Archive - May 7, 2014

In a word... "mixed" Early ugliness gave way to another ramp job courtesy of USDJPY's 101.50 level holding - which managed to clamber the Dow to unchanged on the week and stabilize the S&P (after it bounced off its 50DMA). But... Nasdaq and Russell just could not get it together until the last few minutes  thanks to a VIX slam, JPY ramp and 30Y dump. Yellen's testimony pushed some volatility through markets and perhaps provided the extra pressure on the small caps (after warning of valuations). The term structure steepened modestly with 30Y +1.5bps and the rest of the curve rallying 2-3bps (10Y unch). The USD rallied modestly off 19-month lows. Gold had its worst day in 3 weeks, breaking below 1300 and testing its 100DMA (tick for tick with silver on the day). Oil prices jumped back up to around $101 as Copper slipped back towards $3. And finally, we hesitate to mention it... today's market schizophrenia was enough to trigger a Hindenburg Omen.

With market internals dismally weak and 967 of the Russell 2000 index's members down over 20% from their highs (a bear market), the question is: how long can they maintain the status quo thanks to a handful of big blue chips as levered longs attempt to stay solvent?

Another month, another confirmation that when it comes to the US consumer, it is all about student debt (and to a lesser extent, car loans). Moments ago the Fed reported that consumer credit number for March: at $17.5 billion, it not only blew out the expectation of a $15.5 billion increase (although when one adds last month's $3.5 billion downward revision to $13.0 billion the two month total actually missed), but was the highest monthly increase since February 2013. That's the good news. The bad news was once again in the composition: of this $17.5 billion $16.4 billion was non-revolving debt, or about 94% of total. The "good", or revolving, credit card debt? Only $1.1 billion.

Everyone knows that when it comes to apologists and scapegoats, Q1 was all about weather excuses, and as SocGen already showed earlier today when it took a $730 million charge on its Russian subsidiary, Q2 misses will all be Ukraine's fault, which is ironic because as recently as a month ago experts were screaming over each other how little Ukraine matters for the global economy, how meaningless Russian exposure is to western banks and so on. But while one can at least superficially justify a bank provisioning against deposit flight and the accumulation of bad debt in a country in which paying one's debt is the last thing on the population's mind, a new and quite different victim of the Ukraine crisis was revealed earlier today when beer titan Carlsberg swung to a net loss and issued a profit warning: beer.

There should be no 'flexible currency' and no central planning of money. They are at the root of the boom-bust cycle, the very reason for the various crises that have beset Western economies in recent decades. Switzerland would be far better off if no-one had the power to meddle with its money supply. As it is, there has been plenty of meddling already, and quite a bit of suspension of disbelief would be necessary to conclude that there will be no price to pay. As always in monetary matters, the bill will be presented at an unknown future date, but it could be a very big bill in this case... but Switzerland's Keynesian dunderhesds are well on their way to that coming due as they blast any gold repatriation plans as "reducing the credibility of the SNB’s policy."

Prepare for the biggest Golden Turdball since Twitter...

Simply put, warns Matt King - as the taper continues - "markets stopped following fundamentals about two years ago." But it's changing... one asset class at a time...

In a move reminiscent of the Victorian Age, when those "downstairs" lived off the scraps of those "upstairs", a new app 'PareUp' is set to revolutionize the way the increasingly poor and starving masses in America feed themselves. As HuffPo reports, in a country that wastes between 30 and 40 percent of its food, PareUp is a new app that aims to connect consumers to restaurants and food shops with excess food - enabling the impoverished to benefit from the excess greed of the well-to-do by buying their used and forgotten food scraps (at significant discounts of course). "Good food is a terrible thing to waste," boasts the app - and rightly so - but is it not a dismally sad reflection of a nation, that opines of its all time high stock prices as indicative of its cleanest dirty shirt status, that we need this service (and there's an app for that!)

Everything (all 110 slides of it) you wanted to know about the GSEs but were afraid to ask... (with Bill Ackman's biased long perspective)

And so the flattening, and the "inexplicable" (Chinese and Japanese) bid for Treasurys continues. After yesterday saw 3 Year paper selling at a better than expected rate, if still at the highest yield since 2011, today it was the turn of 10 year paper to sell briskly, with the high yield of 2.612% once again pricing through the When Issued 2.618%, although in a mirror image of the short end, this was the lowest yield since June of 2013. The bid to cover came at 2.66, modestly below April's 2.76 and on top of the TTM average of 2.63. However, the internals were more curious with Dealers getting just 29.1%, matching their take down from March, and the lowest since March 2013. This meant Indirects were left with 49.3%, well above last month's 44.7%, and above the 43.9% TTM average, highest since the 49.7% in February. Directs were left holding 21.6% of the auction, above the 17.7% average.

Looks like Ukraine won't be buying that gold with IMF loan proceeds after all. Moments ago, in what has become a monthly tradition, Gazprom reported that Ukraine has once again forgotten to pay its latest monthly, April, gas bill. As a result, the total amount of money now due rises from $2.2 billion which was the invoice through the end of April, to $3.5 billion. As RT reminds us, and as was reported previously, this means that in June Ukraine might receive Russian gas only on the condition of advanced payment.

We can't wait to hear how Janet Yellen explains the following slide that the Chairman of the Joint Economic Committee Kevin Brady just lobbed at her.

Friday, the 2nd day of May, brought two important pieces of government reported information: The April unemployment report came in much better than expected, or “blows pasts forecasts“ as USA Today reported, and initial Obamacare enrollment included more of the previously uninsured than expected, something that Mother Jones says is “far far higher than previous estimates.” Both pieces of information are a good way of looking at an analysis pitfall common in the world of Wall Street and now being increasingly ported over to the rest of the news cycle: the fallacy of mistaking how something does vs expectations with whether its good or bad.

It is unclear if the most recent crackdown on synthetic drugs was prompted by today's Yellen testimony, but according to AP, the US government - seemingly in desperate need to find new things to spend money on - has decided to take its vendetta with sellers of drugs, just synthetic drugs, personal, and starting this morning, "broadened its national crackdown on synthetic drug manufacturers, wholesalers and retailers as federal agents served hundreds of search and arrest warrants in at least 25 states.... The DEA has been cracking down on synthetic drugs, including so-called bath salts, spice and Molly."