Wondering where the world's economies are in the leverage cycle? Well, wonder no more. SocGen is out with its updated "leverage clock" which shows you where the bank thinks everyone falls in terms of ticking debt time bombs. As you'll see, SocGen's assessment is quite generous...
November has been a banner month for black swans. From Leftist political coups in Portugal to terror attacks in Paris to downed Russian fighter jets in Syria, the market is gradually learning to expect the unexpected. In its latest Quarterly Economic Outlook, SocGen outlines five political and economic black swans that could land in 2016.
While the world was following the tragic events unfolding on Friday night in France where hundreds of innocent civilians were killed or injured, an important economic development took place at the IMF, whose staff and head Christine Lagarde, officially greenlighted the acceptance of China's currency - the Renminbi, or Yuan - into the IMF's foreign exchange basket, also known as the Special Drawing Rights. Here are the initial early responses by various Wall Street analysts.
Virtually every single fungible dollar raised through issuance of debt has been used for one thing - to buyback stock!
For those eager to cut to the chase and curious if overnight we have had another standard USDJPY ramp levitating US equity futures on low volume, the answer is yes. And since the USDJPY carry was patient enough, it managed to trigger the 2100 ES stops and as of this moment the futures were comfortably on the politically-correct side of 2100.
... for many equities are simply, as SocGen puts it, "too scary."
"During the busy reporting weeks, upgrades rise relative to downgrades only for this to reverse during ‘quiet’ periods when companies revert to guiding numbers back down again. Why is this important? History shows that during the busiest reporting weeks the S&P 500 has risen 60% of the time versus less than 50% during the quietest weeks. The simple message is this: don’t be short during US reporting seasons."
It's Back To The Future As Stocks, Futures Jump On The Latest Abysmal Economic News; China Tremors ReturnSubmitted by Tyler Durden on 10/21/2015 05:57 -0500
26 years ago, today was envisioned as day when cars flew, holographic movies were box office hits, hoverboards roamed, and people were fired by fax. None of the happened. Instead the only "back to the future" moment this morning is a deja vu one we have seen every day for the past 7 years: bad economic news leading to surging stocks.
"The Squeeze Has Run Its Course" - According To BofA "The Rally Needs Central Bank Action To Continue"Submitted by Tyler Durden on 10/19/2015 12:42 -0500
"This positioning squeeze should have now run its course. Both positioning analysis based on our proprietary flows and the CFTC data suggest that the market is now short USD and long risk for the yea. A further increase in risk appetite will depend on central bank action, starting with the ECB this week."
We noted previously that last week's face-ripping rally was the biggest short-squeeze sicne 2011, but, as SocGen notes, this "savage reversal" - as the biggest losers rebounded - was the worst price momentum whiplash since 2009. Bear market rallies are typically characterised by sharp reversals and elevated levels of volatility, and as SocGen warns there are several things which point to this being a technical bounce (rather than longer-term supportive value-seeking).
Presenting SocGen's "China Syndrome": "The Vicious Cycle Of Lower Demand, Prices And Commodity Currencies"Submitted by Tyler Durden on 10/07/2015 17:59 -0500
"There's a circularity and self-fulfilling relationship between commodity currencies, lower commodity demand and lower commodity prices in an environment of oversupply."
"They're Converging To Dire Levels!": SocGen's Edwards Delivers Critical Warning On Inflation ExpectationsSubmitted by Tyler Durden on 10/07/2015 17:00 -0500
"The collapse in inflation expectations tells us that the market believes the central banks, despite their monetary profligacy, are failing to prevent the western economies from turning Japanese, and thus at risk of repeating their devastating slide into outright deflation in the 1990s."
"You Never Go Full-Krugman": Insane Helicopter Money Calls Continue As Trapped Central Banks Face Keynesian EndgameSubmitted by Tyler Durden on 10/07/2015 14:31 -0500
"The helicopter. Rather than buying assets, central banks drop money on the street. Or even better, in a more modern and civilised fashion, credit our bank accounts!" Yes, "even better!"...
"We are still in a very cautious environment for emerging-market currencies and unless there is a sharp turnaround in commodity prices or capital flows, I still think there’s going to be pressure on the ringgit and the rupiah."