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Is JPMorgan About To Bailout Argentina?

With Argentine politicians explaining that "Argentina is not in default" and ISDA set to decide if last night's default is an 'official' trigger event for CDS, it appears Kirchner, Kicillof, and their (k)omrades may have found an angel. The initial 'bailout' plan, by which Argentine banks bought the holdouts defaulted debt (then promptly acquiesced to Argentina's old debt-swap agreement), failed last night; but, as WSJ reports, JPMorgan is in discussions to buy the defaulted bonds of Argentina's holdout creditors. While this would not impact the default decision (that is history), it would speed up the exit from default rapidly. Of course, JPM is not doing this out of love for Argentina, we suspect they are on the hook for a few billion CDS and need some cheapest-to-deliver bonds to help them through the settlement process.



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All Major US Equity Indices Are Now Down Since MH17 Crashed

Who says geopolitics doesn't matter in today's efficient markets?



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Muppet Slaughter: Goldman Removes Adidas From Its "Conviction Buy" List Minutes After Its Biggest Drop In History

"We remove adidas from the Conviction List following the company reducing FY14 net income guidance (to €650mn from €830mn), resulting in 33%/40%/46% cuts to our FY14-16 earnings estimates. Our new 12-month price target is €77.5. Since being added to the Conviction List on October 18, 2013, the shares are -16.1% vs. FTSE World Europe index +6.7%. We also remove the stock from the Directors of Research Focus List." - Goldman Sachs



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Chicago PMI Collapses To 13-Month Lows, Biggest Miss On Record

We warned last month that under the covers Chicago PMI looked a lot weaker than the headlines and this morning's collapse confirms that. Against expectations of a small rise to 63.0, Chicago PMI plunged from 62.6 to 52.6 (13-month lows) for the biggest miss on record. According to the release itself, "A monthly fall of this magnitude has not been seen since October 2008 ." The was an 8 standard-deviation miss from analyst expectations (Joe Lavorgna was on the high side at 63.0). New orders, inventory, production, order backlogs, and prices paid all dropped (but employment rose?). This is the biggest 2-month drop since Lehman (and 2nd biggest since 1980). We await the seasonal adjustment "correction" as MNI get the call from Yellen.



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Stocks Open Weak - Lose All July Gains

The Dow and S&P 500 are now in the red for July as stocks are opening weak this morning. Of course, the month's big loser is the Russell 2000 which is down 5.3% - its worst month in over 2 years.



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"Costs" For Who? Adidas Drops Most Ever After Slashing Guidance: Blames Russia

It would appear "Russia" is the new "weather" when it comes to missed earnings expectations. As Bloomberg reports, Adidas shares fell by a record after the world’s second-largest sporting-goods maker slashed its full-year profit forecast, bursting euphoria around the German company less than a month after its national team’s victory in the World Cup. The reason, aside from golf, "turmoil in Russia," which just happens to be its most profitable region. But Jack Lew promised that there would be no impact?



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Risk Off As Employment Costs Surge: This Is Where Wages Supposedly Rose The Most

While earlier today initial claims disappointed modestly to the upside, the economic print the market has been fascinated by is the otherwise C-grade economic indicator released by the BLS, the Employment Cost Index, which is quite a backward looking (today's release looked at Q2) at wages, salaries and benefits. The reason it is fascinated by it is that, supposedly, total employment costs rose the most in 6 years, with wages rising the most since Q3 2008 and benefits: the most since Q2 2011. And the reason why the risk switch has been pushed into the Off position is because this alleges that wages are finally rising, something which the Fed did not know yesterday, and which will make the hawkish case that much stronger.



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Employment Costs Surge Most In 6 Years As Initial Claims Miss

Following last week's "seasonal volatility"-driven plunge in claims to new cycle lows, this week saw a 32k rise to 302k, missing expectations for the first time in 4 weeks. However, what is more worrisome for bullish equity market investors is the surge in employment costs. The Employment Cost Index jumped 0.7% (beating expectations of a 0.5% rise) - its biggest jump since Sept 2008. This is the biggest variance from expectations in 8 years and suggests Janet Yellen's 'slack' just got a lot tighter. Good news is bad news for bonds and stocks (for now).



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Goldman Does It Again: Banco Espirito Santo Bonds & Stock Are Crashing

A week ago, investors were exuberantly buying Banco Espirito Santo (BES) stocks and bonds on the back of disclosures from Goldman Sachs that they have bought stakes in the bank "by virtue of its client transactions." This morning, Goldman along with its muppeted clients  (and hedge funds D.E.Shaw and Baupost) are licking their falling-knife-catching wounds as the stock of BES is down over 50% to new record lows and its bonds have cratered nearly 20 points to 57, after announcing a stunning $5 billion loss. Exuberance has turned to fear over 'burden-sharing' and bail-ins across the capital structure.



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NIRP DERP: A Chart Of What Europe Economy Really Looks Like

Curious what Europe's true economic state is? The chart below, showing Europe's annual inflation or lack thereof, and which just dropped from 0.5% to 0.4%, missing estimates of an unchanged print despite the ECB's ongoing and losing war with disinflation, and soon deflation, shows all you need to know.



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Frontrunning: July 31

  • Moscow fights back after sanctions; battle rages near Ukraine crash site (Reuters)
  • On Hold: Merkel Gives Putin a Blunt Message (WSJ)
  • Argentina’s Default Clock Runs Out as Debt Talks Collapse (BBG)
  • Argentina braces for market reaction to second default in 12 years (Reuters)
  • Banco Espirito Santo Plunges After Posting 3.6 Billion-Euro Loss (BBG)
  • Adidas Plunges After Cutting Forecast on Russia, Golf (BBG)
  • GOP Says Lerner Emails Show Bias Against Conservatives (WSJ)
  • Londoners Cashing in Flee to Suburbs as Home Rally Wanes (BBG)
  • BNP Paribas Reports Record $5.79 Billion Quarterly Loss (WSJ)
  • Swiss Banks Send U.S. Client Data Before Cascade of Settlements (BBG)
  • Putin Sows Doubt Among Stock Bears Burned by 29% Rebound (BBG)


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Futures Tumble On Espirito Santo Loss, European Deflation, Argentina Default

It has been a deja vu session of that day nearly a month ago when the Banco Espirito Santo (BES) problems were first revealed, sending European stocks and US futures, however briefly, plunging. Since then things have only gotten worse for the insolvent Portuguese megabank, and overnight BES, all three of its holdco now bankrupt, reported an epic loss despite which it will not get a bailout but instead must raise capital on its own. The result has been a record drop in both the bonds (down some 20 points earlier) and the stock (despite a shorting ban instituted last night), which crashed as much as 40% before stabilizing at new all time lows around €0.25, in the process wiping out recent investments by such "smart money" as Baupost, Goldman and DE Shaw. The result is a European financial sector that is struggling in the red, while adding to its pain are some large cap names such as Adidas which also tumbled after issuing a profit warning relating to "developments" in Russia. Then there was European inflation which printed at 0.4%, below the expected 0.5%, and the lowest in pretty much ever, and certainly since the ECB commenced its latest fight with "deflation", which so far is not going well. The European cherry on top was Greece, whose dead cat bounce is now over, after May retail sales crashed 8.5%, after rising 3.8% in April.



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Obama Sued: House Authorizes Lawsuit Against President With 225-201 Vote

Argentina defaults; Russia, Ukraine, Libya, Israel, Gaza, Iraq all in a state of (hot or otherwise) war, the worst Ebola epidemic in the history of Africa, and now Obama is getting sued.



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Peter Schiff And Doug Casey On The "Real" State Of The Economy

"...the numbers that they crank out to make everybody feel good are almost as phony as the numbers that the Argentine government cranks out... I would say that inflation is realistically in the 8-10% range here in the US—and it’s going much higher. The growth is all a fantasy. It’s all a result of the assumption that there is no inflation, when there really is because what we have is inflation masquerading as economic growth. But the bottom line is the economy is really contracting, that’s why the labor force is shrinking, that’s why we’re using less energy, that’s why the people’s standard of living is going down, and real incomes are falling and job opportunities are disappearing. It’s because we’re in a recession and no one wants to admit it."



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Forget Ebola, Florida Issues "Flesh-Eating Bacteria" Public Health Warning

As Ebola spreads mercilessly across the world, it appears Florida has a problem that sounds just as awful. As CBS reports, Florida health officials are warning beachgoers about a seawater bacterium that can invade cuts and scrapes to cause flesh-eating disease. At least 11 Floridians have contracted Vibrio vulnificus so far this year and two have died, according to the most recent state data.



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