Is Hugh Hendry A Greater Fool?

The current premise is that global equities markets will rise regardless of economic fundamentals. Money must flow into equities [perceived as the only asset class capable of producing “acceptable” returns] because the alternatives offer virtually no return…with interest rates pinned near zero in most western economies. Just buy any equity [akin to dart throwing] and a “greater fool than you” will buy after your purchase, at a higher price, ad infinitum... thus ever increasing the asset’s value This is such an obviously flawed argument on so many levels... albeit, like almost any strategy, is surprisingly effective from time to time.

OPEC Who? US Crude Oil Production Hits Record High

US Crude oil production shows absolutely no sign of slowing - despite tumbling rig counts - as this morning's data shows the US produced 9.19mm barrels/day last week - the most since records began in 1983. Since the OPEC meeting in November, US crude production has only accelerated... the global 'game of chicken' continues...

The Dead Mortgage Cat Bounce Is Over

While earlier today the MBA came out with some absolutely ridiculous numbers namely that there was a 49.1% surge in mortgage applications in the week ended January 9, this was, as Stone McCarthy reported, due largely to seasonals. To wit: "The MBA's broad mortgage application index soared 49.1% last week. While we think much of the increase is a response to lower mortgage rates, we also think the application data are still subject to some holiday-related noise." So what is really going on with that all important metric for the US housing market: mortgage originations? For the answer we go to the biggest mortgage originating bank in the US itself, Wells Fargo. Here is the answer:

S&P 500 Drops Below 2,000

BTFD? The S&P 500 remains 50-60 points 'rich' to the Federal Reserve Balance Sheet.

Dear Jamie Dimon: This Is Why US Banks Are "Under Assault"

Earlier today, during the JPM conference call, when Jamie Dimon wasn't busy explaining why the Q4 earnings presentation was sorely missing the page showing JPM's latest Net Interest Margin, a staple placeholder page in the presentation appendix, he found time to lament something totally different. As Bloomberg reports, Dimon lashed out at U.S. regulators for putting his bank "under assault." We don't know how American, or how fair, or how complex, but we know why. The reason: JPMorgan and the rest of the world's banks have now become the world's biggest organized crime syndicate. The evidence? $178 billion in government kickbacks to keep their criminal scheme going for the past 5 years: something which none other than the BCG called a "cost of doing business" - criminal business that is. 

5 Key Takeaways From The ECJ's Kinda Sorta 'Thumbs Up' To Draghi

An adviser to the Luxembourg-based European Court of Justice (ECJ) has delivered a tentative thumbs-up to an ECB bond plan unveiled in September 2012 that was aimed at countering euro break-up fears. Dow Jones explains the key five takeaways from the court's findings...

Crude Crumbles On Unexpectedly Large Inventory Build

WTI crude oil prices staged a recovery this morning - fueling optimism once again that stability was here... Then the EIA inventories data hit. With crude (Crude inventory rose 5.39mm barrels against expectations of a 1.75mm barrels and a 3.062mm barrel draw last month) and distillate inventories (+2925K, Exp. 2100K, Last 11205K) surging considerably more than expected (some expecting a draw), futures prices are fading back rapidly...

Wednesday Humor: Maxine Waters Takes On HFT Rigging And Broken Markets

Yesterday was a bad day for the HFT lobby, after not one but two incidents which exposed the high frequency parasites doing what they do best, and perhaps only: rigging markets.  And since it would be laughable if its wan't tragic, we decided to make it even more laughable, by noting that none other than intellectual titan in the House of Representatives, Maxine Waters, had a few choice words to say about the latest HFT rigging busts. That's right: Maxine Waters now opines on market microstructure issues.

 

Damage Control Time

Dow Drops 600 Points In 24 Hours As 30Y Yield Crashes To Record Low

US equity prices and US Treasury yields are tumbling after the disappointingly narrative-destroying retail sales data for 'gas tax cut'-based December. The Dow is now down almost 600 points from yesterday's highs  At 2.39%, 30Y Yields have never been lower...ever! US stock indices are down 3% year-to-date, testing the lows of the year. Crude is rolling back over, gold is surging, and the USDollar is fading...

US Retail Sales Drop Most Since June 2012 (And Don't Blame Gas Prices)

But but but... US retail advanced sales dropped a stunning 0.9% MoM (massively missing expectations of a 0.1% drop). The last time we saw a bigger monthly drop was June 2012. Want to blame lower gas prices - think again... Retail Sales ex Autos and Gas also fell 0.3% (missing an exuberantly hopeful expectation of +0.5% MoM) and the all-important 'Control Group' saw sales fall 0.4% (missing expectations of a 0.4% surge). Boom goes the narrative.

Greater Fool Theory, Cognitive Dissonance, & Financial Instability

"I am concerned that a sizable equity market correction looms. In order to justify general equity market over-weights, either risk premiums needs to fall further, or the economy and financial markets need to have reached a level of ‘escape velocity’ powerful enough to push them forward, even in the face of Fed rate hikes. I find such a ‘soft landing’ scenario improbable at best."

Frontrunning: January 14

  • U.S. Index Futures Decline on Commodities Slump, Growth Concerns (BBG)
  • Al Qaeda claims French attack, derides Paris rally (Reuters)
  • Charlie Hebdo With Muhammad Cover on Sale With Heavy Security Precautions (BBG)
  • How an Obscure Tax Loophole Brought Down Obama's Treasury Nominee  (BBG)
  • ECB’s bond plan is legal ‘in principle’ (FT)
  • Charlie Hebdo fallout: Specter of fascist past haunts European nationalism (Reuters)
  • DRW to acquire smaller rival Chopper Trading (FT)
  • Oil fall could lead to capex collapse: DoubleLine's Gundlach (Reuters)

JPM Misses Revenues And EPS Due To Another $1 Billion In Legal Costs

Looks like the Jefferies earnings harbinger were right, because with another quarter down, and here is another painful report by JPM, which just launched the Q4 earnings season for financials with a miss on both the top and bottom line, reporting $1.19 in EPS, well below the $1.32 consensus, and just barely above the lower estimate of $1.16. This was a decline from both the previous quarter (by 17 cents) and from a year ago (by 11 cents). Revenues missed as well, with JPM reporting $23.552 billion in top line, a decline of $560 million from a year ago ($1.6 billion lower than Q3), and below the $24.0 billion consensus. And while JPM's latest recurring, non-one time "one-time, non-recurring" charge came as a surprise to most (although how over $30 billion in legal charges can be considered one-time is beyond us), at the same time JPM once again resorted to the oldest trick in the book, taking the benefit of some $704 million in loan loss reserve releases, nearly offsetting the entire negative impact of the legal charge.

Market Wrap: Copper Plummets; Euro Plunges To 9 Year Low On Euro-Court's OMT Ruling, Futures Down

'After two days of sharp intraday and vicious reversals, the BTFD algos are suspiciously missing overnight, when as reported earlier, a bout of margin calls and stop loss selling meant not crude but copper would crash in today's episode of "guess the crashing commodity", on what Goldman dubbed a Chinese demand collapse which for those confused is different than an OPEC supply glut, and is also the reason why the entire commodity complex is trading at a decade plus low. As a result copper plunged to a five and a half year low, in the process halting the market due to the severity of the plunge. But the big event overnight was the farcical announcement by the European top court, which as everyone expected, rejected the German rejection of the OMT as illegal, stating it was not only legal (with certain conditions) but greenlighting the way for the ECB's QE in one week, a move which sent the EURUSD crashing to a fresh 9 year low!

Italy's President Napolitano Resigns: What Happens Next

Giorgio Napolitano, Italy’s longest-serving president, resigned before the end of a second 7-year presidential term. Napolitano accepted 2nd term in 2013 after parliament failed to elect his successor for days, had signaled from start he wouldn’t have served another full mandate. Here, courtesy of Bloomberg, is what happens next.

A "Conditional Bazooka": European Top Court Finds ECB's OMT "May Be Legal" But Must Meet Conditions

Moments ago, the Advocate General Pedro Cruz Villalon of the EU Court of Justice in Luxembourg delivered the non-binding opinion on issue of Mario Draghi's "unconditional" OMT. Here are the details from Reuters and Bloomberg:

  • EU COURT ADVISER SAYS OMT PROGRAMME IN LINE WITH EU LAW SO LONG AS CERTAIN CONDITIONS MET
  • EU COURT ADVISER SAYS OMT LEGITIMATE SO LONG AS THERE IS NO DIRECT INVOLVEMENT IN FINANCIAL ASSISTANCE PROGRAMME THAT APPLIES TO STATE IN QUESTION
  • EU COURT ADVISER SAYS ECB MUST OUTLINE REASONS FOR ADOPTING UNCONVENTIONAL MEASURES SUCH AS OMT PROGRAMME

In other words, Draghi's "unconditional" bazooka just became conditional, but it is still a bazooka, albeit one that will never actually be used since well over two years after it was revealed following Draghi's famous "whatever it takes" speech, it still has no legal termsheet or basis, and no definition on its pari passu or burden-sharing status. And it never will: after all it was merely meant as a precautionary device designed to scare away the bond vigilantes, and never to be actually implemented.

Copper Halted After Crashing 8% On LME, Sends AUD Plunging, Futures Dip Under 2000

Today's prime time event hasn't even arrived, that would be the European Court of Justice (ECJ) delivering its final opinion on the legality of the ECB’s previously announced OMT program, in less than an hour, and already the fireworks have begun, most notably out of Asia where after yesterday's epic commodity drubbing many were caught with their pants down and margin calls up, and what followed was a classic liquidation puke, when Copper prices crashed over 8% on the LME, to fresh 5 year lows and below USD 5,500/T in London.