zaterdag 22 juli 2017

Don Quijones; The ECB Morphs Into The Mother Of All “Bad Banks”

More than just a few “fallen angels.” As part of its QE operations, the ECB continues to pour billions of freshly created euros each month into corporate bonds – and sometimes when it buys bonds via “private placements” directly into some of Europe’s biggest corporations and the European subsidiaries of non-European transnationals. Its total corporate bond purchases recently passed the €100 billion threshold. And it’s growing at a rate of roughly €7 billion a month. And it’s in the process of becoming the biggest “bad bank.” When the ECB first embarked on its corporate bond-buying scheme in March 2016, it stated that it would buy only investment-grade rated debt. But shortly after that, concerns were raised about what might happen if a name it owned was downgraded to below investment grade. A few months later a representative of the bank put such fears to rest by announcing that it “is not required to sell its holdings in the event of a downgrade” to junk, raising the prospect of it holding so-called “fallen angels.” Now, sixteen months into the program, it turns out that the ECB has bought into 981 different corporate bond issuances, of which 34 are currently rated BB+, so non-investment grade, or junk. And 208 of the issuances are non-rated (NR). So in total, a quarter of the bond issuances it purchased are either junk or not rated (red bars)...


The ECB initially said it would only buy bonds that are “rated”, and rated investment grade. Thus having a quarter of the bonds on its books either junk or not rated represents a major violation of that promise. The ECB is clearly loading up on risk and possibly bad credit that Draghi’s successor is going to have to eat at some point further down the road. Already home to hundreds of billions of euros worth of artificially low-yielding peripheral sovereign bonds, the ECB is becoming a dumping ground for risky corporate debt that is paying super-low yields. Under Draghi’s tutelage the ECB has morphed into the world’s biggest bad bank with over €4.23 trillion in “assets,” including:
- Toxic Greek sovereign debt
- Dubious other periphery sovereign debt
- 242 junk-rated or non-rated corporate bonds
- 149 negative-yielding bonds. The main reason those bonds bear negative yields is Draghi’s massive multi-year bond buying binge.
# It’s difficult to know which companies are benefiting the most. The ECB has refused to reveal details, divulging only the International Securities Identification Number (ISIN) of the bonds, but not the amounts. When the ECB buys these bonds, it inflates the bond prices and pushes their yields down, which is the purpose, and it lowers the cost of capital for these companies even further. Yet according to the EU’s Competition Commission, none of this constitutes unfair competition. The European Parliament is not so sure. A cross-party group of members recently wrote to Draghi, asking for company-by-company disclosure of securities being bought and the size of each holding, so that it can dispel any concerns that the purchases may be benefiting a small group of favored companies. The letter warns, since its implementation the QE program has “spurred a certain level of concern, since it can be perceived as a disguised subsidy to certain companies.”
Its not just the opacity, arbitrariness, or the potential for conflicts of interest that are worrisome about the ECB’s QE program; so, too, is the level of dependence it has spawned among national governments and corporations for virtually free money. As much as Draghi may want to further taper the ECB’s monthly purchases of bonds after reducing them from €80 to €60 billion earlier this year, many of the program’s beneficiaries are quite simply no longer ready to go it alone. Draghi’s home country of Italy, in particular, cannot afford the higher interest rates that would result from reduced bond purchases. Higher rates would bankrupt the country. In that respect, Italians see Draghi as their guardian angel at the ECB. Likewise, many of the companies that have benefited from the ECB’s lavish support over the last 16 months may find life somewhat tougher once the punch bowl is taken away and the price of borrowing from the market returns to some semblance of reality. Until that happens, those companies will continue to wet their beak in the fountain of virtually free money, while the ECB’s balance sheet grows bigger and uglier by the month. What will Draghi do?

Palestinian 'Day Of Rage' In Jerusalem Results In Six Deaths, Hundreds Injured

Thousands of Palestinians heeded the words of Muslim leaders and Palestinian political factions and came to Jerusalem's al-Aqsa mosque on Friday to protest the metal detectors that Israeli security forces had placed outside the al-Aqsa Mosque / Temple Mount compound. Three Palestinians were killed and hundreds injured in the worst Jerusalem violence in years at the al-Aqsa mosque, while three Israelis were killed in their homes by a knifing attack in the same time frame. Thousands of Palestinians refused to enter the al-Aqsa Mosque for Friday prayers, which would have required going through metal detectors. Instead, they filled the streets and prayed peacefully, facing Mecca. Israel had deployed 3,000 police and soldiers in and around Jerusalem’s Old City, in order to keep the situation under control. BBC and Times of Israel
But after the Friday prayers ended, many of the Palestinians confronted police, throwing stones and other objects, as police responded with stun grenades, water cannons and tear gas. Three Palestinians were shot dead in separate incidents during the clashes. In a separate incident, a Palestinian teenager broke into an Israeli home in a West Bank settlement as the family were eating dinner and began stabbing family members, killing a man and two of his children. A number of anti-Israel protests were held in capitals across the Middle East and Asia on Friday. Thousands gathered in Amman, Beirut, Istanbul and Kuala Lumpur Friday afternoon in solidarity with Palestinian worshipers in Jerusalem who have been protesting the metal detectors.... Reuters and Times of Israel
# Power struggle over metal detectors as Mahmoud Abbas threatens to cut ties; The metal detectors were installed last week after a deadly gun battle inside the al-Aqsa Mosque / Temple Mount compound on Friday morning, July 14. Three gunmen, Palestinians with Israeli citizenship, killed two police officers. Israeli officials point out that metal detectors are used in Jewish and Muslim holy sites around the worl, including at the mosques in Mecca and Medina. However, Palestinian activists insist that they can't be used at the al-Aqsa mosque. Some have accused the Israelis of a plot to take control of the al-Aqsa mosque, and of using the metal detectors as a step in that plot. One Israeli Islamic leader, Kamal Khatib, accused the Israelis of inserting chemical substances into the al-Aqsa Mosque wall to cause corrosion, and give the Israelis an excuse to take over the mosque as its walls deteriorate. Israeli government officials themselves have been split on this issue, with some arguing that the metal detectors are so divisive that it would be better to remove them. However, the government made a final decision that they would not be removed.
# Palestinian Authority president Mahmoud Abbas announced late on Friday that he was freezing all contacts with Israel: "I, on behalf of the Palestinian leadership, announce a freeze of all contacts with the occupation state on all levels until Israel commits to canceling all the measures against our Palestinian people in general and Jerusalem and Al-Aqsa mosque in particular. The measures were falsely presented as a security measure to take control over Al-Aqsa mosque. The steps taken by Israel are leading to a religious confrontation and an evasion from a diplomatic process." Washington Post
Israeli security forces have announced that the metal detectors and other security measures are necessary for the safety of the worshippers, and will not be taken down. So it appears that a major power struggle is in progress, and one side or the other will have to step down. Abbas is very unpopular with the Palestinian people, who see him as a failed leader who has been unable to do anything to end Israel's occupation of the West Bank, despite having been in power for years. Friday's announcement was undoubtedly motivated at least partially to increase his popularity. However, Abbas appears to have left ambiguous the question of whether "a freeze on all contacts" means that the security agreement that the Palestinians have with Israel will also be frozen. Under this agreement, Palestinian security forces arrest Palestinians in the West Bank who are suspected of planning terror attacks on Israel. This agreement has undoubted prevented many terror attacks, but it's very unpopular with the Palestinians, who see it as a way for the Palestinian security forces to be doing Israel's dirty work. If the security agreement were suspended, it would mean that Israel would have to deploy thousands of its own police in cities across the West Bank, something that would be even less popular with Palestinians than the agreement itself. Abbas has threatened to end the security agreement in the past, but has never done so, probably for these reasons.... Times of Israel and MEMRI

Traders 'Stunned' As Nasdaq Fails To Rise, Debt-Ceiling Despair Inverts Yield Curve

As Stocks soared. The day started off badly with, European stocks fell to the lowest level in 10 days as concern about potential antitrust collusion sent carmakers toward the worst decline in more than a year. Euro Stoxx 600 has now erased all the gains from the French Election euphoria...


Nasdaq failed to achieve its 11th day in a row of gains as early European weakness was just too much for the machines to overcome, though they tried (11 days would have been the longest winning streak since July 2009) Dow ended the week red, Trannies worst week since Brexit...


LPL's Ryan Detrick notes that the Nasdaq has been up for 10 consecutive sessions for the first time since Feb ’15. Since 1980, this has happened 21 other times, and the next month on average for Nasdaq was +2.6%, higher 16 of those 21 times overall. VIX was clubbed to new lows in an effort to pump up stocks and go for the 11th daily win, but failed...


VIX closed at 9.31!! That is the lowest weekly VIX close in history...


Utes were the week's best-performing sector (not exactly growthy) and financials worst...


FANG Stocks are up 11 days in a row and had their best week since Oct 2016 (thanks to NFLX) and the best 2-week gains (11%!) since July 2015...



Bonds and Stocks recoupled this week...


As a reminder this has been an epic short-squeeze, the last time shorts were this low was at the peak for the S&P in Q2007...


Treasury yields tumbled this week, first weekly close lower in yields in the last 4 (2nd biggest weekly yield decline in 4 months)...


With 10Y back below 2.25% back to pre-Fed-rate-hike levels...


The yield curve flattened dramatically this week, 2s10s down 9bps, biggest drop since the first week of 2017...


Debt Ceiling concerns are really beginning to accelerate...


In short-term debt markets...


The Dollar Index was crushed this week, down 1% for the second week in a row to its lowest since May 2016...


The Euro was the week's best performer among the majors (nearing 1.17, highest weekly close since Jan 2015), Cable was weakest this week...


We note that in general it is tracking last year's post-Dec-rate-hike trajectory...


The problem is, there is no Trump Effect to levitate the dollar in H2 this time. The Dollar is on target for the 6th monthly drop in the last 7. Gold is up 6 days in a row (9 of the last 10), breaking above its 50-, 100-, and 200-day moving-averages...



This is gold's best week in 3 months...


WTI Crude closed the week back at a $45 handle (down for the 7th week in the last 9) as OPEC supply is projected to hit 2017 highs...


Bitcoin soared 25% this week, its biggest rise since Brexit...


Finally, there's this...

vrijdag 21 juli 2017

Don Quijones; Did The City Of London Just Press The Panic Button On Brexit?

Oh the irony: EU capitals are trying to attract the very institutions that caused some of the worst financial scandals of the last ten years. In a sign of growing desperation, the City of London Corporation, the enigmatic city within the city that serves as the ultimate bastion of privilege in the UK, is now trying to appeal to brute populist sentiment to defend its position as the world’s most important financial center. In a memo to the British Treasury, MPs, and financial institutions, the City’s Brexit envoy to the EU, Jeremy Browne, bemoaned that the French are pushing for the most damaging Brexit possible, even if France doesn’t directly benefit. The memo was duly leaked to one of the UK’s most anti-EU newspapers, The Daily Mail: Browne’s recent meeting at the Banque de France was the worst he had had “anywhere in the EU”. The French, he said, “are crystal clear about their objectives: the weakening of Britain and the ongoing degradation of the City of London” and plotting to “actively disrupt and destroy” the UK’s financial sector when Britain leaves the EU. 
France isn’t the only country aggressively trying to poach business from the City of London; so too are Germany, Spain, Luxembourg, the Netherlands and even Italy. But France differs from the rest in one key aspect, says Browne: it “sees Britain and the City of London as adversaries, not partners.” The recent election as president of Emmanuel Macron, a former investment banker at Rothschild & Cie Banque, has merely intensified this dynamic. Paris has promised to unfurl the red carpet for the City of London’s highest paid bankers by offering low tax rates and bank-friendly legislation, including scrapping a proposed financial transaction tax, while also seeking to grow as a clearing center. Clearing is a huge business for the City of London. The U.K. is estimated to handle 75% of all euro-denominated derivatives transactions, equivalent to around €930 billion of trades per day. It’s also home to roughly 90% of US dollar domestic interest-rate swaps. The world’s largest clearinghouse for interest rate swaps, LCH, is based there and is majority-owned by London Stock Exchange Group Plc. LCH functions as a middle man collecting collateral and standing between derivatives and swaps traders to prevent a default from spiraling out of control.
As Bloomberg reports, the role of clearing houses like LCH in global finance has become far more entrenched since the 2008 Financial Crisis and the inexorable expansion of derivatives trading. For years the French government, together with the European Central Bank, has wanted a piece of the action. Ironically, it was the European Court of Justice (ECJ), the same court whose jurisdiction the UK government is now determined to elude, that, in 2015, stopped that from happening on the grounds that the ECB cannot discriminate against an EU member. But if the UK leaves the EU, and thus the ECJ’s jurisdiction, that ruling will no longer be applicable. If the City’s euro-denominated clearing operations are relocated to the continent, there’s a risk that other operations will follow in their wake. That could be a major problem for a country that has grown so dependent on the financial industry. Almost 2.2 million people work in financial and related services such as accounting and law, two-thirds of them outside London. They produce nearly 12% of the UK’s GDP, 11% of its tax take, and a net trade surplus of £72 billion ($104 billion).
One of the glaring ironies of the Brexit debate is the extent to which the UK has benefited from the creation of the euro, despite not being a member. Since the creation of the single currency at the turn of the century, Britain’s share of key financial markets has exploded. London is now home to almost one-half of the entire global interest-rate OTC derivatives market, compared to 35% in 2001. Its share of global forex turnover increased from 33% to 41% between 2001 and 2014. And its share of global hedge fund assets doubled, from 9% to 18%. A disorderly exit from the EU will at least stall, if not reverse, these trends. Given how much is at stake, it’s no surprise that the City of London Corporation was one of the largest backers of Project Fear, the massive PR campaign aimed at sowing and watering the seeds of dread about the potential consequences of Brexit in the lead-up to last year’s referendum. So, too, were many of the global banks operating in London’s Square Mile. By having a large base in the City, global financial institutions get the best of both worlds: they get both EU “passporting rights”, that is, the ability to trade across Europe, as well as the ability to engage in activities that would be unimaginable in most other financial jurisdictions, including New York. The banks and other financial institutions would much rather that the status quo remained unchanged, as, too, would the City of London Corporation, Britain’s state-within-a-state.
As such, it’s too early to write London off just yet. But if things have to change, the banks will make sure it’s to their advantage. And France’s government seems determined to lend them a helping hand. “We want Paris to become Europe’s new number one financial hub after Brexit,” French Prime Minister Edouard Philippe said, speaking in English to an audience of financial executives. As Reuters reports, France will have its work cut out trying to convince businesses that these changes are for the long term. Be that as it may, it is still a sad sight to see the governments of some of Europe’s largest nations bend over backwards to court the attention of the City of London’s biggest patrons, the same institutions that were responsible for many of the worst financial scandals of the last ten years. Rather than seizing this opportunity to stifle the malign role that the City of London plays in the global economy, most European capitals are determined to emulate it. A surprisingly large number of people still have a strong sense of attachment to physical money, particularly in Europe’s most important economy, Germany. But the IMF has suggestions on how to win the War on Cash....

El-Erian; Exposes The Upside And Downside Of Liquidity-Driven Markets

Over the past few months, government bond yields have fallen, the dollar has weakened and financials have underperformed, yet the major stock indexes are at or very near record highs, as persistently supportive liquidity conditions have more than compensated for policy and growth disappointments. By boosting returns and repressing volatility, ample liquidity is a gift for investors. It makes the investment journey pleasing, comfortable and lengthy. But it is not a destination. With the exception of buoyant stocks market indexes, it is hard to find many financial markets that have managed to retain their post-U.S. election mood. Specifically:
- After climbing to 2.60 percent, the yield on 10-year Treasuries has fallen to below 2.30 percent.
- The yield differential between U.S. Treasuries and German Bunds has narrowed from more than 220 basis points to just 170 basis points.
- The widely followed DXY dollar index, which reached a high of 103 on Dec. 28, has depreciated sharply to 94, a level not seen since August of last year.
- The Mexican peso has appreciated to its strongest level in a year, after falling sharply on fears of U.S. protectionism.
# Much of this reflects the process of markets repricing to lower expectations for U.S. growth and for Federal Reserve policy tightening compared to the rest of the world, and especially relative to Europe and the European Central Bank. The main reason for this is reduced hopes for a rapid economic policy breakthrough powered by the implementation of tax reform and infrastructure programs. Despite Republican majorities in both chambers, Congress has struggled to come together on major legislations, most visibly health care (an issue that dominated the party’s narrative during the campaign). This has delayed pro-growth economic bills, while making their prospects more uncertain. With Fed monetary measures already stretched, there has been little policy offset to a soft patch in indicators of household and corporate economic activity. Yet none of this seems to have been reflected in the major stock indexes. All three, the Dow Jones, Nasdaq and S&P, registered more record highs this week. In the process, the leadership of the market has returned to tech and other disruptors, after a brief but intense post-election romance with financials and industrials deemed to be the largest beneficiary of Trumponomics...


The markets’ overall sense of "goldilocks" -- not too hot, not too cold, explains much of the gap between buoyant stock indexes and lagging economic and policy fundamentals. Growth may be low, but the markets perceive it as relatively stable. The Trump administration has not followed through on protectionist measures that would threaten a global trade war. Concerns about disruptive European politics, to the extent they even registered in stock markets, have been alleviated by President Emmanuel Macron’s victory in France. But the most reassuring factor for traders and investors remains very loose financial conditions. Interest rates continue to be low throughout the advanced world, with markets also marking down their expectations of Fed tightening in the last few weeks. Two systemically important central banks, the ECB and the Bank of Japan, continue to provide a lot of liquidity, and on a predictable monthly schedule; and, as signaled on Thursday by ECB President Mario Draghi, they seem in no rush to taper, despite the improvement in economic conditions.
Moreover, with corporate balance sheets flush with cash, valuations are also influenced by understandable expectations of more dividends, stock buybacks, and mergers and acquisitions. Liquidity, especially when ample and predictable, can fuel markets and condition investor behavior in a supportive manner for quite a while. But when judged against the objective of durable long-term gains, it is best seen as part of the investment journey. The destination, however, doesn't depend on liquidity alone. Economic and corporate fundamentals play a much larger role. So far, equity investors have experienced an unusually long and fulfilling journey -- one that, absent a major accident, could last a little longer. What remains more elusive, however, is confidence that this will end up at an enjoyable destination....

Close Sell Long Gold

*) Close Sell 20 CFD Long Gold a 1254 (Open Buy a 1247,20)
*) Bruto Profit 116,41 Euro / Netto Profit 83,06 Euro

German Automakers Tumble Following "Bombshell" Cartel Allegations, Dax Slides

For more than 20 years, the German auto industry has been operating like a cartel, according to a new "bombshell" report, which has sent the shares of Germany's biggest automakers reeling. Der Spiegel is reporting that the big three German car companies (Volkswagen, Daimler and BMW) have been holding secret “working groups” since the 1990s, where they would discuss, production costs, suppliers, strategy and, importantly, emissions purification. The meetings were initially reported to regulators by Volkswagen in a filing with German competition authorities. The magazine described the meetings as “one of the biggest cartel cases in German economic history.” It was at these meetings that the companies agreed on the appropriate gas purification standards for their diesel vehicles, thus laying the groundwork for the diesel scandal that has resulted in massive fines for these companies both in Germany and the US. The working groups also selected suppliers, helping to set costs for vehicle components. The ongoing discussions allegedly involved more than 200 employees in 60 working groups in areas including auto development, gasoline and diesel motors, brakes and transmissions.
Talks may have also involved the size of tanks for AdBlue fluid for diesel autos, according to Bloomberg. The allegations are guaranteed to result in more fines for the automakers, which were just beginning to move on from the diesel emission scandal that rocked the industry. “These allegations look very serious and would mean more than 20 years of potential collusion,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler told Bloomberg. “There seems to be a never-ending story of bad news about the industry’s bad behavior.”
# As Bloomberg explains, European carmakers are shoring up diesel as they need it to bridge the gap between tightening rules for greenhouse-gas emissions as they invest in ramping up electric-car plans. The Spiegel report followed announcements by Audi and Mercedes this week that they’re recalling diesel vehicles to update pollution-control software amid probes by environmental authorities into potential emissions violations. German authorities first became aware of the problem when they raided Volkswagen’s offices last year, searching for evidence that the company sought to rig steel prices. Instead, it found evidence of collusion between German automakers. Two weeks later, VW submitted a voluntary admission to antitrust authorities, as did Daimler in hopes of minimizing penalties. Following the report, which assures billions more in settlement costs and litigiation fees are coming, the shares of Germany's Big-3 have all tumbled on the news...


Dragging the Dax to session lows, which is starting to affect US stocks...

WTI Tumbles Towards $45 Handle After Tanker-Tracker Signals OPEC Supply At 2017 Highs

Despite the 'bullish' inventory data (and demand), WTI Crude just sank towards a $45 handle - red on the week - as tanker-tracking firm Petro-Logistics signals OPEC crude supply rising again this month will be the highest this year (along with US shale output at record highs). As Bloomberg notes, supply from OPEC members is set to exceed 33 million barrels a day this month, more than 600,000 barrels a day higher than the first-half average, according to Petro-Logistics. The data could reinforce skepticism about the effectiveness of the Organization of Petroleum Exporting Countries’ production cuts as officials from the group gather for meetings in St. Petersburg, Russia. This pushed prices below the pre-DOE data lows and red for the week...


Oil remains in a bear market on concern that growing output in the U.S., Libya and Nigeria is offsetting other producers’ curbs, meaning stockpiles aren’t shrinking fast enough. The report from Petro-Logistics found that Saudi Arabia, the United Arab Emirates and Nigeria are behind the extra barrels. The latter is exempt from making cuts as it tries to recover from disruption due to theft,sabotage and attacks by rebels. The findings of Petro-Logistics further weaken “the foundations under the output deal, which is what the market is also saying by sending prices lower,” said Jens Naervig Pedersen, analyst at Danske Bank A/S. “It puts pressure on OPEC before the meeting this weekend”....

US Urges All Nationals In North Korea To "Depart Immediately", Bans Tourists From Visiting!

The US is set to ban all citizens from traveling to North Korea, according to two agencies that operate tours there. Koryo Tours and Young Pioneer Tours said the ban would be announced on 27 July to come into effect 30 days later, the BBC reported. "After the 30-day grace period any US national that travels to North Korea will have their passport invalidated by their government." The ban comes one month after US student Otto Warmbier died following his imprisonment by the Kim regime. China-based Young Pioneer Tours, which had taken Warmbier to North Korea, and Koryo Tours said the ban will come into force on July 27, the anniversary of the end of the Korean War, with a 30-day grace period. Koryo Tours added that the Swedish embassy in Pyongyang, which handles consular affairs for the US in the North, informed it of the ban, but did not say how long it would last.
The U.S. embassy in the South Korean capital, Seoul, did not immediately respond to a request for comment. Rowan Beard said that the 30-day grace period would "give leeway for any Americans currently in the country as tourists or on humanitarian work". Simon Cockerill, of Koryo Tours, said: "It remains to be seen what the exact text is, but the indication is it's just a straight up ban on Americans going." Mr Cockerill told the BBC the agency would still conduct tours and take Americans until the ban came into effect. Rowan Beard of Young Pioneer Tours, told the BBC the embassy was urging all US nationals to depart immediately. He said the embassy was trying to check on the number of US tourists left in the country. For now there has been no official confirmation from the US: the state department continues to have an alert dated 9 May strongly warning US citizens not to travel to North Korea.
# As the BBC adds, there has been movement towards a ban for a while in the US, which increased with the Warmbier death. In May, two congressmen introduced the North Korea Travel Control bill to cut off the foreign currency the country earns from American tourists. The House foreign affairs subcommittee is scheduled to take up the draft legislation on 27 July but it would still have to go to the Senate. So there could be an executive order. Last month, Secretary of State Rex Tillerson said: "We have been evaluating whether we should put some type of travel visa restriction to North Korea. We have not come to a final conclusion, but we are considering it." Apart from the treatment of Americans in North Korea, tension has been increasing over Pyongyang's nuclear programme. Some are suggesting the US is using the date the ban is set to be announced - 27 July - to cloud North Korea's Victory Day on the same day. It was not clear if the urge to clear out US citizens from North Korea is a precursor to more "aggressive" (or kinetic) action by the US government....

Money Supply Growth Tumbles To Lowest Since Lehman

Growth in the supply of US dollars fell again in May, this time to a 105-month low of 5.4 percent. The last time the money supply grew at a smaller rate was during September 200, at a rate of 5.2 percent. The money-supply metric used here, an "Austrian money supply" measure, is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on this metric and its growth. The "Austrian" measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short time deposits, traveler's checks, and retail money funds). M2 growth also slowed in May, falling to 5.6 percent, a 20-month low...

ms1.png

Money supply growth can often be a helpful measure of economic activity. During periods of economic boom, money supply tends to grow quickly as banks make more loans. Recessions, on the other hand, tend to be preceded by periods of falling money-supply growth. Thanks to the intervention of central banks, of course, money supply growth in recent decades has never gone into negative territory. Nevertheless, as we can see in the graph, significant dips in growth rates show up in years prior to a economic bust or financial crisis. For insights into what's affecting money supply growth, we can look at loan activity, such as the Federal Reserve's measure of industrial and commercial loans. In this case, we find that the growth rate in loans has fallen to a 74-month low, dropping to 1.9 percent. Loan growth has not been this weak since April of 2011, in the wake of the last financial crisis...

loans.png

We find similar trends in real estate loans and in consumer loans, although not to the same extent...

realestate_loans.PNG

The current subdued rates of growth in the money supply suggests an economy in which lenders are holding back somewhat on making new loans, which itself suggests a lack of reliable borrowers due to a lackluster overall economy. This assessment, of course, is reinforced by the Federal Reserve's clear reluctance to wind down it's huge portfolio, and to end its ongoing policy of low-interest rates, concerned that any additional tightening might lead to a recession....

Mac Slavo; Chechnya's Leader Claims "Russian Doomsday Device" Is Activated

Ramzan Kadyrov, the leader of Chechnya, gave a rare interview to a media outlet in the United States that aired Tuesday, and what he said is taking many aback. While speaking to HBO’s Real Sports, Kadyrov made a troubling comment about his country’s nuclear arsenal and a Russian doomsday device.
# Kadyrov said, “America is not really a strong enough state for us to regard it as an enemy of Russia. We have a strong government and are a nuclear state. Even if our government was completely destroyed, our nuclear missiles would be automatically deployed. We will put the whole world on its knees and screw it from behind.” That comment certainly puts the left’s insistence on a war with Russia in perspective. And Kadyrov is probably being more accurate than not in that statement. According to The New York Times, Russia built a system in the 1980s that could do what Kadyrov described, known as the Perimeter System. Bruce Blair, the former US nuclear officer who broke the story of the Perimeter System for The New York Times in 1993, told Business Insider that the system works when it detects nuclear explosions. Only a small crew, deep in a bunker, has a hand in the otherwise automated system, according to Blair...


Essentially, if another country conducted a nuclear attack that would destroy the government of Russia or anything a 1980s-era system would perceive as a nuclear attack, an automated system would empty Russia’s missile silos in an immediate counterattack. Blaire’s concern is the automation of such a system. “One concern is that it’s highly automated, and cyber attacks, for example, or other phenomena, natural or man-made, could set it off,” Blair said. “It poses a risk of accidental nuclear attack by Russia.” But there has yet to be an accidental nuclear attack and it’s been over 30 years since the system was first activated.
# But could the 1980’s technology pose a problem and cause an all out nuclear war? It’s hard to say, and experts are not sure either. “This was designed to retaliate massively against the US. What the specific targets are in this plan no one really knows, but it can be safely assumed it’s large-scale,” Blair said, adding that it would destroy most Americans and most large US cities. This is troublesome to many Americans, considering the US president is supposed to sign off on any nuclear attack to prevent accidental strikes, and the left is continuing to push the former Soviet Union increasing tensions with Russia. If Washington were incapacitated by a nuclear strike, it’s unclear whether it could respond at all. The US’s nuclear weapons are code-locked and absent the president and a backup in the Pentagon, the US may not be able to respond. Moscow code-locks its weapons as well, but this system would allow it to retaliate even after a nuclear decapitation....

Euro Surges To 2-Year High In "Bipolar" Draghi Reaction; Futures Flat

The euro's surge to an almost two-year high put a cap on the global market rally in Friday's quiet session, with most major exchanges consolidating after a second strong week of gains. The MSCI Asia-Pacific index declined for first time in ten days while the European Stoxx 600 index was fractionally in the green as were US equity futures ahead of earnings reports from General Electric, Honeywell, Schlumberger and others. Oil gained with Brent flirting with $50, zinc rallied along with most base metals. European stocks are little changed, while Asian stocks decline with Tokyo shares falling for first time in three days. Also overnight, AUD traders were caught wrongfooted for the second time in one week after the Aussie fell sharply following an unexpectedly dovish speech from RBA Deputy Governor Debelle, who said there’s no significance in the board’s neutral rate discussion, which earlier this week sent the Aussie surging. "No significance should be read into the fact the neutral rate was discussed at this particular meeting," Debelle said in text of speech. "Most meetings, the board allocates some time to discussing a policy-relevant issue in more detail, and on this occasion it was the neutral rate."
In addition to the drop in AUDUSD, Australian sovereign yields all dropped 5-7 basis points in bull steepening move; three-year yield drops as much as nine basis points to 2.00% - the steepest decline since March on a closing basis. Kiwi rallied to highest since September 2016 on Finance Minister Joyce comments; yen little changed. S&P futures near unchanged. WTI crude holds near $47; Dalian iron ore falls 0.7%. But most of the attention was on the EUR in the aftermath of Thursday's paradoxical Draghi press conference, which led to a "bipolar" market reaction, seen as dovish by rates while hawkish by FX. Summarizing the market reaction, Yann Quelenn, a market strategist at Swissquote Bank said,“Draghi tried to talk the Euro down, even going so far as to suggest that ECB’s quantitative easing could be increased and prolonged. But the currency markets were not buying Draghi’s line, and neither are we. Available bonds are too scarce, and turn to a taper is too clear to disguise." As a result, bonds jumped even as the euro headed for its strongest level against the dollar in almost two years on bets the European Central Bank will start tapering its stimulus program despite Draghi's sounding particularly dovish, with the greenback already under pressure from U.S. political developments. Yields on Italian bonds dropped...


While the EUR surged to the highest since August of 2015, and is up 11% for 2017...


While the US dollar dropped to the lowest since August amid growing political concerns after reports that U.S. special counsel Robert Mueller expanded his investigation of Trump less than a day after the president told the New York Times that any digging into his finances would cross a red line...

“Everything speaks in favor of further EUR appreciation, increasing portfolio inflows, changing monetary policy, improved political risks,” according to Peter Kinsella, a London-based senior foreign-exchange and rates strategist at Commonwealth Bank of Australia. “It’s an armor-plated rally and it won’t stop” Euro zone stock markets were modestly lower on the day, as some analysts against expressing concerns a stronger euro may do more to undermine growth going forward. MSCI's gauge of stocks across the globe was steady after rising for a 10th straight session on Thursday, its longest such streak since February 2015. It has advanced around 3 percent in the latest rally.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan, which has gained about 5 percent in the past two weeks, eased 0.2 percent, dragged down by a fall in material and financial shares. Japan's Nikkei dropped 0.2 percent. "We can be pretty sure that when Draghi sat down for his press conference yesterday the last thing he expected to see was the euro hit its highest level in over two years and for equity markets to slide back," said CMC Markets analyst Michael Hewson. "The strength of the euro does appear to be acting as a bit of a headwind for European stocks as they look to close the week sharply lower, in contrast to the performance of UK and US stocks this week." As of 6:10am ET, S&P500 futures were little-changed close to a record-high level as investors looked forward to a Federal Reserve meeting and manufacturing data next week. E-mini contracts were almost flat at 2,472.25 after the cash index ended Thursday within one point of its record-high close. Nasdaq 100 futures were also little-changed as the benchmark index climbed to all-time intraday highs for the second consecutive day. Contracts on the Dow Jones Industrial Average also held steady on Friday.
European stocks are little changed, while Asian stocks decline with Tokyo shares falling for first time in three days. In currencies, the Bloomberg Dollar Index was down 0.1 percent, in line for a weekly loss of 0.8 percent, at 10:41 a.m. in London, as the greenback weakened against most of its G-10 peers. The yen was up 0.2 percent at 111.71 per dollar. The euro climbed 0.1 percent to $1.1642 after reaching a 23-month high earlier in the session. The common currency has gained 1.6 percent this week, its second straight five-day advance. In commodities, oil headed for a second weekly increase as U.S. crude inventories continued to shrink. West Texas Intermediate was 0.4 percent higher at $47.09 a barrel. Copper advanced 1.3 percent to $6,033 a ton, a four month high, leading a rally in industrial metals. Gold was poised for its first back-to-back weekly advance since June 2. Bullion for immediate delivery added 0.2 percent to $1,247.25 an ounce. In rates, the yield on U.S. 10-year Treasuries fell two basis points to 2.24 percent. Benchmark yields in Germany dropped three basis points to 0.5 percent, down nine points this week. Yields in France dipped three basis points.
*) Market Snapshot;
- S&P 500 futures rise 0.2% to 2475.20
- STOXX Europe 600 unchanged at 384.07
- EUR/USD: +0.1% to 1.1641
- USD/JPY: -0.2% at 111.71
- Brent Futures up 0.7% to $49.62/bbl
- Gold spot up 0.3% to $1,247.58
- U.S. Dollar Index down 0.2% to 94.17
*) Top Overnight News;
- Trump Inquires About Power to Pardon; Aussie Tumbles After RBA Comments; Power Struggle at Guggenheim
- Trump Removal of Mueller Likely Would Trigger Justice Purge
- Ten of the nation’s biggest lenders including JPMorgan Chase & Co. and Bank of America Corp. together made $30 billion last quarter, just a few hundred million short of the record in the second quarter of 2007
- Mario Draghi said policy makers are still waiting for inflation to catch up with the economic recovery as they put off discussions on winding back stimulus until after the summer
- President Donald Trump’s interview with the New York Times on stirred speculation he may consider firing Special Counsel Robert Mueller for investigating Trump’s business dealings as part of the Russia probe
- The International Monetary Fund agreed to a new conditional bailout for Greece, ending two years of speculation on whether it would join in another rescue and giving the seal of approval demanded by many of the country’s euro-area creditors
- OPEC and Russia’s plan to clear the global oil glut hasn’t worked as they hoped, but there’s little expectation the world’s largest producers will act more aggressively when they meet this weekend I- nvestors may turn to equity at the expense of debt given he rolling five-year return on global stocks has outpaced government debt over the past three months as weighted by the standard deviation of gains
- ACS Studies Counterbid to Atlantia’s $19 Billion Abertis Offer
- Paysafe Gets 590p/Share Takeover Proposal from CVC, Blackstone
- Microsoft Regains Turnaround Momentum on Strong Cloud Growth
- EBay Rattles Investor Faith With Slow Merchandise Growth
- Visa’s Kelly Extends First-Year Win Streak as Outlook Raised
- Zinc’s Rally Set to Endure as Top Producer Predicts $3,000
- Google Says Russia Leads in State Requests to Remove Content
- Exxon to Challenge Treasury Finding It Violated Russia Sanctions
- Credit Suisse’s Once-Mighty Stocks Unit Withers Under Thiam
- Delta Wins Lease Deal for Air Terminal at New York’s LaGuardia
*) Asia equity markets traded marginally in the red, following the lacklustre close on Wall St. amid a slew of earnings releases which were ultimately mixed. ASX 200 underperformed, led by the soft resources, metals and energy sectors, whilst Nikkei 225 also traded in the red to conform to the tone in the region, as JPY's indecision during the session offered no direction for the currency. Elsewhere, Shanghai Comp. and Hang Seng both traded subdued, with the PBoC's increased open market operations of CNY 140bln failing to lift the Chinese bourses. Finally, 10yr JGBs trade marginally higher amid the cautiousness in the region, with the curve steepening as the super-long end underperforms. Participants also await the auction for 10yr, 20yr and 30yr government paper.
# Top Asian News;
- HNA Group’s Dealings With U.S. Travel Startup to Be Probed
- OZ Minerals Says CFO Luke Anderson to Leave Co. in September
- Bank Indonesia Says Rate Review Delayed by Swearing-in Ceremony
- RBA’s Aussie Dollar Rollercoaster Shows Dilemma for Global Peers
- Reliance to Give One Free Share for Each Held After 8-Year Gap
- Huhtamaki Shares Fall as Indian Tax Reform Hits Demand
- China Artificial Intelligence Bid Seeks $59 Billion Industry
- AAC Drops Most in 7 Years as Jefferies Cites Revenue Warning
*) European equity markets trade mixed amid currency influence. Subdued trade has been evident, following yesterday's ECB press conference, with EU bourses trading range bound for the morning. The FTSE out-performs as it benefits from the weaker GBP. Telecoms out-perform as earnings continue to dictate the state of play, following a strong report from T-Mobile US being followed by a beat for Vodafone. Fixed Income markets have been led by bunds, with the latest ECB survey being responsible for a second round of bidding in German paper. The survey cut the inflation forecast by 0.10% for 2017 - 2019, with the statement stating that risks are still tilted to the downside.
# Top European News;
- U.K. Government Borrowing Jumps as Inflation Boosts Debt Costs
- Landis+Gyr Trades Below Offer in Largest Swiss IPO Since 2006
- European Banks’ 2Q Likely to Be Better Than U.S. Peers: HSBC
- SKF CEO Says Electric Cars May Hurt Part of Bearing Business
- ECB: Professional Forecasters Cut Inflation Outlook Through 2019
- Siemens Slams Brakes on Russia After Turbines Spotted in Crimea
- Hochtief Slumps as ACS Mulling Abertis Bid Lowers Buyout Chance
- Swatch’s Strong Forecast Bolsters Decision to Keep Workers
# In currencies, RBA Deputy Governor Debelle stated no automatic reason to conform to recent hikes abroad. New Zealand Finance Minister Joyce stated NZ firms are coping well with NZD at current levels, added NZD reflects strong NZ economy. FX markets have slowed this morning, as FX traders seem non-excitant following yesterday's volatility. The price action largely came overnight from the antipodeans. Comments from New Zealand's Finance Minister Joyce stated that NZ firms are coping well with NZD at current levels further adding that a strong NZD reflects strong NZ economy and he is unperturbed by NZD strength. NZD/AUD broke through 0.94 as bulls arrived, consolidating just below at 0.9390, a firm break of this level could see a test of 0.9480. Further, Aussie weakness aided the NZD/AUD push, as RBA Deputy Governor Debelle stated that there is no automatic reason to conform to recent hikes abroad.
# In commodities, precious metals have continued their bullish grind, spurred by the Trump reports yesterday. Gold looks toward 1250.00, as July's recovery continues. Oil continues to struggle to find any real direction, however, WTI's July 43.65 upward trendline continues to provide support, WTI bulls would need to see a firm break of 48.50 to indicate a change in momentum.
# No economic data is scheduled in the US....

Friday Market Observations

# The SPX and NDX made new all-time closing highs again today as stock markets get pulled up into the high-energy 7/20-7/21 turn window that sometimes marks important peaks in bull market years. The low volume test of QQQ highs Wednesday at 143.8 argues for a pullback to test the 7/12 gap-fill area of 139-140
# For the second day in a row, we're getting a SPX sell signal on the 5-day MA on the CBOE equity put/call ratio and the SPX failed to break above "pivot resistance" at 2479, which implies a pullback to test the 7/12 gap at SPX 2430-2440.
# Crude oil took out the 7/4 high today before pulling back, we are bullish. We think the oil sector is making a major low here and should make a big run into 8/20.
# Gold and silver also rallied in an EW 5-wave pattern on the hourly chart from the 7/10 Full Moon into yesterday. We could see a corrective pullback, but we are bullish and the Comex gold COTs are arguing that the PMs have made a major low.
# Bonds finished an EW 5-wave rally on the hourly today before correcting.
# The USD gave us an EW 5-wave decline on the hourly chart and tested 94, we should get a bounce here on Friday....

America's Most Underfunded Corporate Pensions

We spend a lot of time talking about the public pension crisis because, well, it's a massive $5 - $8 trillion dollar overhang on the economy and one which will undoubtedly result in some heartache for investors at some point in the future. Unfortunately, there are some problems that are too large for even U.S. taxpayers to fix and, with an underfunding of $52,000 (mid-point) per household, somehow we suspect this is one of them. Of course, our nation's various governmental institutions aren't the only ones to have unwittingly created massive ponzi schemes from which there is no escape. In fact, as Bloomberg points out today, as of the end of 2016 over 90% of the top 200 corporate pensions in the S&P were unfunded to the tune of $382 billion. Here's a look at the funded status of the top 20...


Meanwhile, just the top 20 corporate pension funds are underfunded by over $100 billion...


So what happens when these massive corporate obligations become so underfunded that they can't possibly ever be fixed? As the 400,000 pensioners in the Central States Pension Plans are all too familiar, the obligations get handed over the Pension Benefit Guaranty Corporation (PBGC), an entity which is nearly bankrupt itself, at which point payouts are slashed leaving retirees with about half of the monthly income they expected in retirement.
# Per CBS: February was a bad month for Larry Burruel and thousands of other retired Ohio iron workers. His monthly take-home pension was cut by more than half from $3,700 to $1,600. Things have been rough in the Rust Belt, but this was a particularly powerful punch in the pocketbook for Burruel, who started in the trade at 19 and worked 36 years before opting for early retirement to make way for younger workers. Unfortunately, this sagging industry doesn't have enough younger workers to pay for retirees like Burruel, whose pension plan is in what the U.S. Treasury Department calls "critical and declining status." Burruel and the 400,000 members of his Central States Pension Fund are the canaries in the coal mine as far as pension cutbacks go. At least 50 Midwestern pension plans, mostly the kind jointly administered by trustees for a labor union and a group of employers, are in this decrepit condition. Several plan sponsors have already applied to the Treasury Department to cut back retirees' allotments. This cross-section of America includes more than a million former truck drivers, office and factory employees, bricklayers and construction workers who are threatened with cutbacks that could last the rest of their lives.
# Who could have guessed that the efforts of our government and largest corporations to backstop the investing risk of millions of households across the country would end so poorly?

Relations Between Germany And Turkey Spiral Into Crisis

The diplomatic crisis between Germany and Turkey deepened on Thursday when Germany's foreign minister Sigmar Gabriel told a press conference that it was no longer safe for German people and businesses to travel to Turkey. The announcement was triggered by Turkey's detention of a Germany human rights defender and two German journalists with no credible charges or supporting evidence. Gabriel broke off his summer vacation and returned to Berlin to deal with the crisis that arose out of the arrests, particularly of German human rights activist Peter Steudtner for allegedly aiding a "terror" group.
# Gabriel declared a “re-orientation” of Germany's Turkey policy, and said that the country’s actions show it's “departing from the basis of European values.": "Steudtner never wrote about Turkey, he had no contacts in the political establishment and never appeared as a critic. One can’t advise anyone to invest in a country when there is no legal certainty and where companies, completely respectable companies, are presented as terrorists. I therefore do not see how, as the government, we can still guarantee German company investments in Turkey if, as has happened, arbitrary expropriations for political reasons have not only been threatened but have already taken place. German citizens are no longer safe from arbitrary arrests in Turkey. We have no other choice, because we are responsible for the protection of our citizens of our country, but to adapt our travel and safety advisory to Turkey and let Germans know what can happen to them when they travel to Turkey. We can’t go on as we have before. We have to be clearer than before so that those in charge in Ankara understand that such a policy won’t be without consequences." Deutsche Welle
# Ibrahim Kalin, spokesman for Turkey's president Recep Tayyip Erdogan, said: "We think these are domestic political statements for the upcoming elections in Germany. Unfortunately, this has become fashionable in Germany. People are being anti-Turkey and demonstrating their paranoid animosity against our president to score political points. We are strongly condemning suggestions that German nationals visiting Turkey would not be secure. We think that those unfortunate statements are an investment for internal politics aimed at the approaching elections in Germany. How come Germany tolerates this? When we talk about them, they respond ‘We have justice and independence.’ Well, why don’t they respect Turkish justice? This is disrespectful to Turkey. They will respect our justice. There was direct interference in the Turkish judiciary and the comments used overstepped the mark. The comments again show the double standards in their approach to the law of those who prevent terrorists from being brought to justice while embracing members of terrorist groups who target our country." Al Monitor
Germany's actions were triggered by Steudtner's arrest, and also because Turkish authorities had, several weeks ago, handed their German counterparts a list of 68 German companies they accused of having links to Erdogan's enemy Fethullah Gülen.... Hurriyet (Ankara)

Turkey Commemorates First Anniversary Of Attempted Coup

Life in Turkey has changed dramatically in the year that's passed since the failed coup attempt on July 15 of last year. Well over 100,000 people have lost their jobs or been arrested with no credible charges and no supporting evidence. Turkey's president Recep Tayyip Erdogan says all of these people were involved in the coup attempt, because they had a connection to his former friend, and now enemy, Fethullah Gülen, the 76-year-old political enemy of Erdogan, living since 1999 in self-imposed exile in the Pocono Mountains in Saylorsburg, Pennsylvania, after splitting with Erdogan. Gülen is a Muslim cleric with a worldwide network of schools and businesses, run by his followers. For Erdogan, this worldwide network was for many years a good thing, a sign of a progressive Turkey, fighting extremism, and providing education and jobs. But relations between Erdogan and Gülen started to sour in 2012, and were severed completely in 2013. Since then, this huge international network has turned in Erdogan's eyes from a good thing to a bad thing, promoting terrorism instead of fighting extremism. Irish Examiner
Erdogan now claims that last year's coup was planned and executed under the direction of Gülen and the Fethullah Terror Group (FETO). Gülen's name is linked to large numbers of schools and businesses, and Erdogan is accusing anyone linked to these schools and businesses, as being linked directly to Gülen and to last year's coup. For example, anyone who has an account in the Gülen-linked Aysa Bank, who has placed children in Gülen-linked schools, who has participated in fund-raising events for Gülen linked humanitarian causes can be fired or arrested and jailed. Anyone having a phone with the encryption application BYLOCK, allegedly used by the Gülen organization, is also assumed to be guilty of participating in the coup. There are many reasons why Erdogan's reasons for firing and jailing over 100,000 people do not make sense:
- Obviously, no more than a dozen or so people could have been involved in coup planning, or the details would have leaked out.
- Few people find credible the claim that 76-year-old Gülen orchestrated the coup from his easy chair in the Pocono mountains of Pennsylvania.
- In fact, Erdogan has repeatedly demanded that the US extradite Gülen back to Turkey, but Erdogan has been unable to provide any evidence that would meet American court standards to satisfy an extradition request.
- Erdogan started his purge well before the coup attempt. In particular, four months before the coup, Turkey and the world were shocked when Erdogan shut down Zaman, the country's major opposition newspaper, the largest newspaper in the country.
- In the days following the coup attempt, an extremely large and complex purge was put into place, with Erdogan giving himself increasingly dictatorial powers. Many analysts believe that the purge was in the planning stages for several months, waiting for the right opportunity to implement it.
- For years, starting long before the coup attempt, Erdogan has been aggregating power to himself, and has been changing Turkey's character from a secular state to a conservative Islamist state. This made him popular with millions of pious Turks who had felt ignored by the old secular elites. This all came to a head in 2007 over the issue of women wearing headscarves. However, Ataturk, the revered founder of Turkey after the collapse of the Ottoman Empire, declared that Turkey would be a secular state, with freedom of worship for people of all religions, including Jews and Christians. Ataturk asked the army to be the preserver of the secular state, and many in the army today see it as their job to stop Erdogan's changes. In fact, this split within the army between those who honor Ataturk and those who honor Erdogan may have been the reason that the coup was attempted in the first place...

Young men stand on a Turkish army tank in Ankara on July 16, 2016, the day after the attempted coup. (Reuters)

During the last year, Erdogan's Turkey has been arresting tens of thousands of Turkish citizens, and only occasionally a foreign national. The arrest of German national Peter Steudtner appears to have been a "last straw" for the Germans.... Hurriyet (Ankara) and AFP

The Dangerous Season Begins Now

Is “sell in May” really the best recommendation? After all, it is merely a saying based on general experience. We will take a closer look at the seasonal pattern below.
*) The Precise Seasonal Pattern of the Russell 2000 Index; The small and mid-cap index Russell 2000 exhibits particularly pronounced seasonal trends. That makes it very useful for the purpose of seasonal analysis. Unlike a standard price chart, the seasonal chart of the Russell 2000 depicts the average pattern that emerges in the index in the course of a year. The horizontal axis shows the time of the year, the vertical axis the average percentage changes over the past 30 years. The seasonal trends of the index can be discerned precisely at a glance.
 # Russell 2000 Index, seasonal pattern over the past 30 years, the Russell 2000 enters a period of seasonal weakness in mid July...


As can be seen, the Russell 2000 does indeed typically decline between May and October. However, there is one last surge into a mid July interim peak before it actually begins to fall rather noticeably. This underscores that it is important to analyze seasonal trends with precision. The period of seasonal weakness in the Russell 2000 Index is highlighted in dark blue on the chart. It begins on July 15 and ends on October 27.
*) The Russell 2000 Declined in 17 of 30 Cases in the Seasonally Weak Period; But what were the returns of the index in individual years? The following bar chart shows the return generated by the Russell 2000 Index between July 15 and October 27 in every single year since 1987.
# Russell 2000 Index, percentage return between July 15 and October 27 in every year since 1987. On three occasions the index suffered losses in excess of 25 percent...


As you can see, the color red clearly predominates. Not only did losses occur more frequently, on average they also tended to be larger than the gains. In other words, short positions not only had a greater average win rate than long positions, they also delivered higher average profits....

AMZN Slides After Hours On Report Of FTC Probe

Just last week we noted that the one entity that could 'out-Amazon' Amazon, the US government, was beginning to ask if Bezos' company was too big? Tonight we got our first glimpse as the FTC sent a shot across the world's 2nd richest man's bow, probing allegations of illegal discounting. Reuters reports, that as part of its review of Amazon's agreement to buy Whole Foods, the Federal Trade Commission is looking into allegations that Amazon misleads customers about its pricing discounts, according to a source close to the probe. The FTC is probing a complaint brought by the advocacy group Consumer Watchdog, which looked at some 1,000 products on Amazon's website in June and found that Amazon put reference prices, or list prices, on about 46 percent of them.
An analysis found that in 61 percent of products with reference prices, Amazon's reference prices were higher than it had sold the same product in the previous 90 days, Consumer Watchdog said in a letter to the FTC dated July 6. Following receipt of the letter, the agency made informal inquiries about the allegations, according to a source who spoke on background to preserve business relationships. The FTC declined comment for this story. It was not known if the agency would open a formal probe into the allegations. Amazon said in a statement that Consumer Watchdog's study was "deeply flawed." The initial reaction was to sell...


How long before this dip is bought? Well that didn't take long!!??

donderdag 20 juli 2017

Nasdaq Limps To Best Run Since Feb 2015 As Bitcoin Surges Most In 13 Months

Despite Bank of Japan and ECB talk, and thanks to a tanking VIX, the new normal of utter tranquility in markets continued. Soft Data rolled over again today...


Draghi didn't sound dovish enough and EUR spiked, sending the dollar dumping (down 8 of the last 10 days) to its lowest level since August 2016...


The Dollar Index is now unchanged since January 2015...


But Bund and Treasury yields found what Draghi said to be a little more dovish, 30Y touched 2.80% handle, lowest since June 29th...


Every effort was made to ensure the Nasdaq completed its 10th day higher in a row (longest streak since Feb 2015), smashing VIX to 9.51 if tomorrow is green, then that will be longest streak since 2009...


This is easy...


And Mueller headlines early on gave dip-buyers the perfect opportunity to ignore the shitty data earlier in the day, but major indices generally flatlined all day in a very narrow range, Trannies were worst, S&P and Dow closed red...


Utes outperformed and Financials slumped into the last hour as early gains in energy were erased...


FANG Stocks ended the day unchanged...


Chipotle was hammered once again because of rats and norovirus (yeah that's all), now unchanged since April 2013...


Treasury yields went nowhere today, ending unch across the board (except 30Y -2bps) after being bid on Mueller's headlines...


Draghi-driven EURUSD strength weighed on the Dollar index...


Gold gained on the day with a kneejerk higher after headlines on Mueller's probe of Trump...


While many seem convinced that this latest rally in WTI means something, it doesn't, more of the same range-bound trading and a reverse today, back below $47 to settle...


Bitcoin surged 18% today, best day since June 2016...


While no catalyst was obvious, we do note that the move began almost to the second as news broke of the AlphaBay Dark Web bust...


And finally, as we noted earlier, the debt ceiling anxiety is starting to get real...