In a day in which there was and will be virtually no A-list macro data (later we get the FHFA and Richmond Fed B-listers), the inevitable low volume centrally-planned levitation was attributed to news out of China, namely that Likonomics has set a hard (landing) floor of 7% for the GDP, and that just like other flourishing economies (Spain, Italy, California) China would invest in "monorails" to get rid of excess capacity, as well as a smattering of European M&A activity involving Telefonica Deutscheland and KPN. In Japan, the government upgraded its economic view for the 3rd straight month and also raised its view on capex for the 1st time in 4 months: who says the (negative Sharpe ratio) PenNikkeistock market is not the economy? All this led to a 2% rise in the Shanghai Composite - the most in 2 weeks - and the risk on sentiment also resulted into tighter credit spreads in Europe, with the iTraxx Crossover index falling 4bps and sr. financial also declining by around 4bps, with 5y CDS rates on Spanish lenders down by over 10bps. Naturally, US futures wouldn't be left far behind and took today's first major revenue miss of the day, that of DuPont, which beat EPS and naturally missed revenue estimates, as bullish and a signal to BTFATH (all time high). On the earnings side, in addition to Apple, other notable companies reporting include Lockheed Martin, Altria, AT&T and UPS.
The Innovator’s Dilemma strikes again, this time with the news that the city of Detroit has filed for bankruptcy protection. As a business term, ConvergEx's Nick Colas reminds us that the “Dilemma” describes how successful companies fall from grace because they ignore new competition with disruptive technologies at the low end of their markets. In a world that increasingly revolves around intellectual capital (a.k.a. people), government at all levels needs to think about how they do not fall prey to the same error. As for Detroit, any lasting solution likely needs far more government intervention than is currently possible. And so to where Detroit goes from here, we’ll borrow from another business paradigm that parses all solutions to troubled operations into three buckets: "Fix, Close or Sell." In summary, Detroit’s failures are certainly of its own making. The way forward will need leadership that is unavailable locally.
- Earthquake Sends Kiwis Screaming From Wellington Buildings (BBG)
- China quake death toll more than doubles to 54, hundreds hurt (Reuters)
- In 2011, Michigan Gov. Snyder said bankruptcy wasn't an option for Detroit. Two years later, he changed his mind (WSJ)
- GlaxoSmithKline says Chinese laws might have been violated (FT)
- SEC Tries Last Ditch Move to Put SAC’s Cohen Out of Business (BBG)
- Detroit’s Bankruptcy Reveals Dysfunction Common in Cities (BBG)
- Obama to start new offensive on economy (FT)
- As WTI and Brent reunite, Gulf of Mexico faces squeeze, not glut (Reuters)
- Extended Stay Files for Public Offering (WSJ)
- Apple Developer Website Hacked: Developer Names, Addresses May Have Been Taken (MacRumors)
- Treasuries Not Safe Enough as Foreign Purchase Pace Slows (BBG)
Don't look now but futures are up as usual, driven higher by both good and bad news. The biggest event of the weekend, if largely priced in, was the victory by Abe's coalition in the upper-house leading to the following seat breakdown. Of course, judging by the Yen and market reaction, which barely managed to eek out a gain: its first in four trading days, the event was largely of the "sell the news" type despite such bold proclamations: "Abe’s victory in the upper house is bullish for Japanese equities and the Japanese economy as a whole, as the removal of political headwinds bolsters the government’s ability to press forward with all ‘three arrows’ of its growth strategy," John Vail, Tokyo-based chief global strategist at Nikko Asset Management Co., which manages $162 billion, wrote in an e-mail. Elsewhere in Europe, Portugal bond yields have plunged by roughly 60 bps on news that the Portuguese President Silva has backed the centre-right coalition government, consequently ruling out snap polls. Well, what else is he going to do? This also comes on the heels of a Goldman report that said a second bailout for the country will be necessary and will likely be discussed in the fall. That too is bullish. What also was bullish in Europe apparently is that government debt hit a new record high of 92.2% of GDP. Remember: debt is wealth so just buy more futures. Looking forward to the US, the market will focus on the latest existing home sales data, the Chicago Fed activity index, as well as earnings report releases from McDonalds, Texas Instruments and Halliburton and a bunch of other companies that will beat EPS and miss revenues.
Detroit will be followed by many cities, and this was not hard to see coming, not at all - as exemplified by the ample warnings given not just by me but by at least one other pundit who was derided for her candidness.
This earnings season is much worse as almost every single company is missing on the revenue side which is not as easily to "fix" as the EPS....
BS... Defined: Bernanke Seeks (BS) to Divorce QE Tapering From Interest Rates - OR - Economic Prestidigitation!Submitted by Reggie Middleton on 07/18/2013 12:27 -0400
Raise your hand if you think Bernanke can keep everybody drunk while simultaneously pulling away the punch bowl!!!!
Real, meaty analysis and ideas!
The recent attempt by AT&T to expand into the smartphone leasing business company in order to encourage customers to upgrade their equipment more frequently only confirms something that most industry observers have suspected for a long time: end customers have finally had it with annual (or even biannual) cell phone updates. And now we have proof. According to the WSJ, fewer people are upgrading their smartphones: "The rates at which American cellphone users have traded in their devices for more advanced models have declined over the last few years, according to analysts at UBS. They turned negative last year, when about 68 million people upgraded their phones in the U.S., down more than 9% from a year earlier." That was the first year in the past decade in which the turnover rate was below 0%. Sadly for Apple, Samsung and their competitors, 2013 is not shaping up any better: "UBS predicts upgrades will fall again this year."
- Bernanke Seeks to Divorce QE Tapering From Interest Rates (BBG)
- China launches crackdown on pharmaceutical sector (Reuters)
- Barclays, Traders Fined $487.9 Million by U.S. Regulator (BBG) - or a few days profit
- Barclays to fight $453 million power fine in U.S. court (Reuters)
- When an IPO fails, raise money privately: Ally Said to Weigh Raising $1 Billion to Pass Fed Stress Tests (BBG)
- Bank of England signals retreat from quantitative easing (FT) ... Let's refresh on this headline in 6 months, shall we.
- Russia's Putin puts U.S. ties above Snowden (Reuters)
- Smartphone Upgrades Slow as 'Wow' Factor Fades (WSJ)
- Snowden could leave Moscow airport in next few days (FT)
- New Egypt government may promote welfare, not economic reform (Reuters)
"Her neck had an obvious electronic injury," was the local Public Security Bureau's findings following the death of Ma Ailun, a 23-year old Chinese woman whose family alleges she was electrocuted by her iPhone. In its statement, Apple said: "We are deeply saddened to learn of this tragic incident and offer our condolences to the Ma family. We will fully investigate and cooperate with authorities in this matter." The case remains under investigation, with Chinese officials yet to provide details on whether her smartphone, the charger, or something else killed the woman; but, as the WSJ reports, The China Consumers’ Association in May warned about the dangers of a "flood" of uncertified power chargers on the market (in Chinese). In the release the association warned the chargers could turn a smartphone into a “pocket grenade” and cause explosions, electric shock, or fires in a variety of electronic devices. Reuters notes that Ma's sister tweeted on Sina's microblog saying that Ma collapsed and died after using her charging iPhone 5 and urged users to be careful and the message has gone viral - "(I) hope that Apple Inc. can give us an explanation. I also hope that all of you will refrain from using your mobile devices while charging."
- An actual Bloomberg headline: Granny’s Gold Bars Are Key to Vietnam Push to Boost Dong (BBG)
- Gay delivers further body blow to troubled sport (Reuters)
- China Wealth Eludes Foreigners as Stocks Earn 1% in 20 Years (BBG)
- Bernanke Boom Signaled by Yield Surge as Market Recalculates (BBG)
- Portugal's Parties Set Deadline for Pact (WSJ)
- Corporate Spending Set to Surge in U.S. (BBG)... or not at all based on the actual corporate data
- Legal Fears Slowed Aid to Syrian Rebels (WSJ)
- A mega-camp adds to the Boy Scouts’ troubles (Reuters)
- GSK accused of being ‘ringleader’ in China probe (FT)
- 19 Hospitalized in US-Ukraine Army Exercise - Ministry (RIA)
- Egypt Islamists march as senior U.S. official visits (Reuters)
- German spies made use of U.S. surveillance data (Reuters)
Looks like everybody was in on the act with complying with the National Security Agency’s spying around the world according to secret files. The Guardian newspaper of the UK has just obtained secret fails from Edward Snowden detailing the full extent of the affair. The affair was revealed just about a month ago now, but it now seems that Prism had everybody doing their dirty work.
The internet is on the verge of transforming manufacturing and China's dominance in this industry will soon be under serious threat.
- Summers Said to Show Interest in Fed Chairmanship After Bernanke (BBG)
- Obama Tells Chinese He’s Disappointed Over Snowden Case (BBG)
- Texas Threat to Abortion Clinics Dodged at Flea Markets (BBG)
- A Peek at Trucking Data, and Then the Stock Surged (WSJ)
- China cuts growth target… or does it? (FT) - yes, it does, net of goal seeked Random () of course
- China Official Suggests Tolerance for Lower Growth (WSJ)
- Disney Says Wristband Boosts Sales in Disney World Test (BBG) - next up: implanted RFID chips
- Spain Prepares Cuts in Renewable-Energy Subsidies (WSJ)
- Bernanke Departure With Duke Heralds Cascade of Fed Appointments (BBG)