Of all sectors the one which may pose the biggest surprise to investors is financials: it is here that Q3 (and Q4) earnings estimates have hardly budged, and as of September 30 are expected to rise by 10% compared to Q3 2014. This may prove to be a stretch according to Morgan Stanley whose Huw van Steenis is seeing nothing short of a bloodbath in banking revenues, with the traditionally strongest performer, Fixed Income, Currency and Commodity set for a tumble as much as 25%, to wit: "we think FICC may be down 10- 25% YoY (FX up, Rates sluggish, Credit soft), Equities marginally up but IBD also down 10-20%."
Given that the oil market itself has around 2 million barrels per day of excess supply, Chinese SPR demand is providing a cushion, but not a huge one. Prices may drop when these imports are completed; however, it will not be catastrophic to the market. Considerations of the SPR in China seem overblown when compared to decreases in overall Chinese, Asian, and global demand, which should be the focal points of any investor’s analysis, and not just China’s SPR.
If you don’t think financial markets have been utterly destroyed by central bank intrusion then how can you explain Friday’s 460 Dow point reversal higher after the post-NFP low? It was pure machine rage triggered by another implied “lower for longer” Fed policy signal. In short, we are now in an exceedingly dangerous phase of the central bank end game. They continue to pour gasoline on the first of financial speculation, yet smugly insist all is clear.
When stocks absolutely and completely have to go up, there is only one thing for it: the spurious headline from Nikkei (aka the new owner of the Financial Times). It is 2am in Japan but still, after Thursday's headline that: BOJ IS SAID TO SEE LITTLE IMMEDIATE NEED FOR ADDING STIMULUS... It is now time for the diametrically opposite: BOJ MAY NEED TO EASE AGAIN WITH FED DELAY, NIKKEI SAYS. And sure enough, USDJPY jerks higher and US equities hit the day's highs.
"There’s a lack of faith in monetary policy -- you’ve thrown the kitchen sink at it, you’ve cut rates to zero, you’re printing money -- and still inflation is lower. I think this is a dangerous situation if people perceive that it has the responsibility and it doesn’t have the tools."
It may be tempting to cheer Russian military action in Syria, as it seems ISIS is finally suffering some considerable losses. But I cannot cheer the bombs, whether they are Russian bombs or US bombs or French or British bombs. I do not believe a terrorist group created by foreign intervention in the region will be solved by more foreign intervention in the region. Bombs represent a total failure of policy. They destroy a country’s economy and infrastructure.
With the world's central planners (and their status quo hugging cronies) calling for cash bans (and rather ironically helicopter money at the same time), the soaring costs of getting one's own money appears to be a quiet form of capital control creeping up on the distracted American public. As WSJ reports, the average cost for using an automated teller machine that isn’t tied to a customer’s bank rose to a record $4.52 per transaction (with average “out-of-network” cost tops $5 and can rise to as much as $8 in some places.)
While the US coast guard and search and rescue teams scour the Caribbean seas around the Bahamas for traces of debris from the missing cargo ship El Faro, which disappeared in the eye of Hurricane Joaquin with 33 mostly American crew members aboard more than three days ago, another tragedy struck moments ago when as AP reported an Amtrak train derailed in central Vermont near Northfield. It isn't immediately clear whether there are any injuries.
Small Caps are up 5% off post-payrolls lows and The Dow is up over 650 points as the lower-for-longer, please-give-us-QE4 panic-buying ramp continues... and all this with no Bullard (for now).
Just as we warned previously, the bloodshed was only just beginning at Valeant (and others). Having put all its peers to shame in terms of price hikes, VRX shareholders appear anxious that the 'no-brainer' may just become the poster-boy example to be made of by an anxious-to-show-some-action Congress...
"... standard monetary policy rules might justify a continuation of the current zero-rate policy for much longer, well into 2016 or potentially even beyond. In this context, it is interesting that the reduced market-implied probability of liftoff in 2015 after Friday’s weak employment report mostly translated into a higher probability of liftoff not in 2016 but in 2017!"