An odd update for RIMM shareholders. In an interview with BBC Click, RIM CEO Mike Lazaridis, who has had quite a bit of trouble convincing the market about anything lately, apparently was unable to convince the interview host not to ask a set of questions relating to RIM security issues in India and the Middle East. As a result, Mike proceeded to simply walk out of the interview. Rather odd behavior for a CEO whose credibility level is already perceived as low to quite low by the market. Then again, we expect nothing less from the Chairman on April 27 during the first ever Fed press conference, when someone asks him what exactly the $130 billion or so in "Other Assets" on the Fed's balance sheet actually are.
GFMS, arguably the most respected precious metals consulting company, has just released its much anticipated 2011 Gold Survey. While the rather expensive 128 page report is not available for public consumption (yet), the gist is as follows: GFMS sees gold prices averaging $1,455 an ounce this year and sticking to a range of $1,319-1,620 an ounce, executive chairman Philip Klapwijk told delegates at the launch of its Gold Survey 2011. Klapwijk said the market had probably already seen the lows for this year, after prices slipped towards $1,300 an ounce in late January during a broad-based sell-off of commodities.Quoting Klapwijk: "Overall, we would not be surprised, therefore, to see gold break through $1,600 before the end of the year." Neither would Goldman, which needs to buy some more, thus expect a downgrade shortly.
IMF Releases Global Financial Stability Report, Sees $3.6 Trillion In Bank Maturities Over Next Two YearsSubmitted by Tyler Durden on 04/13/2011 - 09:22
The IMF has released its 2011 Global Financial Stability Report which summarizes the fund's view on the causes for ongoing market instability and proposes some solutions on how to continue. Not surprisingly, the IMF sees the key threat as follows: "The main task facing policymakers in advanced economies is to shift the balance of policies away from reliance on macroeconomic and liquidity support to more structural policies—less “leaning” and more “cleaning” of the financial system. This will entail reducing leverage and restoring market discipline, while avoiding financial or economic disruption during the transition. Thus, ongoing policy efforts to withdraw (implicit) public guarantees and ensure bondholder liability for future losses must build on more rapid progress toward stronger bank balance sheets, ensuring medium-term fiscal sustainability and addressing excessive debt burdens in the private sector." The key issue here is that as the IMF correctly observes household leverage, still at unsustainable levels, continues to be a threat to the financial system (despite aggressive attempts to transfer leverage from the private to the public sector) and may further weaken banks (but not if one listens to JPM - it's all unicorns and rainbows there). Yet the scariest news: "Global banks face a wall of maturing debt, with $3.6 trillion due to mature over the next two years." But that's ok- these banks will focus on funding US Treasury issuance first, ergo no need for more QE...
The FBI and the Secret Service showed their willingness today to utilize the expanded definitions of “counterfeit currency” and “domestic terrorism” brought about by the recent conviction of Bernard von NotHaus of the alternative currency outlet “Liberty Dollar” when the agencies initiated a surprise raid on an unsuspecting Chuck E. Cheese establishment in Des Moines, Iowa. “Haven’t you ever been at the laundry mat with a pocket of change thinking you have plenty of quarters, only to discover that most of them are Chuck E. Cheese tokens?!” railed Anne Tompkins, Department of Justice prosecutor in the Liberty Dollar case, as she read from a carefully prepared DHS script. “That is close enough to counterfeiting for me! It is a blatant destabilization of our democratic economy! What are you supposed to do, let your underpants wallow in filth while Chuck E. Cheese makes a profit? I say no to these financial terrorists!”
March Retail Sales At 0.4%, Below Expectations, Down From 1.1% In February; Ex-Autos And Gas Slightly BetterSubmitted by Tyler Durden on 04/13/2011 - 08:38
March retail sales which came at 0.4%, below expectations of 0.5%, and down from an upward revised 1.1% February, confirm that the economy in Q1 slowed down materially toward the end, and was certainly not as hot as had been predicted early in 2011. This was the lowest improvement since June 2010. The number was offset by the "ex autos and gas" number which came at 0.6%, better than expected, although with ever more capital being diverted to gas purchases this is cold comfort to those who have to use gas. The biggest weakness was in auto sales which dropped by a substantial 1.7%. Retail sales increased a modest 0.3% (and retail and food total up 0.4%). Gasoline stations saw another sizable increase of 2.6% sequentially and 16.7% from a year earlier. Food and beverage stores were among the weakest posting just a 0.1% increase in March.
- Obama Said to Call for Entitlement Cuts, Higher Taxes (Bloomberg)
- Banks Face Sovereign Debt Scrutiny in EU Stress Tests (Bloomberg)
- ECB: Ireland’s Taxpayers Must Share the Pain (FT)
- BRICS Push Resource-Hungry China to Buy Finished Goods (Bloomberg)
- China’s Nuclear Freeze to Last Until 2012 (FT)
- TEPCO still working on plan to end Japan nuclear crisis (Reuters)
- Schneider Says Currently No Talks With Tyco About Alliance (Bloomberg)
- Portugal's Leaders Bicker Over Bailout (WSJ)
- Chinese Companies Go on Global Bond Spree (FT)
Central Banks Favour Gold and AAA Rated Government Debt – Reserve Currencies of EUR and USD QuestionedSubmitted by Tyler Durden on 04/13/2011 - 08:07
Stocks are higher in Europe after gains in Asia despite losses on Wall Street yesterday. Gold and silver are showing tentative gains after 1% declines yesterday. With America set to have the largest budget deficit of any of the developed economies, a whopping budget deficit of 10.8pc of GDP this year alone, gold and silver’s medium term prospects remain positive. The IMF has warned that the U.S. lacks credibility regarding its debt and must implement stringent austerity measures. This is one of the primary factors which strongly suggests that, contrary to the consensus, a double dip recession looks increasingly likely in the U.S. This would be negative for the dollar and US treasuries and lead to higher gold and silver prices due to safe haven buying. Central banks are questioning the dollar and the euro as reserve currencies due to the massive liabilities and debt levels confronting the US and the Eurozone (see News below). This is set to lead to central banks continuing to be net buyers of gold for the foreseeable future
- Chinese cos go on global bond spree; Mainland groups have borrowed $12.2B this yr.
- Japan cuts its economic assessment as earthquake damage mounts.
- Obama said to call for cuts in entitlements, higher taxes.
- Oil hovers above $106 in Asia as investors eye crude demand amid 2-month rally.
- OPEC sees higher demand for its oil in 2011 at 29.9M barrels/day, up 400,000 bbls YoY.
- Swedish government expects public finance surplus in 2011, tax cuts in 2012.
- Taiwan halts plans to build atomic reactors after Japan crisis.
- US Import prices increased 2.7% in March on crude oil, food.
- US lacks credibility on debt, says IMF. Stringent austerity measures needed.
Today's Economic Data Docket - Retail Sales, Bond Auction/Monetization, JOLTS, Beige Book, And Obama's Deficit StatementSubmitted by Tyler Durden on 04/13/2011 - 07:48
Busy day with quite a bit on the economic front: if Gallup is right March retail sales will be weaker than expected. Other key events include the JOLTS survey, business inventories, a Treasury auction and the inverse - POMO; and last Obama is presenting at noon his deficit reduction plan.
JPM Reports $1.28 EPS On $1.15 Consensus... However $0.29 Is From Reduced Credit Card Loan Loss ReservesSubmitted by Tyler Durden on 04/13/2011 - 07:13
And so the loan loss reserve accounting game continues. JPM just reported earnings of a solid $1.28/share for Q1 2011, generated by net revenue of $25.8 billion (a decreased of $2.4 billion from a year ago). This would have been enough to push the stock substantially higher... if only $0.29 of this "beat" was not from a purely accounting benefit from reduced credit card loan loss reserves. Now the only question is how much of this credit card improvement is from credit card holders paying their credit card cards instead of their mortgage (and with a $50 billion annual squatters rent benefit this is not a trivial question). Considering that JPM announced a $650 million expense for estimated costs of foreclosure-related matters our guess is "a lot." Per Jamie Dimon: " "Retail Financial Services demonstrated good underlying performance, while we continued to invest in building branches and adding to our sales force. However, this performance was more than offset by the extraordinarily high losses we still are bearing on mortgage-related issues.(a) Unfortunately, these losses will continue for a while. Rest assured, we are fully engaged in fixing our problems and addressing our mistakes from the past, and we will strive to build the best mortgage business going forward.""
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 13/04/11
Part 2 of the Great Beltway Soap Opera promises to be quite entertaining. According to Reuters, even though the US desperately needs to get a debt ceiling resolution immediately (we are at a point when any debt auction could be the last, depending on how many refunds the Treasury has to issue at any given point), Republicans are resolved to "stretch out negotiations on raising the U.S. debt limit until July....Prolonging negotiations past mid-May when Washington will hit its debt limit could give Republicans more leverage to secure big spending cuts, but it could worry investors as the country runs up against a possible default. The Republicans said they would act before that happened." The only question is whether bond investors (no matter how deflationary attuned) will stay in bonds before any possible compromise. Of course, should yields surge as a result of political "instability" it will merely reinforce the continuation of an easing regime, especially since Goldman is now obviously in a faux-disinflationary regime (more thoughts on that imminently, together with how to trade the unwind of Goldman remaining "Top Trades for 2011" following purported Bill Dudley instructions). And if the debt ceiling debate is in any way comparable to the grotesque farce that was the $38.5 billion, pardon $14.7 billion spending cut, then America is certainly buggered.
Goldman Goes For The Trifecta: Lowers 2011 Copper Price Target From $11,000 To $9,800/mt; Gold, Silver Next?Submitted by Tyler Durden on 04/12/2011 - 21:05
Following two consecutive commodity downgrades which killed crude and all commodities, which led many to wonder just how many pictures of Lloyd Blankfein at Scores does Bill Dudley have locked up in his office, the bank, whose primary M.O. is to push inflation, has gone for one more deflationary report, this time cutting the last man, er doctor, standing: copper. From Goldman: "We are pushing out our $11,000/mt target to 2Q2012 and lowering our 2011 year-end copper price target to $9,800/mt from $11,000/mt. Accordingly, we recently closed our long December 2011 copper trade recommendation – first opened on October 4, 2010 – for a gain of $1,872/mt. We are also raising our 3-month forecast to $9,300/mt, and 6-month forecast to $9,600/mt." And with this we can now scratch Scores, and move on to The Bunny Ranch. Incidentally, this means gold and silver are next. You have been warned.
Contextually, today was interesting bottom-up with only 53% of names agreeing in terms of direction for credit and equity risk (dominated by 50% agreement that conditions deteriorated). 27% saw credit widen as equity rallied while 20% saw credit compress as equities sold off but at the sector level the picture was much more stable with most agreeing systemically worse today. Leisure, healthcare, and Consumer Cyclicals were the only divergent sectors with credit underperformance as equity managed gains (only just in the latter we note). While we saw a clear up-in-quality shift in single-name credit today ( a theme we have been suggesting recently), that was not the story in equities where higher quality names (BBB and above) actually underperformed on average those in the spec grade cohorts. Vol movements were in line with CDS once again with vol rising less for the better quality names and rising dramatically more for the lower quality names (with a particular emphasis on the crossover names in fact).
Nixon had his commerce secretary, Peter G. Peterson (he of enormous wealth these days), promise far reaching and revolutionary “initiatives” to tame our thirst for oil. But Nixon was out of office before these palliatives were revealed. Gerald Ford, caught up in vicious inflation, partly linked to the cost of oil, launched the Energy Research and Development Administration (ERDA), combining the Atomic Energy Commission, the Office of Coal Research and other energy entities in the federal government. ERDA initiated many programs, while politicians invoked the Manhattan Project and the Apollo 11 moon landing. But the search for the Fountain of Eternal Energy failed. Jimmy Carter wanted not only to solve the energy challenge, but to be seen to be solving it. Ergo, he expanded ERDA into the Department of Energy (DOE) and created a separate Synthetic Fuels Corporation. The latter failed after a short and unhappy life. No oil reached the pumps. When the price of oil collapsed in the 1980s, so did hopes for many of the alternative energy sources, including ocean thermal gradients and flywheel energy storage. To its credit, though at great cost, DOE, through its chain of national laboratories, kept searching. The result has been evolutionary improvements in many fields, and some really revolutionary ones in how we find oil and drill for it; these include seismic mapping, new drill bits and horizontal drilling. These evolutionary developments brought more oil to market and have contributed to the recent improvement in domestic production that Obama likes to point out. It has enabled us to cut our imports slightly, so they now stand at 11 million barrels per day out of consumption of 20million barrels per day.Obama wants us to cut those imports by a third. To do this, he has no magic bullet.