Glencore

After 5 days of CEO-confidence-inspired BTFD-ing (a la Bear Stearns), following the 30% collapse at the start of last week, Glencore's stock price is tumbling 7.7% in the early European trading. Following a deep plunge off the open yesterday (which was rallied back to the highs) and extreme volume atthe close, Tuesday's early weakness has pushed the stock to the biggest loss since last Monday's carnage...

News That Matters

• MOAR: Euro-Area Growth Seen Slowing in Sign More Stimulus May Be Ahead (BBG)
• MOAR: Japan's wage growth slows in August, keeping pressure on BOJ for more stimulus (Reuters)
• MOAR: Stocks, Copper, Emerging Markets Jump as Fed Delay on Rates Seen (BBG)
• And yet... Central Banks Lose Bond-Market Credibility as Woes Mount (BBG)
• World Bank cuts Asia growth forecast on China and US rates (BBC)

Following Friday's disastrous payrolls report, which confirmed all the pre-recessionary economic data and signaled that instead of approaching "lift-off" and decoupling from the rest of the world, the US economy is following the emerging markets into a slowdown in what may be the first global, synchronized recession since 2008, the market saw its biggest intraday surge since 2011 and the sharpest short covering squeeze in history, we are happy to announce that the "market" is now solidly back in "bad news is good news" mode.

Never have markets carried so much risk. And never have markets been as vulnerable to an abrupt change in perceptions with regard to central banker competence, effectiveness and capabilities. At the minimum, global markets will function poorly, but risk is now high for a disorderly – Party Crashing - "run" on financial markets, as faith in central banking begins to wane.

US financials' stocks are tumbling as 'investor' hopes for a rate-hike (and some dream about better earning potential for banks) drag XLF (Financials ETF) back to Oct 2014 lows. However, as have noted before, it is the message of the credit markets that has been correct all along (and stocks continue to catch down) as today's jobs data (and Glencore asset sales) poke Financials credit spreads to their highest since Oct 2013.

• U.S., Allies Demand Russia Stop Attacks on Syria Opposition (BBG)
• Russian Airstrikes Defend Strategic Assad Regime Stronghold on Syria’s Coast (WSJ)
• Emerging Stocks Head for Weekly Advance Before U.S. Jobs Data (BBG)
• Wage Strife Clouds Car-Sales Boom (WSJ)
• Oregon town reels from classroom carnage (Reuters)
• Oregon shooter came from California, described as shy and skittish (Reuters)

The signs of deflation are now flashing all over the globe and the possibility of an associated financial crisis is now dangerously high over the next few months. Our preferred model for how things are going to unfold follows the Ka-Poom! Theory, which states that this epic debt bubble will ultimately burst first by deflation (the "Ka!") before then exploding (the "Poom!") in hyperinflation due to additional massive money printing efforts by frightened global central bankers acting in unison. First an inwards collapse, then an outwards explosion.

"The system failed in 2008/09 and rather than allow a proper creative destruction cleansing, policy makers have been aggressively propping it up ever since.  We think the end game is that when the next global recession hits, then QE/zero rate world will be re-appraised."

In August, hedge funds blamed risk-parity funds for their dramatic underperformance. In September, the underperformance continued however this time, with risk-parity funds supposedly buying stocks, one can't blame them. To be sure, some such as Ackman whose 20 million shares of Valeant are hurting badly, will blame the Martin Shkrelis of the world for the biggest biotech tumble in years, but others may have to bite the bullet and admit it is their own lack of ability to come up with alpha in a centrally-planned "market" that is the reason.

Gold in Q3: USD -4.5%, EUR -2.4%, GBP +1.5%, CHF +2.4%, CAD +4.6%. Global stocks fall 5% to 13% - Stocks face worst quarter since 2011 over fears for global economy

• After Rough Quarter, Investors Buckle Up (WSJ)
• From heroes to bystanders? Central banks' growth challenge (Reuters)
• Russian Airstrike in Syria Targeted CIA-Backed Rebels, U.S. Officials Say (WSJ)
• Kremlin says Syria air strikes target list of groups, not just Islamic State (Reuters)
• That’s information warfare? Russia accused of killing civilians in Syria (RT)
• Euro zone factory growth eases in August despite modest price rises (Reuters)
• How Glencore's Crazy Month Makes Greek Banks Look Tame (BBG)

Good news! Bad news is again great for stocks, and overnight we had just the right amount of bad news from Japan, China and Europe to send stocks surging on the first day of the final quarter.