3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  43.05  and Brent: 45.01

3f Gold DOWN  /Yen UP

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil DOWN for WTI andDOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to 0.257%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 10.12%/: 

3j Greek 10 year bond yield FALL to  : 8.55%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1233.75/silver $16.99 (7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 25 /100 in  roubles/dollar) 66.31

3m oil into the 43 dollar handle for WTI and 45 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN COLLAPSES TO 108.33 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9750 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1000 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN STARTS ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year RISES to  + .257%

/German 8 year rate negative%!!!

3s The Greece ELA NOW at  71.4 billion euros,

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.91% early this morning. Thirty year rate  at 2.73% /POLICY ERROR)

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

END

Core durable goods tumble for the 14th consecutive month: generally means a deep recession

 

(courtesy zero hedge)

 

Core Durable Goods Tumble For 14th Month, Longest Non-Recessionary Stretch In 60 Years

Following February’s dismal drops across the board in Durable Goods, expectations were high for a March rebound. However, the mean-reverters were greatly disappointed as Orders rose just 0.8% MoM (missing expectations of a 1.9% surge) off a revised lower print, pushing the YoY change back into the red. Core Durables Goods Orders fell YoY for the 14th consecutive month – a streak never seen in 60 years outside of a broad US recession. Capital Goods Orders (0.0% vs +0.6% exp) and Shipments (+0.3% vs +0.9% exp) both missed and were both revised lower. Not a pretty picture…

The headline Durable Goods Orders printed back in the red YoY…

But a 14th consecutive monthly drop in YoY Core Durable Goods Orders has never happened outside of a recession…

It really is different this time.

Most notably, New Orders for defense aircraft and parts surged 65.7% to $6.1 billion – So not even war can keep the US economy afloat any more!!

Finally, the all important core capex series, or nondefense capital goods ex aircraft was unchanged for the month, and printed a 2.4% decline from a year ago. This too represents 14 consecutive months of core capex declines, something else that has never happened outside of a recession.

Charts: Bloomberg

end

Home prices are showing the slowest growth and for 5 months in a row have missed expectations.  February saw prices rise by 5.38%.

(courtesy zero hedge/Case Shiller)

Case-Shiller Home Price Growth Slowest Since September

For the 5th month in a row (and 10th of last 11), S&P Case-Shiller Home Price growth YoY missed expectations. February saw prices rise 5.38% (below 5.5% exp) which is the weakest annual growth since September 2015. Seattle and San Francisco rose the most MoM as Cleveland and New York saw the biggest drops MoM.

Weakest home prices appreciation since September 2015 and the misses continue…

The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 5.3% annual gain in February, unchanged from the previous month. The 10-City Composite increased 4.6% in the year to February, compared to 5.0% previously. The 20-City Composite’s year-over-year gain was 5.4%, down from 5.7% the prior month.

”Home prices continue to rise twice as fast as inflation, but the pace is easing off in the most recent numbers,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

“The year-over-year figures for the 10-City and 20-City Composites both slowed and 13 of the 20 cities saw slower year-over-year numbers compared to last month. The slower growth rate is evident in the monthly seasonally adjusted numbers: six cities experienced smaller monthly gains in February compared to January, when no city saw growth. Among the six were Seattle, Portland OR, and San Diego, all of which were very strong last time.

“Mortgage defaults are an important measure of the health of the housing market.Memories of the financial crisis are dominated by rising defaults as much as by falling home prices. Today as well, the mortgage default rate continues to mirror the path of home prices. Currently, the default rate on first mortgages is about three-quarters of one percent, a touch lower than in 2004. Moreover, the figure has drifted down in the last two years. While financing is not an issue for home buyers, rising prices are a concern in many parts of the country. The visible supply of homes on the market is low at 4.8 months in the last report. Homeowners looking to sell their house and trade up to a larger house or a more desirable location are concerned with finding that new house. Additionally, the pace of new single family home construction and sales has not completely recovered from the recession.”

Combined with weakness in new home sales, starts, and permits, things are starting to creak in the “real estate recovery” narrative.

END

Markit sees its preliminary PMI for April services rising a bit to 52.  However its manufacturing PMI continues to falter.  They suggest that Q2 is humming along at only a .8% GDP

(courtesy zero hedge)

Services PMI Suggests “0.8% GDP At Start Of Q2” As “Job Creation Slows”

With Manufacturing PMI at multi-year lows and trending lower, why would anyone be surprised that, amid plunging profits in retailers and weakness in restaurant performance indices, Markit’s preliminary Services PMI for April would bounce for the 2nd month in a row to  52.1. However, as Markit notes, despite th emodest pickup, “growth is clearly far more fragile than this time last year.”

Dead cat bounce?

As Markit details,

“The upturn in the rate of growth of business activity and increased inflows of new orders suggest the economy should see GDP rise at an increased rate in the second quarter, butgrowth is clearly far more fragile than this time last year.

“Viewed alongside the recent poor performance of the manufacturing sector, which reported its worst month since October 2009, the survey suggests the economy grew at an annualized rate of just 0.8% at the start of the second quarter, only marginally above the pace signalled for the first quarter.

 Survey responses indicate that persistent weak demand from domestic and overseas customers, the struggling energy sector, the strong dollar and election worries are all eating into business optimism.

“The current pace of growth is also only being supported by price reductions, as an increasing number of firms offer discounts to win sales.

“Job creation has also slowed as a result of costcutting pressures and uncertainty over the outlook, but remains solid. The surveys point to another 150,000 non-farm payroll increase in April, as robust service sector hiring continues to offset factory job losses.”

Additionally, growth momentum remained much weaker than that seen on average since the survey began in late-2009.

Survey respondents suggested that subdued client demand and less favourable underlying economic conditions had weighed on business activity at their units in April. Reflecting this, latest data signalled only a marginal rebound in new business growth from the survey-record low recorded in March.

A relatively weak upturn in new work contributed to slower job creation across the service economy in April. Payroll numbers have expanded continuously for just over six years, but the latest increase was the softest since October 2015 and weaker than the post-crisis trend. At the same time, service providers indicated another modest drop in backlogs of work in April, suggesting a lack of pressure on operating capacity.

end

We now have the 3rd Fed mfg index fall, after the Philly and Dallas Fed.  This time it was the Richmond Mfg Fed index faltering.  You will recall that last month it gave a surprise spike to 7 yr highs.  It did not last long:

(courtesy zero hedge)

Richmond Fed Plunges By Most Since August After March’s WTF Spike

Following the weakness in Philly and Dallas Fed regional – fading off Feb/Mar dead cat bounces –Richmond Fed’s epic 9-standard-deviation biggest spike ever to 7 year highs in March appears to have been a one of as it fell back from 22 (3rd highest ever) to 14 (still above expectations) – the biggest drop since August. Of course how one can take this seriously is anyone’s guess as shipments , new orders, wages, and workweek all crashed from March’s embarrassing spike as did inventory levels for finished and raw materials (not good for Q2 GDP). Worse still outlook for six months ahead saw wages, workweek and new orders collapse further.

As a reminder, here is March…

And so April tumbles most since August…

Charts: Bloomberg

end

Consumer confidence dropped in April and is hovering at 2 yr lows. Income growth potential is falling.  Not a very good sign:

(courtesy zero hedge)

Consumer Confidence Stagnant Since The End Of QE3 As Wage Growth Hopes Fade

We’re gonna need more money-printing. Consumer Confidence dropped in April to 94.2, missing expectations of 95.8 and hovering at its lowest in 2 years. In fact, the current level is relatively unchanged since the end of QE3, despite all the recent surges in stocks as the post-2009 94% correlation between the S&P 500 and confidence is breaking down rapidly and ruining The Fed’s animal spirits’ party. Most crucially, income growth expectations are tumbling as The Conference Board suggests American consumers “do not foresee any pickup in momentum.”

h/t @GreekFire

“Consumer confidence continued on its sideways path, posting a slight decline in April, following a modest gain in March,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved, suggesting no slowing in economic growth. However, their expectations regarding the short-term have moderated, suggesting they do not foresee any pickup in momentum.”

Consumers’ appraisal of current conditions improved somewhat in April. Those saying business conditions are “good” decreased from 24.9 percent to 23.2 percent.However, those saying business conditions are “bad” also declined, from 19.2 percent to 18.1 percent. Consumers’ appraisal of the labor market was also mixed. Those claiming jobs are “plentiful” decreased from 25.4 percent to 24.1 percent, however those claiming jobs are “hard to get” also declined from 25.2 percent to 22.7 percent.

Consumers were less optimistic about the short-term outlook in April than last month. The percentage of consumers expecting business conditions to improve over the next six months decreased from 14.7 percent to 13.4 percent, while those expecting business conditions to worsen rose to 11.0 percent from 9.5 percent.

Consumers’ outlook for the labor market was also less favorable. Those anticipating more jobs in the months ahead decreased slightly from 13.0 percent to 12.2 percent, while those anticipating fewer jobs edged up from 16.3 percent to 17.2 percent. The proportion of consumers expecting their incomes to increase declined from 16.9 percent to 15.9 percent; however, the proportion expecting a reduction in income also declined, from 12.3 percent to 11.2 percent.

end

Seems that the Atlanta Fed keeps getting tapped on the shoulder to revise its GDP higher

Today is really farcical:

(courtesy Atlanta Fed/zero hedge)

Atlanta Fed Boosts GDP Forecast Following Today’s Durable Goods Miss And Downward Revision

If there was some confusion why the Atlanta Fed recently revised its GDP Nowcast higher following the recent retail sales miss, that confusion will be even more acute today when moments ago the Atlanta Fed plugged today’s weaker than expected durable goods print (and downward revision to past month’s data), and ended up with… a GDP forecast that was higher than previously, or an increase from 0.3% to 0.4%.

From the Atlanta Fed’s Nowcast:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.4 percent on April 26, up from 0.3 percent on April 19. After last Wednesday’s existing-home sales release from the National Association of Realtors, the forecast for first-quarter real residential investment growth increased from 8.5 percent to 10.8 percent. After this morning’s advance report on durable manufacturing from the U.S. Census Bureau, the forecast for real equipment investment growth declined slightly while the forecast for real inventory investment increased slightly.

 end

Devastation continues to run rampant in the USA.  One out of 5 American families has nobody having a job.  We are also witnessing a complete devastation in the retail sector as the consumer is basically has no funds for incremental purchases.  The retail chain of Aeropostale (800 stores) will file for bankruptcy and will not continue

(courtesy zero hedge)

In 1 Out Of Every 5 American Families, Nobody Has A Job

Submitted by Michael Snyder via The Economic Collapse blog,

If nobody is working in one out of every five U.S. families, then how in the world can the unemployment rate be close to 5 percent as the Obama administration keeps insisting? The truth, of course, is that the U.S. economy is in far worse condition than we are being told. Last week, I discussed the fact that the Federal Reserve has found that 47 percent of all Americans would not be able to come up with $400 for an unexpected visit to the emergency room without borrowing it or selling something. But Barack Obama and his minions never bring up that number. Nor do they ever bring up the fact that 20 percent of all families in America are completely unemployed. The following comes directly from the Bureau of Labor Statistics…

In 2015, the share of families with an employed member was 80.3 percent, up by 0.2 percentage point from 2014. The likelihood of having an employed family member rose in 2015 for Black families (from 76.4 percent to 77.7 percent) and for Hispanic families (from 85.9 percent to 86.4 percent). The likelihood for White and Asian families showed little or no change (80.1 percent and 88.6 percent, respectively).

For purposes of this study, families “are classified either as married-couple families or as families maintained by women or men without spouses present” and they include households without children as well as children under the age of 18.

Digging into the numbers, we find that there were a total of 81,410,000 families in America during the 2015 calendar year.

Of that total, 16,060,000 families did not have a single member employed.

So that means that in 19.7 percent of all families in the United States, nobody has a job.

And of course there are lots more families that are “partially employed”. In other words, maybe the wife has a job but the husband does not.

So based on these numbers, it would appear to me that the true rate of unemployment in this country is vastly higher than 5 percent, and John Williams of shadowstats.com agrees with me. According to his calculations, the broadest measure of unemployment in the U.S. would actually be sitting at 22.9 percent if honest numbers were being used.

But let’s not just focus on where we are.

Let’s take a look at where we are going.

According to Challenger, Gray & Christmas, job cut announcements by big companies in the United States were up 32 percent during the first quarter of 2016 compared to the first quarter of 2015, and it appears that the job losses are going to continue to mount as we roll into the second quarter. For instance, late last week Intel announced that it is going to be laying off 12,000 workers…

As it navigates its path into the future, Intel, the 47-year-old corporation best known for making microprocessor chips that power personal computers, has announced significant changes to its business.

On Tuesday, Intel’s CEO Brian Krzanich said in a letter to employees that the company over the next year will cut its 107,300-person global workforce by 12,000 people, or 11 percent.

Those are good middle class jobs, and they are exactly the kind of jobs that we cannot afford to be losing.

Meanwhile, the “retail apocalypse” appears to be accelerating once again.

Bloomberg is reporting that teen clothing chain Aeropostale is preparing to file for bankruptcy.  Aeropostale currently operates more than 800 stores across the nation, and it is unclear if any of them will be able to stay open as this process plays out. But of course it isn’t just Aeropostale that has gone bankrupt lately. Here are a few more examples of major retailersthat have recently filed for bankruptcy…

April 16, 2016: Vestis Retail Group, the operator of sporting goods retailersEastern Mountain Sports (camping, hiking, skiing, adventure sports), Bob’s Stores (family clothing and shoes), and Sport Chalet (general sporting goods), filed for Chapter 11 bankruptcy. It will close all 56 stores and stop online sales.

In the filing, it blamed the going-out-of-business sales at “certain Sports Authority locations,” plus the weather, which had been too warm, and trouble with switching to a new software platform. It’s owned by private equity firm Versa Capital Management LLC.

April 7, 2016: Pacific Sunwear of California, clothing retailer with nearly 600 stores and derailed ambitions of skate-and-surf cool, filed for Chapter 11 bankruptcy. PE firm Golden Gate Capital, a lender to the company, agreed to convert over 65% of its loan into equity of the reorganized company and add another $20 million in financing. Wells Fargo agreed to provide $100 million of debtor-in-possession financing.

March 2, 2016: Sports Authority filed for Chapter 11 bankruptcy. It said it would close 140 of its 450 stores, including all stores in Texas.

Just because the stock market has been doing well in recent weeks does not mean that the crisis has passed.

In fact, many experts believe that the crisis of 2016 is just getting started.  Albert Edwards of Societe Generale is one of them…

But what I do know is when in the last few weeks I have heard that Janet Yellen sees no bubble in the US, when Ben Bernanke hones and restates his helicopter money speech, and when Mario Draghi says that the ECB’s policy of printing money and negative interest rates was working, I feel utterly depressed (I could also quote similar nonsense from Japan, the UK and China). I have not one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result.

The only people who will benefit are not investors, but anarchists who will embrace with delight the resulting chaos these policies will bring!

All over the world, the underlying economic fundamentals continue to deteriorate.Here in the U.S., retail sales have been extremely disappointing, total business sales have been steadily falling, corporate revenues and corporate profits continue to plunge, and corporate debt defaults have soared to their highest level since the last financial crisis.

All of these numbers are screaming that a major economic downturn is here, and with each passing week things look even more ominous for the second half of 2016.

end

This seems to be the trend:  even though their report is not that bad, hedge fund Brevan Howard met with a massive 1.4 billion USA redemption:

(courtesy zero hedge)

Iconic Hedge Fund Brevan Howard Slammed With $1.4 Billion In Redemption Requests

It has already been a very bad several years for hedge funds with 2016 starting off especially brutally, as Goldman’s own Hedge Fund VIP basket demonstrates…

… when moments ago we learned that it is about to get even worse for one of the most iconic names in the macro hedge fund space, Brevan Howard, which according to Bloomberg has been served with $1.4 billion in cash redemption requests.

Brevan Howard co-founder Alan Howard

As Bloomberg writes, investors in Brevan Howard Asset Management have asked to pull about $1.4 billion from the firm’s main hedge fund after successive annual declines followed by losses during the first quarter, according to two people with knowledge of the matter.

The Brevan Howard Master Fund, which bets on macroeconomic trends to invest across asset classes, will have to meet the redemption requests by the end of June, said the people who asked not to be identified because the information is private. The fund managed $17.6 billion at the end of March, down from about $27 billion two years ago, according to a company website.

While the firm’s billionaire co-founder Alan Howard has previously said that there will be “exceptional opportunities” to make money this year, those have so far failed to materialize. What is odd is that Brevan’s losses are once again not even that material: the Master Fund closed the first quarter down 0.97 percent after losing 2 percent in March. It dropped almost 2 percent in 2015 and 0.8 percent in 2014, people familiar with the matter said earlier this month.

This, however, appears sufficient for many LPs to send in their redemption papers.

Investors disappointed by hedge funds’ performance during recent market turmoil pulled the most money last quarter since the tail-end of the financial crisis, according to Hedge Fund Research Inc. Money managers betting on macro economic trends suffered $7.3 billion in outflows.

The recent trend of pulling funds away from hedge funds is not new: recently New York City’s pension for civil employees, whose money managers included Brevan Howard, voted this month to pull $1.5 billion from hedge funds. Clients of Tudor Investment Corp. have asked to withdraw more than $1 billion from the firm founded by billionaire Paul Tudor Jones after three years of lackluster returns, while Och-Ziff Capital Management Group LLC saw its assets fall by about $1 billion in March to $42 billion on April 1, according to a company filing.

As central banks continue to take over capital markets and make fundamental-based investing impossible, we expect even more hedge fund casualties who collect 2 and 20 in a worldin which activist central bankers have become the Chief Risk Officers of broader markets, and better yet, they do it for “free.”

end

Eight hundred department stores or 1/5 of the USA capacity is now uneconomic

(courtesy zero hedge)

Malinvestment In US Malls—-800 Department Stores Or One Fifth Of Capacity Now Uneconomic

By Suzanne Kapner at The Wall Street Journal

Department stores need to close hundreds of locations if they want to regain the productivity they had a decade ago, according to new research from Green Street Advisors.

The real-estate research firm estimates that the closures could include roughly 800 department stores, or about a fifth of all anchor space in U.S. malls.

Sears Holdings Corp. alone would need to close 300, or 43%, of its Sears stores to regain the sales per square foot it had in 2006, adjusted for inflation, according to Green Street.

“Department stores used to be a great catchall for different brands, but today many of the brands have stores of their own, and shoppers can also find them online,” said DJ Busch, a senior Green Street analyst.

Sears and other retailers including Macy’s Inc. and J.C. Penney Co. have closed hundreds of stores in recent years as business has shifted to discounters or online merchants likeAmazon.com Inc. But the closures haven’t been enough to offset a drop in sales, Green Street said.

Sales at the nation’s department stores averaged $165 a square foot last year, a 24% drop since 2006, according to company disclosures and Green Street estimates. Over the same period, the stores reduced their physical footprint by 7% in aggregate.

Some chains have moved faster to cull their fleets than others. On Thursday, Sears said it would close 78 stores, including 68 Kmarts, this summer, part of a plan announced in February to “accelerate the closing of unprofitable stores.” But Penney has only closed seven stores this year out of a base of more than 1,000.

Green Street estimates that Penney would need to close a total of 320 locations, or 31% of its stores to return to its 2006 productivity levels, while Nordstrom Inc. would need to shutter 30 stores, or a quarter of its footprint. By comparison, Macy’s, which closed 40 stores last year, would only need to eliminate a further 70 locations, or 9% of its base, Green Street estimates.

While declining to comment on the specifics of Green Street’s report, the chains have indicated that mass store closings aren’t the right strategy.

“There’s a misperception out there that when we close a store, that business transfers online,” Ed Record, Penney’s chief financial officer, told analysts in November. “When we close a store, particularly in a small market, we see our dot-com business go down.

A spokesman for Nordstrom said that all of its stores are profitable, and closing stores “is not our normal practice.”

In addition to closing unproductive locations, Macy’s has been trying to get more shoppers in the door by adding Bluemercury beauty shops and Backstage discount stores to its department stores.

It may be unrealistic to expect that department stores could ever return to historical levels of sales or profits given the changing dynamics of retailing. Many retailers say they make less money selling goods online than they do in their physical stores. And with the Internet making it easier for consumers to comparison shop, discounts have become the norm.

Department stores occupy about two-thirds of mall anchor space, and even though they are being replaced by restaurants, grocery stores, and big box retailers such as Dick’s Sporting Goods Inc. and Target Corp., there aren’t always enough new tenants to go around, said Green Street’s Mr. Busch.

The store glut has important implications for the country’s weaker malls, which rely on their anchors to drive foot traffic. “If department stores were to move forward and aggressively streamline their physical presence it could result in several hundred malls no longer being relevant retail destinations,” he said.

Source: Department Stores N

END

After the market closed we had two biggys on the downside:

First Twitter:

Second:Apple

(courtesy zero hedge)

 

Twitter Crashes After Slashing Revenue Forecast

Despite all eyes on the slightly better than expected MAUs (310m vs 308m exp.), Twitter is being clubbed like a baby seal after-hours as it has slashed Q2 revenue:

• *TWITTER SEES 2Q REV. $590M TO $610M, EST. $677.1M

Most crucially, Twitter explains, “Revenue came in at the low end of our guidance range because brand marketers did not increase spend as quickly as expected in the first quarter.” Which also does not exactly bode well for the overall ad spend market.

Some other key points from the CEO:

We see a clear opportunity to increase our share of brand budgets over time. We have a strong product roadmap designed to tap into incremental brand-oriented online video budgets, and will deliver additional features for advertisers later this year — including more detailed demographic targeting and verification, and reach and frequency planning and purchasing.

This is what Twitter would like the market to focus on: the sequential growth in users:

The market sadly is not seeing it, and instead is looking at the following: the company’s poor guidance which sees Revenue next quarter to be about 10% below consensus estimate of $677.

OUTLOOK For Q2, we expect:

• Revenue to be in the range of $590 to $610 million;
• Adjusted EBITDA to be in the range of $145 to $155 million;
• Stock-based compensation expense to be in the range of $165 to $175 million;
• GAAP share count to be in the range of 700 to 705 million shares;
• Non-GAAP share count to be in the range of 710 to 720 million shares.

For FY 2016, we expect:

• Capital expenditures to be $300 to $425 million;
• Adjusted EBITDA margin in the range of 25-27%.

Note that our outlook for Q2 and full year of 2016 reflects foreign exchange rates as of April 15, 2016.

Meanwhile, Twitter continues its favorite pastime of converting massive GAAP losses into non-GAAP profits by adding back $151 million in stock-based compensation

Some other key highlights:

Advertising Metrics

 

Total ad engagements grew 208% year-over-year, an acceleration in growth compared to Q4 2015,
driven once again by the adoption of auto-play video, increases in ad load versus the prior year period,
and improvements in click through rate in select ad formats. The average cost per ad engagement fell
56% year-over-year, again primarily due to the move to auto-play video. Cost per ad engagement for
direct response and app install ad formats was up nicely year-over-year, as we have made noticeable
improvements in targeting, measurement, and creative capabilities for those formats.

 

Costs & Adjusted EBITDA

 

Non-GAAP total expenses in Q1 grew 26% year-over-year to $490 million. The increase was driven by higher traffic acquisition costs from non-O&O advertising revenue, infrastructure costs, sales and marketing, and employee-related and overhead expenses. Traffic acquisition costs were 57% of non-advertising revenue in the quarter, vs. 64% in Q1 2015 and 61% in Q4 2015. Stock based compensation expense was $151 million in the quarter, $9 million below the low end of our  forecasted range of $160 to $170 million. This also marks the fourth consecutive quarter of absolute decline in stock based compensation expense. Adjusted EBITDA was $180 million in Q1, $20 million ahead of the high end of our guidance range of $150 to $160 million. Adjusted EBITDA margin on GAAP revenue was 30%, approximately 600 basis points better than that of Q1 2015 and 300 basis points better on a
sequential basis. Total employees were approximately 3,800 at the end of the period, reflecting slower
than expected hiring.

 

Balance Sheet

 

We ended the quarter with $3.6 billion in cash, cash equivalents and marketable securities. Free cash
flow in the period was $99 million.
Audience
Total MAU was 310 million for the quarter, which compares favorably to the 305 million reported for Q4
2015. Growth was driven by both seasonality and marketing initiatives.

Investors are not happy:

end

And now Apple misses:

Apple Tumbles After Missing Sales And Earnings, Guides Below Lowest Estimate

First it was Twitter, now it is consumer tech titan AAPL’s turn to tumble.

For those pressed for time, here is the breakdown:

• APPLE Q2 REVENUE $51.56BN, EST 251.97BN
• APPLE Q2 EPS $1.90, EST $2.00
• APPLE SEES 3Q REV. $41B-$43B, EST. $47.4B
• APPLE SOLD 51.2M IPHONES IN 2Q, EST. 50.7M
• APPLE SOLD 4.03M MACS IN 2Q, EST. 4.6M
• APPLE SOLD 10.3M IPADS IN 2Q, EST. 9.4M
• APPLE 2Q IPHONE ASP $641.83, EST. $651
• APPLE BOOSTS QTR DIV TO 57C-SHR FROM 52C, EST. 57C
• APPLE INCREASED SHARE REPURCHASE AUTHORIZATION TO $175B

And now the details:

Moments ago AAPL reported Q2 EPS of $1.90, missing expectations of $2.00 on revenue of $50.56BN which also significantly missed expectations of $52 Billion. Perhaps the biggest drive for this was both the sequential and annual plunge in Chinese sales, which dropped to $12.5 billion from $16.8 billion a year ago.

 

And while Apple beat expectations on iPhone sales, selling 51.2 million units in the quarter, above the 50.7 million expected, it did so on both a lower than expected margin of 39.4%, and lower iPhone ASPs, which dropped to $641.8 below the $651 estimate.

 

The company’s guidance for Q3 revenues was abysmal, and sees only $41-$43BN in sales, well below not only the median estimate of $47.35bn but below the lowest sellside estimate of $43.95bn.

But the scariest chart is probably the one showing the sharp slow down in sales across virtually all geographies.

Tim Cook’s commentary:

“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Tim Cook, Apple’s CEO. “We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.”

But more troubling was the CFO commentary according to whom what was slowing iPhone sales was the slowness to upgrade.

Is the AAPL magic gone?

As of this moment investors says yes, as AAPL tumbles 6% after hours, and that despite AAPL announcing that the Board has increased its share repurchase authorization to $175 billion from the $140 billion level announced last year.

 end

Well that about does is for tonight

I will see you tomorrow night

Harvey