Summing Up Q1 Fundamentals (In 2 Simple Charts)

The disappointment on the faces of talking-heads everywhere is writ large as it appears Q1 2014 will be a flat quarter – the worst quarter in a year and a down one for the Dow. After promises of "as goes January" failed, and "it's just the weather", the promise of a magnificent H2 recovery remains firmly in traders' minds in spite of the total collapse in fundamentals during the last few months. Just how bad? Top-down economic data has plunged to its lowest in 19 months and bottom-up earnings forecasts… well, take a look…

 

Top-Down…

 

Bottom-Up…

h/t @Not_Jim_Cramer

Still believe it's all about fundamentals… and earnings are the mother's milk of stocks?

But… as a bonus chart, here is where the hope is…


    



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Buy-to-Rent is Officially Dead in California

I’ve chronicled the saga of “buy-to-rent” for well over a year now. From some of its most exuberant phases to its now epic retreat (investment firm property purchases are now down 70% year-to-date).

It seems as if the pullback of private equity and hedge funds from this asset class is even more brutal in certain regions, with Blackstone now reporting its purchases in California down a staggering 90% this year.

Not to worry, I’m quite certain unemployed and deeply indebted recent college graduates will soon pick up the slack due to the anticipated resurgence of subprime lending.

From the LA Times:

This time last year, investment firms raced to buy dozens of single-family homes in neighborhoods from Fontana to South Los Angeles to lease them out, transforming the mom-and-pop rental business into a Wall Street juggernaut.
  
But now the firms themselves have all but stopped buying in Southern California, the latest evidence that home prices have hit a ceiling. The professional investors no longer see bargains here.
 

The real estate arm of Blackstone Group, the largest buyer, has cut its California purchases 90% over the last year, a spokesman said. Santa Monica company Colony Capital reports a similar retreat. Oaktree Capital of Los Angeles, meanwhile, is looking to cash out by selling its portfolio of more than 500 homes, many of them in Southern California.

But prices have since been flat in Southern California. Many families are taking a pass on the more expensive homes. And the math doesn’t work on Wall Street either.

“Prices have gotten to the stage where we cannot buy a house, renovate it, rent it and still make a reasonable return,” said Peter Rose, a spokesman for Blackstone, which owns roughly 41,000 rental houses nationwide. “There was a moment in time where it made sense.”
 

On Wednesday, some of the bigger players launched a trade group, the National Rental Home Council, to advocate for their interests in Washington.

Yep, just what we need.
 

“People want to live here, whether they buy or rent,” said Gary Beasley, chief executive of Oakland company Starwood Waypoint Residential Trust.

“Most of the low fruit has been harvested, but there’s still plenty of fruit in the tree,” Beasley said. “And we’ve got fruit pickers.”

Seriously, where do they find these people…

Full article here.

In Liberty,
Michael Krieger

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Buy-to-Rent is Officially Dead in California originally appeared on A Lightning War for Liberty on March 31, 2014.

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As If 194 Hedge Fund Suddenly Cried Out In Terror, And Were Suddenly Silenced

Another day, another disaster for GM. Moments ago, on top of the already previously reported numerous recalls by the car marker bailed out by the US government at a loss (but with so many votes for Obama won that who’s counting), here is the latest.

  • GM TO RECALL MORE THAN 1.3 MILLION VEHICLES IN THE U.S.
  • GM EXPECTS TO TAKE A CHARGE OF UP TO APPROXIMATELY $750M
  • GM CHARGE INCLUDES PREVIOUSLY DISCLOSED $300M CHARGE

And the punchline:

  • GM SAYS VEHICLES MAY EXPERIENCE SUDDEN LOSS OF POWER STEERING

Alas, as a result, hedge fund hotels may experience sudden loss of P&L, because as we reported previously GM just happens to be the most widely held hedge fund stock in the US currently, with some 194 brand name hedge fund holders according to Goldman Sachs, more than even Apple.

So what happens when the hedge fund hotel decides to exit only to realize that the name of the hotel is California? The answer will present itself quite soon.


    



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The Case Against Warrantless Cell Phone Snooping by the Cops

In April the U.S. Supreme Court will hear oral arguments in a

pair of cases
asking whether the police must obtain a warrant
before searching the cell phones of people they have under arrest.
At The Connecticut Law Tribune, the lawyer who writes
under the name Gideon’s Trumpet makes the
case
against giving the cops free rein to snoop
:

Think about any random day. You make phone calls, which tells
the phone companies where you are and who you’re talking to. You
send text messages, which stores the content of your conversation.
You take pictures, which are stored on your phone. And you download
apps that have your bank account and credit card information, maybe
even some medical records.

So, if you’re arrested—and remember, almost anyone can be
arrested; that doesn’t mean they’re actually guilty of
anything—should the police have the authority to simply open your
phone and look through every personal email, Twitter update,
Facebook status, credit card statement and nude picture? For that
matter, should the police have the authority to track your
movements without a warrant?

In a recent column on these two cases
I posed
a similar question: “Should getting arrested for a
minor offense like jaywalking be sufficient to allow the police
virtually unlimited access to your private affairs in search of
additional wrongdoing?” Unhappily, the Obama administration thinks
it should. “Although cell phones can contain a great deal of
personal information,” the administration has
argued
in a legal filing, “so can many other items that
officers have long had authority to search, and the search of a
cell phone is no more intrusive than other actions that the police
may take once a person has been lawfully arrested.”

The problem with that argument is that a cell phone search has
the potential to be far more intrusive than any search
incident to arrest of your pockets, briefcase, purse, or backpack.
That’s because, as noted above, cell phones contain not only photos
and messages; they also contain GPS tracking data. Thanks to the
wonders of technology, our most sensitive and private
information—including our whereabouts at various times—is now
accessible in the palms of our hands. It’s no mystery why law
enforcement wants to take a peek. Yet as Gideon’s Trumpet observes,
“the real reason why police want unfettered access to the phone is
precisely the reason why they should not get it.”

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Russian Military Buildup Questioned, HealthCare.gov Still Malfunctioning, French Leaders Step Down: P.M. Links

  • I don't think I'll ever get tired of this image.Journalists actually went to
    examine that alleged Russian military buildup at the border to
    Ukraine but
    found little
    .
  • HealthCare.gov, which was malfunctioning this morning, is

    still malfunctioning
    this afternoon.
  • Following the pasting the ruling Socialist Party got at the
    polls,
    France’s prime minister stepped down
    . President Francois
    Hollande named the interior minister as the replacement.
  • The Supreme Court today heard an important case on
    software patent law
    and what sort of creations could or should
    actually qualify for patents and how abstract a protected idea may
    be.
  • In a reminder of how utterly useless and unneeded the Federal
    Communications Commission (FCC) is, today it prohibited companies
    controlling more than one television station in the same market
    from
    sharing sales staff
    , which hurts the very small television
    stations the FCC chairman claims it will protect.
  • The State of New York is joining New York City in suing FedEx
    for
    illegally shipping contraband cigarettes
    to customers in the
    state, costing the state more than $10 million in tax revenue.

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Ira Stoll on What a Top Liberal Economist Gets Right—and Wrong

Capital in the Twenty-First Century,
by the French economist Thomas Piketty, is being hailed as “the
most important economics book of the year—and maybe of the decade”
by Nobel laureate Paul Krugman. The Economist says the
book may revolutionize “the way people think about the economic
history of the past two centuries.” Ira Stoll has read it and
reports that it’s better than you would expect. In fact, Stoll
notes, there is quite a bit in the book that free-market types can
embrace. But unfortunately, Stoll adds, Piketty also ignores many
of the most significant failings of modern liberal economics.

View this article.

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Leader of U.K. Independence Party Praises Putin

Last week Nigel Farage, the leader of the
United Kingdom Independence Party (UKIP), and Nick Clegg, British
deputy prime minister and leader of the Liberal Democrats, faced
each other in the first of two scheduled debates on the U.K.’s
membership in the European Union.


Polling
suggests that most Britons who watched the debate
believed that Farage beat Clegg in the first debate, which was more
of an extended Q and A session with a studio audience than it was
an actual debate.

In the build-up for the second debate, scheduled to take place
this Wednesday, Farage is being criticized for comments he made
about the crisis in Ukraine during the first debate and for
praising Russian President Vladimir Putin as an “operator” after
being asked which world leader be admires the most in a
still-to-be-published interview with GQ magazine.

Farage said in response:

We should hang our heads in shame. The British government has
actually geed up the European Union to pursue effectively an
imperialist, expansionist – and even Mr Barroso the commission
president once himself said we are building an empire. We have
given a false series of hopes to a group of people in the western
Ukraine. So geed up were they that they actually toppled their own
elected leader. That provoked Mr Putin. I think the European Union
frankly does have blood on its hands in the Ukraine. And I don’t
want a European army, navy, air force or a European foreign policy.
It has not been a thing for good in the Ukraine.

Watch footage of Farage’s response below (starts at 57:35):

The BBC has the
following to say about Farage’s comments on Putin in an unpublished
GQ interview:

In an as yet unpublished interview for the magazine GQ, details
of which have been released, the UKIP leader was asked which world
leader he most admired.

He reportedly replied: “As an operator, but not as a human
being, I would say Putin. The way he played the whole Syria thing.
Brilliant. Not that I approve of him politically. How many
journalists in jail now?”

Without reading the whole interview, it sounds to me like Farage
is praising Putin’s brutal effectiveness and commitment, not his
moral judgments. That said, Farage’s recent comments on the
crisis in Ukraine and Putin do betray a strange understanding of
moral responsibility that is unlikely to help him attract more
support in future elections. 

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Gold Wins The First Quarter While Dow Drops Most Since 2012

Value stocks handily outperformed Growth stocks by the end of Q1 but the window-dressing pump of the last 2 days rescued all but the blue-chip Dow from ending the quarter in the red. This is the worst quarterly performance for stocks since 2012.  Despite disconnects all over the place today, stocks managed to hold onto gains today. Thanks to some dovosh comments by Yellen (that apparently "some time" is interpreted as more than 6 months), bonds and stocks ripped today leaving long-bonds best quarter since Q2 2012. Gold is the best performing asset of the quarter and HY bonds worst as the USD ended unchanged.

 

Gold ends Q1 as the best-performing asset-class

 

The Dow closed the quarter red – its first since Q4 2012 while the last 2 days rescued the rest of the major indices

 

And Utlities are the best performing sector in Q1 with Discretionary and Builders worst…

 

Nasdaq Biotech Index gained 3% – its best day in 2 weeks – to scramble back above the 100DMA and closing the quarter up just over 4% (its lowest gain in 5 quarters) but March was its worst month in 4 years.

 

Perhaps rather surprisingly 5Y Yields are unchanged (-1bps) on the quarter while 10Y is -30bps, and 30T -40bps – thi sis the best quarter for bonds sicne Q2 2012

 

On the day, Yellen's comments sparked Bond and stock buying as the merest hint of moar dovishness is enough to do this…

 

AUDJPY was in charge…

 

Charts: Bloomberg


    



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Check Out These 8 New “Record Highs”

Submitted by Simon Black of Sovereign Man blog,

There’s nothing like a nice cup of reality first thing on Monday morning.

If you’ve been a reader for any length of time, you know one of the things I periodically do is scan headlines for phrases like “record high” or “all time high”.

The results can often given an interesting big picture perspective of what’s happening in the world.

1) President Obama’s disapproval rating hits a record HIGH of 59 per cent

No surprise here, especially given the latest crash of the Obamacare website this weekend, just before the signup deadline.

2) “Frozen” enters the record books as highest-grossing animated film of all time

This weekend, Toy Story 3 was eclipsed by Frozen as the top grossing animated movie of all time.

2010′s Toy Story 3 had $1.063 billion in total revenue. Frozen just hit $1.072 billion.

Curiously, the average movie ticket price in the Land of the Free was $7.89 in 2010 according to NATO (no, not that NATO. This is the ‘National Association of Theater Owners.)

Today it’s $8.38. This obviously has had an impact. And it doesn’t even account for the rapid inflation in movie ticket prices outside of the United States, which is even more critical given that nearly 2/3 of movie revenue comes from outside the US.

3) Property Tax Revenue Reaches a Record High

Great news– in the Land of the Free, state and local governments are taking more of your money than ever before. This is, of course, in addition to tax increases at the federal level.

4) Corporate Profits Hit A New Record High Last Year

Wages are stagnating. Median household income levels are well below where they were in 1996 when adjusted for inflation. But corporate profits are at a record high.

If you’ve ever wondered where all that money goes that is printed by the central bank, now you have at least a partial answer.

5) S&P 500 falters after nearing record high

The US stock market ended February at a record high and has continually flirted with new record territory throughout the month of March. Now you have another part of the answer to the question above– ‘where does all that printed money go?’

6) French Unemployment At Record High

As it turns out, raising taxes, overregulation of everything, and chasing away your most productive citizens is NOT the path to prosperity. What a shocker.

7) Pricier beef ‘here to stay’ as food costs seen higher: USDA

Beef prices are at/near their all-time high. Not that there’s any inflation. Blame the weather.

8) RMB enjoys record-high activity on global markets in February

The use of the renminbi in worldwide financial transactions as tracked by the Society for Worldwide Interbank Financial Telecommunications (SWIFT) has increased to a record amount. And it’s growing.

The renminbi has already overtaken the Hong Kong dollar, Singapore dollar, and Swiss Franc in terms of its percentage of worldwide financial activity.

And while it’s still embryonic, compared to the dollar, the rise of the renminbi as a potential reserve currency is a trend that cannot be ignored.


    



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State Department Spending $400,000 on a Camel Statue in Pakistan

The State Department sure is in anguish from
deep” budget
cuts (like
every year
). Heck, the cupboards are so bare, they even

bled
$30 million from the Fulbright Program this month. What
can the department still afford?

How about a “500 lb. fiberglass, aluminum, stainless steel,
acrylic and painted”statue of a camel to be put on display at the
American embassy in Pakistan? And it only cost $400,000. And it’s
not even a
one-of-a-kind work.

Buzzfeed got access to a
document
about the procurement of “Camel Contemplating a
Needle” and has an exclusive
report
:

The work, by noted American artist John Baldessari, depicts a
life-size white camel made of fiberglass staring in puzzlement at
the eye of an oversize shiny needle — a not-so-subtle play on the
New Testament phrase about the difficulty the wealthy have in
entering the kingdom of heaven.

Personally, I thought the camel’s expression was more like “a
smug realization of its own sticker price,” but I digress.

To emphasize Baldassari’s fame, the contracting officials
pulled a section from
Wikipedia
. “John Anthony Baldessari (born June 17, 1931) is an
American conceptual artist known for his work featuring found
photography and appropriated images.”

In a statement, State Department press spokeswoman Christine
Foushee said the proposed purchase comes from the department’s
“Office of Art in Embassies.” In new construction projects, she
said, a small part of the total funds, about 0.5%, is spent on art
purchases.

The State Department may have gotten a pretty good deal on the
camel, since Baldessari has sold
even less inspiring
works for millions. But they could have
done even better if they had opened the opportunity to competition.
The department didn’t do that though, insisting that only this
camel could satisfy the “unique artistic criteria” for the
embassy.

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