Archive - Apr 2013 - Story

Two days in Washington D.C. kept caterers busy but produced a 2,126 word communique long on slogans and short on anything actionable. The G-20 statement (below) can be boiled down simply, as we tweeted,

G-20 statement: "if we all lie, same as nobody lying"

— zerohedge (@zerohedge) April 19, 2013

And just to add one more embarrassing detail for them, while section 4 discusses "Japan's recent policy actions," not only does Canada's finance minister James Flaherty believe they "didn't discuss the Japanese Yen," but Japan's Kuroda believes, comments on 'misalignments', "were not meant for the BoJ."

So far, 91 companies have reported 1Q results (28% of total S&P 500 market capitalization). 37% of companies reporting have beaten earnings estimates (below the historical average of 47%) and 13% have missed estimates (vs. average of 15%). The average EPS surprise has been 3.4%, below the 4.8% historical average. Excluding Financials, there are similar positive surprises (37%) and similar negative surprises (13%). Excluding Financials and Utilities, 21% of companies reporting have beaten sales estimates (below the historical average of 38%) and 24% have missed estimates (vs. average of 18%). The average revenue surprise has been -0.1%, below the 1.3% historical average. In short, things are not going according to plan - though we assume this just means the Q4-fantasy-hockey-stick explosion of revenues, earnings, and margins will just get bigger.

Hong Kong’s Chinese Gold & Silver Exchange Society has been in operations for over a century, and it’s President Haywood Cheung was interviewed by Bloomberg news earlier today.  Whoever orchestrated the attack on gold and silver in the last week or so has gravely miscalculated, since the response to the drop has been surging demand for physical gold and silver.  While I tend to be skeptical when I hear about silver shortages since these reports have been so exaggerated in the past, the lack of silver coin availability and premiums are the most extreme I have seen since the financial and economic meltdown of 2008.  Now we discover that the Chinese Gold & Silver Exchange Society has essentially sold out of gold bullion, and must wait until Wednesday for shipments to arrive from Switzerland and London.

As another woeful week wends to a weary close... what we got to look forward to? Although markets appeared to be shooting off in every direction, we do expect we'll see clearer direction soon. Despite the noisy criticism earlier this week of Yen "competitive" devaluation, the G20 meeting said nothing. We suspect certain individuals were quietly sat in the comfy chair, had global reality gently explained to them with the aid of some rusty dental equipment, were slapped around a bit and told to shut it. As long as Japan can sign the pledge on “no competitive depreciation” without giggling we’ll be ok. We do suspect the warmest circle of financial hell is being reserved for those populist European politicians who've tried to appeal to voters with efforts to stem the financial tides, and punished markets for being markets.

Chechen president Ramzan Kadyrov: "Tragic events took place in Boston. As a result of the blast people were killed. Previously, we expressed out condolences to the people of the city, and the people of America. Today, as reported by the media, during his arrest attempt, a Tsarnaev was killed. It would be logical, for him to be detained and investigated, and all the circumstances and degrees of his guilt uncovered. Apparently, the special services needed a result at any cost to calm down society. Any attempts to make a connection between Chechnya and Tsarnaevs, even if they are guilty, are in vain. They grew up in the United States, their attitudes and beliefs were formed there. It is necessary to seek the roots of evil in America. The whole world should fight terrorism. We know thisd better than anyone else. We wish a recovery to all the victims and share the Americans' sense of sorrow."

Simplicity requires eliminating virtually everything we are "processed" to want and need for personhood, and accepting the intrinsic complexity of meaningful projects. There are two basic ways to reduce the stress described in yesterday's entry, The Silent Epidemic in a Broken, Deranged System: Stress: simplify one's life and take control of one's life. The two are not mutually exclusive, of course, but one does not necessarily lead to the other.

US equity indices are in their own little world of glee today. Treasuries, credit, FX markets, swaps, commodities are not playing along. So what is going on? These two charts may help to explain...

Fitch has just downgraded the UK from AAA to AA+ - now lower than France's.

• *FITCH REVISED DOWN U.K.'S ECONOMIC GROWTH IN 2013 TO 0.8%
• *FITCH REVISED DOWN U.K.'S ECONOMIC GROWTH IN 2014 TO 1.8%
• *FITCH CITES WEAKER ECONOMIC, FISCAL OUTLOOK ON U.K.

Fitch doesn't see the UK economy reaching 2007 highs until 2014 - so there's hope?

Earlier, we presented a captioned photo profile of one of the two alleged terrorists, the 26 year-old Tamerlan Tsarnaev who died last night in a shoot-out with the Boston Police. As a follow up, Bloomberg has conducted an interview with one of his gym sparring partners, "Jon K" who trained with Tamerlan in the same Boston gym, and who told BBG TV that "he seemed like a really nice guy, to himself and a little bit arrogant and cocky, but he helped people at the gym all the time with their boxing and was friendly with everyone. It's a complete shock." Jon, who asked that his last name not be used, said: "All week, I have been wondering who the psycho was and it turns out that it was somebody I interacted with. It is shocking, especially as an athlete, he was an athlete, that he would do this to other athletes and just anyone in general."

EURUSD ended the week pretty much where it started - around 1.3100 - having tested from 1.30 to 1.32 during the week. Italian stocks also end the week practically unchanged - despite no government. But... German stocks (DAX) have slumped over 5% in the last six days for the biggest such drop since early June last year. Most other European equity indices end the week down 1.5 to 2.2% but - for some high-beta, JPY-expatriating reason, Italian stocks ripped higher today and saved the week. Swiss rates end the week near their lows. European sovereign bonds in general ended the week flat to slightly tighter. Europe's VIX closes modestly higher (but well off its mid-week highs). So while on the face of it, all is well, the smackdown in core European stocks to 5 month lows suggests things are not going well on the continent.

JUST IN - ANZUR TSARNAEV, FATHER OF SUSPECTS IN BOSTON MARATHON BOMBING SAYS, HE BELIEVES SECRET SERVICES FRAMED HIS SONS. BBC. #911BUFF

— 911 Operator (@911BUFF) April 19, 2013

Following last night's abysmal earnings and outlook shift, it appears the hopers are leaving IBM in their hordes. The biggest single-day drop in 8 years has smashed IBM down over 7% and plunged it into the red for 2013. This drop represents a 120 point drop in the Dow Jones Industrial Average - but have no fear, thanks to EURJPY and the rest of the Dow components magically levtating, the Dow is green...

As the authorities focus on the geographic distribution of what may (or may not) be a delocalized cell, a curious developed has emerged courtesy of NJ.com, which reports that a woman has been found living in West New York who has identified the bombing suspects as her brothers. She adds, logically enough, that she can't believe any of this has happened. She is probably not the only one.

Benjamin Franklin was right. Ultra-committed separatist groups, extremists, and all-around bad guys can always find a soft target. Guard the airport and they’ll blow up the bus station. Guard the bus station and they’ll take out a public park. Constant security, paramilitarism, and steady erosion of freedom constitute an enormous price to pay for a false sense of safety against bad people.

While Cyprus has been brushed away as a "storm in a teacup" and asset-gatherers stare blankly at their screens pointing at record highs to confirm the "market knows best", it appears something rather important 'broke' that day (and hasn't stopped breaking since). While we have discussed the rather glaring divergences between US equities' exuberance and global equity markets and macro- and micro- data; supposedly the Fed's key indicator (the 5Y5Y forward inflation expectation) has reversed rather significantly. The last two times, forward inflation expectations dropped so significantly, the ECB launched LTRO and the Fed launched QE3. It seems the BoJ's QQE is not having the effect perhaps they had hoped on inflation expectations. Will the Fed have to come to the rescue once again? And how will gold react to that?