Archive - Jun 2011 - Story

In a scheduled update to its business outlook for the second quarter of 2011, Texas Instruments Incorporated (TI) (NYSE: TXN) today narrowed and lowered its expected ranges for revenue and earnings per share (EPS).

The company currently expects its financial results to be within the following ranges:

• Revenue:  $3.36 – 3.50 billion, compared with the prior range of $3.41 – $3.69 billion
• EPS:  $0.51 – 0.55, compared with the prior range of $0.52 – 0.60

So you are saying the initial guidance reduction from April 18 was not... transitory?

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 08/06/11

The last time we had 6 consecutive down days was February 13-23, 2009. Which is before March 2009. Which is when the S&P hit 666. Which is when the Fed started Q1. As for the last time we had 5 down days in a row was in August of 2010, just when the Hindenburg Omen was spotted and threatened to undo the entire Centrally Planned house of cards... Which is when the Fed started QE2. Pattern emerging?

One of the most unbelievable developments in the past few days has been the rank, unprecedented, totally amateur and outright pathetic backlash against writers of "short China" theses by the management teams of these same companies that have garnered the all too deserved definition of "Fraudcaps." We have shown before that the hit rate of pieces accusing Chinese companies is well north of 80% as exhibited by the fact that virtually all companies currently halted indefinitely on the Nasdaq are of Chinese origin. But of course, the fact that their stocks plunge only after an investor who has actually done their homework exposes Chinese frauds for what they are, does not prevent these companies to stoop to the lowest rung on the ladder and actually sue these contrarians who in the long run merely prevent further capital erosion from future lazy momos who may have invested in these crap companies. It is time for these smokescreening, grautious, shareholder fund-depleting lawsuits to stop, and for shareholders to instead sue their management teams.
After all, if these allegations are so wrong, than it is the fiduciary
duty of the management team to buy back as much stock as humanly
possible, using both corporate and personal funds: if there is no fraud, this represents a massive discount to fair value and the highest IRR investment these clueless fraudulent management teams can pursue. Commit
fraud once, with the help of the NYSE and Nasdaq, that's fine - the
idiot momos who buy your shares will lose everything, but continue this
charade and CEOs deserve to go to jail immediately, hopefully while ignoring the completely toothless SEC which has failed and continues to fail
miserably when it comes to protecting shareholder interests, especially in this most recent Chinese fraud contagion. Also, we leave the question of when any incompetent sellside banker will be sued for peddling a BUY rating on Chinese fraud completely open...

Nothing quite like hearing it from the printer's mouth every now and then...

According to the just released Beige Book, there was slower growth seen in New York, Philadelphia, Atlanta, Chicago districts. Only Dallas reported acceleration. And yet the denials continue: "wage growth generally remained modest", and there was "widespread improvement reported in credit quality." We wonder where they get these imaginary data feeds from. More from the report: "Manufacturing activity continued to expand in most parts of the country, though a number of Districts noted some slowing in the pace of growth. Activity in the non-financial service sectors expanded at a steady pace, led by industries related to information technology  and business and professional services." Shockingly, the Fed admits there is food price inflation: "Elevated food and energy prices, as  well as unfavorable weather in some parts of the country, were said to be weighing on consumers’ propensity to spend." Lastly, Japan is the new snow: "Widespread supply disruptions—primarily related to the disaster in Japan—were reported to have substantially reduced the flow of new automobiles into dealers’ inventories, which in turn held down sales in some Districts. Widespread shortages of used cars were also reported to be driving up prices....Many Districts indicated that supply disruptions, primarily from Japan, have contributed to lean inventories, which have impeded auto sales somewhat....Inventory levels are mixed, with one retailer explaining inventory has been temporarily increased due to global supply concerns, such as output disruptions in Japan." And so forth. Key word count of the word: Japan - 25 times; Inflation - 1 time; Deflation - zero.

According to a just released report by the BLS, the average unemployed American looked for a job for about 5 months, or 20 weeks, before giving up in 2010. This is a two and a half times extension in the period of disenchantment over the past 3 years, when it took just 8.5 week for the unemployed to give up as recently as 2007. Gradually the feeling of entitlement in America's labor pool seems to be deflating. Alas, it also means that the labor force participation, which continues to be at a 25 year low, will likely not return to recent highs as more and more people are now unemployed for longer, and thus lose marketable employment skills, meaning that the current jump in unemployment is, as many have feared, entirely structural and there is nothing cyclical about it. Additionally, the lucky unemployed succeeded in finding a job in about 10 weeks in 2010, a doubling from 2007's median 5 week period of successful job searching. The issue however is that in May 6.2 million had been out of work for more than six months and more than 4 million haven’t work in more than a year. These are people who are now effectively pushed out of the labor force. Bottom line: perhaps the Fed should just give up on its maximum employment mandate which it now appears to be a complete failure, and just focus on generating hyperinflation which alas will soon be the only way out of the complete disaster America will find itself in in under a year when total US debt is about 120% of GDP.

Today's 10 Year bond (CUSIP: QN3) priced at a solid 2.967%, just wide of the when issued 2.961%, the lowest high yield since November's 2.636% when QE2 was starting (in the form of POMOs, QE2 had long been priced in). The Bid To Cover confirmed the strength of the auction coming at 3.23, a jump from May's 3.00, and higher than the LTM average of 3.10. Indirect Bidders for the first time in 3 months surpassed 50%, taking down 50.6%, with Dealers allotted 41% and the remaining 8.3% going to Directs. Look for QN3 OTR to dominate POMOs over the next 2 weeks. Since there will likely be at most two more 10-year focused buybacks, Dealers will be able to promptly flip this bond to the Fed. As for next month, when the US is on the verge of a full blown default, it is unclear what happens.

Reuters has obtained an advance peek at the crucial Troica report whose findings will determine Greece's fate, and according to Andreas Rinke the conclusion is not very palatable: "The EU, ECB and IMF mission to Greece said in a report obtained by Reuters on Wednesday that the next disbursement of Greek aid could not take place until it corrected the under-financing in its adjustment program." More from Reuters: "The long-awaited report by the so-called "troika" said Greece risked missing its deficit targets without further consolidation measures and that its recession appeared to be longer and deeper than initially expected. "The financing strategy needs to be revised. Given the remoteness of Greece returning to funding markets in 2012, the adjustment program is now under financed," it said. "The next disbursement cannot take place before this under financing is resolved." The troika said a privatization agency with an independent board, to which the European Commission and euro zone member countries could nominate members, would be set up shortly." We fail to see how the Troica can be satisfied by Greek economic data in the next month or so when Greece is expected to run out of money. Hopefully there is more to this because otherwise this ia very unpleasant conclusion for the insolvent country.

A snapshot of the US Afternoon Briefing covering Stocks, Bonds, FX, etc.

Market Recaps to help improve your Trading and Global knowledge
Weakness in CAD evident after mixed Canadian economic data

Beginning at 12:30 pm, the Brookings Institute is hosting a live Q&A via CoverItLive with Congressional Budget Office director Alice Rivlin, who will field questions relating to the nation's debt and fiscal "health." Click on the screen below to be taken to the live Q&A.

Today the world is transfixed with the dissolution of OPEC courtesy of yet another polarizing response to the most recent set of US MENA policies, with Saudi siding with the US (it has no choice in this: recent violent developments in the MENA region means Saudi Arabia is now even firmer attech to Uncle Sam's armed sleeve), yet the truth is that this is a completely non-event from a pure crude supply/demand perspective. Why? Because the real marginal supplier, in light of OPEC's secular decline in output, has been Russia for a long time. The Globe and Mail's Jeff Rubin explains: "Other than a gratuitous gesture to their concerns, any announced OPEC production increase isn’t going to pump more gasoline into U.S. gas tanks or, for that matter, the tanks of motorists anywhere in the OECD... Khalid al Falih, chief executive officer of state-owned Saudi Aramco, recently warned in April that at the country’s current rate of growth in domestic oil consumption, Saudi Arabia would burn a staggering 8.3 million barrels a day of its own oil by 2028. That is almost its current level of production." In other words, Saudi would promote unilateral actions regardless of the other 6 countries that just isolated the Middle East country, simply to keep its population happy with ever greater bribes, but also due to the expansion of its own economy (as transient as it may be). The real story is here: "Russia, the one country actually capable of producing 10 million barrels a day, isn’t even at the table at the OPEC meeting. And it’s been Russia that has been adding the most to world exports over the better part of the last decade as OPEC exports have faltered." In other words, now that the former cartel is finished, and supply bickering and uncertainty portend extreme crude volatility, Russia's role in the energy output scene, and thus in political in general, is about to become that much more important.

One of the conclusions that I try to coax, lead, and/or nudge people towards is acceptance of the fact that the economy can't be fixed. By this I mean that the old regime of general economic stability and rising standards of living fueled by excessive credit are a thing of the past. At least they are for the debt-encrusted developed nations over the short haul -- and, over the long haul, across the entire soon-to-be energy-starved globe. The sooner we can accept that idea and make other plans the better. To paraphrase a famous saying, Anything that can't be fixed, won't. The basis for this view stems from understanding that debt-based money systems operate best when they can grow exponentially forever. Of course, nothing can, which means that even without natural limits, such systems are prone to increasingly chaotic behavior, until the money that undergirds them collapses into utter worthlessness, allowing the cycle to begin anew.

Yesterday we brought you Goldman's quite bearish takeway on Bernanke's speech (excluding the highly irrelevant Jamie Dimon monologue detour: we can't wait to hear what the JPM CEO says once it is announced that Glass-Steagall is being reinstated). Below we present Rosie's key takeaways on Bernanke's remarks. "Bernanke said the 'jobs situation remains far from normal" and as such, this recovery cannot be regarded as being "truly established." That is quite an admission — free money, a tripling of the Fed's balance sheets and 10% deficit/GDP ratios have fallen short of establishing an established recovery. Cause for pause."

In its just released must read Statistical Review of World Energy, BP has many critical observations, the key of which, while not a surprise to most, is that as of 2010, the US is no longer the world's biggest consumer of energy. The new leader, with a 20.3% share of global energy consumption: China. Keep in mind that the Chinese economy is still (in whatever centrally planned terms it discloses) not even half the size of the US, thus one can only imagine how far this number will rise should China ultimately succeed in its goal of converting from an export-led to a consumer-led society. And here we have a market worried about a few million bpd in quota courtesy of the now defunct OPEC. From the report: "World primary energy consumption – which this year includes for the first time a time series for commercial renewable energy – grew by 5.6% in 2010, the largest increase (in percentage terms) since 1973. Consumption in OECD countries grew by 3.5%, the strongest growth rate since 1984, although the level of OECD consumption remains roughly in line with that seen 10 years ago. Non-OECD consumption grew by 7.5% and was 63% above the 2000 level. Consumption growth accelerated in 2010 for all regions, and growth was above average in all regions. Chinese energy consumption grew by 11.2%, and China surpassed the US as the world’s largest energy consumer. Oil remains the world’s leading fuel, at 33.6% of  global energy consumption, but oil continued to lose market share for the 11th consecutive year." And in terms of production reserves: "World proved oil reserves in 2010 were sufficient to meet 46.2 years of global production, down slightly from the 2009 R/P ratio because of a large increase in world production; global proved reserves rose slightly last year. An increase in Venezuelan official reserve estimates drove Latin America’s R/P ratio to 93.9 years – the world’s largest, surpassing the Middle East."