Private Equity

Yesterday in "$20 Trillion In Government Bonds Yield Under 1%: The Stunning Facts How We Got There", we did just that: showed several "facts" demonstrating how, as Bloomberg puts it this morning, "QE Helped Wall Street Steamroll Main Street." It appears many missed the findings of how central planning has now gone full retard, so here again, are the facts...

• There have been 606 global rate cuts since LEH
• $12.4 trillion of central bank asset purchases (QE) since Bear Stearns
• The Fed is operating a zero rate policy for the longest period ever (even exceeding the WW2 Aug’37-Sep’42 zero rate period)
• $6.3 trillion global government bonds currently yielding <0%
• $20.0 trillion global government bonds currently yielding <1%

• Fed puts December rate hike firmly on the agenda (Reuters)
• Charting the Markets: A More Hawkish Fed Rattles Investors (BBG)
• China to modernize and improve fiscal and tax systems (Reuters)
• Deutsche Bank to Cut 35,000 Jobs in Overhaul (WSJ)
• Deutsche Bank Said to Near $200 Million Sanctions Settlement (BBG)
• Barclays profits drop as it abandons cost-cutting targets (FT)

• China's central bank cuts rates for sixth time since November (Reuters)
• Global stocks hit two-month high on dovish Draghi message (Reuters)
• $6.5 Billion in Energy Writedowns and We're Just Getting Started (BBG)
• Alphabet, formerly Google, sets share buyback, shares jump (Reuters)
• Hurricane Patricia, Stronger Than Katrina, Nears Mexico (BBG)
• TVA Cleared to Start First New U.S. Nuclear Power Plant in Nearly 20 Years (WSJ)

Americans in their 20s and 30s are facing a retirement crisis that could plunge them back into the Great Depression, Blackstone President and COO Tony James said Wednesday. Appearing on CNBC's Squawk Box, James exclaimed "Social Security alone cannot provide enough for these people to retain their standard of living in retirement, and if we don't do something, we're going to have tens of millions of poor people and poverty rates not seen since the Great Depression." According to James, the solution is simple - government-imposed mandatory savings through a Guaranteed Retirement Account which employers are mandated to match (whose assets would be managed by?).

• Global Stock Markets Edge Higher Though Global Growth Concerns Weigh (WSJ)
• Nikkei up 1.9% because Japan export growth slows sharply, raising fears of recession (Reuters)
• Saudis Risk Draining Financial Assets in 5 Years, IMF Says (BBG)
• Syria's Assad flies to Moscow to thank Russia's Putin for air strikes (Reuters)
• US Prosecutor Preet Bharara Probing Daily Fantasy-Sports Business (WSJ)
• Syrian army denies Russian ground forces fighting in Syria (Reuters)

This trade has become blood-soaked.

• Canada's Trudeau topples PM Harper in shock election win (Reuters)
• Where Canada’s Harper Hit Hurdles (WSJ)
• Pugnacious Trudeau Steps Out of Father's Shadow and Into Power (BBG)
• European Stocks Decline, Euro Rallies as ECB QE Optimism Fades (BBG)
• Valeant, Under Pressure About Price Increases, Plans Changes (WSJ)
• Syrian rebels say they receive more weapons for Aleppo battle (Reuters)

After yesterday's closing ramp "prudently" just ahead of an abysmal IBM earnings report with the lowest revenues since 2002, and the latest rally in capital markets which sent European stocks to their highest level since August on the back of a barrage of global bad data which has unleashed the Pavlovian liquidity dogs screaming for moar central bank bailouts, this morning has seen a modest decline in the Stoxx 600 driven by energy names, while S&P500 futures are set to open lower on IBM's disappointment at least until the latest massive BOJ USDJPY buying spree sends the pair to 120 and the S&P solidly in the green. The biggest political event overnight was the Canadian election, where Trudeau's liberals swept PM Harper from power, capping the biggest political comeback in the country's history; the Canadian dollar is largely unchanged after initially weakening then rising.

While the big TBTF banks managed to hide much of their ugly balance sheet exposure, and prevent it from hitting the income statement in Q3 as reported previously, while covering up prop trading losses as well as they possibly could, the banks without trillions in deposits were less able to do so: first it was Jefferies, then Goldman posted its worst quarter in years, and now here comes the bank also known as Margin Stanley, which moments ago reported Q3 EPS of $0.34, which even if adjusted for various "one-time" items, at $0.48, not only missed consensus of $0.63 wildly, but it also missed the lowest range of the estimate range ($0.53-$0.70).

Earlier today the largest U.S. mortgage lender Wells Fargo reported results that beat expectations by the smallest possible increment. What caught our attention, however, was the fuel that keeps Wells Fargo's engine humming: mortgage applications. Unfortunately for the housing bulls, there was no good news here because after rushing higher in early 2015 on the latest false hope of an economic recovery or due to fears rates are rising, Wells' mortgage applications and the associated pipeline have declined ever since.

“After careful consideration and analysis, we have decided to close the Fortress Macro Funds and return cash to our investors...  But we have had an extremely challenging two years, and I do not believe the current environment is conducive to achieving our best results."

Just before the first credit bubble burst, Fortress' Macro hedge fund, then known as Drawbridge as well as several other castle-related terms, peaked at just over $8 billion. Together with Phil Falcone's Harbinger, it was one of the most desired venue to work among the young hedge fund crowd. It has been downhill ever since, and unfortunately for the hedge fund run by Michael Novogratz, which reported $2.5 billion in AUM as of June 30, a number which plunged to just $1.6 billion two months later according to HSBC, as a result of a terrible year, down 13.4% YTD after losing 1.6% in 2014, and having suffered its biggest ever drawdown the macro hedge fund, which does not file an equity 13-F, is liquidating.

Austerity: Also known as “sado-fiscalism”. A forlorn attempt to stave off government bankruptcy.

...

Keynesians: Economists “who hear voices in the air (and) are distilling their frenzy from some academic scribbler of a few years back” (John Maynard Keynes).