Just a month ago, Goldman Sachs' head progonsticator David Kostin went full bulltard, telling clients to buy high-beta, high-momentum stocks because (paraphrasing) "hedge funds suck" and will need to play catch-up. Today, his tune has changed. The "dash-for-trash" meme has outperformed dramatically in the last few years as Fed experimentation breathed life into the zombie-est weak-balance-sheet companies and traders rode that artificial wave. However,as Kostin notes, tightening financial conditions have the greatest impact on firms with high leverage and weak balance sheets; and thus, with the Fed more biased towards tightening than loosening (and the market discounting that), the "dash-for-trash" is over (as we noted in July).
It's Official: Hewlett-Packard To Split In Two, Fire Another 5,000; Goldman Notches Second Spin-Off Success After PayPalSubmitted by Tyler Durden on 10/06/2014 05:41 -0500
While the WSJ already broke the news yesterday that Hewlett Packard would split in two companies, and as such today's "shocking" announcement will hardly have the impact of the just as "surprising" split of PayPal which came on the last day of September, what is probably most notable - in addition to the news that HPQ will fire another 5,000 workers, bringing the total to 55,000 - is that just as in the case of PayPal, so for Hewlett-Packard, the financial advisor, i.e., the company which pitched the spin off to executives, was none other than Goldman. One wonders where else Goldman is advising on "spin offs" to take advantage of the bubbly stock market valuations. As a reminder, HPQ is only doing this deal and accessing the public markets now because several years ago it tried to do exactly the same thing in a private transaction with a strategic or financial buyer, and found no bids. Luckily, now we have central bank froth and pervasive risk euphoria to help management bail out at the highest possible stock price.
In the "land of the rising sun," Citi FX Technicals group warns, the sun also goes down sometimes. The present set up on the monthly and daily charts on USDJPY suggests it is time to be cautious, with real danger that we could be 'on the cusp' of a material correction lower for the first time in this 3-month rally. A move as low as 105.50 is not out of the question and that is terrible news for Japanese stocks and Abe's approval ratings.
- European Bond Yields Go Negative (WSJ)
- Traveler from Liberia is first Ebola patient diagnosed in U.S. (Reuters)
- Hong Kong Protesters Step up Pressure on Leung to Quit (BBG)
- JPMorgan to face U.S. class action in $10 billion MBS case (Reuters)
- Turkey mulls military action against Islamic State (Reuters)
- Singapore Home Prices Fall for Fourth Straight Quarter on Curbs (BBG)
- Italy's Economic Woes Highlight Dilemma for European Central Bank (WSJ)
- Advanced iOS virus targeting Hong Kong protestors (Reuters)
- Fed Scrutiny of Leveraged Loans Grows Along With Bubble Concern (BBG)
- Mosquito Virus That Walloped Caribbean Spreads in U.S. (BBG)
In a striking admission that Mario Draghi's "strategy" about the ECB's Private QE future, aka ABS monetization plan, is nothing short of converting Europe's central bank into a "bad bank" repository for trillions in bad and non-performing debt, the FT yesterday reported that "Mario Draghi is to push the European Central Bank to buy bundles of Greek and Cypriot bank loans with “junk” ratings, in a move that is set to exacerbate tensions between Germany and the bank." It is expected that the former Goldmanite will unveil details of a plan to buy hundreds of billions of euros’ worth of private-sector assets at tomorrow's ECB meeting.
The Hong Kong protests, which we covered over the weekend, and which took a dramatic turn for the worse overnight when thousands of students camped out and demand universal suffrage on the city streets and were in turn tear-gassed and arrested en masse by the local riot police demanding students disperse or else, and where the leader of the student protest, Joshua Wong - who had been previously arrested and was released on Sunday night - has openly called for the resignation of Hong Kong Chief Executive Leung Chun-ying in an interview with Hong Kong Cable TV, have done the unthinkable: they have impacted financial markets and the "wealth effect" transmission mechanism of the local billionaires.
When it comes to the robotization of the workforce - especially those who proclaim they earn less than they are worth - we have grown used to the fast-food-worker being upstaged by technology. However, Murata Manufacturing Co. has unleashed the ultimate threat to every financial TV media's anchor... the world’s first cheerleading robots. With ratings plunging, perhaps it's time for managers to consider the dancing pom-pom carrying machines as replacements to say "off the lows."
"...the rise of Germany’s AfD anti-euro party calls into question the euro bail-out machinery and queries the pitch for any form of QE stimulus that has already been pocketed and spent in advance by the markets. It will force Angela Merkel to take a tougher line on Europe, and further complicates the management of the (already dysfunctional) currency bloc."
* Where is Venezuela's 366 tonnes of gold?
* Does Venezuela still control and own unencumbered it’s own gold reserves?
* Is any of the country's gold encumbered, loaned or leased to Goldman Sachs or other banks?
Shale Fracking Is a “Ponzi Scheme” … “This Decade’s Version of The Dotcom Bubble” … “A Lot In Common With the Subprime Mortgage"Submitted by George Washington on 09/19/2014 00:12 -0500
“... Just Before It Melted Down”
This is where our economies are perverted. It’s the final excesses and steps of a broke society. It’s madness to the power of infinity. The only thing that’s certain is that in the end, your money will all be gone. That’s how Mario Draghi ‘saves’ the EU for a few more weeks, and that’s how the big boys of finance squeeze more from what little you have left (which is already much less than you think). A world headed for nowhere.
The high-yield credit market remains stressed. An active week ended poorly as a heavy pipeline saw Vistaprint pull its deal citing "market conditions" as perhaps both a re-awakening of liquidity fears (Fed hawkishness concerns), price/spread moves, potential downgrades soar, and outflows signal the flashing red light that HY markets are shining is as red as ever. With buybacks having dwindled already - removing a significant leg from the equity rally - it seems CFOs are realizing that maybe they should have used some of that easy money to build as opposed to buy as they face weak growth, a lack of liquidity, and a wall of maturing debt in the next few years that will have to be refinanced at higher yields and spreads.
In the wake of non-stop propaganda from politicians of both parties, as well as a mainstream media desperate for ratings, the American public is finally terrified enough to support another war in the Middle East. This is an unfortunate development... With just 6% of likely U.S. voters thinking Congress is doing a good or excellent job according to a recent Rasmussen poll, it’s no surprise to see so many of these corrupt clowns falling over one another to appear tough on ISIS, using myriad hyperbolic and Orwellian statements.
Russia and China are discussing setting up a system of interbank transactions which will become an analogue to International banking transaction system SWIFT, First Deputy Prime Minister Igor Shuvalov told PRIME on Wednesday after negotiations in Beijing. "Yes, we have discussed and we have approved this idea," he said.
Just a few hours ahead of President Obama's strategy oration, we thought worth noting that Americans' trust in the federal government to handle international problems has fallen to a record-low 43%. According to Gallup, confidence in the government to handle international problems slid 17 percentage points last year, when the Obama administration was planning military action against Syria. Unsurprisingly, Democrats remain the most confident in the government as Republicans' faith has collapsed. But it's not just international, only 40% of Americans have any confidence that government can handle domestic problems - also a record low.