Archive - Nov 2013 - Story

Greater-est fools? Or different this time?

Ed Snowden's latest revelation may leave SEC officials quaking as the NSA "has been gathering records of online sexual activity and evidence of visits to pornographic websites as part of a proposed plan to harm the reputations of those whom the agency believes are radicalizing others through incendiary speeches." Of course, as we have seen, this 'information' would never be used by the government for non-radical-terrorist suppressing reasons, as the ACLU notes, is is "an unwelcome reminder of what it means to give an intelligence agency unfettered access to individuals' most sensitive information using tactics associated with the secret police services of authoritarian governments."

In early 2013, many were mystified when one of the most vocal deflationists, and hence stock market bears, David Rosenberg, turned furiously bullish. Just what was the motive behind this transformation many wondered? Thanks to a just filed Gluskin Sheff compensation table, we can put all such lingering questions to rest: the reason, or rather reasons: 3,082,441... all-cash.

In a move reminiscent of the "radical" Tea-Party demands of a few weeks back, the administration has decided:

*OBAMA DELAYING ONLINE INSURANCE ENROLLMENT FOR SMALL BUSINESS
*SMALL BUSINESSES SAID TO USE `DIRECT ENROLLMENT,' NOT WEBSITE

The one-year delay - to Nov 2014, follows the initial Oct 2013 delay citing "sometime in November 2013" availability. The delay applies only to the federal-run SHOP exchanges in almost three dozen states.

Keep a close eye on China: it is on the cusp between the end of the leverage cycle (where as we reported over the past two days, it has been pumping bank assets at the ridiculous pace of $3.5 trillion per year) and on the verge of having its debt bubble bursting. What happens then is unclear.

Recently, newspaper headlines declared that Greece would have a balanced budget for 2013 as a whole. The news came as quite a shock: Recall that when Greek officials came clean about the true state of their country’s public finances in 2010, the budget deficit was more than 10% of GDP – a moment of statistical honesty that triggered the eurozone debt crisis. It seemed too good to be true that the Greek deficit would be completely eliminated in just three years. In fact, it is too good to be true.

As many expected:

• *ITALY SENATE REJECTS MOTIONS TO ALLOW BERLUSCONI TO KEEP SEAT
• *FORMER ITALIAN PREMIER BERLUSCONI OUSTED FROM SENATE

Of course, Sylvio is not happy:

• *BERLUSCONI SAYS HIS OUSTING WON'T LEAD HIM TO RETIRE TO CONVENT
• *BERLUSCONI SAYS TODAY IS 'BITTER DAY' FOR DEMOCRACY

Indeed!

If this week's 2 year auction was an indication of a rising Bid to Cover, and the 5 Year yesterday showed a modest decline, the just completed 7 Year auction was evidence that any rumors of a pick up in ultimate demand in the belly and the long-end of the curve are greatly exagerated. The initial indication of how weak the auction would be came moments before the 11:30 am announcement, when the When Issued was trading at 2.094%. When the formal announcement from the Treasury came that the bond had priced at a high yield of 2.106%, or tailing by a 1.2 bps, the bond complex promptly exhaled. Things only got uglier when looking at the internals: as noted above, the Bid to Cover came at 2.36: a sharp drop from the last auction's 2.66, well below the TTM average of 2.62, and the lowest going back all the way to the 2.26 in May 2009. The takedown was just as unimpressive, with Direct interest sliding to just 16.14% of the final allocation, Indirects likewise seeing their allotment tumble from 42.30% to 34.07%, the lowest since February, which left Dealers holding half of the auction, or the most since June 2012.

While we identified long ago the "wealth effect" nerve center of the New Normal, one thing largely unavailable, was pictures of this trading desk with seemingly no sell buttons. Until now: below, courtesy of Wall Street on Parade, we present a modest compilation of not only what the current NY Fed trading desk looks like but also compare it to its predecessor, as it appeared on vintage photos from the 1930s

Something curious happened earlier today when the DOL revealed its latest initial claims number: while the seasonally adjusted print declined by 10,000 to an expectations beating 316K (a change that identically matched what happened to the Seasonally Adjusted print a year ago), the unadjusted number rose by 37,229 to 363K. That's ok: after all that's what "seasonal adjustments" are for - to take a volatile number which historically posts an abnormal jump or drop in any given week and smooth it out, right? Wrong. Because as the DOL also reported a year ago, the supposedly same "seasonal adjustment" applied to the same week in 2012, when the claims number was 390K adjusted and 359K unadjusted, should have been adjusted in the same direction. And while the 390K claims print in 2012 was indeed a 10,000 drop from the prior week's 400K, the unadjusted number instead of being an increase, was actually a drop, one of 44,768 jobs. How does this same "recurring" seasonal adjustment look further back - after all it is seasonal, so there should be some recurring logic for a specific time of the year? The answer is shown on the chart below.

Unlike every other measure of consumer confidence, sentiment, or comfort, the 'final' UMich Consumer Confidence print recovered its "flash" collapse and managed to beat expectations. However, before the party streamers are broken out, this uptick leaves the confidence data the 2nd lowest since Jan 2013 - led by - drum roll please - the expectations for the future (which rose from a preliminary 62.3 to final 66.8). Perhaps troubling is the drop in inflation expectations - down to 2.9% year ahead, the lowest since Oct 2010. So unlike the rest of the surveys, UMich finds consumers more confident about the future but in the baffle-em-with-bullshit category, expecting disinflationary pressures to grow. Of course, there are seasonality factors - its the holidays nearly - and we note that the 75.1 print is lower than any Nov print from 2004-2008.

Well that escalated quickly. Having broken above $900 yesterday to new record highs (and a 100% gain in a week), the crypto currency is not looking back now. On what is higher than average volume this morning, Bitcoin just broke above the magic $1000 level for the first time (at $1025). Meanwhile, the BTC China "arb'd" rate is around $950 for those playing at home; and Litecoin has just topped $26 (from $4 a week ago!).

Those who were looking at the JPY monkeyhammering at 9:42 spotted the exact moment the November Chicago PMI number was released early to MarketNews subscribers, and also knew precisely that the number would be a beat. Sure enough, at 9:45 when the number was released for broad distribution, this was confirmed because while the headline number dropped from last month's epic 65.9 to 63.0, it was still a sizable beat of expectations of 63.0, with the Employment number rising from 57.7 to 60.9 the highest since October 2011. However, one look at the internals shows that not all was well. In fact, with New Orders dropping from 74.3 to 68.8, production sliding from 71 to 64.3 and backlogs down from 61.0 to 59.8, the forward looking metrics all dipped so it was all up to that old faithful channel stuffer - Inventories - to fill the gap. And fill the gap it did, by soaring from 48.0 to a whopping 61.1, the highest number since September 2006!

While shoppers will perceive the discounts on Black Friday as 'saving' them fortunes, the cost of the 2013 Thanksgiving Day dinner may be the most expensive ever. As the gorging commences, despite an entirely benign inflation in the eyes of the Federal Reserve, the prices of everything from chocolate chip cookies to ice cream are on the rise. But it is the centerpiece of the meal that is weighing on pocket-books. As Bloomberg's Michael McDonough notes, Americans are paying the most for whole frozen turkeys since the Bureau of Labor Statistics began publishing data on the series in 1980.

While the Census Bureau disclosed that headline Durable Goods declined in October by 2.0% (and much more on an unadjusted basis), this was in line with expectations, and was driven by an unexpected -15.9% collapse in new aircraft orders, driven by Boeing which had a 60% drop in orders, down from 127 to only 79 for the month. However, the big surprise was in the ex-transport durable goods number, which declined by -0.1%, crushing expectations of a 0.5% increase and down from last month's revised +0.2%. In other words, the modest rebound in orders in late summer now appears to have been purely a function of channel stuffing, which now has to work its way through the system, as manufacturing with unfilled orders dropped by a whopping -3.1%.