While it is unknown if this is merely a bull trap to get yet another bubble going, then to slaughter everyone with the same relentless barrage of margin hikes as we saw in the spring of 2011, or simply volumes in commodities have gotten so low that even the CME is willing to allow a little price appreciation in exchange for participation is unknown, but as of April 16 silver initial and maintenance margins will be 12.5% lower, while copper margins are declining by 20%.
More jaw-boning helped squeeze shorts as equity indices, credit, and precious metals all closed their highest since the NFP dive as QE3 hope is back on the table. The best day in four months for Materials (now the only sector green from before the NFP print) and Industrials, and the best two-day gain in financials and energy in four months but the S&P 500 remains around 1% off pre-NFP levels (but managed to fill the gap to the lows of last Thursday in S&P futures). Credit (both investment grade and high-yield spreads) managed - just as in Europe - to rip up to pre-NFP levels also (outperforming stocks). Notable divergence between AAPL and SPY started at 1045ET today - as GOOG volume picked up and accelerated which was also when ES (S&P e-mini futures) broke Tuesday's opening level and ran stops. Volume was average with higher average trade size coming in as we reached post-NFP highs (suggesting again professionals selling into strength as weak shorts are squeezed out in a hurry). The dovish comments sent Gold and Silver surging (and China rumors pushed Copper up - and WTI to around $104). VIX crumbled into the close - with its largest drop in over 5 months in percentage terms - though still higher than last Thursday's close. FX markets were noisy once again through Europe but USD ebbed higher in the afternoon - still very modestly lower on the week and day (with JPY leaking weaker today helping carry support risk a little). Treasuries also leaked higher in yield but remain at the immediate spike low yields post-NFP (pretty much in line with stocks generally) but between FX and TSYs, broad risk assets were not as excited as credit and equity markets specifically as we suspect this was weak recent shorts being shaken out suddenly. In context, the S&P 500 is down over 3% in gold terms from before the payrolls print.
Google Reports Earnings, Beats EPS, Meets Ex-TAC Revenues, Announces 2:1 Stock Split And New Non-Voting ClassSubmitted by Tyler Durden on 04/12/2012 16:10 -0400
The headlines flow in:
- GOOGLE 1Q REVENUE $10.65B
- GOOGLE 1Q REVENUE EX TAC $8.14B, EST. $8.14B
- GOOGLE 1Q ADJ. EPS $10.08, EST. $9.64
- GOOGLE 1Q PAID CLICKS ROSE 39% VS YEAR AGO
- GOOGLE 1Q TRAFFIC ACQUISITION COSTS $2.51B
- GOOGLE 1Q COST PER CLICK DOWN 12%
Largest US Teacher Pension Fund Underfunding Increases By $9 Billion To $64.5 Billion, Only 69% FundedSubmitted by Tyler Durden on 04/12/2012 16:06 -0400
While the epically underfunded status of the US, by all definitions a ponzi scheme, whose combined liabilities have a net present value of about $100 trillion, is known to everyone, most can simply shake it off for too reasons: 1) it is a number too big to comprehend, and 2) by the time the ponzi blows up it will be some other generation's problem. However, it may not be so easy for California's retiring teachers. Minutes ago, CalSTRS, or the California State Teachers' Retirement System, with a portfolio valued at $152 billion as of February 29, 2012, and is the largest teacher pension fund in the United States, reported that its underfunding increased by a massive 15%, or from $56 billion to $64.5 billion, which happened despite the market being relatively flat over the past year. In fact this is supposed to be good news: as CalSTRS states, its underfunding was supposed to be even worse by $4.3 billion. So this is really good news. We wonder how good the news will be to tens of thousands of retiring and retired teachers once they understand that their obligations are only funded 69%. And dropping. But wait, there's more: new normal, no new normal, here is what CalSTRS did: it reduced "the assumed rate of investment returns from 7.75 percent to 7.5 percent, which increased the funding shortfall by $3.5 billion." In other words, if the market grows at a true New Normal of 1-2%, or worse, is flat over the long run, we wonder if the obligation coverage ratio would even be in the single digit percentage.
Earlier today, the Chinese Internet (yes, it is its own category) experienced a glitch in the matrix. Whether this is due to further potential confusion over the fate of Bo Xilai (and/or any rumors of a concurrent/past/future military coup), or just overall confusion as to what is actually happening in the country, or simply mere censorship gone uber-wild is unclear. As the WSJ explains it, "At around 11 a.m. local time Thursday, China’s Internet suddenly began behaving very strangely. People inside China reported being unable to access some Chinese web sites like Sina’s Corp’s portals as well as popular foreign web sites not normally blocked by China’s firewall. Simultaneously, Internet users outside China, including in Hong Kong, reported difficulties accessing key Chinese sites, like search engine Baidu and the website of the People’s Bank of China." And while we have no idea of what is going on behind the scenes, we are fairly confident what isn't. Such as the country growing at a 9% as has been wildly speculated all day in what some suggest is a leak of Chinese official data. For a glimpse of what is going on, we went to get some local color such as this message board posting at CND.org. Is this the full story? Of course not. But neither are the endless lies peddled by the PBOC and the CCP. Our advice: keep the below in mind while reading any economic data coming out of the country Ministry of Truth and Bureau of Propaganda in the coming weeks and months. Because if today's Internet glitch is any indication, things behind the scenes are truly starting to heat up.
Reiterating his earlier year call to dollar-cost-average into long Gold via GLD and short Euro (FXE) positions, Charles Biderman of TrimTabs suggests that while the sell-off in stocks may have begun, he does not expect it to pick up steam until after April. His thesis for being long Gold remains the same, the US, Europe, and Japan continue to create ever-increasing amounts of paper-money with which they pay bills - and that is not going to end soon. EM central banks will continue to load up on gold in reserves with an endgame of replacing USD reserve status quo. His short Euro thesis has, in his view, become more prescient as the European recession grows deeper and the EUR drifts towards parity with the USD (whether or not the Fed 'allows' it). He ends with a noteworthy comment on the removal of safe-haven status for common carry currencies such as NZD, AUD, and CAD due to crumbling housing fundamentals.
While 'Apple is the market and the market is Apple' has been the mantra for much of the last few weeks, the last few days suggest a regime change. Apple is currrently trading down three days in a row (which is unusual in itself), having dropped the most in these three days since the middle of December. However, unlike the previous times when Apple dropped, the S&P 500 is ignoring it for two days in a row - something that has not occurred since mid-January and the largest divergence with Apple down 1.2% and the S&P 500 up over 2.1%. Are the professionals using the gap-fill market pump to sell into strength?
But, but... the clients' interests came first.... And Goldman was providing liquidity...
The introduction of the “Mintchip” is really just another extension of the state’s effort to wield supremacy over private affairs. It is creeping socialism under the guise of efficiency. But, as anyone familiar with the nature of state understands, government efficiency is an illusion. As anonymity in free transactions goes, so goes another barrier on further centralized planning. The trick here is that nothing government does is voluntary. The forced usage of the Canadian dollar via legal tender laws renders the assertion of “voluntary” laughable. The Mint claims the chip can be used anonymously but this assurance comes from the institution in cahoots with a central bank that can’t manage a simple metal standard for more than a few decades.
A Monetary Cliff or a Fiscal Cliff: these are the two poisons that Barton Biggs sees rushing straight toward America, with little hope of an uneventful collision. While we have not been shy of our opinions on Barton Biggs' flip-flopping positions, his note on the US "as a nation of totally self-centered special interest groups that terrorize our politicians" struck a chord and deserves praise in its clarity. Noting that Europe seems stuck again, he points to the US market being data and Europe-dependent for the next month and believes the correction is little less than half way over (in terms of size not time). In Biggs opinion "although the Monetary Cliff is more long-term dangerous, the proximity of the Fiscal Cliff, if not dealt with, will trigger the dreaded double-dip recession we are all terrified of and bring on another financial crisis."
The week's final bond auction has closed in a manner comparable to the prior two: uneventful. Minutes ago the Treasury sold $13 billion in 30 year bonds at a yield of 3.230%, down from the 3.381% in March (the highest since the August US downgrade) precisely where the When Issued had been trading, and with a Bid To Cover of 2.76 just modestly better than the prior March auction's 2.70 and the 12 TTM average of 2.67. The internals were also quite boring with Direct taking down 13.4%, Indirects as usual stuck with just under a third, or 30.7%, compared to a 32.9% average, and Dealers taking down 55.9% of the total, an amount which will be promptly rehypothecated in various repo channels, thereby allowing the banks to convert cash into cash, but in the process fund more than half of yet another "successful" auction - just like always. This week's final auction brings total US debt to $16.66 trillion give or take.
"In the last three plus years, central banks have had little choice but to do the unsustainable in order to sustain the unsustainable until others do the sustainable to restore sustainability!" is how PIMCO's El-Erian introduces the game-theoretic catastrophe that is potentially occurring around us. In a lecture to the St.Louis Fed, the moustachioed maestro of monetary munificence states "let me say right here that the analysis will suggest that central banks can no longer – indeed, should no longer – carry the bulk of the policy burden" and "it is a recognition of the declining effectiveness of central banks’ tools in countering deleveraging forces amid impediments to growth that dominate the outlook. It is also about the growing risk of collateral damage and unintended circumstances." It appears that we have reached the legitimate point of – and the need for – much greater debate on whether the benefits of such unusual central bank activism sufficiently justify the costs and risks. This is not an issue of central banks’ desire to do good in a world facing an “unusually uncertain” outlook. Rather, it relates to questions about diminishing returns and the eroding potency of the current policy stances. The question is will investors remain "numb and sedated…. by the money sloshing around the system?" or will "the welfare of millions in the United States, if not billions of people around the world, will have suffered greatly if central banks end up in the unpleasant position of having to clean up after a parade of advanced nations that headed straight into a global recession and a disorderly debt deflation." Of course, it is a rhetorical question.
Back in August 2009 we asked a very simple question: "Is Goldman's Selective Trading Disclosure A Legal Way For Preferred Clients To Front Run The Market?" Today, nearly three years later, the SEC answers our question. The answer - a resounding yes.
The latest consumer-credit data showed a slowing in the growth of the borrow-to-spend trend that had re-appeared through the holiday shopping period. This deceleration signals the deleveraging of the consumer is back and as the following charts from Morgan Stanley shows once people start saving historically, they have tended to remain saving; and that in the kind of low-/no-growth environment (or more specifically a balance sheet recession) we see a lack of credit demand even as credit availability is high. The momentum of saving and the correct focus on debt minimization as opposed to profit- (or living-standard) maximization will eventually outweigh the ever-increasing need for dollar-debasement money-printing flow to maintain the social market status quo. Add to this deleveraging concern the fact that Europe is seeing bank lending contract absolutely (notably weaker than in the US for now) amid tighter lending conditions and this is just another example of the cloggage in the Fed/ECB's transmission channels in this environment.