Archive - Mar 2013

While not according to official government statistics (yet), which we have come to trust so Pavlovian-ly, TrimTab's CEO Charles Biderman notes that based on what is important - the growth (or lack thereof) of real-time wages and salaries, the US economy has slowed enough to enter into recession. Following December's aberrant jumps thanks to tax hike concerns, after-tax wages and salaries (net of inflation) have been shrinking year-over-year since the second week in January. But it gets better, withheld income and employment taxes have been running about 8.3% higher year-over-year. While retail is being told to buy-buy-buy, Biderman exclaims that "insiders at U.S. companies have bought the least amount of shares in any one month," and that the ratio of insider selling to buying is now 50-to-1 - a monthly record. "So far the mass delusion is holding."

A major shift is taking place in Central Bank policy. The herd is ignoring the language as usual... just like they did in 2008.

Every now and then you get a glimpse. A vision of reality that confirms the surreality occurring all around us. This time it comes courtesy of Coleman Andrews, co-founder of Bain Capital, who asks bluntly how confident can investors be that this monetary program will have the effects that the Fed claims it will have? A look at what Fed Chairman Bernanke was saying in the run-up to the 2008 financial turmoil gives some insight into the Fed's record at predicting market outcomes. A must-watch 150 seconds today as it appears belief in Bernanke's omnipotence is back for a moment as he asks "would you trust your life-savings to an institution with that recent record of completely missing what happened in the housing sector and more broadly in the economy." Indeed...

Comes with an “Attendance Justification Tool Kit”

Recent news about Federal plans to "help" manage private retirement accounts renewed our interest in the topic of capital controls. One example of capital control is to limit the amount of money that can be transferred out of the country; another is limiting the amount of cash that can be withdrawn from accounts; a third is the government mandates private capital must be invested in government bonds. Though presented as "helping" households, the real purpose of the power grab would be to enable the Federal government to borrow the nation's retirement accounts at near-zero rates of return. As things fall apart, Central States pursue all sorts of politically expedient measures to protect the State's power and the wealth of the political and financial Elites. Precedent won't matter; survival of the State and its Elites will trump every other consideration.  All this raises an interesting question: what would America look like at $5000 an ounce gold?

Italian stocks have fallen five weeks in a row ending this week down over 3%. The rest of European stocks (including Spain) ended either side of unchanged. A similar picture in Sovereign bonds where Italian 10Y spreads smashed 50bps wider on the week (and Portugal +25bps) while the rest ended +5-10bps only on the week. Today was a weak day overall with the most obvious place to see that weakness the plunge in EURUSD which broke below 1.30 for the first time since early December. Swiss 2Y rates ended negative, EUR-USD basis swaps were leaking worse, and Europe's VIX closed up around 1 vol at 21.5% (well off its highs of the week). Critically, we saw no BTFD appetite in Italian risk assets this week - even with the auction going well - which suggests that Italian banks are as stuffed as they can be and fast money is fleeing.

At 11:35ET, President Obama will address the nation over how well the sequestration discussions are going. Following this morning's rumor-driven ramp, and Boehner's very recent comments that "discussions are over", we await the President's calming tones or hell-fire conjuring warnings... the question is - how many park rangers will be standing behind the President?

Big name brand banks push 75% loss ponzi schemes, yet everybody still flocks to work, and do business, with them. The term Muppet is a compliment!

We saw what happened yesterday when the unknowable vote went exactly as everyone expected - the supposedly totally-priced-in equity market dumped. Today, the rumor is that a deal is on the cards and sure enough S&P 500 futures ramp almost 20 points. Interestingly, this ramp has stopped just as Gold and stocks have recoupled relative to each other on the week. Of course, once the rumor is flatly denied or rejected, we would expect little to no selling pressure in this broken market because there is always hope...

For the first time in two years, Italy's youth unemployment rate is now higher than Portugal's at a staggering 38.7% (which is where Greece was just two years ago). Apart from Germany (which fell from 8.0% to 7.9%), every other nation saw youth unemployment rates rise with a record 24.2% of European youth unemployed. Greece (59.4%) and Spain (55.5%) remain the most concerning as we noted in the past, austerity sounds straightforward as a policy, until the consequences bite in terms of social unrest.

Hedge fund icon Stanley Druckenmiller sat down with Bloomberg TV's Stephanie Ruhle, saying that he’s decided to speak out now because he sees "a storm coming, maybe bigger than the storm we had in 2008, 2010." His fear is that the ballooning costs of Social Security, Medicare and Medicaid (which with unfunded liabilities are as high as $211 trillion) will bankrupt the nation's youth an pose a much greater danger than the debt currently being debated in Congress.  He said, "While everybody is focusing on the here and now, there's a much, much bigger storm that's about to hit... I am not against seniors. What I am against is current seniors stealing from future seniors." While not exactly Maxine Waters' sequestration-based 170 million job loss, this concerning interview is must-see for his clarity and forthrightness from who is to blame, to the consequences of gridlock, our society's short-term thinking, and the concerning demographics the US faces.

The headlines will exclaim ISM Manufacturing beat expectations and reached its highest level since June 2011 (and that is true) but a scratch below the surface shows what really counts. New orders rose as did Production (all good) but the Employment sub-index dropped (what with all these new orders?) and Prices Paid surged to the highest in 20 months. Interestingly New Export Orders improved - though we are unclear (given the PMIs overnight) just who they are exporting to. In other news, the housing recovery is trotting along - apart from the biggest MoM plunge in construction spending in 19 months.

I look at two problems confronting Japan. Despite huge monetary easing and extended QE, deflation not inflation remains the dominant price characteristic. Many who think that QE drives currencies and creates inflation really need to come to grips with Japan. The other problem Japan is encountering is that foreign investors have responded to the policy signals by rotating out of Japanese bonds and into Japanese stocks. However, Japanese investors have not stepped up their export of savings to protect it. Instead over the past four weeks, Japanese investors have sold more foreign assets than any four week period for more than a decade.

Apple is under pressure this morning -1.8%. It has broken recent lows and is traversing the gap from 1/24/12 (meaning if you bought at any time after that you are now losing money - and notably relative to the market). These are 13-month lows - great buying opportunity we are assured by Topeka et al. Just think, an iWatch, iTV, iDunno...