With the March Payroll number printing at a miserable 88K compared to ADP's 158K print, it was only a matter of time before Mark Zandi, still furious from getting the news he won't be the next GSE Tzar, revised the last month's data to 131K as he just did. Concurrently he also announced that the just released April ADP was a huge miss to expectations of 150K, printing at just 119K, or a 31K miss. This was the 5th month in a row of declines excluding the small bounce in February data. It also means that the combined miss to expectations including March (original estimate +200K) and April (estimate 150K) is precisely 100K. This excludes whatever revisions ADP will do to the April number following the even bigger looming NFP miss. Manufacturing jobs? -10,000. Oh yes, anyone looking for seasonally unadjusted ADP data, good luck - keep on looking. In short: yet another atrocious economic data point which however may need the support of the equally horrible sub-49 Mfg ISM due out shortly to take out 1600 in the S&P.
The highlights from Bill Gross' monthly letter: "The past decade has proved that houses were merely homes and not ATM machines. They were not “good as money.” Likewise, the Fed’s modern day liquid wealth creations such as bonds and stocks may suffer a similar fate at a future bubbled price whether it be 1.50% for a 10-year Treasury or Dow 16,000.... if there are no spending cuts or asset price write-offs, then it’s hard to see how deficits and outstanding debt as a percentage of GDP can ever be reduced.... Current policies come with a cost even as they act to magically float asset prices higher, making many of them to appear “good as money”. And the take away: "PIMCO’s advice is to continue to participate in an obviously central-bank-generated bubble but to gradually reduce risk positions in 2013 and perhaps beyond. While this Outlook has indeed claimed that Treasuries are money good but not “good money,” they are better than the alternative (cash) as long as central banks and dollar reserve countries (China, Japan) continue to participate....a bond and equity investor can choose to play with historically high risk to principal or quit the game and earn nothing."
- Physical demand up: U.S. Mint Sales of Gold Coins Jump to Highest in Three Years (BBG)
- Paper demand down: Gold ETP Holdings Cap Record Drop as $17.9 Billion Wiped Out (BBG)
- It's May 1 not April 1: Fed Seen Slowing Stimulus With QE Cut by End of This Year (BBG)
- Another great step for Abenomics: Sony leadership to forgo bonuses after broken promise on profits (FT)
- High-Speed Traders Exploit Loophole (WSJ)
- It's peanut Breaburn jelly time: How Google UK clouds its tax liabilities (Reuters)
- Frowny face day at the Mark Zandi household: Obama Said to Choose Watt to Lead Fannie Mae Regulator (BBG)
- Russia’s 20 Biggest Billionaires Keep Riches From Putin (BBG)
- China Affair With Cheap Diamonds Heats Mass Market (BBG)
- China's emotional ties to North Korea run deep in border city (Reuters)
- US companies must use cash piles for capex (FT) ... and yet they aren't. Tax anyone who doesn't spend for CapEx!
- Chinese Way of Doing Business: In Cash We Trust (NYT)
While it is the labor day holiday in most of the world, and as a result volumes will be more subdued than ever (meaning at least a 10 point algorithmic levitation on no volume for the S&P), let's not forget that Benny and the Inkjets are doing their best to make everyone into a professional day trader (the only "wealth effect" transmission mechanism left) so markets being open seems somewhat counterproductive. That said, futures are already up on the usual atrocious economic data out of Asia this time. First China's official manufacturing PMI slipped 0.3pt to 50.6, coming below expectations, suggesting weak momentum going into Q2. Meanwhile, Korea trade data indicated weaker momentum in exports than expected, rising 0.4% on expectations of a 2% bounce courtesy of Abenomics, and hence a lower trade surplus, while inflation defied median expectations of a rise and slowed yet further. Finally, Australia PMI was an absolute disaster printing even worse than the Chicago PMI, plunging from 44.4 to 36.7, meaning that the RBA is about to join the global "reflation effort." Given that most markets in Asia are closed today, there is no market reaction worth mentioning, aside from the fact that the yen which was logically weaker overnight then ramped up into the European open and US pre-trading as it is, after all, the primary source of "beta" for the global stock markets. Finally, while some are dreading the start of "sell in May and go away" season, what most have forgotten is that never before has May been accompanied by $160 billion per month in central bank de novo liquidity (a number which will only go up- you know, for the wealth effect). Which is why our redefinition of this infamous phrase is "buy in May and buy every day."
If you're trading gold, you're really trading the dollar (euro, etc.). There is something fundamental you should know.
The next Great Depression is already happening - it just hasn't reached the United States yet. Things in Europe just continue to get worse and worse, and yet most people in the United States still don't get it. We have been warning that the next major wave of the ongoing economic collapse would begin in Europe, and that is exactly what is happening. In fact, both Greece and Spain already have levels of unemployment that are greater than anything the U.S. experienced during the Great Depression of the 1930s. Pay close attention to what is happening over there, because it is coming here too. A full-blown economic depression is raging across southern Europe and it is rapidly spreading into northern Europe. Eventually it will spread to the rest of the globe as well. The U.S. economy has become a miserable junkie that is completely and totally addicted to reckless money printing and gigantic mountains of debt. If we stop printing money and going into unprecedented amounts of debt we are finished. If we continue printing money and going into unprecedented amounts of debt we are finished. Either way, this is all going to end very, very badly.
In a little under two minutes, Nigel Farage sums up the utter farce that "the religion" that Europe has become. He explains, his fear is that what will break up the Euro, "is not the economics of it, but wholesale, violent revolution," in the Mediterranean, and that is "all so unnecessary!" Speaking at Simon Black's Offshore Tactics workshop, the so-called modern day Cicero goes on to point out that France's Hollande is "the number 1 among idiots running countries around the world," and worries that Merkel's pending election means there will be more and more 'tough talk and action' as she shows the people she is in charge. Simply put he warns, alongside Ron Paul, that if you have money in European banks, "Get your money out," because, "when the next phase of the disaster comes, they will come for you."
Less than a month after being ejected from Chesapeake Energy, the charismatic, yet controversial, Aubrey McClendon, has launched his next venture in the form of the American Energy Partners. Forbes were sent a copy of the email that Aubrey sent to his many contacts in the oil and gas industry in his search for potential acquisitions, or assets that his new company could get involved with...
People always stop and stare at traffic accidents (no matter how minor) and arguing couples (no matter how unattractive); ConvergEx's Nick Colas has the same problem with the ever-moribund CBOE VIX Index, even though it’s essentially the exact opposite of the proverbial train wreck. Even with the zombie-like march higher for US stocks, surely the uncertain state of the world would demand more than a 13-handle VIX? Well, it doesn’t; and Nick offers up some off-the-beaten track explanations for why “13” isn’t the right answer. Implied volatility should either be higher or… (gulp)… much lower. The biggest overlooked factor for both directions: the role of technology in society and commerce.
'Commingle' hundreds of millions in client funds which are subsequently stolen rehypothecated as collateral by JPMorgan while your firm goes bankrupt as a result of your idiotic prop trading decisions, and what happens? Your toughest choice is whether to vacation in Fiji or St Barths. That said, being former CEO of the world's biggest TBTF hedge fund also known as Goldman, a former governor and senator, and most importantly bundler for the president of the "transparent" administration certainly helps. On the other hand, be a lowly algo trader and quant programmer working at the aforementioned hedge fund, and having dared to "steal" secret trading client code what can "manipulate markets" and what - you get the full wrath and anger of the FBI, the Federal Court System, and now the Supreme Court.
There is a very explicit link between the volatility (or risk) associated with one of the world's lowest yield and supposedly risk-free sovereign bond complexes and the need for liquidity (or cash over gold or commodities). The last two weeks has seen JGB bond volatility drop and gold rally as the correlation (which appears to have strong causal links) continues; and suggests notably more upside for Gold (especially as CoT data shows net longs remain extremely low).
CME's Terry Duffy: "What’s interesting about gold, when we had that big break two weeks ago we saw all the gold stocks trade down significantly, we saw all the gold products trade down significantly, but one thing that did not trade down, was gold coins, tangible real gold. That’s going to show you, people don’t want certificates, they don’t want anything else. They want the real product."
What seems to be known by very few, is what appears to be a very disturbing trend in the distribution of cash domestically vs cash abroad. As the chart below shows, when it comes to offshore-held cash, AAPL is indeed a cash cow. And with the bulk of the company's growth prospects, and ever more so, sales abroad, this makes intuitive sense. As noted above, AAPL reported $102 billion in cash abroad, an increase of $8 billion in the quarter. This is terrific news... if only the company could dividend, buyback or engage in any other shareholder friendly action with this cash. It can't. How about cash held domestically? Well, as can be seen in the red bar below, domestic cash has not only stagnated in the $30-40 billion area for two years, it actually declined in the most recent quarter. And yes, this is the cash that Apple has full recourse to, and which it uses to make dividend payments out of, and to fund stock buybacks. Congratulations to Apple for its record $17 billion bond offering today. Perhaps the real question, however, is when is the next one?
Yesterday we showed the good side of college by presenting those majors that result in the best starting salaries fresh out of college. Now the bad side.