Credit Suisse

Gundlach: Bonds Won't Bottom Until Panic Sends VIX Above 40

More troubling for the bulls who are unable to get the much needed close of trading panic flush as a result of daily last hour levitations is Gundlach's call that the VIX needs to surge above 40 before a bottom can be made in the high-yield junk bond market. Today the VIX closed up 11% to 26.00, a long way off from the panic and revulsion that would send it north of 40. Indeed, the last time the VIX rose above that level was on August 24, when the VIX calculation actually was broken for a brief period of time to avoid crushing countless VIX-linked investors.

Frontrunning: February 8

  • European stocks plunge as Lunar New Year offers no cheer (Reuters)
  • European Stocks Fall, Credit Weakens as Signs of Distress Abound (BBG)
  • Management trouble at world's biggest hedge fund: Bridgewater succession plan in flux as heir Greg Jensen steps back (FT)
  • U.S. athletes should consider not attending Olympics if fear Zika - officials (Reuters)
  • Geithner Gets JPMorgan Credit Line to Invest With Warburg Pincus (BBG)
  • Top Clinton Donor Wants a Law Against $1 Million Gifts Like His (BBG)

"Few Are Yet Willing To Admit The Harsh Reality..."

A multi-decade Credit Bubble is coming to an end. The past seven years has amounted to an incredible blow-off top and the ongoing worldwide collapse in financial stocks provides powerful support for the bursting global Bubble thesis. Few are yet willing to accept the harsh reality that the world has sunk back into crisis as mal-investment, over-investment and associated wealth destruction remain largely concealed so long as financial asset inflation persists. This is true as well for wealth redistribution. The unfolding adjustment process will deflate asset prices so as to converge more closely with deteriorating underlying economic fundamentals.

Futures Unchanged, Global Stock Algos Anemic Ahead Of U.S. Payrolls Report

US futures were largely unchanged overnight, with a modest bounce after the European close driven by a feeble attempt to push oil higher, faded quickly and as of this moment the E-mini was hugging the flatline ahead of today's main event - the January payrolls, expected to print at 190K and 5.0% unemployment, however the whisper number - that required to push stocks higher - is well lower, at 150K (according to DB), as only a bad (in fact very bad) jobs number today will cement the Fed's relent and assure no more rate hikes in 2016 as the market now largely expects.

The Golden Age

Some people say that gold is dead. They point to deflationary pressures and a bear market that started back in September of 2011. The bulls have been wrong for years; however, that may be about to change…

The Real Reason For Oil's Crazy Volatility This Week

The volatility in crude oil trading has reached the highest levels since Lehman's systemic crisis in 2008. Intraday swings of 5-10% are now de rigeur with OPEC and geopolitical headlines jockeying for narrative amid collapsing fundamentals.. but there is another, much bigger driver of this sudden chaos. As Reuters reports, the sudden liquidation of a $600 million triple-levered fund bet on falling prices wreaked havoc through the entire crude complex.

One Of The Biggest High Frequenecy Traders Warns Of Potential Market "Catastrophe"

The head of one of the biggest high-frequency trading companies has warned that there are several faultlines in the structure of increasingly electronic, automated financial markets that could lead to a “catastrophe” in the long run. "We’re creeping in the right direction, but unless we proactively address these issues, sometime in the next several decades we are going to experience a catastrophe due to runaway computerised trading,” Tower Research's Mark Gorton said.

Frontrunning: February 4

  • EU Slashes 2016 Inflation Forecast to 0.5% as Growth Seen Slower (BBG)
  • Bank of England cuts UK growth forecasts (FT)
  • Investors Cast Wary Eye on Fed Rate Increases (WSJ)
  • U.N. halts Syria talks as government closes in on Aleppo (Reuters)
  • Credit Suisse Drops as Investment Bank Slump Deepens Losses (BBG)
  • Six OPEC states ready for emergency meeting with non-OPEC members — Venezuela's minister (TASS)

Futures Flat As Dollar Weakness Persists, Crude Rally Fizzles

After yesterday's torrid, chaotic moves in the market, where an initial drop in stocks was quickly pared and led to a surge into the close after a weaker dollar on the heels of even more disappointing US data and Bill Dudley's "serious consequences" speech sent oil soaring and put the "Fed Relent" scenario squarely back on the table, overnight we have seen more global equity strength on the back of a weaker dollar, even if said weakness hurt Kuroda's post-NIRP world and the Nikkei erased virtually all losses since last Friday's surprising negative rate announcement. Oil and metals also rose piggybacking on the continued dollar weakness as the word's most crowded trade was suddenly shaken out.

Frontrunning: February 1

  • Stocks cautious after rocky China data, bonds fly high (Reuters)
  • Oil falls on China data, fading prospect of OPEC action (Reuters)
  • Republican Vote in Iowa Caucus Hinges on Newcomer Turnout (WSJ)
  • When Trump tells supporters not to donate, they mostly listen (Reuters)
  • Goldman Sachs Employees Shift to Rubio as Bush Support Fades (BBG)
  • Four Theories on How Oil Has Hypnotized the Global Stock Market (BBG)

Rally Hobbled As Ugly China Reality Replaces Japan NIRP Euphoria; Oil Rebound Fizzles

It didn't take much to fizzle Friday's Japan NIRP-driven euphoria, when first ugly Chinese manufacturing (and service) PMI data reminded the world just what the bull in the China shop is leading to a 1.8% Shanghai drop on the first day of February. Then it was about oil once more when Goldman itself said not to expect any crude production cuts in the near future. Finally throw in some very cautious words by the sellside what Japan's act of NIRP desperation means, and it becomes clear why stocks on both sides of the pond are down, why crude is not far behind, and why gold continues to rise.