Archive - Apr 2015

In so many ways, Warren Buffett and modern America are the same thing. An idea packaged and marketed so brilliantly, most of humanity unquestionably believes the myth.  However, when you look beneath the surface, it becomes increasingly clear that neither of them actually come close to what’s printed on the package.

With more than three quarters of US workers trapped in what we will call “wage growth hell,” and whose only chance at seeing a pay hike appears to rest on holding out for a promotion that’s probably not forthcoming, it doesn’t exactly come as a surprise that self-reported consumer spending hit a three-year low for March.

Because with the suddenly collapsing labor market, in which only Americans 55 and over can find jobs, expensive and superfluous Apple Watches should be a game-changer.

We can't make this up. Following Friday's dismal payrolls, today's Fed Labor Market Conditions Index (the aggregate index of all Yellen's indicators) collapsed to its lowest in almost 3 years. That was just the news that stocks needed to complete the biggest opening rally of the year so far.

Amid collapsing macro data and earnings expectations, Markit's US Services PMI smashed expectations and surged to 59.2 (its highest in 7 months) - just like Markit's Manufacturing PMI 'surprised'. Against the worst payrolls data in over 2 years, Markit's employment index rose by most since June. Furthermore, the business outlook tumbled to 8-month lows. And then following ISM Manufacturing's miss and tumble to near 2-year lows, ISM Services met expectations at its lowest since June... as Business Activity tumbled to one-year lows.

The question on everyone's lips: which asset class was responsible for Virtu's trading perfection for yet another year.  It wasn't stocks because adding across the firm's America, EMEA and APAX equity product lines, Virtu revenues actually declined, from $201 million in 2013 to $195 million in 2014. It also wasn't commodities, where revenue dropped by almost $2 million in 2014 to $93.1 million.The answer is...

Good news, bad news, no news... you decide...

Guarantees based on extracting higher taxes, borrowing trillions of dollars and creating trillions more out of thin air only guarantee eventual systemic implosion.

The rhetoric, threats, and promises continue to increase as Greece, its international creditors (i.e. Troika), and its potential pivot partners from Russia to China to Iran all vie for attention. With EU officials proclaiming "[the Greek] government cannot survive," suggesting Tsipras divorce himself from the extreme left of his party; and with 68% of Europeans polled believing Greece is a drag on the EU economy, Greece's last best hope perhaps remains with a pivot to another Troika (Russia, China, and Iran) as energy minister Panagiotis Lafazanis denounced Greece’s international creditors for treating the country with "unbelievable prejudice and as a colony." This all on the day when FinMin Varoufakis 'promises' Christine Lagarde that Greece will repay its IMF loan on April 9th (somehow?).

Because nothing says "legitimate government" like curtailing freedom of speech...

• Political Battle Ramps Up Over Iran Nuclear Deal (WSJ)
• Greece moves to quell default fears, pledges to meet 'all obligations' (Reuters)
• Isolated Greece pivots east to Russia, China and Iran. But will it work? (Telegraph)
• Frustrated officials want Greek premier to ditch Syriza far left (FT)
• Greek political unrest and deepening debt crisis fuel talk of snap election (Guardian)
• Rand Paul’s Challenge: Charting His Own Course (WSJ)
• In Greenspan Conundrum Redux, Odds Are on Bond Traders’ Side (BBG)
• Yemen's Aden suffers amid clashes, aid deliveries delayed (Reuters)
• Record Gasoline Output to Curb Biggest U.S. Oil Glut in 85 Years (BBG)

As market participants slowly make their way back to trading desks around the post-Easter world, and especially the US where a truncated session on Friday morning ended in tears for anyone hoping for a 2015 US recovery following an abysmal March nonfarm payrolls print, they find that unlike on previous occasions, the equity futures liftathon is nowhere to be found this morning, with the S&P set to resume trading in the red for 2015. Away from Greece, whose future remains in limbo, the biggest development over the holiday weekend was a Goldman note in which the central-bank friendly firm said that "the right policy would be to put hikes on hold for now."

The swell of anti-Russian propaganda, confrontation and attempted intimidation by NATO has increased, and if it continues to do so it is likely that Moscow will take action, thereby upping the stakes and the danger even more. It is time that NATO’s nations came to terms with the reality that Russia is a major international power with legitimate interests in its own region. Moscow is not going to bow the knee in the face of immature threats by sabre-rattling US generals and their swaggering acolytes. It is time for NATO to forge ties rather than destroy them — and to build bridges rather than glitzy office blocks.

Behold the proposed new Kingdom Tower for Jeddah, Saudi Arabia — at one full kilometer in height, about twice the size of New York’s new Freedom Tower.