Archive - Aug 18, 2015 - Story

The story behind the deadly chemical explosion that rocked China’s Tianjin port last Wednesday continues to evolve amid fears that the public could be at risk from the hundreds of tonnes of sodium cyanide stored at the facility. Indeed, new samples show that the cyanide level in the water around the site is some 28 times the safety standard. It looks as though determining who actually owns Ruihai will be complicated by the fact that in China, it’s not uncommon for front men to hold shares on behalf of a company’s real owners. In an effort to pacify the country’s censored masses, party mouthpiece The People’s Daily said 10 people, including the head and deputy head of Ruihai had been detained since Thursday. Finally, initial estimates put the cost of the blast at bewteen $1 billion and $1.5 billion.

With hedge funds net short for the first time ever, and Commercial Hedgers are holding the lowest net short position in gold futures since the launch of the gold bull market in 2001, we thought it interesting that - for the first time since 2009, BofAML's fund managers' survey finds Gold is "undervalued."

Noble Group is Asia’s largest commodities trader. According to GMT research, Noble Group took what they have estimated as between $4 to $6 billions worth of fair value gains on asset valuation over the last 5 years. Since we are exactly one week after their Q2 results, in theory Standard and Poor’s had time to do their homework. We expect a big announcement of S&P on Noble Group later this week. UK insurers (who have also a foot in the cargo insurance market) have dumped Noble Group bonds overnight.

API reports a 2.3 million barrel inventory draw - a bigger draw than the prior week - extending the run to 4 consecutive weeks of drawdowns. The initial reaction was a pop higher, however the machines had not noticed that Cushing saw an inventory build (up 389k barrels) and that triggered weakness in WTI Crude...

The robo machines pushed their snouts through 2100 on the S&P index again yesterday. This was the 13th time since, well, February 13th that this line has been re-penetrated from below. But don’t call it an omen of bad luck; its more like monetary rigor mortis. The bull market is dead, but the robo-machines and talking heads of bubble vision just don’t know it yet.

With Bloomberg's IPO index down 20% from its late 2014 highs and pressing 10-month lows (having gone nowhere in 2 years), all is not well in the private-to-public transaction market. Despite the multi-billion-dollar ponzi valuations of various 'disruptors' and leaked data opening the kimono on how insane this reality is, we thought the following clip perfectly summed up how it's different this time...

It is not enough to issue proclamations such as “it is time to get tough” or “It is time to make America great again”. These are the buzz words of a man that is reaching out to tap the rich vein of popular appeal. Perhaps that is what all politicians strive to do, especially when the field of candidates is rather crowded. However, what is clear is that a well-crafted economic strategy is not present, nor are staffers that would have the temerity to disagree with Mr T.

The Dow's volatility is dead... long live The Dow's volatility.

It cannot be stressed enough how important Greece is to freedom, liberty and civilization across the globe. Greece is not a one-off, or merely a small nation in big trouble that holds little relevance for the rest of us. Greece is everything. What is happening to Greece follows the exact same game plan of what will eventually happen to every other supposedly sovereign nation. And it appears The Greeks are actively seeking alternatives...

With oil prices pushing cycle lows and Shale firms as loaded with debt as they have ever been, the spike in energy sector credit risk should come as no surprise as the hopes of the last few months are destroyed. At 1076bps, credit risk for the energy sector has never been higher. As UBS recently warned, more defaults are looming and, as we discussed this week, private equity is waiting to pick up the heavily discounted pieces.

Given the carnage unfolding across EM currencies and the myriad headwinds the world's emerging economies face going forward, it should come as no surprise that sentiment has turned decisively negative. Is it time to be a contrarian? BofAML thinks so.

Will the West endure, or disappear by the century’s end as another lost civilization? Mass immigration, if it continues, will be more decisive in deciding the fate of the West than Islamist terrorism. For the world is invading the West.

"The Goldman blowback is a particularly challenging subject to understand and analyze. Taken to extremes, criticism of the firm, which was founded and built by Jewish Americans, smacks at times of anti-Semitism. Fed officials don’t want to fall into the trap of ostracizing qualified people merely because of their association with the firm or its Jewish roots."

- John Hilsenrath

Since the 2011 Fukushima nuclear disaster, Germany has been one of the few countries that have successfully moved away from nuclear energy. In fact, the contribution of nuclear power in Germany’s electricity generation has now fallen to just 16% and renewables are now the preferred source of electricity generation in the country. However, Germany and its neighbors are now facing an unusual problem. With the dramatic increase in green energy usage, Germany is generating so much electricity from renewables that it is finding it hard to handle it.