• rcwhalen
    11/25/2015 - 08:58
    "This is legal?" Stephanie Ruhle on CDS after watching "The Big Short" (Bloomberg TV) 

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Eating Our Seed Corn: How Much Of Our "Growth" Is From One-Time Cashouts?

Retirement funds, home equity, family assets--these are the financial equivalent of seed corn. Once they're cashed out and spent, they cannot be replaced. So how much of the recent "growth" in GDP results from our consumption of seed corn? It is difficult to find any data on this, something which is unsurprising as the data would reveal the entire "recovery" story as a grandiose illusion: we as a nation are consuming our seed corn in great gulps, and there will be precious little left in a decade to pass down to the next generation. We face not just an impoverishment in consumption but in expectations and generational assets.

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Pump... And Dump

Despite a late-day (very sudden) shellacking in silver, commodities rallied with gold pressing up towards Sept 2013 levels (over $1340). Treasury bonds rallied all day to end near the low yields of the day (-3 to 4bps from Friday). The USD's early losses were unwound as the US day-session continued to leave the greenback modestly lower on the week. And that leaves us with stocks... in almost the exact same pattern as yesterday (except with an overall downward bias) the US open sparked some JPY selling which sent stocks careening to highs only for the European close to smash that hope to smithereens and send stocks limping lacklustrously lower  into the close (recoupling with JPY and Credit). All indices closed red with Trannies underperforming and the S&P (yet again) unable to hold a green year-to-date close.

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This Man's $600,000 Facebook Disaster Is A Warning For All Small Businesses

It continues to amaze us how people are completely ignoring what appears to be an incredible amount of shadiness inherent in Facebook’s business model. Whether or not this is intentional click fraud, it is clear that advertisers are not getting what they think they are getting. They won’t be fooled forever, and once they wake up to the money being wasted on fake “likes” and “clicks,” We're curious to see what happens to their revenue... This will all be exposed by the market sooner or later. I’m just shocked it is taking so long for people to put two and two together.

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Meanwhile, On The Main Square In Sevastopol: Live Webcast

... The Russians are staking out their claim, after those ships which we wrote about and docked at the main Crimean port, have unloaded their cargo.

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China's Corporate Debt Hits Record $12 Trillion

Chinese non-financial companies held total outstanding bank borrowing and bond debt of about $12 trillion at the end of last year - equal to over 120 percent of GDP - according to Standard & Poor's estimates.

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The Good, Bad, & Ugly Of The US Economy

Sometimes one just needs to step back and think, as opposed to getting caught in the eye-twitching idiocy of the JPY-driven ticks in the US equity market day-in and day-out. The following 3 charts may just be that wake-up call that all is not quite as rosy as we are being told and that hope is not a strategy...

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JPM Reports Market Revenue Plunges 15% From Year Earlier, Fixed Income Activity Tumbles

JPMorgan may have had zero trading loss days in 2013 but 2014 is not shaping up well for Jamie Dimon's firm. Just out from Reuters and BBG, which is reporting what the firm just announced at its investor day:


And if the company feels compelled to report this now, one can only imagine what ridiculous addbacks JPM will have to do on earnings day: we can certainly expect at least $2 billion in loan loss reserves releases to make up for a reality that firmtly refuses to comply with Ph.D. economist models. And what is really funny, is that judging by the stock reaction, it is almost as if the algos don't know that nobody trades bonds when it snows outside. Duh.

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Chart Of The Day: JPMorgan's $30 Billion In Legal Fees And Expenses Since 2010 (And Why The New Compliance Officer Just Quit)

The number: since 2010 JPM has paid a mindblowing $29.8 billion in "one-time, non-recurring" legal fees, charges, settlements, and otherwise expenses that in theory at least should not be part of its ongoing business operations.... but are.

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El-Erian To Gross "I'm Tired Of Cleaning Up Your Shit"

Bill Gross, by his own admission, is a demanding boss; but as the WSJ reports, one day last June (amid the bond sell-off), things went a little turbo (leading to Mohamed El-Erian's recent resignation):

Gross: "I have a 41-year track record of investing excellence... What do you have?"

El-Erian: "I'm tired of cleaning up your shit."

While careful to deny that El-Erian's departure had anything to do with 'friction' although even Mr.Gross admits he can be difficult to work with,"sometimes people will say 'Gross is too challenging,' and maybe so. I would say if you think I'm challenging now, you should have seen me 20 years ago."

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Indirect Bidders Show Strong Appetite For 2 Year Bond Auction

Today's auction of $32 billion in near-cash equivalent 2 Year paper was hardly remarkable. The yield was a somnolent 0.34%, pricing through the 0.343% When Issued courtesy of a strong bid in bonds all day (ignoring the ongoing idiocy of the stock market), below last month's 0.38% and just modestly above the 0.32% average, which means that despite all the posturing, few are actually expecting the Fed to do much to short-end rates in the next two years. The Bid to Cover did post a bounce to 3.605, above last month's 3.30, and above the trailing 12 month average which was also 3.30. Perhaps the only thing of note was that the Indirect bid jumped from 28.5% to 34.3%, the highest since June's 35.83% and well above the 24.7% average, and with Directs taking down 19.3%, it meant that Dealers were stuck with just 46.4%, below the 52.3% 12MMA and the lowest since October.

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Tesla Enterprise Value Just 25% Below That Of General Motors

A well-placed Morgan Stanley "Utopia" upgrade here, a 'gigafactory' promise there, sprinkle in a 37% short-interest and what do you have? Telsa is surging once again (up 17% today)... breaking above a $30 billion enterprise value - just 25% below that of GM, based on Bloomberg's data.

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Bank Run Full Frontal: Ukrainians Withdrew 7% Of All Deposits In Two Days

Well that escalated quickly. It seems the ouster of Yanukovych, heralded by so many in the West as a positive, has done nothing to quell the fear of further economic collapse in Ukraine:


This is around a 30 billion Hyrvnia loss (over $3 billion) in just 2 days for the banks and the new central bank chief is considering "stabilizing loans" to help banks deal with the liquidity crisis (though Ukraine's reserves stand at a mere $15 billion).

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Bernanke Is Writing A Book: What Should It Be Titled?

That didn't take long: merely weeks since he walked out of the Marriner Eccles building and into the sunset, Ben Bernanke is writing his memoirs. AP reports: "Ben Bernanke, who stepped down last month after eight years as chairman of the Federal Reserve, is planning a memoir. Bernanke told The Associated Press on Monday that he will focus not just on the defining moment of his time at the Fed, the 2008 financial crisis, but on the "Great Recession" that followed. "I want people to understand what we knew, when we knew it, how we made decisions and how we dealt with the enormous economic uncertainty," said Bernanke, who expects to begin meeting with publishers within the next several weeks. Bernanke, 60, says he will cover his entire career at the Fed, starting in 2002, when he joined the Board of Governors." So our question to you, dear readers, is what should the title of Bernanke's book of memoirs be?

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Ukraine Calls Russia's Bluff, Slashes Nat Gas Imports By 80%

Twice in recent years, Russia has suspended gas supplies, or notably raised prices, as the somewhat well-known "trump card" of Russia's oil and gas supply to Ukraine (and Europe for that matter) remains Putin's easiest option for clenching his iron-first against the divided nation. Following a pre-emptive move in November by Ukraine to diversify its energy supply,  Russia had reduced the price of gas for the highly indebted Ukraine in December (to entice Ukraine under Russia's wing); but, after recent events, Dmitry Medvedev signaled on Monday that the price could be raised again. However, today we find that Ukraine's state oil and gas company, Naftogaz, has slashed gas imports from Russia's Gazprom by stunning 80% in February as Ukraine tries to show Russia it can't be pushed around of course, with limited (and more expensive) alternative supplies, we fear this could well shoot them in the foot. That and the whole being out of money thing too won't help.

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Wall Street Trader: "My Lying Is Part Of Making Deals Although I Generally Consider Myself A Truthful Person"

The story of former Jefferies MBS trader Jesse Litvak, who is currently on trial in New Haven federal court accused of defrauding investors of $2 million by lying on trades of mortgage-backed securities, is well known to regular readers: it was summarized previously in "We Are Doneski Gorgeous!" - How Bond Trading On Wall Street Really Works. In that article we showed, more than just an isolated case of alleged fraud, that when it comes to OTC trades which do not transact on an exchange but instead take place over the phone between a salesman and a buyer, it is all a game of lies, fraud and misinformation... however one which both it is a game of lies, fraud and misinformation. Today, Mr. Litvak confirmed as much when he said, quoting Bloomberg,  "My lying is part” of making deals, he said, “although I generally consider myself a truthful person."

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