Lunes 07/03/16 Credito del consumidor

[Fenix]

JPM's Head Quant Explains Who Unleashed The S&P Rally, And What May Happen Next
Submitted by Tyler D.
03/06/2016 16:43 -0500

Yesterday, when reading the latest note by JPM's "Gandalf" head quant Marko Kolanovic, we noted something strange: for the first time we observed a JPM quant not only commenting on such sensitive topics as social fairness, but daring to challenge the oligarch orthodoxy implying that Buffett is wrong that "the babies being born in America today are the luckiest crop in history."

This is what he said:

While we do not take either a glass half-full or glass half-empty view on the current state of US economy, there are good reasons to believe that ‘the luckiest generation in history’ statement is overly optimistic. US primary results show a very strong lead for D. Trump in the Republican Party, and a surprisingly good showing for B. Sanders. We believe this indicates that a significant part of the electorate disapproves of the current political establishment and feels left behind by the new economy (e.g. voters may not agree with W. Buffet that an average upper-middle class American today has a better living standard as compared to John D. Rockefeller Sr.).

Since the opinion of Kolanovic's boss Jamie Dimon - if only that for public purposes - is largely a carbon copy of Buffett's, we hope this rare statement of truth from a banker does not cost Kolanovic his job, especially since his uncanny insight and abilities to time market inflection points have made him almost as invaluable to stock pickers as Gartman (the latter, by batting a solid 0.000, is arguably the most irreplaceable voice on Wall Street today).

Insight such as this, on who is buying and selling this bear market rally:

Since mid-February, the S&P 500 has staged a meaningful rebound. Similar to the market rally in October 2015, systematic strategies had an important role in both the January selloff (here) and February rally (Figure 1).



Short term equity momentum (1-month) turned positive around the 1930 level and 6m momentum turned positive a few days ago. This would have resulted in CTAs covering most of their short equity exposure and inflows in $50-70bn (also confirmed by the equity beta of CTA benchmarks). The market moving higher also changed the index option (gamma) imbalance and resulted in daily hedging flow that suppressed realized volatility. Lower realized volatility in turn led to some (albeit smaller) equity inflows into Volatility Targeting strategies (~$10bn) and Risk Parity strategies ~$10-$20 bn. All In all, over the past 2 weeks, equity inflows from systematic strategies totaled around $80-$100bn. Taking into account the low liquidity (S&P 500 futures market depth) and assuming that total equity market depth is ~4 times that of futures (including stocks, ETFs, and options), we estimate that more than half of the market rally in the second half of February was driven by these systematic inflows. Another likely significant driver is the rally in oil prices over the past 2 weeks.

... and that, as we showed, and as UBS confirmed last Thursday, has been entirely a function of an epic short covering squeeze.

So now that we know who drove the rally, here - according to Kolanovic - is what happens next:

What is the fate of this market rally? In terms of technical flows, more inflows would come if 3M and 12M momentum turn positive, which would happen at ~2025 and ~2075, respectively (the precise level depends on the timing of potential moves). If volatility stays subdued, volatility-managed strategies could also increase equity exposure. However, equity momentum is also vulnerable to the downside and a move lower could be accelerated by 6M and 1M momentum unraveling at ~1950 and ~1900, respectively. From the perspective of systematic strategies, downside and upside risks are balanced. However, equity fundamentals remain a headwind. In our recent strategy note, we showed that historically, periods of consecutive quarterly EPS contractions are often followed by (or coincide with) economic recessions (~80% of the time over the past ~120 years). EPS recoveries that follow 2 consecutive EPS contractions (~20% of times) were typically triggered by some form of stimulus (fiscal, monetary or exogenous). We expect market volatility to stay elevated and investors to remain focused on macro developments such as the Fed’s rates path, developments in China, and releases of US Macro data. Elevated volatility and EPS downside revisions will provide a headwind for the S&P 500 to move significantly higher (via multiple expansion). While investors need to have equity exposure, we think there are better opportunities in Value stocks, International and EM equities (as compared to broad S&P 500 exposure)

Which probably also explains why late last week JPM's head strategists went underweight stocks last week "for the first time this cycle", while urging clients to buy gold.


The Unintended Consequences Of Greenspan's "Frankenstein" Markets
03/06/2016 18:45 -0500
Submitted by Eugen von Bohm-Bawerk

It is common knowledge by now that Federal Reserve Chairman Alan Greenspan oversaw, enabled and approved of, a major transition in the US economy. His infamous “Greenspan-put” in which his actions at the central bank would be driven, if not dictated, by the whims of financial markets, clearly led to higher asset prices. Investors obviously picked up on the strong bias in the Greenspan-Fed’s conduct of monetary policy as they slashed rates at the tiniest hiccup in financial markets, and kept them at low levels for much longer than what would be considered prudent by former administrations. Following markets on the escalator up and taking the elevator down together set a precedent that created a Frankenstein monster, which socialised losses through the printing press while privatizing profits. Such a system was and still is unsustainable as it more or less ensures valuations decouple from underlying fundamentals.

The monetary system in place since the gold-exchange standard that emerged from the rubble of WWI clearly favours inflation over deflation, so we should expect values expressed in money to have an upward trend imbedded in them. However, a stable system would see nominal valuations rise more or less in tandem. In other words, we would expect a balanced sustainable system to see the price of apples, S&P500, cars, commodities and GDP grow more or less at the same pace.

Note, we are not saying certain markets will never experience idiosyncratic price movements due to their own peculiarities as driven by shifts in supply or demand. On the contrary, shifts in relative prices are the one thing that make a capitalistic system stable over the long run. What we are saying though is that the upward trend in prices is due to a diminution of the value of money per se ,driven by the inherent inflationary bias in monetary policy execution. With stable money, relative prices would change, but not the overall price level. This is important, as any comparative analysis of the pre-Greenspan era versus recent past must take into account the fact that prices do rise, relentlessly. We must thus examine financial asset valuations in relation to other markets to understand what the Greenspan put mean.

One way to do that is to look at equity values relative to GDP. As the chart clearly shows, right after Greenspan takes charge of the Federal Reserve equity valuations move to a completely new paradigm. Monetary policy implementation completely changed under Greenspan’s watch.

Removing uncertainty about the future course of interest rates obviously created a herd mentality among investors. Why would anyone take a contrarian position when the central bank more or less told the public what the Fed would do? Do not fight the Fed emerged as the most profitable market mantra. What used to be extreme overvaluations in the pre-Greenspan era became the exact opposite under his watch. It is almost as Fischer’s unfortunate 1929 “stocks have reached a permanently high plateau“-prediction finally came true. Reversion to mean though, require a 50 per cent drop in equity values. A staggering 90 per cent drop is necessary to compensate for the current extreme over-valuation through an undershoot from the pre-Greenspan mean.

Non Fin Cap to GDP

A better way at looking at equity valuations, which does not entail a flawed GDP concept, is to compare it with other asset classes. Our next chart depict US farmland and residential real estate compared to the S&P 500. The idea is that these all reflect somewhat the productive capacity of society and should therefore yield more or less the same. And throughout history they did. While they clearly diverged now and then, such as the equity boom of the 1960s, farmland bubble in the 1970s and housing in the 2000s, the massive divergence in equity valuations starting with Greenspan’s reigns stands out.sp vs agri

And this is not because farmand productivity suddenly fell. On the contrary, from the 1940s output per acre has steadily risen. This is central bankers herding investors into stocks by altering the risk/reward balance. output in agri sector

As a side note, with the latest bout of monetary madness farmland prices has indeed reached a new bubble; a bubble so severe that it makes the folly of the 1970s look like good old fashioned mid-western prudence. Turns out there were some unintended consequences of printing trillions of currency units after all.Agri without SP500

As we have shown here before, the S&P500 is extremely dependent on what happens around FOMC days.

S&P with and without FOMC

Excluding trading on the day of and after an FOMC decision shaves more than 40 per cent off the index.

[Fenix]

Peak Oil Squeeze? Hedgies Capitulate On Bearish Oil Bets
Submitted by Tyler D.
03/06/2016 19:41 -0500


Hedge Funds covered their short oil bets by the most in 11 months last week. CFTC data shows managed-money short positions dropped 25,639 contracts last week, sustaining a 26% rally off February lows. In April 2015, WTI rallied over 20% off its lows amid the same short-covering squeeze, only to collapse 40% in the next 3 months (despite OPEC hope and calls for stability). Oil ETF shorts have also capitulated back to "normal" long-short ratios suggesting oil has seen "peak" short-covering.

Futures shorts covering in size...



And Oil ETF Shorts have collapsed back to "norms"...



And while this degree of short-covering may be significant, we leave it to Tim Evans, an energy analyst at Citi Futures Perspective in New York, to remind traders of the 'reality' of the supply-demand imbalances...

"We might be starting to chip away at the surplus but have a long way to go before the market moves back into balance."


Are Greek Banks About To Charge For The Privilege Of Banning €500 Bills?
Submitted by Tyler D.
03/06/2016 - 19:45

Just look at it as a repo for everyday depositors: post your €500 notes as collateral, take the haircut, get smaller bills in return.

[Fenix]

Shorts Pulverized: Iron Ore Soars Most On Record After Goldman Says "Bearish Case Intact"
Submitted by Tyler D.
03/07/2016 - 03:12

Just hours after Goldman Sachs issued a report in which it said the iron ore rally is likely to be short lived "in the absence of a material increase in Chinese steel demand, and steel raw materials will once again drive steel prices rather than the other way around", overnight Iron Ore futures traded on the Singapore SGX exploded as much as 19% higher to $58.95 in one session, its biggest jump on record.


Chinese Reserves Drop To Fresh Four Year Low After February's $29BN Decline
Submitted by Tyler D.
03/07/2016 - 04:21

After three consecutive declines in China's Foreign Reserves in the November-January period, which averaged nearly $100 billion per month (with particular attention paid to last month's number), consensus expectations were for a moderation in reserve outflows in February to approximately $40 billion in February; moments ago the PBOC reported, that as expected, reserve outflow "slowed down" to just $28.6 billion, bringing China's total foreign reserves to $3.2 trillion, the lowest level since late 2011.


JPMorgan: "We Think That One Should Start To Re-Enter The Shorts"
Submitted by Tyler D.
03/07/2016 - 08:10

On Thursday, after 7 years of having an overweight or at least neutral stance on equities, JPM "for the first time this cycle" went underweight stocks. This is what JPM's Jan Loeys said:

Equities, credit and commodities have all rallied in the last three weeks, as some of the immediate threats to the world economy have faded from attention, possibly only because the bad earnings season has wound up. But, to us, the fundamentals of growth, earnings and recession risk have not improved, and if anything have worsened. We remain wary of the near-empty ammo box of policy makers.



Our 12-month-out US recession odds have risen to 1/3, while equity-implied odds have instead fallen to near 1/5. But even with no recession this year or next, we see US earnings rising only slowly by low single digits and see little to boost multiples. The eventual recession should bring US stocks down some 30%, creating a strong downward risk skew to returns over the next few years.

It added the following:

* We go Underweight Equities for the first time in this cycle.
* Equity bearish forces include poor macro valuation vs. our recession risk for this year; negative fundamental momentum; and limited profit and return upside relative to the downside we see from the eventual recession.
* The limited upside we see on stocks under our no-recession modal forecast is driven by still dismal productivity growth and the inability/unwillingness of monetary and fiscal policy makers to stimulate growth.

And just in case it is unclear what "Underweight" means, overnight JPM's Chief US equity strategist, Mislav Matejka explained: "We have on 15th Feb called for a tradeable market rebound. Now, following the 13% SX5E and 10% SPX upmove, we think that one should start to re-enter the shorts."

Here are the reasons why JPM is now selling:

Technicals are now closer to overbought than to oversold territory. VIX is at ytd lows – a degree of complacency might be creeping in again. Global P/E is up on the year. PMIs remain under pressure everywhere, with services converging with manufacturing. The Chinese labour component of PMI is the lowest since Jan ’09. Q1 results are likely to be weak again. DXY is not falling, Fed is back in the picture, politics could be very messy – German regional elections on March 13th are important to watch. Finally, we are soon entering poor seasonals, where April-May and onwards saw an increased volatility in the past few years. We take advantage of the bounce to reduce equity weight to an outright UW, in a balanced portfolio. This is the first time since ’07 that we are UW stocks, and follows our 30th Nov cut to our structural equity OW stance. We note that US median ND/E ratio is at 20-year highs, as are Buybacks/EBIT ratios. Eurozone is at an earlier stage of the cycle, but it is unlikely to decouple. UK stays the top regional pick globally, despite Brexit risk. Utilities and Telecoms remain the top global sector OWs. Stay with Defensives and FCF basket"

It goes without saying that if this recommendation If this was Goldman or Gartman, we would of course recommend mortgaging one's mother and buying deep OTM calls on the S&P.

However, with JPM's equity team which boasts such actually correct forecasters are Marko Kolanovic, we would be far more careful to fade anything coming out of the Park Avenue bank; in fact, JPM just may be right, especially after Kolanovic's revelations last night about what the fate of the short squeeze may be, to wit:

What is the fate of this market rally? In terms of technical flows, more inflows would come if 3M and 12M momentum turn positive, which would happen at ~2025 and ~2075, respectively (the precise level depends on the timing of potential moves). If volatility stays subdued, volatility-managed strategies could also increase equity exposure. However, equity momentum is also vulnerable to the downside and a move lower could be accelerated by 6M and 1M momentum unraveling at ~1950 and ~1900, respectively. From the perspective of systematic strategies, downside and upside risks are balanced. However, equity fundamentals remain a headwind. In our recent strategy note, we showed that historically, periods of consecutive quarterly EPS contractions are often followed by (or coincide with) economic recessions (~80% of the time over the past ~120 years). EPS recoveries that follow 2 consecutive EPS contractions (~20% of times) were typically triggered by some form of stimulus (fiscal, monetary or exogenous). We expect market volatility to stay elevated and investors to remain focused on macro developments such as the Fed’s rates path, developments in China, and releases of US Macro data. Elevated volatility and EPS downside revisions will provide a headwind for the S&P 500 to move significantly higher (via multiple expansion). While investors need to have equity exposure, we think there are better opportunities in Value stocks, International and EM equities (as compared to broad S&P 500 exposure)

Now if only Goldman would also go "long" the S&P500, then the confusion about what is really going on would be eliminated instantly.

"The Iron Ore Market Has Gone Berserk" - What Drove Iron's Biggest Surge Ever
Submitted by Tyler D.
03/07/2016 - 08:28

'Efficient' markets at their very best once again. Following a 19% spike overnight, analysts and traders alike are stunned by "the departure from fundamentals" as "the iron ore and steel markets have gone berserk." On the heels of home price surges, sent soaring after government suggestions that they will support growth, "investors are expecting further monetary easing by the Chinese government to boost steel demand," but as Bloomberg notes there has been no "corresponding increase in physical orders."

[Fenix]

Even "Flim-Flam Accounting" Can't Hide This Profitless Recession
Submitted by Tyler D.
03/07/2016 - 08:52

If you think all this is a solid foundation for ever-higher profits, by all means go buy stocks with all four feet. But don't be surprised if the rest of the market disagrees at some point - for example, when even flim-flam accounting can't hide the fact that profits are in a free-fall back to "normal" levels 60% below current levels.

Non-GAAP Earnings Are About To Plunge The Most Since 2009; As For GAAP Don' Even Ask...
Submitted by Tyler D.
03/07/2016 - 09:15

The estimated earnings decline for Q1 2016 is -8.0%. If this is the final earnings decline for the quarter, it will mark the first time the index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009. It will also mark the largest year-over-year decline in earnings since Q3 2009 (-15.7%).


Will Russia End Up Controlling 73% of Global Oil Supply?
Submitted by Tyler D.
03/07/2016 - 09:30

Russia has played a master stroke in the current oil crisis by taking the lead in forming a new cartel, but it’s a move that could spell geopolitical disaster. If this scenario plays out, Russia will emerge as the de facto leader of the major oil producing nations of the world, accounting for almost 73 percent of the global oil supply.


Deutsche Bank Discovers Kuroda's NIRP Paradox
Submitted by Tyler D.
03/07/2016 - 09:50

Surprise! Negative rates are set to backfire in Japan as consumption likely to suffer.


WTI Crude Spikes To $37, Brent Over $40 After Genscape Report
Submitted by Tyler D.
03/07/2016 - 10:23

Stocks are up thanks to another mindless spike in WTI Crude this morning after Genscape reported a smaller than expected build at Cushing. WTI spiked over $37 and Brent back above $40 on the news as Futures and ETF shorts cover.


As JPM Goes Short, Goldman Says "Never Better Time To Buy S&P Calls"
Tyler Durden's picture
Submitted by Tyler D.
03/07/2016 10:37 -0500

Shortly after JPMorgan's historically correct forecasters unleashed their "short stocks" prognostication, we joked that if only Goldman would go "long" the S&P500, then the confusion about what is really going on would be eliminated instantly. And so the alarm bells on this bounce should be ringing loud and clear as Goldman just told its portfolio manager clients that "S&P 500 calls are more attractive now than at any time on record."



With JPMorgan "going underweight US equities for the first time in this cycle," Goldman Sachs would like to sell S&P 500 Calls to its portfolio manager clients...

Our model suggests SPX calls are more attractive than at any time on record over the past 20 years.



Specifically, our GS-EQMOVE model estimates there is a 21% probability of a 5% up-move over the next month based on the current levels of S&P 500 Free Cash Flow yield, Return on Equity, ISM new orders and US Capacity Utilization.



However, the options market is only pricing in a 5% chance of such a move. While a 5% up-move is far from guaranteed (there is a 79% probably it doesn’t move up 5%), the options market is pricing less than 1/4th the probably as our model suggests is warranted by the fundamentals.



Call buying in this environment offers strong risk-reward and allows investors to gain upside exposure while limiting risk. Call buyers risk losing the premium paid.

Looking back through time, there were four months when calls were almost this attractive: Jan-2007, Nov-2006, Feb-2001, and Jan-1996. The SPX was up as much as 1.6%, 2.0%, 2.0%, and 4.1% during the months that followed, respectively.



Finally, we note the small print, as Goldman also suggests - though much more quietly - that Puts are also attractive vs. history (85th percentile)



So to sum up: the awkwardly correct forecasters at JPMorgan say it is time to short stocks, and the Gartman-esque Goldman Sachs (1 for 6 in top 2016 trades, got crushed on its gold recos, and just crucified anyone who was short iron ore overnight) would like to sell S&P 500 calls to its clients... Trade Accordingly.


Iron Ore 'Frenzy' Sends Dry Bulk Shipper Stock Up 340% In 2 Days
Submitted by Tyler D.
03/07/2016 - 11:01

The "berserk" iron ore market has created a tsunami of utter idiocy and short-covering across many sectors, most egregiously - dry bulk shippers. DRYS is up 18%, DSX up 20%, and NM up 25%, but Eagle Bulk (EGLE) is the big winner as the mania underlying iron ore combined with an earlier filing said to amend forebearance as the company tries to find financing alternatives, spiked the stock up 340% in 2 days.


BlackRock Can Buy Gold Again: IAU Suspension Lifted After 300 Million New Shares Registered
Submitted by Tyler D.
03/07/2016 11:15 -0500

Something strange happened on Friday: as a result of the 20% YTD surge in the price of gold and "surging demand", BlackRock announced it had temporarily suspended the creation of new shares of its $7.8 billion gold Exchange Traded Product IAU "until additional shares are registered with the Securities and Exchange Commission."

Today, Blackrock explained what happened: in a nutshell, as a result of a surge of investor buying of IAU between February 19, 2016 and March 3, 2016, the "Trust issued and sold a total of 24,900,000 Shares in excess of the total Shares registered." Effectively, IAU was in violation of SEC rules after selling 25 million shares more than it had registered for. The temporary suspension also meant the ETP could not satisfy investor demand for gold on Friday as it was prohibited from creating new share units.

Blackrock called the failure to register earlier "inadvertent."

To promptly remedy this non-compliance, BlackRock filed an S-3 statement this morning, registering another 300 million IAU shares,which as the chart below shows boosts its total eligible shares outstanding by nearly 50%.



The increase in shares brings the new eligible total far above the total Blackrock had available as of the gold price in 2011, and also above the last peak in IAU outstanding shares which peaked around 700 million.

This also means that there are no more structural limitations preventing IAU to buy as much gold as there is demand.

The filing can be found here, and the relevant language is below:

On March 20, 2015, the Trust filed an automatic shelf registration statement registering 120,000,000 Shares (the "Prior Shelf Registration Statement"). Between February 19, 2016 and March 3, 2016, the Trust issued and sold a total of 24,900,000 Shares in excess of the total Shares registered on its Prior Shelf Registration Statement (the "Excess Shares"). The failure to file a new automatic shelf registration statement of which this prospectus is a part before the Trust sold more than the Shares registered on the Prior Shelf Registration Statement was inadvertent. On March 3, 2016, the Trust became aware of the error and immediately suspended the issuance of additional Shares pending the filing of a new automatic shelf registration statement of which this prospectus is a part. The Excess Shares were not registered at the time of their initial sale, and may not qualify for an exemption from registration, under the Securities Act of 1933, as amended (the “Securities Act”). Authorized Participants and other investors who purchased Excess Shares could have rescission rights. If rescission rights are exercised by these investors, the Trust may be required to reacquire the Excess Shares at a price equal to the price originally paid for such Excess Shares, plus interest owed to the investor on such Excess Shares. Any such investors who no longer own the Excess Shares they acquired may have the right to collect damages from the Trust in lieu of the rescission rights described above. If investors were successful in seeking rescission and/or damages, the Trust would face financial demands that could adversely affect its reputation, business and operations. Additionally, the Trust may become subject to penalties imposed by the SEC and state securities agencies. If investors seek rescission and/or damages or the Trust elects to conduct a rescission offer, the Trust may or may not have the resources and will need to sell gold potentially at unfavorable prices to fund the repurchase of the Excess Shares.

Something curious: in the filing BlackRock revealed that it may have to sell gold in the fund in order to buy back the shares that were inadvertently not registered and pay interest to investors who purchased the shares. Those investors "may have the right to collect damages" from the fund, the filing said. One almost wonders if BlackRock will be selling those 24.9 million IAU shares just as gold is undergoing its next surge.

We wonder if any other gold ETPs will do the same "inadvertent mistake" and oversell gold, just to have the freedom of selling millions of gold-backed shares at their sole discretion to cover the costs from "repurchasing the Excess Shares"?

[Fenix]

Will Italian Banks Spark Another Financial Crisis?
Submitted by Tyler D.
03/07/2016 - 12:57

Italy is no Greece...it's worse!


It's Not The Fundamentals; It's Oil, Stupid!
Submitted by Tyler D.
03/07/2016 - 13:11

So did the G-20 decide that coordinated buying of crude oil was "unequivocally good" for the world's economy stock markets?


Morgan Stanley Has Had Enough: "When You Think Of Something, Do The Opposite"
Submitted by Tyler D.
03/07/2016 - 13:13


Why Helicopter Money Can't Save Us: We've Already Been Doing It For 8 Years
Submitted by Tyler D.
03/07/2016 13:26 -0500

There’s a lot of talk going around these days about “helicopter money.”

For those unfamiliar, it’s billed as a kind of last Keynesian resort when ZIRP, NIRP, and QE have all failed to boost aggregate demand and juice inflation.

For instance, HSBC said the following late last month: “If central banks do not achieve their medium-term inflation targets through NIRP, they may have to adopt other policy measures: looser fiscal policy and even helicopter money are possible in scenarios beyond QE and negative rates.”

And here’s Citi’s Willem Buiter from Septemeber: “Helicopter money drops would be the best instrument to tackle a downturn in all DMs.”

So what exactly is this “helicopter money” that is supposed to provide a lifeline when all of central banks’ other forays into unconventional policy have demonstrably failed? Well, here’s Buiter to explain how it works in theory (this is the China example, but it's the same concept everywhere else):

The first-best would be for the central government to issue bonds to fund this fiscal stimulus and for the PBOC to buy them and either hold them forever or cancel them, with the PBOC monetizing these Treasury bond purchases. Such a ‘helicopter money drop’ is fiscally, financially and macro-economically prudent in current circumstances, with inflation well below target and likely to fall further.

Now whether it’s “fiscally, financially and macro-economically prudent in current circumstances,” (or any circumstances for that matter) is certainly questionable, but what’s not questionable is that it is indeed feasible.

How do we know? Because we’ve been doing it for 8 long years.

If you think about what Buiter says above, it’s simply deficit financing. The government prints one paper liability and buys it from itself with another paper liability that the government also prints.

Sound familiar? It’s called QE.

The only difference is who the bonds are bought from. With QE, the central bank buys in the secondary market in an absurdly transparent attempt to pretend like there’s some degree of separation between the central bank and the government.

In so-called “helicopter money,” the central bank simply drops the bullshit facade (pardon the language) and buys directly from the government. But it’s all deficit financing. Need proof? Just compare changes in government deficits to the changes in bank reserves (i.e. where QE shows up) as shown in the table below.

Below, find a hilariously frank assessment from Deutsche Bank who basically asks, “why are we even talking about this as though we haven’t been financing deficits for years?”

* * *

From Deutsche Bank

The argument that monetary easing has run its course and it is time to enact fiscal stimulus is starting to be heard around the world. The most eye-catching of such views is a call to deploy ‘helicopter money’, which we define as monetary financing of fiscal deficit. However, this argument is misleading. Surely this has already been implemented in many developed countries through QE. Why bring it up now despite it has been already deployed?

Figure 16 compares the cumulative central government fiscal surplus/deficit of developed countries over 2008- 15 (A) and the cumulative increase in the bank reserves portion of the monetary base (= almost the equivalent of the BoJ current account; (B)) over the same period. In Japan, for example, the cumulative increase in fiscal deficit for this period reached ¥225trn, while bank reserves increased by a cumulative ¥239trn. Thus, the increase in bank reserves exceeded the total fiscal deficit and the degree to which monetary policy financed the fiscal deficit (B/A)*(-1)) reached 106% (more than 100%). All the other countries, excluding Australia, Canada, and Norway, are already implementing on a set scale monetary financing of fiscal deficit, albeit not on the same scale as Japan. The degree of monetary financing is 82% in Sweden, 60% in the UK, 35% in the US, 26% in Denmark, and 16% in the Euro area. The most extreme case is Switzerland, where despite a fiscal surplus, the central bank has increased bank reserves 13.7 times greater than its fiscal surplus. Helicopter money has already been deployed in many countries. The reason that inflation is not rising in these countries despite helicopter money is that the currency (or monetary) regime has changed from a fiat money regime to a de-facto quasi-hard currency regime, the latter of which does not allow credit creation. Naturally, expanding the scale of helicopter money is possible in most of the countries.

A more extreme helicopter money argument is to request that the central bank altruistically not accept an equal value of financial assets (such as government debt) in exchange for central bank debt, which would in turn lower the net worth of the central bank, possibly into insolvency. However, this is mere academic theoretical brain-storming; in reality, we think a central bank that would seriously accept this does not exist.

* * *

So the next step isn't "helicopter money", where that means monetary financing of the deficit. That's already happened.

The next step is pushing central banks into insolvency by making them fork over more cash to the government than the face value of the bonds they receive. While Deutsche doesn't think such a central bank exists, we think otherwise, especially considering the fact that if the interest rate the banks pay on reserves rises while the average coupon on the banks' bond holdings doesn't, negative equity is already in the cards.

And besides, the ECB is buying bonds that guarantee losses if held to maturity. So please, don't tell us about what central banks would "seriously consider."

[Fenix]

Did Fed's Fischer Stop The Squeeze?
Submitted by Tyler D.
03/07/2016 - 13:39

With the S&P 500 trading back above 2,000, it appears The Fed needed to do something to tamp down the enthusiasm exhibited by this manic short squeeze. As Fed vice-chair unleashed the following: "We may be seeing the first stirrings of higher inflastion," the short-squeeze ended and everything reversed...

China: A 5-Year Plan And 50 Million Jobs Lost
Submitted by Tyler D.
03/07/2016 - 13:52

China never had an actual economic model or growth model. It simply printed an obscene amount of money, especially after 2008, and used it to build factories, 30-storey see-through apartment blocks and highways into nowhere cities, without giving much if any thought to where this would lead when their formerly rich western customers had less to spend on its ever increasing amount of ever more useless products. It was "to infinity and beyond" from the start, but that’s a line from a kids’ fantasy story, not a 5-year plan or an economic model.


It's Official: This Is The Biggest Short Squeeze Ever (And May Get Even Bigger)
Submitted by Tyler D.
03/07/2016 - 14:06

US equity markets are soaring once again and two things are driving it - CTA-driven short-covering in commodities and the algo-driven squeeze of the most-shorted stocks. Having risen 13 of the last 16 days, "Most Shorted" stocks are now unchanged since The Fed rate-hike, soaring 25% in that time - the biggest squeeze in history. And Credit Suisse warns, it could get worse...as the dash for trash continues.


Dow, S&P Give Up Squeeze Gains
Submitted by Tyler D.
03/07/2016 - 14:42

Only Small Caps are green now as the fallout from Fischer's inflation furore escalates...



"In The Last Seven Years, China Accounted For 40% Of All Global Debt Creation"
Submitted by Tyler D.
03/07/2016 - 14:48

China's velocity of money is now the lowest in the entire world, a world in which China provided 40% of the entire credit impulse since 2008: "In the last seven years, China has accounted for around ~40% of entire global incremental debt creation. Such a rapid accumulation of debt in less than a decade, when combined with the capital-intensive nature of the economy and a less sophisticated financial sector, drove China’s velocity of money to one of the lowest levels globally (~0.5x, i.e. below that of Japan)."


This Is What JPM Meant When It Said The "Market Is Trapped"
Submitted by Tyler D.
03/07/2016 15:07

Two weeks ago, JPM's Marko Kolanovic put out a very interesting observation, according to which further gains in the S&P500 are capped to the upside due to one very popular reason: the US Dollar. What he said, in a nutshell, is that while a weaker dollar is beneficial for energy (clearly) and multinational stocks, it is a stronger dollar that has been driving the broader S&P 500 higher (which correlates ~30% with the USD) due to the dominant influence of Momentum and Low Volatility stocks in the index.

In other words, as the dollar weakens, it supports the most beaten down, energy, sector (which has now undergoing a record short squeeze), but it ultimately will pressure the broader market lower through Tech and Momo. As Kolanovic called it: "a market trapped by the USD."

This is what Kolanovic said exactly:

We are not excited about owning the S&P 500 as core exposure to risky assets. The S&P 500 is capitalization weighted, has high momentum bias, is internet heavy, and is implicitly long USD (when the USD is near historical highs). The current correlation of the S&P 500 to USD is ~30%. One of the reasons behind the positive correlation of the S&P 500 to USD is the high weight in Momentum and Low Volatility stocks in the index, and these stocks’ positive correlation to USD. At the same time, the index has low weight in Value stocks that are negatively correlated to USD (correlation of momentum, value and S&P 500 to USD are shown in Figure 1). When it comes to macro drivers of equities, the S&P 500 may be trapped by USD: it can’t rally to new highs without USD (momentum sectors, FANGs, etc.), and at the same time the strong USD is capping any significant upside due to its negative impact on EPS (via value segments such as multinationals and energy).





We didn't have long to wait to see precisely what Kolanovic meant, as today's market provides a perfect confirmation.

On one hand we have surging Energy stocks, not just today, but over the past five days. On the other, we have seen a steady drop lower in the USD over the same time period, which initially kept Tech and Momentum stocks flat...



... but today has led to a decisive move lower in 2015's dominant tech group, the FANGs:



Which presents an unpleasant dilemma for the Fed: can it push the S&P higher when it is trapped by a stronger dollar, and if not, can is push the S&P higher when it is trapped by a weaker dollar as well.

What it really means, is that hopes of multiple expansion going forward can be forgotten: recall that the S&P now is already at a higher multiple (and thus more expensive) than it was at the beginning of the year; it also means that unless somehow the S&P500 constituent companies can once again find a way to grow their real earnings (which as we have showed recently are at 2010 levels), any breakout attempts for the S&P500 will fail.

And that is the real problem: how to grow revenues and earnings in a world in which global trade is crashing, in which sovereigns and consumers have record debt, and where wage growth - in the US - just posted its biggest monthly collapse in history.

[Fenix]

China Is About To Unleash A Monster Housing Bubble, In Six Easy Steps
Submitted by Tyler D.
03/07/2016 - 16:27

What is worrisome is that since this trick can be applied basically anywhere in China, it will be and the elite in Shanghai and Beijing will catch on as will tier 2-4 cities, whose governments are even more desperate to rescue the housing market. With the elite and smart money milking the existing banking system in this way and moving money out, China's 3.2 Trillion (and declining for 4 consecutive months) official reserves doesn't look all that impressive.

One Venezuelan's Angry Rant: Six Stories From A Socialist Apocalypse
Submitted by Tyler D.
03/07/2016 - 16:30

"It's reached the point where social media is used to discuss toilet paper strategy... The most common alternative is to shower right after going to the bathroom. The smallest denomination of money is used for toilet paper, because it's worthless."


Average Wall Street Bonus Drops 9%; Lowest Since 2012
Submitted by Tyler D.
03/07/2016 - 17:03

When it comes to concerns about their professional future, few things faze Wall Streeters: mass layoffs - no big deal, someone else will hire; empty steakhouses - that's ok, Hustler Club is packed (and expense accounts are accepted just fine). But lower compensation and all hell breaks loose. Which is why quite a few hearts must have been pounding today when New York state Comptroller Thomas DiNapoli released his annual Wall Street compensation report in which we revealed that average Wall Street bonuses for 2015 will drop by a quite substantial 9% to "only" $146,200, the second consecutive year of declines, and the lowest since 2012 when average bonuses were $142,860.


Why The Fed Will Never Normalize Rates (In 4 Simple Charts)
Submitted by Tyler D.
03/07/2016 - 19:30

It's not the economy, it's the debt, stupid...

"They Blew It All On Hookers, Blow And Fancy Toys" – Hedgie Sees Lower Oil, Soaring Gold, & QE For The People
Submitted by Tyler D.
03/07/2016 - 20:00

"...most people simply assumed the good times would go on forever... because it was different this time. But like any uninhibited party fueled by unlimited cash, the hangover was sure to follow."


Thanks To The Republican Civil War, Every Scenario Ends With Hillary Winning The Election
Submitted by Tyler D.
03/07/2016 - 18:00

But no matter what happens on the Republican side from this point forward, it is going to take a miracle of epic proportions to keep Hillary Clinton from winning the presidency. Every plausible scenario ends with her in the White House, and that is a truly horrible thing to imagine.

[Fenix]

Hyundai Perú llama a revisión a vehículos de modelo Genesis Coupe por falla


Hyundai Genesis Coupe Hyundai Genesis Coupe " Fuente: Hyundai

Un total de 72 vehículos correspondientes al modelo Genesis Coupe, de la marca Hyundai, vendidos entre los años 2012 y 2015, serán sometidos a revisión ante una posible falla, informó Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual (Indecopi).

El representante de la marca en el país, Automotores Gildemeister Perú S.A, le comunicó a la Autoridad Nacional de Protección del Consumidor, que en estos automóviles que están equipados con transmisión manual puede darse la posibilidad de que el perno de fijación del porta diferencial pueda aflojarse, generando un ligero ruido en el bastidor posterior.

El ente fiscalizador señaló que la empresa indicó que remitió a sus clientes cartas notariales, a fin de informar sobre la campaña de seguridad. Además, indicó, reemplazarán lo pernos de fijación del porta diferencial y la cubierta del diferencial, si fuese necesario y sin costo alguno.
Los usuarios afectados pueden comunicarse a la central telefónica: 617-9971 o a los correos electrónicos: wcisneros@agildemesiter.com.pe o jingaruca@agildemesiter.com.pe.

Publicado el Lunes, 7 de Marzo del 2016