Archive - Sep 26, 2013 - Story

For the 3rd day in a row, precious metals have been monkey-hammered lower in the first hour of trading on the US markets... no news, no headlines, no technicals - just good old-fashioned $10 cliff-dives in gold...

4 days to go... and so it begins...

*REID SAYS IT'S UP TO REPUBLICANS TO SPEED BILL, SEND TO HOUSE

US HOUSE SPEAKER JOHN BOEHNER PLEADS WITH REPUBLICAN CAUCUS TO 'BE FLEXIBLE'

UPDATE: BATS Halted trading

• *BATS Y HALTED TRADING AT 9:44 A.M., COMPANY SPOKESMAN SAYS
• *BATS Y EXCHANGE EXPERIENCING 'INTERNAL NETWORKING ISSUE'
  

Just 12 hours after NYSE and NASDAQ agree to collude on fixing the "glitches", we get another broken market...

Being bullish on the market in the short term is fine... The expansion of the Fed's balance sheet will continue to push stocks higher as long as no other crisis presents itself. However, the problem is that a crisis, which is 'always' unexpected, inevitably will trigger a reversion back to the fundamentals. The market will eventually correct as it always does - it is part of the market cycle. The reality is that the stock market is extremely vulnerable to a sharp correction. Currently, complacency is near record levels and no one sees a severe market retracement as a possibility. The common belief is that there is 'no bubble' in assets and the Federal Reserve has everything under control.

With the entire Fairfax Financial LBO 'offer' premium now disappeared and then some, it seems the news for BlackBerry is going from bad to worse. As Reuters reports, in an announcement that highlighted the faded relevance of the company, T-Mobile US Inc said it was no longer efficient to keep BlackBerry devices in its stores. The 4th largest US wireless provider said it will ship them if people want them but they will no longer be stocked in stores.

After cratering another 10%+ lower this morning, and touching the mid-$8 level, JCP had no choice but to defend itself as otherwise it was straight to zero as the short surge pummeled the stocks with relentless fury. Sure enough, moments ago the management team posted an unsolicited release informing everyone who had "inquired" that despite reality seeping in with every passing day that the inevitable end is getting closer, the company is "pleased" with its turnaround efforts and "anticipates" positive comp store trends.

In a world in which nobody knows anymore if good is good, bad, neutral, or completely irrelevant, today's final Q2 GDP revision was largely meaningless, although we are confident the algos will somehow take this red flashing headline as a sufficient reason to ignite momentum higher. At 2.48%, the final print was below the expected 2.6%, and below the first revision of 2.52%. Yet despite the small change deep to the right of the decimal comma, there was little to note: Personal Consumption came at 1.8%, missing expectations of 1.9% as the consumer obviously can't grow any further, and resulted in 1.24% of the 2.52% GDP print, modestly higher than the 1.21% in the first Q2 revision, but well below the 1.54% in Q1. Other components saw a modest drag from net exports which from 0.00% declined to -0.06%, while change in private inventories dipped from 0.59% in the prior revision to 0.41% in the final one. This is also well below the 0.93% in Q1. Finally, fixed investment was also in line, at 0.96%, up a fraction from the 0.90% in the final revision.

Despite the last 2 weeks of 'systems upgrades' being responsible for lower-than-expected jobless claims data, the smart analysts and strategists had lower expectations to 325k - the lowest in 6 years - and sure enough claims beats expectations and prints 305k (for the 4th week in a row - 2 of them with broken systems). This is a drop of 5k from last month's entirely made-up data as we note that once California (among the biggest contributors to the claims data) has caught up with its backlog - so theoretically this is a 'real' data point. Continuing claims ticked up by the most in 2 months.

Presented without commentary (if confused - wink wink Mario Draghi - Ray Dalio will explain).

Moments ago Mario Draghi's nightmare just got worse following a release by the ECB overnight that loans to the private sector dropped 2 percent from a year earlier. That’s 16th monthly decline and the biggest since the start of the single currency in 1999. "The data shows a depressing picture for the credit market," said Annalisa Piazza, an analyst at Newedge Group in London. "Although the ECB made clear that the ECB cannot do much to boost credit to the corporate sector, we expect the current picture for loans to remain one of the key reasons behind expectations of a prolonged period of accommodation." Translated: all monetary transmission mechanisms in Europe are completely broken, which in turn feeds the feedback loop of the deleveraging depression, leading to even less demand for loans, more deleveraging by banks ad lib.

• The new normal name of a broken market: glitches - NYSE, Nasdaq Consider Cooperating to Address Glitches (WSJ)
• Early Thursday Humor: Abe Tells Wall Street Japan’s Economy Is Exceptionally Good (BBG)
• Rising Rates Seen Squeezing Swaps Income at Biggest Banks (BBG)
• JPMorgan Mortgage Talks Said to Discuss $11 Billion Deal (BBG)
• Can't make this up: HFT firm "finds" Fed did not leak data early to benefit HFT firms (FT)
• Hertz Cuts Full-Year Forecast on Weak U.S. Airport Rentals (BBG)
• Greece does not need third bailout, seeks debt 'reprofiling' - deputy PM (Reuters) - right, it needs a fourth and fifth
• Hezbollah gambles all in Syria (Reuters)
• Twitter Adds J.P. Morgan and Morgan Stanley as Bankers on IPO (WSJ)
• Messi in Court Shows Tax Collectors Set to Pursue Star Athletes (BBG)

The best summary of what has (not) been going on in the downward drifting equity markets comes from DB's Jim Reid, quoting: "Markets are in non-panicky limbo at the moment ahead of the upcoming US budget debate. US equities fell for the 5th day in row (S&P 500 -0.27%) and although this is the worst run since the Christmas/New Year’s Eve period of 2012 (due to the fiscal cliff debacle), the cumulative fall is only -1.9% over this decline. Meanwhile Treasuries hit a 7-week low in yield as they recorded their 12th decline in the last 14 days." As has been the case over the past week, stocks in Asia have generally traded lower with the exception of the Nikkei225 which day after day continues to do its insane penny stock thing, first dropping -1.5% only to close up 1.2% on absolutely no news, but some chatter the Abe administration would raise the sales tax on October 1, only to offset the fiscal benefit by lowering corporate tax.  How this has any net impact is beyond us. Proceeding to Europe, stocks failed to sustain the initial higher open and moved into negative territory, with Italian asset classes underperforming, as market participants digested reports citing Italian MP Gasparri saying that PdL lawmakers are ready to quit if Berlusconi is ousted. This in turn saw a number of Italian banking stocks come under intense selling pressure, with the Italian/German yield spread widening in spite of supportive reinvestment flows that are due this week.

Yesterday, it was Goldman which (paradoxically, considering the firm's role in the recent Term Loan underwriting) took the axe to JCP securites, both bonds and stocks. Today, it is the turn of Citi's Deborah Weinswig which after reviewing its JCPenney cash burn analysis, goes for the jugular with phrases such as "We think adequate cash for 2014/2015 is in question", "The turnaround is taking longer than we anticipated, and we are concerned  about a softening macro environment combined with deteriorating vendor relationships", and of course "We maintain our EPS ests. but are lowering our target price to $7, down from $11 prev., based on an EV/Sales valuation methodology using our 2015 sales estimate." And it gets worse: "Where’s The Floor? — As a supplement to our EV/Sales valuation methodology, we have conducted a basic liquidation valuation, yielding $324M total value, or $1/share." Well, as long as there is a "floor"...