Bank of America
It is not just shorts buying and insiders selling. One other, quite persistent force has reemerged and contrary to the speculation that corporations are currently in an stock repurchase blackout period, the reality is anything but.
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, massive corporate issuance (which we are seeing), China selling pressure (and its impact on repo markets) and "broken" wholesale money-markets.
Call it an example of an abbreviated public lifecycle. After IPOing at $22.50 just last March and then promptly tumbling, Candy Crush maker King Digital was stuck in no man's land: demand for its products was promptly waning and the organic growth its underwriters had promised was nowhere to be found. The fundamentally savvy hedge funds sniffed this out and promptly jumped on board what seemed like a royal flush slam dunk to zero. And then, overnight, out of nowhere Activision decided to crush the Candy Crush shorts, who had built up a short stake amounting to 25% of the float, when it announced it would acquire the company for $5.9 billion or $18/share, a 16% premium to the previous day closing price... and also a 20% discount to the IPO price.
Having watched the credit markets grow more and more weary of the major US financials, it should not be total surprise that ratings agency S&P just put all the majors on watch for a rating downgrade:JPMORGAN, BANK OF AMERICA, WELLS FARGO, CITIGROUP, GOLDMAN SACHS, STATE STREET CORP, MORGAN STANLEY MAY BE CUT BY S&P. Despite all the talking heads proclamations on higher rates and net interest margins and 'strongest balance sheets' ever, S&P obviously sees something more worrisome looming. S&P blames The Fed's new resolution regime for its shift, implying "extraordinary support" no longer factored in. This comes just hours after Moody's put Bank of Nova Scotia on review also (blaming the move on concerns over increased risk appetite).
- China PMI>50.5
- US ISM>52
- US payroll>225K
- US banks rally: XLF>$26 would confirm stronger “domestic demand” expectations.
- US dollar stable: if the Fed can hike without boosting dollar this is positive
Bullish Fund Flows Return With A Vengeance: Largest Equity Inflow In 6 Weeks; Money Put Into Bonds, CommoditiesSubmitted by Tyler Durden on 10/30/2015 07:04 -0500
The bullish fund flows are back. This is how Bank of America summarizes the latest EPFR capital flow sentiment: "Loving Wall Street: $15bn equity inflows + $5bn HY/IG inflows + 6 straight weeks of commodity inflows = investors are "risk-on."
"The rise in household savings rates amid so much central bank support is paradoxical to us, and mimics what we highlighted in the credit market earlier this year. Companies in Europe are deleveraging, not releveraging"
While we still haven't taken out the all time highs said squeeze would lead to - there are about 30 points to go there; but as the following chart below shows, with just two trading days left, October is on pace for the biggest monthly point jump in S&P500 hi
Sorry Fed, here is why your attempt at terminal reflation was doomed from day one.
"It could simply be 1998/99 all over again. After all, a “speculative blow-off” in asset prices is one logical conclusion to a world dominated by central bank liquidity, technological disruption & wealth inequality. What worked back then? What rose from the rubble of 1998? How would one position for one final melt-up on Wall Street..."
In reading various recent regulatory reports, it is clear that almost none of the promises that were made to the public about what was going to happen under Dodd-Frank financial reform is actually happening. Welcome to another day at the casino where the model continues to be — heads they win, tails you lose.
"On the current trajectory, we doubt the market can stay stable beyond a few quarters, especially if some SOE and/or LGFV bonds indeed default."
- Bank of America
The Morning After: Valeant Default Risk Soars After Called Next "Tyco", Sellside "Analysts" HumiliatedSubmitted by Tyler Durden on 10/22/2015 09:08 -0500
As always happens after shocking events like yesterday which "nobody could have possibly predicted", watching the Penguin gallery reel in its humiliation is absolutely worth the price of admission.
This trade has become blood-soaked.