Archive - Apr 2015

The worldwide commodity glut is not a surprise to Austrian school economists - It is a wonderful example of the adverse consequences of monetary repression to drive the interest rate below the natural rate.

This new nothingness is creating a youth, a political system and an economic outlook which is based more in peoples’ heads and minds than it is in reality.

At a certain point, even central bankers will realise they can go no further.

Moments ago AAPL reported Q2 earnings for the quarter ended March 31, 2015 which saw AAPL beat soundly on the top and bottom line as as result of a jump in iPhone sales, even as iPad and Mac sales came in below the expectation. EPS was $2.33 vs consensus $2.16, while revenues came in at $58.0 billion, $2 billion higher than the $56.0 billion expected. But while the operations were impressive if China and iPhone centric, what everyone is focusing on is the AAPL news that it once again expanded its buyback program en route to hitting the Goldman forecast of a record $900 billion in 2015 for the entire S&P500, by announcing it would boost its buyback authorization by more than 50%, from $90 billion to $140 billion.

If there is anything the past two years have revealed, is that all Wall Street economists are lousy weathermen. So, to avoid more humiliation next year when the Fed's rate hiking plans are again derailed by snow in the winter, we present the one device that no "economist" should ever again be seen in public without.

The cynicism among the informed classes has never been so deep. Even the pompom boys in the cheerleading clubs like CNBC and The Wall Street Journal express wonderment at the levitation of stock indexes and bond values. They chatter about a “correction” of 20 percent being a healthful tonic that would clear away some dross and quickly usher in a new episode of “growth” — or growthiness, which, like truthiness, became an acceptable approximation of the real thing. The truth, as opposed to truthiness, is they no longer believe their own bullshit about growthiness. Behind the financial jitters of the informed minority is the greater fear of social unrest.

If you thought Santander Consumer was bad, meet Skopos Financial, an Austin-based subprime auto lender that specializes in loans to "car buyers with no credit, low FICO scores, or a previous bankruptcy, repossession or foreclosure." With Skopos, "the best part is speed."  

Earlier today, while the European markets were caught in the latest myopic buying frenzy resulting from the hope that an imminent termination of Yanis Varoufakis may mean a Greek debt deal is imminent, the Central Union of Municipalities and Communities of Greece ("KEDE") held a meeting in which it said that while it "declares it support for the national negotiating effort", it would not transfer any funds to the Bank of Greece.

If the DOJ and CFTC is going to be consistent, then they have to indict the entire financial community from the CME, Exchanges, Brokers, Institutions, Investment Banks, Hedge Funds, Management Funds and High Frequency Trading Firms.

For 6 months, investors have been buying the idea - pitched by any and every status-quo-sustaining talking head, politician, and central banker - that low oil prices are unequivocally good for America. This has manifested itself in retail stocks handily outperforming the S&P. However, as Bloomberg notes, the last few weeks has seen that reverse dramatically as it appears investors, losing faith in the big-takers, have realized that "consumers aren't spending as much of the money saved from lower gasoline prices."

Serf's Up...

While it’s an open question as to whether acquirers are grossly overpaying in the race to find drug targets that fit well with their existing pipelines and offer the best chance for marketing synergies, it appears that at least in some cases, the premiums paid in healthcare M&A deals are being passed right along to patients. "It seemed like highway robbery,” one industry insider tells WSJ.

Currently, with Central Banks fully engaged in monetary interventions on an unprecedented global scale, there is seemingly nothing that can stop the current advance. Of course, it is that very "thought process" that has been a hallmark of exuberant markets in the past.

BTFD is FUBAR for now...

While pricing right on the When Issued screws, or 0.540%, tied for the lowest high yield since October 2014, today's $26 billion auction of 2 Year paper was nothing to write home about. From a low Bid to Cover, which at 3.30 was down from March's 3.457%, and the lowest of 2015, to a slide in the Indirect bid to only 38.1%, also the lowest for 2015, to the highest Dealer take down of 2015, with commercial banks left with 47.8% of the short-end issue, there was not much demand for the paper which pays a 0.50% cash coupon and which matures on April 30, 2017.