One of the most trumpeted stories justifying the US economic "recovery" is the resurgence in car sales, which have now returned to an annual sales clip almost on par with that from before the great depression. What is conveniently left out of all such stories is what is the funding for these purchases (funnelling through to the top and bottom line of such administration darling companies as GM) comes from. The answer: the same NINJA loans, with non-existent zero credit rating requirements that allowed anything with a pulse to buy a McMansion during the peak day of the last credit bubble. Bloomberg reports on an issue we have been reporting for over a year, namely the 'stringent' credit-check requirements for new car purchasers by recounting the story of Alan Helfman, a car dealer in Houston, who served a woman in his showroom last month with a credit score lower than 500 and a desire for a new Dodge Dart for her daily commute. She drove away with a new car.
This past week saw the initial public offering of the single most anticipated IPO of 2013 - Twitter. If you tweeted about it then you are not alone as the news dominated the media headlines and the market. With Twitter already sporting a 11x price-to-sales ratio, and no earnings, what could possibly go wrong? However, it is that growing complacency among investors that should be the most concerning as the general sentiment has become that nothing can stop the markets as long as the Fed is in the game. This week's issue of things to ponder over the weekend provides some thoughts in this regard...
- JP Morgan 75K
- Goldman Sachs 100K
- UBS 100K
- Bank of America 110K
- HSBC 120K
- Barclays 125K
- Citigroup 130K
- Deutsche Bank 130K
With JPM having stolen the spotlight for every possible instance of fraud and market manipulation in the past year, it was easy to forget there are other prominent banks that engage in precisely the same deceptive practices as, well, everyone else. One such prominent bank is none other than everyone's old favorite bloodthirsty mollusc, Goldman Sachs, which in a filing reported that "currencies and commodities were added to a list of financial products and related activities that are subject to investigation. The filing also added options trading and technology systems and controls to the list." So, pretty much everything is being investigated.
Over the past year there has been some confusion about whether Ben Bernanke has managed to not only completely break the stock market (which, if one harkens back to hallowed antiquity used to discount good or bad news in the future, and "trade" accordingly), but also invert it fully. The chart below from Guggenheim will once and for all put any such confusion to rest. As Guggenheim's Scott Minderd points out "The 52-week correlation between S&P 500 returns and the change in the Citigroup Economic Surprise Index has plunged from 0.45 to -0.13 over the past 12 months. A negative correlation indicates that weak U.S. economic data tends to push equity prices higher, while strong economic data tends to send them lower."
The U.S. House just passed a bill called H.R. 992 - the Swaps Regulatory Improvement Act - that was literally written by mega-bank lobbyists. It repeals the laws passed in 2010 to prevent another meltdown like the one that crashed our economy in 2008. The repeal was co-sponsored by a former Goldman Sachs executive and passed with bipartisan support from some of the House’s largest recipients of Wall Street cash. It’s so appalling... so unbelievable... so blatantly corrupt... that you’ve got to see it to believe it...
- US admits surveillance on foreign governments ‘reached too far’ (FT)
- He must be so proud: Obama halted NSA spying on IMF and World Bank headquarters (RTRS)
- Obamacare website gets new tech experts; oversight pressure grows (Reuters)
- R.B.S. to Split Off $61 Billion in Loans Into Internal ‘Bad Bank’ (NYT)
- Draghi’s Deflation Risk Complicates Recovery (BBG)
- Abenomics: Nissan slashes full-year profit forecast 15% (FT)
- Credit Suisse Dismisses London Trader Over 'Unusual Trading' Losses (WSJ)
- RBS avoids break-up with 38 billion pounds 'internal bad bank' (Reuters)
- Twitter Said to Attract More Than Enough Interest for IPO (BBG)
Demand for gold in the Middle East remains robust and there has been an eightfold increase or 700% increase in demand in recent years. Geopolitical uncertainty in the region, from Libya to Egypt to Syria and Iraq and Iran is leading to demand for bullion.
Thus, the Dubai Gold & Commodities Exchange plans to list a spot gold contract in the second quarter of next year. The bourse, which offers gold and silver futures, is talking to local merchants and industry organizations and aims to get regulatory approval for the product by early 2014, Chief Executive Officer Gary Anderson told Bloomberg. Demand for bullion in Dubai expanded eightfold in the last six to 10 years, he said.
Dubai accounts for about 25% of global physical gold trade and the United Arab Emirates will grow as a precious metals trading hub partly because of its location near the largest consuming nations, according to the Dubai Multi Commodities Centre, which owns a majority stake in the DGCX.
- US Blasts Germany's Economic Policies (WSJ)
- Citigroup, JPMorgan Said to Put Currency Dealers on Leave (BBG)
- Watchdog: Syria Destroys Chemical-Arms Equipment (WSJ)
- Kynikos Alumni Start Hedge Fund Betting on Declining Stocks (BBG)
- China state media calls for stern action after Tiananmen attack (RTRS)
- IMF warns of financial shock risk to Africa (FT)
- Insurers Oppose Obamacare Extension as Danger to Profits (BBG)
- BoJ content to ignore Fed tapering and go its own way (FT)
- U.S. attorney wants DOJ to take civil action against BofA (RTRS)
- NSA Fallout Hits AT&T's Ambitions In Europe (WSJ)
For those curious what Bernanke's market may do today, we flash back to yesterday's AM summary as follows: "Just as it is easy being a weatherman in San Diego ("the weather will be... nice. Back to you"), so the same inductive analysis can be applied to another week of stocks in Bernanke's centrally planned market: "stocks will be... up." Add to this yesterday's revelations in which "JPM Sees "Most Extreme Ever Excess Liquidity" Bubble After $3 Trillion "Created" In First 9 Months Of 2013" and the full picture is clear. So while yesterday's overnight meltup has yet to take place, there is lots of time before the 3:30 pm ramp (although today's modest POMO of $1.25-$1.75 billion may dent the frothiness). Especially once the market recalls that the NOctaper FOMC 2-day meeting starts today.
- Budget deficit priorities people: U.S. NSA spied on 60 million Spanish phone calls in a month (Reuters)
- Stuck in countless scandals, Obama does what he does best: speak. Obama To Speak At Installation Of FBI Director James Comey (TPM)
- Five killed as car ploughs into crowd in Beijing's Tiananmen Square (Reuters)
- U.K. Storm Brings Power Cuts, Snarls Transport in South (BBG)
- China Signals ‘Unprecedented’ Policy Changes on Agenda at Plenum (BBG)
- Sandy's Legacy: Higher Home Prices (WSJ)
- Merkel Enters Concrete SPD Talks as Finance Post Looms (BBG)
- Keep arming those Syrian al-qaeda rebels: Car bombs kill scores in Baghdad, in sign of crisis in Iraq (WaPo)
- J.P. Morgan's Mortgage Troubles Ran Deep (WSJ)
- Detroit’s public library contains story of city’s decline (FT)
- Argentina elections: President loses in Buenos Aires province (BBC)
- Phone-hacking: trial of Andy Coulson and Rebekah Brooks to begin (Guardian)
As Citi's Matt King recent showed, when it comes to stepwise, quantum leap repricings of widely held credits, the revelation is usually a very painful, sudden and very dramatic one. This can be seen nowhere better than in the default of Lehman brothers, where while the firm's equity was slow to admit defeat it was nothing in comparison to the abject case study in denial that the Lehman bonds put in. However, as can be seen in the chart below, when it finally came, and when bondholders realized they are screwed the morning of Monday, Septembr 15 when the Lehman bankruptcy filing was fact, the move from 80 cents on the dollar to under 10 cents took place in a heartbeat.It is the same kind of violent and anguished repricing that all unsecrued creditors in the coming wave of heretofore "denialed" municipal bankruptcy filings will have to undergo. Starting with Detroit, where as Reuters reports, the recovery to pensioners, retirees and all other unsecured creditors will be.... 16 cents on the dollar!... or less than what Greek bondholders got in the country's latest (and certainly not final) bankruptcy.
- Contractors describe scant pre-launch testing of U.S. healthcare site (Reuters)
- Carney Says BOE Revamp Offers Wider Access to Cheaper Funds (BBG)
- Help wanted in Fukushima: Low pay, high risks and gangsters (Reuters)
- Merkel and Hollande to change intelligence ties with US (FT)
- Twitter IPO pegs valuation at modest $11 billion (Reuters)
- NSA monitored calls of 35 world leaders after US official handed over contacts (Guardian)
- Officials alert foreign services that Snowden has documents on their cooperation with U.S. (WaPo)
- Scottish Nationalists Lose Vote After Plant Threatened With Axe (BBG)
- Fernández contemplates a train wreck in Argentine elections (FT)
- Irish Government will consider ‘best options’ for bailout exit (Irish Times)
Busy, Lackluster Overnight Session Means More Delayed Taper Talk, More "Getting To Work" For Mr YellenSubmitted by Tyler Durden on 10/25/2013 06:00 -0500
It has been a busy overnight session starting off with stronger than expected food and energy inflation in Japan even though the trend is now one of decline while non-food, non-energy and certainly wage inflation is nowhere to be found (leading to a nearly 3% drop in the Nikkei225), another SHIBOR spike in China (leading to a 1.5% drop in the SHCOMP) coupled with the announcement of a new prime lending rate (a form a Chinese LIBOR equivalent which one knows will have a happy ending), even more weaker than expected corporate earnings out of Europe (leading to red markets across Europe), together with a German IFO Business Confidence miss and drop for the first time in 6 months, as well as the latest M3 and loan creation data out of the ECB which showed that Europe remains stuck in a lending vacuum in which banks refuse to give out loans, a UK GDP print which came in line with expectations of 0.8%, where however news that Goldman tentacle Mark Carney is finally starting to flex and is preparing to unleash a loan roll out collateralized by "assets" worse than Gree Feta and oilve oil. Of course, none of the above matters: only thing that drives markets is if AMZN burned enough cash in the quarter to send its stock up by another 10%, and, naturally, if today's Durable Goods data will be horrible enough to guarantee not only a delay of the taper through mid-2014, but potentially lend credence to the SocGen idea that the Yellen-Fed may even announce an increase in QE as recently as next week.
- Deutsche Bank 170k
- Bank of America 170k
- HSBC 171k
- Citigroup 180k
- UBS 195k
- JP Morgan 195k
- Barclays 200k
- Goldman Sachs 200k