Archive - Apr 2014 - Story

The numbers were not bad. It is what was in the earnings slidedeck charts that is spooking the investors...

Despite the Dow's price-weighted index of just 30 stocks pushing comfortably into the green for the 7th Tuesday in a row (on dismal volume), things were not as exuberant anywhere else in stock-land. Amid a very narrow range day, completely divergent from the rest of the risk-asset complex, sustained only by the life-giving blood of Fed-sponsored VIX-selling into the FOMC event risk, performance today was internally weak with Russell 2000 closing red for the week (as the S&P and Dow managed to regain green for April but the Dow still could not make it green for 2014). Away from stocks, Credit markets were weak, Treasuries rallied (with yields lcosing 1-2bps lower on the day despite equity strength), Gold closed marginally higher and oil up 0.5% on the week. The USD closed up for the day but unch on the week as JPY strength dislocated from stocks.

The only question we have about the following list of 6,932 busted option trades comprising 34,484 call and put (mostly call of course) contracts on the NYSE ARCA Options which took place this morning at the market open until just 13 minutes later "due to an internal system issue", is whether Goldman is the party that somehow benefited from the DKing of these millions of trades as it did back in August of 2013.

Having been quiet all day, Vladimir Putin chose just before 330 on a Tuesday to respond to US and EU sanctions:

*PUTIN: U.S., EU SEEKING TO BLAME RUSSIA FOR UKRAINE CRISIS
*PUTIN SAYS HE CAN'T UNDERSTAND MOTIVATION FOR SANCTIONS
*PUTIN SAYS NO CAUSE-EFFECT BEHIND SANCTIONS

And while he said he sees no need for counter-sanctions currently, he did warn that Russia may reconsider participation of Western companies in egenergy projects if sanctions continue.

It appears the only thing holding stocks up this afternoon (as volume dries up entirely) is the fact that it's Tuesday...

Earlier today the EBA published its common methodology and scenario for the 2014 EUwide bank stress test. The adverse scenario covers the period 2014 to 2016 and at least on the surface is generally tougher than the adverse scenarios in previous similar exercises, resulting in a severe negative deviation of EU GDP growth of 7% from its baseline level by 2016. So far so good. But where the whole thing disintegrates into yet another sham spectacle confirming just how insolvent European banking truly is, is one simple observation: not even under the adverse scenario does the ECB contemplate the possibility of deflation!

Speaking at The Brooking Institution on April 12, Reserve Bank Of India Governor Raghuram Rajan  - no stranger to controversial truthiness (as we have noted here and here) - made clear his views on the rest of the world's central bankers as he concluded, "the first step to prescribing the right medicine is to recognize the cause of the illness. And, when it comes to what is ailing the global economy, extreme monetary easing has been more cause than cure. The sooner we recognize that, the stronger and more sustainable the global economic recovery will be."

Housing data weaker than expected? Check. Consumer confidence weaker than expected? Check. New cycle highs in stocks - check, check, and check. Why not - after all, as we noted this morning, what really matters is JPY and the fact that it's Tuesday. The Dow is now practically unchanged year-to-date... but ex-Tuesdays is down over 7%. Despite stocks hitting new highs, treasury yields continue to slide, gold is up, and credit markets are not making new tights. Just remember, when it comes to investing, "it's not the economy, stupid! It's Tuesday.. oh and tomorrow is FOMC."

Despite explaining that the Apple debt offering would be of similar size as last year's epic $17 billion bond issue, the seven-part offering only managed to issue $12 billion. While still considerable in the world of corporate bond issuance, this is a notable drop for a firm that was so adamant about releveraging to turnover its cash to shareholders...

• *APPLE TOTAL DEBT OFFERING SIZE $12B

The deal's longer-dated bonds came a little cheaper than last year's also at 10Y +77bps and 30Y +100bps and only 29% of the issue was long-dated (as opposed to 50% last year). We remind readers that following last year's huge deal, equity markets weakened notably in the weeks after (and it seems the rate-locks on today's issue are already being lifted in Treasury markets as rates fall).

Whenever the beltway bandits run low on excuses to run-up the national debt they trot out florid tales of crumbling infrastructure - that is, dilapidated roads, collapsing bridges, failing water and sewer systems, inadequate rail and public transit and the rest. This is variously alleged to represent a national disgrace, an impediment to economic growth and a sensible opportunity for fiscal “stimulus”. But most especially it presents a swell opportunity for Washington to create millions of “jobs”. One thing is clear. There is no case for adding to our staggering $17 trillion national debt in order to replace the bridges of Madison county; or to fix state and local highways or build white elephant high speed rail systems; or to relieve air travelers of paying user fees to upgrade local airports or local taxpayers of their obligation to pay fees and taxes to maintain their water and sewer systems. At the end of the day, the ballyhooed national infrastructure crisis is a beltway racket of the first order. It has been for decades.

One of East Ukraine's largest cities, Luhansk, has seen its police headquarters over-run by pro-Russian activists (with machine guns and greande launchers evident):

*GUNSHOTS HEARD AS POLICE BUILDING STORMED IN LUHANSK: IFX
*PRO-RUSSIAN PROTESTERS STORM LUHANSK POLICE BUILDINGS: IFX

In the immediate aftermath, the police chief has resigned over the separatist demands but as France24 reports, Ukraine's president has slammed police 'inaction' and 'criminal treachery' as rebels stormed state buildings. The demonstrators chanted "Referendum Russia" and raised a Russian flag over the building after the takeover.

When it comes to expressing democratic opinion, one can wait for one's corrupt congressional critter to do something, which will never happen if that something is against the will of the largest lobbying client, or one can take matters into their own hands. The latter is what disgruntled Libyans did moments ago. From Reuters:

• GUNMEN STORM LIBYAN PARLIAMENT, START SHOOTING AND FORCE LAWMAKERS TO ABANDON VOTE ON NEXT PM -SPOKESMAN
• SEVERAL PEOPLE WOUNDED BY SHOOTING AT LIBYA'S PARLIAMENT, GUNMEN ARE ALLIED TO ONE OF THE DEFEATED PM CANDIDATES -SPOKESMAN

It may not be the most polite way to get one's views across but it gets the job done. But more importantly, when it comes to the epic chaos that is post-CIA intervention Libya, what difference does it make if parliament is stormed by enraged vigilantes?

Having previously called Russia a "good neighbor, good partner, and good friend," it seems increasingly clear that the West faces not just Russia but China too as it brings more sanctions to bear. As The BRICS Post reports, Beijing announced its support for a beleaguered Moscow, calling on all parties to resolve the crisis, and warning that they "believe that sanctions are inconducive to the solution of problems. On the contrary, they will escalate tensions."

There are many ways to slice and dice America's power/wealth hierarchy. The conventional class structure is divided along the lines of income, i.e. the wealthy, upper middle class, middle class, lower middle class and the poor. We suggest that a more useful scheme is to view America through the lens not just of income but of political power and state dependency. Sadly, eight of the nine classes are hidebound by conventions, neofeudal and neocolonial arrangements and a variety of false choices.