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The Week That Was: April 15th-19th 2013

Succinctly summarizing the positive and negative news, data, and market events of the week...

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US Equities Slump To Worst Week In 5 Months

This week saw the largest plunge in US macro data in 11 weeks pushing us back towards the lowest levels since August. Fundamentals (macro and also micro- earnings) did have some impact - with stocks having their worst week in 5 months (but the S&P managed to bounce off its 50DMA) and despite carnage in its largest components, the Dow gained 10 points (of which -150 points were from IBM, GE, and MCD). Today saw a small recovery bounce amid low volumes driven by JPY weakness (testing back up toward 100 post G-20 silliness) and VIX compression as macro overlays were lifted and positions reduced. Gold gained on the day but silver lagged ending the week -5.5% and -11% respectively, with the USD gaining 0.77% on the week (as JPY weakened almost 400 pips off its Monday night highs). Treasuries traded in a 4-6bps range all week (and flow was quiet) but the long-end ended lower in yield by 2-4bps.

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Fed Governor Stein Warns When A TBTF Bank Fails, Depositors Will Be Cyprus'ed

"Perhaps more to the point for TBTF, if a SIFI does fail I have little doubt that private investors will in fact bear the losses--even if this leads to an outcome that is messier and more costly to society than we would ideally like. Dodd-Frank is very clear in saying that the Federal Reserve and other regulators cannot use their emergency authorities to bail out an individual failing institution. And as a member of the Board, I am committed to following both the letter and the spirit of the law."

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Earnings Update: Just Five (Plus One) Charts - A Complete Disaster

So far, 91 companies have reported 1Q results (28% of total S&P 500 market capitalization). 37% of companies reporting have beaten earnings estimates (below the historical average of 47%) and 13% have missed estimates (vs. average of 15%). The average EPS surprise has been 3.4%, below the 4.8% historical average. Excluding Financials, there are similar positive surprises (37%) and similar negative surprises (13%). Excluding Financials and Utilities, 21% of companies reporting have beaten sales estimates (below the historical average of 38%) and 24% have missed estimates (vs. average of 18%). The average revenue surprise has been -0.1%, below the 1.3% historical average. In short, things are not going according to plan - though we assume this just means the Q4-fantasy-hockey-stick explosion of revenues, earnings, and margins will just get bigger.

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G-20 Releases Statement On Japanese Devaluation (But Nobody Mention The Yen)

Two days in Washington D.C. kept caterers busy but produced a 2,126 word communique long on slogans and short on anything actionable. The G-20 statement (below) can be boiled down simply, as we tweeted,

And just to add one more embarrassing detail for them, while section 4 discusses "Japan's recent policy actions," not only does Canada's finance minister James Flaherty believe they "didn't discuss the Japanese Yen," but Japan's Kuroda believes, comments on 'misalignments', "were not meant for the BoJ."

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Chinese Gold Exchange Sold Out - Begins Importing From Switzerland

Hong Kong’s Chinese Gold & Silver Exchange Society has been in operations for over a century, and it’s President Haywood Cheung was interviewed by Bloomberg news earlier today.  Whoever orchestrated the attack on gold and silver in the last week or so has gravely miscalculated, since the response to the drop has been surging demand for physical gold and silver.  While I tend to be skeptical when I hear about silver shortages since these reports have been so exaggerated in the past, the lack of silver coin availability and premiums are the most extreme I have seen since the financial and economic meltdown of 2008.  Now we discover that the Chinese Gold & Silver Exchange Society has essentially sold out of gold bullion, and must wait until Wednesday for shipments to arrive from Switzerland and London.

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Chechen President Statement On Boston Bombers: "Seek The Roots Of Their Evil Inside America"

Chechen president Ramzan Kadyrov: "Tragic events took place in Boston. As a result of the blast people were killed. Previously, we expressed out condolences to the people of the city, and the people of America. Today, as reported by the media, during his arrest attempt, a Tsarnaev was killed. It would be logical, for him to be detained and investigated, and all the circumstances and degrees of his guilt uncovered. Apparently, the special services needed a result at any cost to calm down society. Any attempts to make a connection between Chechnya and Tsarnaevs, even if they are guilty, are in vain. They grew up in the United States, their attitudes and beliefs were formed there. It is necessary to seek the roots of evil in America. The whole world should fight terrorism. We know thisd better than anyone else. We wish a recovery to all the victims and share the Americans' sense of sorrow."

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What Have We Got To Look Forward To?

As another woeful week wends to a weary close... what we got to look forward to? Although markets appeared to be shooting off in every direction, we do expect we'll see clearer direction soon. Despite the noisy criticism earlier this week of Yen "competitive" devaluation, the G20 meeting said nothing. We suspect certain individuals were quietly sat in the comfy chair, had global reality gently explained to them with the aid of some rusty dental equipment, were slapped around a bit and told to shut it. As long as Japan can sign the pledge on “no competitive depreciation” without giggling we’ll be ok. We do suspect the warmest circle of financial hell is being reserved for those populist European politicians who've tried to appeal to voters with efforts to stem the financial tides, and punished markets for being markets.

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Tamerlan Tsarnaev's Gym Partner Profiles Dead Bomber

Earlier, we presented a captioned photo profile of one of the two alleged terrorists, the 26 year-old Tamerlan Tsarnaev who died last night in a shoot-out with the Boston Police. As a follow up, Bloomberg has conducted an interview with one of his gym sparring partners, "Jon K" who trained with Tamerlan in the same Boston gym, and who told BBG TV that "he seemed like a really nice guy, to himself and a little bit arrogant and cocky, but he helped people at the gym all the time with their boxing and was friendly with everyone. It's a complete shock." Jon, who asked that his last name not be used, said: "All week, I have been wondering who the psycho was and it turns out that it was somebody I interacted with. It is shocking, especially as an athlete, he was an athlete, that he would do this to other athletes and just anyone in general."

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Guest Post: A Radically Simple Life

Simplicity requires eliminating virtually everything we are "processed" to want and need for personhood, and accepting the intrinsic complexity of meaningful projects. There are two basic ways to reduce the stress described in yesterday's entry, The Silent Epidemic in a Broken, Deranged System: Stress: simplify one's life and take control of one's life. The two are not mutually exclusive, of course, but one does not necessarily lead to the other.

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What Is Going On In US Equity Markets Today?

US equity indices are in their own little world of glee today. Treasuries, credit, FX markets, swaps, commodities are not playing along. So what is going on? These two charts may help to explain...

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According To 'French' Fitch, France Is Now Rated Higher Than The UK

Fitch has just downgraded the UK from AAA to AA+ - now lower than France's.


Fitch doesn't see the UK economy reaching 2007 highs until 2014 - so there's hope?

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Sister Of Bombing Suspects Emerges In West New York

As the authorities focus on the geographic distribution of what may (or may not) be a delocalized cell, a curious developed has emerged courtesy of, which reports that a woman has been found living in West New York who has identified the bombing suspects as her brothers. She adds, logically enough, that she can't believe any of this has happened. She is probably not the only one.

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German Stocks Have Worst Week In 10 Months

EURUSD ended the week pretty much where it started - around 1.3100 - having tested from 1.30 to 1.32 during the week. Italian stocks also end the week practically unchanged - despite no government. But... German stocks (DAX) have slumped over 5% in the last six days for the biggest such drop since early June last year. Most other European equity indices end the week down 1.5 to 2.2% but - for some high-beta, JPY-expatriating reason, Italian stocks ripped higher today and saved the week. Swiss rates end the week near their lows. European sovereign bonds in general ended the week flat to slightly tighter. Europe's VIX closes modestly higher (but well off its mid-week highs). So while on the face of it, all is well, the smackdown in core European stocks to 5 month lows suggests things are not going well on the continent.


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Killed Chechen Bomber Brother: "I Don't Have A Single American Friend, I Don't Understand Them."

While the first alleged terrorist bomber, 19 year-old Dhjokar Tsarnaev, born in Kyrgystan, is on the loose currently somewhere in Boston and is the target of a massive manhunt, his brother, 26 year-old, Tamerlan Tsarnaev, born in Russia and legal US resident since 2007, died overnight in a shootout with the local police. It appears he was a boxer, studied at Bunker Hill Community College, was very religious, didn't drink or smoke, wanted to become an engineer, and his favorite movie was Borat. His YouTube page can be found here: on it can be found videos of Islamic preacher Feiz Mohammad. Most informative is a captioned photo narrative by Johannes Hirn showcasing the older brother's boxing pursuits and a glimpse into his history and philosophy.

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