• Tim Knight from...
    02/06/2016 - 00:25
    What we must remember is this: we are in a bear market, and the risk of a countertrend rally is present, but confined. The opportunity on the downside movement dwarfs the risk of a push higher, as...

Citigroup

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"2016 Will Be No Fun" - Doug Kass Unveils 15 Surprises For The Year Ahead





My overriding theme and the central drama for the coming year is that unexpected events can take on greater importance as the Federal Reserve ends its near-decade-long Zero Interest Rate Policy. Consensus premises and forecasts will likely fall flat, in a rather spectacular manner. The low-conviction and directionless market that we saw in 2015 could become a no-conviction and very-much-directed market (i.e. one that's directed lower) in 2016. There will be no peace on earth in 2016, and our markets could lose a cushion of protection as valuations contract. (Just as "malinvestment" represented a key theme this year, we expect a compression of price-to-earnings ratios to serve as a big market driver in 2016.) In other words, we don't think 2016 will be fun.

 
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The Fed's Rate Hike Trickles Down: JPM To Hike Deposit Rates... For Its Wealthiest Clients





Two weeks ago we said that "those who have savings at US banks, please don't hold your breath to see any increase on the meager interest said deposits earn." We were wrong: some should certainly have held their breath, because as the WSJ reports today, "some bank customers won’t have to wait much longer to reap benefits from the Federal Reserve’s decision to raise interest rates." Some, such as clients of J.P. Morgan, which will begin raising deposit rates for some of its "biggest clients" in January. "Biggest" clients, of course, is a universal euphemism for "wealthiest."

 
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The Credit Crunch Is Back: Banks Scramble To Collateralize Loans To Record Levels





Banks have finally woken up to the risk their billions in C&I loans issued to fund "financial engineering" are exposed to. The reaction: an unprecedented surge in loan collateralization, with the percent of total loans secured by collateral soaring by nearly 50% in the past quarter to a record 55.9%, the highest ever!

 
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Everything Central Banks Have Tried Has Failed: According To Citi's Buiter Just One Thing Remains





"If, as seems possible, the ECB will increase, in H1 2016, the scale of its monthly asset purchases from €60bn to, say, €75bn, and if these additional purchases are concentrated on public debt, the euro area will benefit from a ‘backdoor’ helicopter money drop –something long overdue."

 
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Frontrunning: December 24





  • Global Stocks Take Breather After Oil-Fueled Rally (WSJ)
  • Junk Investors Evade the Trade (WSJ)
  • How the Third Avenue Fund Melted Down (WSJ)
  • Oil Traders Set to Pounce as U.S. Prepares to Lift Export Ban (BBG)
  • JPMorgan Says Japan Inc. Must Prepare for Yen Below 100 a Dollar (BBG)
 
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Slammed By Redemption Requests, These Hedge Funds Raise "Gates" To Avoid Firesale Liquidations





Needless to say, these names are just the beginning: once the redemptions - and gating - genie is out of the bottle, there is no putting it back.

 
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Futures Rise, Drop, Then Rise Again In Illiquid Session After China Promises More Stimulus





It has been a seesaw session with U.S. stock index futures following their dramatic buying burst in the last half hour of market trading yesterday by first rising, then falling, then rising again alongside European equities both driven almost tick for tick with even the smallest move in the carry trade of choice, the USDJPY, even as Asian shares trade near intraday highs after China’s leaders signaled they will take further steps to support growth.

 
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The Fed's "Alarm Clock" Went Off 6 Hours Too Late: What This Means For Stocks And Bonds





"Typically rate rises start when profits are growing faster than debt and when companies are still deleveraging. This is around “half-past two” on our leverage clock2: 1994 and 2004 both fit this pattern. Now, with companies having been leveraging up for the past four years, and net debt/EBITDA in both Europe and especially the US at its highest non-recessionary level ever, it feels more like eight o’clock, or possibly even later."

 
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Repo Experts Stumped: How Could Fed Hike Without Draining ANY Liquidity: "This Is A Market By Decree"





"The Fed didn't really drain any liquidity yesterday. They moved the IOER up to .50%, moved the RRP rate up to .25%, and the RRP volume came in at $105 billion, only $3 billion more than the day before. Where was the draining? But interest rates moved up anyway to reflect the tightening, without any fundamental change. Basically, the Fed decreed a rate tightening and the market moved rates higher.... I wonder how many economic interest rate models include "by decree" as a factor?"

 
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Citi "Resizes Infrastructure" Post Fed Rate Hike - Slashes 2,000 Jobs





Perhaps in a recognition of the collapsing yield curve, and for sure in the face of the mainstream's bullish narrative on US banks in a post-rate-hike paradigm, Citi has announced plans to cut at least 2,000 jobs starting next month. Despite exuberance over higher rates, it appears Citi's CEO Michael Corbat wants to restructure some of the bank’s businesses.

 
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The Complete Fed Decision Preview: All You Need To Know





At 2 p.m. EST, the only thing the financial world will care about and discuss will be the Fed's [first rate hike in 9 years|epic disappointment]. So for those who still haven't made up their mind about what the Fed's [dovish|non-dovish] rate hike means, here is all you need to know.

 
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Marissa Mayer's Value "Added": Yahoo Is Now Worth A Negative $13 Billion





at the beginning of the year Meyer's severance was worth $158 million. It has since declined to $60 million. During the same time the enterprise value of Yahoo's core operations, as valued by the market, has declined from negative $1 billion to negative $13 billion. Sounds like a fair trade.

 
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Frontrunning: December 9





  • Gloomy mood prevails despite calmer commodities (Reuters)
  • A Strong Dollar Hurts China More Than the U.S. (BBG)
  • China Sets Yuan at Four-Year Low in ‘Stress Test’ (WSJ)
  • Dow Chemical and DuPont Are in Advanced Talks to Merge (WSJ)
  • Yahoo scraps plan to spin off Alibaba stake (Reuters)
 
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11 "Alarm Bells" That Show The Global Economic Crisis Is Getting Deeper





But just like in 2008, the “experts” at the Federal Reserve are assuring all of us that everything is going to be just fine.  This is the exact same kind of mistake that the Federal Reserve made back in the late 1930s.  They thought that the U.S. economy was finally recovering, and so interest rates were raised.  That turned out to be a tragic mistake.

 
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Wall Street Unleashes Echo Of Groans After ECB "Disappointment"





One recurring word prevails in every single Wall Street reaction to Mario Draghi's announcement today: "disappointment"... the same disappointment we warned about yesterday, and which we said could push the EURUSD to 1.09 today, just as happened an hour earlier.

 
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