Wall Street Journal
In case you misunderstood and judged the market's reaction to Janet Yellen's first FOMC statement, the ultimate Fed mouthpiece is out with a few clarifying words (well 712 words posted in under 4 minutes). The Wall Street Journal's Jon Hilsenrath clarifies "The Fed stressed it has not changed its plan to keep interest rates low long after the bond-buying program ends," and added further that "the Fed said explicitly for the first time that it likely would keep short-term rates lower than normal, even after inflation and employment return to their longer-run trends." While noting a bigger consensus of members around a 2015 rate 'liftoff', Hilsenrath is careful to point out that the Fed also blamed the weather for not having a clue.
It would appear that yesterday's announcement by NY AG Schneiderman (who appeared to find Virtu's practically flawless trading record too much to bear) has prompted further investigations into HFT shenanigans by regulators. As WSJ reports, regulators are taking aim at the relationship between high-frequency trading firms and major exchanges, examining whether the preferential treatment market operators offer the firms puts other investors at a disadvantage. The CFTC probe is focused on complicated, often opaque incentive programs that give high-volume trading firms financial benefits such as discounts on fees the exchanges charge to execute trades.
Just days before the annexation of Crimea, while promising that they would not instigate actions to antagonize the West, Russia launched a massive unscheduled military drill. Now, with Crimea under their pro-Russian forces control, and despite promises that Putin seeks to go no further than Crimea, the Wall Street Journal reports that Russia will begin unscheduled military aviation exercises in regions bordering Ukraine. The crews will be practicing "actions during airstrikes" on enemy military targets, communications jamming, air defense and attacks by military jets, the spokesman said.
Just last week Goldman noted that February was "the busiest month in the buyback desk's history," so one has to wonder just what management is thinking when the Wall Street Journal reports that corporate insiders are more bearish than they have been at least since 1990. According to this adjusted measure, there have been two prior occasions when the insider ratio got almost as bearish as it is today - early 2007 and early 2011 - and the first came a half a year before the beginning of the worst bear market since the 1930s. Simply put, it seems management teams are using their company's balance sheet as their own personal piggybank.
We have an economy that is weaker than the headline numbers claim with inflation that is higher than the headline numbers claim.
With US manufacturing jobs down almost 40% from their 1980s peak, proclaiming the last few years marginal increase a "manufacturing renaissance" is more statistical noise, smoke, and mirrors than fact. That is a problem for an administration (and entire genre of Keynesian dreamers) that rely on this sector to prove how effective they have been with stimulus (and not just pulling demand so colossally forward that the future is bleak). How to fix this apparent dilemma between policy talking points and factual data? Easy - as WSJ reports, change the definition of "manufacturing."
It has been over a week since Malaysia Airlines Flight MH370 disappeared without a trace, and the world is nowhere closer to finding either where the airplane and its 239 passengers and crew are to be found, nor what actually happened. Instead, what initially was speculation about a midair disintegration, and subsequently suggested a potential case of airplane terrorism gone wrong, has now transformed into a theory that the pilot and/or crew may have been engaged in "foul play", especially since it appears that based on tracking data, that the plane flew for nearly seven hours after someone "skilled" purposefully shut down its communications and tracking beacon: possibly indicative of a stealthy midair hijacking. However, the same satellite data gave no precise location, and the plane's altered course could have taken it anywhere from central Asia to the southern Indian Ocean.
It seems if you can't beat the digital dickweeds, then you join 'em. Dennis Kneale, infamous for his exclamations regarding bloggers while working for CNBC, has finally been let go by Fox also... these are his tips on how to be unemployed (at age 56!) via his new blog...
- China worries chill markets, copper slumps (Reuters)
- Peak dot com dot two idiocy: Candy Crush Saga maker King seeks $7.56 bln valuation from IPO (BBG)
- Obama Meeting With Yatsenyuk Raises Stakes in Ukraine (BBG)
- Federal prosecutors open criminal probe of GM recall (Reuters)
- Pimco Cuts Government Debt on Outlook for Fed Buying (BBG)
- Missing Malaysian Jetliner Confuses World That’s Online 24/7 (BBG)
- Mortgage Giants Face Endgame (WSJ)
- Russia Calls U.S. Aid to Ukraine Illegal Amid Standoff (BBG)
- U.S. judge freezes assets of Mt. Gox bitcoin exchange boss (Reuters)
- Ousted Libyan PM flees country after tanker escapes rebel-held port (Reuters)
- Senate-CIA Dispute Erupts Into a Public Brawl (WSJ)
If the U.S. economy is getting better, then why are major retail chains closing thousands of stores? If we truly are in an "economic recovery", then why do sales figures continue to go down for large retailers all over the country? Without a doubt, the rise of Internet retailing giants such as Amazon.com have had a huge impact. Today, there are millions of Americans that actually prefer to shop online. But Internet shopping alone does not account for the great retail apocalypse that we are witnessing. In fact, some retail experts estimate that the Internet has accounted for only about 20 percent of the decline that we are seeing. Most of the rest of it can be accounted for by the slow, steady death of the middle class U.S. consumer. Median household income has declined for five years in a row, but all of our bills just keep going up. That means that the amount of disposable income that average Americans have continues to shrink, and that is really bad news for retailers.
Just when you thought the distractions in Russia, Malaysia, and Libya were enough to take the spotlight off domestic drama, Chris Christie's BridgeGate scandal bubbles back into the headlines. As WSJ reports, Manhattan federal prosecutors have subpoenaed records from the Port Authority of New York and New Jersey related to the business interests of its chairman, David Samson, people familiar with the matter said Monday. Samson, a close ally of Christie, is, according to sources, under investigation for potential conflicts between his private business interests and his actions as chairman of the sprawling bi-state authority, which oversees Hudson River crossings into New York City, airports, the PATH rail system and the World Trade Center complex.
Now that it appears clear the bottom is in for gold, it’s time to stop fretting about how low prices will drop and how long the correction will last - and start looking at how high they’ll go and when they’ll get there. When viewing the gold market from a historical perspective, one thing that’s clear is that the junior mining stocks tend to fluctuate between extreme boom and bust cycles. As a group, they’ll double in price, then crash by 75%... then double or triple or even quadruple again, only to crash 90%. Boom, bust, repeat. Given that we just completed a major bust cycle - and not just any bust cycle, but one of the harshest on record, according to many veteran insiders - the setup for a major rally in gold stocks is right in front of us.
With 40% of the portfolio in cash and having returned $4 billion to clients at year-end, Seth Klarman's Baupost Group has "drawn the line in the sand" as they reflect on the diminished opportunities in the so-called "Truman Show" market we see today. In the face of mixed economic data and at a critical inflection point in Federal Reserve policy, Klarman notes, the stock market, heading into 2014, resembles a Rorschach test - "what investors see in the inkblots says considerably more about them than it does about the market." From "born bulls" to "worry genes" and from Bitcoin to flash-mob-speculation, "there is a growing gap between the financial markets and the real economy...and the overall picture is one of growing risk and inadequate potential return almost everywhere one looks... as every 'Truman' under Bernanke’s dome knows the environment is phony."
Following last week's discovery that Mohamed El-Erian was "sick of cleaning up [Bill Gross's] shit" as tensions soared at PIMCO, the "bond king" has struck back blasting to Reuters that he's "so sick of Mohamed trying to undermine me," claiming El-Erian wrote the damaging WSJ article. Furthermore, the somewhat paranoid-sounding Gross indicated that he had been monitoring El-Erian's phone calls but when questioned by Reuters for evidence of El-Erian's undermining, Gross responded "you're on his side. Great, he's got you, too, wrapped around his charming right finger." As one analyst noted, "I've never seen Bill and Pimco scrutinized like this before... a couple of high-profile stumbles and mediocre showings, coupled with some outflows clearly has some investors on edge."
- Spot the inaccuracies: Stocks rise on Ukraine diplomacy, ECB easing speculation (Reuters)
- Bank of England Extends Record-Low Rates Into a Sixth Year (BBG)
- China's Chaori Solar poised for landmark bond default (Reuters), explained here previously
- EU leaders meet in Brussels to address Ukraine crisis (FT)
- Nine-month-old baby may have been cured of HIV, U.S. scientists say (Reuters)
- China Raises Defense Spending 12.2% for 2014 (WSJ)
- China Stock Index Rises as Developers Jump on Policy Speculation (BBG)
- VTB Cancels New York Forum as U.S. Relations Sour (BBG)
- IBM workers strike in China over terms of Lenovo takeover (FT)
- College Board Redesigns SAT Exam Making Essay Portion Optional (BBG)