Archive - Feb 6, 2014 - Story

Yesterday it was Twitter, today it is LinkedIn. Moments ago, the professional social network reported EPS that just barely beat at $0.39 vs expectations of $0.38, while revenue printed at $447.2 MM vs $437.6 MM expected. However, it is this excerpt from the LNKD release that is causing the stock to be TWTRed 10% after hours.

Early volatility around Draghi's lack of easing (and a subsequent surge in EURUSD) gave way to excess exuberance as USDJPY ramped over almost 100 pips (on absolutely no news whatsoever) on the day dragging the S&P 500 25 points higher from the day's lows, back over its 100DMA and back to unchanged to the December taper. Trannies topped the taper (+1.5% on the day) but stocks remain red on the week. All this re-risking ahead of tomorrow's major noise-soaked jobs data... Bonds sold off once again but from 10amET, which coincided with the end of the initial JPY ramp, Treasuries, gold, and the USD all trod water as stocks and JPY pushed on ahead. Systemic cross-asset class correlation surged on the day to well over 0.9. S&P and Dow have best day since Mid-December; Trannies almost best day since October - and all this before tomorrow's crucial weather-impacted jobs report - make sense to anyone? TWTR -24% at $50.

While Washington debates over what is the proper explanation of the CBO's report which explicitly states that millions of workers will drop out of the labor force over the next decade thanks to Obamacare, Obama himself may have finally thrown in the towel, realizing that the longer the full implementation of Obamacare is delayed, the longer the myth that it is a viable Ponzi scheme - as opposed to non-viable - can persist. Perhaps this explains why AP reports that the White House is now considering an extension of the president's decision to let people keep their individual insurance policies even if they are not compliant with the health care overhaul, according to two top industry officials.

Presented with little comment aside to note that 9 of the last 10 Januaries have seen negative surprises...

According to a 2001 Fortune interview, Warren Buffett believes that Market-Cap-to-GDP is "probably the best single measure of where valuations stand at any given moment." As Doug Short shows in the following charts, we suspect Warren is a little more than worried about the valuation of his portfolio (unless of course, it's different this time). Both the "Buffett Index" and the Wilshire 5000 variant suggest that today's market is at lofty valuations, now above housing-bubble peak in 2007.

Money on the sidelines? EM fixed? Expectations of a terrible jobs number tapering the taper? One thing we do know for absolute certain - this ramp in stocks has nothing whatsoever to do with fun-durr-mentals... as USDJPY 102 takes the S&P back to unch on the Taper and above its 100DMA.

And so the most lucrative insider trading case in history has just resulted in a criminal conviction.

• EX-SAC FUND MANAGER MARTOMA FOUND GUILTY OF INSIDER TRADING
• MARTOMA CHARGED IN MOST LUCRATIVE INSIDER SCAM IN U.S. HISTORY
• EX-SAC FUND MANAGER MARTOMA FOUND GUILTY ON ALL CHARGES
• MARTOMA ACCUSED OF ILLEGAL TRADES TIED TO ALZHEIMER'S DRUG

Hopefully Steve Cohen's alleged hush money which bought Martoma's allegiance and silence will be worth it (and still there upon release) to make Martoma's stay in Federal pound me in the ass prison - up to 25 years - more pleasurable... 

The last month has made the baffle-'em-with-bullshit Schrodinger-driven central planning confusion proud as the all-important measures of confidence in the US (which stoke the fires of multiple expansion) have dropped, been revised, risen, and stalled. However, today's third indication - from Bloomberg - of Consumer Comfort shows a notable fall to near three-month lows - diverging dramatically from the other measures. The last time this happened, the Conference Board and UMich data rapidly deteriorated to the year's lows. It ha snow been a month since this indicator was in the 'comfort' zone but perhaps most notably those earning over $100k saw their biggest drop in comfort since July 2011.

Keep those dominoes steady... steady... and nobody exhale:

• UKRAINE IMPOSES LIMITS ON SOME INTERBANK FX OPERATIONS
• UKRAINE TIGHTENS RULES ON COPRORATE FOREIGN-CURRENCY PURCHASES

There is of course, good news:

• UKRAINE CENTRAL BANK SAYS INTERBANK LIMITS ARE TEMPORARY

Just like in Cyprus.

The concept of continuously doubling down in order to achieve financial and economic goals is now a respectable and established norm. Takahashi’s Wager of 1930s Japan shows that such a policy, while initially successful, can remove all sensible restraints. On the surface ‘Gamblernomics’, like the ‘Takahashi Wager’, appears successful - the equity market has risen substantially, the currency has fallen, and government bond yields remain low. So far, so good. How is the government gauging the success of this dice roll? They are looking for two percent inflation, a positive growth number, and have committed to two years of massive QE to achieve these goals. As time passes and these targets are not met, the policy makers will double down again, by which point interest payments and welfare spending are likely to comprise most of the budget.... Today’s adherents of ‘Gamblernomics’ are not only found in Tokyo, but also reign in all major financial capitals, each playing their own version of a similar wager. All believe that doubling down is a sober strategy given the sunk costs of lost growth.  As a new generation of gamblers sit at the table, ghosts of gamblers past whisper - “Place your bets.” 

Less than a year ago, David Rosenberg fundamentally shifted his thesis from deflationary to stagflationary at first, and then to outright inflationary, aka from bearish to bullish, based on one simple thesis: labor costs, and thus wage inflation - that all important harbinger of broad economic inflation - have nowhere to go but up. Unfortunately, they also have another direction they can go: down.

Yesterday we reported a warning by BNP that "The Run On Ukrainian Deposits May Have Already Started." Obviously, while the real implications for the country's financial system should a full-blown bank run emerge would be dire , they would take some time to manifest themselves, especially since as Interfax reported, the country's central bank still has $17.8 billion in reserves as of today (if sliding at an alarming pace). To be expected, overnight the same central bank reiterated its support for the currency, knowing that the last thing it can afford is an evaporation in confidence. However, judging by the surge in Ukraine CDS ealier today, which soared by 89bps to 1,089bps today, highest since Dec. 10 on closing basis, i.e., before the Russian bailout (which may or may not be concluded), investors are hardly convinced by the local developments. And the final confirmation that very soon it will be all up to a Russian bailout to fix the situation, was news from minutes ago that the Ukraine just had a failed bond auction. Then again, Russia itself had a failed bond auction just days ago, so perhaps it has bigger fish to fry than pre-funding the Ukraine rescue package.

With all eyes hope-full-y transfixed on tomorrow's non-farm payrolls data and its confirmation-biased 'select-a-headline' post-data farce, we thought it worth a look at the noise in the signal and a reminder, as Bloomberg's Joseph Brusuelas notes, the annual benchmark revisions that will be published and likely obliterate everything we thought we knew about job growth (or lack of). As Brusuelas notes, the January jobs report is likely to be better-than-forecast because the weather-impacted December estimate will see upward revisions as firms probably made up for hiring postponed during the previous month. While weather effects may dominate the topline estimate, the underlying trend in hourly and weekly earnings is likely to remain quite weak since it’s not contingent on swings in seasonal patterns.

While the stock market ramp on the disappointing ECB press conference can be, somewhat, explained and was to be expected by the central bank-addicted market's renewed focus that since the ECB did nothing, it is now the BOJ's turn to ramp up Quantitative Easing - a thesis which has been floating since November, and at one point resulted in 700 pips of "priced in" USDJPY upside - one group of investors is having a bad day: all those short Green Mountain Coffee shares, which as we pointed out last night exploded to 52 week highs in the aftermath of the Coke minority investment announcement. This is today's maximum pain trade.