It’s official: all the markers of manias both past and present have now been surpassed.
The reason one can't help but wonder just how much of FB's "users" are merely robotic autoclicks and/or originate at various clickfarms somewhere in Asia, is that taking the Google Trends chart posted above, and represented as of today, reveals something troubling.
IBM numbers in a nutshell: Revenue dropped by 11.9% to $19.6 billion; Net Income dropped by 2.4% to $2.3 billion...
And yet... GAAP EPS rose by 2.6% to $2.36!
Here's the accounting magic behind this "beat"
Just as the S&P appeared set to blast off to a forward GAAP PE > 21.0x, here comes Greece and drags it back down to a far more somber 20.0x. The catalyst this time is an FT article according to which officials of now openly insolvent Greece have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, but were told that no rescheduling was possible. The result if a drop in not only US equity futures which are down 8 points at last check, but also yields across the board with the German 10Y Bund now just single basis points above 0.00% (the German 9Y is now < 0), on its way to -0.20% at which point it will lead to a very awkward "crossing the streams" moment for the ECB.
Bank of America Revenue Drops, Misses Due To Declining Trading Revenues, Loan Creation And Net Interest MarginSubmitted by Tyler Durden on 04/15/2015 07:02 -0500
One look at BofA's earnings report shows why contrary to popular opinion, the bank that bailed out insolvent Merrill Lynch is far better off to be pnealized with tens of billions in legal fees than running its business unbothered by the racketeering government. The reason: a year after BofA reported $6 billion in litigation charges, moments ago Bank of America announced only $0.4 billion in legal fees, which meant it barely had any credible addbacks. So when looking at its numbers on a realistic, GAAP basis, BofA once again missed EPS, with the bottom line printing at $0.27, or below the $0.29 estimate.
Following countless quarters in which JPM suffered about $30 billion in legal charges, the tempets in Jamie Dimon's legal settlement teapot may be quieting down, with a quarter in which JPM experienced "only" $687 million in pre-tax legal expenses, or about $0.13 in EPS. As a result of this reduced kickback to the government to continue operating, JPM managed to beat expectations on both the top and bottom line, printing revenues and EPS of $24.8 billion amd $1.45 respectively, fractionally higher than the $24.5 Bn and $1.41 expected. Actually, half of that was accurate: JPM's GAAP revenue of $24.1 billion missed expectations, however its "managed basis" non-GAAP revenue did beat.
“What’s going on is the customers don’t have the f***ing money. That’s it. This isn’t rocket science.”
Some companies are notorious for buying back billions in stock in order to mask the decline in their earnings by reducing the number of shares outstanding. Alcoa, which still has a major debt overhang from the last financial crisis, is unable to do that as it simply does not have the free cash flow to dedicate to shareholder friendly activities. Instead, Klaus Kleinfeld's company is forced to resort to an even more primitive form of EPS fudging: massive quarterly EPS addbacks.
Hedge Fund Legend Julian Robertson Warns Of A "Complete Explosion" Unless Fed Contains "Boiling, Bubble" MarketSubmitted by Tyler Durden on 04/06/2015 22:28 -0500
According to hedge fund legend Julian Robertson, the Fed must act and hike rates soon because “the economy warrants it and I think [the Fed is] not crazy enough just to let this thing boil over into complete explosion. I am looking at a bubble that is almost sure to pop at some time and I don't know when it's going to happen, but I know it's going to happen. The bigger this bubble gets, the bigger the burst." What happens then: "I don't think it's at all ridiculous to think of a selloff like we saw in 2008."
As market participants slowly make their way back to trading desks around the post-Easter world, and especially the US where a truncated session on Friday morning ended in tears for anyone hoping for a 2015 US recovery following an abysmal March nonfarm payrolls print, they find that unlike on previous occasions, the equity futures liftathon is nowhere to be found this morning, with the S&P set to resume trading in the red for 2015. Away from Greece, whose future remains in limbo, the biggest development over the holiday weekend was a Goldman note in which the central-bank friendly firm said that "the right policy would be to put hikes on hold for now."
The amount of non-GAAP addbacks boosting the S&P "earnings" to their latest quarterly high has never been greater. In fact, the last time the absolutely notional value of pro-forma addbacks was anywhere near this close was in the Lehman "kitchen sink" quarter, when companies took advantage of the biggest bailout in capitalist history, to square their fudged income statement and balance sheet with accounting reality, resulting in an addback that was greater than the actual GAAP print!
Back in September 2013 we wrote "Coming Soon To A Theater Near You: MBIA's $1 Billion World War Z" in which we explained why MBIA will soon have a substantial problem (amounting to just about around $600 million) with several CLOs which we dubbed "Zombie CLOs" or as they were actually known, Zohar, on which it had written insurance, and which would become evident sooner or later once someone took a long, hard look at the collateral manager of the CLOs, namely Lynn Tilton's Patriarch Partners. Well, finally someone did take a long, hard look and today, our warning comes full circle following a shocker out of the SEC accusing Lynn Tilton of fraud and of "hiding the poor performance of loan assets in three collateralized loan obligation (CLO) funds they manage."
Does it really take purportedly intelligent people six years to see that the macros are not responding? Better still, isn’t it time for the Fed to explain the exact channel by which its interest rate pegging and forward guidance is supposed to be transmitted to the main street economy? After all, if these channels are blocked or ineffective - then its flood of liquidity never leaves the canyons of Wall Street. In that event, the central bank actually functions as a financial doomsday machine, inflating the next financial bubble until it bursts. Then, apparently, its job is to rinse and repeat.
Banks have reclassified a quarter trillion in assets in order to avoid the negative effects of an impending rate hike cycle. In the end, investors would be wise to remember that something is only worth what someone is willing to pay you for it.