Yes. The national intelligence has fallen that far. The morons in West Philly can't spell 'Cat'. At least 75% wouldn’t know the Vice President of the U.S.. More than 50% can't add 5 + 5. And 80% wouldn't know when and why the Civil War was fought.
Investors have faith that despite the collapse in funding needs the Fed will not Taper anytime soon. Investors have hope that GDP will pick up in the second-half of 2013 (or worst case 2014 or 2015 or 2016) and that's what will drive 'real economy' earnings back from the brink. But most of all, investors today have an un-ending veneration of the P/E multiple-expanding solution to any- and everything in any way negative for stocks. There always seems to be some 'average', some forward-measure, some catalyst for multiples to expand confirming expectations of a round number for a nominal stock index in the future. However, as Morgan Stanley's Adam Parker notes, the humility-arrogance cocktail of forecasting multiples is becoming more troublesome as QE accounts for up to 2 turns for the overall market relative to 'normal' growth and rates.
As stocks hit new highs, politicians proclaim crises over, and oil prices leak back lower, it is all too easy to forget just what is going half-way around the world from the comfort of the American-Idolatry. This image of 'real' troops in 'real' Syria may jolt a few 'Call of Duty' players from their comas.
The mainstream media would have us believe that the U.S. economy must be in great shape since the stock market has been setting new all-time record highs this month. But is that really true? Yes, surging stock prices have enabled sales of beach homes in the Hamptons to hit a brand new record high. However, the reality is that stock prices have not risen dramatically in recent years because corporations are doing so much better than before. In fact, the growth in stock prices has been far, far greater than the growth of corporate revenues. The only reason that stock prices have been climbing so much is because the Federal Reserve has been flooding the financial system with hundreds of billions of dollars that it has created out of thin air. The Fed has created an artificial stock market bubble that is completely and totally divorced from economic reality. Meanwhile, everything is not so fine for the rest of the U.S. economy.
UPDATE: That didn't last long... 60% of the gains in the Nikkei and the weakness of the JPY now retraced - as the market cries out for moar bad data...
Following last night's admission that if central bankers get found out for monetization that it all goes pear-shaped, it seems tonight's epic miss in Japanese Industrial production and Household spending has done nothing but push the hordes of levered speculators into an "if-bad-is-good-then-terrible-is-awesome" buying frenzy. The 3.3% MoM IP drop (compared to a -1.5% expectation) is the largest since Feb 2009 (ex Tsunami) and among the largest MoM drops in the history of the data series. The miss is the largest in 2013 (since Abenomics began) and makes it 6 of the last 8 months missing expectations. Household spending shrank for the 2nd month in a row, missing expectations for the 3rd month in a row. Of course, being the well-trained muppets that they are, this data brings buyers into the Nikkei which jumped 180 points even as JPY gapped only around 30 pips weaker.
Imagine there was a time when bottled water didn't exist in our catalog of popular commodities. Perhaps the trend started in 1976 when the chic French sparkling water, Perrier made its introduction. There it was seductively bottled in its emerald green glass amongst the era of disco and the spectacle of excesses... who could resist right?! What could be more decadent than to package, sell and consume what most consider (in the western world) a common human right easily supplied through a home faucet! It’s absurd that the cost of designer water is at a "280,000% markup" to your tap water and it's reaching record heights in consumption.
When Detroit filed for bankruptcy, the city's demands for a Federal bailout promptly rose to the surface and then just as promptly dissipated following a polite but stern rejection by the president, almost too fast and without any fight, according to some. Or maybe that is only how it appeared. According to the NYT, Detroit's advisors may be looking at a completely different source of Federal "assistance" - a much more indirect one, even if at the end of the day, it is taxpayers who end up footing the bill. Obamacare.
"It's noisy, it's really hot, fast, they rush you. Sometimes you don't even get breaks. All for $7.25? It's crazy," is how one worker described the conditions that have caused her and the rest of America's fast-food employees to go on strike today. They demand the right to unionize and better pay - calling for a raise in the minimum wage from $7.25 to $15. Workers chanted, "Supersize our wages," as spokespersons for the Fast Food Forward campaign explained the economic logic, "If they have more money in their pockets, they'll spend it right here, helping to boost the entire economy." Which leaves us asking the always awkward question - where does this new 'economy boosting' money come from for this 107% pay rise? With gas prices rising, rents soaring and many employees already reliant on food stamps and medicaid, "I can't even order something off the menu with what I earn," one worker noted, "It makes me wonder what I'm even doing there." Indeed it does with all those benefits on offer elsewhere.
While Mississippi (34.9%) and Louisiana (33.4%) have the highest percentage of obese adults, Bloomberg's latest data shows that Delaware and Oklahoma are getting fatter the fastest of all US states. Notably, every state has seen an increase in the level of obesity since 2000 (though D.C. and California have risen the lease). Colorado has the highest number of 'ideal weight' citizens per obese adult (4.83) but even there it has plunged from over 7 adults in 2000. Things are not getting better anywhere.
Just flashing red headlines for now:
- JPMORGAN ACCUSED BY U.S. REGULATOR OF MANIPULATING POWER MARKET
- JPMORGAN ACCUSED OF MANIPULATIVE ENERGY-BIDDING STRATEGIES
- JPMORGAN ACCUSED OF ENERGY-MARKET MANIPULATION IN 2010 AND 2011
- U.S. FERC ANNOUNCES JPMORGAN ALLEGED VIOLATIONS IN E-MAIL
And now we look forward to learning how many hundreds, or maybe even thousands, of cents the settlement will be, which will also include a full wristslapping pardon of Blythe Masters of course.
"There is a huge artificial boom going on," warns Jim Rogers as for the first time in history, all the world's major central banks are simultaneously printing money. While he remains adamant of the positive outlook for agriculture, the fact that "the whole world is trying to debase their currencies," produces a "major disconnect" between asset values and economic realities. Stocks are at new highs, not based on reality, but on printing presses "and that cannot work... this is going to end very very badly." While not all western economies are as egregious as others, the intertwined nature means their fate remains very much tethered to the US, and as Rogers concludes, "everybody will suffer, be very very careful as these are perilous times."
Today's most eagerly anticipated earnings release, that of Herbalife, also known as the focus of the most entertaining feud of 2013 between Bill Ackman and Carl Icahn, were just released, and they are a blowout.
- HERBALIFE LTD. 2Q ADJ. EPS $1.41, EST. $1.18
- HERBALIFE 2Q REV. $1.22B, EST. $1.16B
- HERBALIFE OPERATING CASH FLOW $214 MILLION
- HERBALIFE SEES YR ADJ. EPS $4.83-$4.95, EST. $4.78
- the always amusing: HERBALIFE 2Q HAS EXPENSES 7C-SHR ON 'ATTACKS OF CO BUSINESS'
The biggest news as always was not reported: it was the most recent short interest in the name. At 36% it means much more pain in store for shorts. But the punchline is that Herbalife just announced a $0.30 dividend per share: a dividend which will to a big extent come straight out of Bill Ackman's pocket.
Ahead of a week full of data and central banks, it is likely unsurprising that volumes were dismal and protection/hedging was sought. Once again we saw dips bought with a rush to get markets green (after the collapse in Asia overnight weighed very modestly on Europe and US markets) but once a few people realized the impact of the Treasury's latest refunding data (must read) stocks did sell off into the close. This was the worst day for the S&P futures in a month with a 0.4% sell-off. Once cash markets closed,futures popped back up to VWAP. The USD ended the day unchanged (but AUD was 0.7% weaker and JPY 0.4% stronger as carry unwinds are clear). Commodities slid on the carry weakness with Silver -0.8% and gold holding $1330 with a small loss. Brent-WTI pushed further ahead to $3 (with a small loss in WTI under $104.50). Treasury yields leaked higher with the long-end underperforming (30Y only +3bps). Builders, financials, and energy underperformed on the day; Utes and Staples were best.
If there was any doubt that the Fed would proceed with tapering its monthly deficit monetization (i.e., $85 billion in POMO/S&P500 flow injection) over the next few months, those were just laid to rest courtesy of the Treasury's quarterly refunding statement which was filed moments ago, and specifically its Marketable Borrowing Estimates.
Last week’s House debate on the Defense Appropriations bill for 2014 produced a bit more drama than usual. Had Amash’s amendment passed, it would have been a significant symbolic victory over the administration’s massive violations of our Fourth Amendment protections. But we should be careful about believing that even if it had somehow miraculously survived the Senate vote and the President’s veto, it would have resulted in any significant change in how the Intelligence Community would behave toward Americans. The US government has built the largest and most sophisticated spying apparatus in the history of the world. Rep. Amash’s amendment was an important move to at least bring attention to what the US intelligence community has become: an incredibly powerful conglomeration of secret government agencies that seem to view Americans as the real threat.