Archive - Jun 2, 2011

Econophile's picture

Sinking Manufacturing Is A Stagflationary Trend





The downturn in the economy caught most economists by surprise. They have yet to realize that we are now in a stagflationary economy. All the signs are there, yet they have no explanation for it. QE3 anyone?

 

Tyler Durden's picture

The Consumer Contraction Begins: May Same Store Sale Summary - 12 Misses, 5 Beats





It is still not too late to short that consumer discretionary basket, albeit with a footnote: whatever you do don't short the ultra luxury retailers. Those will be doing very good, courtesy of all their shoppers having the Amex Discount Window credit card. Everyone else: better luck next time. As the chart below from BofA shows the May retail SSS data turned very sour with 12 misses and only 5 beats, and just like every other segment, very soon the stock market, which since Jackson Hole has been reacting to newsflow like a retárd, will finally grasp that even with nobody paying their mortgage, the reality of diminishing squatter returns is unavoidable. That said, since the data comes from Bank of America, naturally there would be a scapegoat: "may results were negatively impacted by unseasonably cool weather as well as pressure from high gas prices." That's ok: In keeping with tradition, QE3 will very soon be blamed on unreasonably normal weather.

 

Tyler Durden's picture

Fed Balance Sheet And Monetary Base Update - New Records All Around





The Federal Reserve, just like Atlas, continues carrying the weight of if not the world, then certainly the stock market on its shoulders. As expected, both the Fed's balance sheet, and its economic equivalent, the Adjusted Monetary Base, just hit fresh all time records. This will continue for 4 more weeks at which point QE2 will end and what happens next will depend entirely on what side of the bed Bernanke wakes on.

 

Tyler Durden's picture

Guest Post: Insider Trading: “You Can’t Regulate Uncertainty”





Adding insult to injury, the SEC costs business billions of dollars annually – probably scores of billions, if you take all the secondary and trickle-down costs into account: direct fees, legal fees, printing, mailing, and other costs of compliance. They have a direct budget cost of something over a billion dollars per year, but that’s trivial relative to the indirect costs they impose on the economy. They ought to be ashamed, diverting a significant fraction of GDP from productive use into the pockets of parasites, in the name of protecting business and investors, when they do the opposite. The SEC is like a Pied Piper who attracts ravening hordes of rats with his flute instead of getting rid of them – and then charges people tenfold for the “service.” This is one agency I would abolish, immediately and completely. Not a single one of its functions should even be handed off to other agencies. The SEC serves absolutely no useful purpose whatsoever – just the opposite. It’s not a question of getting it under control or paring it back. It should be eliminated in toto.

 

Tyler Durden's picture

Moody's Leaked Again: Told Nancy Pelosi Will "Probably Not" Downgrade US Weeks Ago; Did Her Multi-Millionaire Investor Husband Know Too?





Moody's reputation for leaking inside information is well-known: after all it was one of its own employees, Deep "Throat" Shah, who leaked to infamous hedge fund Galleon information of upcoming LBOs. But at least that wasn't information originating from Moody's: the world's most incompetent rating agency was merely a conduit. Yet we were little surprised to learn that the firm that facilitated the housing bubble, and where such apparatchiks as Mark Zandi reside, informed none other than House Minority leader Nancy Pelosi that it likely wouldn't downgrade the US debt as long as several weeks ago. Per Dow Jones: "Moody's earlier Thursday took the unusual step of warning that it might place the U.S. government's debt rating under review for a possible downgrade. The agency said the review would come if Congress doesn't make progress on raising the country's debt ceiling. Pelosi said she was alerted to the Moody's report just after House Democrats met with President Barack Obama at the White House. She said a few weeks ago she was in New York and the head of Moody's told her that it "would probably not downgrade, so this is interesting news today," she said. "But the fact is we cannot default" on the debt." We are relieved to learn that the head of Moody's, a firm which only last summer received a Wells Notice from the SEC, in an investigation which was promptly scuttled by powerful and rich people, takes its responsibility of protecting material, non-public information with such passion. Yet it is the topic of another leak of non-public information, and not Moody's criminal incompetence, that bothers us. Because as we noted last week, it is now proven scientifically that members of both Congress and Senate (especially democrats), tend to trade a littel too much on inside information. And even if not Ms. Pelosi, who precisely will guarantee us that Ms Pelosi's husband, multi-millionaire Paul Pelosi who just happens to be the owner of Financial Leasing Services, Inc., a San Francisco, California-based real estate and venture capital investment and consulting firm, did not procure the Moody's inside information courtesy of wagging tongues at Moody's and in his wife's mouth, and then proceed to trade accordingly. Alas, with the regulator in charge being the same one who let the whole Moody's investigation get deadended in record time, we are not hopeful of getting any information or justice. Ever.

 

Tyler Durden's picture

Guest Post: The Fukushima Cloud's Green, Not Silver Lining





According to China Business the earthquake and tsunami halted production at most of Japan’s giant solar power companies, including Kyocera, Sharp and Sanyo because of the subsequent lack of electricity. Prior to the earthquake China and Japan essentially shared the European photovoltaic (PV) market; since the earthquake analysts predict that Japan will lose one quarter of its market share. The shift has already started, as The Nikkei business daily reported on Wednesday that Softbank Corp, Japan's third-largest mobile phone operator, has announced plans to assist in the construction of about ten 20-megawatt facilities, costing about 8 billion yen ($100 million) each. But, as in many Western countries dominated by the nuclear and oil industries, solar energy policies have up to now enjoyed fitful support in Japan, where pioneers such as Sharp Corp and Kyocera Corp have lost their lead to overseas rivals that received larger subsidies and lower production costs. Furthermore, the cost of solar panel installation in Japan is double that in Germany. So, who will be one of the major beneficiaries of this policy shift towards reducing solar costs? China, surprise surprise.

 

Tyler Durden's picture

Treasury Continues To Dip Into Retirement Accounts, Prepares To "Take Out" $66 Billion Chunk To Make Room For New Bond Issuance





Today, very quietly, the Treasury released its latest refunding announcement, in which it disclosed it would issue another $66 billion in 3, 10 and 30 Year notes next week. The irony of course is that the US is and continues to be at its debt ceiling limit (or just $25 million short of it), at a total of $14,293,975 million. Furthermore, as was also disclosed by the Treasury, this gross issuance will also be the net amount added in marketable debt, as upon settlement on June 15, there will be no redemptions of maturing bonds. Which simply means that the continued "disinvesting" (which is merely a polite word for plundering) from intragovernmental debt, also known as retirement accounts, is about to kick into high gear. As a reminder, the only solution that Geithner currently has to run the government, at least until August 2 when even this runs out, is to slowly drain the debt in non-marketable accounts, in the form of Suspension of G-Fund and ESF reinvestments, as well as the Redemption and suspension of of CSRDF Investments, measure which when combined will provide a short-term buffer of $232 billion. Yet for all practical purposes, what is happening is that retirement accounts are now being seriously plundered, and if the unthinkable were to happen, and the debt ceiling would not rise, not only would the US be in technical default, but various retirement funds, which already are underfunded, would find themselves even more severely in the Red. As the chart below shows, the total amount of intragovernmental debt currently outstanding, has dropped to levels last seen in early April, even as total debt has continued its steadfast move higher. The scary thing is that by the time August 2 rolls around, the current total of $4.608 trillion in various Trust Funds, will drop to well about $4.4 trillion, or an implicit 6% underfunding in 2 months merely to keep the bloated government operating for a few more months.

 

Bruce Krasting's picture

Best performing stocks YTD? - Go figure!





A comment on the market is that the best performing stocks this year are just junk.

 

Tyler Durden's picture

Discount Window Borrowings Spike To Highest In 2011





There was a time when depositor institutions (which nowadays paradoxically includes such entities as Goldman Sachs and its millions of ATMs crisscrossing the land), not flush with unprecedented amounts of bank reserves (which just hit an all time record high of $1.59 trillion), would go to the Fed's discount window for short-term funding needs: a stigmatized act which telegraphed to the street that the borrowing bank was undergoing some form of liquidity crunch. Not surprisingly, the Fed fought tooth and nail to prevent discount window disclosure from becoming public, especially since it was later discovered that the biggest recipients of Fed Discount Window generosity were foreign banks, and especially Dexia. We bring this up because going through the Fed's weekly balance sheet update (yes, it just hit a new all time record, and yes, we will provide a full breakdown soon) we find that weekly borrowings across the Fed's three discount window facilities, Primary, Secondary and Seasonal Credit, surged to a 2011 high of just over $100 million, and also saw the very first usage of the "reserved for really ugly bank" Secondary Credit Facility in the current year to the tune of $9 million. Yes, in the grand scheme of things this is a modest number, but when one considers that with all the liquidity sloshing around there should be no discount window borrowings at all, the fact that we have had such a dramatic spike is troubling to say the least. As for the culprit, we have one guess. If proven correct, this would mean that the emergency liquidity provisioning system of the ECB is starting to get a little "problematic" to put it mildly.

 

williambanzai7's picture

JuMP THaT SHaRK! (UPdaTe: A MeSSaGE FroM JaWs QE3)





We're gonna need a bigger boat...

 

Tyler Durden's picture

And For The Other Dot Bubble 2.0 IPO...





With all the commotion associated with the Groupon IPO, some may have missed that in scrambling to take advantage of the IPO window which closes on June 30 with the end of QE2, today music streaming company Pandora (Proposed ticker symbol "P") announced it would increase the money it would attempt to raise publicly up to $142 million at a price of $7-9/share for 13.7 million shares (of which 8.7 million are from selling shareholders). In other words, Pandora would retain at most $45 million in cash from the offering. But the stunner is that assuming the offering closes, the 13.7 million pro forma float is a laughable 8.6% of the total number of shares outstanding after the offering, or 158.7 million shares. Which also implies that Pandora would have a ridiculous valuation of $1.1-$1.4 billion! And what are the multiples: well, Q1 revenue was a healthy $51 million growing about 100% Y/Y from $22 million a year earlier, so about $200 million annualized. Ok: a 5-7 revenue multiple for a dot com 2.0 company, we'll buy it. The problem is that total costs and expenses increased by the same amount Y/Y: from $24 million to $56 million. Ergo, EBITDA, forget net income, was a negative $6.8 million in Q1. Annualized, this is, well, negative, meaning the company will have an EV/EBITDA that is N/M and at best #Ref!. So yes, the bubble is back. And for all intents and purposes, the only prospectus we are interested in is the one that specifies the terms and conditions of the quadruple negative ETF that will track only the stock of GRPN and P. To everyone else who does not get a primary allocation, just look at LinkedIn, where everyone who bought post the break and held is now at a loss.

 

ilene's picture

Thrilling Thursday - Can We Make Another Billion Today?





The idea of turning the EU into a Bankster's Paradise (where you lose sovereignty to your creditors) slapped the Dollar down to it's lows of the day and boosted the EU markets and US futures and gave us our re-shorting opportunity on oil.

 

RANSquawk Video's picture

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 02/06/11





RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 02/06/11

 

Tyler Durden's picture

Guest Post: Too Big To Fail Or Too Stupid To Stop - Screw Banks/Not People





This morning, amidst news of Moodys cutting Greece's debt rating to Caa1, I came across a phrase I wish I'd thought of first, reading through a friend's morning commentary. The phrase? "Too Stupid to Stop". According to Bill Blain, Senior Director at Newedge in London, and self-professed Euro skeptic, "'Too Stupid to Stop' is based on politicians behaving as rational maximisers of their electoral objectives." He was referring to the real reason behind all the bank-demanded bailout loans for austerity measures throughout Europe. In the United States, that mantra can be extended to include appointed officials, like Treasury Secretary, Tim Geithner (still not admitting our record debt increase came directly from the $4 trillion worth of Treasury issuance and other forms of assistance extended to our banking system since late 2008, as we endure his stomach-churning 'show-begging' to the GOP for a debt cap raise) and Fed Chairman, Ben Bernanke (ditto). It also, of course, applies to congress people whose political survival depends on corporate and bank contributions and financial support, the ones that believe the Dodd-Frank bill changes anything. Rather than considering how governments have systematically done, and continue to do, the wrong (as in immoral, unfair, and uneconomically sound) thing by trying to preserve banks, any politicians possessing the ability to think independently (an oxymoron, I know) should be asking themselves instead, how clever they could be about closing them down. Take a cue from Iceland. But, the 'Too Stupid to Stop" behavior, prevents this from occurring.

 

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