Archive - Apr 2014 - Story

In a rhetorical self-QE released by its strategist Peter Oppenheimer, discussing recent changes to long-running market trends, among which the crash in momo stocks, and the EM to DM inversion, the punchline was the most important. To wit: "We see less scope for this peripheral index... Peripheral spreads may narrow further, but more now via higher bund yields. After all, 5-year Spanish and Italian bond yields have converged to the same levels as the US. We still like selected parts of the peripheral markets, particularly the banks, but would prefer to express this via single names than via index overweights...  the drivers of returns may have shifted away from some areas such as US growth and European periphery towards more of a cyclical bias across markets, with a particular focus on exposure to a DM macro recovery." In other words, while the momentum bubble may have popped (if still has a loooooong way to go before it deflates) the European peripheral bubble is about to go pop as well. For all those who just bought Spanish 10 Years at a record low yield (yes, record low) yesterday, our condolences. Then again, it's only other people's money.

The US middle class, well on its way to extinction, just took out the first and most critical  milestone, to wit - the US middle class is no longer the world's richest. And yes, "it's all downhill from here."

Europe closes and stoks pop on the heels of an AUDJPY ramp... but HY Credit is not in the mood at all...

Hollande's promise to bring jobs to the nation is failing dismally. It is no surprise that Le Front National are gaining power as for the 32nd time in the last 34 months, joblessness has risen in France (to a new record high). Nothing to add here, yields continue to fall in Europe as nothing matters but hope for ECB QE as the 2nd biggest economy in Europe (and 5th largest in the world) is getting worse faster...

The verbal combat continues as the US resorts to using Jack Lew in its latest barrage of panic-inducing threats:

*LEW SAYS RUSSIA NEEDS TO 'TAKE A STEP BACK'; U.S., ALLIES WORKING TO ENSURE RUSSIANS 'PAY THE PRICE'
*LEW SAYS U.S. PREPARED TO ACT IF RUSSIA DOESN'T STEP BACK

As a gentle reminder, while the Ruble has weakened since the sanctions (oh and Russia's credit rating has been downgraded), it is US equities that suffered the largest "costs"...

Since Fed's Tarullo uttered those ugly words that "valuations are stretched," US growthy momentum stocks have been hammered. The rally of the last few days was met with exuberant BTFWWIII proclamations from various talking-heads as all the problems in the world were fixed and leveraged long high-beta was once again the no-miss trade du jour... until today...

Look closely at this photo. There are 2 snipers from the Ukrainian army near the Ukraine army base around 20km from pro-Russian held Slovyansk.

Well that didn't take long... for now USDJPY 102 is the US equity market's best friend. Only the S&P 500 is green for the week now as Nasdaq's gains from AAPL/FB are wiped away by the 10% plunge in AMZN.

After 5 years in a row of April preliminary-to-final upward revisions, 2014 did not disappoint as the flash 83.0 was upgraded to 84.1 final and near the highest since the crisis. This is the biggest beat since November as current conditions and outlook both rose as did short-term inflation expectations. Current Conditions is at its highest since July 2007 - mission accomplished.

Markit's US Services PMI dropped and missed expectations input and output prices soared, employment tumbled, and business activity slowed. Staffing levels increaed at the slowest pace since June 2012 and the latest expansion of new business was only slightly faster than the 18-month low seen in March, and weaker than recorded at any time in 2013. So much for that post-weather pent-up-demand surge...

Last Thursday, when to much fanfare, the latest diplomatic iteration of the Ukraine "de-escalation", i.e., the Geneva Accord, was revealed, we said "Everyone knows that the half-life of these pointless diplomatic summits  aimed at "de-escalating" geopolitical tensions is measured in days if not hours..." Looks like many did not know. So moments ago Angela Merkel finally explained it for them, and even the slowst algos:

• MERKEL SAYS GENEVA ACCORD PROCESS HAS FAILED

During discussions with Vladimir Putin today, Merkel said Russia had a chance to convince Ukraine separatists to back down but "that chance has now gone."Perhaps even more concerning is her concluding remark that:

• MERKEL SAYS JOINT G-7 ACTION AGAINST RUSSIA NOW BEING PREPARED

.... To be followed shortly thereafter by the Russian "scorched earth" response to NATO we discussed earlier?

It seems for a brief period, Amazon traders were in denial... but a mere 12 hours after reading our six simple charts explaining the ugluy reality behind this greatest of all momentum stocks, it seems the algos have finally got the message and the game-theoretical first mover advantage is kicking in... Amazon is down almost 6% this morning (and down almost $40 from its post-earnings highs) suggests the Bezos magic money machine is fading fast.

Overnight, four months after our prediction, the FDIC-backed hedge fund not only that, but so much more that even we were shocked, because from a Q1 GDP which Goldman had originally predicted was going to be 3%, the crack team of economists - or is that team of economists on crack - lowered its Q1 GDP to, drumroll, 1%! And that's in the aftermath of the stronger than expected Durable Goods reports. Because it's only logical that good news is bad news. And vice versa.

Just 2 weeks ago, the USS Donald Cook entered The Black Sea on a mission to "reassure NATO allies and Black Sea partners." So, one wonders what it is to be made of the fact that, as ITAR-TASS reports, the US warship USS Donald Cook with the Aegis missile defense system onboard has left the Black Sea, according to a Russian Defense Ministry source. This leaves only the USS Taylor on its mission of "peace and stability"... should NATO allies be un-reassured?