Bank of America

“August’s survey highlights a lack of growth momentum and continued weak price pressures across the U.S. manufacturing sector, which adds some fuel to the dovish argument as policymakers weigh up tightening policy in September. With the headline PMI swiftly losing ground after a modest rebound during July, the latest figure now points to the weakest overall pace of manufacturing growth for almost two years."

"YTD investor performance has been plagued by “non-stop pain trades” as liquidity expectations weaken and investment horizons shorten. For example, July/August saw the S&P 500 media sector lose $100bn of market cap in 15 trading days, as well as significant losses in Asian and Emerging Market currencies following the Chinese yuan devaluation."

"Short-term, markets seem intent on forcing either the Fed to pass in September, or the Chinese to launch a more comprehensive and credible policy package to boost growth expectations. Alternatively, a credit event in commodities (note CDS is widening sharply for resources companies – front page chart) may be necessary to cause policy-makers to panic. Markets stop panicking when central banks start panicking."

"Arguably the only reason to be bullish risk assets right now is there are no reasons to be bullish."

To the utter horror of Ashley Madison's 37 million customers - and to the sheer delight of millions of divorce attorney around the globe - last night the Impact Team did just as it threatened it would, and released a data dump with all the user data in the form of a 9.7GB torrent.

Just two days ago we warned of the dramatic disconnect between equity insurance and credit insurance markets - at levels last seen before Bear Stearns collapse. As the Yuan devaluation shuddered EURCNH carry traders and battered European assets, US equity markets stumbled onwards and upwards, impregnable in their fortitude with The Fed at their back no matter what. However, US corporate bond markets were a bloodbath...

It is what happened in investment grade fund flows in the latest week that is making CEO, especially those whose compensation is a direct function of how much stock they repurchase, very nervous because as Lipper reported overnight IG funds just saw $1.8 billion in outflows, the most in over two years or since June 2013. And without the fund inflow train into IG funds operating smoothly, suddenly stock buybacks appear in jeopardy...

After years of moving lower, the past two quarters have seen a marked increase in Commercial & Industrial Nonperforming Loans.

After China's shocking currency devaluation, which some more conspiratorially-minded observers have concluded was China's retaliation to the west for the IMF's recent snub that pushed back China's evaluation for inclusion into the SDR to some indefinite point in 2016, the only question on everyone's mind is whether the Fed will delay or outright cancel any imminent "data-dependent" rate hikes as a result of the implicit tightening of monetary conditions thanks to China, and the dramatic appreciation of the USD which would not have taken place without China.

One year ago, as part of its always entertaining long-run forecasting exercise, Bank of America predicted that GDP growth in 2015 and 2016 would be 3.3% and 3.4% respectively. Fast forward one year, when in its updated "long-run" forecast, Bank of America's crack economist Ethan Harris admits he was off by "only" 30% in his prediction of next year's GDP, and instead of 3.3%, he now "forecasts" 2015 GDP to be... 2.3%. But the punchline is this: "if history is our guide, at some point in the next decade the US will experience a recession, but predicting a recession far in advance is almost impossible. We plan to update this table on a regular basis."

What do you do when even wealthy people begin to face an increasingly hard time purchasing a home in a vertical market completely disconnected from income trends? You reduce downpayments and lower credit standards, of course. Where have we seen this story before...

Aside from the socialist utopias of Greece and Venezuela, who else is on the default chopping block? The CDS heatmap below lays out all the countries which according to the market, are most likely to tell their creditors the money is gone... it's all gone.

"The wealth management arm of Bank of America Merrill Lynch is liquidating its clients’ money from one of Paulson & Company’s funds and has put another fund under "heightened review,'" NY Times reports. As it turns out, this was not the year to be long Greece and Puerto Rico. 

Curious why after its massive drubbing yesterday, which led to the second highest volume day for AAPL stock in 2015, the phone market is down another 1.3% this morning? The reason: Wall Street's momentum chasing penguins have re-emerged, and moments ago Bank of America, right on time as in just after the stock broke its 200 DMA and entered a correction, decided to downgrade AAPL from Buy to Neutral, lowering its price target from $142 to $130.

• Unhappy Voters Shake Up Presidential Race (WSJ)
• China stock exchanges step up crackdown on short-selling (Reuters)
• China Dethroned as World’s Most Liquid Stock Market After Curbs (BBG)
• Xiaomi retakes the smartphone lead in China as Apple slips (Engadget)
• Impact of EPA’s Emissions Rule on Industry to Vary (WSJ)
• Citadel’s Ken Griffin Leaves 2008 Tumble Far Behind (WSJ)
• Greece says expects bailout deal by Aug 18 (Reuters)