Archive - Oct 2015 - Story

Who holds the majority of the debt that would be at risk in a Russian default? Not China.  Not Iran.  Not Syria.  No, it’s the exact same nations, and banks and funds within those nations, that are applying the sanctions against Russia. So, if Russia does default, what does it mean in terms of its political relationship with the West? Nothing. But what does it mean to its creditors? Everything... Simply put, if Putin believes that the benefits of a default outweigh the consequences to his country, he won’t hesitate to do it, no matter the international ruckus it might raise.

Moments ago, the BB- rated Valeant debt "story" went from bad to worse, when S&P just revised its outlook to negative citing "Risks To Growth" adding that its "negative rating outlook reflects risks to our base case expectation that Valeant can sustainably grow revenue and EBITDA, given the potential reputational, legal, and regulatory risks the company is facing."

From its highs at $60.97 (after opening at $60), Ferrari has crashed over 16% and broken below its IPO prices today...

In the latest example of US foreign policy gone horribly awry, "ally" Turkey is now bombing the very same Syrian Kurds who just two weeks ago received 50 tons (literally) of US weapons and ammo paradropped from on high. The situation has become so convoluted and self-defeating that one wonders how long it will be before someone in Congress decides it's time to take a look at exactly what's going on here and why it seems like this entire debacle is simply too bad to be true. 

"Investors are now facing the second most extreme episode of equity market overvaluation in U.S. history (current valuations on similar measures already exceed those of 1929). The belief that zero interest rates offer no alternative but to accept risk in stocks is valid only if one believes that stocks cannot experience profoundly negative returns. We know precisely how similar valuation extremes have worked out for investors over the completion of the market cycle, and those outcomes have never been deferred indefinitely. The only question at present is how many grains are left in the hourglass."

"During the third quarter, we determined that it was necessary to adjust our smartphone inventory primarily through the write-down of older generation phones, and via the acceleration of secondary market dispositions of excess phone inventory."

Yesterday's tumble on the read-through from component-maker Dialog Semi added to fears, noted by Berenberg Bank the previous week, that iPhone sales momentum was not as rosy as Tim Cook told Jim Cramer after all, is not seeing many BTFDers this morning. As we previously noted, the China channel checks painted an ugly picture, and now JPMorgan (while maintaining their 'overweight' rating on AAPL) is warning that it expects "cautious guidance" amid a weakening global macro picture.

On the heels of the nuclear deal and Tehran's ground operation in Syria, Iran is stepping up efforts to prove that contrary to Western rhetoric, it is not in fact "isolated." According to the country's economy minister, Iran is now set to join the BRICS bank and step up its cooperation with Brazil. This is symptomatic of Washington's waning ability to exert American influence on global affairs both political and economic.

Today, as we previewed last week, we got just the deal we envisioned.  Which leaves us only with the soundbites, such as this one moments from from John Boehner.

BOEHNER SAYS AGREES WITH RYAN THAT PROCESS THAT PRODUCED BUDGET DEAL "STINKS"; BUT ALTERNATIVE WAS CLEAN DEBT CEILING HIKE OR DEFAULT

And as Boehner's last act, he now has the honor of telling the US public that its latest and greatest debt target has just been increased to just shy of $20 trillion.

Despite ongoing low gas prices, a recovery in stocks, and the nationally-advertised unemployment rate remaining low, Consumer Confidence tumbled in October from eight-year highs to three-month lows. Worse still, "hope" slid to its lowest in 3 months as "jobs plentiful" slid notably with fewer jobs and decreasing income.

In January when Markit Services PMI printed 54.2, the weakness was blamed on weather (and port strikes). Now it is sunny October, following the warmest September ever on Earth, and Services PMI has plunged to 54.4 - its lowest in 9 months (handily missing the 55.5 bounce expectation). This flash data shows the weakest payroll numbers since February and business confidence remains just marginally higher than the three-year lows of July. As Markit warns this weakness "will add to calls for policymakers to delay hiking interest rates until the economy finds a firmer footing."

The head of the UN Human Rights Council is at it again, although this time it appears Saudi warplanes spared the Yemeni wedding parties in favor of a Medecins Sans Frontieres hospital that was completely destroyed along with all of the equipment and supplies inside around 11:30 PM local time. This is latest in a string of "mistakes" and the second tragedy to strike an MSF facility in the last 30 days.

We have heard many explanations for the torrid market rally since last September, ranging from the rational - short squeeze - to the generic - "bad news is good news under central planning" to the deranged - "ignore the news, the U.S. economy is actually stronger and China is recovering." And now, courtesy of the U.S. Treasury's Office of Financial Research, here is the official explanation from the government itself.