Archive - Jan 27, 2014

With food-stamp recipients dominated by 'working age Americans' for the first time in history; and 1.4 million having recently dropped off the benefits rolls, we suspect, extremely sadly, that the following breakdown of homelessness in America is about to get worse. Los Angeles has by far the greatest number of unsheltered homeless in America and New York City the largest population - at around 65,000 - of homeless people in the US. One wonders at the State of the Union tomorrow...

The fact that the phrase sounds antique should warn us of the scale of our folly. We have lost, given away, pawned the power we once claimed. We have ceased to be who we once were. Or at least who we claimed and hoped to be – The People. Now who are we? The Consumer? The Unemployed. The Unwanted? ”We, the Unwanted” does not have the same ring about it does it? And yet that is what we are fast becoming. It is time to chose. Sit in front of your television or computer screen and let it sooth you, until one day you too find you have have become one of the unheard, unlamented, Unwanted. Or reach out to others and grasp hold. It is surely time that we re-assert what the phrase “We, The People” once meant.

"I don’t think we’re going to get enough young people signing up to make this bill work as it was intended to financially," warned Democrat Virginia Representative Jim Moran. The Democrat, as The Daily Caller reports, seemingly daring to break ranks with his peers, added that he understood Millennial lack of signing up as "frankly, there’s some legitimacy to their concern because the government spends about $7 for the elderly for every $1 it spends on the young." This stunning declaration, of course, fits with the narratives that most mathematically-capable human beings can comprehend but starkly refutes the hopes and dreams of the President's healthcare policy... The reason that Jim Moran could be so honest... after 12 terms of toeing the lying line, he has announced his retirement.

Backdrops conductive to crises can drag on for so long – sometimes seemingly forever - as if they’re moving in ultra-slow motion. Invariably, they lull most to sleep. Better yet, such environments even work to embolden the optimists. This is especially the case when policy measures are aggressively employed along the way, repeatedly holding the forces of crisis at bay. In the face of mounting risk, heightened risk-taking and leveraging often work only to exacerbate underlying fragilities. But eventually a critical juncture arrives where newfound momentum has things unwinding at a more frenetic pace. It is the nature of such things that most everyone gets caught totally unprepared. Now, Bubbles are faltering right and left - and fearful “money” is heading for the (closing?) exits. And, as the global pool of speculative finance reverses course, the scale of economic maladjustment and financial system impairment begins to come into clearer focus. It’s time for the marketplace to remove the beer goggles.

Following his WSJ letter comparing the "progressive war on the 1% in America" to fascist Nazi Germany persecution of the Jews and "just as Kristallnacht was unthinkable in 1930, the descendant 'progressive' radicalism in American thinking is unthinkable now", Tom Perkins appeared on Bloomberg TV to explain himself. His first step was to apologize for the analogy but not the message that "the creative 1% is being threatened." The interview with Emily Chang is fascinating and wends it way from Rolexs, yachts, and underwater airplanes to trailer parks, and from being disconnected with reality to implying Krugman's craziness. However, Perkins sums his message up thus:"the solution is less interference, lower taxes and let the rich do what the rich do - that is get richer... and they will bring everyone else along with them when the system is working." It appears the 'system' needs a different final solution.

There appears to be a somewhat interesting controversy afoot in explaining the reason for the emerging markets panic and in establishing a solution for it. The approach of Gavekal would simply like to keep the Ponzi scheme of past years rolling forward.

Put down that prom dress. It seems, as ConvergEx's Nick Colas notes, Retail isn’t the only service moving from the brick and mortar world to the virtual one. Online high schools have been popping up (on the internet, of course) more and more often in the last few years: even Stanford University started a program in 2006. Of the 22 million high-school aged (14-18) population in the US, about 1 million are estimated to be enrolled in a class or a full-time high school online. That said, virtual schools are unlikely to replace traditional classrooms anytime soon: they’re still used mostly for supplemental or make-up courses rather than a complete education. But, Colas adds hopefully, the technology points in a positive direction: free high school education means more high school diplomas, which could lead to a higher labor force participation rate, lower unemployment, and higher earnings for those who might have otherwise dropped out.

While the stats of the union remain unremarkable at best, it would appear that despite the rancor in Washington, President Obama will get his way "whatever it takes." As the WSJ reports, the State of the Union address Tuesday night will emphasize his intention to use unilateral presidential authority — bypassing Congress when necessary — to an extent not seen in his previous State of the Union speeches. "We need to show the American people that we can get something done," Dan Pfeiffer, a senior White House adviser, told CNN; it seems no matter how totalitarian and unconstitutional it would appear to be.

That margin debt just soared to new all time highs in december should come as no surprise to anyone. However what may come as a shock to many is that the other key metric provided by the NYSE - total net free credit - also known as investor net worth (calculated as Free Credit Cash plus Credit Balances in Margin Accounts less Margin Debt) just dropped to a whopping $148 billion, double where it was in February 2013, and double where it was during the peak of the last stock (and credit and housing) bubble, when it rose to a then-all time high of $79 billion in June 2007. It was all downhill from there.

We hear, read and listen day in and day out that it’s the Dollar that’s dead, that’s it’s the USA that will be knocked off the top of the roost and come hurtling to the ground with its neck being throttled by 1.364 billion Chinese hoards.

There are two major factors that have emerged in the last five years that have sparked a surge in LNG investments. First is the shale gas “revolution” in the United States, which allowed the U.S. to vault to the top spot in the world for natural gas production. This caused prices to crater to below $2 per million Btu (MMBTu) in 2012, down from their 2008 highs above $10/MMBtu. Natural gas became significantly cheaper in the U.S. than nearly everywhere else in the world.  The second major event that opened the floodgates for investment in new LNG capacity is the Fukushima nuclear crisis in Japan. Already the largest importer of LNG in the world before the triple meltdown in March 2011, Japan had to ratchet up LNG imports to make up for the power shortfall when it shut nearly all of its 49 gigawatts of nuclear capacity. In 2012, Japan accounted for 37% of total global LNG demand. The future of LNG may indeed be bright, especially when considering that global energy demand has nowhere to go but up. But, investors should be aware of the very large threat that Japanese nuclear reactors present to upstart LNG projects.

As the nation anxiously awaits President Obama's State of the Union speech tomorrow, we thought a brief reflection on the nation's view of him and his government was worthwhile. A glance at Gallup's front page tells us all we need to know. A mere 17% of respondents say their representatives deserve re-election; Obama's approval ratings are among the most polarized on record; 65% are unsaitsified with how government works; and, at 40%, the President's overall approval rating is practically at record lows. But, apart from that, we are sure the state of the union will be strong and it's nothing but up from here...

With emerging markets in panic mode, investors are bound to be reminded of the enduring observation, first made by a 19th century British businessman named John Mills, that: “Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal in hopelessly unproductive works.” With that in mind, investors seem happy to link the ongoing emerging market sell-off to either a) China’s large capital misallocation triggered by the 2008-11 credit boom or b) the Federal Reserve’s promise to start tapering last May, followed up now by the real thing. But could there perhaps be another explanation?

So much for the only silver lining in Q4 and Nasdaq leadership from AAPL. Moments ago AAPL reported results which beats on the top and bottom-line, reportined revenues of $57.6 billion in line with the expected $57.5 billion, and EPS beating modestly at $14.50 vs Exp. $14.07 mostly thank to the retirement of 46 million diluted shares from a year ago. However the good news ended here, with the one thing the market was focusing on - iPhone sales - missing badly, as the company only sold 51 million iPhones in the quarter of the 5S release, compared to expectations of 54.7 million. Additionally, Apple also guided to lower revenues than the street had expected, and is now seeing $42-44 billion in the next quarter compared to consensus estimates of $46.1 billion and for all those calling for the demise of the US consumer - you may be right: AAPL Americas revenue declined by 1% from a year ago, when AAPL also had a new product launch. Is AAPL's largest market starting to say "meh"?

During the first minute of trading on January 27, 2014 there were wild price swings in at least 11 stocks: symbols BKH, GEB, HAYN, UBSH, WSBC, FLIC, EFF, GABC, BBOX, SP and TPZ. We know this because about 90 minutes later, Nasdaq canceled trades in these symbols citing the clearly erroneous transaction rule 11890(b). However, as Nanex shows in its usual great (and imperceptible to the SEC) detail, these trades appear anything but erroneous... we can only imagine who the market-maker algo belonged to that the Nasdaq canceled all of these trades...Goldman?