Archive - Oct 2013

Gone are the days where people looked towards next year when building their portfolios, or five years down the road as they approach retirement. Now from a combination of apprehensiveness and shear paranoia in our unstable markets, investors are looking only as far as they can throw for their personal investment decisions. In more than 30 years of money management, Lance Roberts has never seen such a rapid change in the way people make financial plans. Instead of saving for the future, many are opting for fast gains - yet at the same time they want low risk. Others are playing it completely safe. In fact, in a quarterly poll, 83% of respondents said they were holding on to their cash versus investing in the stock market.

Continuing to play Obama like a fiddle, the Snowden revelations have done more to change US foreign policy in a few short months, than all laws passed since the advent of the Patriot Act. In the latest example of just this, moments ago, USA Today first and the WSJ and others subsequently, reported that according to Dianne Feinstein, chair of the Senate Intelligence Committee and an NSA supporter, the National Security Agency has stopped gathering intelligence on allied political leaders, a practice that has drawn global criticism. "The White House has informed me that collection on our allies will not continue, which I support," according to Feinstein. It was not immediately clear if this is an implicit admission that the White House actually did know about the NSA's spying on foreign leaders over the past decade, and lied about being unaware. Recall that Obama denied just this last night, but at this point the pit of lies is so deep, few actually care or are keeping track.

The NYSE Composite is indicating some uncomfortable symmetry currently. As NewEdge's Brad Wishak notes, the index (which represents 61% of the market capitalization of globally listed companies) has risen about the same amount over the same period as in the run-up of the last debt-fueled bubble (only this time the valuations are notably richer). Will Janet Yellen make sure this time is different...? Or is the right question, 2007 USA or 2006 Zimbabwe?

The kabuki theater that passes for governance in Washington D.C. reveals the profound level of ignorance shrouding this Empire of Debt in its prolonged death throes. Ignorance of facts; ignorance of math; ignorance of history; ignorance of reality; and ignorance of how ignorant we’ve become as a nation, have set us up for an epic fall. It’s almost as if we relish wallowing in our ignorance like a fat lazy sow in a mud hole. The lords of the manor are able to retain their power, control and huge ill-gotten riches because the government educated serfs are too ignorant to recognize the self-evident contradictions in the propaganda they are inundated with by state controlled media on a daily basis.

As Rand Paul grows more vociferous with regard the Janet Yellen nomination, he and his father are once again pressing for more transparency into what really occurs at the Fed. While some argue that there has never been a more 'transparent' Fed as we are plagued with volumes of double-speak (projections and prognostications), Ron Paul explains in this brief clip that "the big stuff is done in secret," including international central bank bailouts. His hope, based on the fact that Janet Yellen is a self-described agent of transparency that "the time is ripe," to truly audit the Fed.

While the market is focused on AAPL's income statement, we decided to take a quick glance at its balance sheet, where we looked at - what else - its infamous cash hoard. Once the envy of every company in the universe, AAPL's cash and equivalents, while still very impressive at a record $146.8 billion, is potentially a reason of concern. Because while AAPL's Q4 $9.9 billion in cash from operations were certainly impressive as a result of the company's recent shareholder friendly overtures it has been burning cash at a far faster clip than in prior quarters and spent $7.8 billion in Q4 in dividends and share buybacks. So much so, that the amount by which its total cash holdings grew in the quarter was a tiny $140 million, a far cry from prior quarters when it generated billions in cash in any given quarter. So one wonders: was this the peak for the most fantastic cash balance growth in history?

Moments ago, AAPL beat the top and bottom line as follows:

• Q4 EPS of $8.26, Est. $7.92
• Q4 Revenues of $37.5 billion, Est. $36.84
• Q4 gross Margin: 37.0% vs Est. 36.9%

That was the good news: the bad is as follows:

• IPad sales of 14.1 million missed estimates of 14.3 million
• Q1 margin between 36.5-37.5%, below the street estimate of 37.74%, which is what according to some is pushing the stock lower after hours

Welcome to the commodity world: after all this is what AAPL wanted with the 5C right?

Shitty data, worse earnings, worst volume, new highs. Among the lowest volume days in NYSE single-stocks, S&P futures trading, and VIX options saw stocks levitate back to overnight highs during the day only to slide lower to around unch by the close. Trannies have managed 11 up days in the last 13 and gained 10.3% - sure why not? S&P 500 hit new all-time highs but ended the day well off its highs. Gold hit 5-week highs but faded back to modest gains. The USD rallied early and faded to unch by the close. Treasuries rallied early on but faded into close +/1bp on the day... The pattern was the same across most assets but a very last minute 4.5 point rampapalooza closed the S&P at all-time highs.

The National Republican Senatorial Committee has laucnhed a bumper sticker campaign to "remind Americans of the same error messge they are seeing each day when trying to log on to Healthcare.gov."

One has to wonder if somewhere deep down a change is occurring in America. While stock prices soar to record highs, it is clear a growing number of 'real' people are realizing the nonsense that watching a 'market' as anything indicative of reality has become. The latest 'shift' is the appearance on New Orleans local TV of a two-minute primer on an "alternative" school of economic thought - Austrian Economics. While the anchor is careful to add the caveat that the mainstream economists think the world would be a terrible place if they didn't help us along, the brief clip begins with some useful common sense, "the market alone should decide the value of products and services. If a company is not successful, it should go bankrupt." Indeed...

To summarize:

In just the first 9 months of 2013, DM countries have injected $1 trillion in liquidity sourced exclusively by central banks; EMs have injected another $2 trillion driven by bank loan demand.
The total global M2 is over $66 trillion, growing at an annualized pace of over 6%.
The amount of excess liquidity, i.e. the infamous "liquidity bubble" in the global fungible system is "the most extreme ever in terms of its magnitude"

And that's really all there is to know: the monetary music is playing and everyone has to dance... just don't ask what happens when the music ends.

Radiation Levels Will Concentrate in Pockets at Certain  West Coast Locations

The recent strong rise in the so-called CBOE SKEW index is yet another among the various divergences that make the stock market's current advance suspect. Skew measures the perceived tail risk of the market via the pricing of out-of-the-money options. Generally, a rise in skew indicates that 'crash protection' is in demand among institutional investors. An unusual move in the skew index (which historically oscillates approximately between a value of 100 and 150) is especially interesting when it diverges strongly from the VIX, which measures at the money and close to the money front month SPX option premiums. Basically what a 'low VIX/high skew' combination is saying is: 'the market overall is complacent, but big investors perceive far more tail risk than usual' (it is exactly the other way around when the VIX is high and SKEW is low). In other words, a surprising increase in realized volatility may not be too far away.

What you won't find anywhere else. Trust me, I've looked...

Ohio said on Monday that it does not have enough of the lethal injection drug pentobarbital to carry out a scheduled execution next month. As Reuters reports, Ohio is the latest U.S. state to face a scarcity after the European manufacturer banned its sale for lethal injections of prisoners sentenced to death. The European Union is opposed to the death penalty (physical as opposed to economic) and has put pressure on US States to stop the practice. If only there was an anonymous online exchange where 'drugs' could be bought and sold to meet the demands of those looking for a quick fix (or multiple executions) despite the oversight of various freedoms by governments.