Wal-Mart shares are plunging as the firm reports a 'total disaster' in its February sales. Bloomberg obtained internal emails that note:
"In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.... That points to our competitive landscape, which means everyone is suffering and probably worse than we are”
Things must not be serious over in Bentonville for this much truth to suddenly hit the tape. One senior executive summed it up perfectly - “Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?” The company notes the end of the payroll tax cut by Obama and asks "We need to stop the stupid."
Update: it missed.
It is only fitting that in the aftermath of the earlier meteor explosion above the Russian Urals, that the world's attention next shifts to yet another historic celestial event, this time of near-Earth asteroid 2012 DA14, which will make a historic flyby of the planet, missing Earth by some 17,500 miles. According to scientists at NASA's Jet Propulsion Labs, the asteroid, which is 150 feet in size, an object of this size makes a close approach like this every 40 years. The likelihood of a strike is every 1,200 years. Of course, the neo Keynesian among us would wish the latter number was much smaller: just think of the untapped GDP potential that would result from the epic destruction. And while a direct impact would not lead to any mass extinctions as was the case 65 million years ago, when the earth was hit by a meteor 6 miles across, this rock could still do immense damage if it struck given its 143,000-ton heft, releasing 2.4 megatons of energy and wiping out 750 square miles. The closest approach will take place at 2:25 pm Eastern, and NASA will be covering the event live below.
Taxpayer-funded bank rescues in the euro area so far already amount to €300 billion, and that is not counting what might be used to bail out Cypriot banks and what may still be required in Italy and Spain. A recent study by Ernst & Young has revealed that euro-land banks in the aggregate now hold € 918 billion ($1.23 trn.) in non-performing loans (7.6% of all loans outstanding). In light of such staggering numbers, the idea to use the ESM for direct bank recapitalization seems somewhat ambitious. This is especially so as the idea to employ the ESM to take over the costs of already bailed out banks is being pushed by a number of euro area members. But then again, whatever they say, we seem happy to believe for now...
We noted yesterday the apparent perfect (ill)-market-timing of increases in corporate buybacks and nowhere is this more evident than across Europe. The following chart might just make all those activist shareholder mom-and-pops, demanding CEOs 'use' their cash hordes, think twice... it appears the CEOs really don't have better crystal balls than the rest of us...
Everyone recalls the slow motion trainwreck from the afternoon of January 25, when in an epic bitchfest, hedge fund titans Bill Ackman and Carl Icahn screamed at each other telephonically for about an hour on CNBC in what was nothing but one big pissing match. Just over two weeks later, Icahn forced a major squeeze in the stock when as we wrote previously and as we predicted, he disclosed a massive 13% stake, or some 14 million shares in the company built up through stock and calls (essentially costless thanks to Icahn's recent profits on Netflix). What many may not know however, is that for Icahn, the HLF stake was nothing more than a $500 million dollar impulse buy. Why? Because as the chart below, which breaks down the cumulative purchases of HLF stock by various Icahn's funds, shows, the billionaire only held some 1.7 million shares until the January 25 afternoon of his screamfest with Ackman. Then the Monday after the feud Icahn went ballistic, and proceeded to buy some 120,000 shares on Monday and 197,459 option-equivalent shares, after which he tapered off his stock purchases while ramping up the call buys, and buying an epic 10 million share-equivalent calls in the next two weeks, without pause, compassion or remorse, and with just one thought: crush, mangle and destroy Ackman!
It is perhaps no surprise that VIX has dropped to new six year lows today as the volatility of the underlying equity market has now been repressed to its lowest point is 17 years. Not since 1996 has short-term realized volatility been this low. The premium (between implied and realized volatility) continues to compress as options traders scalp the difference but increasingly that trade will feel like those nickels just ain't worth the impending steam-roller's wrath. As we noted last night, implied vol skews are as complacent to any downside risk as they have been since before the crisis was even being considered...
In a shining example of true form capitalism, Russian scammers opportunists took advantage of the cosmic fury at the ongoing G-20 meeting in Moscow expressed by an attempted bombardment via meteor (which allegedly left the hole shown in the picture below), and are already seeking to find the level of equilibrium demand for cosmic commodities and market clearing prices by offering pieces of the meteor for sale on local websites. From Moscow Times: "Enterprising businessmen in the Urals city of Chelyabinsk lost no time in finding a way to capitalize on the meteor strike that shook the city on Friday morning. By early afternoon, several websites were already selling "fragments of meteorite." Two-centimeter fragments of the celestial body that hospitalized dozens and injured hundreds more in the Urals early on Friday were being offered for 500 rubles a piece by 2 p.m. Moscow time."
The media appears to be gorging on the 2% drop today in Gold and 11% drop in the last 4 months. Gold's demise today appears triggered by JPY's dump at around 8amET - though longer-term, it appears gold and stocks are recoupling in the reflation trade from around the start of QE2. At $1600, gold is back at August 2012 levels but +134% from the 2008 Lehman 'event'.
An over-indebted, overcapacity economy cannot generate real expansion. It can only generate speculative asset bubbles that will implode, destroying the latest round of phantom collateral. For those seeking a summary, here is the global endgame in fourteen points.
With a week to go until the Italian elections, things are getting a little odd to say the least. The somewhat scandal prone Berlusconi, who self-declared himself leading in the polls just recently, has come out swinging in defense of his fellow business leaders' ethical egressions. The Bunga party banner-man defends bribery, "These are not crimes," he notes, as The FT reports, "bribes are a phenomenon that exists and it’s useless to deny the existence of these necessary situations..." This apparently on the heels of the Finmeccanica CEO's Indian helicopter deal bribes and Monte Paschi's derivative debacle. It would appear his argument lies somewhere betweeen, 'if everyone's doing it - then it's ok', and 'everyone's been doing it forever so why stop now?' One Italian paper, though, disgusted at the state of their nation, describes the entire political and elite establishment of 'guilty inertia' - calling for an end to what Berlusconi appears to be saying is corrupt business-as-usual. And yet we are to trust these technocrats when they say 'crisis over', all is well, recovery is here?
While it is certain that derivative-hopers and uptick-algo-watchers are relieved to see a better than expected rise in University of Michigan's Confidence index (thanks to a generous rise in current economic expectations - which we suspect is as co-dependent on the miracle of rising stock prices as it is used to reflexively justify higher equity prices). Stocks are bid (briefly) on this but remain, medium-term, notably dislocated from the real state of less-than-exuberance among the people. And in great rhetorical questions, this one remains: are stocks now higher because rising consumer confidence, or is consumer confidence rising because stocks just spiked.
As US Investors Pulled Cash Out Of Stocks In December, Foreigners Purchased The Most US Equities Since July 2009Submitted by Tyler Durden on 02/15/2013 - 10:43
One of the more perplexing developments in the end of 2012, when as we pointed out previously US investors scrambled to deposit some $220 billion into the "safety" of savings accounts, resulting in major cash outflows out of US equities - cash which has since been returned, explaining the spike now declining, in equity reallocations back into stocks - ahead of the confusion over the Fiscal Cliff dividend and capital gains tax rates, was how US stocks did not tumble far more on this accelerated withdrawals out of equities. We now have the answer. As the TIC data reported minutes ago, in addition to purchasing some $30 billion in Treasurys, and $18.1 billion in MBS, as well as $2.6 billion in corporate bonds, foreigners bought a whopping $25.9 billion in US stocks in December, just as US investors were withdrawing over tax-related fears. This followed another whopping $21.5 billion inflow from foreigners in November, and was the highest equity inflow since the $30 billion allocated to US stocks in July 2009. This in turn brings the 6 month moving average to $14.2 billion, also the highest since the summer of 2009. Mystery solved who the banks have to thank for keeping the US stock market afloat in those days in mid to late December when the US equity investors was getting the hell out of dodge.
It would appear that the channel-stuffed awesomeness of the auto manufacturing business has caught up with the inexorable reality of demand (even with uber cheap credit and subprime financing). January's Industrial Production missed positive (+0.2%) expectations and fell -0.1% for the first time in 3 months. What drove the slide? A 5.5% plunge - the largest in 6 months - in vehicle production (which dragged Manufacturing production -0.4% overall). This slide in Industrial Production does not offer much additional hope/hype for those looking to discard Q4's negative GDP print and expecting a Q1 jump.
Curious why nobody at the G-7 or G-20 had the gall to outright accuse Japan of currency manipulation? Simple: because everyone else in the G-7 and G-20 has been doing precisely what Japan only recently started doing a few months ago. As such, it would be outright "glass house" hypocrisy if there was a formal Japanese condemnation by the group of overlevered nations, which moments ago released its draft communique not naming the island nation outright as was widely expected. Of course, that the G-20 did not accuse Japan of engaging in what everyone clearly knows is currency war, does not mean that everyone else is not doing this. To the contrary: they are, and the lack of a stern rebuke of Japan simply means the currency wars will now intensify, devolving into the same protectionism and trade wars as the first Great Depression was so familiar with, which to borrow a parallel from history again, will end with the kind of war that ultimately ended the first Great Depression.
As the G-20 continues to craft the most egregiously hypocritical words to describe what is declaring currency war and what is merely commenting on the need for a weaker currency, JPY has plunged back towards the week's lows and Gold and Silver have been slammed lower in another instantaneous 1% gap-down (as we have seen at 8amET every day this week). Silver now below $30 is back near the lows of the year. Treasuries are leaking higher in yield as the precious metals are sold.