Tag: finance

It would appear that there is even a limit for the Supreme Court as to what they will allow President Obama to get away with:

• *OBAMA’S RECESS APPOINTMENTS QUESTIONED BY U.S. SUPREME COURT

As Bloomberg reports, justices across the ideological spectrum questioned whether President Barack Obama complied with the Constitution when he appointed three members of the National Labor Relations Board during a Senate break.

 

Via Bloomberg,

U.S. Supreme Court justices suggested they may curb the president’s power to make temporary appointments without Senate approval, as the court took up a constitutional standoff between the White House and congressional Republicans.

 

Hearing arguments today in Washington, justices across the ideological spectrum questioned whether President Barack Obama complied with the Constitution when he appointed three members of the National Labor Relations Board during a Senate break.

 

…

 

A company facing NLRB sanctions, backed by Senate Republicans, says the chamber wasn’t in a recess when Obama made the appointments. Several justices today suggested they accepted that characterization.

 

…

 

“It really is the Senate’s job” to determine whether the chamber is in recess, said Justice Elena Kagan, one of Obama’s two appointees to the high court.

 

…

 

The case also may affect 1,000 decisions and orders issued by the NLRB since January 2012, when Obama made the appointments.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/v0Yw-q-KqTE/story01.htm Tyler Durden

The Dow is -1.5% in 2014 now – at the lows of the year

 

It was all looking so good. NASDAQ was green for the year (so were Trannies), stocks in general were rising and everyone on TV could proclaim how well the 'market' was handling the taper. Then Dennis Lockhart spoke…

• *LOCKHART SEES `GROWING CONFIDENCE' IN 2014 OUTLOOK
• *LOCKHART SAYS U.S. ECONOMY ON `MORE SOLID' FOOTING
• *LOCKHART BACKS $10 BLN TAPER AS CONFIDENCE IN 2014 GROWS

That's great news right? Wrong? Stocks didn't like it… and NASDAQ rapidly gave up its gains… Fun-durr-mentals remain in control eh? It shouldn't be a big surprise given what Goldman Sachs warned about over the weekend!

The drop actually began at around 1219ET, before Lockahrt's headlines hit Bloomberg at around 1225ET

 

 

as perhaps it was merely a coincidence that he was hawkishly positive and stocks dumped back to JPY carry levels…

 

Which slammed the NASDAQ off its YTD green levels…

 

Late last night the music may have just skipped a major beat after Goldman released a Friday evening note that is perhaps the most bearish thing to come out of Goldman's chief strategist David Kostin in over a year, (and who incidentally just repeated what we said most recently a week ago in "Stocks Are More Expensive Now Than At Their 2007 Peak"). To wit:

S&P 500 valuation is lofty by almost any measure, both for the aggregate market (15.9x) as well as the median stock (16.8x). We believe S&P 500 trades close to fair value and the forward path will depend on profit growth rather than P/E expansion. However, many clients argue that the P/E multiple will continue to rise in 2014 with 17x or 18x often cited, with some investors arguing for 20x. We explore valuation using various approaches. We conclude that further P/E expansion will be difficult to achieve. Of course, it is possible. It is just not probable based on history. 

 

The current valuation of the S&P 500 is lofty by almost any measure, both for the aggregate market as well as the median stock: (1) The P/E ratio; (2) the current P/E expansion cycle; (3) EV/Sales; (4) EV/EBITDA; (5) Free Cash Flow yield; (6) Price/Book as well as the ROE and P/B relationship; and compared with the levels of (6) inflation; (7) nominal 10-year Treasury yields; and (8) real interest rates. Furthermore, the cyclically-adjusted P/E ratio suggests the S&P 500 is currently 30% overvalued in terms of (9) Operating EPS and (10) about 45% overvalued using As Reported earnings.

Cue David Tepper to bring out even bigger greater fools who do believe in his 20x PE multiple "thesis." Cause if 20x works, why not 40x, or 60x, or moar?

* * *

Kostin's full "market is now overvalued" note here

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4eOBOpM1nGw/story01.htm Tyler Durden

The Dow is -1.5% in 2014 now – at the lows of the year

 

It was all looking so good. NASDAQ was green for the year (so were Trannies), stocks in general were rising and everyone on TV could proclaim how well the 'market' was handling the taper. Then Dennis Lockhart spoke…

• *LOCKHART SEES `GROWING CONFIDENCE' IN 2014 OUTLOOK
• *LOCKHART SAYS U.S. ECONOMY ON `MORE SOLID' FOOTING
• *LOCKHART BACKS $10 BLN TAPER AS CONFIDENCE IN 2014 GROWS

That's great news right? Wrong? Stocks didn't like it… and NASDAQ rapidly gave up its gains… Fun-durr-mentals remain in control eh? It shouldn't be a big surprise given what Goldman Sachs warned about over the weekend!

The drop actually began at around 1219ET, before Lockahrt's headlines hit Bloomberg at around 1225ET

 

 

as perhaps it was merely a coincidence that he was hawkishly positive and stocks dumped back to JPY carry levels…

 

Which slammed the NASDAQ off its YTD green levels…

 

Late last night the music may have just skipped a major beat after Goldman released a Friday evening note that is perhaps the most bearish thing to come out of Goldman's chief strategist David Kostin in over a year, (and who incidentally just repeated what we said most recently a week ago in "Stocks Are More Expensive Now Than At Their 2007 Peak"). To wit:

S&P 500 valuation is lofty by almost any measure, both for the aggregate market (15.9x) as well as the median stock (16.8x). We believe S&P 500 trades close to fair value and the forward path will depend on profit growth rather than P/E expansion. However, many clients argue that the P/E multiple will continue to rise in 2014 with 17x or 18x often cited, with some investors arguing for 20x. We explore valuation using various approaches. We conclude that further P/E expansion will be difficult to achieve. Of course, it is possible. It is just not probable based on history. 

 

The current valuation of the S&P 500 is lofty by almost any measure, both for the aggregate market as well as the median stock: (1) The P/E ratio; (2) the current P/E expansion cycle; (3) EV/Sales; (4) EV/EBITDA; (5) Free Cash Flow yield; (6) Price/Book as well as the ROE and P/B relationship; and compared with the levels of (6) inflation; (7) nominal 10-year Treasury yields; and (8) real interest rates. Furthermore, the cyclically-adjusted P/E ratio suggests the S&P 500 is currently 30% overvalued in terms of (9) Operating EPS and (10) about 45% overvalued using As Reported earnings.

Cue David Tepper to bring out even bigger greater fools who do believe in his 20x PE multiple "thesis." Cause if 20x works, why not 40x, or 60x, or moar?

* * *

Kostin's full "market is now overvalued" note here

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4eOBOpM1nGw/story01.htm Tyler Durden

USDJPY’s medium-term trend has turned from bullish to bearish. BofAML’s Macneil Curry warns that the break of the old May highs suggest weakness should extend further with the 200-day moving avarege at 99.71 as a minimum downside target. Given the JPY’s weighting in the USD Index basket, this does not have specific bearish USD implications but does have significant effect on equities as the JPY carry trade comes under pressure.

 

Via BofAML’s Macneil Curry,

$/¥ turns trend, but the US $, in general, is still bullish

$/¥ has turned medium term trend. The break of the old May highs at 103.74 has completed a 3 week Head and Shoulders Top, targeting 102.07/102.30, but weakness should extend much further. The completed 5 wave advance from the Feb’12 lows says we should expect minimum downside targets to the 200d at 99.71, and eventually the Jun’13/Apr’13 lows at 93.79/92.57 before greater signs of stabilization and a resumption of the LONG TERM uptrend towards 124/147 (to be fine-tuned).

 

However, the $/¥ story does not have broader implications for the US $.

Treasuries roll bullish, but how far can they go?

US Treasuries continue to rally following Friday’s bullish reversals across the curve. In the very near term, 10yr yields may hold 2.827%/2.823% area resistance, but as long as 2.935% support remains intact, the risks remain to the downside in yield. KEY RESISTANCE IS SEEN AT 2.792%.  

 

Through here says that we have undergone a medium term bullish turn in trend, exposing the larger, multi-month range lows between 2.544%/2.468%.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/gSb0YqLLKMs/story01.htm Tyler Durden

Just when everyone thought the infamous polar vortex is gone (if not quite forgotten, having dipped the temperatures in some part of the US to sub-Martian levels), it’s baaaack. Sky News reports that America is set to be hit by another blast from the polar vortex although this time Niagara falls may not freeze, as temperatures are likely to be higher than last week’s extreme conditions. “The polar plunge is expected to move south from Canada, bringing colder air and sub-zero temperatures to the US this week. Forecasters say it will sweep over the lower Mississippi Valley and Midwest on Tuesday and Wednesday, and then hit the East on Thursday. The main thrust of the cold air will follow up a couple of days later.”

More from Sky:

“Following the retreat of Arctic air this weekend, waves of progressively colder air will move southward over Canada this week,” said Paul Pastelok, AccuWeather.com’s lead long-range forecaster. “We will likely see a piece of the polar vortex break off and set up just north of the Great Lakes spanning January 16 to 20.

 

“This next main arctic blast will not rival, nor will be as extensive as the event last week.”

 

Many areas are still recovering from last week’s polar vortex, which saw the mercury plunge to -12C (11F) in New York City and -24C in Chicago.

 

A Coast Guard cutter was brought in to keep shipping lanes open, but the ice was too thick to break in places.

 

Residents have flocked to the river banks to take pictures of the polar conditions.

 

Rick Wilson, from Yardley, Pennsylvania, told an ABC TV station: “Incredible. I came down here just to take pictures of this. My grandchildren would not believe this. This looks like something you’d find in Antarctica.”

 

Sky News weather producer Jo Robinson said: “After a milder spell, plunges of cold air are expected later in the week. “The first is expected across parts of Canada, the Midwest and eastern parts of the US over the next few days. “More significant cold air will affect those areas by the weekend, but thankfully it doesn’t look to be as cold as last week.”

Of course, what is bad news for anyone who needs to buy heating at surge pricing, is great news for apologists of bad economic data, because don’t look now, but January employment numbers just became “meaningless” and if the BLS issues another disappointing jobs report on the first Friday of February, it will be the weather’s fault. And, “logically”, if the report is great, it will be entirely due to the recovery.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XmOneksue30/story01.htm Tyler Durden

We noted Friday that the much-heralded Baltic Dry Index has seen the worst start to the year in over 30 years. Today it got worse. At 1,395, the the Baltic Dry index, which reflects the daily charter rate for vessels carrying cargoes such as iron ore, coal and grain, is now down 18% in the last 2 days alone (biggest drop in 6 years), back at 4-month lows. The shipping index has utterly collapsed over 40% in the last 2 weeks. We are sure this is just a storm in a teacup and that all the hopes and prayers of a global manufacturing renaissance will come true. Cue, “this is not a demand issue, it’s an over-capacity issue” excuses in 3…2…1… now where would the container ships get their idea to increase capacity? (hint: central planner-based mal-investment)

 

 

Of course, we are sure the ‘lead’ that the Baltic Dry seems to have over global macro will be quickly ignored…

 

On potential driver of the price plunge is Colombia’s tougher stance on coal exports (via The FT):

The Baltic Dry index is followed closely as a barometer of global trade but Friday’s plunge came in the wake of new environmental rules on ship loading in Colombia, the world’s fourth-largest supplier of seaborne thermal coal.

 

On Wednesday, US miner Drummond halted loading of coal at its port in the country after it failed to comply with the rules. Colombian National Resources, a miner owner by Goldman Sachs, is also reported to have stopped exports because it cannot comply with the new regulations.

 

Colombia, which exports almost 70 per cent of its coal to Europe, has been working on tightening its environmental regulations and last year fined Drummond, the country’s second-biggest coal miner, for dumping material into the sea while rescuing a sinking barge.

 

The new rules stipulate that coal exporters load ships using conveyor belts instead of by barge and crane. Drummond will not be ready to comply with the new rules until March.

 

However, over-stocking remains the major issue (which hints at Q3/4’s surprise inventory builds and macro surprise) is anything but sustainable:

“The physical steel product prices, along with the rebar futures, in China have been falling continuously since mid of December, thanks to the sluggish downstream demand in winter period and the high financing cost,” Mr Guo said.

 

“More importantly, our figures show that the current iron ore stocks at major mills have been available for 21.5 days of consumption, which is the highest level in two years. All of these result in no incentive from the mills to maintain their purchasing appetite as in the fourth quarter of last year,” he added.

Chart: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/2_7yKuunfQA/story01.htm Tyler Durden

Following this morning’s smackdown, it appears low prices encouraged demand and in the last few minutes, gold and silver turned green for the day and surged on heavy futures volume back above $1250 and $20.25 respectively.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/2NGhq4yM6Bk/story01.htm Tyler Durden

By now the widely accepted groupthink on the collapsing labor force participation rate, which as we noted last Friday, cratered to a fresh 35 year low of 62.8% which was the main reason for the collapse in the unemployment rate to 6.7% from 7.3% two months ago, is that it was perfectly expected and is largely due to demographics. Sadly this is just another example of goalseeking a real-time variable to “fit” with a narrative of a recovery when in reality there is no recovery for the record 91.8 million Americans who have given up on work entirely and are now out of the labor force.  All of this is well-known. What may not be as well known is that every two years the BLS releases medium-term (10-year) projections for the participation rate. The projections include the demographic composition of the population and the LFP rates of different  demographic groups, among other statistics. And it is here that we see just how “made up” the narrative surrounding the demographic mea culpa truly is.

Presenting exhibit A: “Labor force projections to 2012: the graying of the U.S. workforce“, released by BLS’ Mitra Toossi in February 2004. Jumping to the punchline, here is what the BLS expected a decade ago:

• Total Civilian Labor Force forecast in 2012: 162,269
• Total civilian non-institutional population: 241,604

Or, a predicted labor force participation rate of 67.2%, or notably higher than the 66.0% as of the report’s publication in February 2004.

Where are we now?

• Total Civilian Labor Force at December 2012: 155,485, just under 7 million less than was expected (and this with the so-called recovery)
• Total Civilian non-institutional population at December 2012: 244,350, or 3 million more than expected.

Net: a 10 million worker delta! Does this mean that, gasp, America’s demographic crunch and “Baby Boomers are retiring” meme were unknown just ten short years ago? Apparently yes. Because somehow the 67.2% expected LFP at the end of 2012 ended up being 63.6% and sliding. And the punchline – if one were to use the expected 67.2% LFP rate, today’s unemployment rate would be higher than 12%!

Because here is what happened next in following BLS labor force participation forecasts:

In a nutshell: lower, lower, lower as the LFP entirely not in line with forecasts, cratered. But hey, what they know now, namely that Americans can’t wait to retire because they have so many 0% yielding savings, they didn’t know back then.

And there you have it: when it comes to the Labor Force Participation rate, one can best summarize it by the old maxim: “We’ll just make it up as we go along.”

Source, ironically, St. Louis Fed: A Closer Look at the Decline in the Labor Force Participation Rate

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/s_HPmkFDTbk/story01.htm Tyler Durden

By now the widely accepted groupthink on the collapsing labor force participation rate, which as we noted last Friday, cratered to a fresh 35 year low of 62.8% which was the main reason for the collapse in the unemployment rate to 6.7% from 7.3% two months ago, is that it was perfectly expected and is largely due to demographics. Sadly this is just another example of goalseeking a real-time variable to “fit” with a narrative of a recovery when in reality there is no recovery for the record 91.8 million Americans who have given up on work entirely and are now out of the labor force.  All of this is well-known. What may not be as well known is that every two years the BLS releases medium-term (10-year) projections for the participation rate. The projections include the demographic composition of the population and the LFP rates of different  demographic groups, among other statistics. And it is here that we see just how “made up” the narrative surrounding the demographic mea culpa truly is.

Presenting exhibit A: “Labor force projections to 2012: the graying of the U.S. workforce“, released by BLS’ Mitra Toossi in February 2004. Jumping to the punchline, here is what the BLS expected a decade ago:

• Total Civilian Labor Force forecast in 2012: 162,269
• Total civilian non-institutional population: 241,604

Or, a predicted labor force participation rate of 67.2%, or notably higher than the 66.0% as of the report’s publication in February 2004.

Where are we now?

• Total Civilian Labor Force at December 2012: 155,485, just under 7 million less than was expected (and this with the so-called recovery)
• Total Civilian non-institutional population at December 2012: 244,350, or 3 million more than expected.

Net: a 10 million worker delta! Does this mean that, gasp, America’s demographic crunch and “Baby Boomers are retiring” meme were unknown just ten short years ago? Apparently yes. Because somehow the 67.2% expected LFP at the end of 2012 ended up being 63.6% and sliding. And the punchline – if one were to use the expected 67.2% LFP rate, today’s unemployment rate would be higher than 12%!

Because here is what happened next in following BLS labor force participation forecasts:

In a nutshell: lower, lower, lower as the LFP entirely not in line with forecasts, cratered. But hey, what they know now, namely that Americans can’t wait to retire because they have so many 0% yielding savings, they didn’t know back then.

And there you have it: when it comes to the Labor Force Participation rate, one can best summarize it by the old maxim: “We’ll just make it up as we go along.”

Source, ironically, St. Louis Fed: A Closer Look at the Decline in the Labor Force Participation Rate

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/s_HPmkFDTbk/story01.htm Tyler Durden