Archive - Jan 2014

Effective April 1st, Target announced to day that it would no longer offer healthcare coverage to its part-time employees. As The Hill reports, Target's HR executives 'spun' the decision as good for the employees..."by offering them insurance, we could actually disqualify many of them from being eligible for newly available subsidies that could reduce their overall health insurance expense." The company will provide a $500 cash payment to "minimize disruption," and specifically calls out Obamacare as "providing new options... that we believe our part-time members may prefer."Of course, just for good measure, Target is cutting 475 jobs and chooing not to fill a further 700 open positions - again, we presume, to minimize disruption (to their bottom line).

There was a time in the financial industry when the many wouldn't suffer for the sins of the few (although taxpayers were certainly excluded from this maxim). Well, for the "many" who work at JPMorgan, that is no longer the case because as Reuters reports, JPM employees can forget getting a pay raise in 2013 (although with sub-2% annual inflation as calculated by the BLS one wonders just why anyone should be getting a raise: just hand out an edible iPad or two and the COLA is fixed). The reason for the lack of a raise: "the bank's massive legal bills" - bills which incidentally were incurred when a select few JPM employees cheated and defrauded the system - illegally - in order to procure massive year end bonuses, most if not all of which were not clawed back, and subsequently were caught (one can only imagine how many of the "few" are still at the bank, doing manipulation and defrauding as usual. And now it is everyone else's turn to pay because the bank lacked the most elementary supervision of its criminal employees (long since fired) and raked up roughly $20 billion in litigation and legal settlement charges.

Citi's credit group is bullish; but, as they admit, for all the wrong reasons. Bullish, because they still believe that the extraordinary liquidity environment which has dominated the last four years will remain in place this year (despite tapering) and for the wrong reasons because aside from their doubts about the foundations of much of the economic recovery itself, nearly all the factors that they would normally base their view on the markets on seem to be pulling in the opposite direction. In their own words, "everything is expensive; and the market is driven purely by a variant of the Greater Fool's Theory."

Dedicated readers of The Wall Street Journal have recently been offered many dire warnings about a clear and present danger that is stalking the global economy. They are not referring to a possible looming stock or real estate bubble. Nor are they talking about other usual suspects such as global warming, peak oil, the Arab Spring, sovereign defaults, the breakup of the euro, Miley Cyrus, a nuclear Iran, or Obamacare. Instead they are warning about the horror that could result from falling prices, otherwise known as deflation. Get the kids into the basement Mom... they just marked down Cheerios!

NFLX is soaring after hours to fresh all time highs, not so much due to some blockbuster numbers, but because the company reported results that beat Wall Street's lowballed estimates once again. These were as follows:

• Revenue of $1.175 billion; EPS of $0.79, or $48.4 million, beating expectations of $0.66; Domestic net adds were 2.33 million, vs estimate 2.05 million, leaving a total of 33.4 million subs at the end of the quarter, and 31.7 million paid subs.

In terms of the company's business model, the things are as they were: NFLX is using the cash generated from its doomed, runoff legacy DVD rental business, which in Q4 generated $110MM of the total profit, or half of total, and is using that to fund its international expansion. So far, NFLX has 10.9 million total international streaming subs, which resulted in losses of $57.2 million. It remains unclear what the breakeven on this international growth strategy is in terms of subs, although NFLX has so far burned $663 million on foreign expansion in the past two years, offset by $991 million in profits at its domestic streaming operations. Does this justify a 300x P/E? For now the market's answer is a resounding yes, having sent the stock higher by $55 in the after hours, up 17%!

The Dow Transports has outperformed the Industrials by over 3% year-to-date (+1.9% vs -1.1%) as both the Trannies and Russell pressed new record highs today (as the Dow and S&P lagged on bigger-cap earnings disappointments). Treasuries lost ground with the front-end worst (5Y +6bps) but 30Y was unch leading to a significant further flattening in the curve to its 2nd flattest close in 17 months. The USD ended the day (and week so far) unchanged as a big drop in CAD was offset by a rally in AUD and GBP. Gold & silver dribbled lower all day and were smacked into the close; with copper flat to slightly lower on the day as WTI surged towards $97 (narrowing the spread to Brent to 1-month lows). It was recent business-as-usual in VIX as it leaked higher testing 13% once again and credit markets remain divergent from stocks (though the relative safety of investment grade credit was bid this afternoon). For those keeping track, today's market was brought to you by the letters USDJPY and the number 17.62.

The reason why today's move is largely meaningless and purely optical, is because there is still an 85% differential between the official rate, and what one can get for a dollar on the black market. Which as the chart below shows is substantially higher, and at last check was 78.38 Bolivars per dollar. Said otherwise, the brand new official exchange rate, which will soon be implemented for everyone, is still 590% higher than the real clearing price of the currency on the black market. Curious why the currency is crashing so fast? Perhaps ask the 50% (and rising) annual inflation in the socialist paradise.

Like being sworn at? Then these are the jobs for you. As the myth of a manufacturing renaissance in America remains just that, the Services industries bear the brunt of an ever-increasingly entitle public's needs. As IB Times' Lisa Mahapatra notes, according to a study by Marchex that examined rates of crusing across 20 service industries, Satellite TV providers's customer service agents get the most abuse.

A United Nation study has reported that about 206 million people are now unemployed. This is the cost of socialism taxing the rich so there is no job creation with nearly half of that number amounting to youth under 25 years old. The economy on a global scale is terribly weak. This UN annual report released Monday by the International Labour Organisation (ILO) is shocking and politicians cannot see what they are doing to the future.

Simple: it reassigned, or fired, all the investigators and police officers.

With the world awash in liquidity and yet every one of the world's leaders spreading the "ogre of deflation" myth to ensure the administration of moar free money; we thought it interesting that with government identified inflation statistics entirely benign that the prices of US cattle and milk have reached record highs (and show no sign of stopping as Cattle is limit-up today again). The rise has been almost non-stop beginning in early 2009... now what else began to rise in an almost straight line then?

No matter how centrally-planned and meticulously managed the US economy/market has become, the policy-setting powers-that-be have yet to be able to control one thing... mother nature...

Today the ante was just upped once more, as the 4 Week Bill Bid to Cover rose yet again, from 6.4x to 6.6x. Logically, this print is now the latest and greatest highest Bid to Cover since December 2011, and the question remains: why the scramble for safety?

The current Administration has taken on the "war on poverty" as its primary battle ground going into the mid-term elections later this year.  As NFIB's Bill Dunkleberg recently noted, "since it is an election year, the main theme will be addressing the disparities in income and wealth (i.e. tax the rich and increase welfare programs) rather than promoting policies that would create jobs and raise incomes in a growing economy. This year, policy will be all about votes." This isn't a new fight.  As Robert Rector stated recently - that particular war has been less than successful.

"Fifty years and $20 trillion later, LBJ's goal to help the poor become self-supporting has failed."

However, while the Administration will use the argument to garner votes in an election year, the most interesting aspect about the income inequality debate is that it is the very policies of the current Administration that is fueling the income shift. 

For gold to hit a new all time high adjusted for inflation, it would have to clear at least $2,193 per ounce. If you go by 1970 dollars (when gold started its last bull market) it’d have to hit $4,666 per ounce.