30Mar2015 Market Update: U.S. Dollar Rising, Oil Lower And Trading Sideways Along With Equities On Lower Volume

Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in Brazil leading the region. The Bovespa is up 1.82% while U.S.’s S&P 500 is up 1.00% and Mexico’s IPC is up 0.84%.

U.S. Consumer Spending Tepid; Savings at Two-Year High

U.S. consumer spending barely rose in February as households used the windfall from lower gasoline prices to boost savings to the highest level in more than two years, the latest sign that the economy hit a soft patch in the first quarter.

They Are “Undermining People’s Trust In Their Money”

Submitted by James H. Kunstler via Kunstler.com,

It’s not what most people think: a return to some hypothetical “normality,” with the ghost of Ronnie Reagan beaming down like a sun-god under his lopsided pompadour, and all the happy self-driving GM cars toodling back and forth from WalMart-to-home loaded to the scuppers with new electric pop-tart warmers and 3-D underwear printers. (Or drone deliveries of same from Amazon.com.)

I mean, surely the thinking folk out there must be asking themselves: what is the way out of this Federal Reserve three-card-monte, one-percenter-stuffing, so-called “economy,” and what is the destination of this society when that mendacious model for living fails?

I digress for a moment: there was a chap named Richard Duncan on the pod-waves this weekend (FSN Network) putting out the charming idea that quantitative easing (QE — governments “printing” money to buy their own bonds) had the effect of “cancelling debt” and that it could continue for decades to come. I don’t doubt that there are Federal Reserve officers who believe this. The part they leave out — and Mr. Duncan also left it out until pressed — is that there are consequences. Consult the operating manual of the universe, and you will find that there really is no free lunch or get-out-of-jail card.

The truth is, when you rig a money system with price interventions, distortions, and perversions, they will eventually express themselves in ways destructive to the system. In the present case of world-wide QE and central bank monkey business, these rackets are expressing themselves, finally, in wobbling currencies. In many nations, people are deeply unsure of what their money is worth, and how much it might be worth a month from now. This includes the …

With blog, Bernanke has new platform to make old argument

(Reuters) – Ben Bernanke launched a blog on Monday, giving the former Federal Reserve chairman a new pulpit from which to make an old argument: why interest rates need to be so low.

SEC accuses financier Lynn Tilton of defrauding investors

WASHINGTON (Reuters) – U.S. regulators took aim at the flamboyant financier Lynn Tilton and her advisory business on Monday, saying she breached her fiduciary duty to investors by hiding the poor performance of loans underlying three collateralized loan obligations.

March 2015 Texas Manufacturing Survey Rate of Growth Contracts

Of the five Federal Reserve districts which have released their March manufacturing surveys – two forecast weak growth and three are in contraction. A complete summary follows.

Dallas Fed Collapses At Fastest Pace Since Lehman, Lowest Since June 2011

Dallas Fed’s Richard Fisher had his credibility (whatever is left) crushed for the 4th month in a row. After explaining carefully to no lessor status quo glad hand than Steve Liesman that the Texas economy will see a net positive from low oil prices, Dallas Fed data has utterly collapsed – at its fastest pace since Lehman. Printing a stunning -17.5 (over twice as bad as expected -8.5), this is the 4th miss in a row (and increasingly worse misses). The Dallas Fed was last lower than this in Jun 2011. Across the board, the components were an utter disaster… employees contracted, prices paid and recoeved tumbled, production plunged, and new orders collapsed. More worryingly, furture capex tumbled once again.

Collapsing-er…

A reminder… low oil pries are net positive to the Texas economy… Liesman and Fisher….

* * *

Who could have seen this coming?

Charts: Bloomberg

Lynn Tilton Charged By SEC For CLO Fraud, As Warned Here Nearly Two Years Ago

Back in September 2013 we wrote “Coming Soon To A Theater Near You: MBIA’s $1 Billion World War Z” in which we explained why MBIA will soon have a substantial problem (amounting to just about around $600 million) with several CLOs which we dubbed “Zombie CLOs” or as they were actually known, Zohar, on which it had written insurance, and which would become evident sooner or later once someone took a long, hard look at the collateral manager of the CLOs, namely Lynn Tilton’s Patriarch Partners.

First, a little background on the Zohar CLO from our September 2013 article:

MBIA’s most recent issue is not new per se, as it dates back to 2003/2005 – as far as we can tell, however – the water looks like it is just starting to boil over and MBIA does not seem to have reserved for what appears to be a rather meaningful problem. According to preliminary analyses, it does not appear that MBIA has ever really addressed this particular $1 billion of Zombie CLO insurance on their books, which looks to be coming due in short order (unlike their well-followed RMBS issues and long-dated future CMBS losses).

These freshly-surfacing problems stem from a particular pair of Zombie CLO’s — Zombie-I and Zombie-II (along with Zombie-III, illiquid/black box middle-market CLO’s). While information is (intentionally?) difficult to gather, we have heard that MBIA would be lucky to recover much more than $400 million from the underlying insured Zombie assets over the next three years, which would leave them with a nea …

UnitedHealth Group to Buy Catamaran in $12.8 Billion Pharmacy Benefits Deal

The companies are combining forces in an effort to negotiate better deals with drug makers, which could lead to lower drug prices for consumers.

Ben Bernanke Pens First Blog Post, Defends Fed, Says He “Was Concerned About Seniors”

It would appear the $250,000/hour speaking opportunities for Ben Bernanke have ground to a halt, and as such, the former Chairsatan has decided to dispense his wisdom for free to anyone who cares, by becoming a blogger at Brookings. And, not surprisingly, in his first post, the person who less than a decade ago said the following, in exactly those words…

Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.

… is out and about defending the Fed and central banks from pushing rates so low, in Europe you are now paid to borrow money, and are charged to save.

So, to those who are too lazy to click on the following link to the Brookings blog where Bernanke is now blogger emeritus, here is the punchline.

In what can only be described as a litany of defensive insecurity, Bernanke launches a full-on assault on all those who accuse the Fed of crushing the economy, which now includes not only tin-foil fringe blogs of the Austrian economics persuasion, but such “very serious people” as Guggenheim’s CIO Scott Minerd who over the weekend said “The long-term consequences of global QE are likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity” and rhetorically asks “Why are interest rates so low? Will they remain low? What are the implications for …

February 2015 Pending Home Sales Index Sees a Major Improvement

Written by Steven Hansen

The National Association of Realtors (NAR) seasonally adjusted pending home sales index jumped and is now deeply into expansion. Our analysis of pending home sales agrees – and we are projecting a relatively good month for existing home sales in March 2015.

Earnings Have Peaked and a Dropping For the First Time since 2008

Earnings may very well have peaked.

MarketWatch notes that adjusted profits (even after all of the accounting gimmicks), FELL last year. This is the first time this has happened since we entered the alleged “recovery.”

For the full year, adjusted profits slipped 0.8% to $2.09 trillion. The last time profits fell was in 2008 when a recession was in full swing. Banks and other finance companies showed lower earnings, while nonfinancial firms modestly increased profits. Profit figures are adjusted for depreciation and the value of inventories.

Source: Marketwatch

Bear in mind… earnings are overstated. Indeed, a study performed by Duke University found that roughly 20% of publicly traded firms manipulate their earnings to make them appear better than they really are. The folks who were surveyed for this study about this practice were the actual CFOs at the firms themselves.

These practices have only worsened since the “crisis ended.” Corporations have been reducing loan loss reserves, buyback shares via debt, and axing jobs en masse in efforts to juice earnings as high as possible.

This has resulted in the HIGHEST corporate profit/ GDP ratio since the Feds began tracking this metric in the 1940s:

Put simply, corporate profits are at a record high relative to the economy… and they just began to roll over.

Take a look at the below chart showing current stock levels and changes …

Wall Street higher as biotechs rally on M&A deals

NEW YORK (Reuters) – U.S. stocks rallied more than 1 percent on Monday, with biotech stocks among the most active names amid a number of major deals in the space.

Greek Reforms List Proposes Bad Bank, Lowers Asset Sales Target

Greece’s government has proposed setting up a bad bank to deal with the rising level of bad loans, a finance ministry official said on Monday.

Well: GNC to Strengthen Supplement Quality Controls

The action comes after the New York State attorney general’s office accused GNC and three other major retailers of selling herbal supplements that were fraudulent or contaminated with unlisted ingredients.

Despite Abysmal Weather, Feb Pending Homes Sales Surge By Most In 9 Months

Putting the last nail in the coffin of “the weather is to blame” meme, pending home sales surged in the abysmal weather conditions of February by the most since May 2013. Up 12% YoY, any rational economic being would be hard pressed to explain how the weather is impacting the economy when brave home-buying souls ventured out in such masses to buy… as The Midwest region saw the biggest surge in sales… up a stunning 11.6% MoM.

NAR has rotated rapidly away from the weather meme…

Last week’s existing home sales miss brought us this excuse…

NAR’s Larry Yun: “Severe below-freezing winter weather likely had an impact on sales as more moderate activity was observed in the Northeast and Midwest compared to other regions of the country.”

And now…

NAR’s Larry Yun: “Pending sales showed solid gains last month, driven by a steadily-improving labor market, mortgage rates hovering around 4 percent and the likelihood of more renters looking to hedge against increasing rents,”

Charts: Bloomberg

Pending home sales give hopeful sign for U.S. housing market

WASHINGTON (Reuters) – Contracts to purchase previously owned U.S. homes rose to their highest level in 1-1/2 years in February, a sign the lackluster recovery in the U.S. housing market could be accelerating.

Wall St. Surges in Early Trading

Strong economic reports in Europe bolstered markets there, and energy companies were doing well in the United States.

Oil eases as big powers negotiate with Iran

LONDON (Reuters) – Oil prices slipped on Monday as officials from Iran and six world powers discussed a possible deal over Tehran’s nuclear programme that could bring an end to sanctions and allow an increase in Iranian oil exports.

Market Opens – Panic Buying Ensues

While the narrative claims China QE rumors, the chart shows that when the casinoes open, the algos gamblers rush in…

If Open, Then Buy…

Ignore Bonds…

Charts: Bloomberg

Itineraries: In Atlanta, a Quest to Keep Its Airport the World’s Busiest

The city’s officials believe its bustling hub has been crucial to local economic growth and have intensified efforts to attract businesses.

Germanwings Co-Pilot Head Been Treated For “Suicidal Tendencies” In The Past

The horrible events of last week just go from bad to worse, if that is possible, as investigators dig further into the disturbed past of murderous co-pilot Andreas Lubitz and find more problems, as Reuters reports:

GERMANWINGS CO-PILOT HAD BEEN IN TREATMENT FOR SUICIDAL TENDENCIES IN THE PAST

Reports have suggested he was troubled by his sexuality and also seeking treatment for vision problems. While careful to note that recent treatments suggested no suicidal tendency, this merely raises questions about historical screening and ongoing monitoring among a group of people who are ultimately responsible for the lives of many others… especially after finding “a small mountain of anti-depressants” in his apartment.

Headlines (via Bloomberg)

*PROSECUTORS: TREATMENT OF CO-PILOT INCLUDED SUICIDAL TENDENCIES

*PROSECUTORS: SUICIDAL TENDENCIES TREATMENT WAS SOME YEARS AGO

*PROSECUTORS: RECENT TREATMENT DIDN’T INDICATE SUICIDAL TENDENCY

As IBTimes reports,

The 27-year-old co-pilot Andreas Lubitz believed to have deliberately crashed Germanwings Flight 4U 9525 plane, killing 149 passengers, trawled gay porn websites and sites relating to suicide, investigators have revealed.

He also feared losing his eyesight and was suffering from depression.

A police source in Dusseldorf revealed: “We have a team disassembling his computer, and that of his girlfriend, because the information that we received was that he trawled the dark side of the web vi …

‘Peak Gold’ in 2015? – Goldman Sachs Research Warns of Peak Gold Production

“Peak Gold’ in 2015? – Goldman Sachs Research Warns of Peak Gold Production

Goldman warns that peak gold may happen in 2015

New report says there are only “20 years of known mineable reserves of gold”

Discoveries of new sources of gold production peaked in 1995 despite major bull market

Production lags new finds in 20 year cycle – Indicates 2015 may be year of peak gold production

Production in major gold mining countries has dropped in recent years

This will provide support and should lead to higher prices in long term

For many years, we have written about ‘peak gold’ and the ramifications of the underappreciated peak gold phenomenon for the gold market.

Major gold mining countries have seen declines in their gold production in recent years despite the strong bull market of the last decade.

On Friday, Zero Hedge highlighted a report from Eugene King of Goldman Sachs which supports our assertion. According to King, there are “only 20 years of known mineable reserves of gold and diamonds.”

$20 Oil Looms As Iran-Nuclear Deal Nears Deadline

As the deadline for Iran nuclear talks looms, the possibility of a deal which in some way lifts crude export sanctions is starting to be realized. As we warned 2 weeks ago, despite all the rhetoric, a confluence of political factors makes a deal highly likely at this point; and as The Telegraph reports, Iran is a sleeping oil giant holding 9% of the world’s proven oil reserves and with an estimated 2m barrels per day of excess supply already sloshing around international markets, any significant increase in Iranian output could easily trigger a further rout in prices. While OPEC may well clamp down on this in June, as The Telegraph concludes, by then a barrel of oil may already be selling for $20.

Crude rejects Yemen premium and starts pricing in the supply from an Iran deal…

As we explained previously, a confluence of political factors makes a deal highly likely at this point however.

Firstly, the USA has a stated policy of pivoting from the Middle East and …

UnitedHealth to buy pharmacy benefit firm Catamaran for $12.8 billion

(Reuters) – Health insurer UnitedHealth Group Inc agreed to buy Catamaran Corp in a deal worth about $12.8 billion to boost its pharmacy benefit business as it competes with bigger rivals such as Express Scripts Holdings Co.

U.S. consumer spending tepid; savings at two-year high

WASHINGTON (Reuters) – U.S. consumer spending barely rose in February as households boosted savings to their highest level in more than two years, the latest sign that the economy hit a soft patch in the first quarter.