Archive - Jan 2011

All one can say is oops. That margin compression sure does suck:

Q4 EPS USD 0.91 vs. Exp. USD 0.88

Q4 net sales USD 12.95bln vs. Exp. USD 13.03bln

Net sales are expected to be between $9.1 billion and $9.9 billion, or
to grow between 28% and 39% compared with first quarter 2010

Operating income is expected to be between $260 million and $385
million

We have yet to see snow being blamed for the After Hour stock collapse

Oopsie

Sarky and Jamie in the ring...

Expect dire reactions by financial markets when the US debt/GDP ratio soon tops 100%. With the current spending trajectory and the new tax compromise, total debt will reach $23 trillion by 2020, or some 160% of today’s GDP, 1.6 times the WWII peak. China and Japan might even demand a retreat from our $150 billion a year commitments in Iraq and Afghanistan to protect their bond holdings. Who were the real big spenders?

Following the release of the yesterday's revised CBO projections, we, together with anyone with half a brain, were stunned by the ridiculous assumption that somehow the US government can grow its revenue by 50% (!) in the span of 3 years. Since absent a wholesale increase in taxes, which won't happen ahead of the Obama presidential elections, this has a snowball's chance in happening, the only recourse to the government is to cut spending. But where? Most major governmental expenditures are non-discretionary, yet spending has to be cut... Which brings us to the topic of this post: most likely the biggest sacrificial lamb will be companies on the dole of not only the US government, but certainly foreign governments (where unlike in the US, austerity is rampaging without mercy). Courtesy of data prepared by Lehman's (now Barclays after the Blue Light special rushed purchase of Lehman NA in bankruptcy court) Matt Rothman we present the companies whose revenues are comprised at least 50% of sales to governments, both foreign and domestic.

With the release of the FCIC report we're seeing a new wave of reasons (excuses) for the Financial Crisis. Somehow, no one seems to place any blame on the rating agencies and the lazy institutional investors who outsourced their due diligence to them. Enough of that BS. What the report should have said is "Here's a simple rule: If you can't analyze a security yourself DON'T FREAKING BUY IT!"

My generation is coming into its own and we don’t buy the bull shit of our parents’ generation. We don’t believe in Democrat or Republican. We don’t believe in the system itself. We will be the ones making the decisions going forward. We will default on the astronomic promises our parents made to themselves. We will create an entirely new monetary and financial system. Real free-market capitalism will flourish, not this socialism for the rich garbage Obama loves so much. We will focus on doing good while doing well. Not because the government forces us to, rather because we are witness to and victims of this sick, twisted creation of our parents generation that celebrates total greed without the slightest concern of the consequences to others. - Mike Krieger

Today's $29 billion in 7 Year bonds closed at a 2.74% high yield (95.59% allotted at high), a slight drop from the 2.83% in December. The Bid To Cover was 2.85, a hair less than the 2.86 in December, and in line with the last 12 auction average of 2.875%. The auction came well inside of the When Issued, confirming the auction was much stronger than expected. As a result the entire bond complex has seen prices jump on the back of the very well accepted auction. Indirects, who have recently been skittish from left of the belly auctions showed some modest enthusiasm and bought up 42.2% of the auction, almost certainly to turn around and sell it in the open market, as the Fed is a 1:1 buyer for all gross issuance in 2011: i.e., the fact that Indirects taken down close to half is pretty much meaningless.

Ahead of tomorrow's national street protests, which are expected to count in the millions and which may be the final nail in the current administration's regime, Egyptian opposition leader Mohamed ElBaradei has just landed in Cairo, arriving from Vienna, to join a growing wave of protests against Mubarak inspired by Tunisia's overthrow of their authoritarian president, as Reuters reports. Mr ElBaradei was formerly the head of the UN nuclear watchdog, the IAEA, and who had found no traces of any nukes in Iraq in 2003 right before the invasion that proceeded regardless, said the government should not use violence against the demonstrators. Before his departure, he also told the BBC that he is going to Cairo to join street protests there. More importantly, he said the country "must change and he is ready to lead the transition if asked." With committed leadership, it appears the next US puppet regime is about to tumble.

Everyone is buying gold, right? That's why the price is so high, right?

When the market seems like it is about to roll over, who you gonna call? Why future Treasury Secretary Jamie Dimon of course... Courtesy of IOIA, we now know whose ETF desk has a sole purpose in life to hit the Chairchopper's Russell 2000 target of 36,000 before June, when it all goes to hell.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 27/01/11

By now it should be clear even to the most optimistic observer that the global financial system has given itself over to systemic lawlessness. Once international banks were effectively allowed to print their own money in an unregulated “shadow” system and have it redeemed full value by national taxpayers, the charade was over. The only thing left, at this point, given the full cooperation of governments and an eerie world-wide non-enforcement of law, is for banks, like a cancer to savage and consume every concrete store of non-counterfeit productivity and asset value. Not only have governments from China to the United States committed themselves to a chess game meant to eke out relative advantages on a sinking ship, but they have positively rewarded those who are speeding the collapse. A simple, cannibalistic economic rule now persists until a new system emerges: Economic manipulation, destruction, and extortion are simply more profitable, far more profitable, than good old fashion value creation. Disaster capitalism will be pursued full force.

The second today's POMO ended, the market flushed. The catalyst: the announced Submitted to Accepted ratio, which came at a whopping 5.8x, far higher than both the average and median. We have long claimed that PDs will spike the S/A ratio when in need of immediate Fed liquidity, and thus any time there is a high S/A ratio, watch out below. Well, as the chart below shows, this is precisely what happened today. Furthermore, the beatdown is taking down the commodity complex as well. Is the market starting to finally realize that everything is just a house of cards? (and yes, QE3 is coming. Plan accordingly).

Are all Fed employees currently watching Angelides carefully to see if their name is mentioned (or better yet barricading the doors to keep the FBI out)? Sure seems that way. Either way, great use of tax dollars to keep the Fed's henchmen employed. Since it take only one man to print, and another to refill the ink, aren't all these apparatchiks redundant? Perhaps, just like BBC reports based on witness reports out of Cairo Airport where there apparently is a group of private jets waiting for high-level officials, so the distinguished gentlemen (and ladies) are merely busy transferring whatever is left in the unauditable Fort Knox to their own currently warming up Cessnas?