"We believe the epicenter of the problem is the Chinese banking system and its coming losses. Once analysts, politicians, and investors alike realize the sheer size of the impending losses and how they compare to the current levels of reserves, all focus will swing to the banking system."
“If some fund manager in Texas is saying that your currency is dramatically overvalued, you shouldn’t care on a $10 trillion economy with $34 trillion in your banks. I have, call it a billion - it’s so small it should be irrelevant and yet somehow it’s really relevant.”
My overriding theme and the central drama for the coming year is that unexpected events can take on greater importance as the Federal Reserve ends its near-decade-long Zero Interest Rate Policy. Consensus premises and forecasts will likely fall flat, in a rather spectacular manner. The low-conviction and directionless market that we saw in 2015 could become a no-conviction and very-much-directed market (i.e. one that's directed lower) in 2016. There will be no peace on earth in 2016, and our markets could lose a cushion of protection as valuations contract. (Just as "malinvestment" represented a key theme this year, we expect a compression of price-to-earnings ratios to serve as a big market driver in 2016.) In other words, we don't think 2016 will be fun.
Valeant Pharma is halted for the 4th time today, this time for news pending, as the stock has lost 40% of its value since the open...
In an apparent replay for 2012's Knight Trading algo-implosion $400 million cash-infusion bailout, Jefferies (owned by NY-based I-bank Leucadia) is riding its white horse to the rescue of FXCM and its $200-million-plus client losses:
- *LUK IN $300M DEAL TO LET FXCM CONTINUE NORMAL OPS: CNBC
- *LEUCADIA GIVE FXCM $300M IN FINANCING CNBC
Leucadia will get $250m in senior notes as part of the deal, CNBC says. So - in summary - a central bank blew up an FX broker and a mid-market junk-bond underwriter bailed them out... must be good for a green close for the week in stocks!
The scientists were found guilty of providing: “Imprecise, incomplete and contradictory information”
According to CNBC's David Faber, Knight Capital will live at least for another day and avoid bankruptcy. Instead, it will experience dilution which will make its equityholders almost wish the company was filing. Knight, via Jefferies, is about to stick its shareholders with a massive dilution following the issuance of a $400 million convert bond at a $1.50 conversion price, or more than 60% dilution from Friday's $4.05 closing price. This means the pro forma share count will soar from 90 million to 350 million upon conversion, which as David Faber says, will take place promptly by all members of the syndicate after 10 business days. In other words, KCG just issued stock at a ~63% discount to new money.
The question is, "Will we make it till friday before a Euro bailout?'
David Faber discusses Goldman's real estate losses, and draws some conclusions about the upcoming pain for REITs. And yet, thanks to Goldman, which has been instrumental in upgrading and issuing stock for the REITs (and having a massive blow out quarter thanks in large part to its REIT underwriting activity), the sector is doing unprecedentedly well. Surely one has to wonder just what must happen at this point for people to realize what a ticking time bomb Commercial REITs are?
Everyone else does, why should David be an exception. Fast fwd to 2:20 - "You want a good laugh, take a look at Dick Bove's latest report." Dick - when CNBC makes fun of you for smoking the "shutes" you know you have reached a new low on the propaganda pole. At least that DC advisory job beckons - better make use of it quick. The next election is in just over 3 years.
Too bad Mr. Faber did not mention the source for the AIG information. But we love him anyway