Merrill

Merrill

Frontrunning: August 26

  • Bankers Brace for Fed Wind-Down (WSJ)
  • A Veteran Saudi Power Player Works To Build Support to Topple Assad (WSJ)
  • Gunmen shoot at weapons experts' vehicle in Damascus: U.N (Reuters) - as long as it's not drones
  • ECB Council Members Split in Jackson Hole Over Rate Cuts (BBG)
  • Fed Officials Rebuff Coordination Calls as QE Taper Looms (BBG)
  • As Egyptians Ignore Curfew, Talk of a U.S.-Brotherhood Conspiracy (NYT)
  • Pipeline-Capacity Squeeze Reroutes Crude Oil (WSJ)
  • Lawmakers Probe Willful Abuses of Power by NSA Analysts (BBG)
  • Indictments Expected in Alleged Trading Code Theft (WSJ)
  • India’s ONGC takes Africa gasfield stake (FT)
  • Capital Flight Drains Reserves as Rupee, Rupiah Fall (BBG)
  • Banks scale back rates business (FT)

Frontrunning: August 23

  • Lew warns Congress to strike debt ceiling deal (FT)
  • Central-Bank Moves Blur the View (WSJ)
  • Brazil, Indonesia launch measures to shore up their currencies (FT)
  • More mainstream media reminded about Fukushima - Radioactive ground water under Fukushima nears sea (AP)
  • Fukushima inspectors 'careless', Japan agency says, as nuclear crisis grows (Reuters)
  • New York Banker Arrested on Rape Charges in East Hampton (NYT)
  • This time they mean business, for real: CFTC Moves to Rein In High-Speed Traders (WSJ)
  • Britain operates secret monitoring station in Middle East (Reuters)
  • Moody’s considers downgrading top US banks (FT)
  • China's Bo calls wife mad after she testifies against him (Reuters)
  • JPMorgan Sub-New Normal Growth Seen Vexing Next Fed Chief (BBG)
  • SEC calls for cooling-off period for more staff (Reuters)

Frontrunning: August 21

  • Obamacare, tepid U.S. growth fuel part-time hiring (Reuters)
  • Cameron was behind UK attempt to halt Snowden reports (Reuters), Britain defends detention of journalist's partner (Reuters)
  • Goldman Options Error Shows Peril Persists One Year After Knight (BBG)
  • China expresses 'shock' as Japan's nuclear crisis deepens  (Reuters)
  • Inquiry into China insurance firm rattles industry (Caixin)
  • Cheaper rivals eat into Apple’s China tablet share (FT)
  • Exporting fast food: Subway Targets Europe With as Many as 1,000 New Outlets in 2014 (BBG)
  • Reserve Bank of India boosts liquidity to ease pressure on banks (FT)
  • Justice Department Plans New Crisis-Related Cases (WSJ) - Holder doing his cutest attempt to pretend the TBTProsecute aren't
  • Syrian Opposition Alleges Gas Attack, Which Government Denies (WSJ)

Guest Post: What Is Going To Happen If Interest Rates Continue To Rise Rapidly?

If you want to track how close we are to the next financial collapse, there is one number that you need to be watching above all others.  The number that we are talking about is the yield on 10 year U.S. Treasuries, because it affects thousands of other interest rates in our financial system.  When the yield on 10 year U.S. Treasuries goes up, that is bad for the U.S. economy because it pushes long-term interest rates up.  When interest rates rise, it constricts the flow of credit, and a healthy flow of credit is absolutely essential to the debt-based system that we live in. 

Frontrunning: August 16

  • Critics Decry Risks Posed by Link Between China's Banks and Bonds (WSJ)
  • U.S. retailers say uneven recovery keeps consumers cautious (Reuters) - er, what recovery?
  • Easy Credit Dries Up, Choking Growth in China (NYT)
  • Fed's Bullard Floats Idea of Small Cuts to Bond Buying (WSJ)
  • EU wants one definition of bad loans for bank tests (Reuters) - because in Europe they can't even agree what an NPL is...
  • Nagasaki Bomb Maker Offers Lessons for Fukushima Cleanup (BBG)
  • With Gmail Overhaul, Not All Mail Is Equal (WSJ)
  • Snowden downloaded NSA secrets while working for Dell, sources say (Reuters)
  • Apollo co-founder buys into New Jersey Devils (FT)
  • Republicans to vote on debate boycott because of Clinton programs (Reuters)
  • J.C. Penney Heads for Ninth Quarter of Plunging Sales (BBG)

Frontrunning: August 15

  • This won't end well: Islamists call Cairo protest march as Egypt death toll mounts (Reuters)
  • JPMorgan Said to Expect Multiple Fines for Whale Loss (BBG)
  • Ex-bosses at JPMorgan unlikely to face charges in 'Whale' scandal (Reuters)
  • China could target oil firms, telecoms, banks in price probes (Reuters)
  • For once, it's not the weather's fault: U.K. Retail Sales Increase More Than Forecast on Heatwave (BBG)
  • Japanese visits to shrine on war anniversary anger China (Reuters)
  • India Fighting Worst Crisis Since ’91 Seeks to Buoy Rupee (BBG)
  • Japan Signals Corporate Tax Cut a Long Shot as Deflation Eases (Reuters)
  • Indonesia Tackles Graft in Energy Sector (Reuters)
  • Merkel Touts Strength of German Economy (WSJ)
  • and... British stuntman who parachuted into London Olympics opening ceremony as James Bond dies in fall (AP)

Frontrunning: August 14

  • Vocal billionaire activist IRR - 150x: Icahn bought $1 billion of AAPL stock, seeks $150 billion buyback (BBG)
  • BlackBerry Said to Have Sought Buyers Since 2012 (BBG) - for a phone or the entire company?
  • IPhone Fingerprint Reader Talk Boosting Biometric Stocks (BBG) - also, the NSA will need to grow its Utah data center
  • UPS Jet Crashes in Birmingham, Ala. (WSJ)
  • America's Farm-Labor Pool Is Graying (WSJ)
  • Hong Kong Lowers Storm Signal as Typhoon Closes on China (BBG)
  • Indian submarine explodes in Mumbai port (FT)
  • BofA Banker Sued by Regulator Later Joined Fannie Mae (BBG)
  • Software that hijacks visits to YouTube uncovered (FT)
  • Chinese Billionaire Huang Readies Iceland Bid on Power Shift (BBG)
  • China to launch fresh pharmaceutical bribery probe (Reuters)
  • Defeat at J.C. Penney Hurts Ackman as Performance Trails (BBG)

Frontrunning: August 12

  • Solyndra Cola: California aims to 'bottle sunlight' in energy storage push (Reuters)
  • Ackman may sues himself after all - Penney Board Assails Director William Ackman, Considered 'Rogue' After Releasing Deliberations (WSJ)
  • CFTC subpoenas metals warehousing firm as inquiry heats up (Reuters)
  • Obama Plan to Revamp NSA Faces Obstacles (WSJ)
  • Japan growth slows in second quarter, adds to sales tax uncertainty (Reuters)
  • China Urbanization to Hit Roadblocks Amid Local Opposition (BBG)
  • Parents Losing Jobs a Hidden Cost to U.S. Head Start Budget Cuts (BBG)
  • US seeks better access to Africa as part of trade pact review (FT)
  • Singapore Cuts Trade Outlook as China Slowdown Caps Recovery (BBG)
  • White House Sifts Fiscal Ideas With Band of Senators (WSJ)
  • Spain may ask United Nations for support over Gibraltar (Reuters)
  • Michigan Safety Net for Boomers Frays on Bankrupt Detroit (BBG)

Stock Market Bubbles And Record Margin Debt: A (Repeating) History Of Ignoring All Warnings

It is well-known that as part of the S&P500's ascent to new records, investor margin debt has also surged to all time highs, surpassing for the past three months previous records set during both prior, the dot com and the housing, stock market bubbles. And as more attention has shifted to the topic of speculator leverage once more, inquiries into the correlation between bets upon bets and stock performance are popping up once more, in this case in a study by Deutsche Bank titled "Red Flag! - The curious case of NYSE margin debt." Of particular note here is a historical comparison of margin-debt warnings that have recurred throughout history but especially just before major stock bubble crashes, such as in the period 1999/2000, 2007/2008 and of course today, which have time and again been ignored. Here is what was said then, what is being said now, and what is ignored always.

Frontrunning: August 9

  • JPMorgan Nears Settlement With SEC on London Whale Loss (BBG)
  • Without even a wristslap: Iksil to face no U.S. charges in 'Whale' probe (Reuters)
  • China’s Credit Expansion Slows as Li Curbs Shadow Banking (BBG)
  • China slowdown shows signs of abating (FT), even as...
  • Australia central bank Lowers Growth Outlook as Economy Transitions From Mining (BBG)
  • SAC Business Plan Goes to Judge, Plan Would Allow Firm to Maintain Business Operations but Restrict Its Ability to Move Assets (WSJ)
  • Another buyer of Herbalife? - Norway’s oil fund plans to turn active (FT)
  • Mark Carney plays down scepticism over interest rate policy (FT)
  • Orders Evaporate for Celebrity Perfumes (WSJ)

David Stockman: Hedge Funds, Prime Brokers, And The Whirligig of Wall Street Finance

As David Stockman, Reagan's infamous Budget Director, writes in his bestseller, The Great Deformation: The Corruption Of Capitalism In America – "the last thing hedge funds do is hedge."  The hedge fund complex is "not so much a conventional industry as it is a giant moveable trade": Wall Street trading desks frequently morph into independent hedge fund partnerships, and senior hedge funds often sire “cubs” and then sons of cubs. The protean ability of this arrangement to spawn, fund, and replicate successful momentum trades cannot be overstated, and has "generated trillions of permanent momentum-chasing capital." Ultimately, he warns, "apologists for the Fed’s evisceration of the capital markets could not see... they had unleashed the financial furies in the violent momentum trading modus operandi of the hedge fund casino."

Frontrunning: August 8

  • Fukushima: "300 metric tons of contaminated water were likely leaking into the ocean daily" (WSJ)
  • Unexpected strength in China trade data eases some gloom (Reuters) - actually, perfectly expected data fakery
  • Pimco, BlackRock Seek to Bar California Mortgage Seizures (BBG)
  • How will Amazon's Bezos change The Washington Post? (Reuters)
  • Montreal Maine Railway Files for Bankruptcy After Crash (BBG)
  • Fed Belongs to Everybody as Public Says It’s Our Money in Crisis (BBG)
  • Local Russian TV channel broadcasts rare critical segment about Putin (Reuters)
  • Loeb’s Reinsurer With No U.S. Staff Gains From Obama’s Jobs Act (BBG)
  • As Berlusconi star fades, daughter Marina tipped as new leader (Reuters)
  • Detroit Rattles Muni Market (WSJ)

Frontrunning: August 7

  • Libor Settlements Said to Ease CFTC’s Path in Rate-Swaps Probe (BBG)
  • Manhattan Homes Under $3 Million Never Harder to Buy (BBG)
  • Just two years late: Abe Pledges Government Help to Stem Fukushima Water Leaks (BBG)
  • Chesapeake drops energy leases in fracking-shy New York (Reuters)
  • Hedge Fund Magnetar Won't Face Charges Tied to Mortgages (WSJ)
  • U.S. envoy leaves Cairo after talks declared over (Reuters)
  • Credit-Crisis Oracle Rajan to Head India’s Central Bank (BBG)
  • Bank of England Changes Policy Tack (WSJ)