November Business Inventories print at 0.7%, slightly below expectations of 1.0%, and a reduction from the previous month's 1.3%. That said, there is no change to the ongoing trend of increasing inventories being the primary, and according to many, only boost to economic output, which is ironic because inventories really have no impact on output except when they are being liquidated at below cost as Best Buy shareholders found out the hard way despite our repeated warnings of a top line and margin collapse. And yes, the fact the retail sales declined as inventories increased is a sure sign of an ongoing Golden Age.
As Best Buy's Chairman Loses Almost Half A Billion In Two Hours, Here Are The Other Biggest Losers From Today's MaulingSubmitted by Tyler Durden on 12/14/2010 - 10:37
With Best Buy stock now down almost 15% for the day, it is not a good day for holders of the name, starting at the very top with Chairman Richard Schulze, whose 67.5 million shares in stock are now worth $400 million less than they were about two hours ago. And of course, with holdings of 22.5 million shares, expect Black Rock's Bob Doll to make 5 surprise appearances on CNBC explaining to the infidels one last time (expect for the next "last" time) how he expects the S&P to print at 10,000 in the next 12 months. That said, it is a little surprising to find none other than Hussman in spot 34 with 1.5 million shares.
BBH's Marc Chandler picks up where John Taylor leaves off and makes his case for a stronger dollar. Nothing new here, but the report appears to be having an impact on the market. In broad terms, Chandler is positive on a hawkish Fed which would bring back some strength to the dollar, while he observes nothing but total chaos in Europe: "European officials finish the year very much as they began it: finding it exceeding difficult to navigate the treacherous channel. Ironically, Obama and the Republicans have found a patch of common ground before Europe reconciled the conflicting demands. While there is a common understanding that there is no alternative to monetary union, there appears to be no meeting of the minds on how to ensure this. And there’s the rub." As he puts is so poetically, "Europe, Your Rope."
Meet the contestants in the European insolvency race, direct elimination round:
And the comedy continues. After Best Buy makes it clear that not even liquidation level prices are enough to draw consumers in, the Department of Truth is out with its latest attempt to make Americans believe that even with $10 billion in November credit card and other revolving debt declining $10 billion from October, and home equity loans outstanding falling another $2.6 billion, coupled with a drop in average hourly wages, retail sales actually picked up by 0.8%, better than expectations of 0.6%, a decline from the October reading which was revised from 1.2% to 1.7%. Retail sales ex-autos increased by 1.2%, on expectations of 0.6%, a decline from the revised October increase of 0.8%. Not too surprisingly, the biggest beneficiary in the pick up in spending was at gasoline stations which saw $38.1 billion in spending compared to $36.7 billion last month. Expect much more strength in gas sales going forward as the Chairman's genocide plan becomes appreciated by all: after all the PPI also jumped from 0.4% to 0.8%, beating expectations of 06% by a wide margin.
Retail Renaissance Revolt: Best Buy Plunges As Top Line Misses, Cuts Forecast, Comp Stores Down And Sees Pervasive WeaknessSubmitted by Tyler Durden on 12/14/2010 - 09:09
Is the retail revolution over? Best Buy, which was seen by many as the best indicator of retail hunger for all sorts of irrelevant Made in China Gizmos is plunging in pre-market trading, now down over 10%, after the company announces a massive top line miss of $11.89 billion in Q3 revenue on expectations of $12.45 billion. We can't remember when a retailer had a nearly 5% miss in top line, and is certainly a major cause of concern for not only the retail renaissance but for... Apple, for whom the store is the second biggest seller. Some other horrendous data points: Q3 comp sales down 3.3%; domestic Q3 comp sales down 5.0%, the company sees year EPS USD 3.20-3.40, saw USD 3.55-3.70, vs. Exp. USD 3.59, and notes domestic sales were softer than expected (as if it wasn't obvious). Broader market futures are also moving lower on the news that the market has managed to extract as much as it could out of a consumer base that is no longer paying its mortgages. Incidentally, how this could be a surprise is stunning: on October 31 we wrote that "TV pricing bloodbath threatens already razor-thin retailer margins" - of course, what is obvious to some, is completely opaque to the robots who only focus on positive headlines news. Perhaps a number for RenTec to tweak that algo a little?
Contagion Is Back As S&P Threatens To Downgrade AA+-Rated Belgium Within 6 Months If No Government FormedSubmitted by Tyler Durden on 12/14/2010 - 08:55
And so European contagion is back as S&P, now clearly with a mandate to remind that Europe is in a heap of trouble every month or so, puts Belgium on Outlook negative, saying that it is basically just a matter of time before the country loses its AA+ rating. The bogey: 6 months, which likely means that around May of next year, just like a year prior, we will see the same fireworks out of Europe, only this time not from Greece, but from the very heart of what is left of a solvent continent. "If Belgium fails to form a government soon, a downgrade could occur, potentially within six months. Should a government be formed but is, in our opinion, ineffective in its fiscal stance or devolution, we are likely to consider rating action within two years." Sure enough, the EURUSD does nothing on the news.
Retail sales will probably provide the most important information in a day that also includes reports on small business sentiment, producer prices, business inventories, consumer confidence, and the final FOMC meeting of the year….There is no POMO today.
RANsquawk European Morning Briefing - Stocks, Bonds, FX – 14/12/10
There is more to Deutsche Bank than just that douchey joke of an economist who appears on CNBC every other day to repeat that the November NFP number was irrelevant (incidentally we agree, simply because everything out of the BLS now has the same trustworthiness as Chinese data, and the November number was politically motivated to pass the UI extension) and who changes his story diametrically and on a daily basis, with every incremental piece of economic data that does not fit his amateur theories. Deutsche Bank has always had a very decent fixed income platform, and we are happy to announce that in reading the firm's 2011 FI forecast we encounter not only views that diametrically oppose those of the aforementioned hack (for which alone the report is worth reading), but also has some very detailed and insightful observations (which we are confident David Rosenberg would agree with wholeheartedly). The report's summary: bonds may drop a little more, then surge once it becomes clear the economy is as scroomed as always. And another interesting observation, which has to the do with ending the 10s30s flattener trade. We tend to agree with that as well. Having almost penetrated 100 bps today, the second retest proved unsuccessful, and the time for a steeper long-end is coming (primarily due to a renormalization of the curve), and a flattening of the 2s10s.
What individuals fundamentally seek is order, by which we do not mean regimentation but harmony, i.e., “a pleasing combination of the elements in a whole,” wherein the whole is the wholeness of one’s life. And because such order is virtually impossible to attain in isolation (even hermetic monks live in a society of shared belief, without which their mode of existence would be devoid of meaning), individuals socialize for this reason, and naturally so. For insofar as there is order in nature (and of course there is astounding order), freedom – which is inherent, for instance, in the random variation that is integral to the evolutionary process – is the cause, not the effect, of it. So too, then, is freedom in the human realm “the Mother, not the Daughter, of order,” it being but the conscious application of its counterpart in the natural realm. And thus is freedom the sine qua non of human civilization – the foundation upon which its twin pillars stand – without which the order that its individual members yearn for cannot be generally attained or continually increased.
The Asian sharks are smelling the aforementioned blood. As of a minute ago, silver has jumped to far above intraday highs and is three nickels away from $30. At the same time gold is flying too, moving well north of the $1,400 barrier, as JPM silver's short is nothing compared to its gold paper shorts. And if the firm is capitulating on one, it is a certainty it is doing so with not only gold, but all positions it may have margins calls in. Look for a spike in GC repo paper rates tomorrow as the tri-party system manager tries to take advantage of its monopoly status as the big dog in the repo market (that just happened costing Lehman its liquidity line).
Water, Meet Blood - JP Morgan Admits To, Reduces Massive Silver Short Position, Proves Millions Of Conspiracy Theorists CorrectSubmitted by Tyler Durden on 12/13/2010 - 19:58
In the latest example that virtually every conspiracy theory is almost always inevitably proven to be fact, the Financial Times reports that JP Morgan, the firm targeted by thousands of "tin foil hat" wearing, conspiratorially-oriented "gold bugs", has cut back on its US silver futures. "JPMorgan has quietly reduced a large position in the US silver futures market which had been at the centre of a controversy about its impact on global prices for the precious metal." And in what can only be considered an unprecedented victory for all those who have over the past year agitated to putting JP Morgan out of business, most recently spearheded by the likes of Mike Krieger and Max Keiser, by forcing a massive short squeeze on its commodities trading desk, we learn that "the decision by JPMorgan was an attempt to deflect public criticism of the bank’s dealings in silver, a person familiar with the matter said. The person added that the bank’s position in silver would from now on be “materially smaller” than in the past." Of course, the latter is pure and total bullshit: as Bart Chilton indicated over the weekend, it is JP Morgan who at one point or another (and possibly very recently) controlled as much as 40% of the silver market, via a massive short. Attempting to make others believe that this short could be covered without pushing the price of the silver metal to over $100/ounce is an indication of either how stupid JPM believes the general population to be, or just how desperate the firm is to end the ongoing short squeeze onslaught. Either way, we are confident that this first unprecedented confirmation that a) JPM is indeed massively short silver and b) that it is hurting bad, will merely redouble efforts to put the world's biggest financial company out of business.
Our speculations that the SPY is increasingly used as nothing but a broad market hedge by asset managers, which are terrified to short individual single names in pair trades over concerns of short squeezes and forced buy-ins, has been proven: as of the end of November, the SPY, for the first time dating back to the start of our data, and possibly ever, has become the most shorted security on the NYSE, at 294.1 million shares short. That this has happened just at the time when the market hit a new 2010 high is not surprising: as single names melt up, hedge funds offset long risk by selling SPY in droves. Perhaps just as notably, the short interest in Citi, which had long stayed flat at around 400 million shares, has plunged by almost 30% in the last two weeks of November, and has dropped to 293.6 million shares, behind the SPY in terms of total shorts. Yet what may be the most curious datapoint is that the shorts outstanding as a percentage of float in the KRE ETF (the KBW Regional Banking ETF) have exploded from 13.2x to 24.6x! This means that there are 24.6 more shares short this ETF than there is daily volume. Should there be a forced squeeze in KRE, the intraday stock price will likely make the Volkswagen short squeeze seem pale in comparison.