http://www.zerohedge.com/fullrss2.xml/feed en Falling Oil Prices Not The Reason For America's Economic Woes http://www.zerohedge.com/news/2016-02-09/falling-oil-prices-not-reason-americas-economic-woes <p><a href="http://www.acting-man.com/?p=43155"><em>Submitted by Antonius Aquinas via Acting-Man.com,</em></a></p> <h3><span style="text-decoration: underline;"><strong>Why Should a Decline in Oil Prices be Bad?</strong></span></h3> <p>The dramatic fall in the global price of oil is being cited by the financial press, government officials, and academia as the catalyst for the recent abysmal U.S. economic data which shows that the economy is, in all likelihood, sliding into a recession or worse.</p> <p>&nbsp;</p> <p style="text-align: center;"><img alt="Oil_cartoon_12.09.2014_large" class="aligncenter wp-image-43160" height="355" src="http://www.acting-man.com/blog/media/2016/02/Oil_cartoon_12.09.2014_large.png" width="600" /></p> <p style="text-align: center;">Oil prices in dire straits&hellip;</p> <p>While falling oil prices sound like a plausible explanation for the abysmal financial numbers, anyone with a modicum of economic sense (which excludes much of the financial Establishment) can see that it is merely a smokescreen to obfuscate the real culprit.</p> <p>The fall in oil prices, while detrimental to many oil producers, should actually be a boon for the rest of the economy, especially those industries that are heavily reliant on energy. Lower fuel prices mean lower production costs leading to,&nbsp;<em>ceteris paribus</em>, greater output.</p> <p>&nbsp;</p> <p style="text-align: center;"><a href="http://www.acting-man.com/blog/media/2016/02/1-Gasoline-weekly.png" target="_blank"><img alt="1-Gasoline, weekly" class="aligncenter wp-image-43156" src="http://www.acting-man.com/blog/media/2016/02/1-Gasoline-weekly.png" style="width: 600px; height: 265px;" /></a></p> <p style="text-align: center;">The price of gasoline has declined precipitously &ndash; click to enlarge.</p> <p>&nbsp;</p> <p>For consumers, lower oil prices mean lower utility bills and cheaper gasoline, both of which mean more disposable income for either savings or more consumption. Why would greater disposable income lead to a recession?</p> <p>Naturally, lower prices are not good for oil producers. But a decline in one sector of the economy (albeit an important one), does not lead to a general collapse. While the energy sector may be contracting, industries that use fuel should be able to expand as their production costs fall.</p> <p>&nbsp;</p> <p style="text-align: center;"><img alt="Kipper Williams cartoon 6 January 2015" class="aligncenter wp-image-43159" height="500" src="http://www.acting-man.com/blog/media/2016/02/Kipper-Williams-cartoon-6-002.jpg" width="399" /></p> <p style="text-align: center;">What constitutes great news in oil exploration nowadays</p> <p>&nbsp;</p> <h3><u><strong>The Pseudo-Prosperity of the Printing Press</strong></u></h3> <p><strong>The Federal Reserve&rsquo;s Quantitive Easing (QE), Zero Interest Rate Policy (ZIRP), Operation Twist (OT), and their variations have created a massive bubble in asset prices which is now beginning to burst.</strong> All of these polices have been undertaken to save the banking system from collapse after the crisis of 2008. Since the start of the Great Recession, none of the problems that have led to it have been addressed.</p> <p>Not only has the stock market been artificially inflated by the Federal Reserve, but it has come at a devastating cost in the decimation of savers, as the return on their money has dropped to next to nothing. This, of course, has had debilitating consequences on retirees and seniors.</p> <p>&nbsp;</p> <p style="text-align: center;"><a href="http://www.acting-man.com/blog/media/2016/02/2-TMS-2-plus-FF-rate.png" target="_blank"><img alt="2-TMS-2 plus FF rate" class="aligncenter wp-image-43157" src="http://www.acting-man.com/blog/media/2016/02/2-TMS-2-plus-FF-rate-1024x598.png" style="width: 599px; height: 350px;" /></a></p> <p style="text-align: center;">Broad US money supply TMS-2 and the Federal Funds rate &ndash; click to enlarge.</p> <p>&nbsp;</p> <p><strong>The Obama Administration, with little opposition from Republicans, has increased the federal deficit to nearly $20 trillion from the $9 trillion it had inherited with little or no hope of any reduction</strong>. Its wasteful stimulus program of a few years ago has done nothing to improve conditions while its collectivist health care initiative has placed crushing burdens across the economic spectrum.</p> <p><strong>What is even scarier is that Obama is apparently clueless about current economic conditions, as he mindlessly demonstrated in his (thankfully) last State of the Union Address:</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;Anyone claiming that America&rsquo;s economy is in decline is peddling fiction. What is true &ndash; and the reason that a lot of Americans feel anxious &ndash; is that the economy has been changing in profound ways, changes that started long before the Great Recession hit and hasn&rsquo;t let up.&rdquo;</p> </blockquote> <p>Obama is correct in one sense: there is a &ldquo;profound change&rdquo; that is happening in the economy, however, it is a change for the worse which he and his harmful policies have created.</p> <p>&nbsp;</p> <p style="text-align: center;"><a href="http://www.acting-man.com/blog/media/2016/02/3-Federal-Debt.png" target="_blank"><img alt="3-Federal Debt" class="aligncenter wp-image-43158" src="http://www.acting-man.com/blog/media/2016/02/3-Federal-Debt-1024x486.png" style="width: 600px; height: 285px;" /></a></p> <p style="text-align: center;">Federal debt since the 1990s &ndash; Obama took office in January 2009 &ndash; click to enlarge.</p> <p>&nbsp;</p> <p>Not surprisingly, in their rebuttal to the speech, the Republicans offered little in substance. Instead, they chose a spokesperson whose only claim to fame was her infamous decision as governess of South Carolina to remove the Confederate flag from state buildings. Needless to say, the choice of Nikki Haley met with disgust among the party&rsquo;s base. The GOP is not called the &ldquo;stupid party&rdquo; for nothing!</p> <p><em><strong>Unfortunately, for the vast majority of Americans, there is little likelihood that the present Administration or the next, be it of a different party, will turn things around. Instead, there will probably be more of the same.</strong></em></p> <p><u><strong>Until there is a change in ideology where the corrupt notions of money and credit creation via the printing press and the running of gargantuan deficits are debunked, American living standards will never improve.</strong></u></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="486" height="252" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160209_oil.jpg?1455054706" /> </div> </div> </div> http://www.zerohedge.com/news/2016-02-09/falling-oil-prices-not-reason-americas-economic-woes#comments Federal Deficit Federal Reserve Money Supply None Obama Administration Recession South Carolina Tue, 09 Feb 2016 23:05:00 +0000 Tyler Durden 523195 at http://www.zerohedge.com What's Dragging Down European Banks: Oil And Commodity Exposure As High As 160% Of Tangible Book http://www.zerohedge.com/news/2016-02-09/whats-dragging-down-european-banks-oil-and-commodity-exposure-high-160-tangible-book <p>Yesterday, when looking at the <a href="http://www.zerohedge.com/news/2016-02-08/forget-europe-why-time-has-come-panic-about-canadian-banks-one-chart">exposure of the Canadian banking sector to energy</a>, we found something disturbing: according to an RBC analysis, local banks were woefully underreserved.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/03/Canada%20reserves.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/03/Canada%20reserves_0.jpg" width="501" height="412" /></a></p> <p>&nbsp;</p> <p>Yet while clearly overly optimistic about the severity and the duration of the commodity crunch, at least Canada's banks do provide some information, which however is more than can be said about most European banks. As Morgan Stanley writes, "<strong>Europeans have not typically disclosed reserve levels against energy exposure, making comparison to US banks challenging. </strong>Moreover, quality of books can vary meaningfully. For example, we note that Wells Fargo has raised reserves against its US$17 billion substantially non-investment grade book, while BNP and Cred Ag have indicated a significant skew (75% and 90%, respectively) to IG within energy books. Equally we note that US mid-cap banks typically have a greater skew to higher-risk support services (~20-25%) compared to Europeans (~5-10%) and to E&amp;P/upstream (~65% versus Europeans ~10-20%)."</p> <p>Morgan Stanley then proceeds to make some assumptions about how rising reserves would impact European bank income statements as reserve builds flow through the P&amp;L: in some cases the hit to EPS would be . </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>A ~2% reserve build in 2016 would impact EPS by 6-27%, we estimate:We believe noticeable differences exist between US and EU banks’ portfolios in terms of seniority and type of exposure. As such, applying the assumption of a ~2% further build in energy reserves in 2016, versus ~4% assumed for large US banks, <strong>we estimate that EPS would decline by 6-27% for European-exposed names (ex-UBS), with Standard Chartered, Barclays, Credit Agricole, Natixis and DNB most exposed.</strong></p> <p>&nbsp;</p> <p>Marking to market of high yield and lower DCM/credit trading is also likely to be an issue (and we forecast FICC down ~5% in 2016):We previously showed that CS had the biggest percentage of earnings from HY and already had the worst of peers YoY FICC in 3Q, which we fear could continue to drag, despite a vigorous focus on restructuring.</p> </blockquote> <p>A matrix of boosting reserves would look as follows on bank EPS:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/MS%20Euro%20exposure%202.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/MS%20Euro%20exposure%202_0.jpg" width="600" height="388" /></a></p> <p>But the biggest apparent threat for European banks, at least according to MS calulcations, is the following: while in the US even a modest 2% reserve on loans equates to just 10% of Tangible Book value...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/MS%20US%20exposure.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/MS%20US%20exposure_0.jpg" width="600" height="304" /></a></p> <p>... in Europe a long overdue reserve build of 3-10% for the most exposed banks, would immediately soak up anywhere between 60 and a whopping 160% of tangible book!</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/MS%20Euro%20exposure%201.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/MS%20Euro%20exposure%201_0.jpg" width="600" height="350" /></a></p> <p>Which means just one thing: as oil stays "lower for longer", and as many more European banks are forced to first reserve and then charge off their existing oil and gas exposure, expect much more diluation. Which, incidentlaly also explains why European bank stocks have been plunging since the beginning of the year as existing equity investors dump ahead of inevitable capital raises.</p> <p>And while that answers some of the "gross exposure to oil and commodities" question, another outstanding question is what is the net exposure to China. As a reminder, this is what Deutsche Bank's credit analyst Dominic Konstam said in his explicit defense of what needs to be done to stop the European bloodletting:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The exposure issue has been downplayed <strong>but make no mistake banks are heavily exposed to Asia/MidEast and while 10% writedown might be worst case for China but too high for the whole, it is what investors shd and do worry about </strong>-- whole wd include the contagion to banking hubs in Sing/HKong</p> </blockquote> <p>Ironically, it is Deutsche Bank that has been hit the hardest as the full exposure answer, either at the German bank or elsewhere, remains elusive; it is also what has cost European banks billions (and counting) in market cap in just the past 6 weeks. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1162" height="678" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/MS%20Euro%20exposure%201.jpg?1455054574" /> </div> </div> </div> http://www.zerohedge.com/news/2016-02-09/whats-dragging-down-european-banks-oil-and-commodity-exposure-high-160-tangible-book#comments Barclays Book Value China Deutsche Bank High Yield Morgan Stanley Standard Chartered Wells Fargo Tue, 09 Feb 2016 22:38:19 +0000 Tyler Durden 523199 at http://www.zerohedge.com S&P Downgrades Banks With Highest Energy Exposure; Expects "Sharp Increase" In Non-Performing Assets http://www.zerohedge.com/news/2016-02-09/sp-downgrades-banks-highest-energy-exposure-expects-sharp-increase-non-performing-as <p>Moments ago S&amp;P continued its downgrade cycle, this time taking the axe to the regional banks with the highest energy exposure due to "expectations for higher loan losses." Specifically, its lowered its long-term issuer credit ratings on four U.S. regional banks by one notch: <strong>BOK Financial Corp., Comerica Inc., Cullen/Frost&nbsp; Bankers Inc., and Texas Capital Bancshares</strong>. The&nbsp; outlooks on these banks are negative. </p> <p>It also revised the outlook on BBVA Compass Bancshares to negative from stable and affirmed the 'BBB+/A-2' issuer&nbsp; credit ratings.</p> <p>We assume the non-regional mega banks are insulated from such actions because they are the primary beneficiaries of the Fed's generous $2.5 trillion in excess reserves which will allow banks to mask as much of O&amp;G portfolio deterioration as is necessary to "weather the cycle."</p> <p>What is notable is that among the S&amp;P non-sugarcoated comments are some true fire and brimstone gems, which suggest that the big picture for banks with substantial energy exposure is about to get far worse. Here is what S&amp;P said:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>These rating actions follow a review of U.S. regional banks with large energy&nbsp; loan portfolios as a percentage of both total loans and Tier 1 capital. </strong>Since we revised our outlooks to negative on five regional banks in January 2015, energy prices have declined by more than one-third and the asset quality of energy loan portfolios has deteriorated materially, albeit from fairly benign levels. <strong>Throughout 2015, criticized and classified assets climbed significantly, and in the fourth quarter, several regional banks with large energy loan portfolios reported increases in loan loss provisions and energy loss reserves to varying degrees, and, in certain cases, nonperforming assets (NPAs) also rose.</strong></p> <p>&nbsp;</p> <p><strong>Given further declines in energy prices in recent months, less hedging activity by borrowers, and potentially more difficulty for borrowers to cure (i.e., resolve) borrowing base deficiencies through capital raises or asset sales, we think troubled debt restructurings and NPAs in the energy sector will increase, <span style="text-decoration: underline;">possibly sharply</span>, in coming quarters</strong>. We also think banks will increasingly emphasize the potential loss content among rising levels of NPAs that we expect to see throughout 2016. In addition, we think <strong>regulatory scrutiny of energy loan portfolios will increase in 2016, including during the upcoming Shared National Credit (SNC) exams (two will be conducted in 2016) and the annual stress tests regulators mandate, which may encourage the use of higher loss assumptions.</strong></p> <p>&nbsp;</p> <p>Many banks have been lowering their energy price assumptions ("price decks") for exploration and production (E&amp;P) loans throughout 2015, resulting in reduced borrowing bases (the value of a borrower's reserves against which banks typically lend). <strong>In the next semiannual borrowing-base determination this spring, we expect that borrowing bases will decline further, </strong>mainly because of lower energy prices (i.e., valuations) and possibly lower reserve replacement, <strong>which could lead to more borrower deficiencies </strong>(i.e., loan balances that are greater than the borrowing base). Although banks typically allow borrowers as long as six months to resolve a deficiency, <span style="text-decoration: underline;"><strong>we think many borrowers will have fewer options to cure through debt capital issuances or asset sales and dispositions, which were more common last year</strong></span>. Specifically, the cost of capital has increased for many borrowers, and private equity firms may be less willing to commit additional capital to resolve deficiencies. <strong>In addition, E&amp;P borrowers may have unsecured debt in addition to their reserve-based loans, which could pressure their overall finances and push them into default or bankruptcy.</strong></p> <p>&nbsp;</p> <p>Equally as important, <strong>we think the performance of indirect credit exposures in local energy-focused markets could deteriorate somewhat over the next two years</strong>. Although deterioration has not yet been meaningful, <strong>we still think the energy price slump could hurt commercial real estate (CRE) in these local markets, such as Houston or smaller cities in Texas, throughout 2016 and 2017. </strong>However, we recognize that lower energy prices could have a broad-based positive impact on U.S. consumers and corporations where energy is a significant input cost. <strong>We are also wary of strategies that some banks may execute to aggressively grow their loan portfolios in other loan segments, such as CRE, in order to offset contraction in their energy loan portfolios.</strong></p> <p>&nbsp;</p> <p>Although we expect that banks will likely continue to increase their loan loss provisions and reserves within their energy loan portfolios over the next several quarters, we consider that currently low NPAs, solid preprovision earnings generation, and, in some cases, high risk-adjusted capital (RAC) ratios offer the banks a cushion to absorb higher loan loss provisions<strong>. This was a key factor in our decision to limit our rating actions to one notch at this point.</strong></p> <p>&nbsp;</p> <p>In our analysis of these companies, we evaluate the potential impact of certain adverse scenarios, based on default and net loan loss assumptions for different types of energy lending. For example, <strong>we expect that E&amp;P reserve-based lending will have lower net loss rates than energy services lending because of conservative advance rates on reserve collateral</strong>. We will continue to consider the array of possible assumptions regarding energy loan default and net loss rates, as the cycle develops. At this time, however, we do not believe that these banks' loan loss provisions would exceed preprovision earnings under most foreseeable scenarios, and, thus, our rating actions following this review were limited to a one-notch downgrade.</p> <p>&nbsp;</p> <p>The following table presents a few of the key metrics we are tracking and lists the banks that are included in today's actions, as well as others we believe have above-average exposure to energy.</p> <p>&nbsp;</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/S%26P%20downgrade%20banks_0.jpg" width="600" height="374" /></p> </blockquote> <p>Is that the end of it? Not even close. Expect much more pain - initially among the regional lenders, many of whom have been given explicit instructions to extend and pretnd as long as possible by the Dallas Fed as <a href="http://www.zerohedge.com/news/2016-01-16/exclusive-dallas-fed-quietly-suspends-energy-mark-market-tells-banks-not-force-shale">reported exclusively here before </a>- before we reach a true bottom in bank exposure. </p> <p>Finally, for the full list, here is a breakdown from Raymond James laying out the US banks, both regional and national, with the highest exposure to energy: while some of these were just downgraded, this was for a reason: expect much more negative surprises from these lenders in the coming months as more shale stop servicing their debts. </p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/bank%20exposure%201.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/bank%20exposure%201_0.jpg" width="600" height="578" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="931" height="580" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/S%26P%20downgrade%20banks.jpg?1455057306" /> </div> </div> </div> http://www.zerohedge.com/news/2016-02-09/sp-downgrades-banks-highest-energy-exposure-expects-sharp-increase-non-performing-as#comments Commercial Real Estate CRE CRE Dallas Fed default Excess Reserves Non-performing assets NPAs Private Equity ratings Raymond James Real estate Regional Banks Tue, 09 Feb 2016 22:35:52 +0000 Tyler Durden 523204 at http://www.zerohedge.com Economics Professor: Negative Interest Rates Aimed at Driving Small Banks Out of Business and Eliminating Cash http://www.zerohedge.com/news/2016-02-09/economics-professor-negative-interest-rates-aimed-driving-small-banks-out-business-a <p>More than one-fifth of the world&rsquo;s total GDP is in countries which have imposed negative interest rates, including <a href="http://www.washingtonsblog.com/2016/01/negative-interest-rates-sign-desperation.html">Japan, the EU, Denmark, Switzerland and Sweden</a>.</p> <p>Negative interest rates are <a href="http://www.washingtonsblog.com/2016/02/bohica-negative-rates-coming-america.html">spreading</a> <a href="http://www.zerohedge.com/news/2015-12-08/canada-just-hinted-negative-interest-rates-are-coming">worldwide</a>.</p> <p>And yet negative interest rates &ndash; <a href="http://www.foxbusiness.com/features/2016/02/09/former-fed-president-urges-negative-interest-rates.html">supposed to help economies recover</a> &ndash; haven&rsquo;t prevented Japan and Europe&rsquo;s economies from absolutely going down the drain.</p> <p>Nor have they even stimulated spending. As ValueWalk <a href="http://www.valuewalk.com/2016/02/negative-interest-rates-wont-you-take-me-to-funkytown/?all=1">points out</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Japan has had ultra-low rates for years and its economy has been terrible. Trillions of debt in Europe now trades at negative interest rates and its economy isn&rsquo;t exactly booming.&nbsp; Denmark, Sweden and Switzerland all have negative interest rates, but consumer spending isn&rsquo;t going up there. In fact, <strong>savings rates have been going up in lockstep with the decrease in interest rates, exactly the opposite of what the geniuses at the various central banks expected</strong>. </em></p> <p>&nbsp;</p> <p><em>Why is this happening? Simply, savers are scared. Lower interest rates have wrecked their retirement plans. Say you were doing some financial planning 10 years ago and plugged in 3% from your savings account.&nbsp; Now its 0%.&nbsp; You still have to plan for your retirement. Plug in 0%. What happens to your planning now?&nbsp; 0% compounded for X years is 0%.&nbsp; The math is simple. So <strong>in order to have your target savings at retirement, you need to save more, not spend more</strong>. But for some reason, the economists that run central banks around the world can&rsquo;t see this. They are all stuck in their offices talking to one another and self-reinforcing this myth that they can drive spending up by reducing the rate of return on investments.&nbsp; Want to see consumer spending go up?&nbsp; Don&rsquo;t wreck their savings plans so that they are too scared to spend.&nbsp; But that&rsquo;s too simple. Instead, central banks use a chain of causation that doesn&rsquo;t exist to try to create change 3 or 4 steps down the line. It hasn&rsquo;t worked, and it won&rsquo;t work. It isn&rsquo;t in an individual&rsquo;s self-interest to go out and spend their money on more &ldquo;stuff&rdquo; in order to spur economic growth.</em></p> </blockquote> <p>So what&rsquo;s really going on? Why are central banks worldwide pushing negative interest rates?</p> <p>Economics professor Richard Werner &ndash; the creator of quantitative easing &ndash; <a href="https://professorwerner.wordpress.com/2016/02/09/negative-interest-rates-and-the-war-on-cash/">notes</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>The experience of Switzerland [shows that] negative rates raise banks&rsquo; costs of doing business. The banks respond by passing on this cost to their customers. Due to the already zero deposit rates, this means banks will raise their lending rates. As they did in Switzerland. In other words, reducing interest rates into negative territory will raise borrowing costs!</em></p> <p>&nbsp;</p> <p><em>If this is the result, why do central banks not simply raise interest rates? This would achieve the same result, one might think. However, there is a crucial difference: raised rates will allow banks to widen their interest margin and make their business more profitable. <strong>With negative rates, banks&rsquo; margins will stay low and the financial situation of the banks will stay precarious and indeed become ever more precarious</strong>.</em></p> <p>&nbsp;</p> <p><em>As readers know, we have been arguing that <strong>the ECB has been waging war on the &lsquo;good&rsquo; banks in the eurozone, the several thousand small community banks, mainly in Germany, which are operated not for profit, but for co-operative members or the public good</strong> (such as the Sparkassen public savings banks or the Volksbank people&rsquo;s banks). The ECB and the EU have significantly increased regulatory reporting burdens, thus personnel costs, so that many community banks are forced to merge, while having to close down many branches. This has been coupled with the ECB&rsquo;s policy of flattening the yield curve (lowering short rates and also pushing down long rates via so-called &lsquo;quantitative easing&rsquo;). <strong>As a result banks that mainly engage in traditional banking, i.e. lending to firms for investment, have come under major pressure, while this type of &lsquo;QE&rsquo; has produced profits for those large financial institutions engaged mainly in financial speculation and its funding</strong>.</em></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong><em>The policy of negative interest rates is thus consistent with the agenda to drive small banks out of business and consolidate banking sectors in industrialised countries, increasing concentration and control in the banking sector.</em></strong></span></p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;"><strong>It also serves to provide a (false) further justification for abolishing cash</strong></span>. And this fits into the Bank of England&rsquo;s surprising recent discovery that the money supply is created by banks through their action of granting loans: by supporting monetary reformers, the Bank of England may further increase its own power and accelerate the drive to concentrate the banking system if bank credit creation was abolished and there was only one true bank left &ndash; the Bank of England. This would not only get us back to the old monopoly situation imposed in 1694 when the Bank of England was founded as a for-profit enterprise by private profiteers. It would also further the project to increase control over and monitoring of the population: with both cash and bank credit alternatives abolished, all transactions, money creation and allocation would be implemented by the Bank of England.</em></p> </blockquote> <p>If this sounds like a &ldquo;conspiracy theory&rdquo;, the Financial Times <a href="http://ftalphaville.ft.com/2014/01/22/1748152/the-time-for-official-e-money-is-now/" target="_blank" title="As Kaminska explains">argued</a> in 2014 that central banks would be the real winners from a cashless society:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Central bankers, after all, have had an explicit interest in introducing e-money from the moment the global financial crisis began&hellip;</em></p> <p>&nbsp;</p> <p><em>***</em></p> <p>&nbsp;</p> <p><em><strong>The introduction of a cashless society empowers central banks greatly</strong>. A cashless society, after all, <strong>not only makes things like negative interest rates possible</strong><strong>,</strong> it <strong>transfers absolute control of the money supply to the central bank</strong>, mostly by turning it into a universal banker that competes directly with private banks for public deposits. All digital deposits become base money.</em></p> </blockquote> http://www.zerohedge.com/news/2016-02-09/economics-professor-negative-interest-rates-aimed-driving-small-banks-out-business-a#comments Bank of England Borrowing Costs Central Banks Eurozone Germany Japan Money Supply Quantitative Easing Switzerland Yield Curve Tue, 09 Feb 2016 22:33:44 +0000 George Washington 523203 at http://www.zerohedge.com Trump, Sanders Set To Dominate As New Hampshire Votes In Nation's First Primary http://www.zerohedge.com/news/2016-02-09/trump-sanders-set-dominate-new-hampshire-votes-nations-first-primary <p dir="ltr">Last week, the “teflon Don” took a hit in Iowa.</p> <p dir="ltr">Despite the fact that the last Des Moines Register poll before the caucus showed the brazen billionaire pulling ahead of Ted Cruz in the state for the first time since August, Donald Trump lost, in what many deemed a surprising outcome.</p> <p dir="ltr">Initially, Trump congratulated Cruz. Later, he called the senator a cheater and accused him of “stealing” the state by bilking the hapless Ben Carson out of votes. </p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">Ted Cruz didn't win Iowa, he stole it. That is why all of the polls were so wrong and why he got far more votes than anticipated. Bad!</p> <p>— Donald J. Trump (@realDonaldTrump) <a href="https://twitter.com/realDonaldTrump/status/694879900256354304">February 3, 2016</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p><span style="font-size: 1em; line-height: 1.3em;">Tonight, we get the nation’s first primary as voters head to the polls in New Hampshire, where Bernie Sanders and Donald Trump hold commanding leads. </span><span style="font-size: 1em; line-height: 1.3em;">“<strong>Trump, who has held a sizable lead in the Republican race in New Hampshire, appears poised to win his first contest of the 2016 campaign</strong> after finishing </span><a href="https://www.washingtonpost.com/2016-election-results/iowa/" style="font-size: 1em; line-height: 1.3em;">second in Iowa</a><span style="font-size: 1em; line-height: 1.3em;"> a week ago” <a href="https://www.washingtonpost.com/politics/voting-begins-in-nh-as-presidential-hopefuls-make-a-final-sprint/2016/02/08/d56162d6-cecf-11e5-88cd-753e80cd29ad_story.html">WaPo writes</a>. “In the Democratic race, Sen. Bernie Sanders maintained his double-digit lead over former secretary of state Hillary Clinton.”</span></p> <p><span style="font-size: 1em; line-height: 1.3em;">“<strong>Sanders' 54% to 40% advantage over Hillary Clinton</strong> is down slightly from a 55% to 37% lead in the previous Poll of Polls,” CNN reported on Monday. “<strong>Trump tops the GOP field with 31%</strong>, well ahead of Marco Rubio” who is polling at 15% and “has picked up four points since the previous New Hampshire Poll of Polls, the biggest change in the averages in the last week.”</span></p> <p dir="ltr">Ted Cruz has 13%, John Kasich is sitting on a respectable 11% and Jeb Bush has 10%.</p> <p dir="ltr">Rubio - who put up a strong showing in Iowa before stumbling in the last GOP debate - is keen to keep up the momentum. “It’s great to be targeted, because it means you’re doing something right,” he told ABC. “Rubio's stumble under New Jersey Gov. Chris Christie's ferocious fire at Saturday's GOP debate, meanwhile, threatens to stall his momentum heading into New Hampshire,” CNN notes. "Voters in New Hampshire are serious about, they understand what's at stake here," Rubio told CNN. "<strong>The future of America is at stake</strong>."</p> <p dir="ltr">“I think the people of New Hampshire deserve better than someone just throwing mud and insulting the other candidates,” Cruz said, in a jab at Trump. “He doesn’t like the fact that he lost in Iowa, so he’s chosen to go down the road of insults.”</p> <p dir="ltr">In a particularly inauspicious move, Ben Carson is set to skip his own “victory” party in order to get a head start in South Carolina. “Ted Cruz’s campaign and surrogates seized on the news, inferring that the trip meant Carson would be suspending his campaign and encouraging his supporters to caucus for Cruz,” <a href="http://www.politico.com/blogs/new-hampshire-primary-2016-live-updates/2016/02/ben-carson-skips-new-hampshire-party-219001">Politico notes</a>.</p> <p dir="ltr">As for Trump, the real estate mogul taunted protesters at his final rally before the ballot. “Oh, they’re getting rid of some protesters. Look. Are the police the greatest?” he asked a crowd of some 12,000 people. “<strong>I like protesters because that’s the only way the cameras show how big the crowd is</strong>.”</p> <p dir="ltr">Here’s The Oregonian with some of the key themes for Tuesday’s vote:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p dir="ltr"><em>Marco Rubio really might be a robot -- or, rubot, as he's been dubbed. At his last rally before New Hampshire voters headed to the polls, he showed that his tendency to repeat scripted lines -- sometimes the same ones over and over in a single short speech -- isn't reserved for TV debates. At Nashua Community College on Monday he said it was difficult for he and his wife "to instill our values in our kids instead of the values they try to ram down our throats." Then he said it two more times before stepping down from the podium, seemingly unaware that he was repeating himself.</em></p> <p><em> Hillary Clinton is progressive. No, really. Sanders, seeking to clearly differentiate himself from Clinton, tweeted out last week, "You can be a moderate. You can be a progressive. But you cannot be a moderate and a progressive." This claim has received a fair amount of pushback. 'Moderate' is a practical term. Broadly speaking, it refers to a candidate who focuses on consensus building and incremental progress, someone who doesn't believe the US political system is capable of sudden, lurching change, or just doesn't want that kind of change. A moderate's opposite is a radical, someone who believes rapid, revolutionary change is both possible and necessary." Clinton, meanwhile, has been trying to shore up her progressive credentials all week. "I won't cut Social Security," she tweeted last Friday. "As always, I'll defend it, &amp; I'll expand it. Enough false innuendos."</em></p> </blockquote> <p>As for Jeb Bush, the candidate who has received the most money from Wall Street, it's do or die time and the former Florida governor is coming out swinging.&nbsp;</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">.<a href="https://twitter.com/realDonaldTrump">@realDonaldTrump</a>, you aren’t just a loser, you are a liar and a whiner. John McCain is a hero. Over and out.</p> <p>— Jeb Bush (@JebBush) <a href="https://twitter.com/JebBush/status/696717836824244228">February 8, 2016</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>Trump's response: "He's a stiff who you wouldn't hire in private enterprise, OK? This is a stiff. This is a guy that if he came looking for a job, you'd say, 'No thank you.' And that's the way it is."</p> <p>Tonight we'll find out who the "stiffs" really are in New Hampshire where America's political aristocracy is set to suffer a punishing defeat at the hands of the so-called "protest candidates."</p> <p>Asked who he thought would prevail on Tuesday evening, President Obama <a href="http://www.politico.com/blogs/new-hampshire-primary-2016-live-updates/2016/02/new-hampshire-primary-2016-obama-prediction-219009">said only this</a>: "I have no idea."</p> <p><em>More from Google</em></p> <p><em><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2016/02/09/NH1.png"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2016/02/09/NH1_0.png" width="600" height="263" /></a></em></p> <p><em><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2016/02/09/NH2.png"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2016/02/09/NH2_0.png" width="600" height="264" /></a><br /></em></p> <script src="https://ssl.gstatic.com/trends_nrtr/429_RC03/embed_loader.js" type="text/javascript"></script><script type="text/javascript">// <![CDATA[ trends.embed.renderWidget("US_cu_lh4OpVIBAADKOM_en", "fe_list_ac0f3ec1-aa9e-4b73-a7f5-74f6a49d6dce", {}); // ]]></![cdata[></script><p><script src="https://ssl.gstatic.com/trends_nrtr/429_RC03/embed_loader.js" type="text/javascript"></script><script type="text/javascript">// <![CDATA[ trends.embed.renderWidget("US_cu_lh4OpVIBAADKOM_en", "fe_list_ee780a03-df67-470d-86cc-d35c0a961776", {}); // ]]></![cdata[></script></p> <p><script src="https://ssl.gstatic.com/trends_nrtr/429_RC03/embed_loader.js" type="text/javascript"></script><script type="text/javascript">// <![CDATA[ trends.embed.renderWidget("US_cu_lh4OpVIBAADKOM_en", "fe_int_over_time_2b9e6bb1-ba8a-49dc-989f-4e19286a66a8", {}); // ]]></![cdata[></script></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="256" height="152" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/NH.png?1455056095" /> </div> </div> </div> http://www.zerohedge.com/news/2016-02-09/trump-sanders-set-dominate-new-hampshire-votes-nations-first-primary#comments Bernie Sanders Donald Trump Florida John McCain Real estate South Carolina Tue, 09 Feb 2016 22:16:02 +0000 Tyler Durden 523202 at http://www.zerohedge.com Deutsche Desperation & Twist Talk Save Stock Sheep From Slaughter http://www.zerohedge.com/news/2016-02-09/deutsche-desperation-twist-talk-save-stock-sheep-slaughter <p>What a day... this seemed appropriate...<br /><iframe allowfullscreen="" frameborder="0" height="360" src="https://www.youtube.com/embed/jup-5Xu1OOU" width="480"></iframe></p> <p>Dow futures show the utter craziness of the intraday swings today as Japanese collapse led to panic-buying on &quot;Rock Solid&quot; Deutsche comments which led to dumping on oil&#39;s collapse after IEA supply glut issues which led to panic buying at the open (amid chatter of Operation Twist 2 by The Fed) followed by panic-selling as oil careened lower only to see stocks ripped higher again as DB unveiled a desperate bond buyback plan... which ran stops and then utterly gailed...<br /><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD9.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD9_0.jpg" style="width: 600px; height: 319px;" /></a></p> <p>Small Caps were worst on the day... and Trannies ended green...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD10.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD10_0.jpg" style="width: 600px; height: 423px;" /></a></p> <p>Much of the day&#39;s late-day exuberance was after Deutsche announced a half-hearted desperation play - buying back its &quot;cheap&quot; debt with its scarce liquidity... It failed to even get the stock green on the day...<br /><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD6.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD6_0.jpg" style="width: 600px; height: 319px;" /></a></p> <p>As we detail here..<strong>.Deutsche Bank may very well be in trouble.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Late last month, Europe&rsquo;s most systemically important bank reported a truly epic loss of $7 billion, the first annual loss since the crisis and since then, its CDS spreads have been blowing out as the market begins to contemplate the unthinkable.</p> <p>&nbsp;</p> <p>Meanwhile, the stock is trading near all-time lows and as we said when John Cryan announced the official results for Q4 and 2015, don&rsquo;t be surprised to see the equity trading in the single digits by year end.</p> <p>&nbsp;</p> <p>Even as the likes of Wolfgang Schauble proclaim there&rsquo;s nothing to worry about, the bank&rsquo;s own actions tell a different story. As FT reports, the bank is now set to buy back billions in senior bonds to shore up confidence. &ldquo;After European banks suffered a second consecutive day of sharp falls, Deutsche Bank is expected to focus its emergency buyback plan on senior bonds, of which it has about &euro;50bn in issue,&rdquo; FT reported in Tuesday afternoon. &ldquo;</p> <p>&nbsp;</p> <p>&ldquo;The bank&rsquo;s shares still fell 4 per cent, taking the decline since the start of the year to 40 per cent.&rdquo;</p> <p>&nbsp;</p> <p>The plan doesn&rsquo;t involve Deutsche&rsquo;s CoCos, which have come under heavy pressure over the last several days with yields soaring as the market increasingly doubts the bank&rsquo;s ability to make good on its subordinate debt. Deutsche will need to make coupon payments in April.</p> <p>&nbsp;</p> <p>&ldquo;Deutsche Bank has plenty of scope for a bond buyback, with &euro;220bn of liquidity reserves,&rdquo; FT notes. Of course the bank&rsquo;s&nbsp; liquidity&nbsp; position will be diminished thanks to the buyback and the buyback is only necessary because the market is concerned about the bank&rsquo;s liquidity. So there&rsquo;s a bit of a chicken-egg scenario going on with this truly absurd attempt to calm markets by reducing debt</p> <p>&nbsp;</p> <p><strong>In any event, we seriously doubt this will do anything to restore some semblance of confidence in the bank which, you&rsquo;re reminded, is sitting on a derivatives book equivalent to 20 times Germany&rsquo;s GDP.</strong></p> </blockquote> <p>Bargain?...</p> <p>The collapse of credit risk continues to signal more pain to come for US equities - especially the more credit-sensitive small caps..<br /><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD1_0.jpg" style="width: 600px; height: 313px;" /></a></p> <p>Oil&#39;s collapse weighed energy stocks down... with financials managing to get back to unch on DB&#39;s news...<br /><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD7.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD7_0.jpg" style="width: 600px; height: 312px;" /></a></p> <p>Financial credit risk spiked to its highest since 2012...<br /><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD2_0.jpg" style="width: 600px; height: 302px;" /></a></p> <p>And Energy credit risk hit record highs...<br /><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_HYEN_0.jpg" style="width: 600px; height: 316px;" /></p> <p>Bonds weren&#39;t buying the equity craziness...<br /><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD8.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD8_0.jpg" /></a></p> <p>Treasury yields were mixed with a weak 2Y auction (after Twist 2 rumors) pushing front-end yields higher and long-end lower...<br /><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD3_0.jpg" style="width: 600px; height: 311px;" /></a></p> <p>The Dollar limped lower once again, with early JPY weakness fading and Swissy strength leading the way...<br /><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD4_0.jpg" style="width: 600px; height: 309px;" /></a></p> <p>Despite USD weakness, commodities were lower across the board but it was crude and copper that were clubbed...<br /><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_EOD5_0.jpg" style="width: 600px; height: 314px;" /></a></p> <p><em>Charts: Bloomberg</em></p> http://www.zerohedge.com/news/2016-02-09/deutsche-desperation-twist-talk-save-stock-sheep-slaughter#comments Bond CDS Copper Crude Deutsche Bank Germany Tue, 09 Feb 2016 22:06:05 +0000 Tyler Durden 523188 at http://www.zerohedge.com What The Charts Say: "Complacent" Bulls Remain As S&P Support Under Pressure http://www.zerohedge.com/news/2016-02-09/what-charts-say-complacent-bulls-remain-sp-support-under-pressure <p>The S&amp;P 500 is down 8.02% YTD through the first five sessions of February. <strong>This is the second worst start to the year going back to 1928 and the weakest since 2008, </strong>when the S&amp;P 500 dropped 8.95% YTD through the first five days of February. This, as BofAML&#39;s Stephen Suttmeier details, compares to an average 1.16% gain for this period. <strong>The S&amp;P 500 also has bearish signals for the Nov-Jan and January barometers. This is a risk for 2016.</strong></p> <p><strong>We have made a case for a &ldquo;sell into strength&rdquo; tactical rally but the S&amp;P 500 has not gotten much strength to sell. </strong>Many short-term indicators are becoming less supportive. The 5 and 10-day put/call ratios look complacent. Indicators that recently generated tactical oversold buy signals, such as the VXV/VIX ratio, Williams %R, the NYSE McClellan Oscillator, and slow stochastic, are rolling over. Both the 14-day Williams %R and McClellan Oscillator hit overbought before falling. Daily slow stochastic generated a sell signal below overbought on Friday.</p> <p><u><strong>The 5 and 10-day put/call ratios look complacent</strong></u><br />Both the 5 and 10-day CBOE Total Put/Call ratios have dropped back toward the more complacent levels that coincided with the prior S&amp;P 500 highs from early November and late December.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml1.jpg" style="width: 600px; height: 492px;" /></a></p> <p>There is some room for the put/call ratios to move lower before hitting these complacent levels, but the put/call ratios are much closer to overbought or complacent levels than they are to oversold or fearful levels.</p> <p><strong>The rally for the S&amp;P 500 from mid October through early November occurred with diminishing price momentum. </strong>Following this bearish divergence between the S&amp;P 500 and daily slow stochastic (see red arrows below), buy signals on stochastic have preceded lower S&amp;P 500 highs and sell signals have preceded lower S&amp;P 500 lows.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml2_0.jpg" style="width: 600px; height: 391px;" /></a></p> <p>Daily slow stochastic generated a fresh sell signal on Friday. <u><strong>The risk is for a lower S&amp;P 500 low.</strong></u></p> <p><u><strong>First support under pressure</strong></u><br />We previously highlighted using the rising channel from January 20 as a guide for a &ldquo;tactical&rdquo; and &ldquo;sellable&rdquo; rally.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml3_0.jpg" style="width: 600px; height: 359px;" /></a></p> <p>This channel came in at 1884 on Friday vs. an S&amp;P 500 close at 1880. The channel rises approximately 6 points per session, which means that a failure for the S&amp;P 500 to close above 1890.21 on Monday (2/8) increases the risk for a decisive break of the channel and perhaps 1872 chart support as well. This would expose the 1820-1812 lows. First resistance moves to 1917-1927. This is below the more important 1947-1950 resistance, where a break is required to put in a base for a stronger tactical bounce.</p> <p>Weak VIGOR &amp; most active A-D line say <u><strong>SPX risk below 1812</strong></u><br />Tops for VIGOR, our longer-term volume model, and our US top 15 most active A-D line remain in place.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml4_0.jpg" style="width: 600px; height: 694px;" /></a></p> <p>Both indicators continued to hit new lows last week to reflect a US equity market under distribution. New lows for these indicators increase the risk for new lows in the S&amp;P 500 below 1812.</p> <p><u><strong>If SPX follows VIGOR &amp; Most active A-D line, risk of top</strong></u><br />Both VIGOR and the US top 15 Most Active A-D line show big tops.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_baml5_0.jpg" style="width: 600px; height: 380px;" /></a></p> <p>In addition, tops for the Value Line Arithmetic, NYSE Comp, Russell 2000 and the S&amp;P Midcap 400 are also potentially bearish for the S&amp;P 500 (Chart Talk: 02 Feb 2016). In our view, this says that the S&amp;P 500 shows risk below 1812 with the rising 200-week moving average at 1787 and the 38.2% retracement of the October 2011 to May 2015 rally at 1730.</p> <p><u><em><strong>We still are not ruling out a cyclical correction within the larger secular bull market with risk toward 1600-1575.</strong></em></u></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1196" height="758" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160209_baml5.jpg?1455032706" /> </div> </div> </div> http://www.zerohedge.com/news/2016-02-09/what-charts-say-complacent-bulls-remain-sp-support-under-pressure#comments CBOE McClellan Oscillator Russell 2000 Value Line Tue, 09 Feb 2016 21:50:00 +0000 Tyler Durden 523190 at http://www.zerohedge.com Crude Confused After API Reports Across-The-Board Inventory Builds http://www.zerohedge.com/news/2016-02-09/crude-confused-after-api-reports-across-board-inventory-builds <p>WTI crude had tanked into the NYMEX close (by the most in 5 months) but managed to get back above $28 before fading into inventory data. Against expectations of a 3.6mm build, API reported a <strong>2.4mm barrel crude build (the 5th weekly build in a row).</strong> Even more critically, API reported a<strong> 3.1mm Gasoline build</strong> (notably above the expected +400k build) and Cushing saw a 2nd weekly build of 715k. WTI ignored it initially but then decided to rally modestly before fading to unch.</p> <p>&nbsp;</p> <p>Builds across the complex..</p> <p><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_API1_0.jpg" style="width: 600px; height: 503px;" /></p> <p>&nbsp;</p> <p>The reaction... lower...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_API2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/09/20160209_API2.jpg" style="width: 600px; height: 423px;" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="961" height="806" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160209_API1.jpg?1455053978" /> </div> </div> </div> http://www.zerohedge.com/news/2016-02-09/crude-confused-after-api-reports-across-board-inventory-builds#comments Crude NYMEX Tue, 09 Feb 2016 21:40:36 +0000 Tyler Durden 523192 at http://www.zerohedge.com The Return Of Crisis http://www.zerohedge.com/news/2016-02-09/return-crisis <p><a href="http://www.peakprosperity.com/blog/96701/return-crisis"><em>Submitted by Chris Martenson via PeakProsperity.com,</em></a></p> <div class="content clearfix"> <p>Financial markets the world over are increasingly chaotic; either retreating or plunging. Our view remains that there&rsquo;s a gigantic market crash in the coming future -- one that has possibly started now.</p> <p><strong>Our reason for expecting a market crash is simple: <em>Bubbles always burst</em>.&nbsp;</strong></p> <p>Bubbles arise when asset prices inflate above what underlying incomes can sustain. Centuries ago, the Dutch woke up one morning and discovered that tulips were simply just flowers after all. But today, the public has yet to wake up to the mathematical&nbsp;reality that over $200 trillion in debt and perhaps another $500 trillion of un(der)funded liabilities really cannot ever be paid back <em>under current terms</em>. However, this fact is dawning within the minds of more and more critical thinkers with each passing day.</p> <p>In order for these obligations to be reset to a reality-based level, something has to give. The central banks have tried to modify the phrase &ldquo;under current terms&rdquo; by debasing the currency these obligations are written in via inflation. Try as they have, though, they&rsquo;ve been unable to create the sort of &quot;goldilocks&quot; low-level inflation that would slowly sublimate that massive pile of debt into something more manageable. &nbsp;</p> <p>Wide-spread inflation has not happened. Why not? Because they&#39;ve failed to note that plan of handing all of their newly printed money to a very wealthy elite -- while a socially popular thing to do among the cocktail party set -- simply has concentrated the inflation to the sorts of assets the monied set buys: private jets, penthouse apartments, fine art, large gemstones, etc. So yes, their efforts produced price inflation; just of the wrong sort. &nbsp;</p> <p><strong>Even worse, all the central banks have really accomplished is to assure that when the deflation monster finally arrives it will be gigantic, highly damaging and possibly uncontrollable.&nbsp;</strong> I&#39;ll admit to being worried about this next crash/crisis because I imagine it will involve record-setting losses, human misery due to lost jobs and dashed dreams, and possibly even the prospect of wars and serious social unrest.</p> <p><span style="text-decoration: underline;"><strong>Let me be blunt: this next crash will be far worse and more dramatic than any that has come before.</strong></span> Literally, the world has never seen anything like the situation we collectively find ourselves in today. The so-called Great Depression happened for purely monetary reasons.&nbsp; Before, during and after the Great Depression, abundant resources, spare capacity and willing workers existed in sufficient quantities to get things moving along smartly again once the financial system had been reset.</p> <p><strong>This time there&rsquo;s something different in the story line: the absence of abundant and high-net energy oil. </strong>Many of you might be thinking<em>&nbsp;&ldquo;Hey, the price of oil is low!&rdquo;</em> which is true, but only momentarily. Remember that price is not the same thing as net energy, which is what&#39;s left over after you expend energy to get a fossil fuel like oil out of the ground. As soon as the world economy tries to grow rapidly again, we&rsquo;ll discover that oil will quickly go through two to possibly three complete doublings in price due to supply issues. And those oil price spikes will collide into that tower of outstanding debt, making the economic growth required to inflate them away a lot more expensive (both cost-wise and energetically) to come by.&nbsp;</p> <p><strong>With every passing moment, the world has slightly less high-net energy conventional oil and is replacing that with low-net energy oil. </strong>&nbsp;Consider how we&#39;re producing less barrels of production in the North Sea while coaxing more out of the tar sands. From a volume or a price standpoint right now, the casual observer would notice nothing. But it takes a lot more energy to get a barrel of oil from tar sands. So there&#39;s less net energy which can be used to grow the world economy after that substitution.</p> <p>Purely from a price standpoint, our model at Peak Prosperity includes the idea that<strong> there&rsquo;s a price of oil that&rsquo;s too high for the economy to sustain (the ceiling) and a price that&rsquo;s too low for the oil companies to remain financially solvent</strong> (the floor). That ceiling and that floor are drawing ever closer. When we reach the point at which there&rsquo;s not enough of a gap between them to sustainably power the growth our economy currently is depending on, there&rsquo;s nothing left but to adjust our economic hopes and dreams to more realistic -- and far lower -- levels.</p> <p>When this happens most folks will undergo a &quot;forced simplification&quot; of their lifestyles (as well as their financial portfolios), which they will experience as disruptive and emotionally difficult. That&#39;s not fear-mongering; it&#39;s just math. (And it&#39;s the reason why we encourage <a href="http://www.peakprosperity.com/blog/95104/announcing-our-new-book-prosper" target="_blank">developing a resilient lifestyle today</a>, to insulate yourself from this disruption, as well as be able to enter the future with optimism.)</p> <h2><u>Too Much Debt</u></h2> <p>Our diagnosis of the fatal flaw facing the global economy and its financial systems has remained unchanged since before 2008. We can sum it up with these three simple words: <strong><em>Too much debt.</em></strong></p> <p>The chart below visualizes our predicament plainly. It has always been mathematically impossible (not to mention intellectually bankrupt) to expect to grow one&#39;s debt at twice the rate of one&#39;s income in perpetuity:</p> <p class="rtecenter"><img src="http://media.PeakProsperity.com/images/Debt-and-GDP-II-1-15-2016.jpg" style="height: 421px; width: 600px;" /></p> <p>All but the most blinkered can rapidly work out the fallacy captured in the above chart. Sooner or later, borrowing at a faster rate than income growth was <em>going to end</em> because<em> it has to</em>. &nbsp;Again, it&#39;s just math. Math that our central planners seem blind to, by the way -- all of whom embrace &quot;More debt!&quot; as a solution, not a problem.</p> <p>Despite being given the opportunity to re-think their strategy in the wake of the 2008 credit crisis,<strong> the world&rsquo;s central banks instead did everything in their considerable power to create conditions for the most rapid period of credit accumulation in all of history</strong>:</p> <p class="rtecenter"><img src="http://media.PeakProsperity.com/images/debt-chartII-2-8-2016.jpg" style="height: 466px; width: 599px;" /></p> <p><strong>Lesson <em>not</em> learned!</strong></p> <p>The chart&#39;s global debt number is only larger now, somewhere well north of $200 trillion here in Q1 2016. &nbsp;But consider, if you will, that entire world had &lsquo;only&rsquo; managed to accumulate $87 trillion in total debt by 2000 (this is just debt, mind you, it does not include the larger amount of unfunded liabilities). Yet governments then managed to pour on an additional $57 trillion just between the end of 2007 and the half way point of 2014, just seven and half short years later.&nbsp;</p> <p>Was this a good idea? Or monumental stupidity? We&rsquo;re about to find out.</p> <p>My vote is on stupidity.</p> <h2><u>Banks In Trouble</u></h2> <p>In just the first few weeks of 2016, the prices of many bank stocks have suddenly dropped to deeply distressed territory. And the price of insurance against default on the bonds of those banks is now spiking.</p> <p>While we don&#39;t know exactly what ails these banks -- and, if history is any guide, we probably won&rsquo;t find out until after this next crisis is well underway -- but we can tell from the outside looking in that something is very wrong.</p> <p>In today&rsquo;s hyper-interconnected world of global banking, if one domino falls, it will topple any number of others. The points of connectivity are so numerous and tangled that literally no human is able to predict with certainty what will happen. &nbsp;Which is why the action now occurring in the banking sector is beginning to smell like 2008 all over again:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Gundlach Says &#39;Frightening&#39; Seeing Financial Stocks Below Crisis</strong></p> <p>Feb 5, 2016</p> <p>&nbsp;</p> <p>DoubleLine Capital&rsquo;s Jeffrey Gundlach said <strong>it&rsquo;s &ldquo;frightening&rdquo; to see major financial stocks</strong> <strong>trading at prices below their financial crisis levels.</strong></p> <p>&nbsp;</p> <p>He&nbsp;cited Deutsche Bank AG and Credit Suisse Group AG as examples in a talk outlining bearish views at a conference in Beverly Hills, California, on Friday. <strong>Both banks fell this week to their lowest levels since the early 1990s</strong> in European trading.</p> <p>&nbsp;</p> <p><strong>&ldquo;We see the price of major financial stocks, particularly in Europe, which are truly frightening,&rdquo;</strong> Gundlach said. &ldquo;Do you know that Credit Suisse, which is a powerhouse bank, their stock price is lower than it was in the depths of the financial crisis in 2009? Do you know that Deutsche Bank is at a lower price today than it was in 2009 when we were talking about the potential implosion of the entire global banking system?&rdquo;</p> <p>(<a href="http://www.bloomberg.com/news/articles/2016-02-05/gundlach-says-frightening-seeing-financial-stocks-below-crisis" target="_blank">Source</a>)</p> </blockquote> <p><strong>This time it looks like the trouble is likely to begin in Europe, where we&rsquo;ve been tracking the woes of Deutsche Bank (DB) for a while.</strong> But in Italy, banks are carrying 18% non-performing loans and an additional double digit percentage of &lsquo;marginally performing&#39; or impaired loans. Taken together, these loans<a href="https://next.ft.com/content/af047134-c509-11e5-808f-8231cd71622e" target="_blank"> represent more than 20% of Italy&#39;s GDP</a>, which is hugely problematic.</p> <p>The Italian banking sector may have upwards of 25% to 30% bad or impaired loans on the books. That means the entire banking sector is <em>kaput</em>.<em> Finis.</em> Insolvent and ready for the restructuring vultures to take over.</p> <p>On average, in a fractional reserve banking system operating at a 10% reserve ratio, when a bank&#39;s bad loans approach its reserve ratio, it&#39;s pretty much toast. By 15% that&#39;s pretty much a certainty. By 20% you just need to figure out which resolution specialist to call. At 25% or 30%, you probably should pack a bag and skip town in the dead of night.</p> <p>This handy chart provides some of the context for Europe more broadly. I&rsquo;ve highlighted everything from Europe in yellow, showing how the banks there currently top the list of awfulness:</p> <p class="rtecenter"><img src="http://media.PeakProsperity.com/images/Banks-in-Trouble-2-5-2016.jpg" style="height: 427px; width: 600px;" /></p> <p class="rtecenter">(<a href="http://www.zerohedge.com/news/2016-02-05/these-are-banks-market-most-concerned-about" target="_blank">Source</a>)</p> <p><strong>The extreme weakness in European financial shares, combined with other factors, is dragging down Europe&rsquo;s stock market dramatically. </strong>The decline has now wiped out all of 2015&rsquo;s market gains and has broken convincingly below the neckline (yellow line, below) of a typical &ldquo;Head &amp; Shoulders&rdquo; formation:&nbsp;</p> <p class="rtecenter"><img src="http://media.PeakProsperity.com/images/Euroe-Stocks-2-8-2016.jpg" style="height: 337px; width: 601px;" /></p> <p>Since the beginning of the year, the stock prices of these select banks are down (as of COB Friday 2/5/16):</p> <ul> <li>DB -28.3%</li> <li>Credit Swiss -29.9%</li> <li>MS -22.6%</li> <li>C -22.0%</li> <li>Barclays -21.7%</li> <li>BAC -21.2%</li> <li>UBS -20.3%</li> <li>RBS -19.6%</li> </ul> <p>Those are pretty hefty losses over a short period of time, and that&rsquo;s meaningful. While the headline equity indexes are managing to keep their losses minimized, these bellwether stocks from the critical finance sector are stampeding out the back door.</p> <p><strong>And when I say &lsquo;critical&rsquo;, I mean in the sense that a hefty amount of the overall earnings within the S&amp;P 500 and other major stock indexes were fraudulent profits were derived from the banks feeding on central bank thin-air money and front-running central bank policy.</strong></p> <p>What&#39;s there to worry about? Well, just pick something. It could be a combination of headwinds conspiring to drag down bank earnings from here. Take your pick: reduced trading and M&amp;A revenue, and lower profits from ridiculously flat yield curves and negative interest rates.</p> <p>However, we have to include the possibility that <em>No more bailouts are coming.</em> Why not?&nbsp;Mainly because it would be politically incendiary at this moment to even try such a thing. Public resentment of the banks is high all over the world, and in the US specifically, there&rsquo;s an election primary that is hinging for the Democrats on Wall Street coziness. Maybe the markets are pricing that in?&nbsp;</p> <p><strong>Or it could be that these banks have been playing with fire (again) and got burned (again). </strong>We know for sure that a number hold a boatload of junk debt from the energy sector that will need to be written off. And we suspect many are staring at losses from writing too many derivative contracts that have turned against them.</p> <h2><u>But It Gets Worse; A Lot Worse</u></h2> <p><strong>If only the greatest near-term risks were limited to the bad actions of the banks. But that&#39;s sadly not the case.</strong></p> <p><strong>The collapse in the price of oil has been vicious, but it&#39;s likely not done.</strong> The oil patch has morphed into a capital-destruction zone for many drillers and as we have been warning all last year, the fallout is going to be worse than we can imagine. And it&#39;s just getting underway.</p> </div> <p>&nbsp;</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="277" height="190" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160209_peak.jpg?1455034820" /> </div> </div> </div> http://www.zerohedge.com/news/2016-02-09/return-crisis#comments BAC Barclays Central Banks Chris Martenson Credit Crisis Credit Suisse default Deutsche Bank ETC Fractional Reserve Banking Global Economy Goldilocks Great Depression Gundlach Italy Market Crash non-performing loans RBS Reality Tue, 09 Feb 2016 21:25:00 +0000 Tyler Durden 523189 at http://www.zerohedge.com Anadarko Slashes Dividend By Over 80% http://www.zerohedge.com/news/2016-02-09/anadarko-slashes-dividend-over-80 <p>Just days after ConocoPhilips became the first major to slash its dividend, moments ago Anadarco followed suit and announced, just one week after it reported earnings that, it too would virtually halt distribution to shareholders, when it said that it would cut its dividend - the first such action in decades - from 27 cents to just 5 cents per share, an 81% cut, and far above the more modest expected reduction of 14 cents. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The Board of Directors of Anadarko Petroleum Corporation (APC) today declared a quarterly cash dividend on the company's common stock of 5 cents per share, payable March 23, 2016, to stockholders of record at the close of business on March 9, 2016. The quarterly dividend represents a 22-cent reduction from the prior level of 27 cents per share. </p> <p>&nbsp;</p> <p>"We believe this adjustment to our dividend is the appropriate action to take in the current environment," said Al Walker, Anadarko Chairman, President and CEO. "On an annualized basis, this action provides approximately $450 million of additional cash available to enhance our operations and financial flexibility. Our Board will continue to evaluate the appropriate dividend on a quarterly basis."</p> </blockquote> <p>Expect most other energy companies to follow suit, citing the "current environment" as the reason for halting distributions to shareholders.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="610" height="335" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/APC%20logo.jpg?1455051275" /> </div> </div> </div> http://www.zerohedge.com/news/2016-02-09/anadarko-slashes-dividend-over-80#comments Tue, 09 Feb 2016 20:54:37 +0000 Tyler Durden 523187 at http://www.zerohedge.com