Month: February 2018

Authored by Caitlin Johnstone via CaitlinJohnstone.com,

In an otherwise fine video response to the last night’s vapid, flag-waving State of the Union address, Bernie Sanders once again promoted the neocon think tank-generated and unproven claim that Russia interfered in America’s 2016 elections via “cyberwarfare”, and repeated the completely baseless insinuation that they colluded with Trump to do so.

“How can he not talk about the reality that Russia, through cyberwarfare, interfered in our election in 2016, is interfering in democratic elections all over the world, and according to his own CIA director will likely interfere in the 2018 midterm elections that we will be holding?” asked the Vermont Senator.

“How do you not talk about that unless you have a very special relationship with Mr. Putin?”

This is not an exception to the rule for Sanders, but one more addition to an already consistent and deliberate pattern. In February of last year Sanders delivered a widely viewed video message to his massive online audience solely geared at promoting the Russiagate narrative. At the end of March, he did it again. In May, he did it again. Over and over and over again, month after month after month, Sanders has been using his immense platform as the most popular and trusted politician in America to sell these world-threatening cold war escalations to the millions of Americans who adore him.

This is a big deal. This is not some petty quibble with Sanders’ policies like disagreeing with the specifics of his stance on free trade or fracking. This is not some minor detail which can be dismissed with accusations of purism and impracticality and “Hey, no politician is perfect.”

This is the single most pressing issue of our time, and Bernie Sanders is currently, actively marching our world in the exact opposite direction of where it needs to be heading. There is no threat to our species more imminent and dangerous than the threat of annihilation in a nuclear holocaust, and Sanders is helping to manufacture consent for escalations which make that possibility more and more likely. This is a huge problem, and we need to talk about it right now.

I keep getting shushed and dismissed by American progressives whenever I try to bring this up, and that pushback is getting a lot more heated now that Sanders is preparing for the possibility of a 2020 presidential run. As an aggressive promoter of Bernie-or-Bust in the Democratic primary contests, I must say that some of the “DO YOU WANT TRUMP TO WIN??” responses I’ve been getting have been giving me flashbacks, and they aren’t coming from the direction I’m used to.

I sit in a weird space on the political left with regard to Senator Sanders because I have never been one of the nasty, vituperative lefties who constantly shit on Bernie and call him a “sheepdog” or anything like that, but I also haven’t been able to look past his dangerous capitulations to the establishment, so I tend to catch flak from both sides of the debate. I recognize how pervasively toxic the US political climate is and how sane Sanders is in comparison, but at the same time his relentless promotion of a blatant psyop designed to manipulate the public into consenting to geopolitical agendas which have been in place since long before Russiagate is a very big problem that needs to be addressed.

It’s like if you found the perfect boyfriend with a great personality, a rockin’ bod, and an amazing lifestyle… who also happens to murder a prostitute once in a while. All the other truthful and undeniable things Sanders said in his State of the Union response were eclipsed by his promotion of an extremely dangerous agenda like a tiny piece of cat poo on an expensive French cuisine. It’s absolutely unforgivable, and it should be loudly and aggressively resisted by every clear-eyed rebel on earth.

How can Trump not talk about the reality that Russia, through cyberwarfare, interfered in our election in 2016, is interfering in democratic elections all over the world, and according to his own CIA director will likely interfere in the 2018 midterm elections? #BernieResponds

— Bernie Sanders (@SenSanders) January 31, 2018

I’m not even saying I’ll oppose Bernie’s presidential run if it comes down to that in 2020. If that’s the direction the American people want to take this thing as part of the awkward two-steps-forward, one-step-back shuffling movement that any shove toward freedom will necessarily look like, I don’t imagine that I will try and stop them. As horrible as Sanders’ foreign policy is I understand that Americans are in an abusive relationship with oligarchy, and if they genuinely feel he’s their best shot at sane domestic policy and a real healthcare system I don’t at this time think it’s my place as an Australian to tell them not to go that route to escape the abuse.

I can however promise that I will never, ever stop aggressively fighting the Russiagate establishment propaganda that Sanders has been consistently promoting. The further into cold war escalations we get, the more likely it is that a nuclear weapon could be discharged in the chaos and confusion. There are too many small moving parts to be able to predict and control how these escalations will unfold, which is why we came within a hair’s breadth of total annihilation on more than one occasion in the last Cold War.

Stephen Cohen is easily the leading expert on US-Russian relations in America, and he recently sounded his ongoing alarm in an interview with Jimmy Dore that everyone should watch. Cohen is not a Trump supporter, not a conspiracy kook, and not a Russian agent, but a gifted and learned scholar who says that the political pressures being placed on Trump by the Russiagate narrative have placed us in a uniquely dangerous place in our species’ history which we may very well not make it past. He makes a very solid argument, and I strongly encourage everyone to heed his warning.

Make no mistake: our species absolutely has the freedom to fail this test. We absolutely have the freedom to fail as a species and go the way of the dinosaurs. There is no divine hand shielding us from this fate enabling us to behave as unconsciously and recklessly as our still-evolving primate brains desire without the natural consequences that come with it. Our biggest and most trusted voices should be pointing us toward life, not toward extinction. We must all do better, and we must all demand better.

Friends don’t let friends Russiagate, Bernie. Do better. Be better.

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It looks like neither Alphabet/Google nor Apple will hit $1 trillion in market cap after today’s earnings, with the former sliding – as noted previously – after it missed on earnings and TAC, while Apple reported Q1 results which missed on number of iPhones sold – which not only missed but actually declined 1.3% relative to last year – and on the company’s revenue guidance which was far weaker than expected.

Apple reported Q1 EPS and revenues of $3.89 and $88.3bn, both beating expectations of $3.84 and $87.3bn, and above the company’s own forecast range of $84-$87 billion, even if gross margin was in line, printing at 38.4% vs 38.4% expected despite an iPhone ASP of $796, above the $767 expected.

That’s the good news: the bad news was that Apple reported Q1 iPhone sales of 77.3 million, which was not only a drop from the 78.3 million iPhones sold last year, but bigly missed expectations of 80.2 billion.

Less relevant, iPad revenue gained 6% to $5.9b, after the company released new models in the middle of the year. Meanwhile, Mac sales fell 5% to $6.9b, even though Apple released new Macbook Pros over the summer. Apple had released new Macbook Pros just before Christmas 2016.

But what everyone’s attention was focused on, was Apple’s forecast for the next, Q2 quarter, in which Apple sees revenue of only 60-$62Bn, well below Wall Street estimates of $65.88 billion, on gross margin of 38-38.5%, below the 39% consensus estimate.

The full forecast in a nutshell:

• revenue between $60 billion and $62 billion
• gross margin between 38 percent and 38.5 percent
• operating expenses between $7.6 billion and $7.7 billion
• other income/(expense) of $300 million
• tax rate of approximately 15 percent

As Bloomberg confirms, it’s was a big miss for Apple on the outlook, with the high end of its range almost $4b short of analysts expectations. That confirms investors’ worst fears that the strength of demand for the iPhone X won’t be sustained into the second fiscal quarter. Samsung releases the new Galaxy S9 on Feb 25.

Still, Tim Cook happy:

“We’re thrilled to report the biggest quarter in Apple’s history, with broad-based growth that included the highest revenue ever from a new iPhone lineup. iPhone X surpassed our expectations and has been our top-selling iPhone every week since it shipped in November,” said Tim Cook, Apple’s CEO. “We’ve also achieved a significant milestone with our active installed base of devices reaching 1.3 billion in January. That’s an increase of 30 percent in just two years, which is a testament to the popularity of our products and the loyalty and satisfaction of our customers.”

Although judging by the kneejerk reaction in the stock, which dropped, rebounded, and was then flattish after hours trading, shareholders were less enthused about the slowdown in demand for the company flagship product.

The result in chart format:

Apple Net Income grew 12.2% Y/Y, EPS rose by 24% even as iPhone sales declined -1.3%

Product sales: The big surprise here was that iphone sales came in at only 77.3 million, far below the 80 million expected, and the first holiday quarter decline in history, dropping -1.3%. Less relevant, though still material, Apple sold 13.2 million iPads, an increase of 1% Y/Y, generating $5.9 billion in revenue in the quarter, a 21% increase Y/Y. Apple also said it sold 5.1 million Macs in Q118, compared to 5.4 million units in the year ago quarter, a 5% year-over-year unit sales decline, as well as a 5% drop in revenue.

Regional breakdown: in a welcome development, for the first time in years, sales grew around the globe with not a single region posting a Y/Y decline. Greater China posted growth for the 2nd quarter in a row, with 10.6% year over year revenue growth. Japan saw the strongest year over year revenue growth, up 26%. U.S revenues increased by 10% Y/Y while the rest of the Asia Pacific increased by 17% year over year.

Finally, while the company’s record cash hoard grew once more, rising to $285.1 billion total…

… the cash number net of debt was roughly flat at $163 billion. As a reminder, most of this cash remains locked outside of the US, but will now be repatriated as part of Trump tax reform, allowing the company to buyback a lot more stock.

Shareholders are certainly enjoying the company’s optimistic forecast, sending the stock 3% higher to new all time highs.

 

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Authored by Jim Bianco via Bloomberg.com,

Defying the best efforts of central banks over the last nine years, inflation has yet to rear its head. Although many would welcome inflation growth above 2 percent, the markets are flashing warning signs that a return to pre-crisis levels might not produce the expected results. Instead, such an increase could bring volatility, which is often a code word for falling markets.

 

On Jan. 25, 2012, the Federal Reserve aimed for 2 percent core personal consumption expenditures as a desired level of inflation. As the chart below shows, inflation has mostly remained well below this target. That was bad timing on the Fed’s part.

 

The Fed’s inability to create inflation has flummoxed Chair Janet Yellen, who led the last meeting of her tenure on Wednesday. As the following two citations show, the “data-dependent” Fed chief was reduced to the words “guess,” “expect” and “believe.”

On Oct. 15, 2017, she said:

My best guess is that these soft readings will not persist, and with the ongoing strengthening of labor markets, I expect inflation to move higher next year. 

And on Dec. 13, 2017, she said:

I’ve talked in detail about this in the past and recognized that there is uncertainty about what’s holding inflation down, but my colleagues and I continue to believe that the factors that are responsible this year for holding inflation down are likely to prove transitory. 

The markets have also struggled to forecast inflation correctly. The chart below shows the U.S. 10-year inflation breakeven rate, or the market’s expectation for the average inflation rate over the next 10 years. Between 2010 and 2013 the market regularly thought inflation was returning, but it never did. A year ago, it also thought so, but that didn’t happen, either. And the market thinks inflation is returning now.

 

While subdued inflation has thoroughly confused many economists and traders, the markets are exhibiting some peculiar behavior about its eventual return that may give investors reason for pause.

The chart below shows a rolling six-month correlation between the implied volatility of various assets and U.S. 10-year Treasury Inflation-Protected Securities inflation breakeven rate. Equities (red), U.S. Treasuries (cyan), and foreign-exchange (orange) are seeing a swift end to their negative correlation between volatility and inflation expectations.

 

To see the trend better, the next chart shows the average of the correlations depicted above. It is poised to move into positive territory for the first time since July 2007. In other words, higher inflation may bring with it higher volatility for the first time in almost 11 years. But the concern is that volatility is often a signal of declining markets.

 

The relationship between inflation expectations and asset prices is also changing.

The next chart shows a rolling six-month correlation between stock prices and inflation.  It is falling, as would be expected when the Fed is tightening. The correlations are now heading toward zero. Should they too flip to negative, further increases in inflation expectations would coincide with lower returns on risk assets.

 

Proclamations of inflation’s triumphant return have been frequent in the last decade. So far, these have all been false alarms. Nonetheless, markets are once again sending that signal.

Throughout the post-crisis era higher inflation expectations have coincided with lower volatility and higher risk asset prices. We believe the assumption that this relationship continues explains why so many forecast, or want to see, inflation’s return. It signifies a strong and robust economy that financial markets should want. However, this relationship is on the verge of flipping. Higher inflation expectations may soon be a recipe for higher volatility and lower risk asset prices, as they were precrisis and especially in the 1970s to 1990s.

Central banks and traders should be careful what they wish for.

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Amazon appears to have done it again, and following a blockbuster third quarter in which the company smashed expectations, Amazon once again reported both revenues and EPS which handily beat expectations, rejecting the sharp selloff in the stock that was observed in the last hour of trading.

In Q4, Amazon reported EPS of $3.75, a huge beat of consensus estimate of $1.83, but that number included a tax benefit of $789 million for the Trump tax cuts. The company reported net sales of $60.45 billion, also above the $59.84 billion consensus estimate, largely due to the contribution of AWS.  The number was just shy of high end of the company’s own range, which topped out at $60.5.

Still, as a reminder, AMZN EPS expectations as recently as June were just shy of $3.00

Amazon’s Q4 operating income of $2.127BN was nearly double last year’s 1.255BN, and well above the the high end of the company’s Q3 range, which topped out at $1.65 billion.

The closely followed AWS segment reported net sales of $5.113 billion, a Y/Y growth of 44% (slightly more than the 42% increase last quarter, bet below last year’s 47% growth rate). AMZN reported AWS operating income of $1.354 billion, an increase of 46% Y/Y. AWS margin in Q4 was 26.5%, virtually unchanged with the 26.2% reported last quarter.

Putting AWS in context, whereas AMZN’s total operating income was $2.13 billion in Q4, AWS was $1.354 billion, or 64% of total. In other words, the rest of the company made $773 million. While the division has been facing tougher competition from both Microsoft and Google, prompting some concerns about whether the growth can continue on pace, especially amid price wars, so far it has yet to materialize despite a slowdown in modest slowdown AWS growth.

Looking forward, AMZN sees the following solid revenue and operating income:

• Net sales are expected to be between $47.75 billion and $50.75 billion, or to grow between 34% and 42% compared with first quarter 2017. The guidance midpoint is 1.1% above the analyst estimate of $48.70 billion.
• Operating income is expected to be between $300 million and $1.0 billion, compared with $1.0 billion in first quarter 2017.

Jeff Bezos was as usual, quite optimistic, and had one particularly interesting comment: “Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down.” Full statement:

“Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down. We’ve reached an important point where other companies and developers are accelerating adoption of Alexa. There are now over 30,000 skills from outside developers, customers can control more than 4,000 smart home devices from 1,200 unique brands with Alexa, and we’re seeing strong response to our new far-field voice kit for manufacturers. Much more to come and a huge thank you to our customers and partners.”

What is notable here is that while Amazon rarely gives any numbers for its devices segment, CEO Jeff Bezos pointed out that the company has sold “tens of millions” of Echo devices and Kindle readers last year.

Despite the company’s generous spending ways, analysts have said that high margin streams of revenue like those from its advertising, subscription and credit card businesses are expected to continue to grow and help offset higher spending.

For all the concerns about AMZN’s cash burn, the company reported LTM Free Cash Flow in Q3 of just under $8.4 billion, a rebound from the $8.0 billion last quarter.

Some more good news: after sliding to just 0.8%, the lowest in 3 years, Amazon’s operating margin for the quarter rebounded strongly to 3.5% in Q4.

After a significant rise in the company’s LTM operating margin in the past two years, it appeared to have plateaued once again, although in Q4 it posted a modest rebound, from 2.0% to 2.3%.

Also notable, now that Whole Foods is part of Amazon, the company employed a total of 566,000 (most part-time) workers (a record) as of Sept 30, and up 66% Y/Y, as global net sales growth rose to 36% in Q4.

And so despite the odd selloff in the regular session, which dragged the stock down by 4% on no news, the stock has rebounded, wiping away the last hour loss, if still below where AMZN was trading recently.

 

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Google parent Alphabet missed earnings expectations and tumbled over 5% after hours…

Google is still growing in a serious way, with the number of money-making clicks up around 43% from the same time last year. But each individual click is making less money now.

 

Earnings missed, operating income disappointed, and costs per click fell notably.

• 4Q EPS $9.70, estimate $10.04 (range $9 to $10.92) (Bloomberg data)
• 4Q paid clicks +43%
• 4Q Google other revenue $4.69 billion
• 4Q revenue ex-TAC $25.9 billion, estimate $25.59 billion (range $24.91 billion to $26.36 billion) (BD)
• 4Q cost-per-click -14%
• 4Q operating income $7.66 billion, estimate $10.24 billion (range $9.92 billion to $10.90 billion) (BD)
• 4Q Other Bets revenue $409 million
• 4Q Other Bets operating loss $916 million
• 4Q Google advertising revenue $27.23 billion
• 4Q free cash flow $5.96 billion
• 4Q capital expenditure $4.31 billion

Of course there was an attempt to save the day…

Alphabet to Buy Back Shares up to Added $8.59B Class C Stock

But for now it’s not helping the stock.

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Everything (except gold) was hammered today from the end of Asian trading… (even if the machines did try their best to rally stocks)…

But, as Bob Pisani explained, the most important thing is… “Nothing to see here… move along…”

 

China ugly overnight…

 

European stocks are suffering (DAX below key support)…

 

And while futures were weaker heading into the open, a sudden panic-buying ramp happened at the bell… but it did not last… Totally chaotic trading then ensued…

 

Cash markets were just as chaotic with Nasdaq and Trannies the big laggards…Small Caps and The Dow managed to ramp into the green to close..

 

 

With AMZN, AAPL, and GOOG earnings tonight, it’s anyone’s guess but AMZN was hit hard today…

 

Since Janet Yellen’s last FOMC meeting, gold is a notable outperformer and bonds the big laggard…

 

Bonds were an utter bloodbath today with the long-end up almost 9bps!!

 

30Y Yields blew through 3.00%…

 

The dollar was monkeyhammered lower.. again…

 

Gold spiked back above $1350…

 

WTI soared non-stop from Tuesday’s post-DOE close to top $66 once again into tonight’s close..

 

And just to top things off, cryptocurrencies were a bloodbath today…

 

Leaving everything but Ethereum deeply red YTD…

 

But notably as Bitcoin tested below $8500, a sudden surge of (Novogratz) buying stepped in…

 

Physical Gold or Digital Gold?

 

 

Anyone else think this is a message from the Chinese? As Trump threatens trade wars and the Lunar New Year looms?

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