13:10 Divisas: "¿Insinuará algo Draghi?"
Bankinter
Eurodólar (€/$). El cruce permaneció estable durante la semana pasada teniendo en cuenta las caídas bursátiles. Esta semana la atención seguirá en el crudo y en una macro que arroja señales mixtas a ambos lados del Atlántico. En este escenario, sólo veríamos al euro depreciarse de nuevo si Draghi insinuara algo el jueves. Si no, lo más probable es que el cruce siga moviéndose dentro del rango estimado semanal: 1,08-1,10.
14:17 Facebook: resistencia clave de corto plazo en 108
Trading Central
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Punto pivote (nivel de invalidación): 108
Nuestra preferencia: posiciones cortas debajo de 108 con objetivos en 90 y 82 en extensión.
Escenario alternativo: arriba de 108 buscar mayor indicación al alza con 116,7 y 125,2 como objetivos.
Comentario técnico: el RSI apoya la noción de un mayor descenso.
Este tipo de petróleo car por debajo de 0$ barril
Lunes, 18 de Enero del 2016 - 14:57:00
El petróleo es tan abundante y barato en los EE.UU. que al menos un comprador dice que tendría que pagar para vender un cierto tipo de crudo de baja calidad. Flint Hills Resources LLC, la división de refino del imperio industrial de los hermanos multimillonarios Charles y David Koch, dijo que pagaría -0,50 dólares por barril por el North Dakota Sour, un petróleo con alto grado de contenido de azufre, de acuerdo con los precios listados en su sitio web.
Ello representa una caída de $13.50 por barril desde hace un año y los $47,60 marcados en enero de 2014.
Mientras que el precio negativo se debe a la falta de capacidad de los gasoductos para una variedad particular de crudo de ultra baja calidad, pone de relieve lo mal que están las cosas en el mercado del petróleo de Estados Unidos.
Los precios del petróleo de referencia se han derrumbado más de 70 por ciento en los últimos 18 meses.
"Los productores que tienen que pagar para vender su aceite da a los productores un montón de incentivos para cerrar sus pozos", dijo Andy Lipow, presidente de Lipow Oil Associates LLC en Houston.
Nuevo deterioro en las perspectivas de inflación
Lunes, 18 de Enero del 2016 - 15:53:00
El debate sigue siendo intenso en los bancos centrales. En Europa, sobre la necesidad o no de ampliar las medidas expansivas. En USA, sobre el ritmo de normalización monetaria a corto plazo.
En Japón, sobre la ampliación de las medidas monetarias expansivas ante sus potenciales riesgos a medio y largo plazo.
En definitiva, son todas cuestiones que no recordaba desde que se puso en funcionamiento el QE en USA al principio de la Crisis.
Pero, en ninguno de los tres importantes bancos centrales se está debatiendo otra cuestión quizás más relevante: ¿cómo enfrentarse al nuevo deterioro que observamos en las expectativas de inflación a nivel mundial?
En la zona EUR el breakeven de inflación 5 años cae por debajo de 1.6 %, el nivel más bajo desde octubre pasado.
En USA ha caído hasta 1.17 %, con el plazo 10 años en niveles bajos de 1.45 %.
Muestra precisamente la correlación histórica entre las expectativas de inflación y los precios del crudo. Una relación significativa que rebate cualquier sesudo estudio sobre la menor dependencia del crudo de la economía norteamericana. Al menos, en términos de expectativas.
El precio del crudo cerró el viernes en su nivel más bajo de los últimos años, incluso por debajo de los niveles que vimos en 2009 por debajo de 30 $ barril. Y con ello, entre otras cosas, arrastró a la baja al resto de los activos (financieros) de riesgo.
Las preguntas son evidentes:
1. ¿Se está sobrereaccionando ante la debilidad de los precios del crudo?
2. ¿Se está subestimando la resistencia de la economía norteamericana?
3. ¿Se está sobreestimando el impacto negativo de la inestabilidad de los mercados financieros sobre el crecimiento?
4. ¿Se está infravalorando la posible reacción de la Fed
El último punto es especialmente relevante en este momento. En definitiva, ¿hasta qué punto la fortaleza del empleo USA más que compensa el riesgo derivado de la inestabilidad financiera en un contexto de bajas expectativas de inflación? Al final, es el otro debate que se centra en determinar cual es el indicador más eficiente de la evolución de la inflación en el futuro. La Fed se enfoca en la situación doméstica USA, dando por hecho una respuesta afirmativa a las tres primeras preguntas anteriores. Es un debate interesante, pero costoso como estamos viendo desde el inicio del año.
¿Y el ECB? Sigo pensando que la combinación de desapalancamiento y bajas expectativas de inflación requiere más medidas expansivas desde el ECB. Pero, tras la decisión de diciembre, parece complicado que se tomen ahora. Probablemente en marzo.
José Luis Martínez Campuzano
Estratega de Citi en España
Oro sube ante caída de acciones y desplome del petróleo a mínimo de doce años
El oro subía hoy mientras los precios del petróleo tocaban mínimos de 12 años y las acciones europeas caían por la persistente preocupación sobre el crecimiento global, lo que llevaba a los inversores a buscar activos más seguros.
Sin embargo, los avances del metal precioso se veían limitados por la fortaleza del dólar y un repunte del crudo desde mínimos previos, lo que generaba cierto alivio en la aversión al riesgo que el viernes disparó un alza del oro del 1%.
A las 1035 GMT, el oro al contado subía 0.1%, a 1,089.90 dólares la onza, mientras que los futuros del metal en Estados Unidos para entrega en febrero perdían 90 centavos, a 1,089.80 dólares la onza.
Los precios del oro han aumentado casi un 3% en lo que va del año, después de que una serie de datos económicos débiles de China y una nueva caída del yuan a comienzos de enero provocaron una liquidación de acciones locales que se propagó a los mercados globales.
Los precios del crudo tocaron su menor nivel desde fines del 2003 debido a que los mercados esperan más exportaciones iraníes tras el levantamiento durante el fin de semana de las sanciones internacionales contra ese país.
Las acciones europeas caían 0.1% el lunes y los títulos asiáticos se desplomaron a su mínimo desde 2011 durante la noche, ya que los inversores huían de los activos de riesgo después de datos económicos débiles en Estados Unidos.
Entre otros metales preciosos, el platino caía 0.9%, a 821.66 dólares la onza; la plata bajaba 0.2%, a 13.89 dólares la onza; y el paladio retrocedía 0.3%, a 489.47 dólares la onza. gestion.pe
Publicado el Lunes, 18 de Enero del 2016
Precio del dólar sube al cierre de la jornada por escasa liquidez
El precio del dólar subió frente al sol al cierre de la sesión de hoy, en un día en que el día no laborable en Estados Unidos hizo que haya una escasez de moneda extranjera en el mercado local frente a la demanda de los agentes económicos.
Efectivamente, el precio de venta del dólar interbancario (entre bancos) terminó en 3.434 soles, nivel superior al de la jornada de la víspera donde se ubicó en 3.430 soles.
La cotización de venta del dólar en el mercado paralelo o casas de cambio se situó en 3.44 soles en horas de la tarde, mientras que en las ventanillas de los principales bancos se ubicó en 3.610 soles en promedio.
Depreciación
Con estos datos, el sol se depreció 0.59 por ciento en lo que va del año, teniendo en cuenta que el precio del dólar cerró hoy en 3.434 soles.
Según el ente emisor, el dólar mostró hoy un nivel mínimo de 3.428 soles y máximo de 3.434 soles en la jornada de hoy, además de un precio promedio de 3.4302 soles. Andina
Publicado el Lunes, 18 de Enero del 2016
Cuatro arbitrajes le cuestan S/.54 millones a gobierno peruano
Defender al Estado en cuatro procesos de arbitraje internacional, a los que el Perú está sometido por los TLC, demandan unos S/ 53 millones solo en la contratación de dos estudios de abogados estadounidenses, según difundió el portal Gran Angular.
En concreto, el Estado peruano ha gastado S/. 53’897,000 (US$ 15’852,065.17) en defenderse de las controversias con Renco Group, DP World Callao SRL, Eceteco Internacional Company S.L. y Bear Creek Mining Corporation.
Este monto corresponde a los pagos que viene ejecutando el Ministerio de Economía y Finanzas (MEF) a dos estudios de abogados estadounidenses: White & Case LLP y Sidley Austin LLP.
Según la información que ha publicado Gran Angular, por gastos más fuertes en la defensa corresponden al caso Renco Group: más de S/ 19 millones (US$ 5’730,769.27).
Esta empresa que estuvo a cargo de la administración del Complejo Metalúrgico de La Oroya, tiene un largo historial de contaminación y procesos internacionales por la afectación de la salud de la población, y que colocó a La Oroya como una de las ciudades más contaminadas del mundo.
Esta empresa inició un proceso arbitral en el año 2010 en contra del Estado peruano por US$ 800 millones, alegando diversos incumplimientos al Tratado de Libre Comercio (TLC) suscrito entre EE.UU. y Perú.
Así, las empresas se valen de los TLC u otros acuerdos internacionales para llevar a los Estados a los tribunales del arbitraje internacional. En los cuatro casos que viene siendo sometido el Perú, las cifras de las demandas interpuestas por las empresas oscilan los S/ 7,752 millones (US$ 2,280 millones), monto que supera el presupuesto total de todos los programas sociales del país para el año 2016 (Juntos, Pensión 65, Cuna más, Qali Warma, Haku Wiñay, Vida digna y Servicio vidas, entre otros).
Pese a que el Estado viene enfrentando diversos litigios internacionales sigue firmando TLC sin redefinir sus mecanismos de protección. De acuerdo al Ministerio de Comercio Exterior y Turismo (Mincetur), el Perú tiene 20 tratados internacionales en vigencia, cuatro por entrar en vigencia y cuatro en negociación.
En América Latina los países que se han visto envueltos en un mayor número de demandas han sido Venezuela, Ecuador, Bolivia y Argentina, los tres primeros han decidido denunciar al CIADI (Centro Internacional de Arreglo de Diferencias relativas a Inversiones, adscrito al Banco Mundial).
Mientras, otros Estados han decidido no continuar con el actual sistema de protección de inversiones, como China, India, Indonesia, Sudáfrica y Australia, este último tomó como posición oficial rechazar toda posibilidad de incluir al arbitraje internacional como método de solución de controversias en sus Acuerdos Internacionales de Inversión (AII), tras ver como se iniciaba por parte de Philip Morris un procedimiento arbitral que impugnaba la adopción de medidas gubernamentales antitabaco.
Un estudio realizado por Hildegard Rondón: Los problemas jurídicos planteados en los arbitrajes internacionales de inversión, 2009, afirma que con los Tratados Bilaterales de Inversión, que firman los Estados para favorecer una inversión extranjera, se abre la oportunidad de demandar al Estado, lo que hacen es “proteger la inversión y proteger al inversionista”.
Y pone como ejemplo a Brasil, que no pertenece al CIADI y que no reconoce cláusulas de arbitraje y que, sin embargo, es el país que cuenta con mayores inversionistas extranjeros en Sudamérica, y es a la vez un país con mucha inversión en la región, tirando con ello por la borda el discurso que los acuerdos de inversión, es la única vía para obtener la inversión extranjera.
Publicado el Lunes, 18 de Enero del 2016
Lunes 18/01/16 Feriado por Martir L. King
36 mensajes
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Re: Lunes 18/01/16 Feriado por Martir L. King
por Fenix » Lun Ene 18, 2016 6:31 pm
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 18/01/16 Feriado por Martir L. King
por Fenix » Lun Ene 18, 2016 6:51 pm
"How The Investment Grade Dominos Will Fall" - UBS Explains
Submitted by Tyler D.
01/16/2016 - 20:42
As a potential worst case scenario, we use the simple sum of probabilities from 2001- 2002 and the current debt stock as an example of what could happen during a protracted downturn. If this comes to fruition, we estimate fallen angel volumes over 2 years could spike to $413bn, with $117bn of 10+ fallen angel paper (again crashing into a 10+ HY market that is only $48bn in size). This is an ugly spectre that the high-grade markets would need to face in future years.
Exclusive: Dallas Fed Quietly Suspends Energy Mark-To-Market On Default Contagion Fears
Submitted by Tyler D.
01/17/2016 - 11:21
The Dallas Fed met with the banks a week ago and effectively suspended mark-to-market on energy debts and as a result no impairments are being written down. Furthermore, as we reported earlier this week when first nothing the rumor, the Fed indicated "under the table" that banks were to work with the energy companies on delivering without a markdown on worry that a backstop, or bail-in, was needed after reviewing loan losses would exceed the current tier 1 capital tranches.
Mid-East Massacre: Qatar Crashes, Saudi Stocks Plunge Most Since Black Monday
Submitted by Tyler D.
01/17/2016 - 12:41
Broad middle-east and african stock markets crashed over 5%, erasing any gains back to November 2008 as the carnage from last week continues. From Kuwait (-4.3%) to Qatar (-8%) it was a bloodbath as Saudi Arabia Tadawul Index plunged 5.4% - the most since Black Monday (now down over 50% from their 2014 highs). These losses are far in excess of US 'catch-up' moves and suggest a dark cloud over Asia this evening.
Iran Unleashes Oil Flood, Will Quintuple Crude Revenue In 2016
Submitted by Tyler D.
01/17/2016 - 13:31
Iran is about to get a lot richer and according to President Rouhani
JPM Explains How Crude Carnage Creates $75 Billion SWF "Contagion" For Equities
Submitted by Tyler D.
01/17/2016 - 13:50
"Assuming selling in accordance to the average allocation of FX Reserve Managers and SWF across asset classes, we estimate that the sales of bonds by oil producing countries will increase from -$45bn in 2015 to -$110bn in 2016 and that the sales of public equities will increase from -$10bn in 2015 to -$75bn in 2016."
US Bank Counterparty Risk Soars After Energy MTM Debacle
Submitted by Tyler D.
01/17/2016 - 14:21
A few dots are starting to be connected now that we have exposed the debacle of The Fed's decision to allow banks to mark-to-unicorn their energy loans. "Something" was wrong in recent weeks as the TED-Spread surged (implying rising counterparty uncertainty among banks) and then the last week - since The Fed's alleged meeting with banks - has seen financial credit and stocks crash. 2008 all-over-again as "when in doubt, sell 'em all" is back for the US financial system.
Cracks At The Core Of The Core
Submitted by Tyler D.
01/17/2016 - 14:50
It is the “Core of the Core” that now concerns us the most. That is where Federal Reserve (and global central bank) policies have left their greatest mark. It is at the “Core of the Core” where momentous misperceptions and market mispricing have become deeply entrenched. It’s the “Core of the Core” that has attracted enormous amounts of “money” over recent years. It’s also here where I believe leverage has quietly been used most aggressively. Over recent years it became one massive Crowded Trade. Now the sophisticated players must contemplate beating the unsuspecting public to the exits.
What Just Happened With OIL?
Submitted by Tyler D.
01/17/2016 16:55 -0500
Yesterday, we reported exclusively how the Dallas Fed is pulling strings behind the scenes to conceal the fallout from the oil market crash. As Dark-Bid.com's Daniel Drew notes, by suspending mark-to-market on energy loans and distorting the accounting, they are postponing the inevitable as long as possible. The current situation is eerily reminiscent to the heyday of the mortgage market in 2007, when mortgage defaults started to pick up, and yet the credit default swaps that tracked them continued to decline, bringing losses to those brave enough to trade against the crowd.
Amidst the market chaos on Friday, a trader brought something strange to my attention. He asked me exactly what the hell was going on with this ETN he was watching. I took a closer look and was baffled. It took me awhile to put the pieces together. Then when I saw the story about mark-to-market being suspended, it all made sense.
Here is the daily premium for the last 6 months on the Barclays iPath ETN that tracks oil:
Initially, Dark-Bid.com's Daniel Drew thought this was merely a sign of retail desperation. As they faced devastating losses on their oil stocks, small investors turned to products like oil ETNs as they tried to grasp the elusive oil profits their financial adviser promised them a year ago. Oblivious to the cruel mechanics of ETNs, they piled in head first, in spite of the soaring premium to fair value. After all, Larry Fink is making the rounds to convince the small investor that ETFs are indeed safer than mutual funds. Because nothing says "safe" like buying an ETN that is 36% above its fair value.
Sure, there are differences between ETFs and ETNs, particularly regarding their solvency in the event of an issuer default, but the premium/discount problem plagues ETFs and ETNs alike. Nonetheless, widely trusted retail sources of investment information perpetuate the myth that ETNs do not have tracking errors.
But was it just retail ignorance?
Something remarkable happened in the last hour of trading on Friday which sparked the massive decoupling in OIL from its NAV...
Making us wonder, was an 'invisible hand' at play? Or was this just more evidence of OPEX-inspired broken markets?
As Dark-Bid.com's Daniel Drew so eloquently concludes,
With the oil fallout quickly spreading, the Fed is resorting to behind-the-scenes manipulation of energy debt, and now, that apparently includes oil ETNs as well.
Is anything too much (too off limits, too conspiracy wonk) for them? Do they really think the ETF tail can wag the oil complex dog and rescue the disastrous MtM values of the US banking system's energy loans?
Submitted by Tyler D.
01/16/2016 - 20:42
As a potential worst case scenario, we use the simple sum of probabilities from 2001- 2002 and the current debt stock as an example of what could happen during a protracted downturn. If this comes to fruition, we estimate fallen angel volumes over 2 years could spike to $413bn, with $117bn of 10+ fallen angel paper (again crashing into a 10+ HY market that is only $48bn in size). This is an ugly spectre that the high-grade markets would need to face in future years.
Exclusive: Dallas Fed Quietly Suspends Energy Mark-To-Market On Default Contagion Fears
Submitted by Tyler D.
01/17/2016 - 11:21
The Dallas Fed met with the banks a week ago and effectively suspended mark-to-market on energy debts and as a result no impairments are being written down. Furthermore, as we reported earlier this week when first nothing the rumor, the Fed indicated "under the table" that banks were to work with the energy companies on delivering without a markdown on worry that a backstop, or bail-in, was needed after reviewing loan losses would exceed the current tier 1 capital tranches.
Mid-East Massacre: Qatar Crashes, Saudi Stocks Plunge Most Since Black Monday
Submitted by Tyler D.
01/17/2016 - 12:41
Broad middle-east and african stock markets crashed over 5%, erasing any gains back to November 2008 as the carnage from last week continues. From Kuwait (-4.3%) to Qatar (-8%) it was a bloodbath as Saudi Arabia Tadawul Index plunged 5.4% - the most since Black Monday (now down over 50% from their 2014 highs). These losses are far in excess of US 'catch-up' moves and suggest a dark cloud over Asia this evening.
Iran Unleashes Oil Flood, Will Quintuple Crude Revenue In 2016
Submitted by Tyler D.
01/17/2016 - 13:31
Iran is about to get a lot richer and according to President Rouhani
JPM Explains How Crude Carnage Creates $75 Billion SWF "Contagion" For Equities
Submitted by Tyler D.
01/17/2016 - 13:50
"Assuming selling in accordance to the average allocation of FX Reserve Managers and SWF across asset classes, we estimate that the sales of bonds by oil producing countries will increase from -$45bn in 2015 to -$110bn in 2016 and that the sales of public equities will increase from -$10bn in 2015 to -$75bn in 2016."
US Bank Counterparty Risk Soars After Energy MTM Debacle
Submitted by Tyler D.
01/17/2016 - 14:21
A few dots are starting to be connected now that we have exposed the debacle of The Fed's decision to allow banks to mark-to-unicorn their energy loans. "Something" was wrong in recent weeks as the TED-Spread surged (implying rising counterparty uncertainty among banks) and then the last week - since The Fed's alleged meeting with banks - has seen financial credit and stocks crash. 2008 all-over-again as "when in doubt, sell 'em all" is back for the US financial system.
Cracks At The Core Of The Core
Submitted by Tyler D.
01/17/2016 - 14:50
It is the “Core of the Core” that now concerns us the most. That is where Federal Reserve (and global central bank) policies have left their greatest mark. It is at the “Core of the Core” where momentous misperceptions and market mispricing have become deeply entrenched. It’s the “Core of the Core” that has attracted enormous amounts of “money” over recent years. It’s also here where I believe leverage has quietly been used most aggressively. Over recent years it became one massive Crowded Trade. Now the sophisticated players must contemplate beating the unsuspecting public to the exits.
What Just Happened With OIL?
Submitted by Tyler D.
01/17/2016 16:55 -0500
Yesterday, we reported exclusively how the Dallas Fed is pulling strings behind the scenes to conceal the fallout from the oil market crash. As Dark-Bid.com's Daniel Drew notes, by suspending mark-to-market on energy loans and distorting the accounting, they are postponing the inevitable as long as possible. The current situation is eerily reminiscent to the heyday of the mortgage market in 2007, when mortgage defaults started to pick up, and yet the credit default swaps that tracked them continued to decline, bringing losses to those brave enough to trade against the crowd.
Amidst the market chaos on Friday, a trader brought something strange to my attention. He asked me exactly what the hell was going on with this ETN he was watching. I took a closer look and was baffled. It took me awhile to put the pieces together. Then when I saw the story about mark-to-market being suspended, it all made sense.
Here is the daily premium for the last 6 months on the Barclays iPath ETN that tracks oil:
Initially, Dark-Bid.com's Daniel Drew thought this was merely a sign of retail desperation. As they faced devastating losses on their oil stocks, small investors turned to products like oil ETNs as they tried to grasp the elusive oil profits their financial adviser promised them a year ago. Oblivious to the cruel mechanics of ETNs, they piled in head first, in spite of the soaring premium to fair value. After all, Larry Fink is making the rounds to convince the small investor that ETFs are indeed safer than mutual funds. Because nothing says "safe" like buying an ETN that is 36% above its fair value.
Sure, there are differences between ETFs and ETNs, particularly regarding their solvency in the event of an issuer default, but the premium/discount problem plagues ETFs and ETNs alike. Nonetheless, widely trusted retail sources of investment information perpetuate the myth that ETNs do not have tracking errors.
But was it just retail ignorance?
Something remarkable happened in the last hour of trading on Friday which sparked the massive decoupling in OIL from its NAV...
Making us wonder, was an 'invisible hand' at play? Or was this just more evidence of OPEX-inspired broken markets?
As Dark-Bid.com's Daniel Drew so eloquently concludes,
With the oil fallout quickly spreading, the Fed is resorting to behind-the-scenes manipulation of energy debt, and now, that apparently includes oil ETNs as well.
Is anything too much (too off limits, too conspiracy wonk) for them? Do they really think the ETF tail can wag the oil complex dog and rescue the disastrous MtM values of the US banking system's energy loans?
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 18/01/16 Feriado por Martir L. King
por Fenix » Lun Ene 18, 2016 7:21 pm
"China Banks Seem To Be Doing Whatever They Can To Avoid Paying Anyone In Dollars"
Submitted by Tyler D.
01/17/2016 - 17:53
What has been going on lately? Well if there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars. We are hearing the following...
Oil Plunges To $28 Cycle Lows As Iran Supply Looms, Stocks Slide
Submitted by Tyler D.
01/17/2016 - 18:05
February WTI Crude futures have plunged to new cycle lows at $28.60 (down 2.7%) as Iran supply looms over an already over-glutted global crude market. Brent is down even more (-3.7%). Dow futures are down 60 points at the open.
Wells Fargo's Problem Emerges: $17 Billion In Junk Energy Exposure
Submitted by Tyler D.
01/17/2016 - 18:37
<Q - Mike L. Mayo>: What percent of the $17 billion is not investment grade?
<A - John R. Shrewsberry>: I would say most of it. Most of it.
<Q - Mike L. Mayo>: So most of the $17 billion is non-investment grade.
<A - John R. Shrewsberry>: Correct.
Foreign Central Banks Furiously Dump US Treasuries: Record $47 Billion Sold In First Two Weeks Of 2016
Submitted by Tyler D.
01/17/2016 - 18:58
According to the latest Fed data, after a drop of $12 billion in the first week of the year, another $34.5 billion in Treasurys held in custody was sold in the week ended January 13, bringing the total to just $2.962 trillion, below the previous recent low recorded in early November, and at levels not seen since April 2015. Adding up the flows from the first two weeks of the year reveals the worst and most custody holdings "outflowing" start to the year in history.
Japanese Stocks Enter Bear Market, Credit Risk Surges To 20-Month Highs
Submitted by Tyler D.
01/17/2016 - 19:19
"It’s difficult to see the fall stopping today," warned one Japanese equity strategist and rightly so as Japan's broad TOPIX idnex just entered a bear markets (down 20% from the August 2015 highs). With the Nikkei well below 17,000, Kuroda is due to speak at the Diet today as Japanese corporate bond risk surges to 20-month highs.
Wells Fargo Is Bad, But Citi Is Worse
Submitted by Tyler D.
01/17/2016 - 19:28
"While we are taking what we believe to be the appropriate reserves for that, I'm just not prepared to give you a specific number right now as far as the amount of reserves that we have on that particular book of business."
Saudi Arabia Is Buying Up American Farmland To Export Agricultural Products Back Home
Submitted by Tyler D.
01/17/2016 - 20:00
The Saudis are explicitly conserving their own resources at home, while exploiting land and water supplies here in America. “We’re letting them come over here and use up our resources. It’s very frustrating for me, especially when I have residents telling me that their wells are going dry and they have to dig a lot deeper for water. It’s costly for them to drill new wells."
The Fed's Stunning Admission Of What Happens Next
Submitted by Tyler D.
01/17/2016 - 21:31
"The events of 1929 taught us that the absence of any rise in prices did not prove that no crisis was pending. 1937 has taught us that an abundant supply of gold and a cheap money policy do not prevent prices from falling."
Here Is The Stealthy Way Some Are Betting On A Market Crash
Submitted by Tyler D.
01/17/2016 - 21:50
Credit markets have been warning of a looming crisis for months...
And as the cost of protecting against credit collapse has soared so the cost of protecting against equity downside (VIX) has started to awaken:
However, as we detailed previously, more than a few market participants have turned to deep out-of-the-money options to protect themselves against drastic downside (pushing the skew - the relative cost of crisis protection over 'normal' protection - to record highs).
And so, with the cost of protection so high, traders are looking for cheaper alternatives.
Since the Fed folded in September (under the same conditions that are playing out now), basically admitting it is terrified to raise rates and willing to backtrack due to market fragility, IceFarm Capital's Michael Green explains, it appears many market participants are piling into par Eurodollar calls:
[the chart shows the cumulative open interest in par calls on eurodollar futures contracts that expire in 2016 and 2017 - basically options on short-term interest rates with a strike price of zero, such that they pay out if the Fed takes rates negative]
When queried whether this is indeed a trade to bet on a market drop, Michael Green responded as follows:
[A reader] thought this might be an attempt by hedge funds to hedge out their exposure to rising interest rates very cheaply.
My initial idea was that it actually could be a bet on negative rates (if for some reason the Fed had to come back into the picture with QE4).
The bottom line: "Deep OTM puts on the S&P are very expensive while par ED calls are relatively cheap. In my view, we are that inflection point where the Fed is going to start to waffle…the bear market beckons and they will not be able to stick with their interest rate guidance. Of course, markets tend to frown on Central Bankers revealed as less than omniscient..."
And the market is already shifting to that opinion - as CME shows, no one trusts The Fed's dot-plots anymore:
Thus, the ED Par Calls are a direct proxy for The Fed's "Dow-Data-Dependent" policy (and given the surge in Open Interest, it seems more than a few agree).
Submitted by Tyler D.
01/17/2016 - 17:53
What has been going on lately? Well if there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars. We are hearing the following...
Oil Plunges To $28 Cycle Lows As Iran Supply Looms, Stocks Slide
Submitted by Tyler D.
01/17/2016 - 18:05
February WTI Crude futures have plunged to new cycle lows at $28.60 (down 2.7%) as Iran supply looms over an already over-glutted global crude market. Brent is down even more (-3.7%). Dow futures are down 60 points at the open.
Wells Fargo's Problem Emerges: $17 Billion In Junk Energy Exposure
Submitted by Tyler D.
01/17/2016 - 18:37
<Q - Mike L. Mayo>: What percent of the $17 billion is not investment grade?
<A - John R. Shrewsberry>: I would say most of it. Most of it.
<Q - Mike L. Mayo>: So most of the $17 billion is non-investment grade.
<A - John R. Shrewsberry>: Correct.
Foreign Central Banks Furiously Dump US Treasuries: Record $47 Billion Sold In First Two Weeks Of 2016
Submitted by Tyler D.
01/17/2016 - 18:58
According to the latest Fed data, after a drop of $12 billion in the first week of the year, another $34.5 billion in Treasurys held in custody was sold in the week ended January 13, bringing the total to just $2.962 trillion, below the previous recent low recorded in early November, and at levels not seen since April 2015. Adding up the flows from the first two weeks of the year reveals the worst and most custody holdings "outflowing" start to the year in history.
Japanese Stocks Enter Bear Market, Credit Risk Surges To 20-Month Highs
Submitted by Tyler D.
01/17/2016 - 19:19
"It’s difficult to see the fall stopping today," warned one Japanese equity strategist and rightly so as Japan's broad TOPIX idnex just entered a bear markets (down 20% from the August 2015 highs). With the Nikkei well below 17,000, Kuroda is due to speak at the Diet today as Japanese corporate bond risk surges to 20-month highs.
Wells Fargo Is Bad, But Citi Is Worse
Submitted by Tyler D.
01/17/2016 - 19:28
"While we are taking what we believe to be the appropriate reserves for that, I'm just not prepared to give you a specific number right now as far as the amount of reserves that we have on that particular book of business."
Saudi Arabia Is Buying Up American Farmland To Export Agricultural Products Back Home
Submitted by Tyler D.
01/17/2016 - 20:00
The Saudis are explicitly conserving their own resources at home, while exploiting land and water supplies here in America. “We’re letting them come over here and use up our resources. It’s very frustrating for me, especially when I have residents telling me that their wells are going dry and they have to dig a lot deeper for water. It’s costly for them to drill new wells."
The Fed's Stunning Admission Of What Happens Next
Submitted by Tyler D.
01/17/2016 - 21:31
"The events of 1929 taught us that the absence of any rise in prices did not prove that no crisis was pending. 1937 has taught us that an abundant supply of gold and a cheap money policy do not prevent prices from falling."
Here Is The Stealthy Way Some Are Betting On A Market Crash
Submitted by Tyler D.
01/17/2016 - 21:50
Credit markets have been warning of a looming crisis for months...
And as the cost of protecting against credit collapse has soared so the cost of protecting against equity downside (VIX) has started to awaken:
However, as we detailed previously, more than a few market participants have turned to deep out-of-the-money options to protect themselves against drastic downside (pushing the skew - the relative cost of crisis protection over 'normal' protection - to record highs).
And so, with the cost of protection so high, traders are looking for cheaper alternatives.
Since the Fed folded in September (under the same conditions that are playing out now), basically admitting it is terrified to raise rates and willing to backtrack due to market fragility, IceFarm Capital's Michael Green explains, it appears many market participants are piling into par Eurodollar calls:
[the chart shows the cumulative open interest in par calls on eurodollar futures contracts that expire in 2016 and 2017 - basically options on short-term interest rates with a strike price of zero, such that they pay out if the Fed takes rates negative]
When queried whether this is indeed a trade to bet on a market drop, Michael Green responded as follows:
[A reader] thought this might be an attempt by hedge funds to hedge out their exposure to rising interest rates very cheaply.
My initial idea was that it actually could be a bet on negative rates (if for some reason the Fed had to come back into the picture with QE4).
The bottom line: "Deep OTM puts on the S&P are very expensive while par ED calls are relatively cheap. In my view, we are that inflection point where the Fed is going to start to waffle…the bear market beckons and they will not be able to stick with their interest rate guidance. Of course, markets tend to frown on Central Bankers revealed as less than omniscient..."
And the market is already shifting to that opinion - as CME shows, no one trusts The Fed's dot-plots anymore:
Thus, the ED Par Calls are a direct proxy for The Fed's "Dow-Data-Dependent" policy (and given the surge in Open Interest, it seems more than a few agree).
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 18/01/16 Feriado por Martir L. King
por Fenix » Lun Ene 18, 2016 7:38 pm
Japan's Nikkei Closes Below 17,000 As Hong Kong Money-Markets 'Break' Again
Submitted by Tyler D.
01/18/2016 - 02:44
With Hong Kong Dollar spot little changed (but pressing the weaker end of its peg band) and 12-month forwards suggesting notable weakness/depegging to come, it appears that the Hong Kong interbank lending debacle is far from over. While overnight money appears stable, 1-week Yuan HIBOR is up 370bps at 11.90%, and 1-month and 3-Month HKD HIBOR just snapped higher ( to Jan 2013 highs and July 2010 highs respectively). It appears comments from Hong Kong Monetray Authority's Norman Chan that it's just a matter of time before outflow of funds lead to the local currency hitting the low end of the peg sparked heavy medium-term demand for liquidity. Offshore Yuan is crepping back weaker (as is crude) after an early bounce but NKY ended below 17,000 - for the first time since September.
Equity Futures Rise After Oil Rebounds From 12 Year Lows; US Markets Closed
Submitted by Tyler D.
01/18/2016 - 07:51
With the US closed today for Martin Luther King Holiday, global risk tone has once again been set entirely by oil, which opened sharply lower at fresh 12 year lows on fears of an Iran oil glut, but has steadily rebounded on the latest OPEC comments, and at last check both WTI and Brent were unchanged trading in the low $29's on muted volume. With Asian markets mixed, European shares swung between gains and losses, while the yen weakened as China stepped up efforts to curb foreign speculation against its currency. Crude oil rose from a 12-year low after the Organization of Petroleum Exporting Countries forecast a decline in supplies from rival producers.
Dow Dumps 150Pts Off Morning Highs As Oil Bounce Dies
Submitted by Tyler D.
01/18/2016 - 09:11
Remember when oil was in the green (because Iran was "priced in") and stocks were in the green (because China was "fixed") this morning? Well, that's over. The dip-buying algo's reflex has run the stops, filled the gaps to unchanged and now stocks and crude are turning lower once again.
Crude back in the red...
And stock-buying algos have run stops there too...
Negative Oil Prices Arrive: Koch Brothers' Refinery "Pays" -$0.50 For North Dakota Crude
Submitted by Tyler D.
01/18/2016 - 10:20
Do you have some extra space in your garage or attic? Or perhaps you own an oil tanker you aren’t currently using. Or maybe you have a storage unit that’s got a little extra room next to an old mattress and box springs. If so, you may want to call up oil producers in North Dakota and ask if they’d care to send you some free oil.
What Crisis Is The Gold/Oil Ratio Predicting This Time?
Tyler Durden's picture
Submitted by Tyler D.
01/18/2016 10:30 -0500
The number of barrels of oil that a single ounce of gold can buy has never, ever been higher.
For the last 30 years, when the ratio of gold-to-oil spikes, something systemically serious occurs globally (as opposed to the usual bullshit "this is transitory" statements).
So what happens next?
Glencore's "Investment Grade" Bonds Just Took Out September Crash Lows: Downgrade To Junk Imminent
Submitted by Tyler D.
01/18/2016 - 10:36
Glencore's 2021 bonds just hit a 5 year low, taking out the September crash levels, and trading at about 64 cents on the dollar. Following the recent junking of Noble Group which has sent its stock price to 12 year lows and hitning that a bankruptcy is now virtually inevitable, we expect Glencore to be junked any minute, with the ensuing cascade of margin and collateral calls testing just how "systematically unimportant" the world's largest commodity traders really are.
Francois Hollande Admits Socialist Policies Failed, Declares "Economic State Of Emergency"
Submitted by Tyler D.
01/18/2016 - 11:30
Remember when showing 'progress' in Europe was as simple as pointing to your high stock market or low bond yields to "prove" everything is awesome. Well for Francois Hollande, the days of hiding behing manipulated data are over and the open kimono reveals a nation whose stability is wracked by record unemployment. In a desperate-for-re-election speech today, socialist leader Hollande admitted his policies needed reform and that France is an economic "state of emergency."
Italian Banks Collapse, Short Sales Banned As Loan Loss Fears Mount
Submitted by Tyler D.
01/18/2016 - 12:40
Italian bank stocks are crashing (with BMPS down 40% year-to-date) as Reuters reports that investors are growing increasingly nervous about how the sector will cope with lower interest rates and a 200 billion euro ($218 billion) pile of loans that are unlikely to be repaid. The broad banking sector is down 4% with stocks suspended, and in light of this bloodbath, Italian regulators have decided in their wisdom, to ban short-selling of some bank stocks (which has driven hedgers into the CDS market, spking BMPS credit risk).
Submitted by Tyler D.
01/18/2016 - 02:44
With Hong Kong Dollar spot little changed (but pressing the weaker end of its peg band) and 12-month forwards suggesting notable weakness/depegging to come, it appears that the Hong Kong interbank lending debacle is far from over. While overnight money appears stable, 1-week Yuan HIBOR is up 370bps at 11.90%, and 1-month and 3-Month HKD HIBOR just snapped higher ( to Jan 2013 highs and July 2010 highs respectively). It appears comments from Hong Kong Monetray Authority's Norman Chan that it's just a matter of time before outflow of funds lead to the local currency hitting the low end of the peg sparked heavy medium-term demand for liquidity. Offshore Yuan is crepping back weaker (as is crude) after an early bounce but NKY ended below 17,000 - for the first time since September.
Equity Futures Rise After Oil Rebounds From 12 Year Lows; US Markets Closed
Submitted by Tyler D.
01/18/2016 - 07:51
With the US closed today for Martin Luther King Holiday, global risk tone has once again been set entirely by oil, which opened sharply lower at fresh 12 year lows on fears of an Iran oil glut, but has steadily rebounded on the latest OPEC comments, and at last check both WTI and Brent were unchanged trading in the low $29's on muted volume. With Asian markets mixed, European shares swung between gains and losses, while the yen weakened as China stepped up efforts to curb foreign speculation against its currency. Crude oil rose from a 12-year low after the Organization of Petroleum Exporting Countries forecast a decline in supplies from rival producers.
Dow Dumps 150Pts Off Morning Highs As Oil Bounce Dies
Submitted by Tyler D.
01/18/2016 - 09:11
Remember when oil was in the green (because Iran was "priced in") and stocks were in the green (because China was "fixed") this morning? Well, that's over. The dip-buying algo's reflex has run the stops, filled the gaps to unchanged and now stocks and crude are turning lower once again.
Crude back in the red...
And stock-buying algos have run stops there too...
Negative Oil Prices Arrive: Koch Brothers' Refinery "Pays" -$0.50 For North Dakota Crude
Submitted by Tyler D.
01/18/2016 - 10:20
Do you have some extra space in your garage or attic? Or perhaps you own an oil tanker you aren’t currently using. Or maybe you have a storage unit that’s got a little extra room next to an old mattress and box springs. If so, you may want to call up oil producers in North Dakota and ask if they’d care to send you some free oil.
What Crisis Is The Gold/Oil Ratio Predicting This Time?
Tyler Durden's picture
Submitted by Tyler D.
01/18/2016 10:30 -0500
The number of barrels of oil that a single ounce of gold can buy has never, ever been higher.
For the last 30 years, when the ratio of gold-to-oil spikes, something systemically serious occurs globally (as opposed to the usual bullshit "this is transitory" statements).
So what happens next?
Glencore's "Investment Grade" Bonds Just Took Out September Crash Lows: Downgrade To Junk Imminent
Submitted by Tyler D.
01/18/2016 - 10:36
Glencore's 2021 bonds just hit a 5 year low, taking out the September crash levels, and trading at about 64 cents on the dollar. Following the recent junking of Noble Group which has sent its stock price to 12 year lows and hitning that a bankruptcy is now virtually inevitable, we expect Glencore to be junked any minute, with the ensuing cascade of margin and collateral calls testing just how "systematically unimportant" the world's largest commodity traders really are.
Francois Hollande Admits Socialist Policies Failed, Declares "Economic State Of Emergency"
Submitted by Tyler D.
01/18/2016 - 11:30
Remember when showing 'progress' in Europe was as simple as pointing to your high stock market or low bond yields to "prove" everything is awesome. Well for Francois Hollande, the days of hiding behing manipulated data are over and the open kimono reveals a nation whose stability is wracked by record unemployment. In a desperate-for-re-election speech today, socialist leader Hollande admitted his policies needed reform and that France is an economic "state of emergency."
Italian Banks Collapse, Short Sales Banned As Loan Loss Fears Mount
Submitted by Tyler D.
01/18/2016 - 12:40
Italian bank stocks are crashing (with BMPS down 40% year-to-date) as Reuters reports that investors are growing increasingly nervous about how the sector will cope with lower interest rates and a 200 billion euro ($218 billion) pile of loans that are unlikely to be repaid. The broad banking sector is down 4% with stocks suspended, and in light of this bloodbath, Italian regulators have decided in their wisdom, to ban short-selling of some bank stocks (which has driven hedgers into the CDS market, spking BMPS credit risk).
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 18/01/16 Feriado por Martir L. King
por Fenix » Lun Ene 18, 2016 7:46 pm
With Bulls At A Decade Low An Oversold Bounce Is Imminent, But JPM Repeats To Sell Any Rips
Submitted by Tyler D.
01/18/2016 - 14:57
One week ago, and just days before Kolanovic again warned - correctly - that a market slump is imminent, JPM's "other" Croat, Mislav Matejka said to "Use Any Bounces As Selling Opportunities." Any bulls who listened to him are in less pain than those who didn't. So what does Matejka think now that all indices are in correction territory and a majority of stocks are in a bear market? The short answer: an oversold bounce is imminent. But what happens next? Well, as JPM itself admits - fade any initial rebound, and STFD.
Tenge Crashes As Low Oil Prices Take Dramatic Toll On Kazakh Economy
Submitted by Tyler D.
01/18/2016 - 15:30
With the lifting of Iran sanctions, the Tenge has crashed5% to record lows at 377/USD (extending the currencies collapse since the USD-peg was scrapped in August). Furthermore, oil production is entering a new year of decline this year in Kazakhstan - a dismal omen for a country so heavily reliant on energy exports.
America's Cash Flow Negative Energy Companies Have $325 Billion In Debt Among Them
Submitted by Tyler D.
01/18/2016 - 16:32
There are roughly 80 U.S. companies that had $100mm in LTM revenue and that had negative EBITDA less CapEx.
The combined market cap of these 80 companies is just shy of half a trillion dollars.
The combined Total Enterprise Value of these 80 companies is $775 billion.
The combined debt of these 80 companies is $325 billion.
Crash Risk & The Imminent Likelihood Of Recession
Submitted by Tyler D.
01/18/2016 - 17:00
"... there is presently an enormous chasm between the point where self-reinforcing selling pressure by speculators is likely to emerge, and the much lower point where balancing buying pressure by value-conscious investors is likely to support the market. Because every seller necessarily requires a buyer, the enormous gap between the two represents substantial crash risk."
"Countdown To The End": EU Officials Say Europe Is "Going Down The Drain"
Submitted by Tyler D.
01/18/2016 - 17:30
"We have until March, the summer maybe, for a European solution. Then Schengen goes down the drain. There is a big risk that Germany closes. From that, no Schengen ... There is a risk that February could start a countdown to the end."
Submitted by Tyler D.
01/18/2016 - 14:57
One week ago, and just days before Kolanovic again warned - correctly - that a market slump is imminent, JPM's "other" Croat, Mislav Matejka said to "Use Any Bounces As Selling Opportunities." Any bulls who listened to him are in less pain than those who didn't. So what does Matejka think now that all indices are in correction territory and a majority of stocks are in a bear market? The short answer: an oversold bounce is imminent. But what happens next? Well, as JPM itself admits - fade any initial rebound, and STFD.
Tenge Crashes As Low Oil Prices Take Dramatic Toll On Kazakh Economy
Submitted by Tyler D.
01/18/2016 - 15:30
With the lifting of Iran sanctions, the Tenge has crashed5% to record lows at 377/USD (extending the currencies collapse since the USD-peg was scrapped in August). Furthermore, oil production is entering a new year of decline this year in Kazakhstan - a dismal omen for a country so heavily reliant on energy exports.
America's Cash Flow Negative Energy Companies Have $325 Billion In Debt Among Them
Submitted by Tyler D.
01/18/2016 - 16:32
There are roughly 80 U.S. companies that had $100mm in LTM revenue and that had negative EBITDA less CapEx.
The combined market cap of these 80 companies is just shy of half a trillion dollars.
The combined Total Enterprise Value of these 80 companies is $775 billion.
The combined debt of these 80 companies is $325 billion.
Crash Risk & The Imminent Likelihood Of Recession
Submitted by Tyler D.
01/18/2016 - 17:00
"... there is presently an enormous chasm between the point where self-reinforcing selling pressure by speculators is likely to emerge, and the much lower point where balancing buying pressure by value-conscious investors is likely to support the market. Because every seller necessarily requires a buyer, the enormous gap between the two represents substantial crash risk."
"Countdown To The End": EU Officials Say Europe Is "Going Down The Drain"
Submitted by Tyler D.
01/18/2016 - 17:30
"We have until March, the summer maybe, for a European solution. Then Schengen goes down the drain. There is a big risk that Germany closes. From that, no Schengen ... There is a risk that February could start a countdown to the end."
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 18/01/16 Feriado por Martir L. King
por Fenix » Lun Ene 18, 2016 7:50 pm
Dollar-Based Investors Eviscerated in Global Stocks
01/18/2016 17:50 -0500
In Saudi Arabia, the Tadawul All Share Index plunged 5.4% on Sunday and dropped further on Monday before ticking up a smidgen. It’s at the lowest level since March 2011. Soothsayers blamed oil, and what Iran will do to the already oversupplied oil market now that the nuclear sanctions have been lifted. But Saudi stocks started losing it in September 2014 and have since collapsed 50%.
Russia’s MICEX stock market index is down only 13% from its high in November, 2015. But the RTSI dollar-calculated index of Russian shares plunged over 7% on Monday as I’m writing this, is down 40% since May 2015 and 70% since August 2011. Every big rally in between was followed by an even bigger slide. The major difference between the dollar-calculated RTSI and the ruble-calculated MICEX is the value of the ruble, which has plunged 2% today to 79.3 rubles to the dollar, a new all-time low. It’s down 57% against the dollar since mid-2014 and 64% since mid-2011. The Central Bank isn’t even trying anymore to prop it up.
China’s Shanghai Composite is down 44% from its high in June 2015. During that time, the yuan has dropped about 6% against the dollar. So dollar-based investors took an additional loss, with the total loss amounting to over 52% (not including transaction costs and fees).
Dollar-based investors, when they buy foreign stocks, make two bets: that those stocks rise; and that the currency of those stocks at least remains stable against the dollar. When they catch it right, with both stocks and currency going up, the returns can be breath-taking. But the opposite happens when both go down, as they’ve been doing recently. And dollar-based investors are getting totally crushed.
There has been a lot of moaning and groaning about the decline in US stocks, with the S&P 500 down 12% from its all-time high in May last year, the Dow down 13%, and the Nasdaq down 14%. After seven years of bull market, those declines have a bone-chilling effect. No one is used to losing money in stocks anymore. A whole new generation of traders and investors never experienced a big loss.
But those declines are still puny compared to what happened in past downdrafts in the US markets, and they’re puny compared what is already happening among the major indexes around the world. In fact, the beaten-down US indexes are the world’s best performers!
This chart shows the plunges or crashes of the major indexes since their respective recent highs in 2014 or 2015. The one exception is the dollar-calculated index of Russian stocks, the RTSI$, which has been a dreary affair all the way back to 2011; hence the decline calculated since that date.
Note the ever longer list of markets that have now dropped 20% or more from their recent highs (below the blue line) and are in what a lot of people call a bear market. India’s Sensex and the Nikkei are a hair away from sinking below the blue line (US as of Friday close, Toronto as of Monday morning, Asia as of Monday close, Europe as of Monday afternoon):
Global-stock-exchanges-market-rout-2016-01-18
So, add those equities-based losses to the currency-based losses for dollar-based investors, and suddenly some of these indexes are starting to look like the dollar-calculated RTSI. For dollar-based investors, it has been brutal out there.
So why can’t central banks step in and stem the bleeding and restart the good times?
The answer lies in the Eurozone: France is down 21% from the highs in April; Germany 23%; Spain 29%; and Italy takes the crown with a 45% plunge.
These are the big four economies of the Eurozone. In early 2015, the ECB has unleashed a massive wave of QE and inflicted negative deposit rates on the Eurozone in an effort to flog savers until their mood improves and to drive asset prices up into the sky to create that special wealth effect. That worked wonderfully during the run-up before the well-telegraphed QE and NIRP became reality. But since April, the wealth effect has reversed. The ECB has since enhanced QE, but stock market losses have only increased.
Turns out, our delicious central-bank alphabet soup of QE, ZIRP, and NIRP is losing its effectiveness in inflating stock prices. In fact, it may have the opposite effect. Also look at Japan and Sweden. Despite massive QE programs by their central banks, their stock markets have dropped 19% and 24% respectively.
There’s no longer any guarantee that QE, even a much hoped-for QE4 in the US, will re-inflate stock markets. That era has passed. Central banks have lost their aura of omnipotence. And thus, they’ve lost their omnipotence.
However, when it comes to government bonds, central banks still rule; QE, ZIRP, and NIRP still pump up bond prices and repress yields. Hence the low yields prevailing in fiscally challenged countries such as Japan and Italy. But at the low end of corporate bonds in the US — the lower end of junk bonds — the bottom has already fallen out, and rot is creeping up the rating scale.
A special mention is due Canadian stocks. The TSX has been beaten down 28% since August 2014. Canada is in part a resource economy. Oil & gas, metals & mining, agricultural commodities, lumber, etc. have gotten caught up in a vicious commodities rout. But other stocks have gotten hammered too, including Canada’s formerly must-own hedge-fund darling and stock-market giant Valeant.
During the time that the TSX swooned from its high in August 2014, the Canadian dollar also dropped 25% against the US dollar. A nightmare for USD-based investors.
For instance, if USD-based investors in mid-August 2014 bought US$100 worth of Canadian dollars (C$109.50) and invested them in a Canadian index fund that parallels the TSX, they would have lost C$29.67 on those stocks by Friday. If they sold on Friday, they would have obtained C$79.83. They’d then convert that fortune into USD by paying C$1.45 per greenback and end up with US$55.05. A 45% loss. More realistically, including transaction costs and fees at every step, the loss would have been over 50%.
So how well has the highly touted, strongly urged, even must-do diversification into global equities worked out recently? It has been a massive fee-generating Wall-Street bonanza for one side, and a slickly-engineered form of capital destruction for the other.
01/18/2016 17:50 -0500
In Saudi Arabia, the Tadawul All Share Index plunged 5.4% on Sunday and dropped further on Monday before ticking up a smidgen. It’s at the lowest level since March 2011. Soothsayers blamed oil, and what Iran will do to the already oversupplied oil market now that the nuclear sanctions have been lifted. But Saudi stocks started losing it in September 2014 and have since collapsed 50%.
Russia’s MICEX stock market index is down only 13% from its high in November, 2015. But the RTSI dollar-calculated index of Russian shares plunged over 7% on Monday as I’m writing this, is down 40% since May 2015 and 70% since August 2011. Every big rally in between was followed by an even bigger slide. The major difference between the dollar-calculated RTSI and the ruble-calculated MICEX is the value of the ruble, which has plunged 2% today to 79.3 rubles to the dollar, a new all-time low. It’s down 57% against the dollar since mid-2014 and 64% since mid-2011. The Central Bank isn’t even trying anymore to prop it up.
China’s Shanghai Composite is down 44% from its high in June 2015. During that time, the yuan has dropped about 6% against the dollar. So dollar-based investors took an additional loss, with the total loss amounting to over 52% (not including transaction costs and fees).
Dollar-based investors, when they buy foreign stocks, make two bets: that those stocks rise; and that the currency of those stocks at least remains stable against the dollar. When they catch it right, with both stocks and currency going up, the returns can be breath-taking. But the opposite happens when both go down, as they’ve been doing recently. And dollar-based investors are getting totally crushed.
There has been a lot of moaning and groaning about the decline in US stocks, with the S&P 500 down 12% from its all-time high in May last year, the Dow down 13%, and the Nasdaq down 14%. After seven years of bull market, those declines have a bone-chilling effect. No one is used to losing money in stocks anymore. A whole new generation of traders and investors never experienced a big loss.
But those declines are still puny compared to what happened in past downdrafts in the US markets, and they’re puny compared what is already happening among the major indexes around the world. In fact, the beaten-down US indexes are the world’s best performers!
This chart shows the plunges or crashes of the major indexes since their respective recent highs in 2014 or 2015. The one exception is the dollar-calculated index of Russian stocks, the RTSI$, which has been a dreary affair all the way back to 2011; hence the decline calculated since that date.
Note the ever longer list of markets that have now dropped 20% or more from their recent highs (below the blue line) and are in what a lot of people call a bear market. India’s Sensex and the Nikkei are a hair away from sinking below the blue line (US as of Friday close, Toronto as of Monday morning, Asia as of Monday close, Europe as of Monday afternoon):
Global-stock-exchanges-market-rout-2016-01-18
So, add those equities-based losses to the currency-based losses for dollar-based investors, and suddenly some of these indexes are starting to look like the dollar-calculated RTSI. For dollar-based investors, it has been brutal out there.
So why can’t central banks step in and stem the bleeding and restart the good times?
The answer lies in the Eurozone: France is down 21% from the highs in April; Germany 23%; Spain 29%; and Italy takes the crown with a 45% plunge.
These are the big four economies of the Eurozone. In early 2015, the ECB has unleashed a massive wave of QE and inflicted negative deposit rates on the Eurozone in an effort to flog savers until their mood improves and to drive asset prices up into the sky to create that special wealth effect. That worked wonderfully during the run-up before the well-telegraphed QE and NIRP became reality. But since April, the wealth effect has reversed. The ECB has since enhanced QE, but stock market losses have only increased.
Turns out, our delicious central-bank alphabet soup of QE, ZIRP, and NIRP is losing its effectiveness in inflating stock prices. In fact, it may have the opposite effect. Also look at Japan and Sweden. Despite massive QE programs by their central banks, their stock markets have dropped 19% and 24% respectively.
There’s no longer any guarantee that QE, even a much hoped-for QE4 in the US, will re-inflate stock markets. That era has passed. Central banks have lost their aura of omnipotence. And thus, they’ve lost their omnipotence.
However, when it comes to government bonds, central banks still rule; QE, ZIRP, and NIRP still pump up bond prices and repress yields. Hence the low yields prevailing in fiscally challenged countries such as Japan and Italy. But at the low end of corporate bonds in the US — the lower end of junk bonds — the bottom has already fallen out, and rot is creeping up the rating scale.
A special mention is due Canadian stocks. The TSX has been beaten down 28% since August 2014. Canada is in part a resource economy. Oil & gas, metals & mining, agricultural commodities, lumber, etc. have gotten caught up in a vicious commodities rout. But other stocks have gotten hammered too, including Canada’s formerly must-own hedge-fund darling and stock-market giant Valeant.
During the time that the TSX swooned from its high in August 2014, the Canadian dollar also dropped 25% against the US dollar. A nightmare for USD-based investors.
For instance, if USD-based investors in mid-August 2014 bought US$100 worth of Canadian dollars (C$109.50) and invested them in a Canadian index fund that parallels the TSX, they would have lost C$29.67 on those stocks by Friday. If they sold on Friday, they would have obtained C$79.83. They’d then convert that fortune into USD by paying C$1.45 per greenback and end up with US$55.05. A 45% loss. More realistically, including transaction costs and fees at every step, the loss would have been over 50%.
So how well has the highly touted, strongly urged, even must-do diversification into global equities worked out recently? It has been a massive fee-generating Wall-Street bonanza for one side, and a slickly-engineered form of capital destruction for the other.
- Fenix
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