Capital One

Frontrunning: February 24

  • Futures drop along with oil prices (Reuters)
  • The U.S. Is the World’s Third-Best Equity Market Since 1900 (BBG)
  • U.S. Talks With Mexico Clouded by Mixed Message (WSJ)
  • A Tea Party for the left? Liberals hope so (Reuters)
  • Kushner, Ivanka Trump Block Attack on Paris Pact (WSJ)
  • Saudi Arabia’s Oil Wealth Is About to Get a Reality Check (BBG)

2016 Year In Review

We started this year with the economy deteriorating and finished it with the second interest rate increase in ten years. There were a lot of ups and downs along the way, but ultimately 2016 was defined by three key story-lines:  1) Brexit 2) The Presidential Election 3) Fed Policy. The first two events were votes that shocked the world. The stock market’s reaction to each was arguably even more shocking. 

Frontrunning: October 17

  • Bonds Selloff Spreads on Inflation Concern; Stocks Fall With Oil (BBG)
  • Trump charges U.S. election results being rigged 'at many polling places'  (Reuters)
  • CNN’s Stelter Blames Firebombing of NC Republican Office on Trump's 'Over Heated' Rhetoric (Newsbusters)
  • Britain, France seek EU condemnation of Russia over Syria (Reuters)
  • Inside the Secret Society of Wall Street's Top In-House Lawyers (BBG)

Diversify At Your Own Risk

If one is to hedge with Treasury securities, they must also consider what happens if yields do not decline during a market correction. What if “safe-haven” securities traditionally used for hedging purposes were to lose 5% to 10% or even 20% or more?

"There Is A General Softening In The Consumer's Ability To Pay" - Why Credit Card Companies Are Crashing

On the day in which the government reported modestly stronger than expected retail sales for the month of May, signalling a return to strength for spending and the US consumer - the driving force behind 70% of US GDP - a far more ominous statistic was revealed by credit card company Synchrony Financial, which earlier today announced in a regulatory filing that it expects write-off rates to climb 20 to 30 basis points over the next 12 months, and will increase reserves for soured loans beginning this quarter.

Jamie Dimon Warns "Someone Will Get Hurt In Auto Lending" As Citi Sees No Rebound From Abysmal First Quarter

Jamie Dimon said the market for U.S. automobile lending is “a little stressed” and that he foresees higher losses ahead for some competitors. “Someone will get hurt in auto lending,” but not JPMorgan, Dimon said. Meanwhile, CEO Citigroup Mike Corbat indicated that the company's second-quarter net income will be roughly 25% lower than the same period a year earlier, roughly the same as the abysmal first quarter.

The 4 Key Themes From Q4 Conference Calls

  • Theme 1: US economy appears insulated from global weakness
  • Theme 2: Strong domestic consumer demand persists
  • Theme 3: Managements remain devoted to share repurchases
  • Theme 4: Outlook for China is positive despite recent turmoil

Howard Marks Warns "Investor Behavior Has Entered A Zone Of Imprudence"

"Security prices are not low. I wouldn’t say high, but full. So people are thinking cautiously but they’re acting bullish and they’re behaving in a pro-risk fashion. While investor behavior hasn’t sunk to the depths seen just before the crisis, in many ways I feel it has entered the zone of imprudence... The market is not an accommodating machine. It will not go where you want it to go just because you need it to go there."