Archive - Aug 2013 - Story

NYT's thesis that Ackman's actions prove something is wrong with activism is specious. His actions prove only something is wrong with Ackman

— Carl Icahn (@Carl_C_Icahn) August 15, 2013

While the 'people of Wal-Mart' may reflect the people of America, we hope - based on the chart below - that the growth in Wal-Mart does not reflect the growth of America...

Not satisfied with raising import tariffs on gold and putting in place jarring new FX flow capital controls, it seems the war on a weakening Rupee continues. We previously discussed the unintended consequence of such actions - including the rise of the gold smuggler - but the latest total ban on the importation of gold coins and medallions is edging India closer and closer to the Argentinian edge of Cristina Fernandez totalitarianism (after the initial ban on sales in June). In an effort to "moderate outflows" of Rupee, the Indian central bank slashed the amount of money families can send out of the country per year to $75k (from $200k) and limited overseas investment to 100% of net worth (from 400%). "We will leave no stone unturned" to control the current account deficit and stabilize the rupee, the finance minister warned; which of course removes any hope that monetary easing to revive growth will occur anytime soon.

The American narrative is quickly changing. There has long been criminality and degeneracy within our government (Democrat and Republican) and the corporate cartels surrounding it, but what we are witnessing today is the final step in the metamorphosis that is totalitarianism. The last stage accelerates when the average citizen is not just complicit in the deeds of devils, but when he becomes a devil himself. When Americans froth and stomp in excitement for the carnival of death, and treat the truth as poison, then the transformation will be complete.

Those damn Egyptians are so inconsiderate: first they non-coup just when John Kerry is busy honing his sailing skills. Now, the non-coupy country breaks out in civil war just as Obama is on vacation in Martha's Vineyard. Well, Egypt may be important enough to serve as a middleman when the US pays Lockheed Martin using Egypt as a dumb intermediary, but is obviously not important enough for Obama to cancel his vacation. Moments ago in an audio-only presentation (couldn't russle enough Martha's Vineyardians for the podium behind him? Were his sleeves rolled up? Was he reading from paper or a teleprompter? The people demand to know), Obama joined Kerry in "strongly condemning" the violence that according to some has already spilled over into all out civil war.

Presented with no comment (but an ugly sense of deja vu)...

So rising rates are "a positive"? The Fed would "never allow" rates to rise unless all is well with the world? Well it seems the 10Y yield smashing to new 2Y highs along with some mixed economic data (and a TIC dataset showing the rest of the world is losing confidence in the bond) is enough to set investors rotating out of stocks and bonds and into cash (as the USD surges). The S&P is at one-month lows. The belly is underperforming as 7Y is +23bps on the week, homebuilders are getting monkey-hammered (-4.3% on the week), and AUD is getting smashed lower as carry unwinds persist. The Dow is holding right at its 100DMA (and the S&P 500 at its 50DMA). After 6 Hindenburgs in 8 days it is perhaps no surprise but we note that here are only 6 New 52wk highs today and 303 new 52wk lows.

From last month's cycle-leading 19.8 print, Philly Fed printed a disappointing (but rather preduictably cyclical drop to 9.3). The same pattern we have seen in economic data (post QEs) has happened once again for the fourth year in a row as the headline print dropped the most since November 2012. Missing expectations after such a cognitively reassuring pront last month is hard for some take we are sure but under the surface things are even worse as the average workweek sub-index turned negative, new orders dumped, and both current and futures expectations for number of employees collapsed.

And the bid hits just keep on coming.

While Americans were blissfully BTFD in June, and enjoying the media propaganda that "all is well" and the beard has their back (he does, but not in the conventionally accepted way) foreigners were selling. Did we say selling? Pardon, we meant dumping with a vengeance, throwing out the boatload with the bathwater, with both hands and feet and getting to da choppa.

Industrial production was unchanged in July, missing expectation of a modest 0.3% rise (making this the 4th miss in a row). Under the surface things are not much better as Consumer goods and non-industrial supplies production both fell their most in 3 months (with only Materials production rising). Capacity Utlization also missed expectations (77.6% vs 77.9% exp.) and has seen the biggest 4 month slide since October 2012 as manufacturing production fell 0.1% on the month (the first drop in 3 months). So how's that H2 recovery shaping up?

With all the excitement over France and Germany's emergence from recession based on this morning's advance first-guess GDP data - a recovery-less recovery the likes of which the US has been languishing in for years - we thought it worth a reminder of the hopeful hockey-stick growth embedded in the IMF's forecast for the European Union. Assuming that Europe is still clinging together in 2016, we present the IMF's dreams of the future.. and most intriguingly the OECD's forecast that Germany will grow at a mere 1.1% for the next 50%.

If there was one thing the bulls did not want this morning, it was a goldilocks report in the trifecta of economic data, which included CPI, Initial Claims and the Empire Fed. Sadly, Goldilocks is precisely what they got with CPI printing just as expected, up 0.2% from June, and up 2.0% from a year ago (ex food and energy also in line at 0.2%), claims coming modestly better than expected at 320K vs Expectations of 335K, and finally the Empire Fed offsetting the sligh claims beat by printing at 8.24 on expectations of 10.00, down from 9.46 in July. As a reminder, only a big economic shock could have derailed the Fed's September taper intentions. So far it is not coming, which means only the August NFP report is left.

Up 115bps in 3 months, the 10Y Treasury bond yield just broke above 2.7535% - a level not seen since August 2011. The 3.5% 'disorderly rotation' level remains the next 'target' but we can't help but notice the similarity to the Oct 2010 to Feb 2011 move...

It's a Carl iCahn world, and 13-Fs are nothing more than 45 day old tweets. Also, with Ben Bernanke Chief Risk Manager of the developed world, there is absolutely no point to be invested in hedge funds (why - there is simply no risk, until Ben loses control, then no amount of hedging will help anyone), and as such what "hedge" funds are buying is irrelevant. But since the cottage industry of alphacloners still exists, here, via RanSquawk and Fly, is the full June 30 holding recap of the usual suspects.