Archive - Dec 23, 2014 - Story

And just like that Q3 GDP, the one for the quarter ended Sept.30, was revised from 3.9% (which in turn was revised higher from 3.5%) to a mindblowing 5% - the highest print since Q3 2003 when GDP rose by 6.9%. This was above the highest Wall Street forecast of 4.7%, higher even than Joe Lavorgna's. The drivers: unprecedented revisions to Personal Consumption which supposedly rose by 3.2% in Q3 as opposed to the 2.2% prior reported, and 2.5% expected. Consumption accounted for 2.21% of the final 5.0% GDP print: this was the highest since Q4 2010 when it rose 2.8%. In fact, everything was revised higher: fixed investment rose 1.21% compared to the 0.97% reported previously; private inventories were virtually unchanged after allegedly subtracting 0.6% from growth in the original Q3 GDP estimate; net trade was unchanged adding 0.77% to GDP and finally the government boosted GDP a little as well, contributing 0.8%.

Against expectations of a jubilant 3% surge in November, Durable Goods Orders slipped 0.7% - the biggest miss since December 2013. Perhaps even more worrisome, YoY Durable Goods Orders rose at a mere 0.3% - the slowest since the Polar Vortex. Across the board the data was a disaster, ex-Transports -0.4% (against expectations of a 1% rise), Cap Goods Order non-defense were unchanged (against expectations of a 1% rise) and shipments rose just 0.2% (missing expectations of a 1.3% rise)... But apart from that, everything's great.

So how did Walgreen succeed in boosting its aftertax EPS to beat expectations even as revenues missed expectations, especially with operating income in the quarter virtually unchanged from a year ago? The answer, as shown in the chart below is simple: WAG used the oldest trick in the book, and stretched its effective tax rate for GAAP purposes in the quarter to the lowest it could go.

• Christmas rally enters sixth day in Europe (Reuters)
• Downing North Korea's Internet not much of a scalp (Reuters)
• North Korean Internet Access Restored After Hours-Long Outage (BBG)
• At U.N. council, U.S. calls life in North Korea 'living nightmare' (Reuters)
• Ukraine Cuts Gold Reserve to Nine-Year Low as Russia Buys (BBG)
• De Blasio Seeks to Heal Rifts With Police After Officers Slain (BBG)
• Oil steady around $60 on hopes of strong U.S. data (Reuters) - so it fell below $60 because...
• Australian Dollar Hits Four and a Half Year Low on Chine Growth Worries (Reuters)

A week after the Greek Prime Minister, Antonis Samaras, was unable to push through his nominee for president, Stavros Dimas, in a vote in parliament that needed 200 votes to pass, hours ago the second presidential vote took place and just like last week it again failed to secured the needed 200 votes, with just 168 lawmakers voting for the designated appointee. This means that in the third and final voting round next week, on December 29 - a trading day where bad news will propagate like wildfire in the absence of any market liquidity and means Kevin Henry will have to work overtime buying ETFs - New Democracy's Samaras has to find (or bribe) another 12 votes or else Greece is facing a snap election where the anti-bailout/anti-austerity leftist Syriza party is expected to win, and set off a chain of events that may result in Greece being kicked out of the Eurozone at least if the jitters seen during the summer of 2012 are any indication.

With the wind down of the record 2014 trading slump now in its final days (although judging by volumes throughout the year one may have a difficult time noticing just when the holidays began and ended), the already entertaining zero-liquidity market moves are sure to provide further amusement today in the context of the US economic data bonanza on deck, which includes Durable Goods, GDP, Personal Income and Spending, Richmond Fed, UMich, and New Home Sales. Beat or miss, all of the above are guaranteed to send the S&P to higher recorder highs because in the multiple-expansion euphoria blow-off top phase nobody cares about such trivia as fundamentals or the economy, especially when Japan and Germany are about to monetize all of their gross issuance. Just remember to occasionally keep an eye on the preferred rigging correlation pairs: the USDJPY and the VIX, whose every illiquid jerk will be followed by Citadel & NYFed's algos tic for tic.