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Please Mr. Postman.

Tuesday was another day that had a distinctly circus-like character to it...

Tuesday was another day that had a distinctly circus-like character to it courtesy of everyone’s favorite orange clown, who kicked things off first thing in the morning with more unhinged Twitter rants about everything from media conspiracies to polling to immigrant “caravans” to Amazon.

As you can see, Trump swears Jeff Bezos is fucking over the postman to the tune of “many billions.”

 

To be clear, everyone except Trump understands that the Amazon/Post Office conspiracy theory is ridiculous.

 

According to five people inside the White House who spoke to Bloomberg on condition of anonymity, there “are no ongoing discussions” about bringing the power of the U.S. government to bear on the company.

I guess that depends on your definition of “ongoing discussion.” Trump’s tweets are the very definition of “ongoing” and although one source told Bloomberg that the President’s staff has tried to “explain to [him] that the Postal Service is an independent organization and its mail rates are set by a commission,” it doesn’t seem that matters to him.

Whatever the case, the shares traded on Trump headlines (again) – because that’s definitely healthy:

AMZN

This soap opera is dictating the direction of the entire market. Look at this crazy shit:

ES

Baird was out warning that “any significant changes to Amazon’s USPS contract would result in volume reallocation to UPS and FedEx and pose obvious risks for margins.”

Tesla got some much needed respite on Tuesday from its Q1 delivery report which was (literally) described as “good enough” and “better than feared” by Wall Street. I’m not sure that’s a vote of confidence. Elon is making 2,020 Model 3 sedans per week. That’s lower than the 2,500 forecast, but really, why the fuck am I even talking about this? Tesla is a castle in the sky and everyone knows it. Eventually, Tony Stark may be able to backfill enough concrete to build a foundation under that castle, but no one knows for sure and in the meantime, it’s a crap shoot. The shares were up 7% today, which is hardly enough to erase last week’s egregious losses:

TSLA

The bonds staged a feeble bounce:

TSLABonds

In other “things I don’t give a shit about” news, Spotify opened at $165.90 and that didn’t last:

SPOT

Side note (although not really, because you know… Tesla and tech and bubbles): David Einhorn’s letter is out and the news is of course bad:

The Fed ushered in a new era on Tuesday:

NYFED

Worst pun ever, but we’ll forgive her:

This of course comes as LIBOR is still doing its best Monty Python impression (“I’m not dead yet!”). Here’s some color on how rising short-term funding costs are impacting equities (via Goldman):

The share prices of companies with high floating rate debt have recently mirrored the fluctuations in short-term borrowing costs. Exhibit 6 shows the performance of 50 S&P 500 companies with floating rate bond debt amounting to more than 5% of total debt. Our analysis does not take into account loans or swaps. We exclude Financials and Real Estate, and the screen captures stocks from every remaining sector except for Telecommunication Services. So far in 2018, as short-term rates have climbed, these stocks have lagged the S&P 500 by 320 bp (-4% vs. -1%). The group now trades at a 10% P/E multiple discount to the median S&P 500 stock (16.0x vs. 17.6x). These stocks should struggle if borrowing costs continue to climb, but may present a tactical value opportunity for investors who expect a reversion in spreads. The tightening in late March of the forward-looking FRA/OIS spread has been accompanied by a rebound of floating rate debt stocks and suggests investors expect some mean-reversion in borrowing costs.

Impact

It looks like the dollar got a boost from decent auto sales data in the U.S.:

XY

Treasurys fell as risk appetite returned with 10Y yields bouncing off two-month lows:

yeilds

In Europe, the data is looking like it wants to moderate a bit. We got final PMIs on Tuesday and here’s the verdict:

  • Eurozone March manufacturing PMI 56.6, down from 58.6 in Feb.
  • Germany March manufacturing PMI 58.2, down from 60.6 in Feb.
  • France March manufacturing PMI 53.7, down from 55.9 in Feb.

Obviously, things are still going pretty well (and indeed bumping up against capacity constraints is probably a good problem to have), but there are some caveats. Here’s Chris Williamson, Chief Business Economist at IHS Markit:

March saw the biggest fall in the manufacturing PMI since June 2011 and the third successive slowing in the pace of expansion. We should not be too worried by the fall in the PMI as some moderation in the pace of growth from the surge seen at the turn of the year was inevitable, not least because short-term capacity constraints limit the economy’s ability to grow so quickly for long periods. This has been clearly evident in the recent lengthening of supply delivery times. Some of the slowdown has also been attributable to temporary factors such as bad weather. However, the fact that business optimism about the coming year has slipped to a 15-month low suggests there are other factors that are now hitting factory order books. Export growth has more than halved since late last year, linked in part to the appreciation of the euro, and in some cases demand is being stymied by higher prices.

Here’s hoping the ECB doesn’t miss its window to normalize – or I guess, depending on whether you’re convinced that the global economy cannot stay upright without the monetary training wheels, maybe bad news is good news to the extent it keeps Draghi cautious.

European shares were lower coming off the holiday but did manage to trim losses into the close – German stocks and tech shares were the laggards across the pond:

Europe

Finally, for your moment of zen, here’s Trump talking on Tuesday about “very stupid people”:

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4 comments on “Please Mr. Postman.

  1. …speaking of stupid people … perhaps this guy does not understand that amazon ships my package via fed ex and it is delivered to the post office about 6 blocks from my home and the post office then brings it to my home and throws it on my front porch, no knocking on door – about 6 ft from door, tosses pkg onto porch. I see him do that from the window in the room I use as an office, immediately right of the front door. I have also complained twice to amazon and they are “checking into my complaints” and “will resolve to my satisfaction soon”. If amazon is paying USPS $1.47 to deliver that pkg, as trump said today, well, that’s too much.

    My theory is amazon should discontinue use of USPS; no service, no payment. All problems solved.

    • Tom Swift

      Murphy, did you ever think to ask the delivery person not to do that egregious act? My FexEx guy used to do that and I asked him not to since I could see him. The word got out and now no delivery person from FedEx does that anymore.
      Didn’t have to ask the USPS carrier because she’s a distant neighbor and likes the free bread my wife makes.
      We’re all in this adventure together.

      • Tom, Oh how I would love to have a conversation with the USPS guy! Both times I was on the phone and could not rush out to speak with him — then he was on vacation for a week and I did tell the temp lady that I was hoping to speak with him as she arrived when I was outside filling the birdbath with fresh water – nice lady too — and now he is back but the opportunity has not been presented. I would relish speaking with him. I did call the post office station and complain and frankly their attitude was horrible and clearly were not interested! All the neighborhood complains about the attitude in this post office. Standing in line to buy postage is a true experience just watching how they serve the public. Not even a smile.

        … and here you are bragging about paying off a postal worker for special favors with that free homemade fresh bread that I can almost smell and taste right now! hahaha!

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