Archive - Apr 14, 2015

Fool me three times...

Despite all the money-printing, bond-buying, ponzi-scheming; the looming reality of a possible Greek default is spreading rapidly across the rest of peripheral European bonds. Greek 3Y bond yields are up 167bps, breaking over 23% today. The last week has seen Italian, Portuguese, and Spanish bond risk rise 12-16bps - a dramatic move off such low Q€-driven bases. Already there is chatter that Spain's resurgent Podemos party will look to negotiate restructuring their debt, which merely confirms the fact that for all the bluster, EU leaders are scared stiff of the implications of 'allowing' Greece to exit...

Remember back at the turn of the year when NFIB Small Business Optimism was surging and the mainstream media proclaimed that jobs were coming back thanks to small business, and Obama stated "the shadow of crisis is behind us." Well, if March's Small Business Optimism index is to be believed... it's not. At 95.2 (missing expectations for the 3rd month in a row), this is the least optimistic small businesses have been in 9 months. Worse still, all those jobs that were going to be created by this optimism.. Hiring Plans dropped to 6-month lows.

"Good news" - best month in a year for retail sales... or "bad news" longest streak of misses since Lehman. It is unclear what the market is seeing in this data - Bond yields have plunged and the dollar is getting monkey-hammered (signalling expectations of lower for longer) but stocks are lower (less ZIRP punch in the punchbowl).

After 3 months of missed expectations and the first consecutive drop in retail sales since Lehman, retail sales rose 0.9% in March (missing expectations of +1.1%). While the 0.9% rise is the biggest since March last year, this is now the worst streak of missed expectations in retail sales since 2008/9. Ex-Autos, retail sales also mised expectations (rising just 0.4% vs 0.7% exp).

It appears being Special Adviser to Japanese Prime Minister Shinzo Abe comes with great prerssure to toe the line - as opposed to advise. Koichi Hamada yesterday said USDJPY 105 was "appropriate" and USDJPY 120 was "too weak"... that sent USDJPY tumbling. These comments were reiterated in the early Asia session and adding that he "doesn't think JPY will weaken much further." We wake up this morning and reuters reports that he has entirely flip-flopped his views saying now that "120 is appropriate," and that he " would not oppose further easing." It's clear someone got a tap on the shoulder...

• Shale Oil Boom Could End in May After Price Collapse (BBG)
• Oil above $58 on U.S. shale output report, Mideast (Reuters)
• Ackman Says Student Loans Are the Biggest Risk in the Credit Market (BBG)
• Alibaba Disputes U.S. Group’s Claim it Tolerates Fake Goods on Taobao (WSJ)
• Petrobras takes steps to avert a technical default (FT)
• Yen’s Drop Is Approaching Its Limit, Says Abe Adviser Hamada (BBG)
• 'Slicing and dicing': How some U.S. firms could win big in 2016 elections (Reuters)
• Fed official warns ‘flash crash’ could be repeatedv (FT)

Following countless quarters in which JPM suffered about $30 billion in legal charges, the tempets in Jamie Dimon's legal settlement teapot may be quieting down, with a quarter in which JPM experienced "only" $687 million in pre-tax legal expenses, or about $0.13 in EPS. As a result of this reduced kickback to the government to continue operating, JPM managed to beat expectations on both the top and bottom line, printing revenues and EPS of $24.8 billion amd $1.45 respectively, fractionally higher than the $24.5 Bn and $1.41 expected. Actually, half of that was accurate: JPM's GAAP revenue of $24.1 billion missed expectations, however its "managed basis" non-GAAP revenue did beat.

Judging by the recent action in equity futures, the continuously rangebound US market since the end of QE may be entering its latest downphase, catalyzed to a big extent by the recent strength in the JPY (the EURJPY traded down to 2 year lows overnight), especially following yesterday's not one but two statements by Abe advisor Harada saying a USDJPY at 125 isn't "justified" and a 105 level would be appropriate. A level, incidentally, which would push the Nikkei lower by about 20% and crush Japanese pensions which are now mostly invested in stocks. Not helping matters was the pause in the Chinese and Hang Seng stock bubbles, with the former barely rising 0.3%, while the former actually seeing its first 1.6% decline after many days of torrid, relentless rises.