Desk chatter confirms liquidations are occurring ahead of expected margin calls later in the day. This is evident in widely held stocks like AAPL which just plunged on very heavy volume and has dragged the "off the lows" bounced US equity indices back to their lows of the day...
BOTTOM LINE: Business inventories rose less than expected in August. In light of the disappointing September retail sales report and slower-than-expected inventory growth in August, we reduced our Q3 GDP tracking estimate by three-tenths to +3.2%. We also moved our Q4 GDP forecast down a quarter point to +3.0%.
It may come as a shocker to some, but hopefully not to anyone here, that September retail sales were arguably the worst of the year excluding the "abortion" that was the Polar Vortex. The simple reason: after the US consumer loaded up on debt in the spring and the summer, the payback hangover has finally hit with the payment due in the mail resulting in a collapse in revolving credit as reported previously, and as the September retail sales just confirmed.
Remember when banks said to ignore "one-time, non-recurring" legal fees because they are going away? Well, JPM yesterday showed they aren't. But it was Bank of America today which was slammed with the latest whopping $5.3 billion pretax litigation charge, which pushed its EPS once again into the red. But wait, there's great news: the loss of $0.01 is really a $0.42 non-GAAP adjusted profit if one "adds back" the $0.43 in litigation charges.
The fiat dollar harms us in many ways, but rising prices is the least of them. There is no limit to prices, but credit abuse can only continue so long, before the dollar fails.
"...much like when the Germans bombed Pearl Harbor, nothing is over yet. The Fed has not undone its extraordinary loose monetary policy and is just now stopping its direct QE purchases... Paul [Krugman] will continue to be mostly wrong, mostly dishonest about it, incredibly rude, and in a crass class by himself."
Most people that discuss the "economic collapse" focus on what is coming in the future. And without a doubt, we are on the verge of some incredibly hard times. But what often gets neglected is the immense permanent damage that has been done to the U.S. economy by the long-term economic collapse that we are already experiencing. But because unprecedented levels of government debt and reckless money printing by the Federal Reserve have bought us a very short window of relative stability, most Americans don't seem too concerned about our long-term problems. They seem to have faith that our "leaders" will be able to find a way to muddle through whatever challenges are ahead. Hopefully the following 12 charts will be a wake up call.
The fact that the US economy is nowhere near strong enough to offset the deflation it would import and is already importing through USD strength vs EUR and JPY in particular, has now become a key market theme. Crucially, markets are now collectively having to consider what Bob Janjuah thinks is the reality – that annual trend global growth is converging down at around 2.5%, well short of the pre-crisis levels of over 4%. Janjuah believes "we will see UST 10yr yields closer to 1.5% before they get anywhere near 3.5%, with 10yr Bund yields at 50bp; and a weekly close on the S&P 500 below 1905 was and remains his key pivot point - targeting 1770 as the next stop."
While today's trading volume was better than in recent weeks (as it has been for the last 4 days of collapse), quote activity spiked to the 2nd highest ever on record. As Nanex's Eric Hunsader notes, quote cancellations were higher than ever and are accelerating even as the overall market volume slides lower and lower. What is intriguing is that the last 3 times quote activity spiked this much corresponded with a 'sudden' v-shaped recovery from a significant market weakness - which extended notably for six months or more... is this time different?
In 2008, various liquidity facilities, designed by the Fed, unclogged broken capital markets and helped avert economic and financial disaster. The Fed’s (subsequent) QE and ZIRP policies have enabled fiscal stalemate, turbo-charged wealth inequality, and arguably led to financial asset bubbles. For these reasons, we believe they have become counter-productive. New tactics, should they be needed, would therefore be welcomed. The Fed claims it will turn to “macro-prudential” polices, but as Kevin Warch told The IMF, "macro-prudential policies are vital, but we have no idea what they are." We have a theory for what the Fed does next... and holders of capital (who have been so richly rewarded) will be badly hurt.
We have shown this chart before. We will show it again because, to nobody's surprise, nothing has changed.
Just when the talking-heads thought it was safe to proclaim small business is back, the data turns around and smashes them in the face. The headline NFIB Small Business Optimism index slipped to its lowest since June (the 4th month below the 7-year-high peak in May). More problematic was the sub-indices which saw plans-to-hire drop to six-month lows and wage-related series stalling out, capex spending plans plunge to 2-year lows, along with current job openings.
JPM Results Plagued By Recurring "Non-Recurring" Legal Charges, Stagnant Trading Revenues, Record Low NIMSubmitted by Tyler Durden on 10/14/2014 08:23 -0400
Another quarter down and JPM's earnings are more of the same. We don't recall if JPM's legal charges in the past few years are now $20, $30, $40 billion or more, but as of this morning they are X + $1 billion. In the company's ongoing mockery of the term "one-time, non-recurring", JPM added $1.062 billion in recurring, multiple-time pretax legal expenses, a $0.26 EPS impact to Pro Forma EPS, EPS which also declined courtesy of JPM's repurchase of $1.5 billion in shares in the quarter thus reducing the number of "S". So what were the bottom line numbers: EPS $1.36, a miss to estimate of $1.39;Revenue (non-GAAP revenue that is): $25.16 billion, better than the $24.43 billion; that said GAAP net revenue was $24.246 billion; Non-interest expense rose tom $15.8 billion, well above the $14.52 billion expected, and more than the $15.43 billion Q/Q
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Futures Euphoria Deflated By Latest Batch Of Ugly European News: Germany Can't Exclude "Technical Recession"Submitted by Tyler Durden on 10/14/2014 06:47 -0400
So far the overnight session has been a mirror image of Monday's, when futures languished at the lows only to ramp higher as soon as Europe started BTFD. Today, on the other hand, we had a rather amusing surge in the AUDJPY as several central banks were getting "liquidity rebates" from the CME to push the global carry-fueled risk complex higher, only to see their efforts crash and burn as Europe's key economic events hit. First, it was the Eurozone Industrial Production, which confirmed that the triple dip is well and here, when it printed -1.8%, below the expected -1.6%, and far below last month's 1.0%. This comes in the month when German IP plunged most since 2009, confirming that this time it's different, and it is Germany that is leading Europe's collapse into the Keynesian abyss not the periphery. And speaking of Germany, at the same time Europe's former growth dynamo released an October ZEW survey of -3.6%, the 10th consecutive decline and well below the 0.0% expected: first negative print since late 2012!