Archive - Oct 14, 2014

With more than 4,400 people dead from Ebola - mainly in West Africa - senior WHO official Bruce Aylward told reporters on Monday that the outbreak was continuing to spread geographically to new districts in the capitals of Sierra Leone, Liberia and Guinea. As The BBC reports, the WHO says it is alarmed by the number of health workers exposed to the disease and warned the epidemic threatens the "very survival" of societies and could lead to failed states. "Any sense that the great effort that's been kicked off over the last couple of months is already starting to see an impact, that would be really, really premature," Aylward said, as WHO further warned the number of new Ebola cases may jump to 10,000 a week by Dec. 1 as the deadly viral infection spreads - "the virus is still moving geographically and still escalating in capitals, and that’s what concerns me."

Moments ago, the Fed concluded its latest $931MM POMO, with just 6 more POMOs left ever (at least until another QE program is unveiled), and judging by the last week's performance, the market has finally figured this out. And Goldman, which has been pounding the table on shorting the 10 Year for about a year now, and in the process crucifying even more muppets, has some bad news for TSY shorts: global growth is crashing.

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The rising fear may reflect a shift in sentiment from faith in the omnipotence of central banks to skepticism.

As the US-Saudi 'secret' oil deal continues to depress the price of oil, pressure Russian revenues, squeeze European budgets, and raise doubts about the status quo (OPEC and the rest of the world), not all of The Kingdom's elites are happy. Infamous billionaire Prince Alwaleed bin Talal has written an open letter to Oil Minister Ali al-Naimi and other ministers, as Reuters reports, saying the world's top oil exporter should start worrying about the recent slide in global oil prices and warned against the negative effect of such a drop on the state revenue: "Ninety percent of the 2014 budget is based on it (oil), so to underestimate (these implications) is in itself a disaster which cannot pass unnoticed," he wrote in the letter.

While Greek leaders are proclaiming victory, intending to exit the bailout plan early and fund themselves in the public marketplace - just as they did in April (despite record poverty, unemployment, and suicides); it appears investors are a little less sanguine about the prospect. Greek bond yields have topped 7% for the first time since March and any gains from the 5Y bonds sold to hedge funds in April have now gone (and Greek stocks are at 13-month lows). The driver of recent weakness appears to be fears over whether Draghi's OMT will ever be real enough to monetize Greek debt and a re-rating based on more standalone risk if Greece were to exit the bailout program early.

As if to rub salt into the wounds of Europe's death by a thousand-downgrades, Goldman Sachs followed up Germany's decision to drastically cut its growth outlook for 2014 (+1.2% from +1.8%) and 2015 (+1.3% from +2.0%) by slashing its forecast for Europe in Q3 to a triple-dip recessionary -0.15% GDP growth. This is dramatically below an "over-optimistic" consensus of +0.35% as incoming data is notably weaker than expected. The DAX remains well below the crucial 9,000 level (having plunged early in the European session) and bund yields have collapsed to new record lows.

We have shown this chart before. We will show it again because, to nobody's surprise, nothing has changed.

Just when you think the selloff couldn’t get any scarier, it did. The last hour of trading took over 1% out of the S&P 500 in rapid fashion, reportedly on fears of an Ebola check at a major U.S. airport. Today we offer up a “Top 10” list of specific markets and indicators to watch for signs of a near term market bottom. They include the CBOE VIX Index (key levels at 26 and 32), the action in small cap stocks and crude oil, and the dollar. Less quantifiable issues – but important nonetheless – are headlines related to Ebola (probably getting worse before better), 10-year Treasury bond yields (2.0% and 1.5% possible here), and European policymakers addressing a host of difficult monetary and fiscal policy issues. Bottom line: this is unlikely to be a dramatic “V-bottom” low given the range of issues of concern to investors.  Look for the majority of our “Top 10” to stop going down before calling a bottom.

No one is immune when the tide starts to turn... not even the Canadians.

As oil prices continue to fall, analysts and producers are trying to wrap their heads around the reasons and identify a floor price. Even though crude benchmarks like Brent and WTI keep dropping, the cost of finding oil continues to rise. What are some of the key drivers that have created this paradox?

So… we’ve got a weak and fragile market, losing two of its biggest drivers… at the same time that the Fed is ending QE. This is a recipe for a potential bloodbath. If we wipe out the “bubble” portion of the market move from 2009, we’re going to 1,250 on the S&P 500.

Not satisfied with fighting pro-Russian separatists, Ukrainians are fighting among themselves in Kiev. As RT reports, Kiev police deployed additional forces around the parliament building after a group of demonstrators started throwing smoke bombs and firecrackers at guards in an apparent reprisal over MPs' failure to honor past nationalists. More than 15 officers have been hurt as far-right protesters clash with riot police at the government buildings on the anniversary of UPA (Ukrainian Insurgent Army). Perhapa more troubling is, if this is the internal tension now, how bad will it get in the winter when they are freezing as Ukraine says it won't prepay for Russian gas.

According to Wells Q3 Earnings Supplement, while Mortgage Applications declined from a transitory one year high of $72 billion in Q2 to $64 billion, this number is going far lower. The reason: Wells' Morgage Application Pipeline just tumbled back to $25 billion, matching the lowest number since Lehman, and putting an end to any debate about the state of the US housing market.