Archive - Jan 14, 2016 - Story

Was today, the 2016 equivalent of Bullard's infamous October 2014 "QE4" market sticksave? We don't know, but we do know that there is an uncanny resemblance between the market's action before Bullard's October 2014 "QE4" comment... and the market over the past few weeks. But the real question is what happens next, and if October 2014 is any indication then we are in for a massive "rip your face off" rally.

The (anti)correlations between Chinese FX and US junk debt raises an intriguing question that is somewhat chicken and egg. While Chinese financial conditions were terrible to the point of near disaster, junk bonds were, on the whole, almost inconceivably placid at the same time. But now that Chinese factors regarding the likely Asian “dollar” state have gone on and gone so far, it appears as if the US junk bubble can no longer idly withstand it. Again, all indications here are for renewed selling and participation in the “run.” Does that mean the Asian “dollar” is driving the junk bubble?

When skimming through the company's loan loss reserve disclosure, we found that in Q4 JPM did something it hasn't done in 6 years: for the first time in 22 quarters, or since March 2010, JPM actually increased its loan loss provisions by $89 million, instead of reducing these.

Seriously?

Most Americans will still welcome low prices at the pump. But in the oil boom towns of yesterday, the slowdown is very much being felt - "The jobs are leaving, and if an area gets depopulated, they can't take the houses with them and that's dangerous for the housing market."

“Deutsche Bank AG officials are reviewing whether some employees exaggerated demand as they marketed new securities backed by risky auto loans, potentially suppressing yields for investors,” Bloomberg reports. "The bank has looked at communications between the employees and investors to determine whether such marketing practices were normal salesmanship or if they crossed a line, said the person, who asked not to be named because the matter is private.”

But they said "never sell" - FANTAsy stocks are in trouble with FANGs down 11.5% year-to-date and Tesla plunging over 17% since the holidays... the last pillar of US equity market strength has officially broken...

Having been abandoned by equity analysts, perhaps investors could find some solace in the Treasury analyst community. Alas no: as Bloomberg notes this morning, citing independent Treasury strategist Marty Mitchell, "our concern is that things will only get worse (effects of commodity super-cycle, bankruptcies, debt defaults, hedge fund redemption/failures, global economic slowdown, equity weakness, global debt deleveraging, etc, etc) before they get better."

The raging bulls were so sure of themselves a few months ago. Valuation measures were for suckers. This time was different. It’s the new Obama economy. Profits are so old school. We suddenly sense a little panic amongst the big swinging dick Wall Street traders. Not too much scorn and laughter being directed towards John Hussman lately.

While the trend of US trade partners exporting deflation either across the Atlantic or Pacific continues, one name continues to stand out. China.

Something has changed! After years of consistent down-trend in initial jobless claims, the regime has change since mid-October to an uptrend. This past week saw claims rise 7k to 284k leaving the less-noisy 4-week average at 279k - its highest since early July 2015. Continuing claims also rose to 5 months highs (up over 4% in the last 3 months - the most since June 2009).What many appears to be unable to grasp is that we have seen the best and history tells us what comes next...

A combination of ECB minutes showing some members looking for more stimulus and Basel Committee publishing final risk rules which will mean stiffer capital demands from banks has sparked weakness in EUR (sending the USD higher) and sparking and instant slam-down in gold and silver.

At Berkshire’s annual meeting last May, Buffett said he made “no apologies whatsoever” about Clayton’s “exemplary” lending, in response to a question about an earlier Seattle Times story saying that Clayton trapped borrowers into unaffordable loans on depreciating homes. Well it seems the billionaire will need to send some more donations in as yesterday, four members of Congress sent a joint letter demanding an investigation into predatory practices at Warren Buffett’s mobile home unit Clayton Homes.