Archive - Jul 14, 2015

The latest BofA Fund Managers Survey has left the report authors stumped: on one hand fund managers have the highest cash levels since Lehman at 5.5% (most since December 2008 and prior to that November 2001), which combined with a capitulation in risk appetite due to ongoing stress in Greece and China would suggest a screaming buy signal... but there is one problem: the same fund managers refuse to actually capitulate and sell, and as a result not only are bank longs at record highs, but equities remains solidly overowned but the group, offset by "protection" levels which are the highest since February 2008. In short, the current positioning is a "complete contrast to 2008."

In the past, we documented the overstatements by both the IEA and EIA in 2014 & 2015 in terms of supply, inventory and understatements of demand. Others also noticed these distortions and, whether intentional or not, they exist and they are very large in dollar terms. These distortions, which are affecting price through media hype and/or direct/indirect price manipulation, are quite possibly the largest in financial history.

Following May's bounce in retail sales (thanks to a rise in gas prices), June's headline data printed a 0.3% plunge - the most since Feb 2015 - against expectations of a 0.3% rise. Retail Sales ex-Autos also fell MoM (down 0.1% against expectations of a 0.5% rise). This is exactly in line with our warnings last week that spending was likely to drop following a slide in credit and debit card spending as retail sales declined in autos; furniture; building materials; clothing; general merchandise; restaurants; online and miscellaneous. The control grouop data showed a mere 2.1% rise YoY - confirming recessionary signals from wholesale sales data.

Having tumbled 15pts on Grexit threats and then roared 40 pts on a Greek "deal", S&P 500 futures have traded in a 2pt range for the last 16 hours... dead market walking... or calm before the storm?

While Greek PM Alexis Tsipras is busy figuring out how best to go about pushing the "deal" he reached on Monday morning in Brussels through parliament, EU finance ministers are scrambling to put together billions in bridge financing that will hold Athens over until the activation of the ESM program which is likely at least four months away. Although it's as yet unclear which "least bad" option is preferable for Greece's external debt, Wolfgang Schaeuble has an idea for how the country might pay public sector employees.

Unlike previous quarters when JPM's earnings release was a jumble of legal addbacks, MBS charge offs and loan-loss reserve releases, this time it was positively tame by comparison.

• Greek lawmakers split over bailout as vote looms (Reuters)
• Greek Bailout Rests on Asset Sale Plan That Already Failed (BBG)
• Greece Needs $25 Billion to Get Through August, Scicluna Says (BBG)
• Tsipras Enters Parliament Den to Sell Aid Deal to Greeks (BBG)
• Greece makes samurai bond repayment (FT)
• Iran, World Powers Have Reached Nuclear Agreement (BBG)
• Janet Yellen’s Fed Flounders in Political Arena (WSJ)

One day after the Greek "pre-deal" was announced and the world breathed a sigh of relief, sending US stocks soaring and Greek halted stocks, well, tumbling (via ETFs and ADRs), things are oddly quiet and in fact quite red in Europe, with futures in the US modestly lower, following both China's first red close in several days (SHCOMP -1.2%), and a Europe which is hardly looking very euphoric at this moment: it is almost as if the algos finally got to read the fine print of the Greek deal after trading all day on just the headlines.

It is only fitting that almost exactly 24 hours after the Greek "pre-deal", which may and will end up crashing and burning in very short notice, another long expected "deal", one which has been about a decade in the making, was reached, when Iran reached a landmark nuclear agreement with the U.S. and five other world powers, a long-sought foreign policy goal of the Obama administration. However, just like with the Greek deal celebrations, these too will likely be short lived as the outcome sets the White House on course for months of political strife with dissenters in Congress and in allied Middle Eastern nations.