• Tim Knight from...
    09/29/2014 - 19:50
    Which brings us to Clinkle, which is a firm founded by a 22 year old with no business successes behind him (which at least Color.com's founder could claim, as he sold his firm to Apple for...

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What Happens When A Money Printer Finally Crashes

This is just too delightfully ironic to pass by.

In a world in which nobody has any faith in the capital markets because over $10 trillion in central bank liquidity has been injected to prop out a fragile house of risk asset cards the one place one should have faith (because let's face it: monetarism is the only religion that matters in today's world) is that money will be printed for the foreseeable future, certainly metaphorically and also quite literally. Alas, things did not quite work out that way for the company which, well, prints money (but sadly is not a central bank) when earlier this morning the shares of De La Rue, the company responsible for printing Bank of England banknotes, plunged a record 30% after it issued a profit warning.



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High-Yield Credit's Worst Week In 15 Months Sends Stocks Sliding

This week's 35bps rise in high-yield credit spreads (or ~10%) is the worst since at least June of last year and anxiety spread through other asset-classes appropriately as cheap-buyback-funding and liquidity concerns weighed on all equities - most aggressively small caps. The Russell 2000 is down around 4% from FOMC (and for the year) even with today's buying-panic this afternoon trying to rescue yesterday's losses. Much of today's moves were thanks to The Bill Gross Effect - Treasury short-end sold (2Y-5Y +5bps, 30Y unch), corporate bond spreads jumped wider (HY +20bps, IG +4bps), and European bonds (and German stocks) lurched lower. Markets recovered some of the early move but 2Y closed at 2014 yield highs. The USD closed 1% higher for the 11th week in a row to June 2010 highs. WTI crude close +1.5% on the week, gold unchanged, and copper and silver lower. VIX jumped 22% on the week, closing above 14.5.



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BofA Fears "This Would Exacerbate Any Equity Market Sell-Off"

With over half of all the stocks in the Russell 2000 and Nasdaq already in a bear market, US equity market indices are becoming increasingly driven by a highly concentrated set of stocks that lack any relationship to macro factors. As BofA shows in the charts below, participation in the record-high exuberance in stocks is waning... and waning fast... But, the biggest concern, BofA fears, is a new low for net free credit at -$182 billion - the major risk is if the market drops and triggers margin calls, investors do not have cash and would be forced to sell stocks or get cash from other sources to meet the margin calls. This would exacerbate an equity market sell-off.

 



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S&P Warns On Germany As Anti-Euro Political Party Soars In Popularity

"...the rise of Germany’s AfD anti-euro party calls into question the euro bail-out machinery and queries the pitch for any form of QE stimulus that has already been pocketed and spent in advance by the markets. It will force Angela Merkel to take a tougher line on Europe, and further complicates the management of the (already dysfunctional) currency bloc."



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The Rise In Volatility

First it was the foreign exchange markets, then commodities, followed by fixed income markets. Now it’s the equity markets. Wherever we look, volatility has been creeping higher. To some extent, this is not surprising. At the end of the US Federal Reserve’s first round of quantitative easing, and at the end of QE2, the markets wobbled. So with QE3 now winding to a close (and with the European Central Bank (ECB) still behind the curve), a period of uncertainty and frazzled nerves should probably have been expected.



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VIXnado Sparks Stock-Buying Panic; Bonds & Credit Unimpressed

Well it is Friday...



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Could Iran Be Trading Oil With Russia For Nuclear Support?

With the help of a few former Soviet neighbors, Iran is set to revitalize their crude oil exports after the profound effect of past sanctions. Not only has Russia offered to provide goods and services in return for Iranian oil, Azerbaijan and Kazakhstan have proposed reinstating oil swap deals. With limited access to international finance, oil, and insurance markets, U.S. Deputy Secretary of State William Burns said, “Iran may be losing as much as $50 billion to $60 billion overall in potential energy investments [annually].” These sanctions come after prolonged failure of UN nuclear negotiation talks with Iran. Russia, an active member of those talks, often tries to capitalize on its role to proffer access to RosAtom into the Iranian nuclear industry. Originally under the guise of preventing the weaponization of spent Iranian fuel cells, Russia now seeks to offer their services in return for Iranian oil.



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What Comes Next?

Some investors are clearly getting out of the Fed-generated “herd” trades of recent years... where next?



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Protecting Power & Privilege Has Doomed Regimes Throughout History

If you want to pinpoint the one dynamic pushing the global economy into not just a prolonged recession but a parallel period of massive social instability, look no farther than the social and financial stagnation that results from optimizing the system to benefit the Elites and the entrenched incumbents who protect them from competition and the dispossessed debt-serf classes below. The incestuous embrace of privilege and power by entrenched, socially isolated Elites characterizes failed states and brittle, doomed regimes throughout history.



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Ukraine PM Cries "Russia Wants Us To Freeze" As Locals Prepare For A Long, Cold Winter

We would like to be able to commiserate with Ukraine's US-muppet regime, we really would, but when Ukraine's PM Argeny Yatseniuk, or Yats as he is known to Victoria Nuland, almost cried in an interview with Reuters yesterday when he pleaded that "[Russia] wants us to freeze... This is the aim and this is another trump card in Russian hands.... So, except military offense, except military operation against Ukraine, they have another trump card, which is energy". we have just two things to say to him: i) he is absolutely correct, about Russia having the trump card that is - something obvious to everyone with half a brain from the start of the conflict, and ii) perhaps Ukraine should finally pay Gazprom not only for the gas they would like to use in the future, but also the gas they have already used and payment for which is overdue and which the IMF, i.e., the US taxpayer, gave Ukraine explicit money to pay for and instead was embezzled by the people in power.



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John Kerry Explains What America Is (And Is Not) Doing To Defeat "Odious" ISIS

Confused as to the USA's strategy to defeat ISIS? Have no fear, Secretary of State John Kerry has penned an Op-Ed primer for the man in the street to comprehend why it is necessary for America to confront this "profound and unique threat to the entire world." As Kerry begins, "let's be clear about we're doing — and what we’re not doing..."



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Public Pension Funds Face $2 Trillion Shortfall, Moodys Warns

"Despite the robust investment returns since 2004, annual growth in unfunded pension liabilities has outstripped these returns," Moody's warns in its latest report on the state of public pension systems. As Bloomberg reports, the 25 biggest systems by assets averaged a 7.45% return from 2004 to 2013, but liabilities tripled over the same period leaving them facing a $2 trillion shortfall as investment returns can’t keep up with ballooning obligations. The top 25 funds account for 40% of the entire US public pension system with Illinois, Kentucky, Connecticut, and Louisiana at the top of the 'most underfunded' list.



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3 Things Worth Thinking About

Everyone's a genius in a Fed-induced rally. But what next...



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Meet "Dan" Ivascyn: PIMCO's Gross Likely Successor

Having held positions at PIMCO since 1998, Deputy Chief Investment Officer Daniel "Dan" Ivascyn is said to be the likley successor to Bill Gross, according to Bloomberg.



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RANsquawk - Weekly Wrap - 26th September 2014



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