The Swiss National Bank just threw gasoline on Swiss F.I.RE. Expect to see combustive contagion in the Swiss banking, insurance and real estate giants as knock-on effects spread from so-called hedges
This morning's decision by the Swiss National Bank has polarized the investing community. From the 'smartest men in the room' to the 'most renowned newsletter writers in the world', the reactions could not be more different...
In what has been the most anticipated bankruptcy case in the past several years, hours ago Caesars Entertainment put its main operating unit under Chapter 11 bankruptcy protection in Northern Illinois bankruptcy court (case 15-01153) even as a splinter group of dissident creditors including Appaloosa and Oaktree, holders of about $41 million of Caesars debt and which allege the company has siphoned off billions in value from creditors, put the company into involuntary bankruptcy in Delaware bankruptcy court on January 12. As a reminder, Caesars was one of the sterling LBOs of the last credit bubble, when in 2008 Apollo and TPG decided to take the company private. The problem, as is always the case: too much debt, especially when combined with a broken business model, as Caesars has lost money every year since 2009.
For uber-wealthy Russians, "an apartment in Miami, even the most glorious beachfront apartment, is not a priority right now," warns one real estate attorney, as The New York Observer reports Russian buyers no longer felt they had the liquid assets to carry on with the transaction and were looking to break closed real estate contracts. "Your average Russian buyer tends to be someone who works in the $5, $10, $15 million range. Obviously very wealthy people, but also people who are much more likely to feel a pinch given the economic situation and the exchange rate," and with maintenance costs sky-high, the trophy apartments have shifted from 'safe-deposit-boxes' out of reach of sanctions to burdensome drains.
We see far too much complacency out there when it comes to interest rates, in the same manner that we’ve seen it concerning oil prices. We live in a new world, not a continuation of the old one. That old world died with Fed QE. Just check the price of oil. There have been tectonic shifts since over, let’s say, the holidays, and we wouldn’t wait for the ‘experts’ to catch up with live events. Being 7 weeks or two months late is a lot of time. And they will be late, again. It’s inherent in what they do. And what they represent.
The Fed may raise rates a token amount this year, but the move will be largely symbolic. You can bet there will NEVER be a shock and awe interest rate raise.
"We have to rethink our world just about from scratch. Or else. We’ve lived chasing the recovery carrot for years now, but the economy won’t recover; it can’t. There hasn’t been any real growth since at least the 1980s, the only thing there’s been is increasing debt levels that we mistook for growth." We need to do a lot more thinking, and take a far more critical look at ourselves, than we do at present. We’re not even playing it safe, we’re only playing it easy. And that’s just not enough.
The Long/Short Strategy for the New Reality
1. Go long companies that cater to the 1%.
2. Short companies that cater to the middle class.
3. Go long companies that cater to the poor.
It will be even more disruptive if some among them decide that the only reason for the failure of their collective delusion of grandeur is that they have not been deluded enough and that even more wild-eyed palliatives are therefore needed. Disruption on such a scale is not what the budding entrepreneur wants to contend with as he contemplates whether to risk both his capital and his reputation in launching or expanding a business, in ordering new equipment, or hiring new staff and so fostering a meaningful recovery. Disruption on such a scale is not something we should wish to inflict upon a system we have been both unable and unwilling to fully repair. Either way – damned if they do, damned if they don’t – disruption seems to be what we will get in the months ahead.
The short answer is in parts of Seattle, Charlotte, Phoenix, Atlanta, Tampa, Cincinnati, Raleigh, N.C., Houston, Denver, Columbus, Ohio, Sarasota-Bradenton, Fla., Raleigh, N.C., Chicago, and Winston-Salem, N.C. Among the 2,490 zip codes nationwide with at least one single family purchase by the top four institutional investors between January 2012 and October 2014, the top 50 zip codes with the highest percentage of purchases by the four largest institutional investors were in those metro areas. “The institutional investors kick-started the housing recovery by buying homes in bulk at the lowest point and holding them as rentals,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. Los Angeles County was among the top 10 for most purchases by institutional investors over the past three years, with 6,152. “As the market continues to climb, we expect these investors to start to sell off their inventory to capture the gains made in the past couple of years.”
"Is the recent bout in volatility yet another ‘buy-the-dip’ opportunity or a sign of worse to come? Investors struggle to both keep up with the markets while protecting themselves against a severe correction. By taking a step back, investors might be able to see the forest for the trees to gauge whether their portfolio is ready for what lies ahead." What we find most interesting is that there is very little concern that something could negatively impact the markets. In fact, if anything would actually happen, it will just be a mild 10-15% correction. The problem is that historically, such outcomes have only been found in "rarified air."
What will you accept as real--your intuition that something is deeply amiss in America, or the official propaganda that all is well? The goal of this war is to persuade you to surrender your independence and intuition in favor of passive acceptance of the cleverly cloaked tyranny of the current arrangement. If they cannot persuade you, then disorienting you will do. Misdirecting your intuition is victory enough.
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- How OPEC Weaponized the Price of Oil Against U.S. Drillers (BBG)
- German Industrial Production Falls Amid Plunge in Energy Output (BBG)
- Car Loans See Rise In Missed Payments (WSJ)
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- Oil heads for seventh weekly loss as supply glut drags (Reuters)
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- Janus Chairman Didn’t Know Details of Gross’s Investment (WSJ)
- Kaisa Bondholders Dream of White Knight as Default Becomes Real (BBG)
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- The Bold Charlie Hebdo Covers the Satirical Magazine Was Not Afraid to Run (BBG)
- Evans Says Fed Shouldn’t Rush Rate Rise as Inflation Undershoots (BBG)
- Oil holds above $51 as traders search for floor (Reuters)
- Gross Helps Fuel New Fund With His Own Cash (WSJ)
- ECB warns Greek funding access hinges on keeping bailout (Reuters)
- Greece Jolts QE Juggernaut as ECB Gauges Deflation Risk (BBG)
- Analysts Say There's No Telling How Low Oil Prices Could Go (BBG)
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Market Wrap: Evans' "Catastrophe" Comment Blasts Overnight Futures Into Overdrive, 10-Year Rises To 2%Submitted by Tyler Durden on 01/08/2015 06:56 -0500
After subdued trading in the overnight session until a little after 8pm Eastern, algos went into overdrive just around the time the Fed's 2015 voting member and uberdove Charlie Evans told reporters that "raising rates would be a catastrophe", hinting that the first rate hike would likely be - as usual - pushed back from market expectations of a mid-2015 liftoff cycle into 2016 or beyond (but don't blame the US, it is the "international situation's" fault), in the process punking the latest generation of Eurodollar traders yet again. Whatever the thinking, S&P futures soared on the comments and were higher by just under 20 points at last check even as Crude has failed to pick up and the 10Y is barely changed at 2.00%.