Tag: finance

When one thinks of the bailout-taking, London-Whale-suffering, regulatory-fine-paying, pay-rise-taking CEO of JPMorgan, the first analogy is not the philosophical similarities between Jamie Dimon and Martin Luther King. But, according to Dimon’s letter to shareholders below, he feels injustice has been done and quotes MLK on the future ahead. “The arc of the moral universe is long, but it bends toward justice” Progress, sometimes painful and slow, has been happening all around us all the time, and the optimist in me believes that it will continue.” What a year… he begins.

Dimon “has a dream” of a post-QE, Fed has the tools to exit, inflation not a problem, world is gonna be great future where little rich boys and little poor boys play together.

Let QEdom ring!

 

via Zero Hedge http://ift.tt/1n7TCkC Tyler Durden

Another day, another ‘failed’ IPO. Ally Financial – aka GMAC – that bastion of subprime auto loans and risk management, IPO’d at $25 last night (at the very bottom of the $25 to $28 range) but investors seem to prefer to sell their allocations than pile into this ‘bank’. Enabling the Treasury to exit more of its losing proposition (raisng $2.38 billion), ALLY opened well below its IPO price… at $24.25. As a gentle reminder, ALLY filed to go public in March 2011.

 

 

via Zero Hedge http://ift.tt/1qkOf3o Tyler Durden

Companies will have to increase profit margins to all-time records in order to meet estimates, is the message of utter hope embedded in the forward expectations for earnings and sales growth. As Bloomberg reports, Oppenheimer’s Andrew Burkly warns this is “a scenario we view with ongoing skepticism.” As the chart below shows, the gap between growth in sales (top-line) and earnings (bottom-line) is set to explode in the next few quarters as even the most exuberant analsyst struggle to upgrade their GDP-riddled sales forecasts and are thus forced to make up whatever margins they need to reflect extrapolated buy-and-hold targets for their stocks. The margin for US companies during Q4 was the highest since 1950 and finding ways to reduce costs and make workers more productive will be an “increasing challenge…earnings growth will have to be pared.”

 

 

Chart: Bloomberg

via Zero Hedge http://ift.tt/1kuV57k Tyler Durden

It was about 5 years ago, roughly the same time we launched our crusade against HFT, that we also first made the accusation that as a result of QE and the Fed’s central planning, the forward-looking, discounting mechanism formerly known as the “market” no longer exists, and instead has been replaced with a policy vehicle designed to create a “wealth effect” if only for those already wealthy. In other words, while HFT may have rigged the market, it was the Fed that has openly broken it.

Today, none other than the WSJ is the latest to confirm this. To wit:

We’ve had more proof that financial markets are in thrall to central banks rather than caring about the health of the economy. Data out of Asia and Europe were disappointing, with China suffering a drop in both exports and imports and with industrial production in Italy softening as deflation worries persisted in France. Yet markets are stronger everywhere today. In Asia, that was partly explained by the largely expected but still significant news that China will allow Hong Kong shares to trade in Shanghai, marking a further easing in capital controls. But the real driver has been expectations of continued monetary accommodation from central banks. First, it was the minutes from the Federal Open Market Committee yesterday, which gave the impression that the Fed is eager to convey a message that it wants to keep providing long-term stimulus. Then it was the poor data in Europe, which, rather than unnerving investors, simply raised expectations that the European Central Bank will take aggressive steps to ward off deflation.

And to think 5 years ago this would be considered daylight, fringe tinfoilhat bloggery. Our advice to the WSJ, next time use quotation marks as follows: “markets”

via Zero Hedge http://ift.tt/1qx7o0h Tyler Durden

From a revised 332k last week, initial claims collapsed 32k to 300k (smashing expectations of 320k) and dropping to the lowest of the recovery. This is the lowest initial claims print since May 2007. Rather stunningly, given the real employment situation in America, this claims data is nearing the best levels since 2000 (and certainly does nothing for the un-taper case so many are hoping for). This is the biggest weekly drop since January 2006. Continuing claims also dropped to new cycle lows back to Jan 2008 lows. Mission Accomplished?

 

 

Elsewhere, import prices came in far higher than expected, printing at 0.6% above the 0.2% expected, down from the 0.9% last month, however the increase was driven not by the volatile fuel import prices which tumbled from 5.3% to 1.2%, but by core, nonfuel imports which rose from -0.1% to 0.3% – the highest since January and matching the highest sequential increase of the past year.

This was the lowest annual import price decline since August:

 

The breakdown:

 

The detail:

All Imports Excluding Fuel: Prices for nonfuel imports also increased in March, rising 0.3 percent, after edging down 0.1 percent in February. The March increase was led by a 3.7-percent advance in foods, feeds, and beverages prices, although higher nonfuel industrial supplies and materials prices and prices for capital goods also contributed to the advance. The price indexes for consumer goods and automotive vehicles recorded no change in March. Despite the March rise, nonfuel import prices declined 0.8 percent over the past 12 months

It appears Japan’s exporting of deflation may be coming to an end.

Finally, March export prices rose by 0.8%, the most in over a year, driven by a 2.7% increase in agricultural export prices:

Here are the details:

All Exports: Export prices advanced 0.8 percent in March, the largest monthly increase for the index since a 0.8-percent rise in September 2012. Rising prices for both agricultural exports and nonagricultural exports each contributed to the advance in export prices. Prices for exports also rose over the past year, increasing 0.2 percent. The year-over-year advance was the first 12-month rise since a 0.3-percent increase between July 2012 and July 2013.

 

Agricultural Exports: The price index for agricultural exports increased 2.7 percent in March, after a 1.4- percent advance in February. The March rise was driven by a 6.6-percent increase in soybeans prices, a 7.8-percent gain in wheat prices, a 2.8-percent advance in meat prices, and a 7.0-percent rise in corn prices. Prices for agricultural exports decreased 1.6 percent for the year ended in March, led by falling prices over the past year for corn, soybeans, and wheat.

How long until global food prices start doing their early 2011 spike leading to unfortunate consequences like various regional “springs” around the world, and how long until US inflation imports translates into inflation within America’s internal supply chain?

via Zero Hedge http://ift.tt/1jw9UTA Tyler Durden

In the interests of transparency and on the heels of Mary Barra’s suggestion that some of those involved in the ignition switch problem are still employed at the firm, she has decided to place 2 employees on paid leave…

• *GM BARRA CONFIRMED 2 ENGINEERS PLACED ON PAID LEAVE
• *GM SAID TO PLACE DEGIORGIO, ALTMAN ON PAID LEAVE
• *GM CREATES SPEAK UP FOR SAFETY PROGRAM FOR EMPLOYEES

To distract from the main headlines, GM has created a “speak up for safety” spy-on-your-neighbor plan as part of her safety-first strategy.

via Zero Hedge http://ift.tt/1n7zWNO Tyler Durden

“Fear Of Missing Out” – that is the only way one can explain the irrational idiocy with which asset “managers” are scrambling to allocate other people’s money into today’s “historic” Greek (where unemployment just printed at 26.7%) return to the bond market, and which according to Greek PM Venizelos was eight times oversubscribed, or far more demand than for the Facebook IPO. Ironically, while we joked earlier this week, when the Greek 5Y was trading in the 6% range that the new bond would issue at 3%, we were not too far off on the final terms which were largely expected in the mid-5% range. Instead, Greece shocked everyone when it announced that the avalanche of lemmings had made it possible for Greece to issue debt at a sub-5% yield, and a 4.75% cash coupon! Here is the final term sheet.

• Issuer: The Hellenic Republic
• Amount: €3 billion euros ($4.15 billion, upsized from €2.5 Billion
• Maturity: April 17, 2019
• Tenor: 5 Years
• Yield: 4.95%
• Coupon: 4.75%
• Rating: Caa3/B-/B-
• Underwriters: BofAML, DB, GS, HSB, JPM, MS
• Governing Law: English

Additionally, as the Greek finmin said, “Demand for the bonds was very strong. Participation of foreign institutional investors is expected to approach 90 percent.” And participation of other people’s money will reach 100%.

Goldman’s post-mortem:

Earlier today the Hellenic Republic announced its intention to access international bond markets for the first time since early 2010. Greece’s attempt to regain market access is a result of a combination of macro drivers, which we have highlighted since mid-2012 and which remain in place:

 

1.    Greece is gradually exiting a deep recession, having shed almost 25% of its nominal GDP between late 2009 and late 2013. At the onset of the crisis, the economy featured large imbalances, which pointed to the economic pain set to follow. To mention a few: a very wide primary budget deficit (near 10% of GDP), a current account deficit amounting to almost 14% of GDP, uncompetitive levels of unit labour costs, and significant frictions in the operation of labour and product markets.

 

The structural adjustment programme for Greece, beyond its significant cost in terms of economic activity, has helped address some of these imbalances, at least in part. The country now runs a primary surplus, which currently hovers north of 1.5% of GDP and which different official sector estimates place north of 4% on a structural basis. In addition, the current account deficit has been eliminated, unit labour costs are at lower levels than before the Euro adoption relative to EMU averages, and there have been elements of reform in labour and product markets.

 

As a result, the outlook for the Greek economy is starting to reverse. Investors are expecting mildly positive growth rates and are reducing the required premia to lend the government of the country.

 

2.    After significant losses for bond investors and for governments, Greek debt has been restructured substantially. Despite the sharp rise in the ratio of debt to GDP (north of 175% of GDP), interest payments for Greek debt have been reduced so that the average cost of borrowing remains at or below pre-crisis debt servicing levels (around 4-4.5% of GDP) and the largest part of this is deferred cash payments (and hence requires no market financing to cover). By 2016, more than 80% of Greek debt will be in official hands. And the agreement between Greece and its EMU counterparts is that further debt relief may become available – possibly in the form of maturity extensions of already long-dated official loans and interest burden reductions. Therefore, it is becoming increasingly clear that the probability of default for the Greek foreign law government bonds is low and declining.

 

3.    The Greek government has regained credibility by showing willingness to adopt reforms, which, although unpopular, have helped the country’s recovery prospects. Equally, the EMU governments have shown uniform support towards that effort, largely smoothing the relationship between the country and the Euro area core. So, although Greece’s debt levels are still high, the probability of a disorderly solution has declined

It wasn’t all lunacy. According to Kleinwort Benson, the pricing was “irrational.” From Bloomberg:

• New 5Y GGB should have been priced 100bps higher to be at fair value given Greece’s credit risk, Fadi Zaher, head of bonds and currencies at Kleinwort Benson, says in interview.
• Greek sale said to exceed EU3b as nation ends 4-year exile from international markets
• Pricing of bond is “better than what the Greeks themselves had expected:” Zaher
• Now is ideal time for Greece to issue, amid investor “euphoria” over euro area; sale shows resumption of confidence in country
• Kleinwort Benson chose not to buy because of medium- and longer-term risks surrounding nation’s high debt levels, even though bond may perform well in near term
• Cites example of Argentina: “They went through different phases of debt restructuring, and the problems resumed”
• GGBs don’t look attractive in terms of risk-adjusted returns

Who cares. The bubble is growing, the music is playing, and one must dance. Rinse. Repeat.

via Zero Hedge http://ift.tt/1hkpK40 Tyler Durden

• J.P. Morgan’s Dimon Describes Year of Pain (WSJ)
• SAC Faces a Final Reckoning for 14 Years of Insider Scam (BBG)
• New Standards for $693 Trillion Swaps Market Increase Risk of Blowup (BBG)
• China says no major stimulus planned; March trade weak (Reuters)
• As we said in 2012 would happen: Record Europe Dividends Keep $3 Trillion From Factories (BBG)
• Blame it on the algo: Deutsche Bank Said to Find Improper Communication in FX Case (BBG)
• Coke Sticks to Its Strategy While Soda Sales Slide (WSJ)
• Ukraine’s Rust Belt Faces Ruin as Putin Threatens Imports (BBG)
• RBC Joins Goldman in Suing Clients After Singapore Crash  (BBG)
• Abe Rewrites Rules to Rouse Japan With Governance Revamp (BBG)
• U.S. House panel to look at aluminum prices, warehousing (Reuters)
• Brooklyn Apartment Rents Jump to a Record as Leases Surge (BBG)
• Spain Borrowing at German Yields? It’s Possible, Thanks to U.S.  (BBG)
• The princeling of private equity (Reuters)
• Europe’s steelmakers remain under pressure despite rising demand (FT)

 

Overnight Media Digest

WSJ

* For 13 years running, Americans have been drinking less Coke. Now Diet Coke sales are falling off a cliff. Globally, sales growth of soda is slowing amid concerns about sugar intake and obesity. The trends are industry wide, but it is especially bad news for Coca-Cola Co, a company that derives almost 75 percent of its global sales volume from carbonated soft drinks. (http://ift.tt/1lMtzPP)

* AT&T said on Thursday it is in advanced talks to bring speeds of up to one gigabit per second to six North Carolina cities, or about 10 times the current fastest options. (http://ift.tt/1k88Gih)

* J.P. Morgan Chase & Co Chairman and Chief Executive James Dimon acknowledged that a series of legal headaches in 2013 evolved into “the most painful, difficult and nerve-wracking experience I have ever dealt with professionally.” (http://ift.tt/1lMtCex)

* Auto lender Ally Financial Inc’s initial public offering priced at the low end of its expected range, raising some $2.38 billion for the U.S. Treasury Department. The deal marks the largest U.S.-listed IPO of the year and sharply reduces the U.S. government’s stake in the former General Motors financing arm. (http://ift.tt/1k88EH2)

* Hewlett-Packard Co agreed to pay $108 million to resolve bribery investigations spanning three countries, in a case involving bags of cash, jewelry and tours of the Grand Canyon. U.S. authorities on Wednesday gave a detailed view of corruption at HP, which pleaded guilty to violating the Foreign Corrupt Practices Act and agreed to the facts laid out by the government. (http://ift.tt/1lMtCez)

* Greece plans to sell a new bond, and demand appeared strong among investors ready to look beyond the country’s debt crisis. The country’s desire to issue the bond, its first longer-term debt sale since its international bailout in 2010, was well known. But details of the planned offering and indications of healthy investor appetite spurred a rally Wednesday in Greece’s existing securities. (http://ift.tt/1k88GyC)

* Bank of America Corp agreed to pay at least $772 million to settle allegations it misled customers when marketing credit-card products promising to protect consumers against identity theft and job loss. The pact announced Wednesday is the fifth, and largest, settlement to date in a probe of banks’ sales of credit-card add-on products. (http://ift.tt/1lMtzPV)

* For U.S. energy companies, it has been a simple and profitable strategy: spin off a piece of the business and secure a special tax treatment. Now, the IRS is wondering if some firms are pushing the popular tactic too far. It is conducting an internal review and taking a temporary break from giving guidance to companies looking to form or expand master limited partnerships. (http://ift.tt/1k88GyF)

* Mars Inc agreed to buy Iams and other pet-food brands from Procter & Gamble Co for $2.9 billion, solidifying its position as the world’s biggest pet-food company and effectively ridding P&G of a business that no longer fits with its goals. (http://ift.tt/1lMtCeD)

* Popular websites and millions of Internet users scrambled to update software and change passwords Wednesday, after a security bug in crucial encryption code was disclosed sooner than researchers had planned. Facebook Inc and Yahoo Inc’s blogging site Tumblr advised users to change their passwords because of the so-called Heartbleed bug while Canada’s tax agency shut its filing website as a precaution, weeks before its April 30 filing deadline. (http://ift.tt/1k88EH5)

 

FT

Russia’s biggest steel company Evraz Plc warned that the crisis in Ukraine could hurt its business in 2014, as it reported a deepening in losses for last year.

The World Steel Association expects a pick up in manufacturing in Europe after six years of recession, and has forecast a 3.1 percent pickup in European steel demand. But European steel companies, plagued by high energy costs, remain wary.

A new regulatory study by The Pensions Regulator shows that employers could be charged 10 times more than competitors for running final-salary pension schemes.

In one of the biggest corporate criminal cases in Ireland, a jury cleared former Anglo Irish Bank Chairman Sean Fitzpatrick of charges associated with loans to family members of the region’s business tycoon Sean Quinn.

Co-op Group’s senior board member Lord Paul Myners, who has been facing criticism over a proposed restructuring of the group’s board, has quit just a week before the group is scheduled to post its results.

NYT

* Bank of America Corp has been ordered to pay about $772 million in refunds to customers and fines to federal regulators to settle allegations that the bank used deceptive marketing and billing practices involving credit card products. (http://ift.tt/1lMtCuR)

* Bruce Karpati, a former Securities and Exchange Commission official, is joining the private equity firm Kohlberg Kravis Roberts & Company as its chief compliance officer, a person briefed on the matter said on Wednesday. (http://ift.tt/1k88EH7)

* Top U.S. investment banks have recently instituted a change in their corporate culture telling their most junior employees to take a few days off a month or on the weekends. The banks are responding to fears across the industry that finance is losing its appeal for bright, ambitious college graduates. (http://ift.tt/1lMtzPX)

* Members of the Senate Judiciary Committee expressed concern on Wednesday that the proposed $45 billion merger of Comcast Corp and Time Warner Cable Inc would raise the prices consumers pay for cable television and high-speed Internet service while leaving them with fewer choices for video programming. (http://ift.tt/1k88EH9)

* The Treasury Department on Wednesday sold a 20 percent stake in the once-embattled lender Ally Financial Inc via its initial public offering. The stock sale will raise about $2.4 billion for the government. (http://ift.tt/1k88GyM)

* A bond insurer halted the bankruptcy proceedings for Detroit by offering to buy four treasures in the city’s art museum. The non-binding proposals range as high as $2 billion, including a loan for that amount from a specialized firm that would use the art collection as collateral. Other parties have proposed buying the art collection, or parts of it. (http://ift.tt/1lMtzPZ)

* Walmart Stores Inc plans to announce on Thursday that it is backing Wild Oats organic products, offering the label at prices that will undercut brand-name organic competitors by at least 25 percent. The move by Walmart is likely to send shock waves through the organic market, in which an increasing number of food companies and retailers are seeking a toehold. (http://ift.tt/1k88GyO)

* Toyota Motor Corp on Wednesday announced a recall of nearly 6.4 million vehicles worldwide for problems with air bags that may not deploy or seats that could move in a crash. The recall, which includes nearly 1.8 million vehicles in the United States, brings Toyota’s recall tally for 2014 to almost 2.9 million vehicles in the U.S. (http://ift.tt/1lMtCuW)

* When the Federal Reserve changed the guidelines for its stimulus campaign last month, it did not change its commitment to supporting the economy, according to an account of the decision that the Fed published on Wednesday. Janet Yellen, the Fed’s new chairwoman, convened a secret meeting in early March to discuss the shift, the Fed disclosed on Wednesday. (http://ift.tt/1k88GP4)

* American mutual fund investors with significant exposure to bonds issued by indebted companies in fast-growing economies may be at risk, the International Monetary Fund warned in a report published on Wednesday. Bonds issued by big companies in emerging economies have seen explosive growth in recent years after central banks around the globe started making extraordinarily large purchases of government and corporate bonds. (http://ift.tt/1k88GP6)

 

Canada

THE GLOBE AND MAIL

* A major cybersecurity flaw called “Heartbleed” that exposes encrypted information to hackers has forced the Canada Revenue Agency to shut down its filing system and push back the deadline for online returns. The flaw has got major websites around the world to release software updates to patch a hole that leaves users’ personal information vulnerable. (http://ift.tt/1lMtCuY)

* Canada’s embassy in Beijing has spent about $175,000 in the past two years to buy crates of high-end filters for its staff. Embassy officials are also looking at compensation for workers whose stays in China stand to permanently damage their health. (http://ift.tt/1k88EXs)

Reports in the business section:

* BlackBerry Ltd’s Chief Executive John Chen said the company might consider exiting its handset business if it remained unprofitable. Chen, who took over the struggling company in November, said BlackBerry was also looking to invest in regulated industries such as healthcare, and financial and legal services, all of which require highly secure communications. (http://ift.tt/1lMtCv0)

NATIONAL POST

* Conservative Party of Canada’s efforts to push the Fair Elections Act has run into controversy. The secrecy surrounding the act, the failure to consult in advance of its drafting, the curtailment of debate after, the supreme indifference to legitimate criticism – all under the chilling oversight of the Minister for Democratic Reform, Pierre Poilievre, would be enough to make anyone nervous. (http://ift.tt/1k88EXu)

* The Canadian Broadcasting Corporation may cut about 600 jobs as it grapples with a financial shortfall of $130 million to $150 million, according to a lobby group that watches the national broadcaster closely. (http://ift.tt/1lMtA6d)

FINANCIAL POST

* “Heartbleed”, a cybersecurity flaw that got major websites around the world to release software patches, went undetected for two years, according to one of the organizations that helped identify it. The bug leaves behind no trace when it is exploited and it may take years before the extent of this security breach is fully known. (http://ift.tt/1k88GPg)

* Activist investor George Armoyan has called for the removal of Sherritt International Corp Chief Executive David Pathe. Armoyan said some Sherritt insiders, including former directors, have indicated to him that there is a vacuum of leadership at the company. (http://ift.tt/1lMtCv2)

 

China

– State-owned enterprises, especially those owned by the central government, are likely to play an important role in launching large-scale investment projects aimed at stabilising economic growth this year, the paper reported, citing an unnamed source closed to the State-owned Assets Supervisory and Administration Commission.

SHANGHAI SECURITIES NEWS

– China’s first private equity-style fund focused on futures investment started fundraising on Tuesday. The private equity product called “Donghang Finance Number One Seeds Asset Management Plan”, which is operated by CES Finance, plans to raise 50 million yuan ($8.1 million).

21ST CENTURY BUSINESS HERALD

– China’s securities regulator will not restart equity initial public offerings in April because the agency is still in the process of drafting several new regulations, sources closed to the matter told the paper.

– China’s major online peer-to-peer lending platform Ppdai raised around $50 million its second round of private fundraising, sources said.

CHINA BUSINESS NEWS

– Executives at privately-owned companies complained forcefully about unequal treatment relative to state-owned firms at a roundtable discussion at the Boao Forum for Asia in Hainan, the paper reported in a front-page article.

CHINA DAILY

– Beijing may impose strict traffic controls and suspend operations of polluting companies to reduce smog during the Asia-Pacific Cooperation Forum scheduled for later this year, said Zhuang Zhidong, deputy head of the Beijing Environmental Protection Bureau.

PEOPLE’S DAILY

– Party cadres should be highly attentive to the ongoing “Mass Line” education campaign, an internal propaganda effort aimed at maintaining the common people’s support for the party, said the paper, which acts as a mouthpiece for the ruling Communist Party.

 

Britain

The Telegraph

TOP ECONOMISTS WARN GERMANY THAT EMU CRISIS AS DANGEROUS AS EVER

(http://ift.tt/1gafB93)

The eurozone debt crisis is deepening and threatens to re-erupt on a larger scale when the liquidity cycle turns, a leading panel of economists warned in a clash of views with German officials in Berlin.

NEXT CHIEF LORD WOLFSON DONATES £4M BONUS TO STAFF

(http://ift.tt/1gafCKa)

Lord Wolfson, the chief executive of Next Plc, has waived his £4m bonus for the second consecutive year and awarded it to the clothing retailer’s staff.

The Guardian

LORD MYNERS QUITS CO-OPERATIVE GROUP

(http://ift.tt/1gafCKc)

Lord Paul Myners tendered his resignation in the face of mounting opposition to his plan to reform the way the country’s biggest mutual Co-operative Group is run.

IMF WARNS EUROPE’S BANKING SYSTEM POSES THREAT TO GLOBAL FINANCIAL STABILITY

(http://ift.tt/1gN2Tcm)

The eurozone’s creaking banking system poses a serious threat to global financial stability, according to the International Monetary Fund, which warned European leaders to accelerate plans to support weak banks and create a banking union.

The Times

ANNUITY SALES TAKE A HIT FROM OSBORNE’S PENSIONS REFORM

(http://ift.tt/1gafB97)

Just Retirement, a specialist annuity provider, reported that the shock Budget measure “has had a material effect on individually underwritten annuity volumes”, and warned that it would not meet the sales growth target of 7 per cent for its full year that had been flagged in February.

BRUSSELS DIVIDEND DEAL GIVES RBS PUSH IN RIGHT DIRECTION

(http://ift.tt/1gafB9b)

Royal Bank of Scotland inched closer to corporate normality yesterday after agreeing a deal with Brussels that paves the way for it to resume paying ordinary dividends and gives it more breathing space to complete a key disposal.

Sky News

CAR INSURANCE ‘DROPS TO A FOUR-YEAR LOW’

(http://ift.tt/1gN2Qx6)

Car insurance premiums are at a four-year low after a record 19 percent drop in the cost last year, according to Confused.com’s car insurance price index.

IMF WARNS INVESTORS OVER ‘ROCK-BOTTOM RATES’

(http://ift.tt/1gafCKf)

Investors are becoming dangerously reliant on rock-bottom interest rates, with many becoming so indebted they will face serious problems when borrowing costs rise, the International Monetary Fund (IMF) has warned.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Jobless claims for week of April 5 at 8:30–consensus 318K
Import price index for March at 8:30–consensus up 0.2% from prior month
Treasury budget for March at 14:00–consensus deficit $36.0B

ANALYST RESEARCH

Upgrades

Akamai (AKAM) upgraded to Buy from Neutral at B. Riley
Alkermes (ALKS) upgraded to Buy from Neutral at Mizuho
AmerisourceBergen (ABC) upgraded to Buy from Neutral at ISI Group
BT Group (BT) upgraded to Neutral from Sell at UBS
DexCom (DXCM) upgraded to Buy from Neutral at Sterne Agee
Nike (NKE) upgraded to Outperform from Neutral at Macquarie
Palo Alto (PANW) upgraded to Outperform from Market Perform at JMP Securities
Premier (PINC) upgraded to Buy from Neutral at ISI Group
Prospect Capital (PSEC) upgraded to Buy from Neutral at Guggenheim
Twitter (TWTR) upgraded to Hold from Sell at Cantor
WESCO (WCC) upgraded to Buy from Neutral at UBS
Wright Medical (WMGI) upgraded to Outperform from Neutral at RW Baird
Yamana Gold (AUY) upgraded to Neutral from Underweight at HSBC

Downgrades

Bed Bath & Beyond (BBBY) downgraded to Neutral from Buy at BofA/Merrill
CF Industries (CF) downgraded to Equalweight from Overweight at Barclays
Cabot Oil & Gas (COG) downgraded to Hold from Buy at Stifel
Imperva (IMPV) downgraded to Perform from Outperform at Oppenheimer
Molson Coors (TAP) downgraded to Neutral from Buy at Nomura

Initiations

Apple (AAPL) initiated with a Buy at Deutsche Bank
Crocs (CROX) initiated with a Buy at Buckingham
Deckers Outdoor (DECK) initiated with a Buy at Buckingham
EMC (EMC) initiated with a Buy at Deutsche Bank
HP (HPQ) initiated with a Buy at Deutsche Bank
IBM (IBM) initiated with a Hold at Deutsche Bank
NeoPhotonics (NPTN) coverage resumed with a Market Perform at Raymond James
NetApp (NTAP) initiated with a Hold at Deutsche Bank
Nutrisystem (NTRI) initiated with a Buy at B. Riley
Questar (STR) initiated with an Underperform at BofA/Merrill
S&T Bancorp (STBA) initiated with an Outperform at Raymond James
STB Systems Inc (STBI) initiated with an Outperform at Raymond James
Skechers (SKX) initiated with an Underperform at Buckingham
Steven Madden (SHOO) initiated with a Buy at Buckingham
UGI Corporation (UGI) initiated with a Buy at BofA/Merrill
Web.com (WWWW) initiated with a Neutral at Buckingham

COMPANY NEWS

IDC said worldwide PC shipments totaled 73.4M units in Q1, down 4.4% y/y (MSFT, HPQ, LNVGY)
Gartner said worldwide PC shipments in Q1 fell 1.7% (MSFT, HPQ, LNVGY)
Costco reported March total company SSS up 5%
Imperva (IMPV) cut its Q1 profit and sales outlook, citing delays in receiving certain anticipated orders as a result of an extended sales cycle. Cybersecurity peers Fortinet
AngioDynamics (ANGO) gave a Q4 earnings outlook that beat estimates while guiding revenues for the upcoming quarter in-line with expectations
Pier 1 Imports (PIR) board authorized a new $200M stock repurchase program
Chevron (CVX) said Q1 earnings expected to be lower than Q4

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
iGATE (IGTE), AngioDynamics (ANGO), PriceSmart (PSMT), Joe’s Jeans (JOEZ)

Companies that missed consensus earnings expectations include:
Sigma Designs (SIGM), Apogee Enterprises (APOG), NeoPhotonics (NPTN)

Companies that matched consensus earnings expectations include:
Pier 1 Imports (PIR), Bed Bath & Beyond (BBBY)

NEWSPAPERS/WEBSITES

JPMorgan (JPM) CEO says 2013 was a year of ‘pain,’ WSJ reports
BlackBerry (BBRY) CEO says would consider sale of handset unit, Reuters reports
Apple (AAPL) departure of interface head Greg Christie, FT reports
Apple (AAPL) weighing ‘dramatic’ overhaul of iTunes store, Billboard says
General Motors (GM) requests NASA review in recalled vehicles, Detroit News says
Yahoo (YHOO) hires Bobbi Brown to be editor-in-chief of beauty site, Re/code reports
Facebook (FB) removing messaging from main app, TechCrunch says
Competition, overexpansion hurting Whole Foods (WFM) competitors (FWM, SFM, TFM), WSJ reports

SYNDICATE

Adamas Pharmaceuticals (ADMS) 3M share IPO priced at $16.00
Agios Pharmaceuticals (AGIO) files to sell $75M in common stock
Ally Financial (ALLY) 95M share IPO priced at $25.00
Aviv REIT (AVIV) 8M share Secondary priced at $24.10
Box Ships (TEU) files to sell common stocks and warrants
Hi-Crush Partners (HCLP) 4.25M share Secondary priced at $41.29
New Mountain Finance (NMFC) files to sell 3.5M shares of common stock
Stereotaxis (STXS) terminates $15M at-the-market equity offering with Cantor
Sysorex Global (SYRX) 3.333M share IPO priced at $6.00
TransAlta (TAC) announces $125M common stock offering

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The main overnight event, which we commented on previously, was China’s trade data which was a disaster. March numbers turned out to be well below market consensus with exports falling 6.6% YoY (vs +4.8% expected) and imports falling 11.3% YoY (vs +3.9% expected). The underperformance of imports caused the trade balance to spike to $7.7bn (vs -$23bn in Feb).

And here comes the magic of spin: according to DB, “the market reaction has been muted perhaps because many have attributed today’s drop to distortions caused by last year’s over-invoicing issues…. the data quality issues from last year have caused a very high base for this year’s trade numbers.” In the first quarter of last year, exports grew on average by 19% YoY, which was substantially higher than the growth rate in the adjacent months. This year, Q1 exports have shrunk by an average of 4.7%. It’s a similar story for imports, which averaged 9.5% growth during Q1 last year, significantly higher than months prior and after, and stronger than the average during Q1 this year of 2.9%. So it’s likely that there are some base-effects at play that partially explain the weakness in today’s numbers, even if Lunar New Year distortions have been removed.

In other words, everyone knew about last year’s manipulated numbers, but nobody took them into consideration and now that the “reality” shocked everyone, it is time to goal seek the narrative, or, as it is better known in the US – “snow in the winter.”

In yet other words, fabricated Chinese data should be ignored, but is made more credible because it compares to prior “really and truly” fabricated data. One can’t make this up.

Elsewhere in Europe, initial upside by European stocks buoyed by dovish FOMC minutes – minute which said nothing that was unexpected and yet the “market” soared upon their release as if it was a revelation that Yellen was dovish (let’s ignore the market surge after Yellen’s two out of three ex-convicts can’t get a job speech – in fact, every time it is revealed Yellen is an uberdove, the S&P should surge another 1%) was not sustained and stocks turned lower on no fundamental news, with good size block sale triggering stops in Eurostoxx 50 (-0.73%). Final pricing details on the Greek 5-year bond is due later today, with books over EUR 20bln.

Pricing on the Greek 5-year syndicated bond is due later today, with the final size of the bond boosted to EUR 3bln from EUR 2.5bln as order books exceed EUR 20bln (equating to a rough bid/cover ratio of over 6) as the final yield is set at 4.75% (well below the 5.3% finance ministry target and well above our “the world is a bunch of idiots managing other people’s money” 3% target). Ireland sold EUR 1bln in 10y bonds, marking the third successful return to the bond market since the bailout. Also of note, this morning saw the release of lower than expected French CPI data, underpinning fears of potential deflation in the Eurozone.

Bulletin headline summary from RanSquawk and Bloomberg

• Treasuries gain with JPY, bund and gilt yields fall as European stocks decline. Week’s auctions conclude with $13b 30Y bonds, yield 3.555% in WI after drawing 3.63% in March.
• Yesteday benchmark yields at every tenor fell from session highs after FOMC minutes said some members expressed concern that that upward shift in fed funds projections might be misconstrued as suggesting a move to a less accommodative reaction function
• China’s exports and imports unexpectedly fell in March as Premier Li Keqiang said the nation will roll out more policies to support growth while avoiding stronger stimulus
• Greece is ending a four-year exile from international markets with a bond sale of at least EU3b, more than the government estimated; final yield 4.95%, coupon set at 4.75%
• Draghi will probably take action within two months against the threat of deflation, economists said, with 2/3 of respondents in a Bloomberg survey predicted the ECB will ease policy by June
• Just under half said he may implement multiple measures ranging from interest-rate cuts to asset purchases and long-term loans
• The Bank of Japan is likely to predict that inflation will remain around 2% in fiscal 2016 in its next economic outlook report on April 30, Nikkei newspaper reports, without attribution
• G-7 finance chiefs will discuss the crisis in Ukraine at talks in Washington as a standoff continued in the country’s eastern cities, where pro-Russian protesters faced off against police
• Vladimir Putin is more likely to sign a 30-year deal to supply pipeline gas to China next month after more than a decade of false starts as Russia looks for markets outside Europe
• Sovereign yields fall. Asian stocks gain, Shanghai +1.4%. European equity markets, U.S. stock futures decline. WTI crude, lower, gold and copper higher

US Event Calendar

• 8:30am: Initial Jobless Claims, April 5, est. 320k; Continuing Claims, March 29, est. 2.835m (prior 2.836m)
• 8:30am: Import Price Index m/m, March, est. 0.2% (prior 0.9%)
• 2:00pm: Monthly Budget Statement, March, est. -$36b (year ago -$106.5b)
• 7:00am: Bank of England seen holding bank rate at 0.5%
• 11:30am: Fed’s Evans speaks in Washington along with Reserve Bank of India’s Rajan, other central bankers Supply * 11:00am: U.S. to announce plans for auctions of 3M/6M bills,
• 11:00am POMO: Fed to purchase $2.75b-$3.5b notes in 2018 sector
• 1:00pm: U.S. to sell $13b 30Y bonds in reopening

Asian Headlines

The Nikkei 225 pulled off the opening gains after poor Chinese Trade Balance (7.7bln vs. Exp. 1.80bln (Prev. -22.99bln) as a higher than expected surplus was countered by exports (-6.6% vs. Exp. 4.8%) and imports (-11.3% vs. Exp. 3.9%) falling well below expectations. As such, the Nikkei 225 steadily pared all of those gains throughout the session to close flat. Chinese equities shrugged off the trade data as sentiment benefited from reports that the Shanghai and Hong Kong exchanges are to be intrinsically linked, allowing capital to flow between the Shanghai Composite (+1.4%) and Hang Seng Index (+1.5%) with ease. Chinese stocks also benefited from the first net injection of liquidity for 9 weeks (injection of CNY 55bln vs. a drain of CNY 62bln last week). (RANsquawk)

US Headlines

Fed’s Evans (non-voter, dove) sees at least 6 months between the end of QE and first rate rise, and sees first rate rise most likely in late 2015. (BBG/RTRS)

PIMCO total return funds cuts US government related holdings to 41% in March from 43% in February. (RTRS)

Equities

Stocks in Europe failed to sustain the initial upside buoyed by dovish FOMC meeting minutes and turned lower on no fundamental news, as the weakness in the Eurostoxx50 pulled the other indices lower (around 20k sold), which in turn flushed out stops. As a result, heading into the North American open, the more defensive health care sectors stands on top of leader board.

FX

Dovish FOMC minutes inspired weakness (USD index -0.1%), saw USD/JPY trend lower overnight in Asia and in Europe this morning, in turn provided some degree of support for EUR/USD, which in spite of risk reversal in sentiment remained in the green.

Commodities

Precious metal prices were supported by the dovish FOMC minutes release, with gold moving back above the 50DMA and spot silver moving above the 100DMA level.

In conclusion, here is Jim Reid’s overnight recap

We start off today’s EMR looking at the Chinese trade report for March which was released overnight. There was a high level of anticipation leading up to today’s report given that it’s the first set of trade numbers following the Jan-Feb distortions caused by the timing of the Lunar New Year which fell on the first month of this year and the second month of last year. Today’s March numbers turned out to be well below market consensus with exports falling 6.6% YoY (vs +4.8% expected) and imports falling 11.3% YoY (vs +3.9% expected). The underperformance of imports caused the trade balance to spike to $7.7bn (vs -$23bn in Feb). The market reaction has been muted perhaps because many have attributed today’s drop to distortions caused by last year’s over-invoicing issues. Indeed, the data quality issues from last year have caused a very high base for this year’s trade numbers. In the first quarter of last year, exports grew on average by 19% YoY, which was substantially higher than the growth rate in the adjacent months. This year, Q1 exports have shrunk by an average of 4.7%. It’s a similar story for imports, which averaged 9.5% growth during Q1 last year, significantly higher than months prior and after, and stronger than the average during Q1 this year of 2.9%. So it’s likely that there are some base-effects at play that partially explain the weakness in today’s numbers, even if Lunar New Year distortions have been removed.

China’s Customs Department said today that the Q1 trade drop was partly due to 2013’s inflated data (Bloomberg) and it seems we may need to wait for another few months before the data distortions clear up. By geography, the worst major export market was Hong Kong which was a major source of overinvoicing activity last year. Exports to HK fell 43% yoy in March (-31% YTD) which was much worse than exports to the EU (+10%).

For the moment, the stronger sentiment from last night’s FOMC minutes (discussed below) have partly compensated for the below-consensus Chinese trade numbers. Equities are mixed with China weaker offset by stronger price action in Japan (Nikkei +0.05%). The Australian dollar is up 0.2%, rallying strongly after a strong set of Australian employment numbers but giving up some of those gains after the Chinese data. Copper is down 0.4%. Sentiment has been supported by comments from Chinese Premier Li who pledged further economic reforms and tax breaks to support small-mid size companies. The Nikkei gapped higher at the open but gains have been pared back as USDJPY continues to fall, now below 102, driven by a weaker USD. In Indonesia, the latest results from parliamentary elections have resulted in some risk taken off the table after a 15% rally in Indonesian equities and 7% rally in the rupiah this year. Unofficial exit polls suggest that presidential frontrunner Joko Widodo’s PDIP party has only managed to secure 19.7% of the vote, likely leaving his party in search for coalition partners to form a government. Instead of a coalition focused largely around the pro-reform PDIP, the country faces the prospect of a fragmented multi-party government. The Jakarta Composite is down 3.1% today and the Rupiah is 0.6% weaker against the USD.

Yesterday session was largely dictated by the reaction to the FOMC minutes. Having gone through the minutes, and judging by the market reaction following its release, it now seems markets might have misunderstood Yellen’s post-FOMC press conference or at least over-interpreted the “dot plot” and “six months” comment. Following its release last night, the US treasury curve steepened driven almost exclusively by the front end (3-6bp lower) while 10yr yields were basically unchanged. The USD index dropped by 0.35% and EURUSD popped back above 1.385 which will likely be of some frustration to European policy makers. The S&P500 closed at the highs of +1.1% with a strong showing by tech stocks which finished 1.5% higher. EM had a somewhat mixed day, but the hour or so of LATAM trading post-minutes saw a strong rally in the Brazilian Real and Mexican Peso as markets sold down the US dollar.

Looking at the minutes in more detail, the key points that the market picked up on was the Fed’s discussion on the “dots” and what it meant in terms of how market participants would interpret the future path of rates. The minutes said that “A number of participants noted the overall upward shift since December in participants’ projections….with some expressing concern that this component of the (projections) could be misconstrued as  indicating a move by the Committee to a less accommodative reaction function”. Also, several participants noted “that the increase in the median projection overstated the shift in the projections”. The Committee seems to have resolved the discussion by agreeing on providing an explicit indication in the policy statement that the new forward guidance “did not imply a change in the Committee’s policy intentions, on the grounds that such an indication could help forestall misinterpretation of the new forward guidance”. Adding to the dovish sentiment, the minutes said that softer growth in Q1 was “likely only in part because of the temporary effects“ of the weather.

In terms of inflation, the staff forecast was unchanged from the previous meetings and a couple of participants expressed concern that inflation might not return to target in the next few years and questioned “whether the Committee was providing an appropriate degree of monetary accommodation”. The minutes also revealed that the Committee had actually met before the FOMC itself, via video conference on March 4th (some two
weeks before the actual FOMC on March 18-19th). The video conference was used to discuss possible changes in forward guidance but apparently no policy decisions were made at the time. In an interesting comment, the minutes revealed that staff have “lowered slightly the assumed pace of potential output growth in recent years and over the projection period” and that over the next few years “real GDP growth would exceed the growth rate of potential output”. We’re unsure what to make of this comment but perhaps there are some at the Fed who believe that the output gap in the US economy is lower than previously thought.

Away from the Fed headlines, there were some interesting snippets from yesterday’s bi-annual IMF Global Financial Stability report. The report warned of rising debt levels, and said that the “scaling back of certain extraordinary policy supports has not been accompanied by adequate preparations for a new environment of normalised, self-sustaining growth”. The IMF also said that “Undue delay (in removing easing policy) could lead to a further build-up of financial stability risks, and too rapid an exit could jeopardise the economic recovery and exacerbate still-elevated debt burdens in some segments of the economy”. Indeed, this “Bubble-Taper Tightrope” is something we argued that policy makers would face when we wrote our Credit Outlook for this year. The IMF report also urged China’s banking authorities to remove the implicit guarantee around shadow banking products, but to do so without triggering broad-based financial system stress.

In Japan, the Nikkei is reporting that Japan’s Government Pension Investment Fund, the world’s largest pension fund, is considering investing in emerging market bonds and may also invest in low-rated, high-yield bonds and inflation-linked government securities. According to Reuters, this would be the first time the public fund has expanded its foreign bond investment beyond conventional bonds. The GPIF plans to choose asset managers for foreign bonds by the end of this fiscal year. This comes after a Welfare Ministry panel had earlier proposed that the GPIF diversify its portfolio by shifting away from its heavy focus on low-risk, low-return domestic bonds (Nikkei).

Turning to the day ahead, the focus in Europe will be on Greece’s return to the bond markets. The G20 finance ministers and central bank governors meet today in DC, timed to coincide with the IMF/World Bank meetings which start tomorrow. The G7 finance ministers will also convene today to discuss possibly ratcheting up sanctions against Russia (Reuters). The data docket will be pretty light with industrial production updates from various Euroarea countries and US jobless claims. The BoE wraps up its April policy meeting today. Oh and we have the Masters from Augusta! A lovely way to wrap up the day!

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By Phil of Phil’s Stock World (originally published on April 9, 14)

As nasty as our Big Chart looks at the moment, we only have two Vomiting Cobra Patterns (Nasdaq and Russell) while the other three indexes are still forming Spitting Cobras, which are only LIKELY to head lower.

 

 

Forget the Ukraine, there’s an all-out Global currency war being waged as we speak and yesterday the Dollar was the clear winner by losing 1% of its value in a single day. With over 250 days left until the end of the year, that extrapolates out to -150% by Christmas, which means you’d better start shopping now, before your next IPhone costs $1,000 (if you can afford the gas to get to the store, that is).  

 

 

A weak currency may not be good for those with JOBS, who get paid in Dollars, or those with small businesses, who buy more and more expensive raw materials and then have to accept Dollars from customers. But for our Corporate Citizens, it could not be better. They sell 50% of their goods overseas so a weak Dollar is great for sales and it lowers the relative wages they pay US workers and, of course, it makes Dollar debt so much cheaper to pay back.  

That is how the Interests of our Corporate Citizens and the Government align. Our Government also has a lot of debt to pay back, but they have to pay it back in Dollars and, the less the Dollar is worth, the cheaper it is to pay it back. USUALLY, when your currency is weak, interest rates rise to compensate – so there’s a check and balance to the system but the Fed has destroyed those checks and balances, allowing us to devalue our currency with NO CONSEQUENCES – EVER!!!

 

 

Well, maybe not “ever,” as other countries (cough, Japan! cough, cough) also have mountains of debt that they would like to print their way out of too. China wants a weak currency so they can sell their goods overseas and Germany wants a weak Euro for the same reason. So it’s a global race to the bottom and Corporations love it as it even boosts their earnings since they sell the same stuff now for $40 that they used to sell for $20 10 years ago. It makes every CEO look like a genius. He boosts the “earnings” of his company and justifies his bonus – which keeps him miles ahead of inflation and, after all, as long as the top 0.01% are winning – don’t we all win?

 

The chart above shows salaries, it doesn’t account for the 100% run in the stock market in the past 5 years that the top 0.01% were also well-positioned to take advantage of.

 

Where did all that money come from, you may wonder?  

 

Well, obviously the bottom 90% (100M families) contributed $3,500 and, though $3,500 doesn’t sound like a lot, when you take it from 100M people, it’s $350Bn a year! Since the top 0.01% are only 11,000 families, $350,000,000,000 is enough to give them each $32M a year – so think of the restraint they are showing by only taking $9.3M of it for themselves! 

The other 10,989,000 families in the top 10% shared the rest of the $350Bn; it’s enough for them to each get $31,000 but, of course, the top 0.1% (110,000 families) grabbed $635,000 for themselves and that added up to $70Bn and the next 440,000 families in the top 0.5% (not including those above) gave themselves $125,000 raises for another $55Bn, which left just $225Bn to go to the other 10.5M families in the top 10%, which worked out to just $21,500 in raises over 10 years for the top 10% – no wonder they want to steal more money from the bottom 90% – they barely got any in this round!  

What’s missing from this chart? Wealth creation. There simply wasn’t any! No new wealth was created at all outside of capital gains (which were a lot!) in America in the past 10 years. Money was taken from the wages of the bottom 90% and transferred to the top 10%, but mostly the top 0.01%.   

 

 

Imagine what it’s like to only earn $34,000 and, 10 years later, being paid $30,400 for the same job. That’s the income for the ENTIRE family, not per person. That’s how the bottom 90% of America is living and that is why we’re short XRT (see – it does relate to the markets), because most people simply have no disposable income.

That’s also why we short oil at $102.50 (there this morning) – because, no matter how rich the top 1% get, they can only fly one jet at a time and only use one limo at a time. So things like oil and gasoline, which must be consumed in mass quantities, are simply unaffordable over a certain price. This again is great for rich people as the lack of demand from poor people keeps prices low when they gas up the Range Rover.  

This is unacceptable, to reasonable people, and can’t last. It wouldn’t last if the Fed didn’t make it all possible by artificially manipulating the money supply and the interest rates to mask over what is becoming a plantation-style economy, where the great mass of workers barely make enough while the masters live in blissful luxury in the big house.  

For now, the Corporate Media keeps the masses in line but can we really expect another 10 years of this to continue without some blow-back?  

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