Credit markets had been nervous for the last 48 hours heading into today's Fed minutes and reflective of the FOMC's worries over small-cap forward multiple and covenant-lite loan issuance (both of which we have discussed in great detail as excessive) sparked weakness in the Russell and credit spreads. Yesterday's bounce gave way to selling after the minutes (and on a "good" data day). But a late-day no-JPY-supported melt-up saved the day but stocks are still down after first 5 days of the year - still worst since 2008. Treasury yields leaked higher into the minutes then flattened dramatically with 10s and 30s rallying and 5s and below weakening. 5s30s dropped 7bps on the day - biggest flattening since Taper. 10y did not close above 3%. Gold and silver slipped lower after 2pm then recovered into the close, but WTI crude slid all day - holding losses after the Fed ($92.50). The USD limped lower after the Fed with EURUSD unch on the week before tomorrow's ECB statement.
- Here comes JPM's next multibillion legal reserve: Federal Probe Targets Banks Over Bonds (WSJ)
- Mulally Bows Out of Microsoft CEO Race, Staying at Ford (BBG)
- United States sending more troops and tanks to South Korea (Reuters)
- Eurozone unemployment sticks at record high (FT)
- China-Japan 'Voldemort' attacks up ante in propaganda war (Reuters)
- Alternative Lenders Peddle Pricey Commercial Loans (WSJ)
- John McAfee: glad Intel dropping name from security software (Reuters)
- Jobless Benefits Bill Stays Alive Amid Talks on Offsets (BBG)
- Chicago Colder Than South Pole as Frigid Air Clamps Down (BBG)
- Former Miss Venezuela shot dead in attempted robbery (Reuters)
On September 26, mere hours after a foundering JCP swore up and down to CNBC it would not, repeat not, sell shares to raise much needed liquidity, the same company proceed to go ahead... and sell 84 million shares of stock via Goldman Sachs (which two days earlier suggesting JCP may be a bankruptcy candidate in a credit research report). Back then we summarizes JCP's actions as follows: "Guess what. They lied. Is this criminal? Surely the SEC will get involved immediately." Obviously, the last statement was delivered with an unlimited dose of sarcasm. Which is why we were absolutely floored to read in the company's just released 10-Q that the SEC did, in fact, do just that.
With gold down 10 of the last 11 days (until today), Peter Schiff tells CNBC that this temporary downswing is due to "the fantasy of a US recovery," that so many actually believe and thus, due to this 'recovery' the Fed will taper back its quantitative easing. "It's not gonna happen," Schiff explains, "we have a phony recovery," and the Fed will more likely increase the amount of QE in order to sustain it, "which is very bullish for gold." Crucially, Schiff clarifies that he "doesn't think a taper is inevitable," as many believe, "but an end to QE won't happen by the Fed's choice - the market will force them to tread on the brakes as the USD collapses." As we noted earlier, Schiff also believes there is an attempt to do "whatever it takes" to pull the EUR down to maintain the USD - but as today's price action shows, it's not working... "Long-term, the fundamentals have never been better for gold."
On the surface, CSCO's numbers were not terrible: the company only missed its revenue expectation which is fine: after all nobody cares about revenues anymore and the only thing that matters are adjusted, recasted, pro-forma, non-GAAP, made up EPS numbers excluding virtually all COGS, R&D and SG&A items. Just for kicks, CSCO also threw in that last refuge of a company with no growth prospects: yet another massive $15 billion stock buyback. However, in light of the ongoing idiotic hopium that a recovery is just around the corner, as has been the case for the past 5 years always to no avail, what is cratering the company in after hours trading, was its forecast for the next quarter. It was a doozy:
- Q2 EPS was expected to be $0.52. Instead the company lowered the outlook to a range of $0.45-$0.47.
But the punchline... wait for it:
- Q2 revenues was expected up 4%. Instead it will be... drumroll... -8 to -10%!
Yup: the company expected an up to a 10% drop in revenues. Welcome to Mr. Yellen's recovery.
After spending a day ignoring the reality of moar money printing, it seems 'natural' non-algo forces released Gold and it is spiking after hours. The USD is fading further, stocks soaring moarer, and treasury yields tanking...
Again, The Sell Side Analysts (Even The Rock Star Analysts) Don't Seem To Understand The Mobile Computing WarsSubmitted by Reggie Middleton on 11/03/2013 12:10 -0400
Who would you trust your Apple investment capital to, me or Piper Jaffray rock star analysts?
Looking at all non-equity asset classes, one would be left with the impression that the December taper is an increasingly likely outcome. Sure enough - bonds sold off again, and have been selling off consistently since the FOMC announcement. In fact they are poised to close at 2.62%, the highest yield since October 22. The dollar, inversely, ramped higher on both EUR woes and the expectation that its destruction may "taper" in the near future. As expected, gold did the opposite of the dollar, and Gartman's latest reco, and continued its sell off for the third day in a row: Thus the taper trade continued for the second day in a row in all asset classes, except stocks of course. Despite breifly dipping into the red shortly after today's conflicting manufacturing reports, the late day ramp was once again on location, and helped push ES nearly to a new intraday high in the minutes before the close, before a shakedown took place just after the close, sending ES sliding after hours, and wiping out the entire 3:30 pm ramp in seconds. It can be seen just where the rug gets pulled moments after the 4:00 pm close of trade. And so we close another week of mad fun with Mr. Chairman's, soon to be Mr. Chairwoman's manipulated, frothy, bubbly, markets.
Reggie Middleton's Apple Q4 2013 Analysis: RDF In Full Effect As Analysts & Press Go GaGa Over Garbage!Submitted by Reggie Middleton on 10/31/2013 10:49 -0400
RDF=Realith Distortion Field. I must have a NFG (Null Field Generator). How is it that when I look at numbers I see X & analysts & press sees Y?
Surprised why FB stock is soaring higher by 15% after hours on results that were a beat but nothing all that spectacular, with $2.02 billion in revenues ($1.91 billion expected), and EPS of $0.25 ($0.19 expected)? Because according to the company, it will soon need to colonize a new planet as it will promptly run out of real, bot-based, imaginary and potential users on planet earth following a ridiculous 25% increase Y/Y in daily active users to 728 million, and a mindblowing 18% increase in Monthly Active Users to 1.19 billion (however look at the charts below to see just where the bulk of the growth comes from). Putting Facebook's numbers in perspective: it has 199 million Monthly Active Users in the US, where the average revenue per user is highest. This is 44 million more than the entire labor force, and 63 million more than the number of employed people in the US.
Moments ago, AAPL beat the top and bottom line as follows:
- Q4 EPS of $8.26, Est. $7.92
- Q4 Revenues of $37.5 billion, Est. $36.84
- Q4 gross Margin: 37.0% vs Est. 36.9%
That was the good news: the bad is as follows:
- IPad sales of 14.1 million missed estimates of 14.3 million
- Q1 margin between 36.5-37.5%, below the street estimate of 37.74%, which is what according to some is pushing the stock lower after hours
Welcome to the commodity world: after all this is what AAPL wanted with the 5C right?
Judging by the plunge in IBM stock after hours (accounting for a major portion of the Dow Jones Non-industrial Average Index), the CFO can't pay shareholders with hopium and rumors. The reason: while IBM beat EPS modestly with a very adjusted bottom line of $3.99, beating estimates of $3.96, driven mostly by this: "IBM’s tax rate was 16.0 percent, down 8.6 points year over year" (assuming a flat tax rate Y/Y, GAAP EPS would plunge from $3.68 to $3.30), it was revenues - that ongoing 2013 horror story for the "stawk" and economic "recovery" - that was the problem, because instead of printing at $24.74 billion where it was expected, sales missed by a whopping $1 billion, or $23.72 billion. Of note: while America revenues of $10.3 billion dropped just 1%, and Europe was actually up 1%, it was the all important China and Japan, i.e. Asia-Pacific, where revenues cratered by an unprecedented 15%! So much for both Abenomics and the Chinese "recovery." And what's worse, the Emerging Market callamity of Q3 finally took a big bite: "Revenues in the BRIC countries — Brazil, Russia, India and China — were down 15 percent." Time to push the global recovery myth to the 4th half of 2013 (the third half is where the government shutdown will be squeezed).
The Russell 2000 made a new all-time record high and the S&P 500 gets close as rumor turned into almost news and expectations of a done deal by 11pm tonight. The rumor was bought on the back of JPY-carry surging once again, the "news" was sold - smacking the S&P down around 8 points to VWAP, and then the ubiquitous closing ramp lifted stock back near their highs. The kicking the can left USA CDS wider on the day, put a bid under T-Bills (though the Feb Bills underperformed), lifted gold and silver off their lows, and while the USD was sent scurrying lower (after an early surge), Treasury Bonds ripped lower in yield (10Y _8bps from its highs early on). Spot VIX was crushed back below 15% (down 20% - the most in 2013) and while the rest of the VIX term structure was bid, the Feb/Mar maturities were less exuberant.
VIX futures positioning hit another all-time record short just two weeks ago after collapsing to 12-month high levels as "Taper" concerns increased. From the start of July to the 3rd week of August VIX futures were sold in epic proportions providing the fuel to lift a plateaued stock market from taper-anxiety to new all-time highs (as nothing changed). Over 100 million contracts were sold in the 7-week period - a totally unprecedented amount of complacency. However, in the past 3 weeks, there has been an inflection; is this the end of selling, or are we about to pull VIX even lower with a concerted reflexive selling of even more shorts? As SocGen warns, this historic level of non-commercial short positions (read speculative) implies any market correction - or VIX-related spike - would increase short-covering and exaggerate the fall dramatically. With today's exuberant spurt lower in VIX, vol has caught back with stocks once again.
The highlight of today's economic releases will be the 8:30 am non-farm payroll data, expected to print at 180K jobs, up from July's 162K, and result in an unchanged 7.4% unemployment rate. The "most important jobs number ever " is neither, because even if it comes as a wild outlier to the good or bad side, the Fed is unlikely to change its tapering intentions this late in the game. Still, it will provide fireworks in a very jittery market and if the number is far stronger than expected, expect the 10 Year to finally blow out from below the 3% range which it breached briefly overnight, and never look back, at least not until there is an August 2011 wholesale risk revulsion episode and stocks tumble. Speaking of jittery, overnight the WSJ reports that if picked as Bernanke's replscament, Larry Summers' faces an uphill battle to get the votes of three key democrats on the Senate Banking Committee (Jeff Merkley, Sherrod Brown and Elizabeth Warren). It would be only fitting that the dysfunctional Democratic dominated senate now lashes out against the president, and in the process scuttles the market's only hope of maintaining its Fed-derived gains over the past five years... And there is, of course, Syria which is becoming increasingly problematic for Obama whose support in Congress is looking ever shakier. Will he go it alone in the case of a no vote?