Archive - Aug 2015 - Story

One year ago, as part of its always entertaining long-run forecasting exercise, Bank of America predicted that GDP growth in 2015 and 2016 would be 3.3% and 3.4% respectively. Fast forward one year, when in its updated "long-run" forecast, Bank of America's crack economist Ethan Harris admits he was off by "only" 30% in his prediction of next year's GDP, and instead of 3.3%, he now "forecasts" 2015 GDP to be... 2.3%. But the punchline is this: "if history is our guide, at some point in the next decade the US will experience a recession, but predicting a recession far in advance is almost impossible. We plan to update this table on a regular basis."

Concentrated poverty in the neighborhoods of the nation's largest urban cores has exploded since the 1970s. The number of high poverty neighborhoods has tripled and the number of poor people in those neighborhoods has doubled according to a report released by City Observatory...

Six years ago, hardly anybody outside financial circles had any idea what Quantitative Easing was – hell, many within financial circles had no idea what QE entailed. The success of the narrative created around QE; that it is the mythical ‘free lunch’ that we all intuitively know can’t exist but secretly hope does, has played perfectly to the public and now, having endured for two electoral cycles, the next wave of politicians also believe it will have no consequences and are actually using it when planning the message they feel will endear them to the electorate. What plays better than free money?

It appears that after the great collapse of 2014, oil trading "god" Andy Hall refused to learn from his mistakes, and was convinced that oil would promptly rebound up to its historic levels. He was wrong, and as Reuters reports, after two consecutive months of 3% losses in May and June at which point he was up just 2% for the year, July was by far the cruelest month in history for the oil trader, a month in which he suffered a whopping 17% loss, one which lowered his aum by $500 million to $2.8 billion.

When we earlier noted the change of course for the GOP as RNC Chair Riebus showed Donald Trump much love, we wondered why the sudden shift of attitude and comment on being a Republican nominee? Well, perhaps, just perhaps, there is a reason why Republican leadership is vying for Trump's 'support'... As WaPo reports, former president Bill Clinton had a private telephone conversation in late spring with Donald Trump as he neared a decision to run for the White House, according to associates of both men. While there are no specifics about the call, we are reminded that Trump has also donated to Hillary Clinton’s Senate campaigns and to the Clinton Foundation. With Hillary facing plunging poll numbers and FBI probes, is The Donald the Democratic nominee in waiting?

The "main event" GOP debate isn’t until 9 p.m. ET on Thursday, but for some, the anticipation surrounding Donald Trump’s debate debut will be too much to handle. For those folks, there’s the so-called "undercard", which kicks of four hours earlier and should suffice as an appetizer until the Trump-sized entree is served up piping hot on Fox later this evening. Here is your full undercard preview.

"The question for 2015 is whether Fed actions are going to take away the liquidity punch bowl, and create a problem for the next rally's ability to achieve escape velocity... We saw this principle of diminished liquidity back in 1998-2000, and again in 2007-08..."

What do you do when even wealthy people begin to face an increasingly hard time purchasing a home in a vertical market completely disconnected from income trends? You reduce downpayments and lower credit standards, of course. Where have we seen this story before...

The veracity of China's economic data has long been the subject of debate and when FT called out the country’s National Bureau of Statistics for employing what we called "deficient deflator math" the NBS responded, saying the data reflected the "real situation." Now, virtually no one believes Beijing, with some analysts simply dismissing the "official" figures out of hand. 

Aside from the socialist utopias of Greece and Venezuela, who else is on the default chopping block? The CDS heatmap below lays out all the countries which according to the market, are most likely to tell their creditors the money is gone... it's all gone.

• US Change in Nonfarm Payrolls (Jul) M/M Exp. 225K (Low 140K, High 310K), Prev. 223K, May. 280K
• US Unemployment Rate (Jul) M/M Exp. 5.3% (Low 5.2%, High 5.4%), Prev. 5.3%, Apr. 5.5%
• US Average Hourly Earnings (Jul) M/M Exp. 0.2% (Low 0.1%, High 0.3%), Prev. 0.0%, Apr. 0.3%

We have shown the following chart, showcasing the unprecedented divergence between commodities and stocks countless times: And now the sellside is finally starting to notice, and instead of merely falling back on its traditional "but if you ignore energy..." platitudes aimed squarely at the 5-year-old trader market, is taking it seriously. Here is Credit Agricole's Valentin Marinov with a note released in which he notes simply: "something has to give."

It is unclear what catalyzed today's dump. Futures were briefly green at the open, then as if all hell broke loose and without an explicit  catalyst (although the technical collapse of numerous "story stocks" which had been market leaders for months, both today and in recent weeks has not helped) the E-mini, and individual stocks, just took out level after level of bids and at last check the Dow has dropped to 6 month lows, the S&P is just barely green for the year, while the biggest pain is in the Nasdaq which has dropped as much as 2% intraday. Below we lay out the biggest losers from today's market drop.

In case you’ve been living under a geopolitical rock for the last couple of years, you’d know that despite a brief period of time during which Egypt appeared headed toward a democratic form of government, it went from one brutal dictator to another. As was the case during Hosni Mubarak’s decades of rule, this is precisely how the U.S. government likes it. So much so, that U.S. officials are not only selling arms to the latest despot, General Abdelfattah al-Sisi, but they are actively bragging about it on Twitter.