Archive - Mar 2015

The subprime auto loan market isn't the only place where delinquencies are rising. New data shows foreclosures hitting their highest level in a year while the number of borrowers who have been foreclosed on twice has tripled since the housing bust. 

It may come as a surprise to some that across from the stark Greek economic calamity is an industry that has swam, so to say, while everything else has sunk, because while virtually every other aspect of the Greek economy is in shambles, its shipping industry is not only the pride of the nation, but has created more Greek billionaires than any other aspect of the economy. As Bloomberg recounts, Greeks have long dominated the shipping business. The nation’s fleet, numbering 3,669 vessels in 2013, is the largest in the world, according to the annual report of the Union of Greek Shipowners, making up more than 7 percent of the Greek economy and providing 192,000 jobs in 2013. And, perhaps most relevant, Greek shipping has also made billionaires of the country’s four largest ship owners by tonnage: John Angelicoussis, George Prokopiou, Peter Livanos and George Economou. The quartet control a combined fortune of $7.6 billion. It is these billionaires that are now suddenly sweating...

While some may ISIS is 'deaf' to the new world as it spreads its message of Shariah Law across The Middle East, the terrorist organization appears to be trying to broaden the appeal of the militant group. As Newsweek reports, ISIS has released a video in which a pair of disabled sibling militants use sign language in an apparent bid to recruit fighters from the (apparently under-served) deaf and mute community. The video shows the brothers directing traffic in a busy road saying: “We will strike you soon, by Allah’s permission," and ends with a scene of the brothers setting up rockets.

The consequence will not be eternal virtual prosperity, but rather a wrecked accounting system for the operations of civilized human life. We’ve stepped across the event horizon of that consequence, but we just don’t know it yet. Our bet is that we start feeling the effects sooner rather than later; and when it is finally felt, all the Kardashian videos in this universe and a trillion universes like it will not avail to distract us...

Judging by the euphoric exaggeration and fanboyism on mainstream media this morning, today's Apple Watch (not iWatch, definitely not iWatch) unveiling promises to be "world-changing" for the 'wearables' industry (as well as numerous "first time ever..." comments). Of course, there are 'watches' on the market already, but as Reuters Jason Fields 'jokes', the Apple Watch, of course, does more. The face is high resolution and in color. It even has apps that allow you to do a few of the things you’d be able to do if only you could muster the strength to dig your hand into the front pocket of your jeans, or do a little digging in your handbag.

Single-name CDS performance suggests investors are buying the "opportunity" Citi and Goldman are selling, providing further proof that we truly will never learn.

Dear Mr. Market,

I’m writing to you about the sharp lift in equity valuations over the past month...

Despite all of the talk of cutting the deficit and the like, the political class continues to throw taxpayer money around at a pace that is bankrupting the nation.

Mario Draghi is forced to buy "small" amounts of EGBs on first day of QE, casting further doubt on the viability of PSPP. If the ECB is unable to meet its monthly asset purchase targets expect chaos, as the market has spent the last several months front running the program and would be absolutely horrified if DOMO has to be downsized.

"Despite much hope that the current breakout of the markets is the beginning of a new secular 'bull' market - the economic and fundamental variables suggest otherwise. Valuations and sentiment are at very elevated levels which is the opposite of what has been seen previously. Interest rates, inflation, wages and savings rates are all at historically low levels that are normally seen at the end of secular bull market periods. Lastly, the consumer, the main driver of the economy, will not be able to become a significantly larger chunk of the economy than they are today as the fundamental capacity to releverage to similar extremes is no longer available."

We already know that the Bank of Japan will monetize 100% or just over of all Japanese gross sovereign bond issuance (source). As for Germany, on a run-rate basis, and assuming allocation based on the abovementioned capital key, it means that for the next 12 month period, assuming no major funding changes in Germany, the ECB will swallow more than a whopping 140% of gross German issuance! Or, said otherwise, the entities who will buy more than all gross German and Japanese issuance for the next 12 months, are the ECB and the Bank of Japan, respectively.

Following earlier comments from various Eurogroup members - after yesterday's dismissal of Greece's proposed "reforms" - ranging from Slovakia's "Greece needs to face the naked truth," to Dijsselbloem's "we seem to be losing time on Greece," and Schaeuble's "not a lot has happened on Greece," it appears Greece has quickly folded once again and acquiesced to EU's demands for harsher cuts. With cash unlikely to last more than 3 weeks and being unlikely to get the EU1.9bn in bond profits from the ECB (according to EU officials), Greek officials have stated that they are "willing to enrich" the list of reforms.

When stripping away the now traditional assumption fudges which have flooded every single data set and made virtually all the New Paranormal data meangingless due to its reliance on pre-Lehman crash demographic and labor participation assumptions, the reality is that not only is the American Dream now completely over, but that the American Nightmare has never been worse, because as BofA just calculated, the real US homeownership rate has never been lower!

One could argue America was conceived from intense frustration that ultimately led to separation. Fed up with what they perceived as excessive control by the Crown, colonists to the “New England”, in essence, seceded in 1776, and thus the United States was born. Now, there is a renewed and growing secession conversation brewing, this time fueled by a commodity: Natural gas. Infuriated by Governor Andrew Cuomo’s December decision to permanently instill a ban against hydraulic fracture stimulation, or fracking, residents in 15 communities in the Southern Tier of New York are discussing the possibility of redrawing the border between New York and Pennsylvania.

As Mario Draghi unleashes his trillion euro bond buying program - aimed from what we are told, at lowering risk premia in credit markets to stimulate the eurozone's economy from utter stagnation - things are not going according to plan. Away from Greece, peripheral bond spreads are all up 8bps on the day and stock indices are mixed on this first day of DOMO (Draghi Open Market Operations) Of course, the other reason for Q€ is to implicitly (because one would never explicitly admit to joining the currency wars) devalue the currency - thus improving competitiveness and exports for the EU; but that's not working out so well as Germany's exports dropped and missed by the most since August... this was not supposed to happen.