Submitted by Tyler Durden on 10/13/2015 - 08:18 No professional or successful investor every bought and held for the long-term without regard, or respect, for the risks that are undertaken. If the professionals are looking at "risk" and planning on how to protect their capital from losses when things go wrong - then why aren't you? Exactly how many warnings do you need?
Submitted by Tyler Durden on 10/13/2015 - 10:01 With VIX collapsing 10 days straight (for the first time since October 2010), one might be forgiven for thinking "everything is awesome." However, as always, the real news is in the nuance that the mainstream often misses. As VIX has plunged (complacency about 'normal' risk), Skew (which measures extreme tail risk) has exploded to its highest ever...
Submitted by Tyler Durden on 10/13/2015 - 09:55 Cables leaked by U.S. Army whistleblower Chelsea Manning reveal an apparent plot by the U.S. government to assassinate Bolivian President Evo Morales and overthrow his administration. TeleSUR, a Latin American TV network, reported last week that the Bolivian government is continuing a formal investigation into the allegations, despite denials by U.S. government officials.
Submitted by Tyler Durden on 10/13/2015 - 09:35 After losing 7% in September, and down 20% for 2015 as of Oct. 1, the question is will Andy Hall be the only hedge fund manager with the distinction to have blown up not once but twice in one year, on the very same bet?
Submitted by Tyler Durden on 10/13/2015 - 09:05 So what's left in the toolbag of central banks and states to stimulate recessionary economies if QE has been discredited? The answer: Helicopter Money.
The Oldest Trick In The Book: Here Is How Johnson & Johnson's "Beat Earnings" Despite Sliding RevenuesSubmitted by Tyler Durden on 10/13/2015 - 08:45 When looking at JNJ's EPS line, things were not nearly as bad, because despite a 7% slide in revenues and a whopping 40% collapse in pretax net income, somehow JNJ reported Q3 non-GAAP EPS of a solid $1.49, actually beating consensus of $1.45, and only 7% lower than a year ago. Hardly terrible... until one looks at the detail and finds the "oldest accounting gimmick in the book": adjusting the tax rate.
Submitted by Tyler Durden on 10/13/2015 - 08:44 "Sell the rumor, buy the news" appears to be the meme for now as TWTR delivers on the chatter:
*TWITTER CUTTING UP TO 8% OF JOBS, UP TO 336 JOBS
*TWTR SEES 3Q ADJ EBITDA AT/ABOVE TOP END $110-$115M,EST $116.7M
So drastic job cuts, lowered revenue and EBITDA guidance, and "tough but necessary" decisions - TWTR up 5% in the pre-market.
Submitted by Tyler Durden on 10/13/2015 - 08:33 As Asia opened last night, gold and silver came under pressure (ahead of China's biggest Yuan strengthening since November 2014). As US re-awakens from Columbus Day vacation, it appears demand is back (and in heavy volume) for precious metals...
"Insurgents" Shell Russian Embassy In Syria After Al-Qaeda Calls For Jihad Against Russian CiviliansSubmitted by Tyler Durden on 10/13/2015 - 07:56 "If the Russian army kills the people of Syria, then kill their people. And if they kill our soldiers, then kill their soldiers. An eye for an eye. The war in Syria will make the Russians forget the horrors that they found in Afghanistan. They will be shattered, with God's permission, on Syria's doorstep."
Submitted by Tyler Durden on 10/13/2015 - 07:20 With JNJ about to announce - what are almost certain to be very bad - earnings in just over an hour, the company decided it was prudent to set the mood by preannouncing, less than an hour before earnings, good days are back again and that the company will do all in its power to not only increase the buyback pardon equity-linked compensation of CEO Alex Gorsky, but to reward shareholders for sticking with a company that hasn't announced a major buyback plan in recent months.
Submitted by Tyler Durden on 10/13/2015 - 06:59 For the past two weeks, the thinking probably went that if only the biggest short squeeze in history and the most "whiplashy" move since 2009 sends stocks high enough, the global economy will forget it is grinding toward recession with each passing day (and that the Fed are just looking for a 2-handle on the S&P and a 1-handle on the VIX before resuming with the rate hike rhetoric). Unfortunately, that's not how it worked out, and overnight we got abysmal economic data first from China, whose imports imploded, then the UK, which posted its first deflation CPI print since April, and finally from Germany, where the ZEW expectation surve tumbled from 12.1 to barely positive, printing at just 1.9 far below the 6.5 expected.
Submitted by Tyler Durden on 10/12/2015 - 23:45
Submitted by Tyler Durden on 10/12/2015 - 22:44 After an initial knee-jerk reaction (perhaps on better-than-expected exports - signalling perhaps the devaluation 'worked), AsiaPac stocks are tumbling rapidly as the 11th monthly decline in imports (down a stunning 17.7% YoY in Yuan terms) signaling significant domestic weakness (and thus a larger drag on global growth). Policymakers are already stressing a weaker Yuan will boost exports, and despite recent Yuan strength, it appears the currency wars are far from over.
The warnings are getting louder. Why has Barack Obama airdropped 50 tons of ammunition into areas that “moderate rebels” in Syria supposedly control? This is essentially the equivalent of poking the Russians directly in the eyes. Much of this ammunition will end up in the hands of those that the Russians are attempting to bomb into oblivion, and so to Russia it appears that we are attempting to make their job much harder. And of course the truth is that there aren’t really any “moderate rebels” in Syria at all. Nearly all of the groups that are fighting are made up primarily of radical jihadists and/or hired mercenaries. Personally, I don’t see anyone over there that you could call “the good guys”. At the end of the day, the U.S. supports just about anyone that wants to get rid of the Assad regime, and the Russians are working very hard to keep Assad in power. Just like the civil war in Ukraine, the conflict in Syria is in great danger of being transformed into a proxy war between the United States and Russia, and many fear that these conflicts could eventually be setting the stage for World War III.
Have you heard the one about a homeowner foreclosing on a bank?
Well, it has happened in Florida and involves a North Carolina based bank.
Instead of Bank of America foreclosing on some Florida homeowner, the homeowners had sheriff’s deputies foreclose on the bank.
It started five months ago when Bank of America filed foreclosure papers on the home of a couple, who didn’t owe a dime on their home.
The couple said they paid cash for the house.
The case went to court and the homeowners were able to prove they didn’t owe Bank of America anything on the house. In fact, it was proven that the couple never even had a mortgage bill to pay.
Fitch Ratings is fretting about junk-bond defaults. “After five issuer defaults already this month accounting for nearly $2 billion in new volume,” Fitch now expects that the default rate will hit 3.5% by year-end, up from 2.5% to 3% a few days ago. Through September, the trailing 12-month default rate was already 2.9%.
Worse: a 4% default rate by year end is “more likely” than a 3% default rate. And it’s “set to rise further in 2016.”
In non-recessionary periods, the default rate averages 2%. During recessionary periods it averages 11%. That’s why recessions are terrifying for junk-bond holders. Junk bonds are called “junk” for a reason.
The Money GPS:
We have some catching up to do in terms of discussing Chinese gold import in H1 2015 and how this relates to withdrawals from Shanghai Gold Exchange (SGE) vaults. For this post it’s advised you’ve read The Mechanics Of The Chinese Domestic Gold Market to have a basic understanding of the physical gold supply and demand flows through the Shanghai Gold Exchange within the Chinese domestic gold market.
SGE withdrawals in 2015 are stronger than ever. Although, SGE withdrawals are (seemingly) less correlated to Chinese gold import this year, nonetheless Chinese gold import in the first six months of 2015 was higher relative to the same periods in the years before.
The odds of a U.S. recession are rising…
A recession is when an economy shrinks two quarters in a row. It means businesses are slowing down and selling fewer goods and services.
The stock market typically goes down before, and during, a recession. And a severe recession can cause the stock market to crash, like it did in 2007-08.
Every month, Bloomberg asks a group of economists to estimate the likelihood that the U.S. economy will go into a recession within a year. For the past thirteen months, they’ve put the odds at 10%. This month, they raised the odds to 15%.
I have already posted that I met on Friday evening with Pippa Malmgren. Her father, Harold, worked under four presidents. She has under two, Ronald Reagan and George W. Bush. She was also a member of the President’s Working Group on Financial Markets, aka, the Plunge Protection Team.
We talked of many things when we met and as I left I told her I had enough material from her for months of posts. I will be posting much here at EPJ and also, in Monday’s EPJ Daily Alert, I will report on her views on the future of interest rates and price inflation.
In this post, I want to focus on one of the most important things we discussed, how Wall Street ends up influencing top Washington D.C. officials and, therefore, policy.
We are seeing something special today in the precious metals that hasn’t happened very often in the last few years. We are seeing some upside follow through in the gold and silver prices after the gains from last week and the week before. Precious metal prices did settle back somewhat as the day wore on, but some day-to-day to-and-fro is to be expected. Given the strength in both gold and silver since August, they are slightly ahead of themselves at the moment, or overbought as the saying goes. But there are a lot more positives in favor of the precious metals than there are negatives.
Silver Is Leading
It is particularly noteworthy that silver has broken above its August high. You will recall that silver made a new low price in August, but gold held steady. That created a bullish divergence, and both metals responded with brisk rallies. Silver is up a remarkable 12.6% since then, far outpacing gold, which nevertheless has risen a very respectable 6.5% from its closing low price in August. Of course both of these are significant rallies, and it looks like there is more upside in the weeks ahead for gold and silver.