Archive - Jul 20, 2015 - Story

Even after a few weeks have passed, the unexpected visit of the Saudi Deputy Crown Prince to the St. Petersburg Economic Forum still has a lot of people scratching their heads. The news is full of widespread and contradictory theories, while questions abound. Why had the Saudis accepted an invitation from a country sanctioned by the U.S., its oldest and strongest ally? It is still a bit early for all the pieces to neatly fit together but now, after the dust has settled somewhat, a pattern seems to be emerging that may explain the situation.

Putting it all together, here is the LTM GAAP and non-GAAP EPS, and the resultant P/E ratios for the S&P on a 2015 forward basis (using Deutsche Bank's optimistic growth forecasts for the rest of 2015 which have Q4 2015 GAAP EPS projected to grow 23% from lastt Q4). As of this moment, with the S&P500 at 2130, the S&P 500 is trading at 18.1x forward (non-GAAP) PE based on 2015P EPS of 118, and an unprecedented 20.3x GAAP PE if one uses the far more realistic 105 GAAP EPS.

More than 40,000 food items are being sold with a "poisonous" 10% Value Added Tax hike as of today, burdening the average Greek household with at least 55 euro extra costs per month.

As we showed before when we showed the various Greek circle of debt hell, unless Greece finds a way to access the market once again following its "triumphal return" in mid-2014 when it issued bonds that cost investors (with other people's money) their 2015 bonus, it is only then that the Greek debt repayment hell begins.

The Mexican Peso has devalued 23.5% in the last 12 months, breaking 16.00/USD for the first time in history today...

And then this happened: during a press conference currently taking place, FIFA's embattled President has stormed out of today's Press Conference after comedian Simon Brodkin interrupted the meeting and threw money at him.

We love reading quotes from Hussman in 2000 and 2007. The air is getting pretty thin up here. A stock market driven by Google, Apple, Netflix and a few other tech darlings with no earnings does not make a market. Time is running out for the bulls. The same morons on CNBC ridiculed and scorned his facts then and they scorn and ridicule him now. Do we trust Jim Cramer and Steve Liesman or John Hussman? Guess.

Overnight we saw a flush in precious metals, with no apparent catalyst, and now we are seeing US Treasuries extreme volatility as earlier strength extending gains from last week, are unceremoniously and suddenly dumped after Fed's Bullard warned markets that the probability of a September rate hike is now above 50%. Of course, thanks to meltups pre-market in FB, GOOG, and AAPL, stock indices don't care at all.

The only way to sort the wheat (real collateral based on enterprise value) from the chaff (phantom collateral created by central banks' speculative bubbles) is for a crash to force price discovery and the cramdown of losses.

Several hours ago, in yet another deadly bomb attack attributed to ISIS, at least 27 people were killed and more than 100 others injured in a powerful explosion in the town of Suruc in southeastern Turkey, 10 km from the Syrian border and across from the heavily contested town of Kobane in Syria where surprise ISIS attacks killed more than 200 people last month.

• Gold Plunges to Lowest Since 2010 (BBG)
• In Greek crisis, one big unhappy EU family (Reuters)
• Greek Banks Reopen Their Doors (WSJ)
• Greek reshuffle hints at autumn election (FT)
• Angela Merkel signals conditions for Greek debt talks (FT)
• Dollar hits three-month high on rate view, pans gold (Reuters)
• History Shows Iran Could Surprise the Oil Market (BBG)
• ‘Charlie Hebdo’ Will Cease Publishing Cartoons of Prophet Muhammad (Newsweek)

Today's action is so far an exact replica of Friday's zero-volume ES overnight levitation higher (even if Europe's derivatives market, the EUREX exchange, did break at the open for good measure leading to a delayed market open just to make sure nobody sells) with the "catalyst" today being the official Greek repayment to both the ECB and the IMF which will use up €6.8 billion of the €7.2 billion bridge loan the EU just handed over Athens so it can immediately repay its creditors. In other words, Greek creditors including the ECB, just repaid themselves once again. One thing which is not "one-time" or "non-recurring" is the total collapse in commodities, which after last night's precious metals flash crash has sent the Bloomberg commodity complex to a 13 year low.