It Really Isn't Ackman's Day As CIT Pulls JCPenney Credit

While we have heard this rumor before, the NY Post is reporting that CIT - the largest commercial lender/factor in the US apparel industry - has abruptly stopped supporting deliveries from smaller manufacturers to JCPenney stores. Insiders speculated that CIT got skittish after meeting with JCP officials yesterday and getting a glimpse of financials. It really is not Bill Ackman's day - HLF +10%, JCP -6.7%.

Chart Of The Day: Foreigners Are Quietly Getting Out Of Dodge

While the Fed is posturing daily whether it will or it won't monetize an ever greater portion of gross US issuance (and considering the drop in US funding needs, unless the Fed tapers it will soon very soon buy more than 100% of all 10 Year equivalent issuance going forward), foreigners have made their position vis-a-vis US paper loud and clear. What is their position? The following chart from today's TBAC presentation to the Treasury makes it very clear. With an ever declining, and recently the smallest on file, notional amount of Treasurys at auction going to foreigners since 2009 (and certainly much further back), they are not sticking around to see what happens.


Shorting Stocks On These POMO Days Will Be Frowned Upon By The Fed

While 'tentative', the Fed's POMO schedule for August signals no Taper anytime soon. But, the Fed has generously 'allowed' 4 days for the shorting of stocks in August (Friday 2nd, Friday 9th, Wednesday 21st, and Friday 30th). Away from those days - BTFATH...

Forget The FOMC, Here Is Hilsenrath

Anyone, or rather any vacuum tube algo, hoping that Fed mouthpiece Jon Hilsenrath's traditional post mortem would be kind enough and summarize the FOMC with a simple one or at most two-word phrase ("Buy" or "Superstrong Buy") will be disappointed. At best, the following summary can be summarized as "Neutral", or "Cautiously Non-committal", although as he correctly points out "Modest" is worse than "Moderate" as most recall from elementary school - it is unclear if this news is horrible enough to send the S&P to record highs.

Algorithmic Knee Jerk To FOMC Signals Vacuum Tube Confusion

The usual schizophrenic reactions across asset classes are progressing but with 30 minutes down, it appears bonds are benefitting most (10Y -5bps), gold is up modestly (+$10 at $1320), and the USD down small after swinging both ways already. Stocks are the most 'confused' but just as they tumbled on the realization that the taper is not only still on the table but coming, a rumor spread like wildfire that Hilsenrath was about to provide the much needed "Strong Buy" interpretation of the virtually unchanged from June FOMC statement.

Fed Releases Broken Record: "Prepared To Increase Or Reduce QE", No Taper Mention - Full Redline Comparison

The FOMC appears to have 'tweaked' its message to fit with Bernanke's confusing commentary and confirms that 'tapering is not tightening'.


Bullard no longer dissenting, George is sole dissenter. And don't forget, of course, that this is all pretense in the face of the inevitability of the taper due to refunding, political, and technical reasons. As we noted earlier, it seems preferable to pretend the economy is strong enough to withstand less-easing (tightening) than admit the Fed is cornered.

Pre: S&P Futs 1685, 10Y 2.65%, USD Index 81.80, WTI $104.65, Gold $1311

Redline to follow

Bonds Face Worst July In 10 Years

As liquidity-slurpers the world over wait for the written words from the FOMC this afternoon, it seems the bond market has sold-first-asked-questions-later on its 'Taper' expectations (with 30Y yields now at 23-month highs). It is little surprise (given the real reasons for a Taper as we discussed here and here) but today's ADP and GDP data provide more 'headline' ammo for the Fed to cover the reality that they are cornered. It seems it is better to project the 'fallacy' that the economy is strong enough to withstand a 'tapering' of monetary policy than to admit that there is a technical limit to the extent by which the Fed can print money before it breaks the market and shifts sentiment to a realization that it's nothing but monetization. The US bond market has suffered losses for 3 months in a row now, and this is the first July loss in 10 years - or will the FOMC save them?

Think Your Password Is Secure From The NSA? Try This

Seven minutes. That’s how long it would take to crack one of the passwords we had been using for more than ten years, according to the crypto experts at Silent Circle. The typical 'dog's name, daughter's nickname, favorite ice-cream' style password won’t typically thwart government agencies that are keen to spy on their citizens. They can easily be cracked in a matter of minutes. Since cracking algorithms succeed by picking up patterns in human behavior, the key to a secure password is randomness and disorder. In the security business, this is known as entropy.

Did Larry Summers Just Tap Someone On The Shoulder?

It seems 'someone' doesn't want the world knowing just how much of a 'long shot' Larry Summers is for the great-and-powerful-Oz position of Chairman of the Federal Reserve. As we showed just last week, PaddyPower showed Yellen as a strong 77% probability favorite with Summers lagging notably behind in the pack. Then comes this morning's comment from the second most powerful man in the world:


And Goldman's Jan Hatzius' warnings that Summers is less 'enthusiastic' on using monetary policy than his competitor Yellen. And now - as the image below shows - PaddyPower has removed its betting on the next Fed head. We just wonder who got the tap on the shoulder?

Mortgage Applications Plunging At Fastest Rate In 4 Years; Refis Down 57%

With a number of banks cutting their mortgage departments (Wells Fargo JV and Everbank most recently), it seems the 'weakness' in the housing recovery may be more than transitory. For the 11th week of the last 12, mortgage applications fell for the fastest three-month collapse since June 2009. Mortgage activity is now its lowest in two years with refinancing activity down 57% from its recent peak and new purchases have dropped to their lows of the year (down 13% from the highs) and stand exactly at three-year average levels.

Dear Americans: We Are Happy To Inform You That You Are All Richer!

While today's GDP revision was largely formulaic and served mostly to generate another algo momentum ignition buy program pushing the DJIA to a new all-time intraday high, there was some much better news hidden deep in the revision. We are delighted to advise Americans everywhere that you are all now making some $300 billion more than you were before the 8:30 AM revision. At least that's what the Bureau of Economic Analysis says: according to the quarterly revision, the revized annualized Disposable Personal Income is really some $300 billion higher compared to the pre-revision number. You are all richer!

George Soros Goes Long Herbalife, Makes It "Top 3" Position

It just keeps going form bad to worse for William Ackman. The so-called retail expert tried to diffuse the situation today by announcing a massive $2 billion position in Airgas, only for Herbalife to go right back front and center, following news moments ago from CNBC that none other than George Soros has taken a long stake in Herbalife, and not just any stake but a "top 3" position. We haven't done the math but the float out there must be getting dangerously low for Ackman: low enough to where the Volkswagen scenario we predicted in early January (just as we predicted the imminent epic short squeeze) may finally come in play as there is not enough float to cover Ackman's short, and certainly not when the longs decide to pull all the borrow. If and when the Ackman margin calls hit, we hope that Soros will accept shares of Airgas as deliverable. In the meantime, the stock is up 173% since December, or when we said to go long following Whitney Tilson's "short."

Goldman: "We Expect A Downward Revision To The Fed's 2013 Growth Forecast"

One of the unpleasant side-effects for the Fed's forecasting (insert laughter here) abilities, is that following today's GDP revisions, H1 annualized GDP is now 1.4%. It means that there is no way that the economy can grow fast enough in the second half (especially with such early disappointments to the second half as the just released Chicago PMI miss) to meet the Fed's forecast growth of 2.3%-2.6%. Which, in turn, means more egg on the face of Bernanke and the FOMC's 2013 forecasts. Which is precisely what Goldman just said.

Chicago PMI Misses: New Orders, Employment, Production All Drop, Prices Paid Up

So much for that "priced in" strong start to the second half. All those expecting a major move higher in the Chicago PMI after its June plunge from 58.7 to 51.6 will have to defer their hopes for one more month, following the headline print of 52.3, which missed expectations of 54.0. However, the headline number doesn't do the PMI full justice, because while the growth was driven by all the wrong reasons, namely margin crushing Prices Paid surging from 59.9 to 63.3 - the largest two month jump since 2010 - the much more important trifecta of New Orders (54.6 to 53.9), Production (57.0 to 53.6) and Employment (57.8 to 56.6) all dropped. What this means for the ISM is not exactly clear due to the long-running tradition of baffle with BS, but on the surface it is hardly optimistic... which likely means ISM will explode higher.

Full GDP Revision Broken Down By Component

Think the pick up in Q2 GDP was due to the desired increase in end consumption? Think again. Following the full data revision, Personal Consumption as a component of GDP dropped from 1.54% in Q1 to 1.22% in Q2, offset however by an increase in fixed investment which rose from -0.23% to 0.93%. In fact, aside for Q3 and Q4 of last year, Personal consumption in the just completed quarter was the lowest goin back to Q2 2011 when PCE was 1.03%.

How The US Just Added $550 Billion In "Growth": Full GDP Chart Pre- And Post-Revision

Curious how the comprehensive revision of GDP looks like? Here's how: following the "revised data", Q1 GDP in nominal terms stood at $16.535 trillion. Previously, it was $15.984 trillion. And that is how you add $550 billion in "growth." More importantly, here is the full breakdown of GDP on a quarterly basis: of note - Q1 2011 GDP growth was revised from +0.1% to -1.3%: close call with recession there.

Revised Q2 GDP Prints 1.7%, Higher Than Expected, But Prior Revised Significantly Lower

UPDATE: Markets are reacting in a very 'Taper-On' way with Gold down, bond yields surging, and the USD rising (with stocks leaking lower)

The Q2 GDP printed at 1.7% compared to expectations of 1.0%, however this was entirely offset with the Q1 revision from 1.8% to 1.1%. Since the series is being entirely revised, it is safe to say that these are Apples to Oranges numbers. Q1 was revised to the worst miss in 27 months...

ADP Prints +200K, Beats Estimate With Prior Revised Higher Confirming Taper

While the ADP jobs number is noise, it is no more noise than the BLS' NFP monthly print. And since the NFP jobs number has been targeting the 200K support level for all of 2013, with the 6 month average at precisely the taper-permissive 201K, it was natural that the Mark Zandi-supervised ADP would ultimately revise its data to substantiate the BLS message, which is simple: taper on. Sure enough, ADP beat expectations of 180K coming at 200K, while the previous number of 188K was revised to 198K.