Archive - Jul 2015

Here are just two anecdotes to confirm that not virtually nobody is left to trade bonds any more (as confirmed by the plunging FICC revenues reported by the big banks in Q2), but the reason for this is that there is no bond market liquidity left, a topic extensively covered here for the past 3 years.

This seemingly inexhaustible credit line is now drying up, with severely negative consequences for oil producers with debt that's coming due. The row of dominoes swaying unsteadily in these stiff winds won't take much to topple.

Once again, US equity markets are algorithmically surging as Treasury bonds are aggressively bid. It didn't end well yesterday, and we suspect won't today either...

Despite the imploring of Greek bankers for Greeks to "take your money out of your chests and houses – which are not safe in any case – and deposit at banks," it appears the Greek bank deposit run continues. As The ECB just announced another €900 million increase in Emergency Liquidity Assistance, strongly suggesting that in the 2 days since the last increase, banks are once again insolvent facing a liquidity crunch as the "banks are trustworthy" propaganda falls on very deaf Greek ears.

Following yesterdsy's API data, DOE has confirmed a 2.5 million barrel build in crude inventory - the highest stocks of crude at this time of year in at least 80 years. This was accompanied by a very small drop in production and has squeezed WTI back below $50 (although there was an algo flash-smash up to $50.50 right after the data).

Within 50 minutes of the US cash market open, the S&P 500 has been ridiculed all the way back to unchanged - erasing all the losses from tech titan turmoil overnight. The reason is simple! USDJPY was manhandled up to 124.00 just as we predicted... the question is - how much further will the BoJ push it?

Houses have become stocks... the higher the price, the more demand (especially as the government has your back with low down-payment loans and the re-emergence of IOs). With Existing Home Sales soaring to a SAAR of 5.49 million, the highest since early 2007, the fact that median home prices are at an all-time high appears to be any problem for the releveraging American (or Chinese) homebuyer.

GREECE TSIPRAS WANTS ELECTIONS AS SOON THIRD LOAN AGREED-SRC

GREECE PM MULLS SEP 13TH OR 20TH FOR POSSIBLE SNAP POLLS-SRC

With ugliness in AAPL and MSFT, Nasdaq has gapped almost 2% lower at the open - its biggest drop since January... So what else would one expect but an algo-driven buying panic at the cash open...

"The inherent contradiction of program implementation by a government from within which the bulk of opposition originates will have to be resolved. It is unlikely that uncertainty around the stability of the Greek economy and banking system recedes until this is the case."

Ahead of today's crucial Greek vote, it appears investors are seeking safety in the arms of Bunds, Treasuries, and The US Dollar.

The US economy is widely seen as the world’s best performing major economy at the moment. However, so far this year most economic data have actually been somewhere between very soft and lackluster. The steep fall in truck tonnage is definitely an alarm signal. It indicates that inventories are already too high relative to demand, something that seems to be confirmed by recent industrial production and retail sales data. Given that tonnage has continued to decline since the end of Q1, one can no longer blame the port strikes either. To be sure, the US economy is not yet signaling an imminent recession. At best though it is muddling through at a very subdued pace. It probably won’t take much to push it over the edge.

Clearly, Russia puts great strategic importance on its gold reserves. Both President Putin and Prime Minister Medvedev have been photographed on  numerous occasions holding gold bars and coins as a display of economic stability and strength. Since early 2007 Russia has sold gold only twice, in 2012, in small amounts.

If KO had applied the proper tax rate of 28.7% to its non-GAAP pre tax income of $3.6 billion, the EPS number it would get is not $0.63, but $0.58. Why is this key? Because Wall Street's consensus estimate for KO EPS was $0.60, or right in the middle. And that, ladies and gentlemen, is how both Intel and now Coca Kola used the oldest trick in the accounting book to "beat" EPS: by using an unrealistically low tax rate.