UPDATE: New York City officials order evacuation of upper floors of several buildings near site of partially collapsed crane.
While we are still hours away from "Peak Storm", the structural casualties are already adding up. FDNY reports a 2nd alarm alert at the soon-to-be tallest residential building in Manhattan - 157 West 57th Street (aka One57, where recently a record price was paid for a duplex apartment) entailing a dangling crane. The area is being evacuated - to somewhere we assume that does not have cranes (good luck finding that). The critical question for Steve Liesman remains - how much more is a 'broken crane' worth to GDP than a 'broken window'? Live stream embedded below...
While hardly the biggest priority for NYC at this time, where rats in downtown New York of all varieties are doing their best to scramble away from the flood and get to higher territory, futures have just resumed trading for the overnight session, only to close before the average retail investor can buy or sell tomorrow at 9:15 am. The first trades indicate a resumption of this morning's weakness, but keep the 1400 support area in mind: if solidly taken out this may be Waterloo for the Fed for this year. And while normally we would expect the futures to get a NY Fed-assisted ramp that would make the TSX last second surge seems like a joke, the just released news from AAPL could well shake the bulls out of their trance, and finally force the world's biggest hedge fund hotel (230 hedge funds long) to puke and take the entire market with it. As we post, S&P 500 futures are sliding to 1397.5 (down over 10 points) - in line with where we noted they would trade at today's 'pretend' market close.
It doesn’t matter how abundant liquid fossil fuels might be; it’s their cost that impacts the economy. Many people think “peak oil” is about the world is “running out of oil." Actually, “peak oil” is about the world running out of cheap, easy-to-get oil. That means fossil fuels might be abundant (supply exceeds demand) for a time but still remain expensive. We are trained to expect that anything that is abundant will be cheap, but energy is a special case: it can be abundant but costly, because it’s become costly to produce. EROEI (energy returned on energy invested) helps illuminate this point.
If Apple needed the best possible cover to announce that both mini-Steve Jobs and its head of retail strategy are leaving the firm, it got it courtesy of Frankenstorm and a market that will be closed for at least another 24 hours. We are looking forward to the analyst spin on this. As the head of the firm's iOS development (Scott Forstall) and the head of the firm's retail division (John Browett - a 5-month veteran!) have left the firm. Full bullish statement on the bright future of the company below but one can't help but feel like the guy responsible for the Maps fiasco just got thrown under the bus; and if the stores are doing so well, why is the head of retail out on his ear? Apple was already trading down around 0.65% in European trading this morning pre-announcement- this surely cannot help.
Because the only thing more informative than watching a shut down New York get blown (away) by Sandy, is hearing it live. Watch, and listen, as downtown New York, very much unprepared for what may be a record flood surge, gets the Venice treatment.
With equity cash and futures markets closed, we thought it useful to gauge where equities might have closed if they were trading. As so many need month-end marks for reporting and OPEX-based hedgers are likely anxious, we thought getting some perspective from what the machines are seeing would be useful. With Kevin Henry gone gray as Treasuries closed, risk-assets slipped modestly on the day - with a late day push to the lows on the back of Merkel's 'nein' on euro-bonds. To wit, based on the dependence with FX and commodity markets, S&P 500 futures would be trading under the critical 1400 level. - and based on the Toronto Stock Exchange, S&P 500 cash would be trading around 1404 (down around 8pts on the day). S&P futures are set to re-open at 1700ET 1800ET (and based on CME's site will close again at 0915ET tomorrow).
Through a wider looking glass, apart from Gold, commodity prices remain mostly driven by economic cycles rather than central bank actions. The correlation of Gold with Central Bank balance sheets remains the dominant theme as it grows in substance as a true global currency and a hedge against money debauchment. Since September’s coordinated easing from central banks, commodities have turned in mixed performances (-5% for oil, -3% for metals). The direct impact of monetary policy on industrial commodity prices appears very limited today (contrary to the situation during QE2 period), given the bleak global economic outlook and the absence of aggressive easing from China.
The actions of the world's central banks, from driving rates to the limit or beyond ZIRP into the unconventional moeny-printing (or more acquiescent QE), there is little doubt that the currency wars are under way. As SocGen notes, the spillovers from advanced economies' actions (exporting inflation) into EM currency appreciation create subsequent needs for EM bank actions at times when inflationary concerns remain high. With the Yuan at 19 year highs and suffering from outflows, the potential for QE-based inflows this time could be welcome by the CCP.
Con Ed's SVP John Miksad just hosted a call with some relatively ominous comments. As they expect record outages from wind and rain damage, it is the tides and the flooding that is of most concern as the executive noted that they may cut power to Brooklyn and Lower Manhattan if tides reach forecast ranges:
*CON ED EXPECTING `RECORD' OUTAGES FROM WIND, RAIN DAMAGE :ED US
*CON ED MAY SHUT DOWN LOWER MANHATTAN SYSTEM DUE TO HIGH TIDES
*CON ED: `NOT OKAY' IF TIDES REACH FORECAST 10-12 FOOT LEVEL
*CON ED: 6,500 NYC BUILDINGS, 2800 BROOKLYN CUSTOMERS AFFECTED
Flood surge map and power outage links below...
Hurricane Sandy will negatively impact traffic and retail sales in the retail calendar’s November Week 1. Week 1 is historically ~22.4% of Nov’s sales and Citi's Retail analysts estimate traffic could be down ~40% for the week in negatively impacted areas. They calculate that Sandy could negatively impact November monthly comps by 2-3% based on 22% (Wk 1 mix of month) * -40% (Citi traffic/comp headwind assumption) * 24% mix (average mix of stores impacted). A negative impact of 2-3% in November would yield a negative quarterly impact of ~1-2%.
The Fed sees the need to reduce interest rates as it takes over the US Treasury and MBS markets; but the ECB's actions are more aimed at reducing divergences between peripheral nations and the core. As SocGen notes, it remains unclear how and when the Fed would exit this situation and in Europe, bond market volatility remains notably elevated relative to the US and Japan as policy action absent a political, fiscal, and banking union remains considerably less potent.
The details of the Spanish bad bank are being released and it is ugly - far uglier than many had expected. And while the Spanish government expects priovate interest to take some of this massively discounted 'crap' off their hands, we have three words: 'deleveraging' and 'no bid!'.
- *RESTOY SAYS BAD BANK AIMS TO BE PROFITABLE
- *SPAIN BAD BANK TO DISCOUNT LOANS AVG 46%; FORECLOSED ASSETS 63%
- *SPAIN AIMS FOR BAD BANK NOT TO COUNT TOWARDS PUBLIC ACCOUNTS
- *SPAIN TO DISCUSS BAD BANK WITH INVESTORS IN COMING DAYS
- *SPAIN BAD BANK TO INCLUDE FORECLOSED ASSETS, LOANS, STAKES
The Spanish government remain in a world of their own with this level of self-delusion. Discunt details below...
Will the president preannounce the epic surge that Sandy will bring to Q4 GDP as America fails upward to achieve the Keynesian utopia through an infinity of broken windows - a hurricane that CNBC's Jim Cramer called a "GDP event", or merely an opportunity to take more shots... Find out below.