Auto Sales

• Ukraine attacks rebel city, helicopter shot down (Reuters)
• Euro Unemployment Holds Near Record Amid Factory Gains (BBG)
• Yellen’s Fed Resigned to Diminished Growth Expectations (BBG)
• Junket Figure's Disappearance Shakes Macau's Gambling Industry (WSJ)
• China tried to undermine economic report showing its ascendancy (WSJ)
• Liquidity Trap Hitting AAA Bonds Has ATP CEO Sounding Alarm (BBG)
• AstraZeneca Snubs Pfizer Approach That U.K. Won’t Block (BBG)
• Missing Jet Recordings May Have Been 'Edited' (NBC)
• RBS turns corner as first-quarter profit trebles (Reuters)
• Japan household spending hits four-decade high, wages key to outlook (RTRS) while Real Incomes Drop 3.3% in March, 6th straight decline

In one of his most voracious tomes, The Wall Street Journal's Fed-see-er Jon Hilsenrath prepared 726 words and published them in 5 minutes to explain that the Fed's forecasts for Q1 were dismally wrong, that the future will all be rosy, and their forecasts spot on, and that the Taper is steady..."Fed officials acknowledged the first-quarter slowdown was worse than expected by saying activity "slowed sharply." Previously, they had just said activity merely slowed...Still, officials nodded to signs of a pickup in economic activity in March and April, suggesting they aren't too worried about the winter slowdown."

Not entirely surprising given the data from the automakers in recent weeks, but the 3.4% jump in auto dealer sales provided enough juice to push overall retail sales in the US up 1.1% MoM (beating expectations of 0.8% and with last month's data revised higher). This is the biggest month-over-month jump in retail sales since Sept 2012. The question, of course, is whether this auto spike is sustainable to support the overall sales environment or will the ever lowering credit standards of the subprime auto loan market lead to the inevitable collapse in a few months?

Futures are treading water once more now that Ukraine has stormed to center stage from the backburner after everyone was convinced Putin would let the situation cool off after annexing Crimea. Guess not. Adding the renewed geopolitical jitters to what has already been a beta stock bloodbath into a holiday shortened week assures some high volatility fireworks. Cautious sentiment was observed over in Asia (Nikkei 225 -0.36%) amid renewed fears that geopolitical tensions in Ukraine will flare up again following reports of exchange gunfire with pro-Russian militants. This sentiment carried over into the European session with stocks lower across the board (Eurostoxx50 -0.71%). EUR is lower after ECB’s Draghi said any further strengthening of the EUR would warrant further action by the ECB, including non-standard measures such as quantitative easing - it is amazing how frequently and often the Virtu algos still fall for Draghi's jawboning trick which has now become all too clear will never be implemented and certainly not if he keeps talking about it daily, as he does.

Dispassionate big picture overview.  

The world’s official economic institutions are run by people who believe in monetary fairy tales. The 70 words of wisdom below from IMF head Christine Lagarde are par for the course. She asserts that a new jabberwocky expression called “low-flation” is the main obstacle to higher economic growth in Europe and the DM areas generally and that it can be cured by more central bank money printing.

• Why did Yellen use criminals in her employment case studies? Hilsenrath explainz (Hilsenrath)
• GM avoided defective switch redesign in 2005 to save a dollar each (Reuters)
• Xuzhou Zhongsen Said to Avert Bond Default on Guarantor Aid  (BBG)
• France's New Finance Minister Faces Fiscal Challenge (WSJ)
• The magic is gone: Draghi’s Attempt to Talk Down Euro Lost on Traders (BBG)
• Another John Kerry smashing success: U.S. Gambit on Mideast Peace Talks Falters (WSJ)
• Combat-Ready China Military Seen as Xi’s Goal in Graft Battle (BBG)
• Huge earthquake off Chile's north coast triggers tsunami (Reuters)
• Pressure rises on Gross as investors pull $3.1 billion from Pimco's flagship fund (Reuters)

Among the key overnight events was the February Euro area unemployment report, which was unchanged at 11.9%, lower than the 12% median estimate; in Italy it rose to a record 13% while in Germany the locally defined jobless rate for March stayed at the lowest in at least two decades Euro zone PMI held at 53 in February, unchanged from January and matching median estimate in a Bloomberg survey HSBC/Markit’s China PMI fell to 48 in March, the lowest reading since July, from 48.5 in February; a separate PMI from the government, with a larger sample size, was at 50.3 from 50.2 the previous month NATO foreign ministers meet today to discuss their next steps after Putin began withdrawing forces stationed on Ukraine’s border Gazprom raised prices for Ukraine 44% after a discount deal expired, heaping financial pressure on the government in Kiev as it negotiates international bailouts.

A dispassionate look at the main considerations for investors in the week ahead.

Everyone agrees that the winter just now winding down (hopefully) has been brutal for most Americans. And while it's easy to conclude that the Polar Vortex has been responsible for an excess of school shutdowns and ice related traffic snarls, it's much harder to conclude that it's responsible for the economic vortex that appears to have swallowed the American economy over the past three months. But this hasn't stopped economists, Fed officials, and media analysts from making this unequivocal assertion. In reality the weather is not what's ailing us. It's just the latest straw being grasped at by those who believe that the phony recovery engineered by the Fed is real and lasting. The April thaw is not far off. Unfortunately the economy is likely to stay frozen for some time to come. 

Dispassionate look at next week's calendar.

It was only two weeks ago when Goldman's Jan Hatzius, as we predicted he would, took a hammer to its GDP forecasts for Q1 GDP upon the shocking realization that Q4 "growth" was all inventory driven. This morning, the hammering resumes as Goldman, in the aftermath of today's disastrous retail sales, not only cut its Q4 2013 GDP forecast from 2.8% to 2.4% (vs the 3.2% initially reported), but slashed its current quarter estimate from 2.3% to 1.9%. As a reminder, this number was 3.0% three weeks ago. Once again, nothing beats an economist forecast to know what the future will not be.

While loathed to admit it, US auto makers have done it again. As we have vociferously explained month after month (and has been vocally denied until now by the car makers themselves), much of the recovery in auto sales has been a massive channel-stuffing make-work program (mal-investment once again triggered by 'false' signals created by Fed intervention). Now, as the WSJ reports, Detroit's big 3 are trying to sweeten discounts to clear a massive inventory of unsold vehicles from dealer lots (desparate not to start a profit-killing price war). "We believe we can sell our way out," said GM, but as Morgan Stanley warns, "the best of the U.S. auto replacement cycle is over." Good luck...

A sneaky overnight levitation pushed the Spoos above 1800 thanks to a modest USDJPY run (as we had forecast) despite, or maybe due to, the lack of any newsflow, although today's first official Humphrey Hawkins conference by the new Fed chairman, Janet Yellen, before the House and followed by the first post-mortem to her testimony where several prominent hawks will speak and comprising of John B. Taylor, Mark A. Calabria, Abby M. McCloskey, and Donald Kohn, could promptly put an end to this modest euphoria. Also, keep in mind both today, and Thursday, when Yellens' testimoeny before the Senate takes place, are POMO-free days. So things may get exciting quick, especially since as Goldman's Jan Hatzius opined overnight, the third tapering - down to $55 billion per month - is on deck.

Although there are no policy making meetings, central banks will still dominate the agenda in the week ahead.