Thanks to the handy Bloomberg surveillance tools, we know that there are 287 current members of the Federal Reserve Bank of New York with access to a terminal. As of this moment an unimpressive 10% of them (29 to be exact) are signaling green (or active) with Kevin Henry still 'grey' (or untracked), although somewhat expectedly, the bulk of the active NY Fed employees are traders in some capacity. While some in the media would suggest this is somehow critical insights that the Bloomberg reporters can use to completely understand what is going on in the world, we question the usefulness of knowing whether Bill Dudley is logged in. With only 10% online - is that a buy, sell, or hold signal for Goldman or JPM? More importantly, perhaps, we would lose the ability to track the whereabouts of such 'real' Bloomberg users as Fukky Tantang, Diane Beaver, and Ludger Poos.
There a couple of good reasons to be more than moderately concerned about what’s happening in the fixed income space. Once more my gallant crew, we are sailing into choppy waters... which may mean trouble ahead, but it also spells opportunity! Two things concern us: Firstly, despite global easing, global bond yields have backed up last few days. Immediately the Fed gets the blame with rumours they may scale back QE – which is reactive nonsense. The Fed has made clear we need to see clear evidence of growth, not just hints, before they change course. But the Treasury market is off across the curve. JGBs, Gilts and Europe are all higher last few days. Is this a buying window after some mild panic, or has something really changed? The second issue with the market currently is that global rates are so low the market is losing the will to live/play. When highly speculative CCC names yield less than 7% what's the point in investing? The risk-reward is just too skewed toward higher risk over lowering returns that it simply makes little sense to take.
In keeping with the now constant trend of baffle with BS, since everyone was expecting a weaker advance retail sales print, just like with the BLS report, it was virtually assured that the data would prove everyone wrong. Sure enough, moments ago the census department announced that headline retail sales rose by 0.1% in April, from a downward revised -0.5% in March, beating expectations of a second decline in a row of -0.3%. Retail sales ex autos were in line with expectations at -0.1%, on expectations of a -0.2% print, but it was the sales number ex-autos and gas which surprised the most, rising 0.6% on expectations of a +0.3% increase, up from a -0.1% decline. Of note: gasoline stations saw a dramatic 4.7% drop in sales, following a 3.2% drop in March: are all US commuters now using Back to the Future type hoverboards or just driving to work in the Tesla Model S?
India's economic boogeyman, the monthly trade deficit, continues to rear its ugly head, this and every time, driven be the country's insatiable desire for gold which is so powerful, the country took full advantage of the plunge in gold prices, and saw business imports of gold soar by 138% y/y in April, forcing the trade deficit to hit a 3 month high of $17.8 billion as more fiat left the country in return for bringing in more of the "barbarous relic." Gold imports more than doubled on both a Y/Y and sequential basis, with gold accounting for $7.5 billion, or 18% of total imports, compared to $3.1 billion in March.
For all his endless posturing, North Korea's Un has done absolutely nothing. And if his inability and unwillingness to translate threats into actions continue, that will pretty much be it for North Korea's hope to even get a few loose pennies as a nuisance factor. This may be tested in the next 48 hours as South Korea and the US begin two days of joint naval exercises off the country's east coast, involving the nuclear-powered US aircraft carrier CVN 68 Nimitz. Perhaps more informative than North Korea's bluster will be to see what if any reaction China has to a US presence in a hotly contested (with Japan) naval territory.
In the US, retail sales are expected to continue to slow in the headline, while retail sales ex autos, building materials, and gas should turn positive in April according to Wall Street analysts. Goldman remains below consensus for Thursday's Philadelphia Fed survey, forecasting a slight improvement on the previous month. The firm also expects the flash reading for Euro area Q1 GDP to come in slightly below consensus, consistent with a shallow contraction. We forecast German GDP will turn positive in Q1 after Q4 2012's negative reading. In Japan, GS sees Q1 GDP at 2.8% qoq ann., slightly above consensus, with stronger consumer spending the main driver. Among the central bank meetings this week, Russia, Chile, and Indonesia are expected to remain on hold, in line with consensus.
- Hilsenrath: A Top Contender at the Fed Faces Test Over Easy Money (WSJ)
- Yen drops further as G7 avoids criticizing Japan (Reuters)
- Markets missed Flaherty’s clues on next Bank of Canada chief (G&M)
- Republicans turn screws over Tea Party tax probes (FT)
- Dual-track Libor replacement lined up (FT)
- Risks to China recovery seen as factory output underwhelms (Reuters)
- Barack Obama’s goal of universal healthcare could be set back significantly by Texas Governor Rick Perry (FT)
- Gold Bears Pull $20.8 Billion as BlackRock Says Buy (BBG)
- Mexico sets shelters as volcano shakes, spews ash (AP)
- Europe Eases Corporate Tax Dodge as Worker Burdens Rise (BBG)
- IPOs Set to Raise Most Cash Since Crisis (WSJ)
- Melting Ice Opens Fight Over Sea Routes for Arctic Debate (BBG)
- Top hedge funds bet on Greek banks (FT)
- Icahn Asks Investors to Make Big Bet on a Debt-Laden Dell (BBG)
In the aftermath of the tempest in a teapot scandal surrounding the Bloomberg surveillance of its clients (maybe one should also inquire just what data FaceBook investor Goldman Sachs, not to mention various other data vendors, has on all FaceBook users just to be fair; or whether Goldman feeds its prop desk with REDI trading data ahead of "best-practices" execution; of whether Blue Horseshoe's contact at 555-7617 leaks any material source info to their best connections before an article gets published), which hit a crescendo over the weekend (and certainly brings a new meaning to the Bloomberg radio show "Surveillance"), the firm owned by one of the world's wealthiest men offered its explanation. Here is the full response by Bloomberg's editor-in-chief Matt Winkler.
Overnight risk continues to ignore all newsflow (today the economic reporting finally picks up with advance retail sales due at 8:30 am as expectations for a second modest decline in a row of -0.3%) and is focused entirely on what the consensus decides to make of the Hilsenrath piece, even as the difficulty level was raised a notch following another late Sunday Hilsenrath piece, which puts more variable into the "tapering" equation, and whose focus is whether Bernanke will be replaced by Janet Yellen, Geithner or Summers, or anyone. With all three classified as permadoves, one does scratch their head how the market can be confused: worst case Fed tapers by $10/20 billion per month, market tumbles, then Bernanke's replacement or Ben himself ploughs on even more aggressively with QE. QED.
In a weekend dominated by discussion of the "Taper Tantrum", i.e., interpretations of what Hilsenrath "said" after the close on Friday, what the Fed wanted him to say, what the market's response to what he said or did not say would be, and what the next steps may be, we present this convenient annotation of Hilsenrath's complete recital courtesy of Mike O'Rourke from Jones Trading.
Another night; another Japanese government bond futures halt. The last 2 days have seen JGB prices plunge at the fastest rate since the post-Lehman debacles in Sept/Oct 2008 smashing back to 13 month highs. 5Y yields are surging even more - trading above 34bps now (up from 9.9bps on March 5th). These are simply astronomical moves in the context of JGB history and strongly suggest Abe & Kuroda are anything but in control of the quadrillion Yen domestic bond market as they jawbone inflation expectations into the psychology of the people. Of course, the Nikkei is surging (now up 9% in the last 5 days alone) amid JPY breaking above 102 (but for now it has rallied back to 101.80). Japnese interest rate implied volatility is surging once again also (after its epic collapse last week - which appears the worst-timed lifting of hedges ever, or more like a lifting of hedges into an unwind of actual long positions).
Following our last primer on the digital currency, prices have somewhat stabilized (despite the ongoing efforts of TPTB to regulate it out of existence). The following infographic provides a step-by-step illustration of how a bitcoin transaction occurs.
Currency wars are so pre-"QE eternity." At least that is the opinion of Indian multi-billionaire Lakshmi Mittal, and owner of the world's biggest steelmaker, who urged Europe to embrace protectionism and erect trade barriers to "protect" its manufacturers (benefiting one ArcelorMittal among others), while at the same time bashing austerity, saying "the futures of EU manufacturing depended on politicians in Brussels helping industry face what he said was unfair competition from China." In other words, it's time for Europe to escalate into full blown trade warfare with China. It is unclear if Mr. Mittal had any thoughts on how China would, in turn, escalate to this progression in trade warfare: whether with tariffs, subsidies, or outright dumping. What does appear quite clear is that the owner of ArcelorMittal, who on Friday posted a net loss of $345 million (down from a $92 million profit a year earlier) on Q1 sales plunging by 13%, whose stock is just off its 52 week lows, and who said he may close plants in Eastern Europe if the "economy continues to slump", may have some ulterior motives in asking that Europe fight his war for him.
Think the best paid public servant in your state is some tax-collecting bureaucrat with a commission-based comp structure, or some administrative apparatchik? Think again. As the following infographic from Deadspin shows, in 41 US states, the highest-paid public employee is either the football, basketball or hockey coach at the local state school. Whick takes cares of the "Circuses" part. For now, at least, public sector bakers did not make the list...