It has been a long way up and quick ride down for SunEdison but bad news keeps piling up for the hedge fund hotel even as it dead-cat-bounces again. As the stock bounces, just as it bounced in September after Steve Cohen's Point72 exposed their stake and JPM jumped to the rescue, uncertainty remains extreme. Amid a surge in debt and increasingly negative operating cash-flow, the plunge in stock (asset) price may have triggered a cross-collateral margin call of around $315 million. Furthermore, mass layoffs are on the cards as the CEO attempts to "optimize" the business.
"There’s a lack of faith in monetary policy -- you’ve thrown the kitchen sink at it, you’ve cut rates to zero, you’re printing money -- and still inflation is lower. I think this is a dangerous situation if people perceive that it has the responsibility and it doesn’t have the tools."
Following Friday's disastrous payrolls report, which confirmed all the pre-recessionary economic data and signaled that instead of approaching "lift-off" and decoupling from the rest of the world, the US economy is following the emerging markets into a slowdown in what may be the first global, synchronized recession since 2008, the market saw its biggest intraday surge since 2011 and the sharpest short covering squeeze in history, we are happy to announce that the "market" is now solidly back in "bad news is good news" mode.
"The reason the markets aren't going lower is people are holding and hoping." Incidentally, there is a reason why hope is not a strategy: in the end, it always fails.
Never have markets carried so much risk. And never have markets been as vulnerable to an abrupt change in perceptions with regard to central banker competence, effectiveness and capabilities. At the minimum, global markets will function poorly, but risk is now high for a disorderly – Party Crashing - "run" on financial markets, as faith in central banking begins to wane.
From time to time, the data (from economic activity, inflationary pressure, risk appetite and asset valuations) points unambiguously in a single direction and experience tells us that such confluences are worth watching. We are today at such a point, and the worry is that each indicator is flashing red.
The reaction function of officials takes on added importance in the week ahead.
"Since 2013, stocks rallied while disinflationary pressures were reinforced by a strong USD, low commodity prices and a decline in global demand. If pre-2013 coordination between the two is taken as a reference, then based on current stock prices breakevens should trade about 1.5% wider. This means the Fed should be hiking because inflation is above target. Alternatively, given the current level of inflation, S&P should be trading at half of its value."
"We believe the US will be in recession before the end of 2016 and then things will be really interesting. How will the public receive news of more QE, NIRP, forward guidance, cash bans and capital control in a time when faith in central bank omnipotence disappears?"
Moves will be made to ban physical cash in the coming months.
Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their DebtSubmitted by Tyler Durden on 10/02/2015 17:15 -0400
With the Federal Reserve still hinting at raising interest rates, but trapped by weak economic growth, will the next big move by the Fed be another form of monetary accommodation instead? Or, are the underlying dynamics of the economy and market really strong enough to shake off the recent weakness and continue its bullish ascent?
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”