Archive - May 30, 2014 - Story

As reported yesterday, Former Microsoft CEO Steve Ballmer appears set to be the new owner of the LA Clippers, or Clippys as they are now known, paying the record-shattering price for a basketball team of $2 billion, which is the second largest price ever paid for a US team second only to the $2.1 billion paid for the Dodgers. Considering recently Forbes estimated the value of the same team at $575 million, Ballmer appears set to overpay massively, with a premium that matches any of the ridiculous social networking deals we have seen in recent months. But is this the first time that Ballmer, either as an individual or as a CEO, has overbid? Hell no. In fact, as the following list by WSJ's Paul Vigna shows, the only question when analyzing Ballmer's horrendous track record at estimating fair value of underperforming assets is "where does one begin."

Having failed dismally in his global macro forecasts, the White House' press secretary Jay Carney is stepping down...

• *OBAMA SAYS SPOKESMAN JAY CARNEY STEPPING DOWN
• *OBAMA SAYS JOSH EARNEST TO BECOME PRESS SECRETARY

Perhaps it is time for him to take a role on Wall Street? His accuracy makes him a shoe-in.

Q1 GDP growth in the US was simply abysmal - its worst in 3 years - but that does not matter as hope springs eternal that Spring is sprung and it's all green shoots from here. However... that's not what we are seeing in personal spending data (biggest miss in over 4 years in April) and now Bloomberg's Orange Book which implicitly tracks CEO Confidence via their comments has dropped back to the year's lows - not what we are being told by the talking-heads who promulgate the hockey-stick faith in our central planners.

It is a well known historical trend that as discontent and dissent spread within a society, the power structure will look to demonize unpopular or weak minorities in order to deflect frustrations away from the true culprit, the power structure itself. If we want to see how the state and crony corporate status quo will treat everyone in the future, all you have to do is look at the current “war on the homeless.”

The word "recession" is being used less and less in news stories as the world becomes complacently confident that the central planners have 'fixed' the business cycle. Of course, the unpopularity of the R-word was matched only by the pre-recession lows in 2007/8 before the last collapse in the US economy. In the same way that there can be no bubble when everyone is talking about bubbles... when no one is talking about recessions, we wonder what that means?

Today, for the first time, one bank, Citigroup, has been kind enough to offer a mea culpa, saying "fair value of long-term rates may be lower than we and other market participants may have judged them to be at the beginning of the year." That said, this tongue-in-cheek apology is wrapped by yet another justification for why rates are where they are (hint: Citi, clearly, has no better idea than anyone else, especially considering their previous forecasts on the matter), and why - all else equally priced to perfection - should finally begin to rise.

The mainstream media is latching on to the idea that all is not well in the world of 'markets'. The FT's Gillian Tett notes that, as we have vociferously explained, almost every measure of volatility has tumbled to unusual low levels, "this is bizarre," she notes, "financial history suggests that at this point in an economic cycle, volatility normally jumps." But investors are acting as if they were living in a calm and predictable universe, "[Investors in] the options markets are not pricing in any big macro risks. This is very unusual." In reality, as Hyman Minsky notes, market tranquility tends to sow the seeds of its own demise and the longer the period of calm, the worse the eventual whiplash. Tett concludes, that pattern played out back in 2007... and there are good reasons to suspect it will recur.

When the US economy underperforms expectations, the weather is blamed; and now, on the heels of Japan's pre-emptive blaming of weather for crushed consumer spending patterns; The FT proclaims that El Nino is responsible for the weakness in gold (as monsoon season will reduce physical demand from India)... welcome to mainstream media meteoronomics 101. What is odd about this reasoning is that we are actually more prone to a La Nina than an El Nino pattern this year based on the Southern Oscillator Index.

Update: Sure enough, Eric Shinseki was just thrown under the bus.

Following his meeting with VA Secretary Eric Shinseki, President Obama has decided to do a quick press briefing... will he use the words "under the bus"...?

Iif there is to be a real housing recovery, households have to be formed at a much faster pace. Alas, in recent years household formation has not made a "combeack", it has crashed. In fact, according to Census Bureau data, in Q1 the number of households formed each month was 189,000, down from 1,563,000 in 2013, dropping more or less in a straight line since the article's publication!

It would seem this week's technical breaks in the precious metals was the perfect testing ground for junior Barclays traders to wet their whistle with "sudden bursts of sell orders." Gold - once again - has seen a sudden heavy volume purge in futures ($1.7 billion notional worth in 5 minutes) that has pressed spot prices back under $1,250 and heading towards it worst week in 8 months...

Just as we can't eat iPods, we can't subsist on official reassurances that the Fed and inflation are both benign.

May's preliminary UMich confidence print of 81.8 was the biggest miss to expectations in 8 years. In the two weeks since then, the 'economists' have ratcheted back their exuberance to an expectation of 82.5... and still it missed at 81.9. So two weeks of exuberant equity markets have done nothing to soothe the consumer. The Current conditions sub-index tumbled to its lowest since Nov 2013 (and the outlook dropped also). Stock pushers are going to need higher highs if the dream of multiple expansion is to live on....So just as reminder, against the initial expectations, May's consumer confidence missed by the most in 8 years.

March's miss in Chicago PMI is now a dim and distant aberation as April and now May's Purchasing Managers Index surged to 65.5 - just shy of its Oct 2013 highs. As champgen corks fly and the world celebrates "we're back baby" - we hesitate to burst that exuberant bubble and note that production fell, the employment sub-index fell below its 12-month average (but that doesn't matter, right) and prices paid surged by their most in 5 years (that awkward margin-consuming inflation stoking thing).

Earlier today, as part of its latest macro markets research roundup, Goldman let a phrase slip, which probably better than anything we have seen in the past few years, captures just how truly broken the "market" is. To wit: "it is important to remember that weak global growth is generally negative for risky assets." That Goldman even had to remind its clients of this dramatic observation, puts to rest any doubts about just how much central banks' central-planning has perverted the cost/benefit analysis of the world.