Archive - May 2015

With business confidence collapsing, Bloomberg's Consumer Comfort index - after dropping to its lowest since December - plunged once again this week to 40.9 (from 42.4). This is the lowest since Novemeber and extends the losing streak to 7 weeks - something we have not seen sionce May 2008. This confirms Gallup's weekly tracking of consumer confidence dropped back to its lowest levels since early December 2014 with 53% of Americans now saying the economy is getting worse. Despite all the exuberance over lower oil prices, Consumer Comfort in The South is crashing. Perhaps even worse - for a consumer-driven economy - is that the "buying-climate"suffered its biggest drop since Dec 2011.

Following yesterday's surprise DOJ indictment in which 14 FIFA affiliates were perp-walked out of Zurich's swankiest hotel just days ahead of Sepp Blatter's re-election, one person was quite displeased with this latest US intervention on the international arena: Russian president Vladimir Putin who accused the United States of meddling outside its jurisdiction by arresting officials from FIFA, further hinting that it was part of an attempt to take the 2018 World Cup away from his country.

The US military inadvertently shipped live anthrax samples to labs in nine states and one lab in South Korea. The army says it simply doesn't know what went wrong at the Dugway, Utah site from which the samples originated. Dozens of people are now being treated for possible exposure.

Rare is the person who is a realist. We collectively live in a world of pretend and extend. Every one of us wants our present civilization to continue, though for countless millions the world has already turned upside down as unemployment has soared and war and terrorism proliferate. The very structure of life in our world is threatened because madmen have undermined the financial system through the creation of debt instead of wealth. We have collectively borrowed against our children’s future until their very future is in doubt.

With the biggest miss to expectations in 6 weeks, initial jobless claims rose to 282k (against 270k exp). For context this means jobless claims have gone nowhere since the end of QE3. The smoothed average ticked up very modestly but hovers near 15-year lows. Continuing Claims rose 11k to 2.222 million, missing expectations for the first time in 6 weeks.

Recall that back in December it was first reported that both Deutsche and Barclays "algos" were busted for FX rigging: something we alleged was taking place about 3 years ago. And now, six months later, exchanges are finally admitting that this too conspiracy theory was in reality fact, and quietly have started to clean up their game before the DOJ comes knocking. As the WSJ reports, Thomson Reuters Corp. and BATS Global Markets Inc. will limit the practice known as “last look", also known as quasi-FX spoofing, on their platforms in coming weeks "in a move aimed at increasing transparency in the foreign-exchange market.""

For all you conspiracy theorists...

We are what we think more so than what we eat.

While there were certainly concerning bits of evidence piling up regarding the longer-term fate of U.S. stocks, the most important factors in the immediate-term – such as the ongoing confirmation of new highs by the NYSE Advance-Decline Line – continued to support the bull market. That may be starting to change...

So you're a Trader? Bet your Mother is Proud

Fearing an acceleration in deposit outflows from Greek banks, PM Alexis Tsipras suggested on Wednesday that a deal between Athens and creditors was imminent when in fact he had no evidence to support the contention. Greek officials now promise their optimism "is not just words."

• No change in Greek debt talks after another day of spin (Reuters)
• G-7 Weighs In on Greece as Government Told to Be Serious (BBG)
• FIFA Faces Mounting Pressure From Sponsors as Visa Threatens to End Deal (WSJ)
• U.S. hopes Chinese island-building will spur Asian response (Reuters)
• Japan Inc.’s $104 Billion Investor Payout Set to Surge (BBG)
• Russia masses heavy firepower on border with Ukraine (Reuters)
• China Says Its Most-Wanted Fugitive Is in U.S. Custody (BBG)

As the WSJ reported yesterday when it sent the semiconductor space soaring, moments ago Avago (21x EV/EBITDA) confirmed it would buy Broadcom (19x EV/EBITDA) for $37 billion.  The reason for the deal: as the WSJ noted yesterday, "growth has been hard to come by for Broadcom, a 24-year-old company that makes communications chips for tablets and smartphones, and supplies the Internet links for cable-television and telecommunications devices." Or, in other words, only a delusional, yield-chasing bond holder would be willing to fund (with other people's money) the 18.9x Broadcom EV/EBITDA take out price and just like in the oil and E&P space, when organic growth dries out, there is always zero cost debt to extend the dream a little longer.

Courtesy of central planning, virtually every single capital market has become an illiquid penny stock, with wild swings from one extreme to the other, the latest example of this being the Shanghai Composite, which after soaring 10% in the past ten days, crashed 6.5% overnight tumbling 321 points to 4620 after it briefly rose just shy of 5000. This was the biggest drop since January 19 when the Composite dropped 7.7% only to blast higher ever since. Putting the "plunge" in perspective, now the SHCOMP is back to levels not seen in... one week.

In a sign of just how dire the situation in Greece truly is, Reuters is reporting that Athens now owes billions to drugmakers as the consequences of being completely beholden to the ”institutions” which control the printing of a fiat currency now weigh on Greece's ability to provide basic medical services for its citizens.