Archive - Dec 14, 2010

The man who has become an embarrassment to clowns everywhere was out on Friday literally screaming his usual schtick. That said, the good thing about clowns is they don't give you advice that will make you broke. Unlike Jim Cramer. In his December 10th segment, Cramer says: "I would be willing to risk a small amount of money December $44 call options, they expire on Friday." Oops. Total loss on that small amount of money. And what is even funnier: "Best buy gives us a window into what people are buying for the holidays, so we hear what products are selling." Er, none? As always, trademark Jim Cramer entertainment that will leave you broke.

Yet another confirmation that there is nothing left in this market for sensible stock pickers, courtesy of Lehman's head of quant strategy, Matt Rothman: "In summary, the lower the quality of the company the more they are helped by an easy monetary regime. In these situations, true fundamental investors who focus on such banalities as valuations, free cash flow generation, the repeatability of earnings and the return on shareholder equity find themselves struggling to generate returns." What is sad is that Fed's tinkering with the stock market has now eliminated even that old-time staple trade: the Flight to Safety. Why be worried when the Chairman will not let anything fail? "Bluntly, if you had laid out for us the headlines at the beginning of the month, given them to us in full detail, and asked us to predict how our Quantitative Factors would have performed, well, we would have been wrong. Embarrassingly wrong.... There was simply no flight to quality among investors...Aside from the Euro/Dollar trade, there wasn’t much of a quality trade really anywhere in the market." And with QE3 planning already in process, this inverse flight to safety trend, where increased risk means an even faster scramble for the shittiest assets imaginable, will only get more pronounced. Welcome to the true new normal.

As part of his £200,000 bail, Assange has a 10pm curfew, passport surrender and an electronic tag. Unclear if he is allowed to use a computer. So how about that AES 256 key already?

The man who probably more so than anyone else can be singled out as the person (behind the scenes) responsible for the destruction of America, first with his successful drubbing of every vestige of regulation, then his isolation of Brooksley Born and her all too prescient concerns on structured products and derivatives, and finally, with carrying over his debilitating management practices from Harvard over to the US in general for the past two years, just had his farewell speech, which in typical fashion can be summarized as follows: "I am smarter than you peasants, go to hell." For a more official summary of his valedictory, here is WaPo's Dana Milbank: "Summers's final performance was very much in character. He arrived 10
minutes late for the speech, his suit jacket open, his shirt pulling
tightly at the buttons, his suitpants stained on one of the knees. His
hair showed signs of bedhead, but it could have been mussed by Summers
during one of his morning meetings. He jiggled his legs while listening
to the introduction by EPI President Larry Mishel, who had some edgy
words for his guest. Although both men grew up in Philly, Mishel said,
"when he moved to Boston, he adopted the Boston Red Sox as his baseball
team. Me? I'm still a fan of the Fightin' Phils." Summers rushed to rebut this point - by insulting the home team. "If I
lived in Washington, I might still be a Phillies fan, too." There were
groans in the audience." And of course, it is not like it was Summers fault for doing anything to bring unemployment down even as total US debt under his watch increased by over $2 trillion: "On Monday morning, he went to the Economic Policy Institute, a liberal
think tank, to give his "perspectives on the past two years." But in his
remarks, he spoke of not a single wrong decision he made." So now that the disastrous, and hopefully final, reign of this distant Tatooine descendant is over, here are the three finalist to fill his extra wide chair, two of whom promise to do absolutely nothing to break Wall Street's stranglehold over the White House, and thus increase the odds for a widespread populist mutiny with each passing day.

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.

It's Reggie Middleton vs Goldman again. This time on Apple. Who has the better track record? Let's delve into the logic of an Apple buy and realize who is making the recommendation and why...

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.

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?

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.

All the major stories from around the world shaping today's market.

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.

Deliver those bars and melt that bitch!