GM/Ford Credit Risk Surges To 2 Year Highs As Fitch Raises Auto Sector Concerns

With the feds probing Deutsche Bank's exaggerating Auto ABS demand, car dealerships suing automakers for being forced to channel-stuff, direct evidence of massive channel-stuffing with near-record inventories-to-sales, and sales now beginning to tumble after last month's weak credit growth, it is perhaps no wonder that Fitch has raised the warning flag about automotive vehicle and parts makers...

Last Bubble Standing

EM debt bubble... emaciated, FX Carry... crucified, Crude...crushed,  High yield bonds... burst, Chinese equities... blown, Trannies... trounced, Small Caps... slammed, Biotechs... busted, and FANGs finally FUBAR! But there is one big (very big) bubble left in the world that no one is talking about, and a rather large liquidity-busting pin beckons...

The Cost Of China's "Neutron Bomb" Exploding: $7.7 Trillion And Higher

... if analysts, like those at Autonomous are to be believed, China’s banks could require up to $7.7tn of new capital and funding over the next three years. State bailouts could send the government debt to GDP ratio spiralling from 22 per cent to 122 per cent. That kind of shock would be a challenge for any country, even one of China’s vast might.

Nomi Prins' Financial Road Map For 2016: "The Potential For Chaotic Fluctuations Is Greater Than Ever"

We are currently in a transitional phase of geo-political-monetary power struggles, capital flow decisions, and fundamental economic choices. This remains a period of artisanal (central bank fabricated) money, high volatility, low growth, excessive wealth inequality, extreme speculation, and policies that preserve the appearance of big bank liquidity and concentration at the expense of long-term stability. The potential for chaotic fluctuations in any element of the capital markets is greater than ever. The butterfly effect - the flutter of a wing in one part of the planet altering the course of seemingly unrelated events in another part - is on center stage.

The Great Disconnect Is Palpable

Taken together with the rather steep drop in US industrial production, the risks of a full-blown and perhaps severe recession have undoubtedly grown. Unlike what the FOMC is trying to project via the federal funds rate, a rate that isn’t being fully complemented, either, at this point, visible economic risk is not just rising it is exploding.

China Now Has So Much Bad Debt, It's Selling Soured Loans On Alibaba

If you had any doubt about whether the doomsayers were telling the truth about soaring NPLs in China, look no further than Huarong Asset Management Co, which is set to auction some $8 billion in sour loans on Taobao. As Barclays notes, "AMCs in general will more frequently resort to a “wholesaling model” for distressed asset disposal, given the increasing NPL supply amid the current credit cycle."

Despite Lifting Of Export Ban, Moody's "Bombshell" Sparks Panic In Energy Credit Markets

The Senate and House passed the spending bill this week, which the President signed into law on the same day. Embedded in the law is a provision to lift the 40-year old crude export ban. The lifting of the crude export ban is a historic milestone, but seemingly less relevant for US E&Ps, Midstream and Oilfield Services as compared to a year and a half ago when WTI-Brent spreads were close to $9.00/bbl vs. the current spread of $0.80/bbl. Nevertheless, there is still a negative long-term impact on refiners should spreads re-widen.

Global Stocks, Futures Continue Surge On Lingering Rate Hike Euphoria

Heading into the Fed's first "dovish" rate hike in nearly a decade, the consensus was two-fold: as a result of relentless telegraphing of the Fed's intentions, the hike is priced in, and it will be a "dovish" hike, with the Fed lowering its forecast for the number of hikes over the next year. Consensus was once again wrong on both accounts: first the rate hike was far more hawkish than most had expected (see previous post), and - judging by the surge in Asian, European stocks and US equity futures - the "market" simply is enamored with such hawkish hikes which will soon soak up trillions in liquidity from the financial system.

Frontrunning: December 15

  • Global stocks rise but oil, Fed keep investors nervous (Reuters)
  • Janet Yellen: An orthodox economist for unorthodox times (Reuters)
  • House Democrats Said to Be Open to Lifting Oil Export Ban (BBG)
  • Don't Count on an Oil Rally If U.S. Crude Export Ban Is Lifted (BBG)
  • Germany welcomes 34-state Islamic military alliance against terrorism (Reuters)
  • U.S. soldier Bergdahl may face life sentence in court-martial over desertion (Reuters)

Fitch Warns Of "Historic Junk Milestone" As US Defaults Surge

Despite the rear-view-mirror-gazing optimists proclamations that default rates have been low (which matters not one jot when pricing the future expectations of default into corporate bond cashflows), Fitch just released its forecast for 2016 defaults and notes that more than $5.5 billion of December defaults has increased the trailing 12-month default rate to 3.3% from 3% at the end of November, marking the 13th consecutive month that defaulted volume exceeded $1.5 billion, closing in on the 14-month run seen in 2008-2009.