Archive - Apr 2013

Succinctly summarizing the positive and negative news, data, and market events of the week...

This week saw the largest plunge in US macro data in 11 weeks pushing us back towards the lowest levels since August. Fundamentals (macro and also micro- earnings) did have some impact - with stocks having their worst week in 5 months (but the S&P managed to bounce off its 50DMA) and despite carnage in its largest components, the Dow gained 10 points (of which -150 points were from IBM, GE, and MCD). Today saw a small recovery bounce amid low volumes driven by JPY weakness (testing back up toward 100 post G-20 silliness) and VIX compression as macro overlays were lifted and positions reduced. Gold gained on the day but silver lagged ending the week -5.5% and -11% respectively, with the USD gaining 0.77% on the week (as JPY weakened almost 400 pips off its Monday night highs). Treasuries traded in a 4-6bps range all week (and flow was quiet) but the long-end ended lower in yield by 2-4bps.

"Perhaps more to the point for TBTF, if a SIFI does fail I have little doubt that private investors will in fact bear the losses--even if this leads to an outcome that is messier and more costly to society than we would ideally like. Dodd-Frank is very clear in saying that the Federal Reserve and other regulators cannot use their emergency authorities to bail out an individual failing institution. And as a member of the Board, I am committed to following both the letter and the spirit of the law."

Gold doesn’t blow stock bubbles. It doesn’t manipulate data. Gold doesn’t control interest rates to benefit the big banks at the expense of everyone else. Gold doesn’t lie under oath, nor does it channel the public’s money into foreign banks.

The last five days in and around Boston have been dismal and chaotic. From the real-time video of the horror to the news media one-upmanship and from bombing to manhunt, this infographic clarifies how far we have come...

Participants don’t see them. Outsiders shake their heads, until they get sucked in. Central banks create them, but deny their existence. Risks no longer exist. Take natural gas.

Two days in Washington D.C. kept caterers busy but produced a 2,126 word communique long on slogans and short on anything actionable. The G-20 statement (below) can be boiled down simply, as we tweeted,

G-20 statement: "if we all lie, same as nobody lying"

— zerohedge (@zerohedge) April 19, 2013

And just to add one more embarrassing detail for them, while section 4 discusses "Japan's recent policy actions," not only does Canada's finance minister James Flaherty believe they "didn't discuss the Japanese Yen," but Japan's Kuroda believes, comments on 'misalignments', "were not meant for the BoJ."

So far, 91 companies have reported 1Q results (28% of total S&P 500 market capitalization). 37% of companies reporting have beaten earnings estimates (below the historical average of 47%) and 13% have missed estimates (vs. average of 15%). The average EPS surprise has been 3.4%, below the 4.8% historical average. Excluding Financials, there are similar positive surprises (37%) and similar negative surprises (13%). Excluding Financials and Utilities, 21% of companies reporting have beaten sales estimates (below the historical average of 38%) and 24% have missed estimates (vs. average of 18%). The average revenue surprise has been -0.1%, below the 1.3% historical average. In short, things are not going according to plan - though we assume this just means the Q4-fantasy-hockey-stick explosion of revenues, earnings, and margins will just get bigger.

From Chinese Gold Exchange...

Hong Kong’s Chinese Gold & Silver Exchange Society has been in operations for over a century, and it’s President Haywood Cheung was interviewed by Bloomberg news earlier today.  Whoever orchestrated the attack on gold and silver in the last week or so has gravely miscalculated, since the response to the drop has been surging demand for physical gold and silver.  While I tend to be skeptical when I hear about silver shortages since these reports have been so exaggerated in the past, the lack of silver coin availability and premiums are the most extreme I have seen since the financial and economic meltdown of 2008.  Now we discover that the Chinese Gold & Silver Exchange Society has essentially sold out of gold bullion, and must wait until Wednesday for shipments to arrive from Switzerland and London.

Back in 1980, just as the gold price blasted upwards past $800/oz, buyers reportedly lined up in droves at various bullion dealers to participate in the rally. Investment analyst Jay Taylor writes, “I remember 1980… there was panic buying of gold by people in the streets of New York City. They were lined up around the block to buy gold and Krugerrands at that time.” That flurry of buying ended up representing a classic top. As gold failed to move higher, the speculative frenzy soon reversed into a despondency that dragged gold into a twenty year bear cycle. For those investors who bought at the top, it was a hard lesson learned.

As another woeful week wends to a weary close... what we got to look forward to? Although markets appeared to be shooting off in every direction, we do expect we'll see clearer direction soon. Despite the noisy criticism earlier this week of Yen "competitive" devaluation, the G20 meeting said nothing. We suspect certain individuals were quietly sat in the comfy chair, had global reality gently explained to them with the aid of some rusty dental equipment, were slapped around a bit and told to shut it. As long as Japan can sign the pledge on “no competitive depreciation” without giggling we’ll be ok. We do suspect the warmest circle of financial hell is being reserved for those populist European politicians who've tried to appeal to voters with efforts to stem the financial tides, and punished markets for being markets.

Chechen president Ramzan Kadyrov: "Tragic events took place in Boston. As a result of the blast people were killed. Previously, we expressed out condolences to the people of the city, and the people of America. Today, as reported by the media, during his arrest attempt, a Tsarnaev was killed. It would be logical, for him to be detained and investigated, and all the circumstances and degrees of his guilt uncovered. Apparently, the special services needed a result at any cost to calm down society. Any attempts to make a connection between Chechnya and Tsarnaevs, even if they are guilty, are in vain. They grew up in the United States, their attitudes and beliefs were formed there. It is necessary to seek the roots of evil in America. The whole world should fight terrorism. We know thisd better than anyone else. We wish a recovery to all the victims and share the Americans' sense of sorrow."

Simplicity requires eliminating virtually everything we are "processed" to want and need for personhood, and accepting the intrinsic complexity of meaningful projects. There are two basic ways to reduce the stress described in yesterday's entry, The Silent Epidemic in a Broken, Deranged System: Stress: simplify one's life and take control of one's life. The two are not mutually exclusive, of course, but one does not necessarily lead to the other.