Capital Markets

S&P Downgrades Turkey To BB, Outlook Negative; Lira Tumbles To New All Time Low

"Following the attempted coup on July 15, Turkey's political landscape has fragmented further. We believe this will undermine Turkey's investment environment, growth, and capital inflows into its externally leveraged economy. In the aftermath of the failed coup, we believe that the risks to Turkey's ability to roll over its external debt have increased."

Who Really Won The Oil Price War?

It is probably a tie... Although the Saudis caused damage to U.S. shale, they also hit the global oil industry hard; and while they managed to preserve their market share, they paid a heavy price in terms of oil revenues.

Erdogan Goes Too Far, Market Warns As Lira, Turkish ETF Suddenly Tumble

While so far the Western diplomatic response to Erdogan's unprecedented putsch has been mostly stunned silence (with just the U.N. human rights chief expressing alarm about the mass suspension or removals of judges so far), the market is starting to get concerned, and moments ago the Turkish Lira suddenly tumbled, sliding below Friday's closing level, while at the same time the MSCI Turkish ETF plunged as well.

With "Stock Valuations At Extremes" Goldman's Clients Are Asking Just One Question

This week the S&P 500 surged to a new record high of 2164 this week while the 10-year US Treasury yield touched an all-time low of 1.37%. As a result Goldman, and especially its clients, are stumped. As chief equity strategist David Kostin admits, they have one burning question. As Kostin puts it, they "are struggling to reconcile how extreme valuations of both assets can co-exist."

Global Stock Rally Halted In Aftermath Of Latest French Terror Attack

The tremendous rally of the past 4 days that has sent global stocks soaring in recent days has finally been capped and European shares, S&P futures are all modestly lower following a deadly terror attack in Nice, France. Meanwhile Asian stocks rose as Chinese economic data beat estimates, with Q2 GDP rising by 0.1% more than the estimated 6.6% on the back of stronger housing data.

"The Resentment Will Explode" - In Dramatic Twist, McKinsey Slams Globalization

In a stunning study released today, one which refutes all its prior conclusions on the matter, McKinsey slams the establishment's status quo thinking and admits that the economic gains of changes in the global economy have not been widely shared lately, especially in the developed world. It finds that between 2005 and 2014, real incomes in the world's most advanced economies were flat or fell for 65 to 70% of households, or more than 540 million people.

Germany Sells First Ever Negative-Yielding 10Y Treasury, Corporate Bonds

Just hours prior to Germany selling its first ever negative-yield 10Y bund, German railway operator Deutsche Bahn became the first non-financial company to sell a corporate bond with a negative yield in euros on Tuesday. . Joint leads BayernLB and Raiffeisen Bank set the final spread at plus 15bp as orders reached 840m. The deal priced with a negative 0.006% yield and a 0% coupon.

UK Fund Managers Start Dumping Properties, Admit "Real Estate Needed Re-Pricing"

The uncomfortable moment of truth has arrived for property funds in the UK (and their investors). Following the initial tumble of the post-Brexit dominoes - eight major funds so far either gating redemptions or forcing massive haircuts on to investors who want out - contagion concerns even woke up Britain's regulators (and central bank) as fears of Bear-Stearns-esque forced liquidations spread; and now, as The FT reports, that is what has just started.

Chasing Fools Gold (aka Central Banker Alchemy)

Remember the story of “The Philosopher’s stone?” In a nut shell it was an alchemical substance capable of turning worthless metals into gold. Today, much like those of yore, central bankers across the globe are engaging in that never-ending quest for the ability to turn the worthless – into the precious. And to the ill-informed it seems they have indeed achieved it. That is, as long as you wrap it in the same cloth as found in “The Emperor’s New Clothes.” For if not – the naked truth becomes appalling clear. And it ain’t pretty.

Stockman Warns Of "Awful Price To Be Paid For One-Way Markets"

The boys and girls on Wall Street are now riding their bikes with no hands and eyes wide shut. That’s the only way to explain Friday’s lunatic buying spree in response to another jobs report that proves exactly nothing about an allegedly resurgent economy.

Morgan Stanley Lists The Ten Excuses Hedge Funds Give For Bad Performance

The alpha from the HFRI long-short index was close to 14% per annum in the early 1990s, and has been slightly below zero for the past few years. Why is this? We don’t claim to have some systematic rank ordering of reasons for the decay in performance, but here are ten thoughts.

Larry Summers Wants To Give You A Free Lunch

According to Summers, with this low growth and low interest context, government debt levels no longer matter. In other words, federal governments have free reign to massively increase deficit spending and run-up federal debts, because, on balance, the fiscal stimulus will pay for itself. But who are we to question Summers’ unique qualifications - for example, unlike Summers, we’ve never lost $1.8 billion of other people’s money.

When Narratives Go Bad

There’s a … tiredness … to the status quo Narratives, a Marie Antoinette-ish world weariness that sighs and pouts about those darn peasants all the way to the guillotine.

Bill Gross Says Yellen "Worships False Idols" So "Worry About The Return Of Your Money, Not On It"

"Investors should not hope unrealistically for deficit spending any time soon. To me, that means at best, a ceiling on risk asset prices (stocks, high yield bonds, private equity, real estate) and at worst, minus signs at year's end that force investors to abandon hope for future returns compared to historic examples. Worry for now about the return "of" your money, not the return "on" it."

Goldman Reveals How China Is Covering Up Hundreds Of Billions In Capital Outflows

Far from being fixed, China's capital outflow and FX intervention (and resultant reserve depletion) problems are only getting worse by the month. Only now, the PBOC is actively covering them up. Conveniently Goldman has disclosed precisely how the PBOC has covered up as much as $170 billion in FX outflows in the first quarter, more than 100% of the officially reported $123 billion. In other words, instead of $330 billion in Chinese FX outflows since October, the real number is 50% greater, or half a trillion. Here's the math.