Archive - Jan 18, 2011 - Story

Citi stock sliding (and below the $5 "psychological barrier") following poor earnings which miss EPS big, coming at $0.04 on expectations of $0.08. Q4 revenue USD 18.37 billion vs. Exp. USD 20.36 billion. Tier 1 common ratio of 10.7% at quarter end. Tier 1 capital ratio 12.9% at quarter end. Company says provision for credit losses and for benefits and claims declined USD 25.7bln, the provision for credit losses and for benefits and claims declined by USD 25.7bln for FY 2010 to USD 26.0bln, and the allowance for loan losses was USD 40.7bln at quarter end. According to the company the economic environment 'remains challenging.' And all this happens even as the FASB continues to give banks a green light to pull numbers out of thin air.

Markets mostly bullish this AM following the holiday weekend in the US. Friday’s CPI print seemed reflective of inflation, showing increases in core and non-core metrics, while retail sales was mixed relative to expectations. We fear the real demand rally might well be short lived. Today’s Empire Manufacturing and November TIC flows will be watched closely for forward indications in the US, while the story out of Europe continues to be the market’s focus.

About a month ago, some took offense at our characterization of the Chair-hewlettpackard-man as a "bearded mutant-cum-supreme genocidal overlord" after we predicted to the dot that his monetary policy would eventually lead to a global, well, genocide, presumably first in the developing world. Following riots, self-immolations and outright revolutions in Algeria, Tunisia, Morocco, Jordan, Yemen and Egypt, in the span of a few shorts weeks, we believe we have been once again validated. Putting the period in any debate of what Bernanke's runaway money printing means to the life-expectancy of increasing number of people, is the latest news coming out of Sudan where "security forces on
Tuesday arrested opposition leader Hassan al-Turabi and eight other
party officials after they called for a "popular revolution" if Khartoum
did not reverse price rises." And since economic slack in Sudan is roughly in line with that of the abovementioned other 5 countries, it is safe to say that the bulk of this move is speculation frenzy related, which in turn is purely a function of pervasive and free global liquidity. And this is still just the beginning. As Bernanke will not stop before the Dow hits roughly 36,000 expect these kinds of headlines to be an hourly occurrence.

With the algos having promptly switched to trade stocks higher with dollar weakness (unlike on days when a strong dollar also somehow miraculously leads to stock strength), the world was looking for some data point to validate this morning's ramp in futures, timed perfectly to further neutralize Apple's holiday announcement. The catalyst ended up being the latest ZEW numbers of German and Eurozone economic sentiment, which came so strong in spite of ongoing European insolvency, that all one can do is laugh. These printed as follows: Eurozone ZEW Survey (Economic Sentiment) (Jan) M/M 25.4 vs. Prev. 16.6 (Prev. 15.5); German ZEW Survey (Economic Sentiment) (Jan) M/M 15.4 vs. Exp. 7.0 (Prev. 4.3). Once these hit overnight, the EURUSD went balistic and, of course, futures surged, completely eradicating any threat of a market-wide circuit breaker being hit, which would have been the case hat Apple made the Jobs announcement during regular market hours. On the other hand, how Europe, er, Germany is supposed to preserve its export-led miracle in light of a 500 basis point surge in the EURUSD in just one week, is something only Goldman's Houdini economic team can explain.

Empire index, TICS, builder sentiment, and the weekly confidence poll….Most importantly, it seems that the only thing that matters, is that POMO is back, although we have just a piddling $1-2 billion in Sack Frost initiated AMZN purchases by way of TIPS monetizations.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 18/01/11