“Bill Gross joins the chorus of people who are saying today that without more help from the central banks, markets are in big trouble.
Of course, Bill Gross has been betting heavily on more QE, so he’s also talking his book here.
In fact yesterday, his PIMCO Total Return Fund fell 0.45% on hints that more QE would not be in the offing. He wants the juice as much as anyone.”
Comments »-CALLS- OPTION EXP.DATE STRIKE PRC. VOLUME LAST S/PRC. NET CHANGE AAPL 4/21/12 630.0000 227 11.7100 dn 3.3800 BAC 4/21/12 10.0000 226 0.1300 dn 0.0600 BAC 4/21/12 9.0000 212 0.5500 dn 0.1100 AAPL 4/21/12 650.0000 212 5.3000 dn 1.9500 AAPL 5/19/12 600.0000 199 44.5000 dn 2.9500 SBUX 4/21/12 57.5000 168 1.0900 up 0.3600 AAPL 4/5/12 630.0000 151 2.2000 dn 2.8000 JPM 4/21/12 48.0000 134 0.1500 dn 0.0900 RIMM 4/5/12 13.0000 125 0.3200 up 0.0200 AMZN 4/5/12 205.0000 124 0.1500 dn 0.3300 -PUTS- OPTION EXP.DATE STRIKE PRC. VOLUME LAST S/PRC. NET CHANGE BAC 4/5/12 9.0000 361 0.0300 up 0.0000 BAC 4/21/12 9.0000 211 0.2400 up 0.0500 GLD 4/21/12 156.0000 183 1.5400 up 0.6400 F 6/16/12 10.0000 110 0.0800 up 0.0200 AAPL 4/5/12 620.0000 104 2.8300 up 0.7800 GLD 4/21/12 152.0000 102 0.5600 up 0.2500 GLD 4/21/12 157.0000 100 1.8200 up 0.6800 RIMM 4/21/12 13.0000 96 0.5800 dn 0.0300 GPS 4/21/12 26.0000 94 0.6000 up 0.0400 PBR 4/21/12 24.0000 84 0.2200 up 0.1000 -VOLUME- CALLS PUTS TOTAL 14143 21569 35712
-CALLS- OPTION EXP.DATE STRIKE PRC. VOLUME LAST S/PRC. NET CHANGE STX 4/5/12 28.0000 3827 0.1900 dn 0.1700 SNDK 4/21/12 50.0000 3057 0.2000 dn 1.3200 AAPL 4/5/12 625.0000 2052 4.4000 dn 3.3500 ANR 9/22/12 19.0000 2035 1.0900 up 0.1900 AAPL 4/5/12 630.0000 1918 2.2900 dn 2.7100 GLD 5/19/12 160.0000 1756 2.7200 dn 0.8800 AAPL 4/5/12 635.0000 1393 1.1200 dn 1.9300 GMCR 4/5/12 45.0000 1387 0.5700 dn 0.3800 GMCR 4/5/12 47.0000 1341 0.1300 dn 0.1700 GLD 12/22/12 210.0000 1336 1.2500 dn 0.0900 -PUTS- OPTION EXP.DATE STRIKE PRC. VOLUME LAST S/PRC. NET CHANGE AAPL 4/5/12 620.0000 2674 2.8000 up 0.7000 CBS 5/19/12 33.0000 1720 1.1500 up 0.2500 CBS 5/19/12 30.0000 1720 0.3500 up 0.0500 GLD 5/19/12 156.0000 1486 2.9000 up 0.8000 C 4/21/12 34.0000 1385 0.5300 up 0.2200 AAPL 4/5/12 615.0000 1338 1.5000 up 0.2600 GLD 4/21/12 156.0000 1193 1.5400 up 0.6400 GRPN 4/21/12 18.0000 1071 3.3000 dn 0.1000 GS 4/21/12 115.0000 1049 1.2100 up 0.2700 RIMM 4/21/12 13.0000 899 0.5800 dn 0.0200 -VOLUME- CALLS PUTS TOTAL 267575 250433 518008Comments »
“It’s one of the many ironies of the last few years: The Federal Reserve lowered interest rates in order to (among other things) compel businesses to spend their cash rather than save it. And yet, the pile of corporate cash has grown astronomically in the face of interest rates kept near zero. According to Moody’s (MCO), U.S. corporations were sitting on $1.24 trillion of cash at the end of 2011. That’s more than 8 percent of the entire U.S. economy.
It’s not hard to understand why companies are hoarding cash. With growth tepid and demand low, there’s a decent chance a new factory built in the last couple of years would end up being an idle factory. And let’s not forget one of the key lessons of the financial crisis: It’s always better to have too much cash than not enough.
Nearly a quarter of that giant cash pile belongs to just five companies. Apple (AAPL), Microsoft (MSFT), Cisco (CSCO), Google (GOOG), and Pfizer (PFE) have a combined $276 billion in cash and cash equivalents. And more than half of the whole thing is parked overseas, thanks to our 39 percent corporate tax rate, the highest in the world now. While it’s true that firms have been putting some of that cash to use, a lot of it has gone toward things like dividend hikes and stock buybacks over the last couple of years, which don’t exactly kick the economy into gear.
Some recent data indicate firms are finally starting to spend their cash on things that will actually grow the economy. The latest survey of small businesses by the National Federation of Independent Business shows that 57 percent of firms have made a capital expenditure over the last six months, the largest percentage since March 2008. Much of that appears to be going toward big-ticket items. A combined 63 percent of firms report spending on new equipment and vehicles. Nineteen percent of firms reported having spent $10,000 to $49,000 over the last six months, while 11 percent said they spent $100,000 or more.
A new survey of 2,200 executives of companies with up to 499 employees found that they expect to increase spending by 5.9 percent this year. That’s likely a lowball estimate, since last year the same study by American City Business Journals predicted a 4.7 percent rise, when in fact spending increased 15.3 percent.
In a March 30 report, Citigroup’s (C) chief U.S. equity strategist, Tobias Levkovich, points to a “clear acceleration” in the capital spending intentions of the 735 nonfinancial public companies covered by Citi’s equity research analysts. “[I]t is very clear that business has stepped up, even from levels considered in early January,” Levkovich writes. “Indeed, the capital spending intentions are now up almost 11% for 2012 versus 2011, as compared with the previously planned 6% increase.”
Said Levkovich in a phone interview on Tuesday afternoon, “Despite the fair amount of uncertainly related to China and Europe, there is a willingness among businesses to invest when it makes sense to do so, which is quite encouraging.”
Some business sectors are spending more than others. According to Citi’s research, gas utilities are expected to increase their aggregate capital expenditures by a whopping 82 percent this year from 2011—driven no doubt by the boom in natural gas supplies. Multiline retail firms, which include department and general merchandise stores, are expected to increase investments by 62 percent, while IT companies are set to spend 35 percent more this year on communications equipment and computers.
This should all bode well for the jobs picture, since increases in capital spending tend to be accompanied by hiring. After all, if you’re going to buy a new piece of equipment, you’re probably going to need someone to operate it. Levkovich refers to the NFIB’s Hiring Plans Index as a strong leading indicator of the unemployment picture 12 months later, which he points to as evidence for a continued decline in the jobless rate through the rest of 2012. As noted by Tuesday’s Chart of the Day on Bloomberg.com.”
Comments »
“Economist Gary Shilling says we’re still headed for a recession this year despite the market’s recent bullish behavior, the Globe and Mail reports.
“Despite the recent euphoria of investors over U.S. stocks, we believe the economy is likely to weaken as the year progresses, led by renewed consumer retrenchment,” Shilling wrote in a note to investors.
Shilling points to a number of unusual indicators that suggest the U.S. economy may be weaker than most people believe.
For example, electricity generation is falling rapidly, which this may be because this winter was unusually mild but could also indicate declining economic activity.
Moreover, U.S. rail shipments and the number of containers coming into the ports of Los Angeles and Long Beach, the main entry point for Asian trade in the United States, are both declining.
And while GDP growth has been accelerating recently, Shilling says much of the increase in economic output can be attributed to rising inventories, also not a good sign.
“Either we’re dead wrong on the outlook or investors are ignoring reality as they emphasize risk on trades,” he says.
Comments »“The managing director of the International Monetary Fund made an impassioned plea Tuesday for American leadership in the global economy as she called for the international community to give her organization “more firepower” to bolster tottering economies.
Christine Lagarde told the annual meeting of The Associated Press that last week’s move by eurozone countries to boost their own rescue fund has strengthened her case to ask other large economies to expand the IMF’s financial war chest.
“We certainly need more resources,” she said, without specifying how much more was needed. Lagarde said the IMF would address that question at its spring meeting in two weeks.
The IMF has about $400 billion in resources that it can use to provide loans to countries in trouble. Lagarde has talked about expanding those resources to close to $1 trillion. The 17 countries that use the euro already have promised to provide $200 billion of that amount.
Though the United States is the IMF’s largest shareholder, the Treasury Department has not asked Congress for new IMF funding and will face opposition from Republicans if it does.
Lagarde argues that the IMF’s ability to rescue economies in Europe and elsewhere has a direct bearing on the U.S. economy. She said Europe’s faltering would quickly spread, and the U.S. economic recovery, slowly gaining strength, “might well be in jeopardy.”
“America has a large stake” in how Europe and the rest of the world fares, Lagarde said.
Lagarde said the global economy is making some advances in digging itself out of the worst downturn in decades, but that the recovery remains particularly fragile in Europe. She suggested cutting government spending too quickly in developed countries like the United States and larger European nations could make things worse, not better.
Policymakers on both sides of the Atlantic need “breathing space to finish the job,” she said. As the world’s largest economy, the United States could not shirk its outsized role in the global economy, Lagarde said.
“The world needs U.S. economic leadership,” she said. “Now is not the time to retire, now is not the time to withdraw, now is not the time to phase out. Now is the time to engage.”
Lagarde’s remarks came after the eurozone countries on Friday boosted their emergency bailout funds for heavily indebted countries to $1.1 trillion. That was short of the $1.3 trillion that Lagarde and other international leaders have said is needed to calm financial markets.
Since the Europeans have moved first to raise their firewall, “the time has come to increase our firepower,” she said Tuesday. While short of what the IMF had hoped for, it was a good first step — and something she said the IMF could work with.
Lagarde also suggested that bold steps are needed such as those taken by the Federal Reserve and the European Central Bank to help keep growth strong and steady.
And she said that most countries are running deficits that are too high and “need to bring down debt over time.” And while “some countries under pressure have no choice but to cut deficits today … a global undifferentiated rush to austerity will prove self-defeating. Countries like the United States with low costs of borrowing should not move too quickly.”
Those remarks thrust her into the U.S. presidential debate, where Republicans are united in calling for deep cuts in federal spending, while President Barack Obama — who also addressed the meeting — and congressional Democrats are calling for more job-creating spending, along with raising taxes on the wealthy to help trim budget deficits now exceeding $1 trillion a year.
Asked about Lagarde’s call for the United States to reduce its debt, Obama said: “She’s absolutely right.”
Lagarde noted that more than 200 million people globally, including nearly 13 million in the U.S., are without work, declaring that jobs must be a priority.
Lagarde also said Europe was not yet in the clear and that it was important to continue and expand emergency programs among the 17 countries that use the euro to help heavily indebted countries there.
“We should not delude ourselves into a false sense of security,” she said. “The recovery is still very fragile. The financial system in Europe is still under heavy strain. Debt is still too high, public and private. Stubbornly high unemployment is straining the seams of society. …. Rising oil prices are clearly another cloud on the horizon.”
During a brief question-and-answer period, Lagarde was asked whether some of the more debt-burdened countries would be better off leaving the group.
“As to the size of the eurozone and whether Greece, Portugal and whoever else should or should not be in, you know, it’s a very deeply rooted sentiment that the Europeans, particularly from that area, have that what they have built over the last 50 years or so, right after the second world war, is something that they are very, very attached to.
“And from discussions I’ve had with many leaders, including from the lead countries in the eurozone, I don’t think that there is any political intention, disclosed or hidden, to actually break up that zone,” she said.”
Comments »“We have previewed the phasing out of the LTRO effect previously here on several occasions. Now, courtesy of Art Cashin, everyone is aware that the eye of the European hurricane has officially passed, especially in the aftermath of this morning’s horrendous Spanish bond auction, which shows that reality is back with a bang.
Spanish Auction Disrupts Europe – This morning, Spain had a bond auction. It needed a flea collar, maybe even two. Here’s a Bloomberg recap:
Spanish Yields Reach 12-Week High on Auction
Spain sold 2.6 billion euros ($3.4 billion) of bonds, near the minimum planned, and borrowing costs rose as the impact of European Central Bank’s emergency lending waned. Bonds and the euro declined.
The Treasury auctioned bonds maturing in January 2015 at an average 2.89 percent, up from 2.44 percent on March 15, while bonds due in October 2016 yielded 4.319 percent, up from 3.376 percent on March 1. Securities maturing October 2020 were sold at 5.338 percent, Madrid-based Bank of Spain said today. The Treasury had set a range of 2.5 billion euros to 3.5 billion.
Spain’s financing costs had been held down by the ECB’s 1 trillion euros of three-year loans to banks, known as the LTRO , some of which have been recycled into high-yielding government debt. Yields had declined as much as 95 basis points after ECB President Mario Draghi announced the policy on Dec. 8 and Spanish banks’ holdings of government debt jumped to 220 billion euros in January from 178 billion euros in November.
“It’s back to reality now, the auction shows the LTRO effect has been exhausted and now demand for Spanish paper is becoming much more price sensitive,” Peter Chatwell, a London-based fixed-income strategist at Credit Agricole Investment Bank, said in a telephone interview. – Keith Jenkins, Bloomberg.
This was a rather ugly auction and may set an ugly tone, as European markets look to close for three to five days for Easter.
Watch out!”
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The selling in gold and equities tells hedge fund manager Doug Kass that the rally that was based on Fed easing and the ECB’s LTRO is done for. Time to get negative.
The liquidity rally is over. S and P futures -9, european mkts –, gold -40, euro. Time to be defensive just when shorts worn out. $SPY
ALERT: There Is A Brand New Conventional Wisdom About Why The Market Is Going To Tank
If you didn’t believe that mkts were trading on Fed/ECB liquidity pumping (and expected reaction of others to same) now’s the time to start!
This has been a huge raging debate, of course: Some people say it’s all Fed/ECB pumping that’s been driving markets.
Others point to fundamental improvements in the market, such as jobless claims hitting their lowest levels of the entire cycle right as stocks are hitting their highest levels.
But the events of the last couple of days have reinvigorated the central bank camp.
The timing of the Fed Minutes yesterday having a hawkish bent, combined with the weak performance lately in Italian/Spanish bonds (the LTRO sugar high is wearing off!) has got more people thinking that the market will soon be parched, and that the big selloff people have been calling for for sometime can now commence.
Along these lines, Scotty Barber of Reuters has updates this great chart of market reactions to ECB/Fed actions.
On the other hand, we’d argue that the trend in markets has also explained markets quite well.
The fact of the matter is that we saw a big improvement in the data (relative to expectations) starting last fall, and now we’ve seen a clear string of misses relative to expectations, as this 1-year chart of the Citi Economic Surprise Index points out.
So even now, if the market falls, disentangling the market, the central banks, and the underlying economic reality will not be clear cut.
American International Group (NYSE: AIG) Raised to Outperform at Bernstein.
Bazaarvoice Inc. (NASDAQ: BV) Started as Neutral at Credit Suisse; Started as Overweight at Morgan Stanley; Started as Buy at Deutsche Bank..
Biogen Idec Inc. (NASDAQ: BIIB) Raised to Buy at Goldman Sachs.
Novo Nordisk A/S (NYSE: NVO) Cut to Sell at Deutsche Bank.
SanDisk Corporation (NASDAQ: SNDK) Cut to Outperform at RBC.
Sonoco Products Co. (NYSE: SON) Started as Equal-weight at Barclays.
Southwest Airlines Co. (NYSE: LUV) Raised to Overweight at Barclays.
Starbucks Corporation (NASDAQ: SBUX) Added to Conviction Buy List as Goldman Sachs.
Sysco Corporation (NYSE: SYY) Started as Sell at Goldman Sachs.
Tellabs Inc. (NASDAQ: TLAB) Raised to Neutral at JPMorgan.
United Continental Holdings, Inc. (NYSE: UAL) Cut to Equal-weight at Barclays.Blackstone Group L.P. (NYSE: BX) added to Top Pick list at Citigroup.
Ciena Corporation (NASDAQ: CIEN) Raised to Overweight at JPMorgan.
International Business Machines Corporation (NYSE: IBM) Cut to Neutral at BofA/ML.
McDonald’s Corporation (NYSE: MCD) removed from Conviction Buy List but maintained as Buy at Goldman Sachs.
Novo Nordisk A/S (NYSE: NVO) Cut to Sell at DB
Comments »Gapping up
MAGS +21.7%, MON +2%, GMXR +35.2%, ZNGA +1.7% , MIND +11%, NOOF +12.5%, PLUG +7.7%, AMLN +2.5%,
CHTR +0.8%, AIG +1.1% , CIEN +1%, SBUX +0.7% ,
Gapping down
SNDK -7.5%, HOV -4.3%, GFI -3.8%, HMY -3.7%, RIO -3.5%, MT -3.5%, BCS -3.4%,
AU -2.9%, RIG -2.9%, BBL -2.4%, DB -2.4%, STO -1.8%, CCL -1.8%, BP -1.6%, SLV -1.5%,
GDX -1.5%, BHP -1.3%, TOT -1.2%,
Comments »Ddi Corp. (DDIC) rose 4.9 percent to $12.86. The maker of electronic components for computer and communications companies agreed to be bought by Viasystems Group Inc. (VIAS) for $13 a share in cash.
Gap Inc. (GPS) : The largest U.S. apparel chain was raised to overweight from neutral at Piper Jaffray Cos., which cited improvement in fashion spending. An overweight rating means the shares’ return is expected to beat the median return of companies covered by the analyst in the next year.
GMX Resources Inc. (GMXR) : The oil and natural-gas producer based in Oklahoma City said it drilled and completed its fourth operated horizontal Bakken well, in North Dakota.
Hovnanian Enterprises Inc. (HOV) : The homebuilder will sell 25 million Class A shares in a secondary offering.
SanDisk Corp. (SNDK) fell 6.5 percent to $46.78. The biggest maker of flash-memory cards cut its forecast for first- quarter sales, citing weaker-than-expected pricing and demand.
Tibco Software Inc. (TIBX) : Jefferies & Co. initiated research on the business software developer with a buy rating, estimating the price will climb to $42 a share.
WebMD Health Corp. (WBMD) fell 5.6 percent to $24.26. The medical information company said it expects to buy 5.77 million shares at $26 each after a tender offer expired yesterday.
Williams Partners LP (WPZ) slipped 3.7 percent to $54.20. The U.S. pipeline operator will sell 9 million shares in a public offering. Proceeds will be used to fund a portion of the acquisition by the Tulsa, Oklahoma-based company of Caiman Eastern Midstream LLC, which was announced on March 19.
Comments »
Douglas Kass@DougKass
Dan Alpert@DanielAlpert
