Archive - Jan 14, 2015

Things are escalating... Energy credit markets are pushing back towards record high spreads, copper is pushing back to the overnight lows and gold and silver are flat. US equity markets are the big movers with The Dow down well over 300 points today (and nearly 700 points in the last 27 hours) and the S&P now down almost 5% from its highs. Treasury yields are 8-10bps lower on the day with 30Y yields at record lows and 10Y close.

It's not been a good six months for Harold Hamm. The billionaire CEO of Continental Resources has seen his massive stake in the company cut in value by almost 60% since the start of September and - maybe even more distressing - agreed the largest divorce settlement ever. Hamm's divorce lawyers recently said he took out a personal loan to fund the $1 billion settlement with ex-wife Sue Ann Arnall, but as Reuters reports, a regulatory filing by the company today reveals Hamm pledged 68.7 million of his company shares as collateral for the loan on Jan. 9, or around 18.5% of the outstanding shares.

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.

We still have a LONG way to go to catch up with Oil, Copper, and Junk Bonds.

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...

In December I proclaimed that we'll likely see multiple crashes for 2015. I don't say this lightly & I have a track record on this topic that's foolish to ignore!

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:

How far can a girl go?

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

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. 

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...

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...

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.

...Credit!!

The economy generated 866k jobs last quarter so investors should not overly fret disappointing retail sales.

— Joseph A. LaVorgna (@Lavorgnanomics) January 14, 2015