Herbalife Tumbles 14% On News Criminal Probe Has Been Launched Into Company

The Herbalife drama – perhaps the biggest billionaire pissing contest of 2013 – just got excting again, following FT news that a criminal probe has been launched into Herbalife. “The US Department of Justice and the Federal Bureau of Investigation are investigating Herbalife, the multi-level marketing company that hedge fund manager Bill Ackman has alleged is a pyramid scheme, according to people familiar with the matter. The criminal investigation by the FBI and US attorney’s office in Manhattan raises the stakes for Herbalife, which is already facing civil inquiries from multiple government agencies that are looking into the Los Angeles-based company and its associated network of independent distributors.”

Then again one can’t help but wonder if those “people familiar” have a material stake in Pershing Square, which as is widely known has an extensive short and put position in HLF shares, which as expected tumbled by 14% on the news.

Ironically the selloff started earlier following a Gasparino tweet saying that HLF is cooperating with 20/20 on a possible expose.

Still, as the FT notes “The inquiry may not lead to any charges. Herbalife has not been accused of any wrongdoing” and additionally after the FT story broke, Gasparino added the following:

FT adds:

Herbalife said: “We have no knowledge of any ongoing investigation by the DoJ or the FBI, and we have not received any formal nor informal request for information from either agency. We take our public disclosure obligations very seriously. Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments.”

The probe, if confirmed, will merely be the latest headache following previous news that the FTC is investigating the company on a civil basis.

Of course, the question remains: will Carl Icahn – for whom the outcome of the Herbalife spat with Bill Ackman is much more about personal pride than anything – now be forced to LBO the DOJ and the FBI in addition to the FTC just to make sure there are no roadblocks in his quest to crush Ackman.

It remains to be seen, although rumor has it Jefferies already has a highly confident letter it can underwrite the B2/B- rated junk bonds needed to take private the US Department of Injustice and the FBI.




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Nasdaq Breaks 4,000; Collapses To Worst Week Since June 2012

Equity markets opened down hard, bounced into Europe's close, and then pushed to new cycle lows into the last hour of the day. The Nasdaq hit 4,000 for the first timein over 2 months and closed at its lowest close in 4 months. Around 3pm we saw the standard ramp attempt but it was weak and faded back towards the lows by the close. EURJPY ran the show this afternoon. This is the Nasdaq's worst week since June 2012 (with Nasdaq and Russell -3.5% from the FOMC Minutes alone). All major US equity indices closed red for 2014 (first time in over 2 months). Biotechs fell for the 7th week in a row (the longest losing streak since 1998) in a bear-market -21%. Away from the bloodbath in stocks, bond yields tumbled 8-11bps on the week (with the short-end modestly outperforming)… with 30Y yields (3.47%) at their lowest in 10 months. CAD and EUR weakness today supported modest USD buying but USD Index is -1.3% on the week (biggest weekly drop in 9 months).Commodites were flat today (despite a pump-and-dump in copper early and WTI later) with gold ending the week +1% at $1318.

 

Year-to-Date – not what the status quo was hoping for…

 

The post-FOMC Minutes Fed Dead Cat Bounce has been well and truly crushed…

 

Nasdaq at 4-months lows and below 4000…

 

Year-to-date, all major US equity indices are now underwater…fr the first time since early Feb…

 

Momentum – or high-growth-hype – names have been dumping since Fed's Tarullo popped the bubble with his "stretched valuations" comments…

 

Biotechs are down 21% (bear market) and have fallen 7 weeks in a row for the first time since 1998

 

Treasury yields tumbled…

 

with 30Y yields at fresh 10-month lows…

 

FX markets were relativley clam today but the USD had its worst week in 9 months…

 

Commodities rallied on the week (though copper and oil saw pump and dumps today)…

 

So Fed is tapering – USD is dumping, bonds are rallying and "growth" stocks are tumbling…

 

Charts: Bloomberg




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Obama Administration Slapped With ‘Muzzle Awards’ for Threatening Free Expression

Obama in a snitIn the past few months, the U.S
government has been slapped by
Reporters Without Borders
and the
Committee to Protect Journalists
over its attempts to maintain
a stranglehold on information, to punish government employees who
speak to the press, and even for targeting journalists
themselves.

Now you can add the Thomas Jefferson Center for the Protection
of Free Expression to the list of critics. Out of nine Muzzle
Awards bestowed by the organization this year, three go to elements
of the Obama administration.

For 2014 the Thomas Jefferson Center for the Protection of Free
Expression, which is “devoted
solely to the defense of free expression in all its forms
,”
bestowed dishonors in the area of respect for free expression on
the U.S. Department of Justice, the White House Press Office, the
National Security Agency, and the Department of Homeland
Security.

In its write-up
of the Justice Department
, the Center points out that “the
current administration has pursued more prosecutions for leaks
under the Espionage Act than all previous administrations
combined.” In particular, it refers to the tracking of Associated
Press communications and the surveillance of Fox News correspondent
James Rosen.

[T]he DOJ characterized James Rosen as a “criminal
co-conspirator.” That fact bears repeating: The federal government
labeled a reporter a criminal for merely doing his job.

What was truly shameful about the DOJ’s investigation was that
it never actually considered Rosen a criminal co-conspirator; the
accusation was merely a means by which to circumvent the
requirements of the Privacy Protection Act. In a letter to
Congress, Attorney General Eric Holder stated, “the government’s
decision to seek this search warrant was an investigative step, and
at no time during this matter have prosecutors sought approval from
me to bring criminal charges against the reporter.”

The write-up ends on a hopeful note that the political backlash
sparked by targeting the press will deter future efforts.

We’ll see.

The White
House Press Office
gets called out for its control-freaky
efforts to micromanage the president’s image.

Journalists have been butting heads with the Obama White House
ever since press corps photographers were prohibited from
documenting the President’s first day in office. In fact, during
his first five years in office, the White House has permitted
photography of President Obama alone inside the Oval Office only
twice: during telephone calls in 2009 and 2010. Photos of the
President and his staff working together in the Oval Office have
never been allowed, even though such pictures were routine in the
past.

The sanitized images released by authorized White House
photographers in lieu of actual journalistic photographs are “at
best, visual press releases, and at worst, pure propaganda
masquerading as news.”

The National
Security Agency and the Department of Homeland Security
get
slapped not for their creepy, creepy ways, but for their
intolerance toward those who mock their snoopiness.

Dan McCall sells T-shirts, mugs, posters, and other products
through the website Zazzle.com. Imprinted on his merchandise are
humorous images and messages, often of a political nature. One of
McCall’s designs juxtaposed an image of the National Security
Agency’s (“NSA”) official seal with the words, “Spying On You Since
1952.” Another design featured an altered version of the NSA seal
immediately above the words, “The NSA: The only part of government
that actually listens.” The Department of Homeland Security (“DHS”)
was also a target for parody, with McCall altering the official DHS
seal to read, “Department of Homeland Stupidity.”

The NSA and the DHS were not amused. In 2011, both entities sent
cease and desist letters to Zazzle.com threatening legal action if
the website did not remove the three designs described above.

Ultimately the feds backed own—after three years of litigation
and much more mocking. But the potential remains for the NSA and
DHS to pull the same stunt on anybody who finds humor in the
surveillance state.

Hey, this national security stuff is much too important to be an
object of fun. Or else.

Other booby prize winners include: the North Carolina General
Assembly Police, the Kansas Board of Regents, Modesto Junior
College, the Tennessee State Legislature, Wharton High School
Principal Brad Woods, Pemberton Township High School Principal Ida
Smith.

See the full list of awards, and their rationales, here.

The White House in the same company as Modesto Junior College?
That’s gotta sting.

In the earlier
Committee to Protect Journalists
report, David E. Sanger of
The New York Times commented, “This is the most closed,
control freak administration I’ve ever covered.”

Plenty of people seem to agree.

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“This Is The Power Of A Crowd Looking At A Crowd… And It’s A Bitch”

Submitted by Ben Hunt via Salient Partners’ Epsilon Theory blog,

Le roi est mort, vive le roi!
— French proclamation as coffin of old king is placed into burial vault of Saint Denis Basilica.

The throne shall never be empty; the country shall never be without a monarch.
— English Royal Council on death of Henry III in 1272, proclaiming Edward I king even though he didn’t get the news until months later.

Every time I thought I’d got it made
It seemed the taste was not so sweet
So I turned myself to face me
But I’ve never caught a glimpse
Of how the others must see the faker
I’m much too fast to take that test
— David Bowie, “Changes”

What we’re witnessing right now in US markets is a shift in the Narrative structure around Fed policy, and it’s hitting markets hard because the Narrative structure around the Fed as an institution has never been stronger or more constant.

As more and more generally positive US growth data comes out, most recently in last Friday’s jobs report, the Narrative around Fed policy is shifting from “The Fed will keep rates low forever and ever, amen” to “the Fed is on rails to raise rates sooner and more than you thought”. And that’s a real bummer if you’re long this market, particularly in a momentum or high-beta name.

A Narrative is just another name for what game theory calls Common Knowledge, which for my money is the most powerful force in human society. Common Knowledge is what topples governments, builds cathedrals, and starts (or ends) wars. It darn sure moves markets, particularly in a period of extreme global political fragmentation and stress, as we last saw in the 1930’s and before that in the 1870’s. As Keynes noticed (and successfully traded on with his own investments), market sentiment is driven by the creation or dissolution of Common Knowledge, and you can’t play the Game of Sentiment well if you’re not focused on it.

Common Knowledge is not just public information. It’s public information that everyone thinks that everyone thinks. It’s a signal that’s broadcast publicly by a powerful “missionary” like Yellen or Draghi or a Famous Investor on CNBC or a Famous Journalist in the WSJ, so that we all know that we all heard the message. And if we think that everyone else has heard the message, then the rational behavior is to act as if the message is true, regardless of our private beliefs or observations. This is the Emperor’s New Clothes…each of us can see with our own eyes that the guy is naked, but we’re not really looking at the Emperor. We’re looking at the crowd. Each of us is looking at all of us, and all of us know it.

So when the WSJ tells us that the Friday jobs report was good and strong, when Jon Hilsenrath tells us that this jobs report keeps the Fed “on track”, when Fed Governor Bullard tells us today that Fed actions have been “sufficiently aggressive”, when Janet Yellen tells us that she has a schedule in mind for raising rates…well, those are powerful public statements by incredibly influential missionaries. This is what creates Common Knowledge. We all heard these statements, and more importantly we all believe that everyone else heard these statements, too. So now we will all start to act as if the statements are true for Fed policy, no matter what we privately think the Fed will do or not do, and that behavior becomes a self-fulfilling prophecy, a snowball rolling downhill, as more and more of all of us start to believe that this is what all of us believe. This is the power of a crowd looking at a crowd, and it’s a bitch.

What we’re not seeing – and this is why the Narrative shift in Fed policy intentions is hitting the market so hard – is a change in the underlying and more fundamental Narrative that has controlled global markets for the past five years…the Narrative of Central Bank Omnipotence. I’ve written about this a lot (here and here, in particular), so I won’t repeat all that, but the Common Knowledge structure around the Fed and other central banks in general terms is that the Fed is responsible for market outcomes. It’s not that the “Fed has got your back” or that the Fed will always make the market go up. It’s that the Fed is large and in charge. Central bankers giveth, and central bankers taketh away. That’s the Narrative of Central Bank Omnipotence.

It’s become fashionable of late to say that the Fed doesn’t have as much impact on markets today as it has in recent years. This is, I think, an entirely wrong-headed reading of the game-playing in markets today. Or more charitably, from a game-theoretic perspective there has been zero evidence of a diminution in the underlying Common Knowledge belief structure that the Fed and its brethren are responsible for market outcomes. On the contrary, as these last few days and weeks and months suggest, a belief in the Fed as the ultimate arbiter of markets has never been stronger. The modern Goldilocks market environment is growth strong enough to avoid outright recession, but weak enough to keep the Fed in play. Whenever (and wherever, as this dynamic has been mirrored in Europe, China, and Japan) signs of strong growth and thus diminished central bank support have emerged, markets have sold off. It’s only when growth falters and the drumbeat of increased or continued central bank support re-emerges that markets recover. When real world good news is market bad news, and vice versa, then rest assured that the Narrative of Central Bank Omnipotence is alive and well.

This Common Knowledge belief structure around the institution of the Fed is like the Common Knowledge belief structure around the institution of the monarchy in feudal Europe – incredibly powerful, phenomenally resistant to change, and imbued through popular belief with the power to determine economic outcomes. The Narrative around a particular Fed policy or Chair or regime will change and shift, just as the particular monarch sitting on a throne changed over time. But the underlying institution and its ability to shape the world through its core or existential Narrative changes much more slowly. Importantly, it’s the maintenance of the institution – not the maintenance of any particular king or any particular set of policies – that’s crucial for social control. That was true in 13th century England and 18th century France, and it’s just as true in 21st century western democracies with central banks.

Bottom line:

“don’t fight the Fed” is a reflection of the institutional power of the Fed and the Narrative of Central Bank Omnipotence.

It cuts both ways. You don’t want to be short anything when the Fed is easing, and it’s hard to be long anything when the Fed is tightening. The crowd is picking up on a shift in the easing/tightening Narrative and is beginning to act on that by selling, just as they acted on prior market-positive shifts in the easing/tightening Narrative by buying. Different monarchs; same monarchy.

What’s to come? More of the same, I suspect. Good real world news is bad market news, and vice versa, for as far as the eye can see. Why? Because the crowd is not going to fight the Fed.




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Why the Standoff at the Bundy Ranch is a Very Big Deal

If you haven’t been following the unfolding drama at the Bundy Ranch about 80 miles northeast of Las Vegas you need to start now. The escalating confrontation between irate local residents and federal agents of the Bureau of Land Management (BLM) has the potential to take a very dangerous turn for the worse at any moment, as hundreds of militia members from states across the country are expected to descend upon the area and make a stand with 67-year-old Nevada rancher Cliven Bundy.

Before I get into any sort of analysis about what this means within the bigger picture of American politics and society, we need a little background on the situation. The saga itself has been ongoing for two decades and the issue at hand is whether or not Mr. Bundy can graze his 900 head of cattle on a particular section of public lands in Clark County. Cliven Bundy has been ordered to stop, but he has stood his ground time and time again. As a result, the feds have now entered the area and are impounding his cattle. According to CNN, Between Saturday and Wednesday, contracted wranglers impounded a total of 352 cattle. The Bundy family, as well as a variety of local residents have already had confrontations with the BLM agents. Tasers have been used and some minor injuries reported. Most signoficantly, militia members from across the country have already descended upon the area and it seems possible that hundreds may ultimately make it down there.

To me, the argument of who is right and who is wrong in this situation is the least interesting part of the story. I have noted time and time again that the feds are becoming increasingly out of control and belligerent to American citizens. We know the stories (think Aaron Swartz) and we know the overall trend trend. However, the reason the Bundy Ranch confrontation is so interesting, is that for whatever reason this particular incident seems to be striking a particular chord of dissent. It is often times the most random, unforeseen and innocuous things that spark social/political movements. This standoff has it all.

From CBS News:

LAS VEGAS (CBS Las Vegas/AP) — Militia groups are rallying behind a rancher whose cattle are being seized by the federal government.

The Las Vegas Review-Journal reports that two militia members from Montana and one from Utah have arrived at Cliven Bundy’s ranch.

“We need to be the barrier between the oppressed and the tyrants,” Ryan Payne of the West Mountain Rangers told the Review-Journal. “Expect to see a band of soldiers.”

Payne said that militias from New Hampshire, Texas and Florida are likely to join and stand with Bundy and stay at his ranch.

“They all tell me they are in the process of mobilizing as we speak,” Payne told the Review-Journal, adding that hundreds of militia members are expected.

Lawmakers are adding their voices into the fray, criticizing the federal cattle roundup fought by Cliven Bundy who claims longstanding grazing rights on remote public rangeland about 80 miles northeast of Las Vegas.

Sen. Dean Heller of Nevada said he told new U.S. Bureau of Land Management chief Neil Kornze in Washington, D.C., that law-abiding Nevadans shouldn’t be penalized by an “overreaching” agency.

Republican Gov. Brian Sandoval pointed earlier to what he called “an atmosphere of intimidation,” resulting from the roundup and said he believed constitutional rights were being trampled.

The fact that a U.S. Senator and the Governor are publicly coming out agains the feds is in my opinion a very big deal and may signal the beginning of a true fracturing in the social fabric. Something that I have been expecting for many years.

Heller said he heard from local officials, residents and the Nevada Cattlemen’s Association and remained “extremely concerned about the size of this closure and disruptions with access to roads, water and electrical infrastructure.”

The federal government has shut down a scenic but windswept area about half the size of the state of Delaware to round up about 900 cattle it says are trespassing.

Sandoval said he was most offended that armed federal officials have tried to corral people protesting the roundup into a fenced-in “First Amendment area” south of the resort city of Mesquite.

The site “tramples upon Nevadans’ fundamental rights under the U.S. Constitution” and should be dismantled, Sandoval said.

People being rounded up like cattle in these bullshit “First Amendment areas” is completely unacceptable.

BLM spokeswoman Kirsten Cannon and Park Service spokeswoman Christie Vanover have told reporters during daily conference calls that free-speech areas were established so agents could ensure the safety of contractors, protesters, the rancher and his supporters.

Meanwhile, federal officials say 277 cows have been collected. Cannon said state veterinarian and brand identification officials will determine what becomes of the impounded cattle.

The kindling for social upheaval has been growing in America for quite some time. Disrespectful and ignorant statements from billionaire oligarchs like Sam Zell only make it worse. The question in my mind has always been what will the catalyst be to spark the brushfire? Will it be the Bundy Ranch? We’ll have to wait and see.

Personally, I hope cooler heads prevail and there is no violence, because once you head down the road of violent confrontation between the people and the feds you are opening up a can of worms that will not easily be bottled up again. In such a situation, everybody loses. However, my long-term fear is that unless the government and its puppet masters on Wall Street and elsewhere in big business change course, social upheaval will prove inevitable, whether the Bundy Ranch sparks it, or some other incident down the road. These are troubled times and they are likely going to get worse before they get better.

Full article here.

In Liberty,
Michael Krieger

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Why the Standoff at the Bundy Ranch is a Very Big Deal originally appeared on A Lightning War for Liberty on April 11, 2014.

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NSA Abused Heartbleed Bug For Years, Left Consumers Exposed To Attack

It is one thing for the NSA to spy on everyone in the world, especially US citizens because all of them are obviously potential “terrorizers” just waiting for their opportunity to blow shit up (except for anything in close proximity to the Boston marathon – those things the NSA promptly filters out), but when the NSA itself is found to have not only known and itself abused the prevalent and widespread Heartbleed bug, but left consumers exposed, then it may be time to finally launch a class action lawsuit against Obama’s favorite means to eavesdropping on the entire world.

From Bloomberg:

NSA SAID TO EXPLOIT HEARTBLEED BUG FOR INTELLIGENCE FOR YEARS

 

The U.S. National Security Agency knew for at least two years about a flaw in the way that many websites send sensitive information, now dubbed the Heartbleed bug, and regularly used it to gather critical intelligence, two people familiar with the matter said.

And the punchline:

NSA SAID TO HAVE USED HEARTBLEED BUG AND LEFT CONSUMERS EXPOSED

 

Putting the Heartbleed bug in its arsenal, the NSA was able to obtain passwords and other basic data that are the building blocks of the sophisticated hacking operations at the core of its mission, but at a cost. Millions of ordinary users were left vulnerable to attack from other nations’ intelligence arms and criminal hackers.

 

“It flies in the face of the agency’s comments that defense comes first,” said Jason Healey, director of the cyber statecraft initiative at the Atlantic Council and a former Air Force cyber officer. “They are going to be completely shredded by the computer security community for this.”

How much more abuse from the government can the (granted mostly obese) US population take before it finally snaps?




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GM CEO Barra Lied To Congress: Docs Reveal She Knew About Steering Problem Years Ago

Despite her vehement denial of knowing anything about the ignition switch problems at GM (until late December, early January), documents revealed by the Energy and Commerce Department show:

  • *GM’S BARRA TOLD OF STEERING PROBLEM IN 2011, DOCUMENTS SHOW

We are sure the lawyers will be carefully crafting her PR response to this disaster but as Chairman Fred Upton notes, “There is still much left to examine and we will continue to
follow the facts… These initial documents revealed failures within the system.” It seems this was the last straw for the hedge funds (GM is the most widely held) as the stock is dumping.

 

As Forbes noted,

A recurring theme in the investigation into General Motors delayed response to a safety risk associated with faulty ignition switches is why the chief executive, Mary Barra, didn’t know about the problem earlier and do something about it.

 

She was, after all, the head of global product development before she was CEO, and held a series of engineering and staff jobs before that.

 

“You’re a very important person in this company,” Sen. Barbara Boxer, sounding incredulous, told Barra after reading portions of her resume at a hearing this week. “Something is very strange that you don’t know about these things,” said the California Democrat.

And now…Bloomberg reports,

“These initial documents revealed failures within the system,” House Energy and Commerce Committee Cmte Chairman Fred Upton, R-Mi., says in statement.

  • “There is still much left to examine and we will continue to follow the facts”
  • GM CEO Mary Barra told of steering problem in 2011, according to documents released by cmte
  •  NHTSA sought investigation of Cobalts for airbags in 2007
  • GM engineer Ray DeGiorgio said it was “impossible” to modify switch





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Head Of Asia’s Largest Clothing Retailer: “I Don’t Have An Optimistic View About Consumption In Japan”

Previously we observed that when it comes to discretionary spending, if not so much staples, Japan’s sales tax hike has been an absolute disaster, sending sales at some department stores such as Takashimaya plunging by 25% in the week since the April 1st roll out  of the tax many think could unleash Japan’s next recession.

Today we get some more on the ground perspective on the abysmal (second) reign of Abe, where the stock market may be approaching bear market territory (after everyone was convinced the Nikkei was set to soar in 2014), but it is really the economy which is about to get it, most likely resulting in Abe’s second premature evacuation stage left (with the now traditional Imodium scapegoat) well before the work of Abenomics is completed, in the process sending the USDJPY once again back into double digit territory.

As Bloomberg reported overnight, Fast Retailing, Asia’s largest clothing retailer was crushed in Friday trading, dropping 8% after it cut its profit forecast, citing higher costs and weak demand.

The company’s billionaire President Tadashi Yanai pared the profit outlook after spending more on salaries and expanding overseas, opening Uniqlo stores in New York, Paris, Shanghai and Jakarta to boost sales as a consumption tax increase begun April 1 in Japan damps demand. Costs for part-time workers, distribution and warehousing rose in the first half.

 

Fast Retailing’s net income dropped 15 percent to 23 billion yen in the second quarter ended February, as calculated from first-half earnings the company reported yesterday. Sales climbed 26 percent to 375.3 billion yen in the three-month period, while operating profit fell to 39.2 billion yen from 40 billion yen a year earlier, the company said.

 

The company’s operating margin slumped 23 percent from a year earlier to 10 percent in the second quarter, according to data compiled by Bloomberg. The margin was 17 percent in the second quarter of 2012, the data show. Operating income at the domestic Uniqlo business will probably be 100 billion yen this year, the company said yesterday, 13 percent less than previously forecast.

The reason for the margin collapse – Abe’s much vaunted wages increase (which as we showed previously prevalently amounts to about Y1000 per month, or enough to buy 4 BigMacs).

Sales are expected to slow in the fiscal second half, while costs for labor, transportation and warehouses will increase, Chief Financial Officer Takeshi Okazaki said yesterday, without elaborating.

 

The retailer said last month it plans to change 16,000 part-timers’ contracts at Uniqlo in Japan to full time to maintain a stable workforce. 

 

“The rising labor cost concerns me a little,” said Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co.

Surely Fast at least benefited from surge spending ahead of the April 1 tax hike? Nope.

A last-minute surge in sales before the tax increase failed to materialize, the company said yesterday.

So an 8% correction should at least make the stock cheap? Wrong again.

Fast Retailing’s price fell to about 37 times estimated earnings per share, still the highest multiple among the 10 largest global apparel retailers, according to data compiled by Bloomberg.

“The multiple is just too high” for Fast Retailing, Dairo Murata, an analyst at JPMorgan Securities Japan Co. said by phone today. He rates the shares neutral, the equivalent of hold.

What about the broader economy:

A gauge of economic expectations of people such as taxi drivers and restaurant workers tumbled to 34.7 in March from 40 a month earlier, according to the Economy Watchers survey released April 8 by the Cabinet Office in Tokyo.

The bottom line: “I don’t have an optimistic view about consumption in Japan,” Yanai told reporters yesterday in Tokyo. He said he had yet to see an effect on sales from the tax increase. He will quite soon, and he won’t be happy with what he sees.

And as Bloomberg conveniently points out what we started with, “The last time Japan increased the consumption levy, in 1997, the economy fell into recession.” This time won’t be different.

Bottom line: non-core prices soaring courtesy of Japan’s QE crushing discretionary purchases even as stocks – that much vaunted “wealth effect” transmission mechanism about to enter a bear market, slammed corporate margins meaning CEOs are about to once again lower salaries after having followed Abe’s misguided directive to boost wages, and an economy that is about to recontract and resume its recessionary status quo, even as the BOJ is set to hold Japan’s entire GDP on its balance sheet in as little as two years.

All of the above leads us to conclude that someone simply mistook a p for a b in Abenomics.




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Map of Global Shipping Highlights North Korea’s Isolation

Many readers will be familiar with photos of the Korean
peninsula at night showing the stark differences between the
economies of the capitalist south and the isolated, Stalinist
north. An example of one such photo is below:

Over at the London-based
City A.M.
 Peter Spence has found another way to
highlight North Korea’s isolation. The website marinetraffic.com tracks
ships using AIS (Automatic Identification System) transponders,
which are required by the International Maritime Organization for
all ships over 299 gross tonnage.

Below is a map from marinetraffic.com of the Korean peninsula.
It shows the location of ships as well as shipping density:

Spence mentions a World Bank report that highlights the
differences between North Korea and South Korea’s economic
performance:

An openness to trade has helped to contribute to South Korea’s
economic growth miracle. The World Bank says that the
country “has experienced remarkable success in combining rapid
economic growth with significant reductions in poverty.” In 2013
South Korea boasted an estimated GDP per capita of
$33,200. North Korea’s by contrast, was estimated at a
mere $1,800 in 2011.

Perhaps looking at volumes of shipping to each of the Koreas is
an unfair comparator, as North Korea is able to take greater
advantage of rail links to the continent, but neighbouring China
itself is a hive of cargo ship activity. The port of Dandong, close
to the China-North Korea border is itself incredibly popular.

More from Reason on North Korea here

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Stocks Plunge To New Lows For The Day

The Dow, S&P, and Russell 2000 just pushed to fresh lows for the day after some dead-cat-bouncing hope intraday. Weakness in stocks is worse than FX carry for now but more in line with bond strength as Treasury yields push to new cycle lows. WTI Crude is up and gold is holding gains as the USD is stable.

 




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