Considering the stock is up about 10% in the after hours, the Netflix story remains intact. What was the cost of keeping the last FANG momentum "story" alive? A record $276 million in cash burn in the quarter.
S&P's Downgrade (By A German Analyst) Is A "Politically-Motivated" Decision Aimed At Polish AuthoritiesSubmitted by Tyler Durden on 01/19/2016 12:50 -0500
The Standard and Poor’s rating agency, notorious for its controversial assessments, has this time bashed Poland in the wake of the anti-Polish frenzy whipped up by the European media. To be more precise, Poland was assailed by a German S&P analyst who lowered Poland’s rating from A- to BBB+, despite the economic data that by no means warrant such an evaluation.
BofA Reports $21.3 Billion In Energy Exposure; Beats On EPS Despite Revenue Miss, Sliding Sales And TradingSubmitted by Tyler Durden on 01/19/2016 07:55 -0500
Here is what everyone wanted to know from BofA results: commercial net charge-offs increased $75MM compared to 3Q15, driven by losses in Energy, while the Allowance increased $144MM from 3Q15, driven by energy-related exposures and higher loan growth across the portfolio. Most importantly, BofA revealed its "Utilized Energy exposure of $21.3B ($1B traded products)", down $2.6 billion from a year ago. BofA also notes that the "higher risk sub-sectors of Oil Field Services and Exploration & Production comprise 39% of utilized energy exposure." NPLs increased $110MM from 3Q15, to $1.2 billion driven mostly by increases in Energy.
Last night's Chinese data deluge can only be classified with one word: bad. So if bad news was again bad news as many claim, both commodities (read oil), and US equity futures should be tumbling right now... but just the opposite is happening and in fact both Brent and WTI have already jumped over $30 this morning. This happens even as the IEA said this morning that global oil markets could “drown in oversupply,” And yet this morning both commodities, global stocks and futures soaring? Simple: the following Bloomberg headline summarizes it: "Brent Rallies More Than $1 as China GDP Spurs Stimulus Bets," and where Brent goes, so goes risk, and the S&P.
Gold retains a key role of a major diversifier in well-structured retail investment and pension portfolios ... core defensive and hedging properties vis-à-vis global currencies and fixed income, as well as oil and a range of other commodities.
The optimists have had things their own way in an almost unbroken line since March 2009. January 2016 so far would suggest that the pragmatists are now in charge.
Central banks have lost their aura of omnipotence.
Remember when showing 'progress' in Europe was as simple as pointing to your high stock market or low bond yields to "prove" everything is awesome. Well for Francois Hollande, the days of hiding behing manipulated data are over and the open kimono reveals a nation whose stability is wracked by record unemployment. In a desperate-for-re-election speech today, socialist leader Hollande admitted his policies needed reform and that France is an economic "state of emergency."
With the US closed today for Martin Luther King Holiday, global risk tone has once again been set entirely by oil, which opened sharply lower at fresh 12 year lows on fears of an Iran oil glut, but has steadily rebounded on the latest OPEC comments, and at last check both WTI and Brent were unchanged trading in the low $29's on muted volume. With Asian markets mixed, European shares swung between gains and losses, while the yen weakened as China stepped up efforts to curb foreign speculation against its currency. Crude oil rose from a 12-year low after the Organization of Petroleum Exporting Countries forecast a decline in supplies from rival producers.
"The events of 1929 taught us that the absence of any rise in prices did not prove that no crisis was pending. 1937 has taught us that an abundant supply of gold and a cheap money policy do not prevent prices from falling."
On the heels of new reserve ratio regulations and the biggest strengthening in the Yuan fix in 4 weeks, offshore Yuan has strengthened notably (despite Chinese default/devaluation risk surging in the CDS markets). Chinese stocks are weaker in the early going but corporate bond yields continue to slide to new record lows as the "last bubble standing" stands ignorant of the risks around it.
"It’s difficult to see the fall stopping today," warned one Japanese equity strategist and rightly so as Japan's broad TOPIX idnex just entered a bear markets (down 20% from the August 2015 highs). With the Nikkei well below 17,000, Kuroda is due to speak at the Diet today as Japanese corporate bond risk surges to 20-month highs.
It is the “Core of the Core” that now concerns us the most. That is where Federal Reserve (and global central bank) policies have left their greatest mark. It is at the “Core of the Core” where momentous misperceptions and market mispricing have become deeply entrenched. It’s the “Core of the Core” that has attracted enormous amounts of “money” over recent years. It’s also here where I believe leverage has quietly been used most aggressively. Over recent years it became one massive Crowded Trade. Now the sophisticated players must contemplate beating the unsuspecting public to the exits.
It must be China. Or the weather, which is usually either too cold or to warm – somehow the weather is just never right for economic growth. Surely it cannot be another Fed policy-induced boom that is on the verge of going bust? Sorry, we completely forgot – the Fed is never at fault when the economy suffers a boom-bust cycle. "[An] oversold market can easily become more oversold when it keeps being inundated with evidence that economic conditions are not what they were thought to be."
As a potential worst case scenario, we use the simple sum of probabilities from 2001- 2002 and the current debt stock as an example of what could happen during a protracted downturn. If this comes to fruition, we estimate fallen angel volumes over 2 years could spike to $413bn, with $117bn of 10+ fallen angel paper (again crashing into a 10+ HY market that is only $48bn in size). This is an ugly spectre that the high-grade markets would need to face in future years.