... And all of this takes place in broad daylight, in front of the entire American population, which is too bored, too lazy, and far too distracted by collecting the government handout equivalent of plastic beads, spending on 99 cent apps and watching the Grammys to care.
- Greek Risk Draws Global Concern on Lehman Echo Warnings (BBG)
- Merkel to urge caution in U.S. as pressure builds to arm Ukraine forces (Reuters)
- West Races to Defuse Ukraine Crisis (WSJ)
- German-French Push Yields Ukraine Summit Plan With Putin (BBG)
- Swiss Leaks lifts the veil on a secretive banking system (ICIJ)
- Italy Lenders Seen Cleansing Books Amid Bad-Bank Plans (BBG)
- G-20 Finance Chiefs Face Tough Test in Istanbul (WSJ)
- Demand for OPEC Crude Will Rise This Year, Says Group (WSJ)... or rather prays
- U.S. Banks Say Soaring Dollar Puts Them at Disadvantage (WSJ)
Quarterly earnings fell (yes fell) 2% from Q4 2013 to Q4 2014 on an operating EPS basis, and as Goldman Sachs notes, was only saved from a much more disastrous fate by Apple. However, don't worry about the mother's milk of markets... From now on, everything looks awesome as the hockey-stick extrapolators project EPS growth to resume in its escape velocity gung-ho, higher interest rates are good way by year-end...
...but it's different this time.
And just like that, instead of praising the January jobs report, Goldman's Jan Hatzius is far more interested in pounding the table on its one scariest chart...
- RadioShack files for bankruptcy; Sprint to take over some stores (Reuters)
- Kansas To Issue Bonds and Invest Proceeds to Boost Pension Returns (WSJ)
- Merkel to Make Last Push With Putin as Pessimism Prevails (BBG)
- Islamic State in Syria seen under strain but far from collapse (Reuters)
- Texas Swagger Fades Fast as Oil Town Squeezed Hard by OPEC (BBG)
- SEC probes Blackberry options trading ahead of Reuters report about Samsung talks (Reuters)
- Spanish Bonds Underperform Italy’s as Podemos Gains Popularity (BBG)
- Steelworkers Union Rejects Offer From Refiners (WSJ)
- Brazil January Inflation at Fastest Pace in Nearly 12 Years (BBG)
With S&P facing billion-dollar fines for defying the narrative, Goldman Sachs just dared to go even further against the US government by suggesting that the new oil order may be a blessing in disguise for Russia's oil industry. Simply put, the impact of the lower oil price and sanctions on the Russian economy increase the importance of oil industry tax reform, which could provide stimulus for upstream investments and commercialisation of the country’s vast oil reserves. An acceleration of upstream/downstream tax rebalancing could incentivise the development of substantial new basins in Russia, leading to a production capacity increase and a reduction in refining volumes to levels necessary to supply the domestic market. As a result, in Goldman's view, Russian crude exports would increase, improving the country’s current account, government revenues would grow, and upstream would attract material incremental investments.
Despite having Goldman Sachs CEO Lloyd Blankfein as an investor and being Bill and Hillary Clinton's son-in-law, Marc Mezvinsky (and two former colleagues from Goldman Sachs who manage Eaglevale Partners hedge fund) told investors in a letter sent last week they had been "incorrect" on Greece, helping produce losses for the firm’s main fund during two of the past three years. By 'incorrect' Chelsea Clinton's husband means the Eaglevale fund focused on Greece lost a stunning 48% last year and, as The Wall Street Journal reports, is impacting the overall returns of the roughly $400 million fund which has spent 27 of its 34 months in operation below its "high-water mark."
While we already know that there is only one true irrationally non-economic buyer of stocks in the US equity market, getting confirmation from none other than Goldman Sachs is another matter...
GS: "BUYBACKS yday accounted for 17% of our total flow, at times 33%"
Sourced from a run, this explains the machine-like vertical buying panic of the completely indiscriminate "well stocks are down and we need to maintain our bonuses) corporate buyback machine.
It will be politics rather than economics (or Q€) that drives the shorter-term outlook in Greece. Goldman Sachs warns that the new Greek government’s position is turning more Eurosceptic and confrontational than most (and the market) had anticipated ahead of last weekend’s election. This increases the risk of a political miscalculation leading to an economic and financial accident and, possibly, Greek exit from the Euro area (“Grexit”) and while many assume European authorities have the 'tools' to address market dislocations arising from this event risk, Goldman expects significant market volatility. Rather stunningly, against this background, and in spite of Q€, recommends closing tactical pro-cyclical exposures in peripheral EMU spreads (Italy, Spain and Portugal) and equities (overweight Italy and Spain).
The overnight session had been mostly quiet until minutes ago, when unexpectedly WTI, which had traded down as low as the mid $46 range following the weakest Chinese manufacturing data in two years, saw another bout of algo-driven buying momentum which pushed it sharply, if briefly, above $50, and was last trading about 2.6% higher on the day. In today's highly correlated market, this was likely catalyzed by a brief period of dollar weakness as well as the jump of EURCHF above 1.05, within the rumored corridor implemented by the Swiss National Bank, which apparently has not learned its lesson and is a glutton for a second punishment, after its hard Swissy cap was so dramatically breached, it hopes to repeat the experience with a softer one around 1.05. Expect to see even more FX brokers blowing up once the EURCHF 1.05 floor fails to hold next.
Chinese Corruption Probe Pivots To Bankers As Manufacturing Contracts At Fastest Pace Since August 2012Submitted by Tyler Durden on 02/01/2015 13:29 -0400
With all eyes on China as the great Eastern hope for putting a floor under crude oil prices, last night's dismally disappointing Manufacturing PMI print looks set to remove that last pillar of 'demand' - artificial or not. Having fallen 6 months in a row and printing 49.8, missing expectations of 50.2 (3rd of last 4 months) and down from the prior 50.1, this is the first official contractionary signal for Chinese manufacturing since September 2012. With Industrial Enterprises in China seeing profits collapse at 8% YoY along with the slowest GDP growth (7.3% of magic unicorns and credit expansion) since Q1 2009, the PMI components' broad-based weakness show significant signs of a cyclical slowdown. What is perhaps most worrisome though is that with cries for more RRR cuts or government-sponsored largesse, the banking system has, it appears, become the new focus of the nation's corruption probes as the President of China Minsheng Bank was taken away by the Communist Party’s Central Commission for Discipline Inspection.
The 'souring' of the mother's milk of stock markets continues. Management guidance and commentary implies 3-5pp impact due to 'king dollar' FX headwinds as an astounding 87% of companies guided below consensus expectations for next quarter. Bottom-up consensus 2015 EPS estimates were cut by 4% during January, and, as Goldman Sachs warns, 4Q EPS is tracking 7% below the consensus estimate at the start of reporting season. Finally, and perhaps most worrisome, granular bottom-up consensus is below top-down 'strategist' consensus for the first time since 2009... as the gap between Forward P/E valuations and long-term growth is as wide as it has ever been.
Rather than be a problem, Syriza may well be a solution, if it plays its cards right, but that still leaves politicians and investors denominating Tsipras et al as a problem, if not a menace. The world’s major banks got rich off the back of the Greek population at large, and when their wagers got so absurd they collapsed, the banks saw to it that their losses were transferred to European -and American – taxpayers. And those taxpayers are now told to vent their anger at 'those cheating, lazy Greeks'. The Troika, the EU, the IMF, and the banks whose sock puppets they have chosen to be, are a predatory force that has come a long way towards wiping Greece off the map. And that’s what Syriza has set out to remediate. And for that, they deserve, and probably will need, our unmitigated support.
- Falling Prices Spread Pain Far Across The Oil Patch (WSJ)
- ISIS Group Claims Responsibility for Attacks That Killed 27 in Egypt (NBC)
- Russia Unexpectedly Cuts Key Rate as Economy Eclipses Ruble (BBG)
- Greece’s Feisty Finance Minister Tries a More Moderate Message (NYT)
- U.S. homeownership hits 20-year low, but new households growing (Reuters)
- Indian Banks’ Shares Plunge as Bad-Loan Provisions Surge (BBG)
- Underground Terror Network Said to Benefit Would-Be Jihadists in Europe (WSJ)
- Russia warns West support for Kiev could lead to 'catastrophe' (Reuters)