Jueves 03/03/16 ISM no manufacturero, PMI servicios

[Fenix]

¿Expansión fiscal o reformas fiscales?

Jueves, 3 de Marzo del 2016 - 13:10:00

Sí, las autoridades chinas tienen mucho margen de maniobra para amortiguar el coste económico y financiero del ajuste de modelo de crecimiento. Y de los excesos pasados. Parte de este margen de maniobra es fiscal.

¿Cuáles deberían ser los objetivos de la estrategia fiscal de las autoridades chinas? Aquí tienen algunas recomendaciones desde el FMI...

* Reducir el crecimiento de la acumulación de deuda pública que podría llevar a un nuevo riesgo a medio plazo y limitar el crecimiento económico

* Eliminar subsidios sobre el consumo energético y dejar que funcione el mercado en la relación empresas públicas/privadas eliminando ineficiencias

* Asegurar el uso eficiente de los recursos del Estado, especialmente en su relación con la Administración regional

* Ayudar a la economía a reequilibrar desde el excesivo ahorro actual e ineficiente inversión, a más consumo e inversión limitada pero más productiva

Estas condiciones se pueden considerar básicas para proteger la estabilidad macro, fortalecer el role de las autoridades como gestores prudentes y eficientes de los recursos públicos al mismo tiempo que se favorece la aplicación de reformas estructurales en la economía.

Como dije al principio, hay muchos riesgos encima de la mesa a los que las autoridades chinas deben enfrentarse. Y me refiero a los desequilibrios macro, riesgos financieros y también fiscales, creciente desigualdad y deterioro del medio ambiente. El anterior plan quinquenal se fijó como objetivo un crecimiento del 11 % en la inversión en infraestructuras públicas y proyectos sociales. ¿Podría continuarlo? ¿quién lo haría entre gobiernos locales y el central?.


Muchas veces escucho que el gran problema de los datos en China, en el fondo, es la opacidad. La sensación que tengo al escuchar lo anterior es que quizás no es tanto la opacidad como la falta expertise al valorar las reformas que ya se están implementando. Y también en el terreno fiscal. Un ejemplo es la nueva Ley presupuestaria efectiva desde hace un año que incluye desde mayor transparencia, incluye el control de las finanzas regionales y manejo de la política fiscal a través del ciclo.

Dicho lo anterior, soy el primero en admitir que queda mucho camino por recorrer para alcanzar los objetivos que mencionaba antes desde el FMI. Pero, es fundamental que las reformas pendientes se adapten en su proceso al escenario económico y financiero. Al final, tengan tiempo para ser aplicadas. Aunque, por otro lado, es importante que también sean bien explicadas y "vendidas". Esa transparencia a que la que me refería antes.

José Luis Martínez Campuzano
Estratega de Citi en España


La zona euro se dirige hacia el colapso

Carlos Montero
Jueves, 3 de Marzo del 2016 - 13:45:00

Mervyn King, ex director del Banco de Inglaterra, predice en su libro publicado esta semana –“The end of alchemy: Banking, the global economy and the future of money”, que la zona euro se dirige hacia el colapso.

La razón básica que señala es que hay demasiada deuda en el sistema sin la voluntad política de Alemania de participar en una unión de transferencias. Veamos extractos del libro de King:

“La unión monetaria ha creado un conflicto entre una élite centralizada por un lado, y las fuerzas de la democracia a nivel nacional por el otro. Esto es extraordinariamente peligroso. Existe la necesidad en la zona euro de una mayor integración, incluyendo la deuda”

“El mundo se enfrentará de forma inevitable a una crisis financiera ya que no se han resuelto suficientemente los problemas que causaron los problemas de 2007-2008.”

“Los países del sur de Europa se cansarán de los esfuerzos necesarios para permanecer en la zona euro, a pesar que el argumento contrario sobre que una salida conduciría al caos, a una caída del nivel de vida y a la incertidumbre de la supervivencia de la unión monetaria tiene peso real”

“Pero si la alternativa es la trituración de la austeridad, continuar con el desempleo masivo, y sin un final a la vista de la enorme carga de deuda, salir de la zona euro puede ser la única manera de trazar una ruta de vuelta al crecimiento económico y pleno empleo. En el largo plazo los beneficios superarían a los perjuicios”, afirma King en su libro.


“La zona euro es un experimento fallido. Una ruptura es inevitable, como lo ha sido desde el principio. Las fallas estructurales son demasiado grandes construidas a lo largo de los años. Ninguna unión monetaria ha sobrevivida en la historia a menos que haya también una unión fiscal”.

“Sería mejor para todos los involucrados si Alemania saliera de la zona euro y regresara al marco alemán. Alemania tendría una moneda inmediatamente creíble. En caso de que Grecia o España salieran en primer lugar, esos países sufrirían una hiperinflación o inflación masiva”

“Es importante recordar que Alemania sufriría igualmente. Mientras la euro zona permanezca intacta, los contribuyentes alemanes tienen que seguir actuando para rescatar a los países y los bancos extranjeros, y a sus propios bancos. Por otro lado, si Alemania saliera de la zona euro, las deudas de los bancos alemanes no serían devueltas en marcos alemanes sino en euros desinflados. En general, si Alemania saliera de la zona euro sería menos perjudicial que un escenario de masiva inflación por la salida de Grecia, Portugal y España”.

Mervyn King plantea tres alternativas:

1. Amortización de la deuda para permitir que Europa crezca.
2. Alto desempleo y lento crecimiento, con estancamiento en otros lugares de Europa.
3. Ruptura de la zona euro.

No hay otras opciones realistas.

Lacartadelabolsa

14:17 Exxon Mobil: mayor curva en alza
Trading Central
Punto pivote (nivel de invalidación): 77,00

Nuestra preferencia: posiciones largas encima de 77,00 con objetivos en 87,50 y 90,15 en extensión.

Escenario alternativo: debajo de 77,00 buscar mayor indicación de baja (o de caída) con 71,75 y 66,50 como objetivos.

Comentario técnico: el RSI es alcista y sugiere un mayor avance.

[Fenix]

14:32 El oro podría subir a 1.400 este año
Según los analistas de Taurus
El oro comenzó fuerte el año, pero esto podría ser sólo el principio, de acuerdo con Taurus Wealth Advisors, que dice que los lingotes pueden llegar a ser el mejor activo de este año ya que los bancos centrales agotarán su poder de fuego.

Hay una alta probabilidad de que el metal pueda subir a 1.350-1.400 dólares la onza a finales de año, dijo Rainer Michael Preiss, estratega de Taurus. Un rally a 1.400 dólares elevaría el precio del oro un 13 por ciento desde el precio de ayer lunes, o un 32 por ciento durante el año.

15:25 Shanghai Composite. Vigilando la resistencia de 2933
Análisis técnico Citi
El índice Shanghai Composite ha caído a la media de 200 sesiones tras perder la media de 50 sesiones.

Es interesante que también se haya parado en el soporte de Fibonacci del 76,4% retroceso del rally 2013-2015.

Ahora esperamos la formación de un doble suelo en los mínimos de 2.638, con un objetivo inicial de 3.220+. La resistencia clave se encuentra en 2.933.

A partir de entonces hay una buena resistencia en el rango de 3,617-3,684 (media móvil de 55 semanas y resistencia horizontal). Un cierre semanal por encima de ese nivel, parecería ser un "cambio de juego" positivo.


¿Se repite la historia?

Jueves, 3 de Marzo del 2016 - 15:52:00

Dos meses debatiendo si la Fed se equivocó al subir sus tipos de interés en diciembre y ahora volvemos a debatir si los volverá a subir de nuevo este año. “El mercado se lo pidió”; esta fue la argumentación de muchos analistas para la subida de tipos a finales del año pasado.

Ahora es el mercado el que vuelve a considerar, con un 60 % de probabilidad, que la Fed “debe” volver a subir los tipos de interés.

Antes de nada, les dejo nuestras previsiones macro para la economía USA.

Como ven, no somos pesimistas para su evolución.

Pero, también debo admitir que el riesgo para estos datos es claramente a la baja. ¿De qué tipo de riesgos hablamos? Internacionales, especialmente. Y de los mercados.

Miren de nuevo el cuadro anterior.

Nosotros esperamos que el deflactor core de consumo se acerque progresivamente a niveles de 1.8 % el próximo año.

Pero, los últimos datos conocidos han sorprendido al alza cuando las expectativas de inflación se han seguido deteriorando.

¿Con qué nos quedamos? Naturalmente, responder a esta cuestión pasa por hacer hipótesis sobre la evolución de los precios del crudo y de la evolución del USD. Nosotros esperamos que los precios del crudo se estabilicen cerca de niveles bajos recientes y que el USD siga ligeramente al alza. En definitiva, la economía USA seguirá importando desinflación en los próximos meses.


¿Suficiente para contener el repunte de los salarios? Los salarios por hora trabajada han subido de forma reciente hasta niveles bien por encima del 2.0 %, en un contexto de solidez del mercado de trabajo. Pero, como pueden ver en el grafico de las expectativas de inflación, el deterioro de los mercados ha pesado a la baja mucho más.

Nosotros esperamos que los datos de empleo de febrero que conoceremos este viernes muestren una nueva creación de empleo de 200 m. personas y salarios sin cambios (pero 2.5 % anual), tras el repunte del 0.5 % anterior. Tampoco esperamos novedades en la tasa de desempleo desde el nivel bajo de enero del 4.9 %.

Como ven, hay muchos argumentos a nivel doméstico en USA para defender la continuidad en la subida de tipos. Poco a poco. Pero, lo cierto es que el potencial de inestabilidad de los mercados y la incertidumbre económica mundial seguirán siendo un obstáculo para hacerlo. Entre medias nos quedan meses de mensajes ambiguos desde la Fed, cuando esperamos mucha más contundencia en las medidas monetarias expansivas desde el ECB y el BOJ. Y hasta desde el Banco Central de China. ¿Divergencias en política monetaria? es difícil verlo de esta forma.

José Luis Martínez Campuzano
Estratega de Citi en España

[Fenix]

Large Cap Growth Stocks At "Pivotal" Level
Submitted by Tyler D.
03/03/2016 - 08:11

If this former market leader – large-cap growth – is to return to leadership status, it would do well to hold above this “pivotal” level.


Initial Jobless Claims Rise Again But What's Wrong With This Picture?
Submitted by Tyler D.
03/03/2016 - 08:38

For the second week in a row, initial jobless claims rose (up 6k to 278k) but remain flat at 42 year lows for the last year. Challenger job cuts rose 21.8% YoY (and yet initial jobless claims are lower still YoY. The problem with this 'data' is that employment signals from both manufacturing and services PMIs are entirely divergent...


JPMorgan Goes Underweight Stocks "For The First Time This Cycle", Says To Buy Gold
Submitted by Tyler D.
03/03/2016 - 09:50

"We go Underweight Equities for the first time in this cycle.... We use the rally in stocks to sell it and go underweight stocks, versus HG corporate bonds and cash. The strong rebound of the past few weeks does create near-term momentum, and thus keeps our first UW small. Low growth and easy money and the reduced potential for capital gains should raise the demand for income. We focus this on US HG given its still over 4% yield, a rarity in the HG world. We are not ready to pursue FX or commodity carry at this point, but like high-dividend stocks. Within fixed income, we are now long duration."


Gold Surges Above $1250 On Weak Data, JPM "Buy"
Submitted by Tyler D.
03/03/2016 - 10:26

Extending its gains from yesterday, gold has broken back above $1255 - near 13 month highs - following weak data this morning (ISM/PMI/Factory Orders) and JPMorgan's "Buy Gold" warning.


Another Very Strange Morning For Oil
Submitted by Tyler D.
03/03/2016 - 11:11

Following yesterday's modest drop in US crude production and yuuge build in inventories, headlines about possible Venezuela meetings sent algos into panic-buying mode. This morning the headlines are from Nigeria, whose Petroleum Minister "expects a dramatic price move" claiming a meeting between OPEC and NOPEC will happen on March 20th. Combine that idiocy with significant US Dollar weakness this morning and the surge in Oil ETF share creation and the perfect storm of higher prices in oil (as hedgies pile in).


The U.S. Added Only 70,000 Jobs In February Based On Withheld Taxes
Submitted by Tyler D.
03/03/2016 - 11:47

Two weeks ago we reported that while for most of 2015, tax withholdings rose at a rate of 5% or more from a year ago, on the back of job growth and gains in wages, commissions and other incentive pay, in recent months there has been a substantial dropoff in this key indicator. Today, TrimTabs put an actual jobs number to this particular decline in tax withholdings: according to the research service, the US added only 55,000 to 85,000 jobs in February, less than half of the official estimate.

[Fenix]

Just Two "Reasons" Why Gold Is Breaking Out
Submitted by Tyler D.
03/03/2016 12:05

Aside from the legitimate, but largely irrelevant for the sake of this post, reasons including this morning surprisingly weak service data, in which both the ISM and the Markit PMI reports confirmed that the "malaise in manufacturing has spread to services", JPM's recommendation to sell stocks and buy gold, and the fact that slowly but surely the world is being flooded by negative rates, here are the two most actionable reasons why gold just broke out and soared to $1,260, and is fast approaching levels not seek since January 2015.

First, here is Goldman's Jeff Currie telling CNBC's viewers just two weeks ago to short gold: "we maintain our view of rising U.S. rates and hence lower gold prices with a 3-month target of $1,100 (per troy ounce) and 12-month target of $1000 (per troy ounce)" not to mention Goldman's October 14 summary that gold is a "slam dunk sell."

* * *

But perhaps even more important, was the greenlight for the spike higher from none other than Dennis Gartman. Recall just yesterday, in a note in which Gartman said "We Were Stunningly, Shockingly, Stupidly Wrong", he also had the following good news for gold longs:

... because we respect “reversals” in equities and commodities, the fact that the shares of the largest gold mining operation in North America opened higher and then closed lower upon the day, taking out and closing below the previous day’s lows… an “outside” reversal as they are known… we ran to cover our US dollar denominated gold position mid-day and we shall argue strongly that those still long of gold in US dollar terms, as noted above, should do the same.

To which we added: "Or the opposite, if they actually want to make money."

And sure enough...



OPEC Ministers Now Resorting To Outright Lies In Desperate Attempts To Push Oil Higher
Submitted by Tyler D.
03/03/2016 12:33 -0500

The key (recurring) catalyst for today's early spike in oil, was the latest desperate attempt by an imploding OPEC member, this time Nigeria to push oil higher when overnight its petroleum minister Emmanuel Kachikwu said that key members of OPEC intend to meet with other producers in Russia on March 20 to renew talks on an agreement to cap oil output, Nigeria’s petroleum minister said.

The headlines in question:

* NIGERIA OILMIN SAYS OPEC/NON OPEC TO MEET ON MARCH 20 IN RUSSIA
* NIGERIA OIL MIN SEES DRAMATIC PRICE MOVE AFTER OPEC/NON-OPEC
* NIGERIA OILMIN SAYS OPEC/NON OPEC TO MEET ON MARCH 20 IN RUSSIA

As Kachikwu hopefully added, "there will be a dramatic price movement” when the meeting takes place.

As a reminder, oil-exporter Nigeria recently saw its dollar reserves dry up, forcing it to beg for a massive loan from the World Bank as the current price of oil dooms this particular nation to a very painful economic collapse.

Sure enough, the algos bought this hook, lie and sinker and proceed to force another attempt at squeezing near record shorts.

The only problem is that moments ago, we got confirmation that not only are such desperate attempts to prompt "dramatic price movements", higher of course, laughable, they just suffered a spectacular loss of credibility when moments ago Reuters reported that no decision on the date or venue of a possible meeting between OPEC and non-OPEC producers has been made yet, a Gulf OPEC delegate said on Thursday.

"There has been no decision made regarding the meeting yet. No date or location decided yet. The Gulf countries prefer that it would be held in the first half of April, and preferably in Doha, or some other Gulf city," the delegate told Reuters.

"We are looking forward to having a good meeting and positive results."

Perhaps, but in the meantime you just outed one of the nations most impacted by the ongoing oil rout as nothing but a cheap liar, although in retrospect few would be surprised that the nation which unleashed on the world the infamous email scam is capable of stooping so low.

OPEC leader Saudi Arabia and non-OPEC member Russia, the world's two largest oil exporters, agreed last month to freeze output at January levels to prop up prices if other nations agreed to join the first global oil pact in 15 years. As we further noted, however, not only did Russian oil output rise to a record post-Soviet era high in February, Russian output is now at its absolute limit, which also explains why Russia was eager to "freeze" its production.

Finally, recall that according to Saudi Arabia the oil market remains oversupplied by some 3 million barrels of production daily; the same Saudi Arabia who energy minister Al-Naimi said two weeks ago in Houston that not only will the Saudis never reduce production, but are eagerly looking forward to the marginal oil producers to go out of business.

As such, our advice to the algos is to not follow ongoing lies by desperate OPEC ministers who will do and certainly say anything to get an even 1 cent pop in oil, but to keep an eye on the number of bankruptcies in the shale space. Considering that many shale companies just sold a record amount YTD of new equity, the default wave was just postponed by at least several month, something which - if anything - may prompt Saudi Arabia to pump even more.

[Fenix]

Shortage Of 10-Year Treasuries Hits Record Levels: Repo Rate Plunges To Historic Lows
Submitted by Tyler D.
03/03/2016 - 13:58

As of this morning, whether it is due to shorting or not, there has never been a greater shortage of 10Y paper at least as demonstrated by what just happened in the repo market where the 10Y, according to ICAP unit GovPX, hit a whopping -2.90%, or just shy of the fail rate!


This Is What Is Propping Up Oil
Submitted by Tyler D.
03/03/2016 15:35 -0500

Short positions in oil exchange-traded funds surged to stunningly extreme record levels (up 300% in a month) in Janaury as crude oil plummeted. Since January 20th, however, things have changed rapidly as a massive short-squeeze began...

(axes adjusted to show relative scale of short position)

Now, as UBS notes,

Yesterday oil ended in the green despite a very large reported crude inventory build, a reflection of how biased to the downside sentiment and positioning already is. Today, crude started in the red and has been mixed from there but moving higher. And both days, the stocks have led with energy the best performing subsector in the S&P. Now, there is no doubt that the performance today is TOTALLY short-squeeze led. Though it also shows how negative sentiment and positioning still is.

And this is what is directly propping up the price oil...

The chart above shows the oil futures-equivalent-holdings of the all the Oil ETFs out there (quoted in 1000s of lots).

Thanks to the massive short-squeeze, Oil ETFs are currently net long 272k lots of oil, which is equal to 56% of the front month open-interest in futures, putting an unnatural floor on the market.

Watching the short-positioning continue to fall will provide some with evidence that this artificial bounce is over.


Don't Believe The Bounce? Here Is How To Make 60% If The February Selloff Returns
Submitted by Tyler D.
03/03/2016 - 15:37

"Proxy hedging S&P500 with RTY (Russell 2000) puts continues to offer material value: A repeat of the Feb-16 sell-off would see RTY puts generating ~60% greater hedge benefit than S&P puts, at current pricing."


"No Signs Of Recession" Says Agency That Always Fails To Predict Recession
Submitted by Tyler D.
03/03/2016 - 15:55

The top economist for Moody’s (one of the largest rating agencies in the world) said yesterday, as he unleahed the latest jobs guess, that there are absolutely zero signs of recession. These sameguys were so drunk on their own Kool-Aid that in October 2007, Moody’s announced that “the economy is not going to slide away into recession.” Everyone assumed that the good times would last forever. This is what virtually assures negative interest rates in America.

Gold Enters Bull Market
Submitted by Tyler D.
03/03/2016 17:17 -0500

For the first time since the highs in 2011, Spot Gold has entered a bull market. Now up over 21% from the early December lows, Gold is trading at 13-month highs and outperforming all other asset classes amid the descent into negativity by global central banks...

[Fenix]

Ray Dalio Tells Investors: "Don't Trade Against Pros Like Us, You Will Lose... Own Gold"
Submitted by Tyler D.
03/03/2016 17:27 -0500

Before his presentation to the University of Texas, Bridgewater's Ray Dalio gave a far-ranging interview to Bloomberg's Erik Shatzker which we will have more to say about in the coming days, but the overarching theme was what to expect from markets going forward. He said that while there are "asymmetric" risks to the downside, asset prices will correct to a point where risk premiums return and investors come back, and predicted that equities will return about 4% in the long term. The concern he had was whether the slowdown in markets will have negative repercussions for the economy at a time when central bank policy is becoming less effective.

Repeating comments he has given before, Dalio said that the "next big move I believe will have to be toward quantitative easing, rather than a big tightening,” he said in the interview. The recent developments have surprised the Fed, because it is not paying enough attention to the long-term debt cycle, adding that "If you look around the world, our risk is not inflation and our risk is not overheating economies", something all too clear to the nearly 30% of global economies currently blanketed by negative interest rates.

He also had some rather dire comments on China which we wil get back to in a future post, but what caught our attention was the following exchange in which Dalio discussed whether ordinary investors have a chance of making money in the current market when faced with institutional behemoths like Brigewater which as the world's biggest hedge fund manages over $150 billion.

His honesty was refreshing.

SCHATZKER: Broadly speaking, what's going to work? And what is working, perhaps more appropriately, today?



DALIO: I think there are two ways that the average investor should think of investing. One is, are you going to create a good strategic asset allocation mix that is a balanced portfolio, that means you will not go to the betting table and bet against active investors like me? Look, I'm scared to be wrong in the markets. It is not easy to win in the market. It is more difficult to win in the markets than to compete in the Olympics.



SCHATZKER: Hang on a second. Hang on a second. You guys have an extraordinary track record of winning. Is it harder to compete in the markets today than it been since you founded Bridgewater?



DALIO: No, I don’t think so.



SCHATZKER: Really?



DALIO: Not the way we do it. And the reason I'm saying not the way we do it is we do not take systematic biases. I think for a lot of people, they are systematically long everything. And so when the world gets bad, it's bad for them. In 2008, it was great for us. I don't know, we had nearly 10 percent return in 2008. So we have the opportunity to go either way. We just my be wrong.



DALIO: So I'm so scared about being wrong that it has help reduce my chances of being wrong because I'm so scared. I won't take bets that I don’t feel good about. And we diversify our portfolio. And that is how we got the track record. So you asked me about investors. So I'm trying to go back what investors should do.



SCHATZKER: And what you think is appropriate for your investors.



DALIO: I want to just convey to investors, I think in the average investor, most everybody, do not compete against pros like ourselves or other people; do not making tactical asset allocation bets or moving around in the markets, because you will probably lose.

It is worth noting that Dalio does not suggest that investors will lose because he thinks markets are rigged, something we and Eric Hunsader have been noting for years, instead Dalio's point is that ultimately directional, "tactical" bets will rarely work.

If you're talking about tactical bets, in other words, I could come on the show and I can say, I think this is good. But then what happens is if I come a month later and I then change my mind because something has happened, then I will mislead people. So the tactical bets, I don't think, are going to be helpful.

Granted, Dalio is pitching his "All Weather" portfolio, and yet this statement is perhaps one of the more honest admissions of how the market "works" or rather doesn't, because unlike the empty suits who come on TV to pitch any given stock who ultimately have no idea what will happen and are merely flipping a coin (and who are never heard from again when the trade goes against them) Dalio is warning to give up on hopes for quick "long" (or short) bets leading to major winnings, and instead stick to broader market returns in the form of a diverisifed portfolio. Then again, since for most "ordinary" investors the stock market is merely an chance to strike it rich, fast, we doubt his advice will be heeded.

But the surprising moment of biggest honesty came when Dalio laid out what should comprise a properly diversified portfolio:

I would say that we are in an environment where it is very important to have a well-diversified portfolio, and that'll include assets gold. In other words, what could I tell investors, try to achieve balance in various ways. That's a whole subject about how to do it.



And also I think that gold at 5 percent of your portfolio, 5 percent or 10 percent of your portfolio, under the circumstances, would be also a prudent thing to do. Prudence is the important thing to do. The reason I'm also referring to that is we have a situation where a debt is money. In other words, we have a fiat monetary system, too. And so we are having problems as these central banks operate. And so think of it as another form of cash and when cash now has zero or 0 percent interest rates or less, think of it as one of those possibilities in terms of how do you create diversification.

Debt is indeed money, and so is gold, and unlike debt whose yield increasingly more central banks are now artificially pushing into negative territory and will soon do everything in their power to eliminate physical money so that electronic money is subject to the same "financial repression" as every other asset, gold has and always will be an inert metal with intrinsic value, with zero counterparty risk, zero "central banker policy risk", and whose only real risk is being confiscated through another presidential executive order.

Yes, Bridgewater may have gone through a rough patch recently as we exclusively revealed a few weeks ago, but we applaud Dalio for the intellectual honesty and telling the truth.


3 Things: Recession Odds, Middle-Class Jobs, & Market Drops
Submitted by Tyler D.
03/03/2016 - 18:00

"...it is not wise to dismiss recession risk." Despite the ongoing “hopes” of the always bullish media, the recent rally has not changed the slope, or scope, of current market dynamics. The current “bear market” is not over just yet.


Goldman Cuts More Than 5% Of Fixed Income Workers; BofA To Layoff 150 Bankers And Traders
Submitted by Tyler D.
03/03/2016 - 18:12

Goldman plans to eliminate more than 5% of traders and salespeople in its fixed-income business, cutting deeper into those operations than an annual companywide cull that has already begun. Furthermore, according to a notice filed on the DOL's WARN website, Goldman announced that it would terminate 43 workers, with the layoffs set to occur between May 9, and July 1.


Earnings 'Optimism' Crashes To 7-Year Lows
Submitted by Tyler D.
03/03/2016 - 18:30

As the gap between GAAP and non-GAAP converges (and not in a bullish way), BofA reports the earnings estimate revision ratio (ERR) fell for the sixth consecutive month, to 0.47 from 0.49 – its lowest level since April 2009. So despite the exuberant, we're going back to record highs, rally off the lows, the real mother's milk data suggests more than twice as many cuts vs. increases to earnings forecasts over the last three months... and it's not just Energy anymore.


A Conversation With My Neighbor "Sam"
Submitted by Tyler D.
03/03/2016 - 19:00

“What if the banks stop loaning you money to make your payments on your loans? What happens then?”

“I guess I’m assuming that won’t happen.”

[Fenix]

UBS: "There Is No Doubt That The Move In Oil Is TOTALLY Short Squeeze Led", Here's Why
Submitted by Tyler D.
03/03/2016 20:00 -0500

Earlier today we showed how, courtesy of massive synthetic positions where Oil ETFs are currently net long 272k lots of oil, equal to 56% of the front month open-interest in futures, the price of oil is being propped up by ETF buying, either outright or via an ongoing, relentless short squeeze.


This was to be expected: as we warned a little over a month ago, as a result of a record number of oil shorts, there is a "constant threat of a short squeeze." As SocGen further elaborated, "a positive surprise could happen quite sharply, as short positions are likely to be squeezed by a profit-taking move. On WTI, the in-the-money short positions are really dominating at the front end of the curve while out-of-the-money long positions are dominating at the long end of the curve: the front end of oil curve could thus be more exposed to some profit-taking."

It certainly has.

Today, one Wall Street firm confirms that indeed the recent move in oil has nothing to do with fundamentals, and everything to do with positioning, and as UBS explains, "the performance is TOTALLY short-squeeze led."

Here's why:

RECENT ACTION/ SENTIMENT:



Yesterday oil ended in the green despite a very large reported crude inventory build, a reflection of how biased to the downside sentiment and positioning already is. Today, crude started in the read and has been mixed from there but moving higher. And both days, the stocks have lead with energy the best performing subsector in the S&P.



Now, there is no doubt that the performance today is TOTALLY short-squeeze led. Though it also shows how negative sentiment and positioning is.



Interestingly, with energy outperforming the market the last few days for the first time in a very long while, I actually got a few long only generalist type calls yesterday. Nothing concrete but generalists who are underweight the space trying to figure out if this is a turning point…

WHAT HAS HELPED FUEL THIS SHORT SQUEEZE?

* Positioning and sentiment very biased to the short side/ underweight. And as we move up, the move is also exxacerbated by short gamma positions that have to cover at higher levels.
* Despite high oil inventories (and still building), most upstream producers (from Exxon on down) have guided to lower than expected production as a result of lower capex.
* Ongoing hopes of a potential agreement between OPEC and non-OPEC members (seems umlikely but now a meeting set for March 20th is reviving some market hopes).
* A couple of supply issues like Kirkuk/Ceyhan pipeline damage taking longer to repair than expected and Farcados force majeure in Nigeria still on going issue.
* Credit players covering equity shorts --- evident today that "good credit names" are underperforming and "bad credit names" outperforming.
* We took a day break from equity issuances in the space ystd and this morning… despite energy's strong performance. Though rest assured we haven’t seen the end of issuances yet (RRC WLL, RSPP, MUR, CRZO GPORare all top of mind)… by the same token all this energy issuances are helping the credit side of things which has also been the culprit of the issue.



One may wonder if the squeeze is forced, or simply momentum driven, although we would like to quickly point us that most of the recent equity offerings by O & G companies who have benefited from the rally have noted in the "use of proceeds" that the raised capital would be used to pay down secured debt, i.e., take out the banks. In other words, it is as if the banks are orchestrating a squeeze to allow the shale companies to raise capital which will then allow them to repay their secured debt to the banks, secured debt whose recoveries as we have recently shown are practically non-existent in bankruptcy.



Which in turn means that all that is happening is a new layer of equity is coming in to take out the same banks who, as we recented noted, no longer have an interest in being in part of the capital structure. Impossible, you say? Recall what MatlinPatterson's Michael Lipsky said two weeks ago:

"we always assume that secured lenders would roll into the bankruptcy become the DIP lenders, emerge from bankruptcy as the new secured debt of the company. But they don't want to be there, so you are buying the debt behind them and you could find yourself in a situation where you could lose 100% of your money."

Which leads us to the most important question: if the oil recovery is "real" why are the banks in such a desperate scramble to get the hell out of Dodge?

As for what this means for returns to new equity investors, we believe the answer is self-evident.

"It Hasn't Been This Bad Since The Viking Age": Dry Bulk CEO Warns Of Bankruptcy Tsunami, Counterparty Risk
Submitted by Tyler D.
03/03/2016 - 19:10

"In the coming months there will be a lot of bankruptcies, counterparty risk will be on everybody's lips. The market has never been this bad before in modern history. We haven't seen a market this bad since the Viking age. This is not sustainable for anybody and will lead to dramatic changes.

[admin]

http://www.wsj.com/public/page/espanol-inicio.html