Bank of America

Here Come The Praises For The "Stronger Than Expected" Retail Sales From Bank of America And Goldman

Instead of actually doing the work to figure out what is going on behind the headlines, both Goldman (which also hiked its Q3 forecast GDP to 2.3% as a result) and Bank of America rushed to come to market with their congratulatory notes praising the "far stronger than expected" retail sales number. And as a result clients of these two banks will be promptly skewered as happens now virtually all the time on belief that the "rebound" in the economy is real instead of an ARIMA driven seasonal adjustment abortion.

Frontrunning: August 14

  • Must be those evil speculators' fault: Oil price inflates as speculators bet on stimulus (Reuters)
  • Need moar stimulus: UK Coalition plans housebuilding stimulus (FT)
  • Paul Ryan brings fundraising prowess to Romney presidential bid (Reuters)
  • Chinese serial killer shot dead after massive manhunt (Reuters)
  • Silver Hoard Near Record As Hedge-Fund Bulls Recoil (Bloomberg)
  • World powers eye emergency food meeting; action doubted (Reuters)
  • Clegg Said to Have Role in Picking King Successor as BOE Chief (Bloomberg)
  • Standard Chartered CEO takes charge of Iran probe talks (Reuters)
  • Risks must not hide positive China trends (FT)
  • BOJ should not rule out any policy options: July minutes (Reuters)
  • India Says Growth Sacrifice Needed in Inflation Fight (Bloomberg)

Daily US Opening News And Market Re-Cap: August 13

European equities are trading flat to minor positive territory at the North American crossover having pared losses made following the weaker than expected Japanese Q2 preliminary GDP and reports from Chinese press that China's RRR cut might have been postponed as the People's Bank of China's reverse repo activity still satisfies liquidity needs. Elsewhere, Bank of America cut China's growth forecast from 7.7% to 8.0% for the year, commenting that the country's ability for monetary easing was constrained by house prices. Volumes have been particularly thin, however, and as there is no economic data scheduled for release from the US, it is likely to stay that way. Greek Q2 advanced GDP surprised markets, contracting at a slower pace year-over-year than Q1 and than was expected, boosting risk appetite across the board. As such, Spanish and Italian spreads are seen tighter by 12.6bps and 9.1bps respectively, with the Spanish 10-year yield holding below the key 7% and the Italian's under 6% despite the Italian government debt coming in at a record high of EUR 1972.9bln.

Daily US Opening News And Market Re-Cap: August 10

European markets opened lower as risk-off was observed across the asset classes as participants reacted to the disappointing data from China overnight. Continental equity futures have moved horizontally throughout the session so far with little newsflow or influential data to sway price action. Heading into the European open, little has changed as all European indices are in the red, being led lower by consumer goods and utilities. China posted a sharp narrowing in their trade balance surplus to USD 25bln from USD 32bln in June, as the growth in exports slows across the month. As such, it is not a surprise to hear the usual market chatter of the Chinese central bank taking an imminent move to cut their Reserve Requirement Ratio today. However, as nothing has materialised, the riskier assets have not seen any significant lift from the talk.

Goods Are Good, Services Stink: Chart Of The Day

A curious thing happened on the way to (ever deferred) recovery: America's goods manufacturing sector has been resilient, and in line what one would expect from a recovery. So far so good: the problem as everyone knows, 70% of US GDP is based on "services." And it is here that things get very ugly. As the charts of the day below show, while "goods have been good", it is services that have stunk up the economy in the post-depression era, and are what the Fed has been unable to do anything to stimulate, and by implication have kept US GDP subdued at stall speed levels.

Guest Post: TBTF Banks Laughing All The Way Home Thanks To HARP

HARP, The Home Affordable Refinance Program, is a streamline refinance program developed to help borrowers who have continued to make their mortgage payments, but have be unable to refinance due to a decline in their home value. While it is encouraging that more and more underwater homeowners are gaining the benefits of today’s low interest rates, tremendous profits are being made at their expense. Lack of competition is the primary catalyst, but the underlying economics of the large “too big to fail” banks will do nothing but stoke additional anger in the general public.  Expect this trend to continue until the dynamics of the program is changed once again, possibly in HARP 3.0.  Until then, the cash cow will continue for the TBTF banks.

The "Game Tree" Explains Why The "Risk Of An Ugly End Game Is Rising"

Virtually all developments in Europe over the past two years can be easily explained using a simple version of three actor game theory. So can the endless delays in reaching an actionable resolution. The problem, however, as Bill Gross earlier, and now Bank of America, shows, is that the incentive to delay, based at least on one the actors' preferences - that of the market - is becoming very tenuous, and "the risk of an ugly end game is rising." By implication, this means that the goodwill of both Europe's monetary and political authorities is waning by the day, as last Thursday demonstrated so very vividly.

Today's "Max Pain" - A Stronger Than Expected Non Farm Payrolls Report

While normally quite absurd, we do have to admit that last month, Deutsche Bank's Joe LaVorgna was among the analysts closest to the final actual number, which came in far below consensus. As such we give him the benefit of the first forecast: Joe LaVorgna is expecting a headline/private payroll increase of 75k/80k respectively. The market is looking for 100k/110k. Unemployment is expected to hold at 8.2%. The irony today is that max pain is a far stronger number, which in light of some very recent economic news, can not be ruled out (see Nick Colas' discussion below): if indeed NFP rises by well over 100,000 the market will have to push back its prayer that the NEW QE will come in September into 2013 as Bernanke will not do another easing round just as the presidential election approaches. What are some others thinking? Here is what Bank of America says.

Frontrunning: August 3

  • U.S. nuclear bomb facility shut after security breach (Reuters)
  • EU Commission Welcomes Greek Reform Pledge, Wants Implementation (Reuters) -> less talkee, more tickee
  • China Cuts Stock Trading Costs to Lift Confidence (China Daily) as France hikes transactions costs
  • Holding Fire—for Now—but Laying Plans (WSJ)
  • ECB-Politicians’ Anti-Crisis Bargain Starts to Emerge (Bloomberg)
  • Dollar falls back as non-farm payrolls loom (FT)
  • Ethics Plan to Raise Consumer Confidence (China Daily)
  • Brazil backslides on protecting the Amazon (Reuters) - fair weather progressive idealism?
  • Japan Foreign-Bond Debate May Boost BOJ Stimulus Odds (Bloomberg)
  • Japan’s Lower House Passes Bill to Let Workers Stay on to 65 (Bloomberg)

Bank Of America Has Lost Money Trading On Only Three Days In 2012

From the just released Bank of America 10-Q: "During the three months ended June 30, 2012, positive trading-related revenue was recorded for 95 percent, or 60 of the 63 trading days of which 75 percent (47 days) were daily trading gains of over $25 million and the largest loss was $11 million. These results can be compared to the three months ended March 31, 2012, where positive trading-related revenue was recorded for 100 percent (62 days) of the trading days of which 95 percent (59 days) were daily trading gains of over $25 million. There were no daily trading losses recorded during the three months ended March 31, 2012." This vaguely reminds us of the JPM's trading performance. Just before they got busted for hiding a $350 billion hedge fund in the firm's "risk hedging" aka CIO/Treasury division that is. Also, if anyone else has problems believing that BofA's trading desk, with or without Merrill, both of which are better known as the C-grade (and that is being generous) of Wall Street traders, could generate profits on 122 of 125 trading days, please lift your hand.

Frontrunning: July 30

  • Schäuble View on Eurozone at Odds With US (FT)
  • Juncker: Euro zone leaders, ECB to act on Euro (Reuters)
  • German Banks Cut Back Periphery Lending (FT)
  • Monetary Policy Role in EU Debt Crisis Limited: Zoellick (CNBC)
  • Bond Trading Loses Some Swagger Amid Upheaval (NYT)
  • As first reported on ZH, Deflation Dismissed by Bond Measure Amid QE3 Anticipation (Bloomberg)
  • Record Cash Collides With Yen as Topix Valuation Nearing Low (Bloomberg) - but, but, all the cash on the sidelines...
  • Greek Leaders Agree Most Cuts, Lenders Stay On – Source (Reuters)
  • Chinese Investment in US 'set for record year' (China Daily)