Category: zerohedge

A week ago, Macy’s fired 2500 and announced the closure of five stores. Moments ago, the company which we have been warnings since late 2012 is a meltin ice cube that ends with bankruptcy, JCPenney, which a week ago provided the following glib summary “JCPenney reported today that the Company is pleased with its performance for the holiday period“, turns out was merely joking and just echoed the Macy’s sentiment, announcing the termination of some 2,000 jobs and the closure of 33 stores.

JCPenney today announced that as part of its turnaround efforts, the Company will be closing 33 underperforming stores across the country in order to focus its resources on the Company`s highest potential growth opportunities.

 

These actions are expected to result in an annual cost savings of approximately $65 million, beginning in 2014. In connection with this initiative, the Company expects to incur estimated pre-tax charges of approximately $26 million in the fourth quarter of fiscal 2013 and approximately $17 million in future periods.

 

Remaining inventory in the affected stores will be sold over the next several months, with final closings expected to be complete by early May. The closings will result in the elimination of approximately 2,000 positions. Eligible associates who do not remain with the Company will receive separation benefits packages. Meanwhile, the Company is continuing its plans to open a new store location later this year at the Gateway II development in Brooklyn, N.Y.

 

“As we continue to progress toward long-term profitable growth, it is necessary to reexamine the financial performance of our store portfolio and adjust our national footprint accordingly,” said Myron E. (Mike) Ullman, III, chief executive officer of JCPenney.  “While it`s always difficult to make a business decision that impacts our valued customers and associates, this important step addresses a strategic priority to improve the profitability of our stores and position JCPenney for future success.”

What can one say but: this is just the kind of recovery that justifies an S&P500 at all time highs.

Investors initially cheered… but now not so much…

via Zero Hedge http://ift.tt/1dwD7gC Tyler Durden

The S&P 500 managed to get back into the green for 2014 – which means new all-time highs (topping the all-important 1850 level for the first time today). This is the best 2 days for the S&P since mid-October. Only the Dow remains red for 2014 (a 200bps underperformer versus the Trannies!) among the major indices as JPY carry once again dragged its equity cousins higher in fits and starts. Interestingly, VIX and 30Y bonds were not amused and did not join the party – both unchanged on the day. 5Y and 7Y bonds sold off modestly but rallied off the post-data spike highs in yields all through the US day session. The USD strengthened notably (+0.5% on the week) as JPY weakness led stocks. Oil jumped higher on the day to $94.50 (slamming the WTI-Brent spread) and despite USD strength, gold and silver lifted off early lows to close green. Volume was solid today as the 1.5% dip has been well-and-truly ripped (as banks and tech lead the charge).

 

The Long Bond ignored the party… (though 5s and 7s did sell off modestly…

 

As did VIX…

 

But stocks tracked AUDJPY and gladly made new all-time highs…

 

 

Which lifted the S&P 500 into the green for 2014 (but leavs the Dow lagging still – by over 200bps from Trannies!)…

 

As Financials and Tech led the charge today…

 

 

WTI surged higher (crushing the Brent-WTI spread) as gold and silver recovered off early lows (despite USD strength)…

 

Charts: Bloomberg

Bonus Chart: Everyone thank Nomura (the clear BoJ proxy) for saving stocks with the incessant selling of JPY…

 

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With around 110,000 workers globally, who Amazon claim are compensated above average for retail workers and have generous benefits, the news that 30 Amazon mechanics in Delaware are voting on unionization may strike fear into the heart of Jeff Bezos. With razor-thin margins,  the "cult stock" could hardly cope with any broad-based action to raise wages (though we are sure that would be a buying opportunity no matter what):

• *AFL-CIO: WORKERS' LIVES 'NOT GETTING BETTER' DESPITE RECOVERY
• *AFL-CIO: SEEKS TO UNIONIZE AMAZON AND OTHER LARGE COS.

While local union officials claim not to have targeted the workers, the 'small' vote will take place today but there are hundreds of other workers in the Delaware factory.

 

Amazon has a lot of unionizable employees…

 

Local Officials claim not to have targeted Amazon…

 

It's not about money – apparently – but other things like vacation…

As Re/Code notes:

A group of up to 30 Amazon employees at one of the company’s Delaware warehouses will have the opportunity to vote today in an election that could establish the first-ever labor union representation at a U.S. Amazon facility.

 

The group, which consists of equipment technicians and mechanics, will be voting on whether they want to join the International Association of Machinists and Aerospace Workers. A simple majority — or half of those who vote plus one — is needed to establish the first-ever union shop inside an Amazon facility in the U.S., according to IAMAW spokesman John Carr.

 

Carr said the voting workers, who make up just a small fraction of the more than 1500 employees at the facility, are not most concerned with the wages they are paid. Rather, they’d like help negotiating for things such as vacation and promotion policies, seniority rules, as well as the possible creation of a safety committee, Carr said.

Bezos better hope so – or this will get ugly…

 

Not much room in those margins for a 'raise'… and sure neopugh:

In the weeks leading up to the vote, the workers have been pulled into what unions call “captive audience meetings,” during which their superiors at Amazon attempt to persuade workers against unionization, according to Carr.

 

The union vote is just the latest in a series of events that have shined a negative light on Amazon’s growing network of what it calls fulfillment centers. The company has been engaged in an ongoing battle with some of its German workers who have organized strikes and protests over the past year over wages and was also the subject of an unflattering BBC documentary about worker conditions.

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Americans want NSA spying reined in.

But a poll from November showed that only 11% of Americans trust Obama to actually do anything to rein in spying.

We were right to be skeptical …

Today, Obama announced his fake “reforms” … and he’s not doing anything but putting lipstick on the same ‘old pig.

The New York Times notes that Obama’s “reform”:

Largely codifies existing practices.

The Times points out that the reform is meant to placate NSA critics, without actually challenging national security agencies:

The emerging approach, described by current and former government officials who insisted on anonymity in advance of Mr. Obama’s widely anticipated speech, suggested a president trying to straddle a difficult line in hopes of placating foreign leaders and advocates of civil liberties without a backlash from national security agencies. The result seems to be a speech that leaves in place many current programs, but embraces the spirit of reform and keeps the door open to changes later.

The Times includes a revealing quote:

“Is it cosmetic or is there a real thumb on the scale in a different direction?” asked one former government official who worked on intelligence issues. “That’s the question.”

The answer should be obvious.

This is – once again – Obama saying “trust me” … without changing anything.

Obama has repeatedly promised to change policies started in the Bush administration. But – instead of reforming them – he’s reaffirmed them … and made them worse than ever.

Obama and the NSA have lied over and over again.  They have told the American people (and Congress) to f@ck off.

The real message they are sending is:

We hold the power …  So we’re going to keep doing what we want, and you can’t do anything to stop us.

And see this.

NSA to Congress: F@ck Off

We’ve shown that the NSA has been spying on Congress for some time.

The NSA has never denied that it’s spying on Congress.  Instead, the NSA first said:

Members of Congress have the same privacy protections as all US persons.

And Friday, NSA chief Keith Alexander wrote a letter to Senator Bernie Sanders saying that the NSA cannot reveal whether the agency has been targeting members of Congress in its metadata collection because doing so would violate privacy provisions accorded to civilians in the program:

The telephone metadata program incorporates extraordinary controls to protect Americans’ privacy interests.    Among those protections is the condition that NSA can query the metadata only based on phone numbers reasonably suspected to be associated with specific foreign terrorist groups.  For that reason, NSA cannot lawfully search to determine if any records NSA has received under the program have included metadata of the phone calls of any member of Congress, other American elected officials, or any other American without that predicate.

Sanders

 

This is the exact same excuse the NSA and other intelligence agencies have previously given for hiding how many Americans they spy on.

As Wired reported last June:

The surveillance experts at the National Security Agency won’t tell two powerful United States Senators how many Americans have had their communications picked up by the agency as part of its sweeping new counterterrorism powers. The reason: it would violate your privacy to say so.

 

That claim comes in a short letter sent Monday to civil libertarian Senators Ron Wyden and Mark Udall. The two members of the Senate’s intelligence oversight committee asked the NSA a simple question last month: under the broad powers granted in 2008′s expansion of the Foreign Intelligence Surveillance Act, how many persons inside the United States have been spied upon by the NSA?

 

The query bounced around the intelligence bureaucracy until it reached I. Charles McCullough, the Inspector General of the Office of the Director of National Intelligence, the nominal head of the 16 U.S. spy agencies. In a letter acquired by Danger Room, McCullough told the senators that the NSA inspector general “and NSA leadership agreed that an IG review of the sort suggested would itself violate the privacy of U.S. persons,” McCullough wrote.

In other words, the NSA is sending the same message to both the American people and their representatives in Congress:  f@ck off.

 

via Zero Hedge http://ift.tt/Lf5pR3 George Washington

SocGen’s Albert Edwards, who refuses to pull a Hugh Hendry and to “stop looking at himself in the mirror“, remains one of the few coherent realists in a world where soaring nominal asset prices have managed to confuse virtually every pundit into believing central bank balance sheet and stock market expansion means an economic recovery. Today he shares the one chart which as he says “the importance of which we cannot emphasise enough”, and which he believes highlights the biggest risk equity investors – hypnotized by the Fed’s H.4.1 weekly statement and its weekly record high balance sheet – take when they put all their faith in the Bernanke/Yellen grand behavioral experiment.

From Albert Edwards:

One simple chart – the importance of which we cannot emphasise enough – is the divergence of commodity prices and the equity market during QE3 (see chart below). Why is this important? Because the market has firmly got it into its head that QE will always be good news for equities. So if the economy swoons (maybe due to excessive  monetary tightening either via tapering or a strong dollar), equities will look through any short-term disappointment as more QE will save the day. Investors see bad economic news as good news for equities.

I do believe this to be utter nonsense. For in the same way as investors believe, axiomatically that QE will drive up equity prices, they believed exactly the same thing of commodities until 2012. Commodities are a risk asset and benefited massively from QE1 and QE2, so why has QE3 had absolutely no effect on commodity prices? Exactly the same thing could happen to equities if a recession unfolds and profits plunge at the same time as the printing presses are running full pelt. Do not assume equities MUST benefit from QE.

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Submitted by Alyene Senger via The National Interest,

After a botched rollout that was universally panned, it may seem like things are finally moving more smoothly for Obamacare. But 2014 and beyond promise more turbulence for consumers, with premium tax credits likely to be another crisis.

On January 1, Obamacare’s subsidized exchange coverage began. The Congressional Budget Office projects that exchange subsidies, both the premium tax credits and cost-sharing subsidies, will cost more than $1 trillion over 10 years, with up to 19 million people receiving federal subsidies to offset the cost of their exchange coverage in 2023.

Those who earn anywhere between 100 percent and 400 percent of the federal poverty level ($11,490 to $45,960 for individuals and $23,550 to $94,200 for a family of four in 2013) and are not offered affordable and adequate coverage elsewhere will be eligible for Obamacare’s premium subsidies. These subsidies are applied on a sliding scale, with Americans in the lowest income level receiving the highest premium subsidy.

The credit can be claimed when filing the year’s taxes but it will more likely be used in advance as a way for consumers to lower their monthly premiums. But therein is the problem: The tax credits are tied to the enrollee’s monthly income. Thus, if a person’s income fluctuates, which happens more frequently than many realize, the subsidy amount will change from month to month. Thus, when it comes time to file taxes in April, the amount of subsidy received over the past year must be reconciled with the final calculation of the total subsidy for which the individual was eligible—based on actual income for the entire tax year.

So if you qualify for more subsidy help than you receive during the year, you’ll get a tax refund. But if you were given more subsidy than your income qualifies you for, you will be required to repay the excess subsidy.

However, repayment of the excess subsidy is capped for all those earning less than 400 percent of the federal poverty level (FPL). For those who earn less than 200 percent of the FPL, an individual’s repayment is capped at $300 and family’s capped at $600. For those between 200 percent and 300 percent of the federal poverty level, an individual is capped at $750 and a family repayment is capped at $1,500. And for those who earn at least 300 percent of FPL but less than 400 percent, repayments are capped at $1,250 for an individual and $2,500 for a family.

Only Americans making more than 400 percent of the federal poverty level would be forced to repay all of an incorrectly calculated Obamacare subsidy.

And if subsidized Obamacare exchange enrollees don’t report any changes in their income throughout the year, they could be on the hook for potentially expensive repayments come tax time.

To that end, an analysis published in Health Affairs estimated the number of enrollees who might be subject to repayment and how much repayment would cost. Researchers found “that family income fluctuated greatly from one year to the next” for the American families eligible for Obamacare subsidies, with an expected “37.8 percent having large income increases, while 35.5 percent facing large decreases. Thirty percent of recipients were in families whose income increased more than 20 percent, and 18.9 percent had income increases of more than 40 percent.”

In addition, the authors found the median Obamacare repayment—if no income changes were reported and no adjustments were made to subsidy amounts over a year— would be $857.

Subsidy repayments are just one more headache that Americans don’t need when it comes to their health care. The issue is symptomatic of many problems that will plague the law in coming years. The Obamacare crisis is multifaceted and far from over.

via Zero Hedge http://ift.tt/1a7SJXs Tyler Durden

The market just hit a fresh all time high today which means another major default must be just around the horizon. Sure enough, the FT reported moments ago that a Puerto Rico default “appears increasingly likely” and is why creditors are meeting with lawyers and bankruptcy specialists (most likely Miller Buckfire, fresh from its recent league table success with the Detroit bankruptcy) on Thursday in New York.  The FT cited a restructuring advisor, supposedly desperate to sign the engagement letter with creditors and to force the bankruptcy, who said that “the numbers are untenable” and “to issue new debt the yield would have to rise and where they can’t raise new money they will have to stop paying.”

The untenability of PR’s cash flows results from a “debt service burden that requires paying between $3.4bn and $3.8bn each year for the next four years. As doubts grow about the ability of the commonwealth to service that debt, the cost of doing so will inevitably rise.”

For Puerto Rico bonds, such an outcome would not be exactly a surprise, most recently trading at 61:

The rest of the story is largely known:

If Puerto Rico is forced to take that step, the effects will ripple through the entire $4tn municipal bond market. Because the debt is generally triple tax free, in a world of zero interest rates demand is high and it is distributed widely, including in funds that imply they have no exposure to Puerto Rico.

 

But yields have gone up nevertheless – and prices down – suggesting the markets are increasingly nervous about prospects for repayment. Estimates on how much of that debt is insured range from 25 per cent to 50 per cent of total issuance.

 

“Everyone thinks they can get out in time,” the restructuring adviser said.

 

Puerto Rico cannot really raise taxes much more, since the debt per capita is more than $14,000, while income per capita is almost $17,000, a ratio – at 83 per cent – that makes California, Illinois or New York – each at 6 per cent – models of prudence. Meanwhile, at 14 per cent, the unemployment rate is twice the national average.

What would make a Puerto Rico default more interesting is that as in the case of GM, political infighting would promptly take precedence over superpriority and waterfall payments. According to the FT, “any radical step, which the local government denies considering, would involve significant legal wrangling. Congress could step in and create an insolvency regime, lawyers say, since it has comprehensive jurisdiction, but that too would give rise to partisan fighting. The Democrats would say that pension claims have priority while the Republicans would uphold the priority of payments to bondholders, citing the constitutional sanctity of contracts.“

Of course, since in the US a bond contract now is only worth the number of offsetting votes it would cost, nobody really knows what will happen. And so, we sit back and watch, as yet another muni quake appears set to hit the US, in the process obviously sending the S&P to higher, record highs.

In the meantime, keep an eye on bond insurers AGO and MBI which have taken on water in today’s session precisely due to concerns over what a Puerto Rico default would do to their equity.

via Zero Hedge http://ift.tt/1apdyIf Tyler Durden

The market just hit a fresh all time high today which means another major default must be just around the horizon. Sure enough, the FT reported moments ago that a Puerto Rico default “appears increasingly likely” and is why creditors are meeting with lawyers and bankruptcy specialists (most likely Miller Buckfire, fresh from its recent league table success with the Detroit bankruptcy) on Thursday in New York.  The FT cited a restructuring advisor, supposedly desperate to sign the engagement letter with creditors and to force the bankruptcy, who said that “the numbers are untenable” and “to issue new debt the yield would have to rise and where they can’t raise new money they will have to stop paying.”

The untenability of PR’s cash flows results from a “debt service burden that requires paying between $3.4bn and $3.8bn each year for the next four years. As doubts grow about the ability of the commonwealth to service that debt, the cost of doing so will inevitably rise.”

For Puerto Rico bonds, such an outcome would not be exactly a surprise, most recently trading at 61:

The rest of the story is largely known:

If Puerto Rico is forced to take that step, the effects will ripple through the entire $4tn municipal bond market. Because the debt is generally triple tax free, in a world of zero interest rates demand is high and it is distributed widely, including in funds that imply they have no exposure to Puerto Rico.

 

But yields have gone up nevertheless – and prices down – suggesting the markets are increasingly nervous about prospects for repayment. Estimates on how much of that debt is insured range from 25 per cent to 50 per cent of total issuance.

 

“Everyone thinks they can get out in time,” the restructuring adviser said.

 

Puerto Rico cannot really raise taxes much more, since the debt per capita is more than $14,000, while income per capita is almost $17,000, a ratio – at 83 per cent – that makes California, Illinois or New York – each at 6 per cent – models of prudence. Meanwhile, at 14 per cent, the unemployment rate is twice the national average.

What would make a Puerto Rico default more interesting is that as in the case of GM, political infighting would promptly take precedence over superpriority and waterfall payments. According to the FT, “any radical step, which the local government denies considering, would involve significant legal wrangling. Congress could step in and create an insolvency regime, lawyers say, since it has comprehensive jurisdiction, but that too would give rise to partisan fighting. The Democrats would say that pension claims have priority while the Republicans would uphold the priority of payments to bondholders, citing the constitutional sanctity of contracts.“

Of course, since in the US a bond contract now is only worth the number of offsetting votes it would cost, nobody really knows what will happen. And so, we sit back and watch, as yet another muni quake appears set to hit the US, in the process obviously sending the S&P to higher, record highs.

In the meantime, keep an eye on bond insurers AGO and MBI which have taken on water in today’s session precisely due to concerns over what a Puerto Rico default would do to their equity.

via Zero Hedge http://ift.tt/1apdyIf Tyler Durden

As India continues its anti-gold stance (and does nothing but drive the undergound smuggling business), China is continuing its opening of the world’s biggest physical bullion market. As India’s Economic Times reports, China has granted licenses to import gold to two foreign banks for the first time. “China is actually increasing its transparency,” noted on analyst, allowing more banks to import gold could increase the supply of the metal into the country, easing local prices that are higher than in most Asian nations (premiums are currently about $15 an ounce over London prices, compared to less than $2 in Singapore and Hong Kong). They rose to a record high of $30 in April-May last year. “This is the first step that the regulators are taking to ensure that its [physical] gold futures contract in the free-trade zone can take off.”

 

Via Economic Times,

China has granted licences to import gold to two foreign banks for the first time, sources said, as moves to open the world’s biggest physical bullion market gather pace.

 

Allowing more banks to import gold could increase the supply of the metal into the country, easing local prices that are higher than in most Asian nations.

 

China’s gold imports more than doubled last year to over 1,000 tonnes – ousting India as the biggest buyer – as demand soared to unprecedented levels due to the first drop in international prices in 12 years

 

…

 

“China is actually increasing its transparency. I think there will possibly be further access to other banks as well,” said Cameron Alexander, manager of Asian precious metals demand at metals consultancy GFMS, which is owned by Thomson Reuters.

 

China faced a supply crunch early in 2013 when a sharp plunge in gold prices released pent up demand that eroded inventories at banks and jewellery sellers.

 

Premiums in China tend to be higher as supply is tighter than other parts of Asia due to the quota system and the limited number of import licences.

 

…

 

The granting of new licences is the latest in a string of steps by China to ease restrictions on bullion trading and boost market accessibility.

 

China approved its first gold-backed exchange-traded funds last year and extended trading hours on the futures exchange.

 

…

 

The move also comes as the SGE plans to launch gold futures in the city’s pilot free trade zone this year that would be open to foreign investors.

 

“China will need to allow more foreign players into the physical gold market if it’s planning to have foreign investors participate on its gold futures,” said one of the sources.

 

“This is the first step that the regulators are taking to ensure that its gold futures contract in the free-trade zone can take off.”

via Zero Hedge http://ift.tt/1kCvicW Tyler Durden

The Beige Book may well be renamed the Boring Book due to the uniformity of its monthly pronouncements, but a few things stands out in a report that saw moderate expansion in the economy across most of the US:

• the Fed said most districts reported increases in home sales… except we assume for San Francisco where home sales plunged to 6 year low,
• the Fed sees “very few reports of staff cuts of plant closings”… which we guess ignores the December jobs reports where the least jobs were added since January 2011,
• the Fed said nine districts reported an increase in retail spending… which is curious considering retail traffic plunged and the holiday spending season was the worst since 2009,
• the Fed said almost half of district reported prices were stable… which probably means the Fed’s inflation benchmark is now well below 2%
• and Finally, the Fed said eight district reported upward movement in wages…  which also is confusing considering real disposable income per capita just dropped into the negative.

Oh well: we suppose we will take the Fed’s word for it.

• More interesting were the Fed’s prop mentions of cold weather and Obamacare. Here they are:
• Richmond noted a general slowdown in retail spending in recent weeks and the Kansas City District cited lower than expected holiday sales, which retailers there attributed to a shorter selling season and harsh weather conditions.
• Apparel sales were reportedly strong in Boston and Richmond, while Philadelphia, Cleveland, and Chicago indicated that cold-weather gear and winter items were selling well.
• Contacts report that sales were hampered by harsh weather in late November into early December across much of New York State
• In some regions of the [Cleveland] District, retailers experienced a tapering off as December progressed. They attributed the decline in part to persistently poor weather conditions.
• A few sod and seed companies [in the Richmond district] reported a decline as a result of poor weather conditions.
• Delays in holiday shipments to consumers were reportedly due to the shortened shopping season, higher than expected on-line sales, adverse weather conditions
• [In Chicago] severe winter weather, while reducing store traffic in some locations, spurred sales of winter-related items
• [In Kansas City] district retailers had expected higher levels and attributed the lower than expected sales to a shorter and slower holiday shopping season, and harsh weather conditions.
• Some contacts cited poor weather, and continued fiscal and regulatory uncertainty as reasons for the December slowdown.
• [In Dallas] construction-related manufacturers reported slow demand in early December due to poor weather, but business bounced back soon after.

And yet there was an increase in retail spending? Good to know.

As for Obamacare:

• In regard to hiring and capital expenditure plans, firms continued to expand cautiously and will do so until the pace of growth strengthens and exhibits sustainability; in addition, they face ongoing uncertainty from implementation of the Affordable Care Act.
• Hiring in the District continued to improve, despite lingering concerns about costs related to the Affordable Care Act and difficulty finding highly skilled workers
• Demand was generally soft at hospitals and other healthcare organizations, and administrators reported that they expect decreasing utilization along with declining Medicaid and Medicare reimbursement under the Affordable Care Act.
• Employers continued to express concern about potential cost increases related to the Affordable Care Act.
• Outlooks were positive for the first part of 2014, but some contacts remained concerned about the impact of the Affordable Care Act on business.

In other words, no change.

Full Beige Book can be found here

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