US catch up

US... til Friday 9th May
--- Only 72/500 S&P 500 are beating the index.
--- Last month US PMI Drops, Misses By Most In 8 Months
---Yellen – we will keep rates low.
--- Russell 2000 enters 10% correction near 6 month lows. Russell 2000 first close under 200 DMA since November 2012. DJIA back into red for the year.
--Considerable divergence in bonds means the curve is steepening modestly. Atrocious 30 Y bond auction, expected to price at 3.40, but priced at 3.44,bid to cover was the lowest since 2011.
-- Initial claims dropped 26k to 319k, beating expectations after last week’s spike.
--Strong 10 Year Auction Prices At Lowest Yield Since June 2013 despite 288k NFPs.
--Markets have shifted from the RMB into a USD funded carry trade with low US bond yields working as the catalyst
--NFPS did great! 288K vs 216K expectations. Unemployment rate 6.3% vs 6.6 exp.
--'All time high' is now a market condition: Box pulls IPO 'after a sudden weakening in demand for tech stocks'. ATH is not enough.  18 months ago the company could've got away without even a path to profitability.
--Unempl claims 319k 
-- Non manu PMI 55.2

Then... today... celebrating Donetsk Independence:
--Russell 2000 up 2.5% and +4% from Friday.
--Spike lower in VIX (below 12) and... of course USDJPY stop-run back through 102....
--So... DJIA and S&P hit ATH again. we await tomorrow for more exhuberance.
--T yields rose modestly (2-3bps)

US graph. Corporate profits surge.... what about employment?

Sprott on the greatest danger facing the world today. Thoughts?

Greatest danger facing the world today, according to Eric Sprott, a Canadian billionaire and Chairman of Sprott Asset Management:

“The biggest danger is that the financial system is over-levered. And perhaps at this point I might even mention one of the most ludicrous things I’ve ever seen. It was suggested by the Bank of England that should an important bank not be able to meet its derivative demands because it has a losing position, that claims on that bank be suspended - that entities wouldn’t be allowed to make a claim on those derivative losses. It’s like being in a fantasy land. You lose money but you are not allowed to claim from the guy because he could go down. Of course I know the reason they don’t want anybody to go down: ever since Lehman Brothers they’ve abandoned the word ‘liquidation’ because they saw what a liquidation could do. They don’t want any bank to start the liquidation process because that’s when we find out what things are really worth, and they are not going to be worth anything compared to what the banks have on the books. So the big time bomb is derivatives and leverage in the banking system. We keep getting these comments out of Europe that some country has got to raise $25 billion to boost the capital of the banks. This is in an environment where the paper assets have been allowed to appreciate. Imagine a situation where they start depreciating. The leverage is just way too high and to me that’s always been the lingering huge fear. We could throw in wars, continuing economic decline, which I think we are having, but a bank collapse would be by far the biggest item in terms of how it would affect the financial markets, and in particular in how it would just blow interest into the precious metals area".

Ever wondered what a Chinese Bank run looks like?

"Russia is now asking close to $500 for 1,000 cubic meters of gas, the standard unit for gas trade in Europe, which is a price about a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere."

http://www.nytimes.com/2014/03/24/world/europe/russia-steps-up-economic-pressure-on-kiev.html?partner=rss&emc=rss&_r=2

BJRI is a buy

Catalysts

1. Luxor Capital and PW Partners own 10% of the company – pushing to get new directors elected to the board.

2. Menu innovation, happy hour program embracing mobile technology – save 20% if you order ahead, BJ’s should trade closer to $44m – near term.
3. Winter weather – coming to an end.

Fundamental case for upside.

1. Trading at 25xx forward earnings, but over last 10 years – traded at an av of 42x earnings, current price to sales is 1.2x, over the last decade its average sales multiple has been 1.7x, industry is trading closer towards 2.1x.

2. Analysts expect earnings to grow at 20% annualized over next 5 years vs 15% industry average. Assuming sales can grow @ CAGR of 10% over next 2 years – that puts 2015 sales at $950mn. If the sales multiple only goes up to 1.3x – BJ’s price target is 43.5. 26% upside in 2 years. If 1.7x – then target is 56.88 – 65.39% upside potential.

Statement by the Press Secretary on Ukraine