BAC

Just this week we had: TVIX, MF Global & “customer money”, CPDO, Greek CDS auction, BATS.... I’m all for some complexity and innovation, but it does seem after a week like this, that the financial markets have become too complex, and some real effort should be made to simplify things and put everyone on an even playing field.

Americans have an illogical love affair with their vehicles. There are 209 million licensed drivers in the U.S. and 260 million vehicles. The U.S. has a higher number of motor vehicles per capita than every country in the world at 845 per 1,000 people. Germany has 540; Japan has 593; Britain has 525; and China has 37. The population of the United States has risen from 203 million in 1970 to 311 million today, an increase of 108 million in 42 years. Over this same time frame, the number of motor vehicles on our crumbling highways has grown by 150 million. This might explain why a country that has 4.5% of the world’s population consumes 22% of the world’s daily oil supply. This might also further explain the Iraq War, the Afghanistan occupation, the Libyan “intervention”, and the coming war with Iran. Automobiles have been a vital component in the financial Ponzi scheme that has passed for our economic system over the last thirty years. For most of the past thirty years annual vehicle sales have ranged between 15 million and 20 million, with only occasional drops below that level during recessions. They actually surged during the 2001-2002 recession as Americans dutifully obeyed their moron President and bought millions of monster SUVs, Hummers, and Silverado pickups with 0% financing from GM to defeat terrorism. Alan Greenspan provided the fuel, with ridiculously low interest rates. The Madison Avenue media maggots provided the transmission fluid by convincing millions of willfully ignorant Americans to buy or lease vehicles they couldn’t afford. And the financially clueless dupes pushed the pedal to the metal, until everyone went off the cliff in 2008.

Back in early February, Zero Hedge was among the first to suggest that abnormally warm temperatures and a record hot winter, were among the primary causes for various employment trackers to indicate a better than expected trendline (even as many other components of the economy were declining), in "Is It The Weather, Stupid? David Rosenberg On What "April In January" Means For Seasonal Adjustments." It is rather logical: after all the market is the first to forgive companies that excuse poor performance, or economies that report a data miss due to "inclement" weather. So why should the direction of exculpation only be valid when it serves to justify underperformance? Naturally, the permabullish bias of the media and the commentariat will ignore this critical variable, and attribute "strength" to other factors, when instead all that abnormally warm weather has done is to pull demand forward - whether it is for construction and repair, for part-time jobs, or for retail (and even so retail numbers had been abysmal until the just released expectations meet). Ironically, while everyone else continues to ignore this glaringly obvious observation, it is Bank of America, who as already noted before are desperate to validate a QE as soon as possible (even if their stock has factored in not only the NEW QE, but the NEW QE HD), that expounds on the topic of the impact of record warm weather. In fact, not only that, but BofA makes sense of the fact why GDP growth continues to be in the mid 1% range while various other indicators are representative of much higher growth. The culprit? Global Warming.

Nonperforming Loans climbed $5.23 Billion over Q3 - the first increase after 6 straight quarters of declines.

And the real lesson, dear friends, is that the good old USA is a subprime nation

Following yesterday's broad risk off day, some positive sentiment has returned to markets despite ugly economic data from Germany, and an odd indefinite halt of trading of Greek bonds on the Milan Borse. As BAC notes, for the third straight day, Asian equity markets sold off, as investors are concerned about a Greece debt-swap deal. The regional MSCI Asia Pacific Index slid 0.9%, to finish at its lowest close in a month. The worst-performing market was the cyclical-sensitive Korean Kospi. Its economy, along with many other emerging Asia economies, is highly dependent on exports, so yesterday's data that showed that the Euro area's economy contracted in the fourth quarter added to the bad news. The Hang Seng also lost 0.9%, while the Shanghai Composite fell 0.7%. Japan's Nikkei lost 0.6% and the Indian Sensex fell 0.2%. In Europe, equities are rebounding from their biggest drop since November. Part of the rebound is investors returning to equities to buy the dip, while investors are also expecting a strong ADP employment report later in the day - at 8:15 am. In the aggregate, European equities are up 0.4%. At home, futures are pointing to a solid opening later today. The S&P 500 is set to open 0.5% higher. Elsewhere, German factory orders plunged -2.7% M/M on expectations, from a +1.6% December print, driven by a total collapse in orders from outside the Eurozone which imploded by 8.6% down from +12.1% in December (more shortly). And Europe is now bracing for a Greek default as the Milan Bourse earlier announced it has suspended Greek bonds from trading indefinitely - perhaps related to this is the fact that after trading in the triple digits yesterday, the Greek 1 Year just slid to an all time record 1114% - looks like there is not much value in that post-reorg Greek package offered to PSI volunteers. Finally, the deposit money held at the ECB barely budges, as it prints at €817 billion, down just modestly from yesterday's record print as Europe's banks brace for Thursday's PSI announcement with a big cash buffer.

We have been warning that the stocks of the major US financials are on weak ground for a few weeks as credit (and implied vol) markets for the TBTFs had been underperforming notably. Today saw the financials ETF, XLF, have the largest down day in three months (dropping over two standard deviations), breaking its uptrend and heading for its 50DMA. As volumes in stocks and stock futures surged to year-highs, we note that the major financials were much worse hit than the broad ETF, roughly separated into 3 groups: Good (JPM, WFC), Bad (GS, C, BAC, GE), and Ugly (MS). While the market is 'only' down around 2%, it is worth noting that Financials and Energy stocks are back at five-week lows, while Industrials and Materials are back at two-month lows as the growthium hope fades. Risk was very highly correlated on the downswing today and along with significantly higher than average volume suggests more broad de-risking than idiosyncratic profit-taking as some would like to suggest. Commodities made headlines as Silver is now down over 5% on the week but Gold stabilized for much of the post-European close session around $1675. The vol term structure snapped flatter today, catching short-dated premium sellers fingers as it tends to, ripping to its flattest in 3 weeks as VIX jumped almost 3 vols to around 21% (back above its 50DMA for the first time since Thanksgiving), with its biggest rise in three months.

Not many websites, analysts or authors have both the balls/temerity & the analytical honesty to take Goldman on. Well, I say.... Let's dance! This isn't a collection of soundbites from the MSM. This is truly meaty, hard hitting analysis for the big boys and girls. If you're easily offended or need the 6 second preview I suggest you move on.

As the financials ETF, XLF, jumps from down 1.25% to up over 0.75% today, we note that credit markets for the major US banks are anything but exuberant. In the short-term, US bank credit remains significantly weaker, having broken its trend on February 9th, than the broad ETF or individual bank stocks would suggest. We have seen European credit spreads for banks come back off their worst levels - and at the same time, bank stock prices revert downwards to meet that depressed credit perspective. In the US, stocks remain euphoric and credit has not staged any comeback yet inferring a 5-6% drop in XLF (or rally in credit of course). Perhaps the USD-denominated nature of stocks is 'mispriced' relative to the risk-denominated nature of credit spreads as liquidity floats all risk assets on hope of LTRO2 et al.

Want to get into the head of a hedge fund manager, and see how they view the market: why just buy Apple of course, however good luck explaining to your LPs why you deserve 2 and 20 for "active asset management" aka just following the herd into the biggest hedge fund hotel in history (for at least 216 hedge funds it may be a tough sell). So for everyone else, Goldman's David Kostin (who still has a 1250 year end S&P target - the definitive indicator to sell everything will be when he too gives up) has compiled the data in all the just released 13Fs and has summarized the results as follows...

Now everybody's bank bashing, of course the reason to bash the banks is 4 years old, despite Bove-like analysis to the contrary. I will discuss this on CNBC for a FULL HOUR tomorrow from 12 pm to 1pm.

As AAPL dominates the headlines for its dramatic 5% reversal intraday and biggest drop in over two months, perhaps it is worth pointing out that the lacking volumes have returned with a flourish. ES (the e-mini S&P futures contract) saw its heaviest volume since this mid-December rally began (30% above average) as our recent pontification on the messages from the credit market (along with the rhythmic periodicity of the rally's size and length) may be starting to wear on investors' risk appetites. After European credit markets accelerated to the downside today, US investment grade and high-yield credit was not buying any of the overnight rally in stock futures and moved wide of yesterday's pre-Samaras rally out of the gate. Stocks surged upwards, tracking uber-stock AAPL but as chatter of a NASDAQ rebalance sent game-theorists scrambling to migrate, AAPL's slump dragged everything down (sadly) with ES stalling at the pre-China rumor level before falling to pre-Samaras levels from yesterday's lows. A lack of rumors and no QE mention from FOMC minutes along with lackluster news from the Eurogroup did nothing to rescue the situation as EURUSD ended on its lows (-1% on the week now) and USD Strength saw carry trades dragging stocks down. Interestingly, post-FOMC Treasuries came off their best levels in the afternoon (even as stocks were tanking) but we saw Gold rallying (in the face of a stronger USD) - does make one wonder on where the safety trade is now. WTI closed near its highs of the day (over $102) and as we noted earlier Brent in EUR closed at record highs as Copper is -1.3% on the week and Silver is tracking USD -0.75% or so on the week.

While the star of multibillionaire Bill Gross may or may not be fading (the jury is still out on what the final outcome will be for the man who so far alone among his peers has dared to point out the lunacy in the Fed's actions), that of his far smaller and nimbler peer Jeff Gundlach of DoubleLine Capital has been rising rapidly, and at last check has his fund's AUMs at over $25 billion, a doubling in a few short months. Gundlach is conducting his periodic webcast live at 4:15pm Eastern (i.e., now) at the link below. Anyone can join in. And by the title of the presentaiton, it promises to be quite interesting. Click on the following Link for webcast or the image below.

The defining soundbite from the call Q&A: Regarding Bank of America - "It is wise to avoid banks. Not surprised BAC has gone up - just like NFLX - just like Italian bonds. Reduce risk right now, including, Bank of America."

Here comes the (re)crash and the search for shortable stock is on! The good thing about bankruptcy is that despite silly manilly market, bankrupt is bankrupt and the stock will act accordingly. Ask GGP/LEH investors.

As reported yesterday, the cost of terminal abrogation of contractual rights in the US is, drumroll, $26 billion. Bloomberg notes:

• $26 BILLION FORECLOSURE SETTLEMENT ANNOUNCED IN WASHINGTON
• FORECLOSURE ACCORD RESOLVES 16-MONTH ROBO-SIGNING INVESTIGATION
• FORECLOSURE ACCORD IS SUBJECT TO APPROVAL BY FEDERAL JUDGE
• FORECLOSURE DEAL PRESERVES U.S., STATE RIGHTS TO OTHER CLAIMS
• FORECLOSURE ACCORD COULD CLIMB TO $40 BLN IF 14 SERVICERS JOIN

And a whole lot of corner offices for America's Attorneys General. As for what the market thinks of this "severe" settlement: BAC +1.2%, WFC +0.6%, JPM +0.4%, C -0.1%. For those who don't understand what just happened, US banks just funded Obama's re-election campaign to the tune of $26-$40 billion.