Written by Gary
The averages fell off the session highs as oil fell fractionally and the US dollar stabilized near session highs
Todays S&P 500 Chart
The Market in Perspective
| Here are the headlines moving the markets. | |
 | Eager to Opine on the Toughest Calls in Medical Ethics Arthur Caplan, who has built a career advising doctors on difficult moral issues, will help Johnson & Johnson decide which patients receive experimental drugs. |
| Wall Street rises on easing debt worries (Reuters) – U.S. stocks moved higher on Thursday afternoon, helped by a jump in technology stocks and a reversal in surging global interest rates. |
| “Market 1 – 0 Yellen” Bonds & Stocks Bid As Crude CrumblesOnly one clip seemed appropriate given the last two days… This seemed to sum things up nicely…
But this morning’s epic short squeeze provided the momentum for the rest of the move…
Gartman and Yellen were celebrating briefly this morning…then not so much
Cash indices managed briefly to get green *(Russell and Trannies only) for the week, but leaked lower into the close… |
| UAW wants new talks with Volkswagen to recognize union in Tennessee DETROIT (Reuters) – The United Auto Workers said on Thursday it wants to enter new talks with Volkswagen AG about recognizing the union as collective bargaining agent for workers at the German automaker’s plant in Chattanooga, Tennessee. |
| Contained? Dow “Range-Bound” Streak Reaches Longest EverAt 38 consecutive days, it is now the longest streak without the Dow hitting either a 1-month high or low in at least 100 years. That milestone alone would justify discussion, but as Dana Lyon notes, the current 1-month range in the Dow is a very tight 1.58% (the 17th narrowest 1-month range since 1990). Simply put, the bar for setting a 1-month high or low has been very low for the Dow, yet it has been unable to achieve one; but given the length and amount of the market compression, one might expect it to explode one way or another once the streak was broken As Dana Lyons details, On April 24, we posted what we thought (and hoped) would be our final post concerning the stock market’s lengthy trading range. In the post we noted that for only the 8th time in 100 years, the Dow Jones Industrial Average (DJIA) had made it to 30 days without hitting either a 1-month high or low. It was, in our view, a pretty remarkable stat. Little did we know, however, that 8 days later, the streak would still be alive. And at 38 consecutive days, it is now the longest such streak in at least 100 years. The only longer streak in history occurred in 1910 and lasted 45 days (although the daily data from that era is a little sketchy so it’s possible that our current streak is the longest ever.) That milestone alone would justify an update to the April 24 post. However, there is yet another angle to this streak that is pretty remarkable. The current 1-month range … |
| 98% Of Q1 Consumer Credit Was Used For Student And Car LoansBy now everyone realizes that Q1 will be the second consecutive first quarter to see a negative GDP print. Wall Street’s weathermen formerly known as “economists” have been quick to scapegoat harsh weather once again for this unprecedented “non-recessionary” contraction in the US economy, however what the actual reason for the drop is irrelevant for this specific post; what is relevant is that even in a quarter in which US GDP is set to decline consumer credit, according to the latest update from the Federal Reserve, increased by just over $45 billion. But how is it possible that with such a massive expansion in household credit there was no actual benefit to the underlying economy? Simple: 98% of the credit lent out in the first quarter, or $44.3 billion, went to student and car loans! The amount of credit that actually made it into the broader, consumer economy, i.e., credit card or revolving credit: a negative $600 million, despite a jump in revolving credit in March, when it rose by $4.4 billion to $889.4 billion.
So $889.4 billion in credit card debt: as a reminder this is the key credit amount that has to keep growing for consumers to telegraph optimism about their wages, jobs, and generally, the economy. The problem is that as of Q1, this amount was lower than both car debt, at $972.4 billion, and certainly student debt, which in Q1 rose by another $30 billion to a record $1.355 trillion! |
| Wall St. Wavers, a Day After a Loss Sentiment had been negative after the Federal Reserve chairwoman suggested that share prices were generally overvalued. |
| Facebook Study Disputes Theory of Political Polarization Among Users Almost 29 percent of the news stories displayed by Facebook’s News Feed present views that conflict with the user’s own ideology, the study found. |
| Blackstone Said to Raise $17 Billion for Buyout Fund The enthusiasm of investors for the new fund reflects the sense that private equity firms are poised to strike big deals — and mint money. |
| Turkey, Saudis Form Alliance To Topple Syria’s Assad As US Starts Training Syrian RebelsEver since the mysterious, unexpected bursting of ISIS on the global stage one year ago with much fanfare and even more carefully produced with just the right amount of lighting beheading video clip, we said from the very beginning that when stripped of its “made in Hollywood” YouTube clip veneer and the media’s clear agenda to cast the organization as a new, more evil, more aggressive al-Qaeda, the entire rehashed sequence of events in the middle east is about one thing: removing Syria’s Assad from power just so the energy infrastructure from Qatar and Saudi Arabia can traverse the territory and enter Europe, eliminating Russia’s energy dominance over the continent. Today we got the latest confirmation of this in an AP report according to which “Turkey and Saudi Arabia have converged on an aggressive new strategy to bring down Syrian President Bashar Assad.” Why take the unprecedented step of tipping their cards and revealing what the real motive behind all the constant commotion in the middle east is? Because “mutual frustration with what they consider American indecision has brought the two together in a strategic alliance that is driving recent rebel gains in northern Syria, and has helped strengthen a new coalition of anti-Assad insurgents, Turkish officials say.” According to the AP, this puts the US in a paradoxical position:
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| Greece defies euro zone on pension, labor reform ATHENS/BRUSSELS (Reuters) – Greece defied its international creditors on Thursday, refusing to cut pensions or ease layoffs to meet their demands, dimming prospects of progress next week toward securing desperately needed financial aid. |
| Dan Loeb Slams Buffett For Being Habitual HypocriteLast week, we highlighted the latest example of billionaire hypocrisy, as Bloomberg suggested that George Soros — who ostensibly believes higher taxes on the wealthy would be good for society and for the economy — may owe nearly $7 billion in taxes. Soros, Bloomberg said, has for years exploited a loophole that allows him to delay paying taxes on management fees which, when reinvested tax free, have helped his fund grow to six-and-a-half times what it would have grown to had taxes been paid on the fees when earned. On Wednesday, another billionaire was called out for being a hypocrite and this time it was a fellow billionaire doing the finger pointing. In an interview at the SkyBridge Alternatives Conference yesterday, Dan Loeb — who no one ever accused of mincing words — committed what to many hero worshippers will likely be seen as financial market heresy by accusing Omaha’s favorite octogenarian of habitual hypocrisy both in word and in deed. Here’s more from NY Times:
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| Chinese Company Moves To Replace 90% Of Its Workforce With RobotsSubmitted by Mike Krieger via Liberty Blitzkrieg blog, I’m not one of those people who thinks robots taking over menial labor from human employees is a bad thing. On the contrary, I think such a displacement could ultimately prove very positive for the species. Nevertheless, the short-term pain and suffering that this could cause for displaced workers and their families likely will have tremendous negative repercussions to the societies that are most affected in the near and intermediate-term. Since robots entering the workforce is probably one of the most significant economic trends in the decades ahead, we should all start thinking about how to deal with what will be a major adjustment for hundreds of millions, if not billions, of people. From the South China Morning Post:
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| France Went All Out for Nuclear Energy After World War II, France extended its proud history in nuclear science into a vigorous nuclear power industry. |
| French Nuclear Dynamo Stalls New plants are years behind schedule and way over budget. And problems at one site have raised doubts about whether they will be completed. |
| Goldman Sachs must face $120 million suit over mortgage securities: court (Reuters) – New York’s top state court on Thursday revived a bond insurer’s $120 million lawsuit claiming Goldman Sachs Group Inc lied about a pool of securities backed by subprime mortgages during the period leading up the financial crisis. |
| Not “Unequivocally Good” – Consumer Comfort In The South Slumps To Lowest Since 2014Americans in The South appear to be rushing through the 7 stages of ‘low-oil-price-grief’ rather rapidly. After a few months of disbelief and denial, it appears, judging by Bloomberg’s Consumer Comfort Index, that ‘Southerners’ have jumped right to anger and depression as sentiment tumbles to its lowest since Dec 2014. Along with a surge in job cuts in the energy sector, it appears “low” oil prices are not unequivocally good after all. Hope turns to despair…
This is the first 4-week consecutive drop in Consumer Comfort in a year…
So not unequivocally good after all? Charts: Bloomberg |
| Facebook Study Disputes Theory of Political Polarization Among Users Almost 29 percent of the news stories displayed by Facebook’s News Feed present views that conflict with the user’s own ideology, the study found. |
| Boutique Investment Bank Expands With Two Hires Dean Bradley Osborne has recruited tech deal makers Mathew Hein and David DeRuff as partners and will change its name to DBO Partners. |
| Greece Will Make Next Debt Payment, Varoufakis Says The finance minister says Athens is getting closer to a deal with its international creditors that would unlock 7.2 billion euros in bailout funds. |
| Contributing Op-Ed Writer: How to Solve the E.R. Problem Expanding insurance coverage is only the first step. |
| Prepare for ‘triple taper tantrum’ in 2016, says Morgan Stanley LONDON (Reuters) – Investors spooked by the “taper tantrum” of 2013, when global markets took fright at the U.S. Federal Reserve’s first hint that it might taper its monetary expansion policy, take note: 2016 could be the year of the “triple taper tantrum”. |
| N.S.A. Phone Data Collection Is Illegal, Appeals Court Rules The judges ruled that the USA Patriot Act cannot be legitimately interpreted to permit the systematic gathering of domestic calling records. |
| Gross Bets Against Gross, LosesOn April 21, Bill Gross subtly suggested that German Bunds may be overbought:
Around a week later, Bunds begin to sell-off hard and as April turned to May, a “cascade of small events created a large splash in a structurally ever-thinner mkt” (to quote HSBC), triggering a veritable rout that sent yields on the 10-year from around 10bps when Gross made his short call to a high of more than 70bps during Thursday’s session. The sell-off has been variously attributed to factors ranging from profit-taking, to scarce liquidity, to the frontrunning of what is expected to be a positive month for EGB supply. Given the above, one might have expected that Gross, assuming he followed his own advice, has fared well over the last several weeks. Unfortunately, it appears he may have bet that Bunds would remain range-bound over the short-term (perhaps believing that Mario Draghi’s bazooka would be enough to prevent a dramatic sell-off) because as Bloomberg reports, by the end of March, Gross had sold puts on Bund futures in an amount equal to nearly 5% of his fund’s net asset value. Those puts have risen by as much as 11,000% in the case of one contract, and 6,000% in the case of another. … |
| Central Planning and Crony Capitalism Have Bankrupted the Financial SystemFor over 30 years, sovereign nations, particularly in the West have been buying votes by offering social payments in the form of welfare, Medicare, social security, and the like. The ridiculousness of this should not be lost on anyone. Politicians, in order to be elected, promise to allocate taxpayer funds on social programs that will benefit said taxpayers down the road (we’re simply talking about social spending, not infrastructure or other costs. The concept that taxpayers might simply just keep the money to begin with never enters the equation. And because everyone believes that they are somehow spending someone else’s money, they play along. When you believe that you are spending someone else’s money, it’s very easy to write a blank check, which is precisely what Western nations have been doing for years, promising everyone a safe and secure retirement without ever bothering to see where the money would come from. When actual bills came due to fund this stuff, Governments quickly discovered that current tax revenues couldn’t cover it… so they issued sovereign debt to make up the difference. And so the bond bubble was created. The large banks, that have a monopoly on managing sovereign debt auctions, were only too happy to play along with this. The reasons are as follows: 1) They can use these alleged “risk-free” assets as collateral to backstop tens of trillions worth of derivatives trades. A $1 million investment in your typical US Treasury can backstop over $15 million worth of derivatives if not more. The profits from the derivatives markets remains a primary source of revenue for the banks. |
| Blackstone raises $17 billion for global buyout fund: sources (Reuters) – Blackstone Group LP has secured $17 billion from investors for its latest global private equity fund in just seven months, the biggest so-called first close of a buyout fund ever, according to people familiar with the matter. |
| 3 Things: Trade, Confidence & MomentumSubmitted by Lance Roberts via STA Wealth Management, The Warning Of Imports/Exports At the beginning of 2015, I noted the divergence between the ISM manufacturing survey and the decline in both imports and exports. To wit:
The importance of the chart above was the divergence between the “sentiment based” ISM survey’s and actual economic data. The suggestionthen was that the surveys were going to play catch up to the actual economic activity and not vice-versa. I have updated the chart above to show you that has been exactly the case despite much mainstream commentary to the contrary. |
Summary of Economic Releases this Week
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