Archive - Apr 2015

Everything is awesome and volatility-less... VIX has broken back below the crucial 13 level (trading 12.94) as US equities v-shaped-recover from opening weakness leaving The Dow up 450 points (topping 18,000) from the post-payrolls pessimism... as we overheard on CNBC this morning, "the worst earnings season in 6 years is a buying opportunity."

When You See It ...

In a note today, Bank of America economists (after looking at weather data) admit their finding "puts us in an awkward spot today." What did it find? Namely that all those who reran that 2014 playbook, Ethan Harris and other Bank of America economists included, and decided to blame the weather for Q1 GDP crashing from over 3% to under 1%, are wrong or simply lying.

We've heard from uber-dove 'good cop' Kocherlakota (demanding moar QE), Dudley's admission of Dow-data-dependence, and now its Jeff 'bad cop' Lacker's turn to stir things up. Speaking to reporters this morning, lacker explained that recent economic weakness is "transitory" due to weather, and that the FOMC Minutes, despite economists' spin, show substantial support for a June rate hike. Markets are unmoved (for now).

Centrally issued money centralizes wealth and generates systemic inequality. This is equally true of all centrally issued currencies.  But the inequity that is intrinsic to this system is politically, socially and financially destabilizing, and so this system is unsustainable.

“If a guy runs, officers will chase him. But you can’t just shoot a guy"...

Historically, both times stocks registered similar readings, the markets plunged 50%-90% in the next two years.

Back in April 2013, Apple shocked the world when in a dramatic U-turn to Steve Jobs beliefs, it announced what was "the largest single share repurchase authorization in history" when it boosted its share repurchase authorization to $60 billion from $10 billion. Today, GE did its best to match this number, when it reported that as part of a massive business restructuring, it announced a "new Board authorization of up to $50B buyback." This is how it will fund it.

The monetary gun is shot and the Fed is out of ammo with little options should we have a new recession or a new financial crisis - both of which seem increasingly likely.

Gold prices jumped overnight on initial rumors and again in the last hour as Indian officials note that March Gold imports surged to 125 tons (more than double last March's 60 tons). As Reuters reports, Gold imports in the fiscal year 2014/15 ended March 31 jumped to 900 tonnes, up 36% from a year ago. Surging imports are helped by a falling price since the beginning of the year combined with the relaxation of government (capital control) import restrictions, and despite further efforts by the government to "monetize gold."

Import Prices dropped YoY by 10.5%, the biggest sequential drop since Dec 2008 (following the Lehamn shock). Priod data was revised lower and March's MoM import prices dropped 0.3% after rising 0.2% in Feb (revised lower from a 0.4% rise). US Auto import prices suffered their biggest YoY drop on record as currency wars and implicitly the strong dollar start to bite (even as imported fuels prices rose 0.4%). Other good news for Americans is that food prices are down 1.1%.

• Nikkei tops 20,000, Europe hits 15-year high (Reuters)
• GE to sell real estate holdings, sets $50 billion share buyback (Reuters)
• Iran’s Middle Class Plans for Life After a Deal (BBG)
• Walgreens to Close 200 Stores as It Expands Cost Cuts (WSJ)
• Hillary Clinton expected to announce presidential run as soon as this weekend (Reuters)
• It will cost $1.5 billion to keep Deutsche Bank Libor Manipulators out of prison  (USA Today)
• Police Cameras Bring Problems of Their Own (WSJ)
• Obama says concerned China bullying others in South China Sea (Reuters)
• Investors Revive Appetite for Asian Junk Bonds (WSJ)

Moments ago, General Electric showed why April is much more likley to be a rerun of February than January or March when it announceed that it would go ahead and repurchase half of the total record stock buybacks announced in February, or some $50 billion in what may be the largest stock buyback announcement in history! How will GE fund this massive distribution to its shareholders, of which the most concentrated one will once again be the biggest winners? Simple: by dumping the division that nearly caused its insolvency during the financial crisis, the hedge fund known as GE Capital. As part of the just announced mega transaction, GE announced an agreement to sell the bulk of the assets of GE Capital Real Estate to funds managed by Blackstone. Wells Fargo will acquire a portion of the performing loans at closing.

Overnight market news was once again driven by the Asian superbubble, where as expected, the Hang Seng (+1.22%) soared once more and is now up 9.5% for the week, following news the Hong Kong Exchanges and Clearing Ltd (HKEx) expects it will "substantially increase" quotas for the stock connect program between Hong Kong and Shanghai, HKEx Chief Executive Charles Li said on Friday. The exchange could boost the current quotas, which cap how much mainland investors can buy Hong Kong stocks and vice versa under the trading link, by more than 20 or 30 percent, Li said at a media briefing in Hong Kong. Li did not give a precise date for when the quotas would be raised, but one thing is clear: everyone in China, and Hong Kong, must be all in stocks if the Chinese housing bubble can not be reflated. The Shanghai Comp closed higher by almost 2.0% following better than expected Chinese inflation data, while HK stocks continued their recent rally to closer higher by 9.5% for the week.