Frontrunning: February 11

  • Gold Roars to One-Year High as Turmoil Drives Safe Haven Demand (BBG)
  • Banking Stocks Pummeled in Europe (WSJ)
  • Dollar, stocks plunge sparks scramble for safety (Reuters)
  • Nymex Crude Slips Below $27 a Barrel (WSJ)
  • No Respite for S&P 500 as U.S. Stock Futures Join Global Selloff (BBG)

JPMorgan: "It's Hard To Imagine An Uglier Morning"

"Trying to divine the end of the rout is difficult given the globe is in the midst of a series of tightly intertwined, self-reinforcing, and correlated trades and narratives (i.e. oil slumps and drags inflation down with it which prompts CBs to ratchet up accommodation which sinks banks which crushes general market sentiment and the overall price declines tighten financial market conditions and scares corporate execs and actual economic activity begins to deteriorate)."

Key Events In The Coming "Payrolls" Week

After last week's relatively quiet, on macro data if not central bank news, week the newsflow picks up with the usual global PMI survey to start, and end the week with the US January payrolls report.

Citi On Why Negative Rates Are Like Potato Chips: "No One Can Have Just One"

"Experience in other countries that have entered into this territory should sober you up on the likely economic and inflation impact. No country that has gone into negative rates has experienced major shifts in its growth and inflation profile – minor, yes; major, no. As a consequence every dip into negative rates has been followed by additional moves."

Helicopter Money Arrives: Switzerland To Hand Out $2500 Monthly To All Citizens

With Citi's chief economist proclaiming "only helicopter money can save the world now," and the Bank of England pre-empting paradropping money concerns, it appears that Australia's largest investment bank's forecast that money-drops were 12-18 months away was too conservative. While The Finns consider a "basic monthly income" for the entire population, Swiss residents are to vote on a countrywide referendum about a radical plan to pay every single adult a guaranteed income of around $2500 per month, with authorities insisting that people will still want to find a job.

Macro Hedge Funds Crushed Again

That giant sucking sound you hear is the P&L of macro/FX hedge funds as they look in dismay at their USDJPY exposure.

For Emerging Markets, It Is Now Worse Than The Asian Financial Crisis

"It’s Black Wednesday for emerging markets," one strategist warned and Thursday is not looking any better, as SocGen's Berg warns "The rout in emerging markets could continue for some time, especially as the major global central banks have exhausted their ammunition in recent years, making it unlikely that they will rescue global markets this time around." In fact, as Bloomberg reports, this year's EM turmoil is already worse than in the same period in 1998's Asian financial crisis (and EM FX is even worse).

Sage Investment Advice From Mike Tyson

The optimists have had things their own way in an almost unbroken line since March 2009. January 2016 so far would suggest that the pragmatists are now in charge.

According To SocGen The Problem Is Not "China", It's This

"... after four long years without any profits growth, the risk is that MSCI World mean-reverts to its original 2011 PE multiple, which would imply a further 50% decline from here. Even decline back to average would imply a 15% drop."