Archive - Apr 11, 2013

If weak PC sales throughout 2012 were blamed on expectations for Windows 8, now it is the turn to blame weak PC sales on Windows 8 "lukewarm reception" disappointment. Just never the economy, and the fact that there just is no actual end demand. "Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome," is how IDC describes the utter collapse in PC Shipments in Q1 2013. Against a forecast -7.7%, the worldwide shipment of PCs collapsed -13.9% to a mere 76.3 million units. This is the fourth consecutive quarter of declines and is the worst quarter since records began in 1994. Interestingly, Europe did not do as bad as expected (though the consumer was worse) but the US and AsiaPac (Ex Japan) both plunged more than expected. Lenovo has almost closed the gap to HP as the world's leading supplier after HP's shipments fell a stunning 23% in Q1. HP opened -7.5% and MSFT -4.3%.

The Central Bank of Cyprus (CBC) said last night however that selling the island’s gold had not been on the table. “Such an issue has not been raised, has not been discussed and is not being discussed at the moment,” CBC spokeswoman Aliki Stylianou said. Stylianou added that sale of the gold was a matter handled exclusively by the CBC board. A spokesperson for the Central Bank of Cyprus told the Cyprus News Agency (CNA) that reports of the $523 million gold sale have not been, “raised, discussed or debated,” with the bank’s board of directors. The Central Bank of Cyprus denied the gold sale after reports on Reuters said that Cyprus officials had agreed to sell around 400 million euros in excess gold reserves to contribute to the country's bailout. Stylianou, the spokesperson for the Central Bank of Cyprus said that the gold sale was, “never discussed nor are there current or future plans to do so on the board’s agenda.” Reuters based its story on a draft report from the European Commission which assessed the nation's financing needs.

Despite reassurances from D-Boom that "Spain can once again be the engine of growth for Europe," the troubled nation appears to be going from bad to worse. House prices dropped 9.7% YoY in Q4 2012, its biggest drop on record, taking the price back to 2004 levels. This price pressure merely exacerbates the Spanish banking system's delinquent loans and drives up unemployment. But Spain is not alone, Slovenia, which many have their eye on for being the next bail-in, saw house prices slide 8.8% according to IBTimes. Perhaps there is a correlation between house price bubbles (cough US cough) and banking/sovereign collapse.

Following last month's surge in initial claims (subsequently revised even higher from 385K to 388K), the monthly edition in the series tumbled by 44K to 344K, below estimates of 360K, and which will be revised to 348K or so next month. The reason for the volatility given by the DOL is the "unwind of seasonal swings" which would make sense as the unadjusted number actually rose by 37,025, or about the amount the adjusted number dropped by. Continuing claims rose more than expected to 3,079K, from 3067K, however the number was revised so it can be palatable for MSM consumption, and as a result of the upward revision of February from 3063K to 3091K, it "declined." It is unclear how many if any states were estimate by the DOL in this month's edition of pick the noisy number. Most importantly, unlike the entire past two weeks, a good economic print is good for the market, not just a bad economic print.

As was reported in the previously presented Cypriot Debt Sustainability Analysis, which among other things had this stunner inside of it, things in Cyprus have gone from bad to worse in the brief span of a month. 35% worse to be exact, because this is how much the total bailout of Cyprus has grown by in a few shorts weeks, from €17 to €23 billion, which happened because just as we predicted the stealth outflow from banks was much worse (read bigger) than previously reported, leaving banks with a far bigger hole to plug. This is problematic because at least previously the bailout as a percentage of GDP was in the double digits. No longer so, as the latest (and soon to be re-revised higher) bailout figure now stands at over 120% of the country's €18.8 billion GDP (which itself is about to tumble following the collapse of the economy).

There was much hope in the feudal states of Europe that the monthly December drop in Greek unemployment - the first in years - was the beginning of the end for local misery. Alas, it appears the Greek statistics office leaarned a thing or two from the BLS and it was all seasonal adjustments. As reported earlier today, things just got much worse again, with January unemployment surging by 1.7% in one month to a new all time record high 27.2%. More importantly, the number of employed people in Greece, which dropped to a new record low of 3.617,771 compared to 3,888,400 a year ago (and down 11,653 from December), is now nearly as much as the entire inactive population at 3,346,423 and far below the ranks of the unemployed (1,348,694 - an all time high as well) and inactive. Spread by gender, the unemployment rate for males was 23.9%, while a record 31.4% of eligible women had no job in January. Finally, youth unemployment once again hit a record high 59.3% in January, even as unemployment among those aged 65-74 has soared from 0.9% in 2008 to 6.9% in 2013.

A

A discussion of what investors who are being displaced by BOJ purchases are going to do. It may not be as simple as rushing to buy foreign assets that people are anticipating.

• Obama to report to his bosses today: Obama Meets With Blankfein, Dimon and Moynihan Today (BBG)
• 2007 is here all over again: Seeking Relief, Banks Shift Risk to Murkier Corners (NYT)
• Kuroda Calls BOJ Inflation Target 'Flexible' (WSJ)
• Lagarde warns over three-speed world (FT)
• N. Korea’s Retro Propaganda Calls U.S. Boiled Pumpkin (BBG)
• Luxembourg To Ease Bank Secrecy Rule, Share Data In 2015 (BBG)
• Bank of Korea Keeps Policy Steady (WSJ)
• BOE Stimulus Dilemma Persists as Inflation Seen Higher (BBG)
• EU Sounds Alarm on Spain (WSJ)
• Qatar gives Egypt $3bn aid package (FT)
• RBNZ Says Deposit Insurance May Increase Risk of Bank Failure (BBG)
• Plosser Calls for Reducing QE Pace Citing Gains in Labor Market (BBG)
• Obama budget aims to kick start deficit-reduction talks (Reuters)

Futures green? Check. Overnight ramp in either the EURUSD or USDJPY carry funding pair? Check? Lack of good economic news and plethora of economic misses? Check. In short, all the ingredients for continued New Normal record highs, driven only by the central bank liquidity tsunami are here. The weakness started with Australia's stunning unemployment jump overnight which saw a 36,100 drop in jobs on just 7,500 expected. A miss in Chinese auto sales was next, with 1.59MM cars sole in March, below the 1.596 expected, and even despite the surge in M2 and loan data, the Shanghai Composite closed down once again, dropping 0.29% to 2219.6. Nikkei continued its deranged liquidity-fueled ways, rising 1.96% even as Kuroda is starting to become quite concerned about the rapid move in the Yen, saying he "may adjust policy before the 2% target is reached if the economy and other indicators are growing rapidly." They aren't, and won't be, but if the Nikkei225 is confused for the economy, he just may push on the breaks which would send the only reason for the latest rally, the USDJPY tumbling. Finally, looking at Europe, Italy sold well less than the maximum €6 billion targeted in 2016, 2017 and 2028 bonds, which dented some of the enthusiasm for Italian paper although with Japanese money desperate to be parked somewhere, it will continue going into European and all other fixed income, distorting market signals for a long time. In short, expect the central-bank risk levitation to continue as all the deteriorating fundamentals and reality are ignored once more, and hopium and P/E multiple expansion are the only story in town.