive 45%. At 235bps, the FSB30 stands just shy of the peak levels that were seen in the initial March 2009 crisis moment - though remains below Q4 2011 peak crisis levels. Perhaps, despite all the protestations of 'zee stabilitee', self-sustaining record-profit-margin-driven recovery, and Chinese soft-landing, the vicious circles of austerity in Europe (and perhaps the US) and financials squandering their newly-found liquidity (and certainly not capital) is becoming too large to ignore?
It appears that when it comes to mocking consensus groupthink emanating from lazy career 'financiers' who seek protection from their lack of imagination and original thought, 'creation' of negative alpha and general underperformance (not to mention reliance on rating agencies, only to jump at the first opportunity to demonize the clueless raters), in the sheer herds of other D-grade asset "managers" (for much more read Jeremy Grantham explaining this and much more here), David Rosenberg enjoys even more linguistic flexibility than even us. Case in point, his just released trashing of the latest Barron's permabull groupthink effort titled "Outlook: Mostly Sunny." And just as it so often happens, no sooner did those words hit the cover of that particular rag, that it started raining, generously providing material for the latest "Roasting with Rosie."
The White House announced it was getting into the commodities game in an effort to protect consumers from some of the geopolitical factors spilling over into the retail gasoline market. OPEC and the IEA both said in their monthly reports that market perceptions were behind higher energy prices, not physical shortages. High gasoline prices make for angry constituents. That means politicians, especially politicians fighting to keep their paychecks, start pointing their legislative guns at Wall Street almost as soon as the gavel strikes. Apart from the murky waters of economic nuance, however, President Obama said that, no matter what, American commuters need gasoline. Speculation aside, maybe that's the problem. Gasoline is a necessity and that's in part why the debate ensues. Without massive subsidies, gasoline is going to get more expensive no matter what the politicians say. And until commuters move beyond the carbon mindset, that ride to work will continue to be a rough one.
UPDATE: Added Tim Geithner's ever-positive spin-fest...
Medicare trustees just released their annual report on the program's finances and it does not make for healthy reading. In fact the main headline takeaway is that the social security fund itself will now run dry three years sooner than was projected in 2011. While 2035, the new deadline, seems a long way off, the 5% rise in medicare costs in 2011 should be enough to worry most and perhaps more disturbing is the separate disability program is set to run dry in 2016 (two years earlier than expected) and Medicare is to be depleted by 2014. Headlines via Bloomberg:
- *MEDICARE COSTS RISE 5 PERCENT TO $549 BILLION IN 2011 :UNH US
- *LONG-TERM PROJECTIONS FOR MEDICARE WORSEN, TRUSTEES SAY :UNH US
- *HOSPITALS TO FACE MEDICARE PAYMENT CUTS IN 2024, U.S. SAYS
- *TRUSTEES SAY FUND TO RUN OUT THREE YEARS EARLIER THAN PREDICTED
Juxtaposing the market's recent movements, Nigel Farage's 'when-not-if' perspective on the end of the Euro, Weidmann's concerns, and now ECB's Noyer stunning self-delusion that, as Bloomberg notes:
*NOYER SAYS STEPS TO EXIT EURO CRISIS BEGINNING TO BEAR FRUIT
*NOYER: BANK FUNDING, MONEY MARKET CONDITIONS ARE MUCH BETTER
*NOYER: RECENT EXCEPTIONAL STEPS LET BANKS, GOV'TS STRENGTHEN
*WEIDMANN: RENEGOTIATION OF AUSTERITY A 'BLOW TO CREDIBILITY'
is more than some can bear. As Mr.Farage notes, in the face of the rapidly deteriorating situation in Europe, Barroso and his colleague's ever-smiling perspective on the Euro, "look ridiculous". With Spanish yields over 6%, banks trading at near record high levels of funding costs, Italian risk elevating, political event risk becoming critical, and now macro data turning even worse perhaps Noyer's comments that "delaying fiscal consolidation may lead to greater risks" are spot on - and yet nation after nation rises-up votes to 'deny' austerity.
One scene from the movie Titanic depicts a lounge in one of the upper class quarters of the ship as it slowly sinks beneath the waves. Notwithstanding the vessel listing alarmingly, a motley band of toff revelers are determined to go out in the finest style. Some continue to play at cards with a fatalistic resolve while others determinedly quaff spirits direct from the bottle. Having considered for some time the most appropriate metaphor for the current market environment, we think this may be it: one may be doomed, but one can still party on. Having already hit the iceberg, one major problem we see is the common perspective for both investors and the asset management industry to view debt and equity as the entire universe of investor choices available. Having long exhausted the armory of conventional policies to keep the unsustainably indebted show on the road, increasingly desperate politicians are doing increasingly desperate things, be that gifting money to the IMF in a brazen display of fiscal denial that we can ill afford (US, UK) or simply stealing from other sovereigns (Argentina). The ironic triumph of the Keynesians means that, in trying to save the economy, our central bank may end up destroying it completely by means of the printing press; as a consequence, we now get to experience some of the full-on horror of the Japanese malaise.
Frankly, by now the topic of US student debt has been discussed to death, and like every other bubble, it will keep growing, as the very fungible proceeds are used to purchase such mission critical "student" addenda as iPads and booze, until it bursts. Yet is it really that bad? And how does it look compared to some other countries' bubbles. Like that of the UK? Courtesy of Bloomberg we now know how a similar bubble is blowing across the Atlantic: “In this country, we will be on an order of magnitude ahead of the U.S.,” Lampl said in an interview. “We’re loading up these kids with debt. The whole thing is an absolute disgrace.”
As we noted this morning, the perfect 'reality-check' storm hit Europe this morning and with Draghi dismissing hope for more printing and nationalism raising its ugly specter, broad European equity markets made nearly their largest drop in five months. With the BE500 (Europe's S&P 500 equivalent) at three-month lows and Spain's IBEX within a few points of the March 2009 lows, things are becoming critical once again. Spanish yields jumped back over 6% but Italian spreads actually underperformed on the day +14bps vs Spain +12bps as Holland 5Y CDS blew past 130bps to near crisis-peak levels - leaving GDP-weighted European sovereign risk at three-month highs. The LTRO Stigma has broken above 150bps for the first time since before the LTRO as the realization of the implicit subordination of LTRO-encumbered banks is crushing unsecured bond-holders (on average trading at 350bps near four-month wides). EUR-USD basis swaps deteriorated a little remaining near their worst levels in three months but EURUSD remains miraculously just above 1.31 (though almost 100 pips off Friday's close) as repatriation flows are not helping correlation-driven algos in the US anymore.
There are those who think that Currency Wars are a brand new thing. They are not. More importantly, we now have finally moved on to the real deal:
- EU SAID TO PLAN WTO COMPLAINT AGAINST ARGENTINE IMPORT CURBS - BBG
This perfectly objective and otherwise impartial decision has nothing to do with recent collectivist decisions of what is for the greater good... At least one's greater good that is, which just happens to be the biggest problem with central planning at the global level.