Archive - Apr 2014 - Story

So much for those already abysmally low Q1 GDP forecasts. Moments ago, the Census Bureau released trade data for February which crushed expectations of an improvement from $39.1 billion (revised to $39.3 billion) to $38.5 billion, and instead rose 7.7% to $42.3 billion, the highest monthly trade deficit since September. This was driven by a 0.4% increase in imports to to $231.7 billion offset by a drop in exports of 1.1%  to $192.5 billion. The goods deficit increased $2.2 billion from January to $61.7 billion in February; the services surplus decreased $0.8 billion from January to $19.4 billion in February. Most notably however, is that as a result of this "unexpected" surge in the deficit, the Q1 GDP forecast cuts, anywhere between 0.2% and 0.4% are set to begin.

Despite hope that this time is different, and after a few weeks of improvement that was extrapolated as back-to-the-status-quo for us all, initial jobless claims rose by their most week-over-week in 10 weeks, missed expectations, and hover just below the average of the last year. Not exactly the positive trend that so many would like to use to build their "so buy stocks" thesis. This follows ADP's miss and the ISM reports' internal jobs indices misses. Of course, a 'bad' claims data is great news for more un-tapering.. the bulls, let down by Draghi, now need Friday's payroll data to be truly dismal.

As we noted previously, there was a low expectation that Mario Draghi would unleash a much-hoped-for QE but we suspect the devil of the dovish details will come in the press conference when the bespectacled banker will prove that open-mouth operations and the promise of "whatever it takes" at some point in the future are just as powerful (for now) as any actual monetary policy. Rates lower for much much longer... studying negative rates... contemplating asset purchases... preparing to fire OMT... Euro is too strong comments... expect a wild ride... EURUSD is at 1.3760 as he starts.

All talk, no action. That's what, as usual, happened at the ECB today where after much bluster and QE rhetoric from everyone including former permahawk Jens Weidmann, the ECB did precisely as most had expected. Nothing.

• Russia says expects answers on NATO troops in eastern Europe (Reuters)
• Dealers say GM customer anxiety rising, sales may take hit (Reuters)
• China Unveils Mini-Stimulus Measure (WSJ)
• Londoners Priced Out of Housing Blame Foreigners (BBG)
• New earthquake in Chile prompts tsunami alerts (Reuters)
• Ukrainian Billionaire Charged by U.S. With Bribe Scheme (BBG)
• Chinese Investments in U.S. Commercial Real Estate Surges (BBG)
• Old Math Casts Doubt on Accuracy of Oil Reserve Estimates (BBG)
• US secretly created 'Cuban Twitter' to stir unrest (AP)

Being that markets are unrigged and all, at least according to every single proponent of HFT that is, futures have done their overnight levitation as they have every day for the past month driven by the one staple - the Yen carry trade - even if in recent days the broader market slump during the actual daytrading session mostly impacted biotechs yesterday. And since any news is good news, we don't expect today's main event, the ECB's rate announcement and Draghi press conference, both of which are expected to announce nothing new despite Europe's outright inflationary collapse which most recently dropped to 0.5%, the lowest since 2009.

While we have covered the various ways in which Americans are scraping by in the current feudal economy, from food stamps and disability fraud, to student loans and living in mom and pop’s basement, this reverse mortgage thing is a piece of the puzzle we have been missing. These mortgages are not insignificant either. According to Inside Mortgage Finance, originations were up 20% in 2013, hitting $15.3 billion. So when you see that older guy working the cashier at Wal-Mart and wonder to yourself how he is surviving, the answer may increasingly be a reverse mortgage. Oh, and since the FHA is originating many of these loans, you the taxpayer will be on the hook!

For the 4th month in a row, China's composite PMI fell (with new orders tumbling) - this time to the lowest levels since Nov 2011 and firmly in contractionary territory. However, in the exact antithesis of the manufacturing PMI data, tonight's non-manufacturing data saw the official government data miss expectations and drop (manufacturing rose) while HSBC's services PMI rose (HSBC's manufacturing dropped). This was enough (along with an Aussie retail data miss) to send AUDJPY into conniptions jerking lower then higher then lower as the algos just could not comprehend the levels of absurdity that was flooding their valves. Japanese PMI strolled along in its neither here nor there zone and Aussie PMI tumbled back into contraction after one month of exuberance. In the famous words of Frank Valli, oh what a night.

If The West really wants to 'win', turning Russian public opinion against Vladimir Putin should be the goal. Here’s how to do it.

New cycle lows in Eurozone inflation along with disappointing ISMs across various nations raise the probability of a dovish ECB meeting tomorrow, in Citi's view. However, as Deutsche expands upon, they do not see an obvious trigger for "actual" policy easing in the data and events since the last ECB Council meeting and any "action" will take the form of words, not deeds. Despite all the hope in the world, Deutsche warns there would have to be a substantive deterioration relative to current forecasts to elicit an asset purchasing/QE response from the ECB. Instead, more comments on Euro strength, stronger forward guidance, confirmation of the magic of OMT are more likely but so far the market is absolutely calling Draghi's bluff and saying 'put-up-or-shut-up' especialy in terms of EUR strength.

You’ve probably heard about the recent leaked conversations involving Turkey. It was stunning to hear the highest-ranking Turks casually discussing how to provoke a false flag incident that would justify a large military intervention in Syria. This is a big deal because Turkish troops in Syria opens the door to NATO troops in Syria, which drastically expands the conflict. In case you didn’t know, a false flag is an incident that is designed to deceive people into thinking it was actually carried out by someone else. The same tactic is used by the world’s militaries and intelligence services to nefarious effect. Many believe the Reichstag fire incident that allowed Hitler to drastically expand his power was a false flag operation. So, why would the Turks propose doing such a thing in Syria?

After the success of Putin's op-ed, Venezuela's President Nicolas Maduro has put pen to paper in a NY Times op-ed. Calling for "peace and dialogue," Maduro blames the US government for supporting the 2002 coup and funding the opposition support movements currently. Slamming the US media's biased perspective on his nation's "best [electoral] process in the world," the outspoken leader explains, "the claims that Venezuela has a deficient democracy and that current protests represent mainstream sentiment are belied by the facts. The antigovernment protests are being carried out by people in the wealthier segments of society who seek to reverse the gains of the democratic process that have benefited the vast majority of the people."

America is being run by an unelected gang of essentially self-perpetuating PhDs. The notion of an economics coup d’ etat is not so far-fetched.  So the last 35 years have brought the greatest exercise in mission creep ever undertaken by an agency of the state. That explains why the monetary politburo persists in its absurd quest to force more debt into an economy which is already saturated with $59 trillion of the same. To pretend, as does Yellen and most of the monetary politburo that they must plow ahead printing money at lunatic rates because Congress so mandated it, is the height of mendacity. The Fed has seized power and is not about to let go - common sense be damned, and the constitution, too.

The Fort Hood shooting appears to be over, with the shooter reportedly dead of a self-inflicted wound and according to the latest CNN update, three other people dead, and as many as 14 others injured, some in critical condition. Reports of a second shooter are so far unconfirmed. CNN also reports that the name of the shooter is 34 year old Ivan Lopez. The shooting is also said to not be terrorism-related, but instead a "solider on solider" attack.

BREAKING: Obama says he's following Fort Hood shooting closely, US will get to bottom of what happened.

— The Associated Press (@AP) April 2, 2014

As he visited clients around the nation, JPMorgan CIO Michael Cembalest noted a number of questions repeated... why can’t the US spend more on infrastructure? why can’t the US spend more on worker retraining? why is less money being spent on training, employment and related social services? why is energy spending falling? The answer, ne explains below, to all these questions is the same: these categories are declining since they are being squeezed out by the inexorable rise in entitlement payments.