Faber News Flow

Late last week, we   showed a chart  from Credit Suisse which we described simply as "insanity" because it demonstrated that as the US careened into a depression, with GDP crashing and the unemployment rate soaring, between the latest Fed-driven surge in stocks and the collapse in earnings estimates, the PE multiple on the broader market had eclipsed the previous record of 19.0x set during the market's February all time high, and had now hit a new all-time high of 19.4x. In other words, the market has never been more overvalued than it is right now. Following today's market surge, this disconnect got even greater because as earnings estimates fell further... Instagram DMs Now Available on Desktop ... stocks rose, and the latest PE multiple (on 2021 earnings mind you) is now a dot com bubble-eseque 24x. That this it taking place as the global economy careens into the biggest contraction in generations is patently absurd, or would be if the Fed had not directly taken ov...

While it is not entirely surprising given that practically all of America is under lockdown and the consumption-focused services sector is particularly distressed, US retail sales crashed 8.7% MoM in March (against expectations of a 8.0% drop) Source: Bloomberg Year-over-year, headline retail sales crashed 6.2% - the biggest drop since Sept 2009... Source: Bloomberg Ex-Autos dropped 4.5% MoM (slightly better than expected) and Ex-Autos-and-Gas dropped 3.1% MoM (again slightly better than expected, and the Control Group (that is used for GDP calculation purposes), somehow managed a 1.7% MoM rise (against expectations of 2.0% drop).  The driver appears to be 'hoarding' as food and beverage and health stores saw huge rises in sales... This was the biggest MoM surge in Food & Beverage store sales ever... Source: Bloomberg But the scale of hoarding in Food & Beverage is offset by the utter devastation across so many other sectors... Source: Bloomberg How long can that lift l...

Bank of America joined JPMorgan and Wells Fargo in setting aside billions of dollars for upcoming loan losses as the bank braces for a surge in defaults and delinquencies on its loans amid the complete US economic shut down. The bank reports $22.8 billion in revenue (missing the exp. $22.91BN) generating $0.40 in EPS (missing the exp. $0.46) and $4.0 billion in profit, which was down 45% from the $7.3 billion last year... ... as the bank allocated $4.76 billion for loan losses (above the $3.93BN expected), an increase of $3.7 billion Y/Y and the most since 2010, as its business and household clients reel from the coronavirus pandemic. The bank joins competitors JPMorgan and Wells Fargo which posted their highest provisions in a decade Tuesday (JPMorgan set aside a little over $8 billion, Wells used $4 billion as the appropriate number). Wells Fargo CFO Says Consumer Spending Fell 35%-36% in April The three big lenders have collectively stashed away more than $17 billion to cover defaul...

This is what a depression looks like. With Wall Street already expecting a catastrophic Empire Fed manufacturing index print of -35, just shy of the lows hit during the financial crisis, moments ago the NY Fed reported that New York State business conditions index plummeted fifty-seven points to -78.2, its lowest level in the history of the survey—by a wide margin. The chart says it all:  the biggest miss ever, the biggest drop ever, the lowest print ever. The details below the surface were dire: new orders and shipments declined at a record pace. Delivery times lengthened, and inventories fell. Employment levels and the average workweek both contracted at a record pace. Input price increases slowed considerably, while selling prices declined modestly. As usual, hope dies last and though current conditions were the worst in history, firms expected conditions to be slightly better six months from now. Some more details: Manufacturing firms in New York Sta...

Roughly one week after the first reports were published about the Plano Texas-based department store exploring a Chapter 11 filing surfaced, JC Penney is officially filing for bankruptcy, sending its battered shares sliding even lower. Reuters revealed late last night that a filing is imminent now that the department store chain has had to close all 850 of its stores and furlough its ~95k employees across the US, disrupting a turnaround plan that was - let's be real - probably doomed to fail, anyway. As the "retail apocalypse" moves into warp speed thanks to the pressures of the novel coronavirus outbreak, a representative for the chain told  Reuters  that the company probably has enough cash to survive the months ahead, even as revenue dries up because of the store closures. However, the company is considering bankruptcy protection to restructure its finances and get out from under crushing debt payments. True Religion Jeans Files for Bank...

After surviving February (before COVID) with a modest MoM rise, US Industrial Production plunged 5.4% MoM (considerably worse than the 4.0% drop expected and  the worst MoM since Jan 1946 )... Also, after briefly turning positive YoY in February, March Industrial Production is down 5.49% YoY -  the worst YoY drop since Nov 2009 Source: Bloomberg Best Uses For Stimulus Check US Manufacturing production also collapsed, plunging 6.3% MoM and 6.6% YoY... Source: Bloomberg Capacity Utilization, not unexpectedly, collapsed to its lowest since April 2010 at 72.7%(against expectations of 74.0%)... Source: Bloomberg And finally, The Dow Jones INDUSTRIAL Average is finally caught down to the US INDUSTRIAL production level... Source: Bloomberg ...but after March's drop in IP (and The Dow's Fed-floored bounce), The Dow still has a long way to go.

In the past three weeks stocks have staged a substantial rebound from their March 24 lows, in big part thanks to an unprecedented barrage of Fed-driven bailouts, backstops, and asset purchases which at last count amount to over $5 trillion in committed capital in just the past month, and also due to the growing conviction that a V-shaped recovery is imminent one the coronacrisis pandemic fades away. Setting aside concerns about a second, even more powerful infection wave, the reality is that a V-shaped recovery - the underlying narrative catalyst for the powerful bear market rally - from the current quarter's GDP plunge which according to JPM will be as big as 40% simply will not happen, and here is Bank of America with a clear and succinct explanation why: There is a growing narrative in the markets that the end of the crisis is in sight. By some accounts, countries are bending the COVID-19 cases curve, allowing a relatively quick reversal of social distancing policies and...

In the past three weeks stocks have staged a substantial rebound from their March 24 lows, in big part thanks to an unprecedented barrage of Fed-driven bailouts, backstops, and asset purchases which at last count amount to over $5 trillion in committed capital in just the past month, and also due to the growing conviction that a V-shaped recovery is imminent one the coronacrisis pandemic fades away. Setting aside concerns about a second, even more powerful infection wave, the reality is that a V-shaped recovery - the underlying narrative catalyst for the powerful bear market rally - from the current quarter's GDP plunge which according to JPM will be as big as 40% simply will not happen, and here is Bank of America with a clear and succinct explanation why: There is a growing narrative in the markets that the end of the crisis is in sight. By some accounts, countries are bending the COVID-19 cases curve, allowing a relatively quick reversal of social distancing policies and...

And so the worst quarterly earnings season since the financial crisis (at least until the catastrophic Q2 earnings) is off, when moments ago JPMorgan reported that it missed expectations, with earnings plunging from a year ago, reporting Q1 adjusted revenue of $29.07 billion, which was -2.6% y/y, and missed the estimate of $29.52 billion, while Q1 EPS was 78c, down 71% from the $2.65 reported a year ago. Breaking these down, net interest income was $14.5 billion, flat versus the prior-year, with the impact of lower rates offset by balance sheet growth and mix as well as higher net interest income in CIB Markets.  Noninterest revenue was $14.5 billion, down 5%, and included a $951 million loss in Credit Adjustments & Other  in CIB driven by what the bank said was " funding spread widening on derivatives and $896 million of markdowns on held-for-sale positions in the bridge book" . Noninterest expense was $16.9 billion, up 3%, driven by higher volume- and revenue-related ex...