• Bruce Krasting
    12/18/2014 - 21:42
      The one thing that Jordan can't do in this war is appear to be weak.
  • Marc To Market
    12/20/2014 - 12:21
    When the dollar falls, we are told it is logical.  The empire is crashing and burning.  When the dollar rises, the markets, we are told are manipulated.    Well, the dollar is...

Michigan

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Selling The Bear Case For Stocks





Perhaps the miserable failure of the bear case on global equities over the past 5 years has more to do with marketing the message than anything actually wrong with the arguments for higher volatility and lower asset prices. As a reminder, ConvergEx's Nick Colas notes the classic "4 P’s" of marketing are: Product, Price, Promotion, and Place (Distribution), pointing out that when it comes to getting the bear case out, it is clear which component is missing: Price. Stock markets that churn higher - as they do right now - simply make it too expensive to sit out the rally.  The “Product” and “Promotion” are both fine – you can read negative commentary in many reputable places and speak with very intelligent bears. That takes care of “Place” as well; it’s not hard to find cautionary investment opinions. The take-away from this approach is simple: calling the top may not be as hard as you think. The first 10% pullback may be enough to complete the 4 Ps. Until then, however, it’s just too hard a story to sell.

 
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The Death Of The Rust Belt





Their names are familiar to all of us: Cleveland, Flint, Youngstown, Saginaw, Gary, Toledo, Reading, Akron, Flint and Buffalo were all once booming manufacturing cities that were absolutely packed with thriving middle class families. But now most of the manufacturing jobs are gone and all of those cities are just shadows of their former selves.

 
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UMich Consumer Confidence Drops (Again); Misses By Most In 18 Months





Following last month's drop and disappointing miss, University of Michigan Consumer Confidence just got even worse. Despite record high stock prices and near record high car purcahsing exuberance, consumer confidence tumbled for the 2nd month in a row (just when the pent-up demand of Q1 is supposed to kick in). This is the biggest miss of expectations since Dec 2012 and appears to confirm the lack of exuberance seen in the government's survey data. Inflation expectations dropped to the lowest in 2014 as hopes for the economic outlook dropped to 3-month lows. Not the animal-spirity, wealth-creatingy, exuberance the Fed (and every multiple expansion-hoping muppet) was expecting...

 
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Frontrunning: June 13





  • Tea Party struggles to repeat Cantor-style shock in Tennessee (Reuters)
  • Iran Deploys Forces to Fight al Qaeda-Inspired Militants in Iraq (WSJ)
  • Oil Rallies as Militant Advance in Iraq Threatens Crude (BBG)
  • Gold Set for First Back-to-Back Weekly Gain Since April (BBG)
  • Hedge Funds Get Stung by Slow Markets (WSJ)
  • Sterling nears 5-year high after Carney speech (FT)
  • Britain Warns Boom in Real-Estate Prices Threatens Economy (WSJ)
  • East Europe Leaders Urge EU Unity to Counter Russia (BBG)
  • Formula One Said to Be Valued at $8 Billion as Malone Seeks Stake (BBG)
  • Dumb and dumber: Abe Plans Company Tax Cut in 2015 as Kuroda Warns on Budget (BBG)
 
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Friday The 13th Futures Tread Water On Rising Iraq Fear, Crude Surge Continues





Believe it or not, the main driver of risk overnight had nothing to do with Iraq, with the global economy or even with hopes for more liquidity, and everything to do with a largely meaningless component of Japan's future tax policy, namely whether or not Abe (who at this pace of soaring imported inflation and plunging wages won't have to worry much about 2015 as he won't be PM then) should cut the corporate tax rate in 2015. As Bloomberg reported, Abe, speaking to reporters in Tokyo today after a meeting with Finance Minister Taro Aso and Economy Minister Akira Amari, said the plan would bring the rate under 30 percent in a few years. He said alternative revenue will be secured for the move, which requires approval from the Diet.

 
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More Facts About The Tea-Party's "Goliath-Slayer" David Brat





  • ECONOMICS AND BUSINESS PROFESSOR WITH DIVINITY DEGREE
  • FAN OF AYN RAND
  • ARGUED RELIGION PLAYS ROLE IN ECONOMIC GROWTH RATES
  • OPPONENT OF IMMIGRATION REFORM
  • FACE-OFF AGAINST FELLOW FACULTY MEMBER
  • WAS CRITICIZED BY CANTOR FOR BEING A LIBERAL
 
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The Cantor-Slayer: Meet David Brat





The only thing that is more shocking than yesterday's stunning defeat of Republican Eric Cantor at the hand of a completely unknown tea-party candidate, David Brat - an outcome many have called the "biggest blow to the GOP establishment in years" and one which may be reverberating in equities today as "same as it ever was" politics was dealth a major blow - is just how unknown (and underfunded) David Brat is (and was). So for all those curious to learn some more about this Cantor-slaying "David", here it is from the horse's mouth: his CV from Randolph-Macon College in Virginia.

 
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Frontrunning: May 30





  • Ukraine Rebels Outfox Army to Dent Poroshenko Troop Goal (BBG)
  • Russia Withdraws Most of Forces From Ukraine Border: U.S. (BBG)
  • Super-Size Me! China’s ’Mini’ Stimulus Starts Expanding (BBG)
  • Option B: The blueprint for Thailand's coup (Reuters)
  • Big investors replace banks in $4.2tn repo market (FT)
  • Draghi Shields Catalan Independence Bid From Market (BBG)
  • U.S. companies seek cyber experts for top jobs, board seats (Reuters)
  • Parsley CEO Emerges as One of Youngest U.S. Billionaires (BBG)
 
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Equity Blow Off Top Takes Brief Overnight Rest, Prepares For Another Session Of Low Volume Levitation





Last night's docket of atrocious Japanese economic data inexplicably managed to push the Nikkei lower, not because the data was ugly but because the scorching inflation - the highest since 1991 - mostly driven by import costs, food and energy as a result of a weak yen, and certainly not in wages, has pushed back most banks' estimates of additional QE to late 2014 if not 2015 which is as we predicted would happen over a year ago. As a result the market, addicted to central bank liquidity, has had to make a modest reassessment of just how much disconnected from reality it is willing to push equities relative to expectations of central bank balance sheet growth. However, now that the night crew trading the USDJPY is replaced with the US session algo shift which does a great job of re-levitating the pair, and with it bringing the S&P 500 higher, we expect this brief flicker of red futures currently observable on trading terminals to be promptly replaced with the friendly, well-known and "confidence-boosting" green. The same goes for Treasurys which lately have been tracking every directional move in stocks not in yield but in price.

 
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China's Anti-Terrorism Challenge





After another, even deadlier, terrorist attack in Urumqi, Beijing must reevaluate its anti-terrorism strategy.

 
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Congress Passes Gutted Beyond Recognition Anti-NSA Bill; Original Co-Sponsor Votes "No"





 

It’s shameful that the president of the United States, the chairman of the House Permanent Select Committee on Intelligence, and the leaders of the country’s surveillance agencies refuse to accept consensus reforms that will keep our country safe while upholding the Constitution. And it mocks our system of government that they worked to gut key provisions of the Freedom Act behind closed doors.

- Rep. Justin Amash of Michigan, original cosponsor of the USA Freedom Act

 
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AT&T Buys DirecTV In $67 Billion Deal; Pfizer Makes "Final Proposal" To Buy AstraZeneca, Boosts Offer To $119 Billion





In what is setting up to be a scorching merger Monday, moments ago we got confirmation of news that had been leaked days in advance, namely that both the boards of AT&T and DirecTV had agreed to a transaction whereby AT&T would buy DirecTV in the latest chapter of what we dubbed several months ago the "M&A bubble", for $95/share in a $67.1 billion transaction including debt, consisting of $95/share in stock, $28.50/share in cash. According to the public announcement, the DirecTV purchase represents a 7.7x multiple of its 2014E EBITDA.  Additionally, as the press release states, "AT&T expects the deal to be accretive on a free cash flow per share and adjusted EPS basis within the first 12 months after closing." In other news, almost concurrently with the AT&T announcement, Pfizer also did what many expected it to do, when it announced that as part of its "final offer" it would boost its proposed purchase price for AstraZeneca by 15%.

 
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Frontrunning: May 16





  • Bank of England sees 'no housing bubble' (Independent)
  • ‘If the euro falls, Europe falls’ (FT)
  • India's pro-business Modi storms to historic election win (Reuters)
  • Global Growth Worries Climb (WSJ)
  • Bitcoin Foundation hit by resignations over new director (Reuters)
  • Blackstone Goes All In After the Flop (WSJ)
  • SAC's Steinberg loses bid for insider trading acquittal (Reuters)
  • Beats Satan: Republicans Paint Reid as Bogeyman in 2014 Senate Races (BBG)
  • Tech Firms, Small Startups Object to Paying for Internet 'Fast Lanes' (WSJ) - but they just provide liquidity
  • U.S. Warns Russia of Sanctions as Ukraine Troops Advance (BBG)
  • Major U.S. hedge funds sold 'momentum' Internet names in first-quarter (Reuters)
 
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Yen Carry Slide Drags Futures To Lows





The perfectly expected if completely irrational overnight ramp in various Yen carry pairs tried, and failed, and both the USDJPY and EURJPY were tumbling to overnight lows as we go to print. This is happening despite a rout in India in which Narendra Modi's opposition block is poised for the biggest Indian election win in 30 years, with his BJP party currently leading in 332 of 543 seat - an outcome that is seen as very pro business (and seemingly pro asset bubbles: the INR soared and the Sensex was up as much as 6% in intraday trading before paring virtually all gains following what many say was RBI intervention). And while the Nikkei (down 200 points) did not help the mood this move was mostly in response to yesterday's US selling, which means as usual the culprit for lack of algo risk-taking overnight has been the Yen carry, which moments ago hit intraday lows, and is increasingly flirting with the 101 level (after which double digits, and Abe's second resignation, come very quickly).

 
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Key Events In The Coming Week





This week markets are likely to focus on a few important data prints in DMs, including Philly Fed in the US (expect solid expansionary territory) and 1Q GDP releases in the Euro area (with upside risks). In DMs, the highlights of the week include [on Monday] Japan’s trade balance data and Australia business conditions; [on Tuesday] US retail sales, CPI in Italy and Sweden; [on Wednesday] US PPI, Euro area IP, CPI in France, Germany and Spain; [on Thursday] US Philly Fed, CPI, capacity utilization, Euro area and Japan GDP; and [on Friday] US Univ. of Michigan Confidence. In the US, we expect Philly Fed to print in solidly expansionary territory (at 14, similar to consensus) and to inaugurate what we call the active data period of the month. We also expect CPI inflation to print at 0.3% mom (similar to consensus), and core CPI inflation at 0.18% mom (slightly above consensus).

 
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