“Sandwich Crisis Deepens”: Subway Closes 500 Stores In 2018

The accelerating demise of Subway, the world’s largest restaurant chain, will one day be just another case study of how to run a once-spectacular business empire into the ground, as Americans quickly abandon this iconic sandwich chain in droves, seeking healthier and fresher, or just simply “different” food alternatives.

For the first time in its 52-years of operation, the company contracted in 2016, shuttering 359 US locations, which was the most significant retrenchment in its history. In 2017, the company closed another 800+ US locations, as details emerged that some one-third of shops in the US could be unprofitable.

Subway’s crisis could be linked to many factors: demographic shift, healthy eating trends, a disgraced ex-spokesman charged as a pedophile, and or managerial shifts. As we explained in December, it is only the tip of the iceberg for Subway’s closures, as we stated it is the “beginning of a crisis.”

And according to a new report from Bloomberg, the sandwich chain continues to close US stores at a record pace (which is not saying much as it has only had 2 full years of net closures in its entire history). Not even one month into the second quarter, management already announced that as many as 500 stores are closing across the country. While it is evident that Americans did not spend their Trump tax cuts on Subway sandwiches, the company is shrinking its North American footprint for greater opportunities in the U.K., China, India and Latin America, Bloomberg said. Last year, the chain closed +800 stores, bringing its total U.S. count to around 25,908 — well off the highs of 27,103 in 2015.

“We want to be sure that we have the best location,” Chief Executive Officer Suzanne Greco, 60, said in a phone interview. “We focused in the past on restaurant count. We’re focused now on strengthening market share.”

Store count isn’t everything,” she added. “It is about growing the business.”

Greco told Bloomberg that the company is struggling to increase sales in the U.S. as newer, more modern fast-food chains are crowding out the industry.


More from Greco:

“Subway had been hurt by fierce competition in the U.S., including from a resurgent McDonald’s Corp., whose domestic system sales rose 3.4 percent last year, according to data from researcher Technomic. Subway fell 4.4 percent. It’s also now faced with supermarkets and gas stations that are selling more grab-and-go fare, putting immense pressure on Subway to be faster and more convenient. Along with the closures, some locations are being relocated, and Subway is now using data from SiteZeus to choose better real estate.”

While the US segment clearly topped out in 2015, Greco told Bloomberg that her concentration today is on international expansion. She added the fast-food chain will add more than 1,000 locations outside North America and will primarily focus on the U.K., Germany, South Korea, India, China, and Mexico.

In summary, the compounding effect of store closures, eatery trends, waning restaurant industry, and poor advertisement choices, have ultimately dethroned the world’s largest restaurant chain, and now forced the company into a contraction phase for the third year in a row. And, as a last-ditch effort to preserve momentum and prevent further hemorrhaging of the sandwich empire, management has opted to shrink the North American segment for more, costlier opportunities abroad.

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Leaders Of Two Koreas Will Meet Friday Morning At The DMZ

In a meeting that’s widely viewed as a preamble to a historic summit involving President Trump and North Korean leader Kim Jong Un, the leaders of the two Korea’s – North Korean leader Kim Jong Un and South Korean President Moon Jae-in – are preparing to meet at the border at 9:30 am local time on Friday.

Friday’s summit will take place in the Peace House in in the border town of Panmunjom, located in the heart of the demilitarized zone.


Im Jong-seok, the chief of staff for President Moon, provided a full itinerary of the meeting – which will involve the ceremonial planting of a pine tree on the border – to Bloomberg:

  • Kim to walk across border to South
  • Kim to review South Korean military’s honor guard after walking together with Moon
  • Moon, Kim to start summit at 10:30am local time Friday
  • Moon, Kim to have lunch separately after morning meeting
  • Moon, Kim to plant pine tree on border after lunch
  • Moon, Kim to walk together around border before afternoon session
  • Two Koreas to sign, announce agreements after summit
  • Moon to host banquet for Kim from 6:30pm at peace house
  • No Plan to extend summit to Saturday for now
  • S. Korea: undecided whether Kim’s wife will accompany; hopes Kim’s wife to join dinner
  • Kim Jong Un’s sister part of North Korean delegation
  • S. Korea says issues related to denuclearization can’t be fully resolved at the inter-Korean summit; S. Korea would consider the summit a success if the North’s intention of denuclearization is included in the agreement

Meanwhile, South Korean Foreign Minister Kang Kyung-wha credited President Trump with bringing the two Korean leaders together for Friday’s summit during an interview with CNN’s Christiane Amanpour that’s slated to air Thursday night.

“Clearly, credit goes to President Trump,” Kang told CNN’s Christiane Amanpour in Seoul. “He’s been determined to come to grips with this from day one.”

During the summit, Kim will become the first North Korean leader to cross the DMZ.

The detente between the two countries was an unexpected – but welcome – development, Kang said, for which President Moon also deserves credit. According to her, the combination of tough rhetoric and sanctions was key in bringing the North to the table.

Kang told Amanpour that the détente was unexpected. “I think we’re all surprised. Obviously pleasantly surprised. I think by all indications we are headed towards a very successful summit between my president and Chairman Kim tomorrow.”

She said that Moon’s determination also played a role in the thaw. In her analysis, the combination of tough rhetoric and economic and travel sanctions were instrumental.

President Trump’s rhetoric, of course, has shifted on North Korea as a summit became a more real possibility.

In August, he threatened “fire and fury like the world has never seen.” In September, he said “Rocket Man s on a suicide mission.” This week, he said that Kim Jong-un had been “very open and I think very honorable.”

Kang admitted Presidents Moon and Trump have at times had “different messaging,” but insisted that they maintained close consultations.

At the end, the message was North Korea will not be accepted — never be accepted as a nuclear power.”

Kang said that, if the two leaders can produce a written statement of understanding “on a broad set of issues”, then the meeting would be considered a success.

When asked what would constitute success for President Moon’s summit with Kim, Kang suggested a joint statement of understanding “on a broad set of issues” including denuclearization, peace, and relations between the two countries.

“If we can get — put in writing the North Korean leader’s commitment to denuclearization, that would be a very solid outcome.” She said that it would be “unrealistic” to expect sudden movement toward a formal peace treaty between the two countries.

They have formally been at war since the 1950s, restrained only by an armistice agreement. “You need to create the reality of peace by removing hostilities… And then when there is sufficient confidence on both sides, then you are ready to sign a peace treaty.” Sanctions on North Korea, she said, will not be eased until Kim takes “visible, meaningful steps” toward denuclearization.

Trump reaffirmed earlier during an interview with Fox News that, while there’s still a chance the US-North Korea talks might not happen, the two sides had picked out three possible dates and five possible locations for the summit.

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Simon Black On “The Coming Boom In Gold Prices…”

Authored by Simon Black via SovereignMan.com,

In June 1884, a local farmer named Jan Gerritt Bantjes discovered gold on his property in a quiet corner of the South African Republic.

Though no one had any idea at the time, Bantjes’ farm was located on a vast geological formation known as the Witwatersrand Basin… which just happens to contain the world’s largest known gold reserves.

Within a few months, other local farmers started discovering gold… kicking off a full-fledged gold rush.

Just over a decade later, South Africa became the largest gold producer in the world… and the city of Johannesburg grew from absolutely nothing to a thriving boomtown.

This area is singlehandedly responsible for 40% of all the gold discovered in human history – some 2 billion ounces (or $2.6 trillion of wealth at today’s gold price).

And while the Witwatersrand Basin is still being mined to this day, it’s not as active as it used to be.

Gold production in Witwatersrand peaked in 1970, when miners pulled a whopping 1,000 metric tons of gold out of the ground.

A few decades later in 2016, the same area produced just 166 tonnes– a decline of 83%.

That’s not unusual in the natural resource business.

Whereas it takes nature hundreds of millions of years to deposit minerals deep in the earth’s crust, human beings only require a few decades to pull most of it out.

This creates the constant need for mining companies to explore for more and more major discoveries.

Problem is– that’s not happening. Mining companies aren’t finding anymore vast deposits.

According to Pierre Lassonde, founder of the gold royalty giant Franco-Nevada and former head of Newmont Mining–

If you look back to the 70s, 80s and 90s, in every one of those decades, the industry found at least one 50+ million-ounce gold deposit, at least ten 30+ million ounce deposits, and countless 5 to 10 million ounce deposits.

But if you look at the last 15 years, we found no 50-million-ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits.

So where are those great big deposits we found in the past? How are they going to be replaced? We don’t know.

Bottom line: gold discoveries are dwindling.

Part of the reason for this is that mining companies aren’t investing as much money in exploration.

According to S&P Global Market Intelligence, major mining companies (excluding those in the iron ore business) have been cutting their exploration budgets for years.

By the end of 2016, exploration budgets hit an 11-year low.

And this has clearly had an effect on new discoveries.

This is all because the gold price has been relatively flat for the past several years.

Investors have lost interest. And the mining companies, eager to cut costs, have pared back their exploration budgets as a result.

But this is where it gets interesting: natural resources are cyclical. They go through extreme periods of BOOM and BUST.

When gold prices are high, major mining companies scramble for new discoveries.

Eventually when they start mining those deposits, though, the supply of gold increases, pushing prices down.

As the price falls, the miners’ profit margins fall, which causes investors to lose interest and the miners to reduce production.

This causes supply to fall, prices to increase, and the cycle starts all over again.

In a way it’s almost comical. And that brings us to today. Well, technically yesterday.

We’ve been seeing for more than a year that interest rates have been rising.

Yesterday afternoon the yield on the 10-year US Treasury note surpassed 3% for the first time since 2014.

And oil prices have been rising steadily as well.

Financial markets don’t like this combination– it means that inflation is coming. Big time. And stocks plummeted worldwide as a result.

Now, that immediate reaction was probably a bit too panicky.

But the deep concern that inflation is coming (or has already arrived) is completely valid.

Inflation is a HUGE problem. And the traditional hedge in times of inflation is GOLD.

But remember– new gold discoveries have collapsed in the past 15 years.

And, as Lassonde said above, there are few discoveries on the horizon to make up the difference.

These companies can’t just go out and start a new mine, either. Even if they found a promising deposit, with all of the bureaucratic red tape, it would take seven to nine years to start producing gold.

So when demand for gold really starts to heat up, the supply won’t be there.

And this could really cause the gold price to soar. (Silver could rise even more… but we’ll save that for another time.)

Now, there are plenty of small, highly speculative companies, known as ‘junior miners’ who specialize in exploring for new deposits.

And when the gold market is in a frenzy, juniors with great deposits tend to be acquired at ridiculous prices by the major miners.

Now, I’m not suggesting you load up on junior miners– you can make a lot of money if you know what you’re doing, and LOSE a lot of money if you don’t know what you’re doing.

These are tiny, extremely high-risk companies often run by sharks and con-men.

As Doug Casey writes in his novel Speculator, they’re great and taking YOUR money and THEIR dream, and turning it into THEIR money and YOUR dream.

Fortunately there are safer ways to take advantage of this looming imbalance between supply and demand in the gold market.

Physical coins are an easy option.

Gold coins typically sell at a price that’s higher than the market price of gold– to account for the work involved in minting the coin.

This price difference is known as the ‘premium’.

And when gold becomes popular, the premiums often increase too.

This means you can make money both from the rise in gold prices, as well as the increased premiums.

Avoid anything obscure– stick to the most popular gold coins like Canadian Maple Leafs.

And to continue learning how to ensure you thrive no matter what happens next in the world, I encourage you to download our free Perfect Plan B Guide.

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Gartman Shorts The Nasdaq

With Dennis Gartman refusing to commit to either the bullish or bearish case in recent days, algos have meandered listlessly, without direction, and so has the broader market. That is about to change because in his latest note, Gartman has a present to all those who delight in either trading alongside the “world-renowned commodity guru”… or against him:

But first, here are Gartman’s comments on  Facebook’s blowout earnings:

Much shall today depend upon how the market responds to the strangely bullish earnings and sales figures reported last night by Facebook, from which we are to believe that the company’s problems with the exposure of personal data  has had little if any effect. This is nonsense! Facebook users everywhere are using their “accounts” less frequently and advertising efforts are becoming fraught with problems. You know this; we know this; everyone knows this, but yet the figures released by the company tell us otherwise.

At any rate, FB’s shares rose sharply after the announcement, carrying the NASDAQ futures sharply higher with them. At this point, as we write, the NASDAQ futures are trading 28 “handles” higher, or a bit less than ½% higher and are running into resistance. However, they are doing so on truly negligible volume, continuing the process of volumes rising as prices fall and volumes falling as prices rise.

This is not how bull markets trade; it is, however, how bear markets do. Our strong propensity then is to be a seller into strength and especially so as the CNN Fear & Greed Index has risen over the course of the past two or three weeks from single digit “Fear” levels to the high 30’s-low 40’s, or back to “neutrality.” In bear markets, usually the best that markets can do is make their way from egregiously over-sold levels to neutrality. Rarely can they make their way toward truly over-bought circumstance.

Which brings us to Gartman’s New Reco:

NEW RECOMMENDATION: We’ve been abundantly bearish of equities for the past several weeks, but we’ve failed to put that bearishness to test “officially” in a recommendation and so we shall do so this morning, wading in to sell the NASDAQ futures anywhere above $6560 as it trades $6564 as we write and finish TGL. We’ll risk 1.5% on the trade and we look for $6000 to be taken out to the downside sooner  rather than later. Indeed, should 6400 be taken out today we’ll add to the position immediately

While there is a distinct chance that Garty may be correct, his last trade recommendation fiasco, in which his short oil trade was stopped out in less than 24 hours, suggests that he isn’t, and instead the free money is to the upside.

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Euro Rebounds, Reclaims 1.22 As Draghi Downplays Soft Econ Data

One look at the recent Citi Eurozone Economic Surprise Index, which as shown below, recently plunged to 6 year lows, confirming that Eurozone economic growth recently hit a brick wall and has been in freefall (largely due to the collapsing Chinese credit impulse)…

… is sufficient to explain why most traders were expecting a more dovish Draghi to emerge from today’s press conference. Instead, Draghi once again surprised with his bubbly optimism, downplaying the clearly soft economic data.

Specifically, the ECB president said that he expects economic growth to remain solid, and underscored the hawkish case by stating that he expects “solid, broad-based growth.” In a follow up question, Draghi attributed some of the recent slowdown in economic data to “one-off” factors, which would read as fairly positive for the outlook. Specifically, he blamed the weather, and – once again – the timing of Easter:  “Some normalisation was expected, mostly due to temporary factors, for example cold weather, strikes, timing of Easter”.

He also cited continued strength in data flow on an absolute basis – he summarizes with the line “caution, tempered by unchanged confidence.”

Having touched on FX volatility in recent press conference, Draghi was also asked a question about recent FX moves, although he swerved away from an outright comment on EUR, saying the ECB did not discuss exchange rate volatility and does not comment on recent EUR weakness despite given an opportunity.

Commenting on the presser, ING said that Draghi’s optimism may encourage Euro bulls, and adding that Draghi “not expressing too much concern over recent softening” in economic data has helped the euro and may encourage investors who are bullish on the currency: “EUR passes its first test on Draghi’s comments” according to ING analyst Viraj Patel.

According to ING, the message is that euro-zone growth outlook “remains solid and broad-based could excite some lingering EUR bulls” Patel said, and added that “reading between the lines, one could see these are levels that the ECB are comfortable with.”

He concluded that lower EUR/USD levels will be seen by bulls as “an attractive entry point to go long again ahead of the June” ECB meeting, although notes that hard economic data will determine conviction.

Sure enough, in response to the ECB’s lack of concerns about the economy and FX volatility, the EUR jumped, rising above 1.22.


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Ford Will Stop Selling Nearly All North American Cars; Refocus Only On Trucks And SUVs

As Ford pushes ahead to achieve its profitability target of 8% by 2020, a level that would once again place it ahead of Chrysler-Fiat in the Detroit automaker profitability depth league tables…


… the company announced Thursday that it’s shuttering the last of its US sedan brands as it shifts its focus to international markets, trucks and SUVs. It is a drastic move, as the company will be phasing out sedan models that have a long history with the company, including models like the recently revamped Ford Taurus.

The closures are expected to save Ford $25.5 billion by 2022, Ford Chief Financial Officer Bob Shanks told reporters on Wednesday during the company’s first-quarter earnings call. When the company is finished with the cutbacks, the only non-SUV, non-truck cars Ford will sell in North America will be the Mustang and the as-yet-unannounced Focus Active, according to TechCrunch, which pointed out that the closures were “a long time coming.”

Currently, Ford sells six sedans and coupes in North America: the Fiesta, Focus, Fusion, C-Max, Mustang and Taurus. This lineup hits multiple segments, from the compact Fiesta to the mid-size Focus, C-Max and Fusion to the full-size Taurus. The Mustang stands alone as the lone coupe.

It’s likely Lincoln’s sedans will also disappear, though this was not explicitly stated in today’s press release. Lincoln currently sells the mid-size MKZ and full-size Continental — both share platforms with Ford counterparts. If Ford is phasing out development of sedan platforms, Lincoln will likely suffer, too.

This reduction in traditional cars was a long time coming. North America consumers have increasingly turned to crossovers, trucks and SUVs over sedans and small cars. A trip to any parking lot will likely produce more evidence to this movement. There are several factors involved, from more fuel-efficient and better-equipped trucks and SUVs to improved safety ratings and ride qualities of these vehicles.

The company also reaffirmed that it will soon install hybrid-electric powertrains on its F-150, Mustang, Explorer, Escape and the upcoming Bronco.

The turnaround comes as domestic sedans have led the dropoff in new car sales that has continued this year; the company will now focus exclusively on higher margin models, as Bloomberg  writes:

“We’re going to feed the healthy part of our business and deal decisively with areas that destroy value,” Hackett said on an earnings call Wednesday. “We aren’t just exploring partnerships; we’ve now done them. We aren’t just talking about ideas; we’ve made decisions.”

Ford finds itself on a road similar to the route Fiat Chrysler Automobiles NV followed to pass Ford in North American profitability. Fiat Chrysler CEO Sergio Marchionne now wants to eclipse General Motors Co. before his retirement in 2019.

For Ford, these higher margin vehicles mean not only canning its previous sedan efforts, but also failing to invest in new sedans for the North American market in the future. A similar fate looks like it could be on the way for Lincoln, as well:

Ford said it won’t invest in new generations of sedans for the North American market, eventually reducing its car lineup to the Mustang and an all-new Focus Active crossover coming next year. By 2020, almost 90 percent of its portfolio in the region will be pickups, SUVs and commercial vehicles.

That means the end of the road for slow-selling sedans such as the Taurus, Fusion and Fiesta in the U.S. The automaker conspicuously left the Lincoln Continental and MKZ sedans off its hit list, but since those models share mechanical foundations with Ford siblings, their futures also are in doubt.

“For Ford, doubling down on trucks and SUVs could be just what the brand needs,” Jessica Caldwell, an analyst for Edmunds.com, said in an email. “But this move isn’t without risk: Ford is willingly alienating its car owners and conceding market share.”

New CEO Jim Hackett is pressing ahead with these changes as Fiat Chrysler CEO Sergio Marchionne’s success at turnaround the company’s moribund profitability has him now gunning to surpass General Motors in profitability by the time he retires in 2019. By 2020, almost 90% of Ford’s North American portfolio will consist of pickups, SUVs and commercial vehicles.

Of course, the changes will likely take a few years to produce results.

Ford’s profit margin should “bottom out” this year, Hackett said on the call. The Asia Pacific region will probably lose money in the second quarter before returning to profit in the back half of the year. The company also is reviewing its strategic plans for South America.

“Everything will be on the table” to fix Ford, Shanks told reporters at the company’s headquarters in Dearborn, Michigan. “We can make different investments, we can partner, we can exit products, markets — and we will do that.”

One factor that had been contributing to investor pessimism has been commodity costs, which Ford expects will be a $1.5 billion headwind this year. About $500 million of that came in the first quarter, Shanks said. The automaker began the year flagging to investors that pricier raw materials including steel and aluminum would contribute to profit declining in 2018.

Ford’s first quarter adjusted earnings rose to 43 cents a share, topping analysts’ average estimate of 41 cents. Ford’s automotive revenue increased to $39 billion, higher than the average projection for $37.2 billion from a Bloomberg survey.

And while Shanks, the chief financial officer, warned that certain markets, like the company’s Asia business – where it was slow to break into the Chinese market – could see profitability bottom out during the second quarter, it’s expected to rebound during the second half of the year.  For now analysts are optimistic, althought they expect it will take a few years for the turnaround at Ford to bear results.

“For Ford, doubling down on trucks and SUVs could be just what the brand needs,” Jessica Caldwell, an analyst for Edmunds.com, said in an email. “But this move isn’t without risk: Ford is willingly alienating its car owners and conceding market share.”

“It’s not that the market has permanently given up on good news ever happening at Ford,” said David Whiston, an analyst with Morningstar Inc. who recently lowered his rating on the stock to the equivalent of a hold. “But most people aren’t expecting it until late 2019 or 2020 and that brings up the wild card of, ‘Will we be in a recession by then?’”

Still, even once Ford fixes its problems in the North American market, it still needs to play catch up in China if it ever hopes to outmaneuver its Big Three rivals.

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Trump Says “Hands Off” Approach To DOJ “Could Change” In Fox Interview

During a call-in interview with Fox & Friends Thursday morning that snowballed into an angry rant about “fake news” organizations, Ronny Jackson, James Comey, Michael Cohen, Kanye West, US relations with Iran, the upcoming talks with North Korea, President Trump lashed out at the FBI and its former director, James Comey, while the president claimed he has “nothing to do” with Cohen’s legal troubles.

Despite the cloud of the Russia probe hanging over his head, Trump said he’s still managed to accomplish a lot during his first term in office. And while Trump says he’s tried to “stay away” from interfering with the Department of Justice, at some point his “hands off” approach could change.

Of course, his aggressive remarks followed reports last night that the newest member of his legal team, Rudy Giuliani, had restarted talks with Special Counsel Robert Mueller.

The interview started with Trump calling out Montana Democratic Sen. John Tester for bringing up allegations about Jackson, including his nickname, “the candy man,” which he purportedly earned due to his willingness to hand out prescription drugs in his role as personal physician to US presidents.

Trump said Jackson had withdrawn his nomination to lead the VA largely to spare his family from Democratic scrutiny. Trump insisted that Jackson is an example of an American who should be admired, and that while nobody is truly qualified to lead the VA, Jackson would’ve done a great job.

Asked about his next pick to lead the VA, Trump said only that the candidate would have a “political” background.

Commenting on his meeting with Emmanuel Macron, Trump said the two men had “a fantastic time” and that they “accomplished a lot”. Though Trump wouldn’t say specifically what they agreed on, he said Macron would be leaving with “a different view on Iran”. “He knows where I’m coming from,” he said.

When it comes to Iran, Trump said the Iranian government has mostly refrained from provocative acts and “death to America” rhetoric since he took office. “They don’t try that stuff with me, you don’t see their little boats circling our ships with me. Because if they do, they  know they’re not going to be there very long.”

Moving on to the subject of Michael Cohen, Trump blasted the FBI for raiding Cohen’s home early in the morning while his wife was still in bed, and generally dismissed the raid as part of a witch hunt. Cohen only handles a “tiny fraction” of Trump’s legal work, and that the investigation into his former personal attorney “has nothing to do with me.”

On the subject of North Korea, Trump said negotiations between the US and the reclusive state are going “very well”. And in information that hadn’t previously been disclosed, Trump revealed that Mike Pompeo’s clandestine meeting with Kim Jong Un hadn’t been planned in advance. Meanwhile, Trump added that the US has “three or four” dates for the historic summit picked out, as well as about five potential locations.

Trump again congratulated Kanye West for saying he respects the president, and argued that West sees black unemployment at historical lows under Trump and understands that Republicans are doing more for the black community than Democrats ever would. The president also gave a shoutout to Diamond & Silk, a pair of black women who are outspoken Trump supporters who reportedly faced censorship at the hands of Facebook.

But the president saved his harshest language for James Comey, who had appeared in a CNN town hall the night before. Trump again branded him a “leaker” and a “liar” who should be facing criminal charges.

Early in the interview, which ran for about 30 minutes, Trump shared what he bought Melania for her birthday with the Fox & Friends team.

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Initial Claims Drop To 49-Year Low But Durable Goods Orders Disappoint

Another week, another near record low in US initial claims, which in the week ended April 21 dropped to just 209K from 233K last week, the lowest print since September 1969, and below consensus estimates of 230K. Continuing claims also fell, although less dramatically, by 29k to 1.837 million. That said, some of the data was questionable, with the Labor Department saying claims for Colorado and Maine were estimated last week.

Meanwhile, while Durable Goods rose 2.6% in March, beating expectations of 1.6% if lower from last month’s 3.5% increase, much of this was thanks to transports, which rose 7.6% as well as nondefense aircraft, which soared 44.5%. Excluding transports, durables missed, and were unchanged on the month, down from 0.9% last month, and below the 0.5% expected increase.

Core Capex in the form of capital goods orders nondefense ex air also missed, declining -0.1% in March, far below the 0.5% expected increase, and confirming once again that instead of investing the Trump tax reform proceeds in their businesses, companies are largely allocating capital to dividends and buybacks.

However, perhaps the most important print came in the form of the far less closely followed Advance Goods Trade Deficit, which unexpectedly narrowed substantially, from 75.9BN to just $68.0BN, and far better than the $75BN expected. This suggests that tomorrow’s Q1 GDP print could be a material upside surprise.

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Watch Live: Mario Draghi Press Conference And Cheat Sheet

Anyone expecting major volatility to emerge out of today’s ECB presser, will be disappointed: as discussed previously, today’s Mario Draghi press conference is expected to be a snoozer (the statement which hit earlier was identical to last month).

Consensus expects today’s announcement to be largely a continuation of the theme, with June/July touted as a more opportune time for the ECB to unveil their next stage of major policy announcements.

As a result, Draghi will likely make some reference to the recent softness in data but ultimately maintain that risks to economic growth are ‘broadly balanced.’

For those who missed our preview, here is the one-chart summary courtesy of ING on how the market is likely to react to Draghi’s words.

If that’s not enough, here is a more detailed cheat sheet courtesy of Bloomberg, which notes that the euro has weakened on each of the past four days that Mario Draghi has delivered the European Central Bank’s monetary policy decision. It may make it five in a row should the central bank sound dovish today, charts and trader positioning suggest.

  • Traders don’t see the meeting as a game-changer and expect a rather contained response in the currency market, with overnight volatility in the euro trading Wednesday at the lowest level ahead of a monetary policy decision in more than a year; still, there is potential for a slide of about 0.8%, which last happened a month ago

The euro has dropped nearly 2% since its cycle high on April 17, while risk reversals have turned in favor of euro puts; The recent slide seems to be have been driven mainly by the U.S. side of the equation as the currency market turned rates-driven and the spread between U.S. and German yields widened

That suggests a dovish Draghi may not have been fully priced in already, and the euro could drop below 1.2100; a close below 1.2030 may mark the start of a fresh leg lower that could target a move below 1.1600 on an Elliot Wave basis

  • Currency may test support at $1.2030-$1.2090, with $1.2070-$1.2090 being the key area in focus; a drop toward $1.2070 would represent a slide of 0.8%
  • Any attempt by the ECB President to downplay growth or inflation concerns may spark a knee-jerk reaction toward 55- DMA resistance as short-term short positions will look for cover

The market’s base-case scenario looks for no changes in policy settings or language, mostly focusing on any clues President Mario Draghi may give on the wind-down of the ECB’s monetary stimulus program

Economists surveyed by Bloomberg have pushed back expectations and now see a rate increase by the end of 2019 Q3 and re-investments of maturing debt for up to three years; click here for ECB preview

  • EURO TWI trades little changed compared to March 8, the day the Governing Council last met; in theory, there should be no verbal intervention on the currency given volatility — the ECB’s main source of concern — has eased considerably; one-month realized vol trades at 5.77%, the lowest in three months and more than one vol below past-year average

Positioning, according to traders in London and Europe:

  • Short-term names are short the euro, while real money has been slower in adjusting exposure
  • Corporate names were seen on the offer this week while macro accounts have been the most active sellers around
  • Interbank desks look to fade a dip unless Draghi sounds genuinely worried
  • CFTC data show leveraged investors hold longs close to a four-year high, while asset managers are the longest they have been the common currency on record
  • Bids at 1.2070-90 and 1.2030-50; offers at 1.2250 and 1.2280-00
  • Market looks long gamma at current levels; trailing stops on shorts seen above 1.2300


  • Traders account for downside risks on tenors up to one month; one-week 25d risk reversals trade at 30bps in favor of euro puts, the most bearish sentiment for the common in nearly two months;

* * *

And with all that in mind, here’s Draghi:

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Blain: “Millennials Aren’t Buying Cars Or Homes Because They Are Indentured Slaves”

Submitted by Bill Blain of Mint Partners

“It takes a big hearted girl from the North Country you can tell how you payed those bills and went through heaven and hell…”

Let’s not worry about US stocks dancing around the 200 day moving average, or Deutsche Bank’s miserably miserable (anticipated) results, or the 3.01% US treasury yield (only some 90 bp lower than Greece (and yes I know they are different currencies, but that’s not the point!) And, yes, the main news today will be whatever ECB head Draghi says. Don’t expect any insights into the disturbing signals of European slowdown, but prepare for the usual kick-ra-can-down-the-road obstification about when rates are going to rise. Yawn.

Instead, let’s start with credit where credit is due.

Last night I was at the 20th Birthday Party for the UK Debt Management Office. Founded by Gordon Brown on April 1st 1998, the small and highly professional DMO staff raised nearly £150 bln for the UK last year, prompting Chancellor Philip Hammond to wonder if this made them the most productive workers in the UK? I suppose it’s no wonder my old friend, reformed banker and head of the DMO, Sir Robert Stheeman, did the maths and idly pondered: since they raise something like £800,000 for the UK every minute, perhaps its time to ask for commission based pay packages for his staff?

The success of the DMO is illustrated by the fact so many other countries have since followed the model, and by the number of bankers at last night’s do in the Treasury. Great to see so many old friends there, and thanks for the many kind words about the porridge. I really have no idea how many people read it as its distributed over a larger number of media outlets including Bloomberg, Euromoney and other financial wires – which proves its freely available commentary and therefore not subject to MiFID restrictions.

The other side of the equation this morning is the UK. A few weeks ago I mentioned the concerns of some of my moneyed friends about the low prices being hit on UK bloodstock (racing horses to you and I) sales. It seems the rich have been taking stock and holding back on discretionary spending. Do they know something we don’t? The obvious answer is “Brexit”… it so unsettling and shrouded in uncertainty that Brexit has been an excuse for anything: “What, you got hit by a meteorite on the way to work?… well that’s Brexit for you.. bless”

The truth is very different. Brexit is and always has been a distraction. The rot appears to be far more deep seated in the structure and fabric of the past 30 years. The truth is a few people have lots more money, but lots of people have far less. So, this morning its UK car sales dropping of the proverbial cliff. Millennials aren’t buying cars – no matter how cheap the financing packages are – because there indentured slavery pittances will never allow them to buy their own homes. The middle classes are holding on to their cars for longer because they are working longer and harder, are being indirectly taxed more, and have less to spend.

Meanwhile, they’re also getting fearful of a slide in housing – which is the only way most folk will ever get any kind of liveable pension. A housing slide could be triggered by higher rates, affordability and the threat of the current high employment being reversed by recession.

Or, perhaps something more insidious.

House prices in London are distinctly wibbly. (Wibbly is that moment before Wobbly becomes a Tumble preceding a Catastrophe.) I found myself watching Panorama on Monday night about corruption and money laundering through London property – the tale of the daughter of a Georgian Don who owns three flats in that Knightsbridge development being on prominent case. We’d be fools to ignore the vast swathes of London property in shell company names that may or may not be linked to industrial scale money laundering.

We’d be equally foolish to ignore the signals send by haves and have nots and income inequality – where rich overseas buyers (and once plentiful City bonuses) made Central London a no go zone. What can government do? Clamp down and seize houses as the proceeds of crime? Difficult. They’ll be told its economic suicide to send signals the UK doesn’t welcome money into the country – London property is perceived as a mega safe asset by the rising Asian middle classes, and the government wants them. (Its apparently just poor people who came to rebuild this country since the 1950s the government doesn’t want.. Oh, what biting political satire.. but the Windrush thing is a national disgrace and someone needs to fall on their swords.)

If the UK suddenly became a less attractive place to buy property, and the housing boom fizzles.. ouch. Massive Ouch. The consequences on confidence and the future will be huge. But the consequences of relying on foreign investment to keep property buoyant are equally horrid. Time to move very carefully lest the Labour party gets its act together and starts sounding rational , objective and electable on income inequality and distribution of wealth. (Oh dear.. If I sound like a radical red this morning its because I’m worried. Bandiera Rosa!)

Elsewhere… I don’t know who else has been watching the Hovnanian saga – it’s a US housebuilder that’s been running out of money. It managed to get a loan from a Blackstone owned hedge fund, but on the basis it staged a technical default to trigger CDS – benefitting the fund that was well hedged, but crushing the CDS writers. Doh! I know what you thinking. I did comment on this last year – but here’s the link to the story.

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