http://www.zerohedge.com/news/2013-01-16/dream-over-faa-grounds-nightmareliner

The Dream Is Over As FAA Grounds Nightmareliner

Submitted by Tyler Durden on 01/16/2013 18:17 -0500

The pain for Boeing never stops. Just out from Reuters:

U.S. FAA says requiring airlines to temporarily stop flying Boeing's 787 Dreamliner. #BREAKING
FAA: Battery failures on Boeing 787s could damage critical systems and structures, spark fire, if not corrected
FAA: Will work with Boeing, airlines to develop corrective action plan to resume 787 operations as "quickly and safely as possible"
FAA: Decision to ground Boeing 787s prompted by second incident involving lithium ion battery failure
- FAA: Will also examine Boeing 787 batteries as part of comprehensive review announced last week
So, will Transportation Secretary Ray LaHood (i.e., the US government) perhaps reassess his conclusion from last week that the Dreamliner is "safe" or perhaps this too is just more teething problems... Or merely an ultra aggressive case of industrial sabotage from EADS? In other news, perhaps it is time to find a more appropriate name for the Dreamliner?

Finally we are surprised how nobody has figured out this simple and brilliant solution yet: put Solyndra solar panels on all Dreamliners and call it a day.

For those interest, here is more from Reuters:

The Federal Aviation Administration said on Wednesday it would temporarily ground Boeing Co's 787s after a second incident involving battery failures caused one of the Dreamliner passenger jets to make an emergency landing in Japan.

The FAA said airlines would have to demonstrate that the lithium ion batteries involved were safe before they could resume flying Boeing's newest commercial airliner, but gave no details on when that could occur.

Boeing could not be immediately reached for comment.

Perhaps if Boeing had been reached for comment, it would have said: 'Shouldn't the FAA have ascertained the safety of the lithium ion batteries before clearing our airplane for flight after years and years of delays?

The use of new battery technology is among the cost-saving features of the 787, which Boeing says burns 20 percent less fuel than rival jetliners using older technology.

"Burns" being a great example of using the right word at the right time.

and......

JPM and GS Earnings blurbs.....

http://www.zerohedge.com/news/2013-01-16/jpm-beats-thanks-ongoing-loan-loss-reserve-releases-nim-and-trading-revenues-decline

JPM Beats Thanks To Ongoing Loan Loss Reserve Releases; NIM And Trading Revenues Decline, CIO Posts Loss

Submitted by Tyler Durden on 01/16/2013 - 07:35

The much anticipated JPM earnings are out and while the company beat superficially, posting Q4 revenue of $24.4 billion vs expectations of $24.3 billion, and adjusted EPS of $1.35 "ex-items" vs expected $1.22, the real story as usual is below the surface. And in this case below the surface means what happens with the firm's Net Interest Margin, Trading Revenues, Loan Loss Reserve Releases and, of course, the busted "CIO and Treasury" aka London Whale unit. Starting with the last we have this: "Treasury and CIO reported anet loss of $157 million, compared with net income of $417 million in the prior year. Net revenue was a loss of $110 million, compared with net revenue of $845 million in the prior year. Net revenue included net securities gains of $103 million from sales of available-for-sale investment securities during the current quarter and principal transactions revenue of $99 million. Net interest income was a loss of $388 million due to low interest rates and limited reinvestment opportunities." JPM also warned to "Expect Treasury and CIO net loss of $300mm +/- in 1Q13; likely to vary each quarter." Funny how the once amazingly profitable CIO is no longer is a cash cow when it can't invest excess deposits and recycle reserves via repo into cornering the IG market. Finally, the Net Interest Margin, firmwide and core, declined by 3 and 7 bps respectively QoQ due to, per JPM, lower loan yields, lower yields on investment securities; limited reinvestment opportunities; and higher balances in Fed funds sold and certain secured financings. In other words, ZIRP continues to take its toll on a bank which can no longer be a hedge fund and which can't make money on the NIM curve.

http://www.zerohedge.com/news/2013-01-16/goldman-beats-solid-top-line-results-average-2012-employee-pay-rises-399506

Goldman Beats On Solid Top Line Results; Average 2012 Employee Pay Rises To $399,506

Submitted by Tyler Durden on 01/16/2013 - 08:01

Unlike JPM, there is little that can be faulted with Goldman's just released Q4 earnings, which saw total top-line surge to $9.24 billion on expectations of $7.83 billion, while net earnings printed at $2.822 billion, or $5.60 diluted, nearly double the $1.458 billion reported in Q3 and far above the $978MM in Q4 2011. This beat was driven by solid performance around the board, which was to be somewhat expected: after all this was a quarter of success for the world's most connected hedge fund, which saw one of its own rise to the top of the world's most venerable central bank: the Bank of England, and is certainly pining to have a Goldmanite replace Shirakawa as head of the BOJ in one month. Rhetoric aside, Goldman's performance was impressive, posting the best results since Q1 2012, when total revenues hit $9.9 billion. Increases were seen across all segments, with Investment banking rising to $1.4 billion, Equities up to $2.3 billion, Investment Management at $1.5 billion, and Investing and Lending, aka Prop (yes, the firm discloses it has a prop group, much to the dismay of many people out there apparently) of $1.973 billion. The only weak spot was FICC which while posting a solid $2.0 billion in revenue, actually declined from the $2.2 billion in Q3. Finally, while the comp benefits accrual taken in Q4 was only $1.976 billion, or 21.4% of revenues, on a blended TTM basis and based on the firm's 32,400 employees (down from 32,600 in Q3), this means that the average Goldman bonus in 2012 will be just under $400,000. This is up from $367,057 a year ago: a nearly 10% increase. At least someone's wages are going up.

and.....

http://www.zerohedge.com/news/2013-01-16/two-787-fleets-grounded-well-overnight-optimism

Two 787 Fleets Grounded, As Well As Overnight Optimism

Submitted by Tyler Durden on 01/16/2013 06:54 -0500

Those who went long Boeing in the last few days on hopes the "smoking battery" issue had been resolved, especially following Ray LaHood comment's he would fly the Dreamliner, which is rapidly becoming theNightmareliner for Boeing, anytime anywhere, are about to be grounded, as is the entire 787 fleet of All Nippon Airlines and Japan Airlines following yet another incident forcing an emergency Dreamliner landing. This happened after ANA "alarms indicated smoke in the forward area of the plane, which houses batteries and other equipment, the airline said, and there was a "burning-like smell" in the cockpit and parts of the cabin. The plane landed at Takamatsu airport in western Japan, where the 129 passengers were evacuated using the plane's emergency chutes. The plane also carried eight crew members. ANA said that the exact cause was still undetermined. The event was designated as a "serious incident" by Japan's transport ministry, setting off an immediate investigation by the Japan Transport Safety Board, which dispatched a team to the scene." The result - a 4% drop in the stock so far premarket, and if any more airlines are to ground their fleet the implications for the backlog could be devastating, it will only get far worse for both the company and the Dow Jones average, of which it is part.

Elsewhere, as we already reported, Germany cut its 2013 growth outlook to 0.4%, down from 0.7% in 2012. However, while Juncker yesterday launched the first shot of verbal intervention in an attempt to keep German exports strong, today ECB's Nowotny confirmed that the confusion in Europe is as prevalent as ever, following remarks that the "panic in markets over the EUR is over, and the exchange rate is not a matter of major concern", which pushed the EURUSD higher by some 50 pips. While these remarks directly negated Juncker's, they also made sure that the export-growth driven Germany's recession is here to stay as every yard higher in the EURUSD means, several German GDP ends up several ticks lower. Pick your poison.

In other news the earnings season revs up a gear today as JPMorgan and Goldman Sachs kick off the reporting season for the US investment banks (before US market open). This should set the tone for the rest of the banking sector who report over the following few days including Bank of America and Citigroup tomorrow and Morgan Stanley on Friday. For the record, the market is expecting EPS of $1.22 and $3.66 for JPM and GS respectively. Importantly though, in recent months Q4 expectations themselves have been raised by around 7% and 18% for JPM and GS respectively, according to Bloomberg data. Indeed, expectations for the broader financial sector as a whole are high, with the financials industry sector rallying more than 13% since the lows in mid-November (vs a 8.7% gain for the broader S&P500).

Deutsche Bank's recap continues: In terms of yesterday’s US session, it was a day of two halves as a weaker-than-expected Empire Manufacturing print (-7.8 vs 0.0 expected) and another 3% drop in Apple set the scene for a weak open. From there, the S&P500 managed a 0.6% intraday rally to close with a gain of 0.11%, taking the benchmark to a new post financial crisis high of 1472. Driving the rally was a better than expected retail sales number (+0.5% vs +0.2% expected) which as our US economists point out, came amidst a recent spate of weaker consumer sentiment indicators including the U of Michigan (72.9 Dec vs. 82.6 Oct) and Conference board surveys (65.1 Dec vs. 73.1 Oct). Indeed retail stocks (+0.75%) outperformed on the day led by JC Penney (+3.4%), Tiffany’s (+3.3%) and Macy’s (+2.2%) – helping to offset another weak day for telecoms (-0.9%) and technology stocks (-0.6%). While on the topic of technology, Apple had its second consecutive day of +3% losses. Its stock price closed below $500/share for the first time since February 10th 2012 and is now about 31% below the all-time peak of $702 reached in mid-September 2012.

Across the Atlantic, the head of Fitch’s sovereign ratings team reiterated that another last minute US budget deal isn't consistent with a AAA rating, and the "self inflicted crisis" will put into question the predictability and reliability of US fiscal policy. The agency also said that the risks of the UK losing its AAA rating are increasing, adding that the Treasury's Autumn Statement that it would miss its 2015-16 target to start cutting the level of net debt had weakened the Treasury's "credibility".

In an interview in the FT, PM Rajoy said that his government’s reform programme will begin to bear fruit in the form of an economic recovery later this year, and will “come through very clearly in 2014”. Rajoy also called for expansionist policies from countries that could afford it, probably referring to Germany. Mr Rajoy also insisted that Spain was right not to request aid from the ECB last year - and ruled out any such move for the time being. Mr Rajoy suggested he would only consider OMT in the event of fresh market turmoil. "The option is there, and it would be absurd to rule it out for all time," the PM said. (FT) Turning to overnight markets, most Asian markets are trading with a weaker tone paced by losses on the Hang Seng (-0.22%) and Shanghai Composite (-0.56%).

The Nikkei (-2%) is underperforming broader regional markets, despite better than expected November machine orders (+3.9%mom vs +0.3% expected), partly driven by profit taking following four straight sessions of gains. The JPY is continuing to strengthen across the board following comments on the newswires from the LDP’s Secretary General that a weaker JPY may be of concern for some industries. Staying in Japan, the Nikkei reported that the Abe government will present successors to BoJ Governor Shirakawa and his two deputies around February 15th.

In other interesting headlines, the EU’s Jean-Claude Juncker said that Euro’s recent rise against major currencies had resulted in an exchange rate that was “dangerously high”. The comment drove a late selloff in EURUSD (-0.57%) yesterday, although it remains about 1.7% higher than before the ECB’s meeting last Thursday. On the topic of central banks, Boston Fed President Rosengren said that the Fed could enlarge asset purchases if it were to become necessary. He highlighted that the Fed would want to see about a 0.5ppt drop in unemployment before it would begin to decide whether to halt purchases.

Turning to the day ahead, the German government is expected to publish its annual economic report that is reported to revise down the country’s 2013 growth estimate to 0.5% from a previous estimate of 1% (Reuters). Eurozone CPI, Italian trade data for November and a German 10yr bund auction are the other highlights of today’s European calendar. In the US, December CPI, industrial production, the Fed’s beige book and the NAHB housing market index are the main data releases. But all eyes will be on the JPM and GS results which are due at 12 noon and 12:30pm London time respectively.

and......

http://globaleconomicanalysis.blogspot.com/2013/01/debt-doom-loop-in-spain-deficit-target.html

Tuesday, January 15, 2013 6:55 PM

"Debt Doom Loop" in Spain; Deficit Target Impossible Once Again; Bond Rally Masks European Macro Problems

Magicians at the ECB have temporarily convinced market participants that Europe is in some sort of recovery. It isn't.

All of Europe is now in recession, including Germany as noted earlier today in German Economy Shrinks Most in Three Years; Situation Significantly Worse Than Mood.

"Debt Doom Loop in Spain"

Bloomberg reports Draghi's Bond Rally Masks Trapping Spain Debt Doom Loop.

The bond rally has sent Spanish borrowing That costs to 10-month lows has distracted attention from the nation's growing debt pile.

Spain's budget deficit probably exceeded 9 percent for a fourth year in 2012 as Europe 's highest unemployment rate, a third recession in four years and the cost of bailing out its banks offset almost all of the government's 62 billion euros ($ 83 billion) of spending cuts and tax Increases, According To Economists at Societe Generale SA (GLE) , Lombard Street Research and the Madrid-based Applied Economic Research Foundation.

Total debt will reach 97 percent of gross domestic product This year, the International Monetary Fund forecasts.

"This is a classic example of the doom loop," Societe Generale's London-based chief European economist, James Nixon, said in a telephone interview Jan. 10. "They just Are not making any progress."

"It's very Difficult To Have promised at home and abroad to deficit of 6 percent and to end up Recognizing That You have almost 9 percent," Deputy Prime Minister Soraya Saenz de Santamaria said today, Referring to the 2011 budget figures delivered by the previous Socialist administration. Pledged Rajoy to deliver a deficit of 6.3 percent for 2012.

'Recovering Confidence'

"We are recovering confidence and credibility Which is Something That is lost very Quickly and Is Difficult to regain," Saenz added in an interview on Antena 3 TV.

No Credibility

There is no credibility and if there is any confidence, there shouldn't be. Yields in Spain, Italy, and Portugal have crashed, but I wonder for how long.

Italy and Spain are known basket cases. More importantly, France, the Hidden Zombie in Europe, is about to take a deep plunge.

"Confidence" may be robust for now, but it's all a mirage based on low rates that cannot last and the foolish notion that Europe has turned the corner just as Germany and France head down the sinkhole.

Mike "Mish" Shedlock

Catharsis Ours

Wednesday, January 16, 2013