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Overnight Sentiment: Attempting A Rebound

Following yesterday's most recent Europe-led rout, the market is attempting a modest rebound, driven by the usual carry funding currency pair (EURUSD and USDJPY) levitation, although so far succeeding only modestly with not nearly enough overnight ramp to offset the bulk of yesterday's losses. In a centrally-planned, currency war-waging world, it is sad that only two key FX pairs matter in setting risk levels. But it is beyond hypocritical and highly ironic that according to a draft, the G-20 will affirm a commitment to "avoid weakening their currencies to gain an advantage for their exports." So the G-20 issues a statement saying nobody is doing it, when everyone is, thus making it ok to cheapen your exports into "competitiveness"? In other words, if everyone lies, nobody lies. Of course, also when everyone eases, nobody eases, and the world is back to square one. But that will only become clear eventually.

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RANsquawk EU Market Re-Cap - 18th April 2013

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Massive Fertilizer Plant Explosion Shakes Texas, Town Evacuated, Toxic Fumes, Up To 70 Dead - Live Stream

UPDATE: Entire town (within a mile radius) to be evacuated - toxic fumes may be spreading

UPDATE: Up To 70 Dead, 38 seriously injured included blast injuries, orthopedic injuries, large wounds and a lot of lacerations and cuts.


In the aftermath of the Boston horrors, a massive explosion has occurred at a fertlizer plant in the town of West, Texas (near Waco). This week is the 20th anniversary of the deadly seige in Waco. There are at least 10 other buildings are on fire, including the town middle school, and a large swath of the town was “leveled” in the explosion (a 5-block radius). The explosion occurred around 7:50pm local time. A fireball of nearly 100 feet high has been reported along with a massive power outage. The images and scale of this explosion are incredible and reports are coming in people still trapped. The explosion could be heard from 100 miles away in Dallas. The explosion (clip below) followed the outbreak of a fire at the plant - and occurred as firefighters were working on the blaze. The mayor says "There's a lot of people that won't be here tomorrow"

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Guest Post: More Evidence That The Economic Peak Is In

With European stocks and bonds, US bonds, commodities and precious metals all hinting at problems, the near-all-time-highs levels of the US equity market remain a mirage. We discussed here whether we had seen 'peak economic recovery' and today we extend that analysis. The point of this exercise is to allow your brain to juxtapose visual data to the ongoing mainstream diatribe of economic recovery. Evidence continues to mount that we have seen the peak of activity for the current economic cycle.  The implications of such an occurrence are broad and suggests that the Fed's liquidity driven interventions, and zero interest rate policy, may have well seen the end of their effectiveness.

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Rick Santelli Asks The $14 Trillion Dollar Question

Two minutes into a somewhat boring pre-close wrap-up, the CNBC guests bring up the glaring revelation that perhaps, just perhaps, the Fed's $85 billion per month (plus the BoJ's exuberance) is not enough. But at three minutes, Rick Santelli dares to ask the question that no one wants to hear the answer to. Addressing questions over what bonds and commodities are telling us, Santelli notes the bubble-blowing tendencies of "re-applying [economic] medicines that don't work and don't take hold," and that the current weakness is deflationary. "Just look at 20-year lows in European car sales... or 13-year lows in China GDP growth," he explains, "you have to delever down to some sort of reality - that's the healing process;" but instead, due to "economic semantics," we "keep doing [building bigger bubbles]." With $14 trillion of central bank balance sheet reflation in place, Rick asks, what if its the "wrong medicine?"

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Chinese Auditor Warns "Out Of Control" Chinese Debt Could Spark Bigger Crisis Than US Housing Crash

"This could be even bigger than the US housing crisis," warns senior Chinese auditor Chang Ke, as his accounting firm has all but stopped signing off on bond sales by local governments (as we warned most recently here). As the FT reports, Zhang's firm "audited some local government bond issues and found them very dangerous," as they don't have strong debt-servicing abilities. "It is already out of control," he continues, "the only thing you can do is issue new debt to repay the old," he said. "But there will be some day down the line when this can’t go on." With more than 2,800 counties having discovered the investment-vehicle-bond (a way to avoid the prohibition or directly raising debt), Zhang notes that this "frightening" evolution has led to a situation where he puts little faith in the government guarantee, advising that "when the time comes, it won’t be the government that assumes responsibility. It will be the accounting firms and the banks that do."

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Late To The Party? After 203% Annualized Surge, Record Number Of Foreigners Buy Japanese Stocks

While the following two charts speak for themselves, we challenge anyone (especially in light of existing positioning) to argue that the investing public is not a momentum-chasing, rear-view-mirror-driving, pack of lemmings...

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A Closer Look At Today's German Stock Market Flash Crash

While most of the US was in deep REM sleep, the Germany stock index, the DAX, had a flashback to May 2010: starting at 3:44 am EDT, in the span of 6 minutes or much faster than the gradual drop that led to the US flash crash from three years ago, the DAX went from well and solidly-bid to having zero liquidity... and dumping nearly 200 points in the process. Whether it was rumors of a (subsequently validated) rating agency downgrade, or just an algo testing its quote stuffing ability, the moves showed vividly that when the current rosy paradigm shifts abruptly and violently, all those hoping to be the first out of the door and hit the sell button, simply won't be able to do so. Because sadly there is no such thing as a free "4 year long zero volume levitation" - one must always pay the piper in the end.

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JCPenney Reports Horrific Results, Stock Plunges

At what point does Bill Ackman throw in the towel and admit that his latest windmill crusade is unsalvageable? Perhaps somewhere around now:

  • Q4 EPS: ($1.95), Exp. ($0.19) - No, there was no decimal comma error here.
  • Q4 Revenues: $3.884 billion, Exp. $4.09 billion. This includes a "free" 53rd week in the year which generated $163 million. Ex this, Q4 revenue was $3.721 billion.
  • Q4 Comp store sales excluding the 53rd week were down 31.7%
  • Q4 Interent sales down 34.4%  - must be the store layout's fault
  • Q4 Gross margin: 23.8%, Exp. 30.9%;  (30.2% last); "Gross margin was impacted by lower than expected sales and a higher level of clearance merchandise sales related to inventory reductions in 2012"
  • 2012 cash burn was a gargantuan $906 million; this compares to cash flow of +$23 million in 2011.

And so on. Stock should be down much more, but someone keeps on buying it after hours to telegraph that this epic disaster was "expected"

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Australia: The 'New' Switzerland?

Switzerland is the place that has traditionally stood above all the rest in its reputation for financial stability. Why? Because the currency was well-managed, the banking system was sound, and the country had a long tradition of treating capital well. Over the last few years, however, these advantages have collapsed. Just a small handful of countries inspire confidence in the marketplace. And the most popular seems to be Australia. Now, there’s really no such thing as a “good” fiat currency. But given such fundamentals, it’s easy to see why Australia is replacing Switzerland as a global safe haven.

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Background Check Amendment Fails To Pass Senate, Gun Control In Tatters: Obama To Make Statement

Following a full court press by the Obama administration, and specifically gun tzar Joe Biden, to legislate "stronger" gun law in the last several months ever since the Sandy Hook massacre, the initiative may have just suffered a terminal defeat following a failure to even pass a bipartisan background check amendment in the democrat-controlled Senate. CBS reports that "In a major setback for gun control advocates, the Senate Wednesday voted down a key amendment to the embattled Democratic gun bill, signaling the increasingly dim prospects of any meaningful legislative action aimed at strengthening America's gun laws. The bipartisan Manchin-Toomey amendment, a background check expansion devised by Sens. Joe Manchin, D-W.Va., Pat Toomey, R-Pa., and a handful of other lawmakers, earned only 54 votes, falling six votes short of the 60-vote threshold. Vice President Joe Biden, who led the Obama administration's months-long lobbying effort on behalf of stronger gun laws, presided over the vote."

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Farage Unleashed: "You Are Common Criminals"

"Years ago, Mrs Thatcher recognized the truth behind the European Project," UKIP's Nigel Farage reminds his European Parliament 'colleagues', "she saw that it was about taking away democracy from nation states and handing that power to largely unaccountable people." In one of his most wonderfully vitriolic remonstrations, the fiery Farage blasts Europe's leadership, "this European Union is the new communism." Slamming Olli Rehn and his Troika cohorts for "resorting to the level of common criminals and stealing people's money", Farage warns, rather chillingly, that, "it is power without limits. It is creating a tide of human misery and the sooner it is swept away the better." Simply put, he concludes, the European Parliament is living out a federal fantasy which is no longer sustainable.

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Stocks Slammed To Worst 4-Day Run Of 2013

Despite a well-placed Nikkei headline (at 3am Japan time) that spooked JPY lower in an effort to ramp stocks, S&P futures closed down around 22 points to cap the worst 4-day high-low swing swince December - unable to break VWAP. Protection was well bid everywhere with VIX once again spiking up to over 17.5% before ending the day up 2.5 vols around 16.5% (implying notably more weakness to come for stocks). The S&P sell-off stalled at the 50DMA - its closest to the mythical Maginot line since the post-fiscal cliff rally began. Treasury yields dropped to 4-month lows at 1.67% before bouncing modestly higher into the close. The USD strengthened as EUR had its worst day in months. Copper and Oil suffered the most as growth fears spread (both pinned together -7.2% from last Thursday). Gold and Silver practically flatlined today (with gold a slight outperformer). Tech and energy struggled on the day but homebuilders are the week's biggest losers for now. S&P volume was 2nd highest of the year as Nasdaq and Trannies plunge back to recent lows.

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Update: Boston Bombing Suspect HAS NOT BEEN Arrested; Boston Courthouse Evacuated

First we got headlines coming out, from CNN and WCVB TV in Boston, that a suspect is now in custody:

  • Law enforcement official: Boston Marathon bomb suspect in custody, expected in federal court.
  • Janet Wu reports it is a man who was arrested.
  • The officials says the suspect is to be taken into custody by federal marshals and taken to a courthouse. 
  • There is no immediate word on where the arrest was made.   
  • Suspects at Federal Court are brought into an entrance away from public view.
  • Jack Harper says the security at the Federal Courthouse is almost unprecedented.
  • A source tells Newscenter5's WuWCVB that one male suspect delivered both bombs.

Then this became a media pissing match with both NBC and Reuters denying reports from CNN, AP and WCVB (on the ground), that no arrest has been made.  And now CNN is denying its original report that a suspect has been arrested. At least no report yet of the Boston Federal Court being under 9 feet of water.   Finally, here comes the FBI: NO ARRESTS MADE IN BOSTON MARATHON BOMBING CASE, FBI SAYS

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Egan-Jones Downgrades Germany From A+ To A, Outlook Negative

Synopsis: Chancellor Merkel continues to resist calls for EU bonds (shared liabs.) and money printing and is pushing for fiscal controls and the seniority of bailout funding. Germany is likely to be outvoted by other ECB members and therefore will have greater prospective exposure. Watch for the EFSF and the ESM morphing into banks (thereby depressing eventual recoveries) and a rise in the number of euros. Watch progress on the EU banking union. We used the IMF's data for Germany's debt which is greater than Eurostat's data. Downgrading.

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