Curious where the Fed's trillions in excess reserves have "gone"? Then look no further.
While the "economy in general" and "jobs" remain a close second (with the latter rising rapidly despite a plunging - and entirely useless - unemployment rate), Americans polled by Gallup still see the number 1 problem facing the US is "dissatisfation with government; poor leadership and abuse of power." Compared with a year ago, mentions of government are up slightly; but mentions of healthcare, on the other hand, have quadrupled -- from 4% in January 2013 to 16% today!
There are many hopes and dreams surrounding the massive multiple expansion of 2013 (that Goldman has warned is entirely unsustainable). Top-line growth is already disappointing in the current results season. The bottom-line is going nowhere but faith remains that we are not near 'peak margins'. While financial engineering (e.g. buybacks) remain possible (though harder in a Fed tapering, rising rate, credit saturated environment) the following chart from Philly Fed data indicates that a 'belief' in the margin story is over - as the spread between prices paid and prices received plunges to its lowest since April 2009 (and in line with previous recessionary periods).
Autarky is more than a ten-dollar word for self-sufficiency, as it implies a number of questions that “self-sufficiency” alone might not. The ability to survive without trade or aid from other nations, for example, is not the same as the ability to reap enormous profits or grow one’s economy without trade with other nations. In other words, 'self-sufficiency' in terms of survival does not necessarily imply prosperity, but it does imply freedom of action without dependency on foreign approval, capital, resources, and expertise.
In what will likely be the current Federal Reserve chairman's "exit interview", Ben Bernanke will be speaking at the Brookings Institution on "The Fed Yesterday, Today, and Tomorrow." We are sure there are plenty of messages our readers would like to leave for outgoing chair who Senator Bob Corker described as "the biggest dove since World War II," proclaiming his "degrading effects on our society." Of course, Bernanke will leave knowing he started to exit (and all is well - so what happens next is not his fault) though the following chart may be useful when he, we are sure, reminds the world of his inflation record...
On the surface, the January Philly Fed was a beat, printing at 9.4 on expectations of a 8.7 number and up from a downward revised 6.4. However, the internals were hardly as pretty with the most notable, New Orders, plunging from 12.9 to 5.1, the lowest print since May 2013, and also the biggest three month drop since August 2011. Additionally, while unfilled orders posted a modest increase from -6.6 to -1.0, Inventories were crushed sliding from 16.0 to -19.6, on what one can assume were wholesale liquidations, and judging by the retailers abysmal numbers, at hardly profitable levels. Furthermore, the optimism of the diffusion index respondents seems to be waning as the 6 Months forecast slide from 44.8 to 34.4 after hitting a recent near all time high of just shy of 60. Also bad news for margins, as Prices Paid increased by 2.3 points to 18.7, while Prices Received decline from 10.8 to 5.1 - a delta, in the wrong direction, of 13.6. The only good news in the report was the increase in number of employees from 4.4 to 10.0, however offset by the average employee workweek which dropped from 4.8 to -5.3. So more workers, doing less: so much for wage inflation pressures.
NAHB's confidence indicator dropped modestly, missing expectations (for the 4th time in the last 5 months) by the most since October as prospective buyer traffic tumbled. While the "hope" of realtors remains notably disconnected from the reality of sales (for the 3rd time in 20 years, the 4-month slide in prospective buyer traffic is the largest since Spetember 2010 and has dropped to its weakest since May 2013.
Despite Lagarde's call for more manipulation and money-printing from the world's central banks yesterday, US Treasury Secretary Jack Lew is not amused with his Japanese 'colleagues'. Speaking in Washington, Lew had plenty to say on Europe (not out of the woods), China (need to open markets more), and the IMF (US commitment remains solid - oh, apart from the funding part); but it was his entirely ironic comments aimed at Abe and Kuroda that were risible:
*LEW SAYS JAPAN NEEDS TO `GET THEIR DOMESTIC ECONOMY GROWING'
*LEW SAYS JAPAN CAN'T RELY ON FX RATE FOR ECONOMIC ADVANTAGE
Pot calling kettle black? Or a person who lives in a currency-war "glass-house" throwing stones? Pick your tortured analogy but the US hypocrisy continues.
It would appear that the meteoric 300% rise of Best Buy's shares last year was promoted to the general investing public as the renaissance of the on-the-verge-of-bankruptcy warehouse store and sure enough, the world and his mom piled in to chase the momo higher and higher... until today. With a 30% tumble this morning, those momo-chasing moms and pops may be less enamored to buy-the-dip but there was one 'smart-money' insider who was selling as fast as retail was buying. Co-Founder Richard Schulze (who indicated in August he would be selling to 'diversify' his holdings) piled out of the stock through most of the fourth quarter (at a level well above this morning's opening print).
If we don't understand the problem or the dynamics that are generating the problem, it is impossible to reach a solution or practical plan of action. The four points of ignorance below doom us just as surely as the actual underlying dynamics of insolvency, corruption, debt servitude, and Tyranny of the Majority.
If yesterday's rising PPI print suggested the Fed may continue its $10 billion a month taper at its next meeting, today's comparably rising CPI for December will likely mean that absent another payroll-like shock, the Fed will soon monetize "only" $65 billion per month. The reason: in December core consumer inflation rose by 0.3%, compared to the 0.0% change in November, and in line with expectations. Stripping away food and energy however, the increase was only 0.1%, also in line with expectations, and a decline from November's 0.2% increase. More importantly, on a Y/Y basis, core CPI was up by 1.7%, still shy of the Fed's 2% target but not too far.
Initial claims beat expectations very modestly (326k vs 328k expected) and hover at their average level of the last 6 months. Non-seasonally-adjusted saw initial claims surge to 438k. It would appear the trend of improving claims has ended for now. What is perhaps more worrying is the continuing claims surged by their most in over 5 years - at 3.03 million, this is the highest in 6 months (and the biggest miss in 6 months. It is worth noting that this is before the emergency benefits for 1.3 million Americans disappear (which will likely begin to show up next week or the week after).
Despite several apparently well respected sell-side shops proclaiming that all would be well, the electronics warehouse missed comps (Sales at stores open at least 14 months were down 0.9 percent in the US (compared to expectations of +2.0%) and is being punished. Revenues fell 2.6% for the comparable period also. Shares are down 30% in the pre-market to 7-month lows as the company claims an "intensely promotional holiday season." It seems, perhaps, that following several other retailers' earnings updates the holiday season was even worse than many had expected (especially in the bricks-and-mortar stores that actually employ real people).
Yesterday Bank of America beat thanks to (among other things) ye olde "plunge in the effective tax rate" gimmick which let it beat EPS by two cents instead of missing by three. Today it was Goldman's turn to "beat" lowered EPS expectations of $4.18, posting a substantial beat of $4.60. So did Goldman also fudge its tax rate? Not exactly: instead, what Goldman did was to reduce its compensation benefits from $2.4 billion to $2.2 billion, which meant the firm's compensation margin declined from 35.2% to a tiny 24.9% of revenue. Had Goldman kept the comp margin flat it would have missed EPS by about 50 cents. However, unlike the other "banks" Goldman at least did post a notable beat in GAAP revenues (it was reluctant to use a non-GAAP top line, hear that Jamie?) as well, with Q4 sales rising from $6.7 billion in Q3 to $8.8 billion, on expectations of $7.8 billion. However, compared to a year ago, the top line was 5% lower, while Net Income of $4.60 was 21% lower than a year earlier.
- Charter, Comcast in renewed talks on Time Warner Cable bid (Reuters)
- Bankers' Stock Awards Jet Higher (WSJ)
- Yahoo CEO Mayer Dismisses Operating Chief De Castro (BBG)
- Amazon Employees Vote to Reject Union (Reuters)
- Luxury in China loses luster as wealthy flee (Reuters)
- UnitedHealth Profit Up on Stronger Enrollments (WSJ)
- U.S. government failed to secure Obamacare site: experts (Reuters)
- Spain Sells Bonds at Record-Low Yield as Rajoy Touts Rebound (BBG)
- Newport Beach’s $100,000 Lifeguards Feel Pension Squeeze (BBG)
- Bailed-Out Euro Nations Expect Painful Challenges to Remain (BBG)