Archive - Apr 16, 2013 - Story

On the surface, today's Housing Data was good. Yes, there was a miss in the housing permits number, which declined from a downward revised 939K to 902K, on expectations of a strong 942K print, but let's ignore that: after all bad news is good news (although as the chart below shows even this number was highly skewed due to seasonal adjustments and the NSA number hasn't really budged in the past year). But look at the housing starts: what a whopper: at 1036K, this was the highest print since June 2008 - great news, right? Not really, because the one key indicator here, single-family units, actually posted a sizable drop from 650K in February to 619K in March. The offset: construction starts of multi-family, aka rental units, which in March was a whopping 392K, a 83K seasonally adjusted surge from February, which brings the total multifamily starts to the highest since January 2006 at 423K. Of course, in January 2006, single-family units hit a record 1823K, or about three times as much as the March 2013 number. Thank you Fed and QE for making yet another capital allocation mockery as America is increasingly shifting into a nation of renters. At this pace expect multi-family starts to surpass single unit starts in 4-6 months for the first time ever.

Thanks, it seems, to the global economic slowdown driving energy prices lower, the Consumer Price Index just printed at -0.2% MoM, notably below expectations (its biggest miss in 7 months) and well down from last month's +0.7%. The main driver of this deflationary spike is the drop in gasoline prices -4.4% MoM. Year-over-year CPI (ex Food and Energy) lagged expectations also (1.9% vs 2.0% exp.) meeting the Fed's oh-so-well engineered mandates. However, the 1.9% rise is the slowest pace of inflation in 20 months. On the bright side, the price of used cars is rising at its fastest pace in months thanks to the 97-month term loans and government credit creation.

Moments ago Goldman reported its Q1 earnings which were strong enough to beat the highest Wall Street estimate, printing at $4.29 on an estimate range of $3.33 to $4.27/share. Revenue was $10.09 billion on estimates of $9.65 billion. What is notable is that while the bank is eating the lunch of its competitors, as it tends to do, in virtually all revenue categories (IB at $1.41 billion, FICC $3.22 bn, Equities: $1.92 bn, Investment Management $1.32 bn, and Prop trading $2.07 bn), it still was unable to match its prior year revenue in the key "client flow" categories of FICC and equities, which dropped from $3.46 billion to $3.22 bn, and $2.25 bn to $1.92 bn, respectively. How did Goldman offset the secular decline in market participation by everyone else? By doing what it does best: prop trading - in Q1 the firm's "Investing and lending" group, aka its Prop group, reported revenue of $2.068 billion (highlighted in the chart below) well higher than the $1.973 billion in Q4 and $1.911 a year earlier. This was the highest prop trading revenue reported by Goldman since Q1 2011 when, as we reported in February, the world was on the verge of being fixed. It wasn't, and the result was a collapse in Goldman prop trading in Q2 2011. Will this year repeat? This remains to be seen. However, for now, Goldman's employees are happy: in Q1 compensation benefits were $4.34 billion, or 43% of revenue. And with Goldman reporting "only" 32,000 total staff at period end, or the lowest since the great financial crisis, the average compensation per employee is once again above the "psychological" $400K barrier, or $403,281 on a trailing 12 month basis to be exact. Bollinger time, boys.

It was only a week ago that Iran was shaken by a major 6.1 earthquake, striking just 100 km away from the Busher nuclear power plant: a location so "opportune" some, so inclined, saw in this phenomenon anoter demonstration of the HAARP's capabilities. Those same people will then hardly be surprised to learn that moments ago the entire middle east, from Dubai to Delhi, shook in the aftermath of yet another massive earthquake, this time measuring 7.8 on the Richter scale, which once again was located as the USGS reports, some 86 km East South East of Khash, Iran. According to preliminary reports, the USGS says there is possibility of heavy damage in area of epicenter, and an estimated 359,000 people felt very strong to severe shaking. USGS also estimates that 16K may have felt 'severe' shaking, 343K 'very strong' shaking, 1.7M 'strong' shaking; 1.1M 'moderate' shaking. An Iranian official was promptly on the tape saying hundreds of dead expected from quake in southeast of country, even as the Russian company that built the Busher NPP saying there was no damage from the quake. How much more shaking can either the existing Iranian nuclear power plant, or the much maligned nuclear facility in Fordow, sustain before they go off in a big glowing mushroom cloud: that is the

• Investigators hunt for clues in marathon bombing (Reuters)
• Investigators scour video, photos for Boston Marathon bomb clues (Reuters)
• 'Act of Terror' Kills at Least Three, Injures About 140 as Bombs Wreak Carnage on Marathon Crowd (WSJ)
• Brent Crude Below $100 (WSJ)
• Slower China Growth Signals Days of Miracles Are Waning (WSJ)
• Central Banks at Ease Limit Risk Political Backlash (BBG)
• Merkel plans to quit midterm, says author (FT)
• Monte Paschi Prosecutors Seize $2.3 Billion of Nomura Assets (Businessweek)
• Treasuries back on investors’ buy lists (FT)
• J.C. Penney Said to Seek Ways to Separate Real Estate for Cash (BBG)
• Climate scientists struggle to explain warming slowdown (Reuters)
• Putin Calls for Stimulus Plan After Recession Alarm (BBG)
• TIPS in Longest Selloff Since ’08 as U.S. Bancorp Cuts (BBG)

Yes, there was economic news overnight, such as a Eurozone and UK CPI, both of which came in line with expectations (1.7% and 0.4% respectively), and a German ZEW which confirmed Europe's accelerating deterioration, tumbling from 48.5 to 36.3, far below expectations of a 41.0 print (somehow the huge miss has managed to push the EURUSD up by 60 pips to an overnight high of 1.31 but this is merely the pre-US open manipulation to ramp US equities higher), just as there was news that Angela Merkel's support for a Cyprus bailout is growing (was there an alternative?), and that as part of their ongoing investigation into Italy's repeatedly insolvent Monte Paschi, investigators had seized €1.8 billion worth of assets from Nomura Holdings, and that Spain as usual sold more Bills than expected, driven by oversize Japanese and Pension Fund purchases, but what everyone has been looking for is whether the relentless and record rout in gold is over. For now, it appears that is the case, with gold printing an overnight low of just over $1320 and ramping higher ever since, up 3% so far and rising.