Credit Suisse

The ECB's 4 QE Scenarios, And Why CS Thinks Waking From The "QE Dream" May Be The Worst Possible Outcome

Despite various media reports over the past 24 hours about risk-sharing and sovereign security exclusion (i.e., that of Greek Treasurys), as well as speculation that despite it being priced in more than 100%, the ECB may yet again delay the actual announcement especially with what watershed Greek elections following just days after the ECB announcement, the question remains just what format will European QE take. Here, courtesy of Credit Suisse - a bank which was pounded in the past 2 days following the record surge in the CHF - is a preview of the 4 most likely ECB scenarios, as well as a glimpse at what may be the worst possible outcome for Europe: QE itself!

Largest Retail FX Broker Stock Crashes 90% As Swiss Contagion Spreads

UPDATE: Knight Trading 2.0? Jefferies executive are reportedly on-site at FXCM discussing a $200 million bailout

As we first reported last night, FXCM was among the first of many retail FX brokers (and the largest) to see its clients suffer massive losses from yesterday's Swiss Franc surge following the SNB decision to unleash market forces. There are now at least 4 retail FX brokers (FXCM, Excel Markets, OANDA, and Alpari) who have announced "issues" but FXCM, being among the largest and publicly traded is the most transparent example of wjust what can go wrong when average joes are allowed 100:1 leverage. FXCM is now stuck chasing clients for money they do not (and will never) have.. and its stock is down 90%, trading a $2 this morning (down from $17 on Wednesday). As Credit Suisse notes, time is running out as regulators "tend to be impatient once capital requirements are breached."

Frontrunning: January 14

  • U.S. Index Futures Decline on Commodities Slump, Growth Concerns (BBG)
  • Al Qaeda claims French attack, derides Paris rally (Reuters)
  • Charlie Hebdo With Muhammad Cover on Sale With Heavy Security Precautions (BBG)
  • How an Obscure Tax Loophole Brought Down Obama's Treasury Nominee  (BBG)
  • ECB’s bond plan is legal ‘in principle’ (FT)
  • Charlie Hebdo fallout: Specter of fascist past haunts European nationalism (Reuters)
  • DRW to acquire smaller rival Chopper Trading (FT)
  • Oil fall could lead to capex collapse: DoubleLine's Gundlach (Reuters)

First Of Many: Standard Chartered Hit By Billions In Losses From Commodity Crash

Now that even the pundit brigade has confessed that crashing crude may not be the "unambiguously good" event all of them had sworn as recently as a month ago it surely would be, and stocks are finally comprehending that plunging oil may well be rather "unambiguously bad" because without EPS growth (energy is well over 10% of S&P EPS), without multiple expansion (rumor has it the Fed will hike this year), without a jump in stock buybacks (energy companies account for 30% of the buyback growth in 2015 according to Goldman) and without a boost to GDP (energy capex plans are imploding), the only way is down. But there was one key element missing from the "bad" scenario: impaired banks. At least until now, because as Reuters reports, Asia-focused bank Standard Chartered is the first (of many) bank facing billions in losses resulting from the crude crash.

Frontrunning: January 13

  • Oil Drops Below $45; U.S. Stockpiles May Speed Collapse (BBG)
  • Pound Drops as Traders Write Off Higher Rates on Inflation Slump (BBG)
  • Oil prices down again as UAE defends holding production (Reuters)
  • The Politics Behind the ECB's Threat to Cut Greece Funding (BBG)
  • France dispatched thousands of police and military personnel to protect synagogues and Jewish schools, as the government warned of continued terror threats after three days of deadly violence (WSJ)
  • Chinese Car Dealers Find Days of ‘Printing Money’ Ending (BBG)
  • Gold Rises to Highest Since October as U.S. Rate Outlook Weighed (BBG)
  • Divers retrieve crashed AirAsia jet's cockpit voice recorder (Reuters)

When Even Bloomberg Makes Fun Of China's Stock Bubble

"I'm not sure how long this rally will last," warns one Chinese securities analyst, but adds, Chinese investors "tend to ignore important fundamentals" anyway. When even mainstream media is reporting on the epic farce that is the explosion of retail interest in Chinese stocks (and the concomittant surge in stock prices), perhaps it is time for the 'greater fool' to pull back a little. Perhaps the 'exuberance' is best summed up by the following from a security guard for Beijing's subway system, "low-priced stocks are less risky - big drops won’t result in huge losses for me - I don’t know much about investing, but the stocks my friends recommended have been soaring." Trade accordingly...

Frontrunning: January 9

  • Police Surround Paris Terror Suspects Near CDG Airport (BBG)
  • ECB Said to Study Bond-Purchase Models Up to 500 Billion Euros (BBG)
  • How OPEC Weaponized the Price of Oil Against U.S. Drillers (BBG)
  • German Industrial Production Falls Amid Plunge in Energy Output (BBG)
  • Car Loans See Rise In Missed Payments (WSJ)
  • Jim O'Neill threatens he will replace BRICs with ICs (BBG)
  • Oil heads for seventh weekly loss as supply glut drags (Reuters)
  • Armed man takes hostage in kosher grocery in Paris (AFP)
  • Janus Chairman Didn’t Know Details of Gross’s Investment (WSJ)
  • Kaisa Bondholders Dream of White Knight as Default Becomes Real (BBG)

Frontrunning: January 8

  • French policewoman killed in shoot-out, hunt deepens for militant killers (Reuters)
  • The Bold Charlie Hebdo Covers the Satirical Magazine Was Not Afraid to Run (BBG)
  • Evans Says Fed Shouldn’t Rush Rate Rise as Inflation Undershoots (BBG)
  • Oil holds above $51 as traders search for floor (Reuters)
  • Gross Helps Fuel New Fund With His Own Cash (WSJ)
  • ECB warns Greek funding access hinges on keeping bailout (Reuters)
  • Greece Jolts QE Juggernaut as ECB Gauges Deflation Risk (BBG)
  • Analysts Say There's No Telling How Low Oil Prices Could Go (BBG)
  • Scientists find antibiotic that kills bugs without resistance (Reuters)

Did The World's Biggest Hedge Fund Just Go "All In" On HFT And Dark Pools?

Is the world's biggest hedge fund going all-in on HFT and Dark Pools? We ask because Ray Dalio's Westport, CT-based Bridgewater, which at last check manages around $160 billion between its Pure Alpha and All Weather fund products, and which according to preliminary data had a solid performance in 2014, has just hired Jose Marques, the former global head of the quant and algo-heavy electronic trading at Deutsche Bank, to become Bridgewater's new head of trading.

Frontrunning: January 7

  • Twelve shot dead in Paris (Reuters)
  • Eurozone Consumer Prices Fall for First Time Since 2009 (NYT)
  • Euro's Drop is a Turning Point for Central Banks Reserves (BBG)
  • How $50 Oil Changes Almost Everything (BBG)
  • Mercedes-Benz Moving U.S. Headquarters to Atlanta (WSJ)
  • Greek 10-Year Bond Yields Exceed 10% for First Time Since 2013 (BBG)
  • How Even Dairy Farmers Get Squeezed by Rigging in the $5.3 Trillion Currency Market (BBG)
  • AirAsia jet tail found underwater, black box may be close (Reuters)
  • Italy Unemployment Rises to New High (Bloomberg)

Energy Crisis As Early As 2016

"...we believe the current low crude oil price could be overkill and result in the next “Energy Crisis” by early 2016. Enjoy these low gasoline prices while they last."

Frontrunning: January 6

  • Average 10-year yield of U.S., Japan and Germany dropped below 1% for the first time ever: Free Money in Bond Markets Shows Global Economy Still Struggling (BBG)
  • Brent falls below $52 as oil hits new five and a half year lows (Reuters)
  • China Fast-Tracks $1 Trillion in Projects to Spur Growth (BBG)
  • Saudi Arabia Raises Price of Main Oil Grade for Asian Buyers (BBG)
  • Oilfield Writedowns Loom as Crude Slump Guts Drilling Values (BBG)
  • Biggest Oil-Rig Drop Since 2009 Spells Tough Year Ahead (BBG)
  • CIA says its inspector general is resigning at end of month (Reuters)
  • Pipeline IPOs Climb on Demand for Returns Immune to Oil (BBG)
  • Natural Gas No Savior for Investors Seeking Oil Refuge (BBG)
  • Euro zone economy ended 2014 in poor shape (Reuters)