Archive - May 19, 2014

The clip-on camera company has filed for its IPO. GoPro, which will list on NASDAQ under the symbol GPRO, would, however, probably prefer you not focus too closely on its financials... sshh - EBIDTA -30% YoY for comparable quarter?

Having dramatically exposed the dismal state of JCPenney stores and the sad dismantling of Sears, Belus Capital Advisors' Brian Sozzi has gone north and found his another sad retail spectacle... in Target Canada.

The economic system in which we live today is a crony capitalist system or, we might say, a system of money socialism. And that’s Piketty’s greatest error: to blame capitalism for the negative effects of crony capitalism and money socialism. But perhaps it is no error. Perhaps, he only wants to be loved by politicians and the IMF. I think they love him already, though.

Last week we highlighted just how "rigged" the casino really is (real casinos - as opposed to the equity markets) and while that was shocking, the USA can be proud of another exceptionalism... As The Economist notes, at $119 billion in 2013, the United States was the biggest gambling loser in the world. However, on a per capita basis, Australia and Singapore top the list.

Equity volumes were abysmal today... (NYSE lowest in 2014) which means only one thing... a VIX-driven levitation. Bonds sold off at the long-end (30Y +4bps) but the short-end remained bid (5Y -1bp) but did get 5s30s back to 5 week steeps. USDJPY bounced off  its 200DMA (~101.25) but did not really support stocks higher. Credit markets did not buy the exuberance in stocks either. What today's ramp appears to have been was a gap-fill for VIX from Friday's dislocation on a day with no macro data to upset the algo stop-run procession. Gold and silver (along with all commodities) overnight but once the US day session opened, the selling began and PMs closed unch. The USD ended down 0.1% led by modest EUR strength (despite ECB jawboning) and AUD weakness (rumors of downgrades). "Most shorted" stocks rallied almost 3% from Friday's lows (when S&P bounced off its 50DMA) as once again a squeeze manufactures broad index pick-ups.

Forget international capital flows, forget central banks (even though the world's reaction to the ECB enacting such an extreme policy - QE- this far down the 'recovery' raises questions about the entire false state of the world), and forget positioning... Rick Santelli - stunned at the disconnect between stocks and bonds off the February lows... says there is only one number that matters for lower rates - Nasdaq 3996.

First there was "long social-media", then "short bonds", and now - as Credit Suisse notes - the next "pain trade" appears to be building in USDJPY (which is very worrisome for broad risk assets in general).

After little more than a year of legitimate revaluation of equities following the 2007-2009 credit crisis, and more than three years of what will likely turn out to be wholly impermanent – if dazzling – Fed-induced speculation, investors have again pushed the stone to the top of the mountain. Despite the devastating losses of half the market’s value in 2000-2002 and 2007-2009, investors experience no fear – no suffering as a result of present market extremes. There is no suffering because at every step, as Camus might have observed, “the hope of succeeding” upholds them. As we discussed several months ago, that hope of succeeding rests on what economist J.K. Galbraith called “the extreme brevity of the financial memory.” Part of that brevity rests on ignoring the forest for the trees, and failing to consider movements further up the mountain in the context of how far the stone typically falls once it gets loose. The charts below display various journeys of Sisyphus - a chronicle of multi-year, increasingly speculative market advances that terminated in the same set of conditions that we presently observe.

Ironically, the Fed does have a point: rates do impact existing home sales. The only problem is that according to actual, historical data, not some Fed model projection based on ridiculous assumptions, they impact it exactly in the opposite way of what the Fed proposes!

At $250,000 per speech, this better be worth it...

• *BERNANKE SAYS QE WASN'T A PANACEA BUT `AVOIDED DEFLATION'
• *BERNANKE SAYS EQUITIES HAVE RISEN BECAUSE ECONOMY IS STRONGER
• *BERNANKE SAYS FED BALANCE SHEET COULD BE KEPT LARGE IF NEEDED

It appears not...

Fed's Williams and Fisher are talking this morning in an oddly frank (and concerning) manner...

WILLIAMS SAYS 'SOFT LANDINGS' IN MONETARY POLICY NEVER HAPPEN
WILLIAMS: FED NEEDS TO CONTINUE TO BE WARY OF EXCESSIVE RISK
Williams says our extraordinary policies could have adverse consequences down the road
Fisher must be wary of markets potential to overshoot

So, we have had Tarullo (Feb) and Yellen (May) warning of bubbles in small caps and credit and now Williams and Fisher sounding some alarms... Don't fight the Fed! (unless the Fed says 'sell') It seems the market is heeding the message in the short-term...

China's or the UK's?

While we wait (in vain) for the US to lob sanctions at China for doing what Russia has done and amass a military presence on its border with Vietnam, here is what China had to say about the earlier announcement by the DOJ charging China with espionage and "penetrating" US companies (if having nothing to add regarding the NSA). From the wires:

• CHINA FOREIGN MINISTRY SAYS CHARGES HARM RELATIONS WITH U.S.
• CHINA FOREIGN MINISTRY ‘STRONGLY REFUTES’ U.S. CHARGES
• CHINA FOREIGN MINISTRY SAYS U.S. MADE UP FACTS IN SPYING CASE
• CHINA FOREIGN MINISTRY URGES U.S. TO `CORRECT ITS MISTAKES'
• CHINA FOREIGN MINISTRY CALLS CHARGES `BASELESS,' `RIDICULOUS'

Because if there was anything China needed in the week in which it is finalizing its "holy grail" gas deal with Russia, is more anatagonism from the Obama administration. And now watch as Cisco guides to a far lower sales number for Q2 on what John Chmabers can only describe as a sudden "air pocket" in Chinese demand for its routers.

A one man douche squad...