Archive - Jan 2014

Did the Amazon bubble just pop? Unless Jeff Bezos announces he is working on a space station that just may be the case, because while the company missed both the top and bottom line, and guided lower  - traditionally a perfect trifecta to send the stock soaring afterhours - the stock is plunging some 10% after hours, even if it now has a true bargain-basement LTM PE of 672x.

UPDATE: The miss by GOOG and AMZN (accounting for 13% of Nasdaq market cap) is pushing indices lower after hours...

The S&P 500 And Russell bounced once again off post-December-Taper unchanged levels today but the Dow remains flat from 12/18 as the Nasdaq (led by exuberance in momo social media stocks as AAPL closed <$500) jumped the most in almost 4 months (though remains -1% on the year). The rally in stocks was simply remarkable for its tick-for-tick tracking of USDJPY and EM FX and the S&P was unable to make significant progress past its pre-Turkish-rate-hike levels. Treasuries sold off but remain 3-5bps lower in yield than when Turkey was "fixed". The USD rallied on EUR and JPY weakness (but was almost entirely dead once Europe closed). Precious metals were manhandled instantaneously lower at 8amET then spent the rest of the day trying to recover. Stocks did tumble into the close to recouple with USDJPY but bad news was great news it seems...(for now)

“J.C. Penney has a lot of levers they can pull to get the customers back," Bill Miller gleefully told a Schwab conference in November as he bought JCP bonds. Spreads on those bonds have risen over 200bps since then. However, it was the embattled Legg Mason guru's appearance on CNBC in mid-December that sparked re-exuberance as everyone jumped on his "undervalued" bandwagon and lifted the stock into year-end. Today, back under $6, JCPenney is once again at fresh 33 year lows. Those that followed Miller are down over 25% on their 'investment'.

With President Obama’s State of the Union Address and its associated campaign prominently featuring increased minimum wage, tired arguments for raising the minimum wage are being once again retreaded. Unfortunately, they compound failures of logic, measurement and evidence.

When your manufacturing industry unions kidnap their business leaders, taxes reach extremes of duress, industrial production limps lower and unemployment hits record highs; it is hardly surprising that the world is a little nervous of piling its hard-printed cash into your country. But in the case of France, data reported by the UN shows the biggest collapse in foreign direct investment ever. Figaro reports that FDI fell to EUR 5.7 billion - a drop of over 75% year-over-year - and the lowest since 1987. Ironically, Spain's FDI rose 37% and Germany's quadrupled... Is France an Emerging Market now?

While everyone focuses on the turmoiling in Emerging Markets, a good, old standby is back - the periodic "debt ceiling" IMAX tragicomedy.  Recall that the debt limit, which has been suspended since October 17, is scheduled to be reinstated on February 8. At that time, the nation will be operating right at the debt limit, and the Treasury Department will use extraordinary measures to temporarily issue additional public debt to meet federal financial obligations as it always does during episodes of political posturing that without fail take place until the 11th hour, 59th minute, and 59th second. However, unlike last year when there was a 5 month interval between hitting the debt ceiling, and the day the Treasury's funds fully ran out - the infamous X Date - this time the emergency measures will only last a limited time. What this means when looking at a calendar, is that the Treasury may not have sufficient cash-on-hand to cover all obligations due as soon as February 28.

...Zimbabwe!

(Just yesterday, the government there announced that the Chinese renminbi (among other currencies) will become legal tender in Zimbabwe.)

This morning's utter collapse in pending home sales - a 6-sigma miss by 'economists' unaware that it was cold in December - has been ushered away on the back of "weather" reasoning. However, a glance at the chart below confirms this is total bullshit. As Goldman Sachs admits "broad-based declines by region suggest that colder-than-average weather was likely not the primary driver."

You didn't think the US could at first slowly, and then all of a sudden, expropriate retirement accounts and invest them in the "no risk, guaranteed return" MyRA Ponzi scheme introduced by Obama during the State of the Union address without lots of behavior-modifying indoctrination in the "friendly press" first now did you? Sure enough, here is the first major propaganda salvo, coming from none other than the US Treasury Secretary, Jack Lew, which will be published tomorrow across the McClatchy media empire.

The IMF's woeful forecasting record, chronicled extensively before, has just taken yet another hit, following the latest flip flop on emerging markets. Try to spot the common theme of these assessments by the IMF.

Here's the global financial crisis in a nutshell: access to easy credit can solve a temporary liquidity problem, but it can't increase the value of collateral or generate income. Once the liquidity typhoon dies down, the insolvent pigs will plummet back to earth. That's what we're seeing in the periphery economies and shadow banking systems around the world.

Following NY Rep. Michael Grimm's apology yesterday for threatening to break a reporter in half and throw him off a balcony, none other than former NY Rep. Anthony Weiner had some advice for the cantakerous congressman. Wring in the New York Daily News, Weiner began: "First, if you don’t want to talk about a scandal in which you’re embroiled, whatever that scandal may be, maybe it’s best that you don’t do interviews for a while..." but the snark and irony surges from there.

EM is fixed? Fed will un-Taper? Earnings will recover? Money on the sidelines? We've heard it all this morning as why stocks are recovering modestly... the real fun-durr-mental reason, of course, is in the chart below: behold the US&PJPY or, alternatively, USDSPY.

Hardly as memorable as yesterday's historic launch of Floating Rate Notes, today's 5 year auction in which the Treasury sold $35 billion in paper was a snoozer, and despite fears of a blow out following recent concerns about demand in the bucket following recent revulsion to 5 Years, priced at 1.572%, tailing the When Issued  1.57% modestly, however with a lower yield than last month's 1.6. The Bid to Cover also posted a modest increase from December's 2.42 up to 2.59, even if the general BTC trend continues to be one broadly lower. Within the internals the only notable item was the spike in Indirects, which took down 44.6% of the allocation, up from 24.8%, leaving 10.7% to the Directs and 44.7% to Dealers. Overall, nothing to write home about.

Now that Twitter is officially the second coming of Yahoo Finance message boards, the inundation with offers from clueless hacks who have nothing better to do than sell you $29.95 newsletters with guaranteed get rich quick schemes (one has to be so grateful for this boundless supply of noble humanitarians who would rather see you get rich than follow their own advice, and invest with their own capital...), even more guaranteed than Obama's MyRA ponzi scheme, has hit off the charts levels. However, there is some hope this is ending, and the regulators, as usual 3-5 years behind the curve - are finally be cracking down on these self-acclaimed financial Nostradami following an announcement today that the SEC "charged a New York-based money manager and his firm with making false claims through Twitter, newsletters, and other communications about the success of their investment advice and a mutual fund they manage."