• Tim Knight from...
    10/10/2015 - 11:38
    My favorite sector to short  is (once again) energy, as giants like Exxon are exhibiting topping patterns that strike me as once-a-generation opportunities.

Bank of America

Bank of America
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"It's Not A Risk-On Rally, This Is The Biggest Short Squeeze In Years" Says Bank Of America

Several days ago, when pointing out the record NYSE short-interest, we noted this move may simply mean the following: "a central bank intervenes, or a massive forced buy-in event occurs, and unleashes the mother of all short squeezes, sending the S&P500 to new all time highs." Today, we have confirmation that the rally has been precisely that: a massive short-covering squeeze, when Bank of America's Mike Hartnett looked at the latest weekly fund flow data and noted a "monster $53bn MMF inflows vs redemptions from equity ($4.3bn) & fixed income funds ($2.4bn)...rising cash levels indicate big risk rally (from intraday lows last week SPX +7.7%, EEM +13.5%, HYG +4.2%) driven primarily by short-covering rather than fresh risk-on."

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Frontrunning: October 9

  • Global stocks eye biggest rally in four years on Fed relief (Reuters)
  • FOMC Minutes Sap Confidence in Fed's 2015 Rate Hike Resolve (BBG)
  • Glencore to cut annual zinc production by a third (FT)
  • Tea Party wave that lifted Republicans threatens to engulf them (Reuters)
  • Why Kevin McCarthy Came to Quit Speaker Race (WSJ)
  • A U.S. Recession Just Got a Little More Likely (BBG)
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As A Shocking $100 Billion In Glencore Debt Emerges, The Next Lehman Has Arrived

And now the real shocker: there is over US$100bn in gross financial exposure to Glencore. From BofA: "We estimate the financial system's exposure to Glencore at over US$100bn, and believe a significant majority is unsecured. The group's strong reputation meant that the buildup of these exposures went largely without comment. However, the recent widening in GLEN debt spreads indicates the exposure is now coming into investor focus."

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Mortgage Applications Soar 25% (Ahead Of Regulatory Regime Change)

Mortgage applications rose 25.5% week-over-week - the 2nd largest surge since 2009 - to the highest level (for this time of year) since 2012. Both refis and purchases soared, and exuberance immediatoley extrapolated this surge as 'proving' the housing recovery is healthy. However, as MBA admits, "many applications were filed prior to the TILA-RESPA regulatory change," strongly suggesting this is anything but sustainable.

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Morgan Stanley Predicts Up To A 25% Collapse in Q3 FICC Revenue

Of all sectors the one which may pose the biggest surprise to investors is financials: it is here that Q3 (and Q4) earnings estimates have hardly budged, and as of September 30 are expected to rise by 10% compared to Q3 2014. This may prove to be a stretch according to Morgan Stanley whose Huw van Steenis is seeing nothing short of a bloodbath in banking revenues, with the traditionally strongest performer, Fixed Income, Currency and Commodity set for a tumble as much as 25%, to wit: "we think FICC may be down 10- 25% YoY (FX up, Rates sluggish, Credit soft), Equities marginally up but IBD also down 10-20%."

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Who Owns Your Presidential Candidate?

Despite the arguably undemocratic, obfuscating nature of our nation’s campaign finance laws and the blatant corporatist agenda mandated by the Supreme Court, let’s attempt to break down the major sources of political spending so far in the 2016 presidential election. You may be surprised to find out who is donating money to your candidate — and how that contribution may affect future policy positions.

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The Feudal "Recovery" Continues: 21,000 Waiters Added; 9,000 Manufacturing Workers Lost

Since the start of the depression in December 2007, the US economy has added 1.5 million waiters and bartenders and lost 1.4 million manufacturing workers.

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Big Bank Pink Slip Pandemonium Continues As Bank Of America To Cut "Hundreds" Of Jobs

As WSJ reports, "Bank of America Corp. is expected to announce layoffs in its global banking and global markets unit as early as Tuesday, according to people familiar with the matter."

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Wholesale Money Markets Are Broken: Ignore "Perverted" Swap Spreads At Your Own Peril

At the height of the financial crisis, the unprecedented decline in swap rates below Treasury yields was seen as an anomaly. The phenomenon is now widespread, as Bloomberg notes, what Fabozzi's bible of swap-pricing calls a "perversion" is now the rule all the way from 30Y to 2Y maturities. As one analyst notes, historical interpretations of this have been destroyed and if the flip to negative spreads persists, it would signal that its roots are in a combination of regulators’ efforts to head off another financial crisis, China selling pressure (and its impact on repo markets) and "broken" wholesale money-markets.

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Is This Why Biotechs Are Tumbling: "Head And Shoulders Top" Spotted In The NBI

Now that concerns about a biotech top are in play, biotechs just can't seem to catch a bid, and as of moments ago were down over 3% dragging the Nasdaq just barely positive for the day even with the S&P up 0.8% One reason for the continuied weakness may be that, as Bank of America points out, there are signs the dreaded head and shoulders top has appeared in the Nasdaq Biotech Index.

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