Archive - Jul 10, 2015

Patrick Liu Chunning, the head of Alibaba Digital Entertainment Group, has been arrested over bribery allegations during his tenure as vice president of digital entertainment at Tencent Holdings.  Five other former employees of Tencent are being held by authorities as part of the investigation.

"It will be appropriate at some point this year...to raise the Fed funds rate and normalize monetary policy," Yellen recently explained but given recent comments from Fed heads and the FOMC Minutes, it appears the real meme is "everything is awesome, we promise and as long as it stays that way we will hike rates just a little bit, stand back and watch the implosion, then stand ready to step back in to save the world... oh, and if Greece, China, US Shale, or LatAm blow up contagiously, we won't normalize policy ever again." Yellen speaks on the US economic outlook at The City Club of Cleveland.

Facing pressure from all sides, Greek PM Alexis Tsipras sells out voters and looks to push concessions through parliament ahead of Sunday deadline.

A week ago we warned of the odd build up in inventories in GM's parking lots in China. It appears those warning were spot on as WSJ reports, China’s new car sales recorded the first year-over-year decline in more than two years in June, as slowing economic growth and falling stock markets hit the world’s largest auto market. “2015 will be an off-year for the Chinese car market,” said Dong Yang, a vice president for the auto manufacturers’ association, and we note auto dealers are seeing orders cancelled at a frenetic pace as it appears stock margin calls are draining the liquidity car-buyers once had.

Dear SEC, SIFMA, FINRA, CFTC, and anyone else who refuses to pay attention to the man behind the curtain. Following the initial dump in Treasuries after Greek proposal news overnight, bonds started to rally back... it appears that was unacceptable as 'massive' spoofing was then put in place to signal the price of Treasuries lower (yields higher)...

In short… the two biggest reasons for the markets to be rallying today (Greece and China) are simply temporary issues. They will resolve, very likely for the worse, in the coming weeks. Smart investors should be using this bounce to prepare for the next wave of the Crisis.

Greece has already collapsed, and the only real question is whether the ECB will give Greek depositors time to withdraw some of the €120 billion in deposits it holds hostage with the frozen ELA, or if the ECB will admit the truth about the Greek insolvent banking system risking Eurozone contagion. A better question is just what is the purpose of the IMF whose intervention in Greece can be described in one word: disaster. It can also be described in eleven, as the creator of the Taylor Rule, John Taylor, has done in a blog post which can be summarized as follows: IMF Loans To Greece Bailed Out Banks And Worsened The Situation.

“The energy sector of the high-yield market continues to be a silo of misery... If we stay near these levels, marginal high-cost producers won’t be able to survive.”

Recession watchers stay tuned... Wholesale Sales rose a mere 0.3% MoM (missing expectations of a 0.9% rise) but sales tumbled 3.4% YoY - the most since the financial crisis. Hopers will look at the rise in inventories (+0.8% MoM vs +0.3% exp.) as GDP positive but at some point the hope for a sales pick up fades and inventory stuffing stops (Sales -3.4% YoY, Inventories +5.0% YoY). But what should be worrying everyone right now is the inventory-to-sales ratio holding at recession levels.

We already know that markets and exchanges only break on downdays. So does that mean that on days in which algos are indescriminatly buying ES as follow through from China's stock market manipulation and Greece's "hopes" for can kicking, investors are safe? Nope, as one of the most popular online discount brokers found out moments ago:

• TD AMERITRADE EXPERIENCING "WIDESPREAD" ORDER-ROUTING PROBLEMS - OFFICE OF PRESIDENT: RTRS
• TD AMERITRADE SAYS EVEN ORDERS THAT WERE ACCEPTED ARE STALLED

Were some TDA traders maliciously selling China stocks overnight one wonders, or did Ameritrade also decide to do a "software update" in the middle of the trading day?

"With the drastic fall in share prices recently, social stability is clearly at stake," Credit Suisse says. With the bubble now finished it is only a matter of time before all the 'nouveau riche' farmers and grandparents see all their paper profits wiped out and hopefully go silently into that good night without starting mass riots or a revolution.

Following Varoufakis' resignation as Greek finmin on Monday, the first official casualty of the Greferendum which in retrospect was completely irrelevant, he has been put in a tough position of still having to be physically present in parliament of which he remains a member. But not today: moments ago Yanis tweeted that he will not be present to cast the critical vote supporting Syriza's backtracked proposal, as he will be detained for "family reasons."

The global and European economies are increasingly dominated by bureaucrats taking arbitrary decisions on capital allocation, with little regard for rules or process. The decisions of the ECB to reject the applications of the Bank of Greece for additional funding under ELA could have only been politically motivated, and therefore in clear violation of the ECB’s independence as enshrined in Article 123 TFEU. It is time for EU bureaucrats to stop acting as autocrats.