Archive - Apr 2013 - Story

The 'most shorted' names in the Russell 3000 are up a remarkable 1.4% today compared to 0.45% in the index itself. The short-squeeze off the NFP gap-down lows is impressive indeed. From the open last Friday, the 'most short' names are up 6.6% against the index up only 3.5% as the dash for trash continues in the face of increasingly dismal data. The last 2 times that the 'most short' index was this squeezed relative to the index was late-December (before the equity dip) and mid-Fed (before the equity dip). Just as we warned here and here, the inexorable flow of easy money means the dash-for-trash (as remarkably ridiculous as it seems - though as now know nothing is allowed to fail ever again) has been the winning trade; though as we note below, there is a limit to the 'squeezability' and we appear to be there in the short term.

Manipulation and carefully crafted distortion erode trust, not just in the individuals employed to repeat the lies but in the institutions that issue them. The ruthless pursuit of self-interest is now the norm; truth is a terribly risky disruptor that must be hidden, masked or countered with plausible lies. There can be no trust if there is no truth. How can we trust people who lie to us constantly, who issue one self-serving justification after another for their own parasitic predation? We cannot. The premium in America has shifted from truth to self-serving distortion, and from trust to manipulation. This spiritual and moral rot will end gloriously, have no doubt, for the stock market's permanent ascendancy dissolves all other narratives.

The Japanese government bond market has been cataclysmicly volatile in the last few days since the BoJ shifted from words to action - with an average daily range 8-times normal. But, as a rather famous rates desk trader recently noted, if there is a real "Japan Panic" trade, it will make itself evident at 1pm ET today. His reasoning is impeccable. The BoJ has embarked on a program where it will be buying 'more' long-maturity bonds than the government issues (at around $80bn equivalent per month, ad infinitum, in a nation, that we pointed out here, has a GDP that is 40% of the US.) This surge in liquidity, which as is well known across the G-7 is completely fungible (within and across all bank balance sheets), has to leak somewhere, and the 30Y US Treasury bond is now the highest-yielding 'safe asset'. However, the Fed is monetizing vast amounts of US Treasuries indirectly and so the only way for a large Japanese investor to buy enough to make a difference is at the auctions. And so, if the 30Y auction today prints with a large "negative tail" - inside of the WI - then it would go a long way to confirm the "Japan Panic" trade is on.

The bond king is pissed:

GROSS: Fed’s secret Email list bothers no one it seems.I’ll give up my rant but remember it please.

— PIMCO (@PIMCO) April 11, 2013

In what may be the most appropriate chart to summarize not only the entire US "recovery", the "all time high stock market" and the daily newsflow, we present the number of jobs for those in the motion picture and sound recording industries, i.e, those who "make stuff up." It just hit a record high. And with "circus" jobs at all time highs, we can only assume jobs for makers of bread, if the BLS actually broke it out, would be off the charts as well. We will just leave it at that.

While budgets are thrown around that tax wealth in every way possible and transfer payments are ever-increasing, it seems the post-election euphoria among the poor in the USA has worn off just as rapidly as it did in 2008. Bernanke's irrational exuberance has pushed the 'comfort' of the 'rich' (earning over $100k) to its highest since October 2010 while the comfort of the 'poor' (those earning under $15k per year) has slumped back to the lowest comfort in three months. We need moar wealth transfer.

If weak PC sales throughout 2012 were blamed on expectations for Windows 8, now it is the turn to blame weak PC sales on Windows 8 "lukewarm reception" disappointment. Just never the economy, and the fact that there just is no actual end demand. "Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome," is how IDC describes the utter collapse in PC Shipments in Q1 2013. Against a forecast -7.7%, the worldwide shipment of PCs collapsed -13.9% to a mere 76.3 million units. This is the fourth consecutive quarter of declines and is the worst quarter since records began in 1994. Interestingly, Europe did not do as bad as expected (though the consumer was worse) but the US and AsiaPac (Ex Japan) both plunged more than expected. Lenovo has almost closed the gap to HP as the world's leading supplier after HP's shipments fell a stunning 23% in Q1. HP opened -7.5% and MSFT -4.3%.

The Central Bank of Cyprus (CBC) said last night however that selling the island’s gold had not been on the table. “Such an issue has not been raised, has not been discussed and is not being discussed at the moment,” CBC spokeswoman Aliki Stylianou said. Stylianou added that sale of the gold was a matter handled exclusively by the CBC board. A spokesperson for the Central Bank of Cyprus told the Cyprus News Agency (CNA) that reports of the $523 million gold sale have not been, “raised, discussed or debated,” with the bank’s board of directors. The Central Bank of Cyprus denied the gold sale after reports on Reuters said that Cyprus officials had agreed to sell around 400 million euros in excess gold reserves to contribute to the country's bailout. Stylianou, the spokesperson for the Central Bank of Cyprus said that the gold sale was, “never discussed nor are there current or future plans to do so on the board’s agenda.” Reuters based its story on a draft report from the European Commission which assessed the nation's financing needs.

Despite reassurances from D-Boom that "Spain can once again be the engine of growth for Europe," the troubled nation appears to be going from bad to worse. House prices dropped 9.7% YoY in Q4 2012, its biggest drop on record, taking the price back to 2004 levels. This price pressure merely exacerbates the Spanish banking system's delinquent loans and drives up unemployment. But Spain is not alone, Slovenia, which many have their eye on for being the next bail-in, saw house prices slide 8.8% according to IBTimes. Perhaps there is a correlation between house price bubbles (cough US cough) and banking/sovereign collapse.

Following last month's surge in initial claims (subsequently revised even higher from 385K to 388K), the monthly edition in the series tumbled by 44K to 344K, below estimates of 360K, and which will be revised to 348K or so next month. The reason for the volatility given by the DOL is the "unwind of seasonal swings" which would make sense as the unadjusted number actually rose by 37,025, or about the amount the adjusted number dropped by. Continuing claims rose more than expected to 3,079K, from 3067K, however the number was revised so it can be palatable for MSM consumption, and as a result of the upward revision of February from 3063K to 3091K, it "declined." It is unclear how many if any states were estimate by the DOL in this month's edition of pick the noisy number. Most importantly, unlike the entire past two weeks, a good economic print is good for the market, not just a bad economic print.

As was reported in the previously presented Cypriot Debt Sustainability Analysis, which among other things had this stunner inside of it, things in Cyprus have gone from bad to worse in the brief span of a month. 35% worse to be exact, because this is how much the total bailout of Cyprus has grown by in a few shorts weeks, from €17 to €23 billion, which happened because just as we predicted the stealth outflow from banks was much worse (read bigger) than previously reported, leaving banks with a far bigger hole to plug. This is problematic because at least previously the bailout as a percentage of GDP was in the double digits. No longer so, as the latest (and soon to be re-revised higher) bailout figure now stands at over 120% of the country's €18.8 billion GDP (which itself is about to tumble following the collapse of the economy).

There was much hope in the feudal states of Europe that the monthly December drop in Greek unemployment - the first in years - was the beginning of the end for local misery. Alas, it appears the Greek statistics office leaarned a thing or two from the BLS and it was all seasonal adjustments. As reported earlier today, things just got much worse again, with January unemployment surging by 1.7% in one month to a new all time record high 27.2%. More importantly, the number of employed people in Greece, which dropped to a new record low of 3.617,771 compared to 3,888,400 a year ago (and down 11,653 from December), is now nearly as much as the entire inactive population at 3,346,423 and far below the ranks of the unemployed (1,348,694 - an all time high as well) and inactive. Spread by gender, the unemployment rate for males was 23.9%, while a record 31.4% of eligible women had no job in January. Finally, youth unemployment once again hit a record high 59.3% in January, even as unemployment among those aged 65-74 has soared from 0.9% in 2008 to 6.9% in 2013.

• Obama to report to his bosses today: Obama Meets With Blankfein, Dimon and Moynihan Today (BBG)
• 2007 is here all over again: Seeking Relief, Banks Shift Risk to Murkier Corners (NYT)
• Kuroda Calls BOJ Inflation Target 'Flexible' (WSJ)
• Lagarde warns over three-speed world (FT)
• N. Korea’s Retro Propaganda Calls U.S. Boiled Pumpkin (BBG)
• Luxembourg To Ease Bank Secrecy Rule, Share Data In 2015 (BBG)
• Bank of Korea Keeps Policy Steady (WSJ)
• BOE Stimulus Dilemma Persists as Inflation Seen Higher (BBG)
• EU Sounds Alarm on Spain (WSJ)
• Qatar gives Egypt $3bn aid package (FT)
• RBNZ Says Deposit Insurance May Increase Risk of Bank Failure (BBG)
• Plosser Calls for Reducing QE Pace Citing Gains in Labor Market (BBG)
• Obama budget aims to kick start deficit-reduction talks (Reuters)