Archive - Apr 25, 2014

Since Fed's Tarullo uttered those ugly words that "valuations are stretched," US growthy momentum stocks have been hammered. The rally of the last few days was met with exuberant BTFWWIII proclamations from various talking-heads as all the problems in the world were fixed and leveraged long high-beta was once again the no-miss trade du jour... until today...

Fukushima Didn’t Just Suffer 3 Meltdowns … It Also Suffered Melt-THROUGHS and Melt-OUTS

Look closely at this photo. There are 2 snipers from the Ukrainian army near the Ukraine army base around 20km from pro-Russian held Slovyansk.

Well that didn't take long... for now USDJPY 102 is the US equity market's best friend. Only the S&P 500 is green for the week now as Nasdaq's gains from AAPL/FB are wiped away by the 10% plunge in AMZN.

After 5 years in a row of April preliminary-to-final upward revisions, 2014 did not disappoint as the flash 83.0 was upgraded to 84.1 final and near the highest since the crisis. This is the biggest beat since November as current conditions and outlook both rose as did short-term inflation expectations. Current Conditions is at its highest since July 2007 - mission accomplished.

Markit's US Services PMI dropped and missed expectations input and output prices soared, employment tumbled, and business activity slowed. Staffing levels increaed at the slowest pace since June 2012 and the latest expansion of new business was only slightly faster than the 18-month low seen in March, and weaker than recorded at any time in 2013. So much for that post-weather pent-up-demand surge...

CBO and SSA disagree on the most basic definition of financial health - Net Cash Flow

Last Thursday, when to much fanfare, the latest diplomatic iteration of the Ukraine "de-escalation", i.e., the Geneva Accord, was revealed, we said "Everyone knows that the half-life of these pointless diplomatic summits  aimed at "de-escalating" geopolitical tensions is measured in days if not hours..." Looks like many did not know. So moments ago Angela Merkel finally explained it for them, and even the slowst algos:

• MERKEL SAYS GENEVA ACCORD PROCESS HAS FAILED

During discussions with Vladimir Putin today, Merkel said Russia had a chance to convince Ukraine separatists to back down but "that chance has now gone."Perhaps even more concerning is her concluding remark that:

• MERKEL SAYS JOINT G-7 ACTION AGAINST RUSSIA NOW BEING PREPARED

.... To be followed shortly thereafter by the Russian "scorched earth" response to NATO we discussed earlier?

It seems for a brief period, Amazon traders were in denial... but a mere 12 hours after reading our six simple charts explaining the ugluy reality behind this greatest of all momentum stocks, it seems the algos have finally got the message and the game-theoretical first mover advantage is kicking in... Amazon is down almost 6% this morning (and down almost $40 from its post-earnings highs) suggests the Bezos magic money machine is fading fast.

Overnight, four months after our prediction, the FDIC-backed hedge fund not only that, but so much more that even we were shocked, because from a Q1 GDP which Goldman had originally predicted was going to be 3%, the crack team of economists - or is that team of economists on crack - lowered its Q1 GDP to, drumroll, 1%! And that's in the aftermath of the stronger than expected Durable Goods reports. Because it's only logical that good news is bad news. And vice versa.

Just 2 weeks ago, the USS Donald Cook entered The Black Sea on a mission to "reassure NATO allies and Black Sea partners." So, one wonders what it is to be made of the fact that, as ITAR-TASS reports, the US warship USS Donald Cook with the Aegis missile defense system onboard has left the Black Sea, according to a Russian Defense Ministry source. This leaves only the USS Taylor on its mission of "peace and stability"... should NATO allies be un-reassured?

UPDATE: Ukraine Says Provocations Possible Over May 1-9 Holidays

The fighting-talk (and actions) is growing louder from Eastern Europe.  Following Lavrov's "bloody justice" comments, Ukraine's Acting Head of the Presidential Administration Serhiy Pashynskyi expects a Russian invasion is imminent, warnings that "in case Russian troops cross the Ukrainian border we will qualify it as military invasion and eliminate invaders." These strongly worded comments come after a Ukrainian military helicopter exploded at a base near the eastern town of Kramatorsk (held by pro-Russian forces) on Friday after being hit by a rocket-propelled grenade. Pashynskyi concludes, rather ominously, "I would not recommend Mr. Putin experiment with lives of his servicemen."

The USDRUB rate is back above 36.00 - nearing its record lows - despite a surprise Russian rate hike this morning aimed at stalling the capital outflows. It seems Lavrov's comments that Kiev will face "bloody justice" geopolitical angst is trumping any arbitrage or macro data flows for now. Russian stocks are also fading.

Bonds, Gold, and JPY are bid this morning as US equity futures are fading fast. The Dow and S&P futures are now back below pre-AAPL/FB levels and Nasdaq futures falling fast. Gold is back above $1300 (up over $30 from yesterday's pre-Putin lows). Treasuries, led by the long-end, are rallying as safe-haven bids appear across the whole complex. 30Y yields are down to 3.53 - the lowest since July. JPY is bid once again as USDJPY tests back to the crucial 102 level.

Claiming $100 million in North American weather-related costs, and $310 million losses due to the devaluation of the Venezuelan currency, Ford Motor Company missed revenues and earnings quite significantly:

*FORD 1Q AUTOMOTIVE REV. $33.9B, EST. $34.2B
*FORD 1Q ADJ. EPS 25C, EST. 31C

Furthermore, Ford lost market share (for 0.6 percentage points to 15.3%) and expected operating cash flow in 2014 to be substantially lower than 2013. Ford is trading down 3% in the pre-market.