"It is becoming increasingly clear to us that the level of yields at which credit expansion in Europe and Japan will pick up in earnest is probably negative, and substantially so. Therefore, the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – for example, negative mortgage rates."
Wells Fargo Finally Reveals Its Dire Energy Exposure: $32 Billion To Junk-Rated Oil And Gas CompaniesSubmitted by Tyler Durden on 04/14/2016 10:25 -0400
The punchline in Wells Fargo's earnings report is in the reminder of just how generous Wells has been in lending to junk-rated oil and gas companies in the recent past to compensate for its eclining NIM: Wells reported that ~22%, or $8.8 billion, of exposure to investment grade companies, which means $32 billion is to junk-rated companies!
Expectations of a "less terrible" first quarter for banks may have been premature following yesterday's stronger than expected JPM earnings report. First it was both PNC and Blackrock missing on the top and bottom line, but the highlight of the day was Bank of America which moments ago reported $0.20 in EPS, missing expectations of a $0.21 print, while revenue ex-DVA dropped by $1.4 billion to $19.7 billion, also missing expectations of a $20bn print. BofA reported Net Income of $2.68 billion, down from $3.1 billion one year ago.
During a leisurely stroll around Germany, one may encounter many strange sights but nothing would stranger than the following ad (courtesy of Peter Barkow) which promises negative 1% interest rates for consumer loans up to 24 months.
Will today be central bankers' Waterloo? We'll see, as Mario Draghi stares down sky-high expectations for ECB easing.
In late January, when Haruhiko Kuroda took Japan into NIRP, he made it official. He was full-everything. Full-Krugman. Full-Keynes. Full-post-crisis-central-banker-retard. Now, he's managed to ease and expand his way into a contractionary tightening.
"If central banks do not achieve their medium-term inflation targets through NIRP, they may have to adopt other policy measures: looser fiscal policy and even helicopter money are possible in scenarios beyond QE and negative rates.
“Overall, the trend of more cash at home reflects concern about the outlook for economy among households. This isn’t a good thing.”
"The world has fundamentally shifted over the last decade, especially since we’ve emerged from the Great Recession... But the professional class has been very slow to understand what is going on, not just quantitatively but qualitatively in a new generational configuration that I call the Fourth Turning. They don’t accept the new normal. They keep insisting, just two or three years out there on the horizon, that the old normal will return – in GDP growth, in housing starts, in global trade. But it doesn’t return."
"... When stocks are falling this much, it's hard to justify not acting"
"... Davos - where he mingled with central bankers such as ECB President Mario Draghi and leading company executives - likely prompted him to pull the trigger"
BofA Reports $21.3 Billion In Energy Exposure; Beats On EPS Despite Revenue Miss, Sliding Sales And TradingSubmitted by Tyler Durden on 01/19/2016 08:55 -0400
Here is what everyone wanted to know from BofA results: commercial net charge-offs increased $75MM compared to 3Q15, driven by losses in Energy, while the Allowance increased $144MM from 3Q15, driven by energy-related exposures and higher loan growth across the portfolio. Most importantly, BofA revealed its "Utilized Energy exposure of $21.3B ($1B traded products)", down $2.6 billion from a year ago. BofA also notes that the "higher risk sub-sectors of Oil Field Services and Exploration & Production comprise 39% of utilized energy exposure." NPLs increased $110MM from 3Q15, to $1.2 billion driven mostly by increases in Energy.
There were four things we mostly cared about in today's JPM earnings release, the first Wall Street bank to report Q4 results:i) how did the company's fixed income and equity trading revenue do; ii)what is the bank's credit exposure to energy/oil;iii) did the recent Fed hike do anything to boost the company's Net Interest Margin (this has been the primary catalyst for bank share upside), and iv) did JPM halt its practice of releasing reserves and start building reserves - a major inflection point when it comes to management expectations for future credit quality deterioration.
Just as we saw in the August collapse, US financial stocks appear to be facing the harsh reality that other markets already recognize. While US financial credit markets have been anything but exuberant for weeks, equity options markets have now turned their bullish backs on the banks as Bloomberg reports the ratio of bearish to bullish options on the S&P Financials ETF has climbed to the highest level in a year this week, reflects rising demand for protection against losses as NIM hopes collapse and Fed "error" probabilities increase.
Mario Draghi is on deck Thursday morning and market expectations could scarcely be higher. In fact, Draghi is widely expected to execute the Keynesian trifecta, i) a rate cut, ii) expansion of QE, and iii) extension of QE duration. The ECB has indeed gained a reputation for over-delivering, but as SocGen puts it, "with high expectations comes a high risk of disappointment."
Every day when you flip on the media, there is someone telling you that now is the time to "buy" into the market. Of course, if you are buying, then who is selling? The only "net buyers" of equities this year have been "individuals," while "professional" firms have been "net sellers." This is the epitome of the classic "smart money/dumb money" analysis where individuals are used by institutions to offload positions that are no longer optimal. The question is with corporate profits and earnings declining, weak economic data, and the threat of tighter monetary policy - will individuals once again be left "holding the bag" while institutions derisk portfolios in advance of the next decline?