Archive - Dec 2015

For the first time since early 2014, "no brainer" Apple's Enterprise Value has fallen below that of its tech giant super-hero nemesis Alphabet (the company formerly known as Google). Since early July, Apple has lost a stunning $112 billion of 'value' while Alphabet has added over $150 billion. In September we asked "have we reached peak Apple?" it appears, for now, the answer is in.

It appears $38 is the new strange attractor for WTI Crude oil as it coincides with the last two weeks' "opposites" inventory data releases. Brent and WTI continue to hug each other for the 3rd day in a row. We await tonight's API inventory data (expected to see a 2.5mm draw) for the next move in crude (and therefore US equities).

"In March, I introduced a federal budget amendment that would impose a temporary surtax to pay for our military operations against ISIS. When the Senate reconvenes in 2016, I again plan to explore this option."

The $1.15 trillion spending bill passed by Congress last Friday and quickly signed by President Obama is just the latest triumph in the plutocratic management of politics that has accelerated since 9/11...proof that Washington can work. Mainstream media didn’t stop to ask: “Yes, but work for whom?” Instead, the anchors acted as amplifiers for official spin - repeating the mantra-of-the-hour that while this is not “a perfect bill,” it does a lot of good things. “But for whom? At what price?” went unasked. Secrecy today. Secrecy tomorrow. Secrecy forever. They are determined that we not know who owns them.

It appears that no matter what he says, does, or is alleged to have said or done, The Donald's rating continue to rise. As Bloomberg notes in the following chart of his 'success' so far, Trump's controversial comments appear highly correlated with his poll standings as the latest poll shows his support is now larger than that of his next three rivals combined...

According to eKathimerini, Greek and Turkish jets just got into a dogfight over the Aegean Sea on Tuesday when Ankara's warplanes violated Greek airspace nine times. Two of the Turkish planes "were armed." 

We were fully expecting not only a tail, but a whopping tail in today's weak market. And that is precisely what we got when moments after we learned that the When Issued was trading at 1.774% before the 1pm announcement, the 5 Year printed at 1.78%, a tail of 1.1 bps, a mirror image of yesterday's squeeze into the auction!

The winners from a $5 trillion M&A bubble: Wall Street bankers will make hundreds of millions in M&A fees. The losers: hundreds of thousands of workers who are about to be laid off, pardon, "synergized."

Once upon a time, we had strong, vigorously enforced laws that made a bank the safest place to store paper assets.

May the farce be with you...

My overriding theme and the central drama for the coming year is that unexpected events can take on greater importance as the Federal Reserve ends its near-decade-long Zero Interest Rate Policy. Consensus premises and forecasts will likely fall flat, in a rather spectacular manner. The low-conviction and directionless market that we saw in 2015 could become a no-conviction and very-much-directed market (i.e. one that's directed lower) in 2016. There will be no peace on earth in 2016, and our markets could lose a cushion of protection as valuations contract. (Just as "malinvestment" represented a key theme this year, we expect a compression of price-to-earnings ratios to serve as a big market driver in 2016.) In other words, we don't think 2016 will be fun.

In the aftermath of the first deadly winter storm of the year, a dazed and confused nation suddenly finds itself in need of leadership. Unfortunately, it won't get it: "Obama offered condolences for those who lost their lives and for those who lost their homes in the tornadoes." He then spent the next 6 hours golfing and was "all smiles."

This was not supposed to happen. The spread between the 2Y Treasury yield (which is soaring 7bps today) and 10Y (higher by 3bps) has plunged back below 120bps. The current cliff-edge has been support for the curve four times in the last 8 years but with GC rates blowing out to 7 year highs, one wonders if the size of the moves means we break to new regime lows.

Everyone who is convinced that the current status quo is permanent and unbreakable should consider what happened to the super-wealthy private landholders of the Western Roman Empire. When the empire's power to coerce broke down, the super-wealthy vanished into the dustbin of history. Few believed that possible in 475 AD, but history isn't a matter of belief. Believing it isn't possible doesn't stop history.