It was just three days ago when we brought you what we called “the next shoe to drop:” CLOs. Just hours after our warning, Moody's followed in S&P's footsteps and delivered their first downgrade of post-crisis US CLOs. In the crosshairs: Silvermine Capital or, more specifically, Silvermore CLO and Silver Spring CLO where exposure to junk debt and the increasingly toxic O&G space is worryingly high.
According to Morgan Stanley the biggest threat to the profibatility, viability and outright existence of the most leveraged commercial bank in the world, is none other than ECB president Mario Draghi.
“It’s a big club and you ain’t in it!”
When a leading nominee for President gets something exactly right, we should applaud them for it. In this case, Donald Trump’s call to audit the Federal Reserve is dead on correct. Most Americans don’t realize this, but the Federal Reserve has far more power over the economy than anyone else does – including Barack Obama. The funny thing is that the Federal Reserve is not even part of the federal government. It is an independent private central bank that was designed by very powerful Wall Street interests a little over 100 years ago. It is at the heart of the debt-based financial system which is eating away at America like cancer, and it has no direct accountability to the American people whatsoever.
Venezuela has already started moving much of its gold reserve to Europe where it will be located closer to swap-provider and ultimate custodian, and liquidator, Deutsche Bank, by way of Switzerland. According to BullionStar, Switzerland has imported a net of 35.8 tonnes of gold from Venezuela in January 2016.
The bear will soon be arriving in earnest, marauding through the canyons of Wall Street while red in tooth and claw. Our monetary central planners, of course, will once again - for the third time this century - be utterly shocked and unprepared. That’s because they have spent the better part of two decades deforming, distorting, denuding and destroying what were once serviceably free financial markets. Yet they remain as clueless as ever about the financial time bombs this inexorably fosters.
EM-focused Standard Chartered posted its first annual net loss in more than 25 years on Tuesday as impairments and NPLs skyrocketed in the face of a worsening outlook for the emerging world. Although the bank's top brass tried to strike an upbeat tone in the report, no one is particularly optimistic about the future.
The biggest question on all traders' minds will be whether the bear market short squeeze that sent the S&P higher by 130 points in 6 days, is finally over - with most global market rolling over and with US equity futures unable to find their solid early morning footing, it may finally be time to cash out of the bear market rally which so many predicted, and which GSBank yesterday may have top-ticked with perfection.
"I don't know which one it's going it be - it's a race between China and a 50% deval versus a total collapse internally of their economy; whether it's Japan which we have all been waiting for; or maybe it's the European banking sector forcing the hand of everybody else; whether it's just the loss of central bank control over the monetary system; whether it's the dollar wildly overshooting and then maybe some debt forgiveness that needs to happen."
According to DB, with the vast majority of orders placed w/Chinese ship yards, the current market provides incentive (and maybe even increased scope) for owners to more aggressively pursue cancellations ahead of keel laying. The problem is that the latest order book data shows a whopping 360 dry bulk vessels over 60k tons on order at Chinese ship yards (net of typical non-deliveries). This equates to 37M tons of new capacity or 5% of the fleet!
Just when you thought it was saffe to pile back into the hedge fund hotel that is Valeant Pharma, the stock prices collapses 18% in 2 days back to 3-month lows. Following a Wells Fargo downgrade on Friday to underperform (due to concerns over the firm's ability to pay back its debt), Deutsche Bank piled on implicitly today with a downgrade for Express Scripts in light of Anthem's over-paying arguments which Jim Chanos claims will weigh on the entire PBM space.
With the UK's referendum on EU membership due in four months, it appears the market is gravely concerned about the possibility of Brexit. Despite the unleashing of Project Fear (both military and corporate fearmongery), cable (GBPUSD) has crashed 2.3% (the most in 7 years) to its lowest in 7 years, and both FX volatility and credit risk Brexit indicators are soaring to record highs.
The Next Shoe Just Dropped: Equity NAVs Of 348 CLOs Slide Below Zero; "Market Changed Dramatically In 6 Weeks"Submitted by Tyler Durden on 02/21/2016 23:34 -0400
First it was Junk Bonds, then Investment Grade bonds, then bank loans, and now, in just six weeks, the CLO shoe has finally dropped.
If the Benjamin is killed, it will “deter illicit activities” they say, apparently taking us all for complete idiots. Very organized criminals all over the world could be heard rolling on the floor laughing their heads off at this pronouncement.
That didn’t take much. After a three-day rally, the media is back into “bullish” mode suggesting the bottom is likely in and by the end of this year, it’s all going to be just fine. Unfortunately, history suggests that after such a long unabated expansion risks are substantially higher than it has been previously. Furthermore, as I have repeated often in these missives, in an economy that is driven primarily based on consumption, and such consumption is already weak, it doesn’t take much to “flip the switch.”