Bank of America
When it comes to keeping track of China's economy, one can listen, and ignore, the official goalseeked and made-up-on-the-fly data released by the government, or one can simply observe the price dynamics of the all-important Chinese commodities sector (because with fixed investment accounting for well over 50% of GDP, the marginal price of the commodities that are used in capital investment tell us all we need to know about the true state of the Chinese economy). It is here where we find that contrary to the recent performance of the Shanghai Composite, which has been trading exclusively on the coattails of the most recent unofficial QE by the PBOC, commodity prices in China are actually crashing across the board, which in turn suggest that the real GDP is most likely anywhere between 20% and 60%, if not more, below the "official" 7.5% GDP print.
While yesterday everyone was focusing on the ongoing escalation in Ukraine, or BBQing, the real story was the sudden and quite dramatic collapse, or as we called it, "bloodbath" in global manufacturing as tracked by various PMI indices. Here is the summary.
It is no secret that throughout 2014 Bank of America has been actively urging its clients to join the most crowded short trade of the year, the 10 Year Treasury, which also happens to be one of the best performing asset classes year-to-date, and one which just hit 2014 highs. However, with the 10Y yield plunging, BofA's chief technician, which as is widely known is another words for "momentum chaser" who has over the past year been branded as the new coming of the legendary Tom Stolper thanks to the inverse-accuracy of his calls, has changed his tune, to wit: "the trend in yield is lower." If there was something that could make us nervous about being long TSYs, this is it.
- Ukraine accuses Russia of invasion after aid convoy crosses border (Reuters)
- Hunt for Foley’s Killer Spans Old Policing and Tech Tools (BBG)
- U.S. Probe Examines GM Lawyers (WSJ)
- Argentina accuses U.S. Judge Griesa of "imperialist" attitude (Reuters)
- Violence-weary Missouri town sees second night of calm (Reuters)
- Geneva Banks Break 200-Year Silence to Unveil Earnings (BBG)
- Richest Jailed Putin Foe Says Ukraine Fears Sparked Prosecution (BBG)
- Disclosure of Failed Attempt to Rescue James Foley Is Criticized (WSJ)
- Execution of U.S. journalist reveals the changing business of war coverage (Reuters)
After years of evading the tentacles of the US government, yesterday the crosshairs of American justice (the civil, not criminal variety) which may be blindfolded but certainly has an offshore bank account, finally locked onto the orange man who made over half a billion between 1999 to 2008, according to compensation-research firm Equilar, not to mention saddling Bank of America with the worst Easter egg M&A transaction in history. Well, it turns out the US government may not be able to sue the Moz after all. The reason? He is sick.
It was in June of 2011 when we reported that Bank Of America agreed to pay $8.5 billion to settle mortgage (mis)representation suit, where we said the bank was "about to part with more money than it has earned since 2008 in what will soon be the biggest financial settlement in the industry." Fast forward 3 years later when Bank of America once again makes history with its latest, and literally greatest, mortgage settlement with the US government, putting all of its MBS transgressions in the past, and which will cost the bank some $16.65 billion (of which, however, some $7 billion will be "consumer relief" and the remainder likely tax-deductible), a new record, and allow the bank to continue adding back "one-time, non-recurring" litigation charges to its adjusted, non-GAAP bottom line, thus once again "beating expectations".
- FTW: Europe Stocks Rise as Data Signals Need for Stimulus (BBG)
- More de-escalation: Dozens die in Ukraine in street battles, Donetsk shelling (Reuters)
- Calm largely holds in Missouri after grand jury opens shooting investigation (Reuters)
- Attorney General Eric Holder Vows Thorough Probe of Ferguson Shooting (WSJ)
- World’s Biggest Wealth Fund Slows Emerging Market Investment (BBG)
- Market Chilly to Argentine Debt Proposal (WSJ)
- Israeli air strike kills three Hamas commanders in Gaza (Reuters)
- Retooled Hamas Bloodies Israel With Help From Hezbollah (BBG)
- Investors Pour Into Vanguard, Eschewing Stock Pickers (WSJ)
- Fed Debates Early Rate Increases (WSJ)
With the FOMC Minutes in the books, the only remaining major event for the week is the Jackson Hole conference, where Yellen is now expected to talk back any Hawkish aftertaste left from the Minutes, and which starts today but no speeches are due until tomorrow. And while the Minutes were generally seen as hawkish, stocks continue to levitate, blissfully oblivious what tighter monetary conditions would mean to an asset bubble, which according to many, is now the biggest in history. And speaking of equities, US futures climbed to a fresh record high overnight on just the right mix of bad news.
Nearly a decade after Countrywide was sold to Bank of America in what has become the worst M&A deal of all time, bar none, having resulted in tens of billions of legal charges for Bank of America shareholders, the most recent of which was revealed also minutes ago when Bank of America was said to reach a record $17 billion settlement with the government over the sale of mortgage-backed securities, moments ago Bloomberg announced that none other than Agent Orange himself, Angelo Mozilo, is about to be sued. Again, only this time the lawsuit may actually not be tossed or result in yet another DOJ trademark wristslap.
What is the total amount of shareholder money that has been spent by the bankers to distract regulators and the "cops" from not jailing a single one of them? According to the following chart from the WSJ, just the six biggest offenders have spent over a whopping $110 billion to keep the government happy and the US prison population in check.
Here Comes The European Triple-Dip: Negative German GDP Sends Bunds Under 1% For The First Time EverSubmitted by Tyler Durden on 08/14/2014 06:11 -0500
The hammer finally hit for Europe when overnight both Germany and France reported Q2 GDP prints that missed expectations, the first actually contracting at a 0.2% rate with consensus looking for -0.1%, while France remained flat vs expectations for a tiny 0.1% rise. As a reminder, this GDP is the revised one, which already includes the estimated contribution of drugs and prostitution, suggesting the actual underlying economic growth is far worse than even reported. Then again, this is hardly surprising considering all the abysmal data out of Europe and the rest of the world in recent weeks, and with the Russian trade war sure to trim even more growth, look for all of Europe to join Italy in its first upcoming triple-dip recession in history.
The stories make you want to take all of your money out of the stock market and put it in your mattress!
Coal production in the U.S YoY is down 0.3 percent and continued production slowdowns could continue to hurt firms like Peabody Energy which is down almost 19 percent YTD.
- Russia bans all U.S. food, EU fruit and vegetables in sanctions response (Reuters)
- Snowden receives three-year Russian residence permit (Reuters)
- Headline of the day: Europe's Recovery Menaced by Putin as Ukraine Crisis Bites (BBG)
- Americans worry that illegal migrants threaten way of life, economy (Reuters)
- Almost 90% of Uninsured Won't Pay Penalty Under the Affordable Care Act in 2016 (WSJ)
- Germany’s Bond Advance Sends 2-Year Note Yield Below Zero (BBG)
- Gaza War’s Critics in Crosshairs as Israelis Back Offensive (BBG)
- The 1% May Be Richer Than You Think, Research Shows (BBG)
- Bank of America Near $16 Billion to $17 Billion Settlement (WSJ)
- Deep Water Fracking Next Frontier for Offshore Drilling (BBG)