Archive - Jul 8, 2013

There was some confusion yesterday when news hit that the SecState's wife, Theresa Heinz Kerry, was hospitalized. This came shortly after yet another fiasco involving Kerry who was caught in a rejection, then admission snafu, that while Egypt was burning he was on his yacht not one but two days in a row. We now get some clarity as to the affliction affecting the billionaire heiress:

HEINZ KERRY SAID TO HAVE BEEN HOSPITALIZED AFTER SEIZURE SIGNS
HEINZ KERRY'S DOCTORS HAVEN'T MADE EXACT DIAGNOSIS, PERSON SAYS
HEINZ KERRY'S CONDITION DISCUSSED BY PERSON CLOSE TO FAMILY

Japanese investors are not simply selling foreign assets. They are selling US assets.

Wondering how the blow out in interest rates is impacting commercial banks, which just happen to have substantial duration exposure in the form of various Treasury and MBS securities, not to mention loans, structured products and of course, trillions in IR swap, derivatives and futures? Wonder no more: the Fed's weekly H.8 statement, and specifically the "Net unrealized gains (losses) on available-for-sale securities" of commercial banks in the US gives a glimpse into the pounding that banks are currently experiencing. In short: a bloodbath.

Just when the jawboning from Europe is reaching its climax that Portugal is fixed again, Greece is fixed, and the core is showing green shoots from the near-depression, Germany (the corest of the core) comes out with its worst exports data since 2009. While imports remained stable - suggesting domestic demand is sustained for now - YoY export growth collapsed 3.2%, the worst tumble since November 2009 "illustrating that Germany's economy still has difficulties shifting into higher gear." The details are a horror-story. Exports to the euro-zone, where 40% of Germany's exports are sent, fell by a stunning 9.6% (while exports to the rest of the world dropped 1.6%). To add to the misery for the 'things are getting better' crowd, Germany's industrial production data missed expectations are dropped back into the negative YoY following the 'hope' inspiring positive YoY print in April that signaled all-is-well. Of course, none of that matters, the DAX is up a stunning 2.4% today on the back of this dismal-is-great data. So much for those green shoots...

a simple trend line approach may be the best option for navigating a market that has lots of cross currents

It seems that US investors has become so institutionalized in the new normal world of government bailouts and handouts that when the central planners make a decision that is not instantly accretive to the equity shareholders' bottom-line, the first instinct is to sue them. Following the conservatorship that was forced upon FNM/FRE in 2008, which required the companies to pay a quarterly dividend of 10% on the government's near-80% stake (and obviously implicitly benefited the tag-along bailout riders), the decision in 2012 to change the bailout terms to instead hand over most of their profits to the government (since they moved into profitability - thanks to a Fed-sponsored MBS market). This action "impaired shareholder value" according to Perry Capital - who, Reuters reports, is suing the government, noting "investors had every right to expect these rules to be followed." Indeed, just as the 'rules' have been followed in every bailout that has occurred since 2007.

For hedge funds, June was the cruelest month. 

Ambulances are running everywhere, don't know where to, cannot access what sounds like a war zone.

— Mohannad Sabry (@mmsabry) July 8, 2013

Not much in terms of economic data but lots of corporate news with the official Q2 earnings season kick off, as well as a plethora of Fed speakers which in a centrally-planned world, is all that matters.

• Greece's Economic Future 'Uncertain,' Creditors Say (WSJ)
• Secret Court's Redefinition of 'Relevant' Empowered Vast NSA Data-Gathering (WSJ)
• Thomson Reuters Halts Early Peeks At Consumer Data (WSJ)
• Larry Summers Circles as Fed Opening Looms (WSJ)
• S&P to Argue Puffery Defense in First Courtroom Test (BBG)
• Geithner joins top table of public speakers with lucrative appearances (FT)
• Losing $317 Billion Makes U.S. Debt Safer for Mizuho to HSBC (BBG)
• Pilot Error Eyed in San Francisco Plane Crash  (WSJ)
• Investment group sues U.S. over Fannie, Freddie bailout terms (Reuters)
• Egypt officials 'order closure of Islamist party HQ' (AFP)
• Heinz Kerry Transferred to Boston Hospital for Treatment (BBG) - a boating accident?

The central bank "reason" goal-seeked for today's US overnight ramp - because it sure wasn't fundamentals with both German exports (-2.4%, Exp. +0.1%) and Industrial Production (-1.0%, Exp. -0.5%) missing - was the weekend Spiegel story that despite the unanimous decision by the ECB last week to keep rates unchanged, ECB chief economist Peter Praet and Mario Draghi himself had insisted on a 25 bps rate cut. They were, however, stopped by seven council members from the northern euro states, including Weidmann, Knot and Asmussen. As a result, Draghi was steamrolled in the final vote. Yet somehow this is bullish for risk, pushing equity futures higher and peripheral debt spreads lower, even as the EURUSD has drifted higher. Of course, one can't have an even more dovish ECB as a risk on catalyst alongside a rising Euro, but who cares about news, fundamentals, or logic at this point. All that matters is that US futures are higher, which was especially needed following yet another rout in the Shanghai Composite which dropped 2.44% back under 2,000 following news that China's Finance Ministry has told central government agencies to cut expenditures by 5% this year, and a 1.4% drop in the PenNikkeiStock225 on a weaker USDJPY. Remember: all is well in the global economy (whose forecast is about to be cut by the IMF) if the US is generating a record number of part-time jobs.