NYSE Margin Debt At Highest Since July Means Threat Of Margin Calls High

As so often happens, every time there is a ramp in the stock market, especially one which is not accompanied by retail buying, those who are buying, are forced to do so on increasingly more margin, as there is only so much cash in the market without booking actual profits. Sure enough, as of the end of February, margin debt was $289 billion, the highest since July 2011, while Net Free Credit (Free Credit Cash plus Credit balances in margin accounts less Margin Debt) of negative $33 billion (meaning investors have negative net worth) was the lowest also since July. What does this mean? Simply said, that if the cross asset rout continues, which means bonds yesterday, and stocks and commodities today, the margin calls will once again resume, as they used to in the fall of 2011, leading to a toxic liquidation spiral, pushing prices even lower. So in keeping with the times, and sticking heads in the sand, watch out for that 3pm call from your repo desk. Best idea would be to just let it go through to voicemail.

 

High Yield Credit Fundamentals Starting To Crack

We have been warning of the uncomfortable current similarities to last year's (and for that matter cycle after cycle) high-yield credit underperformance / lagging behavior 'canary-in-the-coalmine' relative to the exuberant equity market for a month now. Now, Bank of America provides - in two succinct charts - the fundamental underpinning of this grave concern as across the high-yield credit universe revenues are not catching up with costs - creating significant margin pressures - and at the end of the day, a market that cares more for cash flow sustainability than the latest headline or quarter EPS upgrade from some sell-side pen-pusher is waving a red-flag as margins are the lowest they have been since March 2009 and is falling at a much faster clip than in the fall of 2008 as the reality of money-printing comes home to roost. And just to add salt to this fundamental wound, technicals are starting to hurt as supply picks up and 'opportunistic' issuance turns notably heavy - perhaps helping to explain how the ongoing inflows have been unable to push prices further up in the US. Lastly European high yield is trading tick-for-tick with sovereign risk still - as it has since the middle of last year and so as LTRO-funded carry fades, we would expect it to underperform - especially as austerity slows growth.

A Thought Experiment: Why Not Just Print, Print, Print And Then Print Some More?

In the past we have jokingly discussed the creation of a Death Star as the way the world can save itself by printing an almost infinite amount of money to support growth. As almost everyone, especially the MMT crowd it seems, can plainly see, if printing some money is good (well it must be, markets are up) then printing more money must be better, right? Well, no (as we discussed in detail here). There are unintended consequences and as we pointed out recently, we are already seeing less and less effervescence in the real economy from QE's impact and the spectre of the inflationary pressures that implicitly limit the 'benefit' of this action is nowhere more painful than in energy prices (and in fact the price of anything in relative limited supply as opposed to cash which is printed daily). Professor Antony Davies, of Duquesne, takes this subtle concept to task in this exceptionally straightforward 206-second video on money as an IOU and its solution to the caveman's ills providing the background for why money's inherent value is relinquished once it becomes printed en masse. Printing more money doesn't make more goods and services appear, simply spreads the value of the existing goods and services among a larger number of dollars - this is inflation. Our wealth comes not from money but from the goods and services that money buys. Q.E.D.

JPM Expected To Pay 'Wristslap Fine' in Misuse of Customer Segregated Funds at Lehman Brothers

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When Is QE Not Really QE, a Bailout Not Really a Bailout?

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It's Only A Matter Of Time Before The Next Crisis Comes

Admin at Jim Rogers Blog - 1 hour ago

It's only a matter of time before the next crisis comes. Maybe by the end of this year, probably by the end of next year. - *in Gulf News* *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

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Hard Work Pays Dividends

Admin at Jim Rogers Blog - 1 hour ago

"Hard work pays dividends." - *in a recent interview with Gulf News* *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

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You Can Get A Bad Economy With Rising Equity Prices

Admin at Marc Faber Blog - 1 hour ago

I think that people should own some gold and I think that people should own some equities, because before the collapse will happen, with Mr. Bernanke at the Fed, they’re going to print money and print and print and print. So what you can get is a bad economy with rising equity prices. - *in Forbes* *Related, SPDR S&P 500 Index ETF (SPY)* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

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Follow The Trends, Ignore the Noise

Eric De Groot at Eric De Groot - 3 hours ago

The US, heavily debt laden herself, has become the driver of global economic growth while European economies circle the drain both individually and collectively? Yeah right! Meanwhile, gold and silver are pounded as the US dollar index test short-term technical support (charts 1 and 2). 1/25 swing low has been challenged hard several times. The sharp decline in volume during yesterday's... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

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When Will The Sheeplez Learn?

Eric De Groot at Eric De Groot - 3 hours ago

Any investor that adjusting long-term investment strategy based on daily noise will find his pocket picked by the invisible hand. The Fed minutes was just another excuse/trigger within a orchestrated transfer of control. The transition between the D-wave decline and A-wave advance is characterized by headline disinformation that hides an orchestrated transfer of control from the weak to... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Reversals In Progress

Today’s Spanish auction results were, in a word, awful. Not just higher yields, but a terrible bid-to-cover and perhaps even worse; all of the funding could not be accomplished. The effects of the LTRO are rapidly diminishing as the money has now generally been utilized and the national banks of a nation can no longer support the funding needs of the countries in the periphery. We have reached the turn here and I predict much higher yields to come now for the troubled nations in Europe including Italy. What could be accomplished by liquidity has been accomplished but solvency problems cannot be cured by liquidity alone and that lesson is about to be re-learned again.

Services ISM Misses Expectations For First Time In 4 Months, First Drop Since September

Unlike yesterday's modest manufacturing ISM beat, today's follow up March Services ISM is out at 56.0, reverting back to the Schrodinger theme so prevalent these days, missing the consensus of 56.8, and down from 57.3 in February, posting the first sequential decline since September 2011, and the first miss to expectations in 4 months. The core New Orders indicator was down from 61.2 to 58.8, still above 50 for 32 consecutive months. The backlog of new orders also dropped from 54.5 to 52.5 Amusingly, despite every energy commodity surging, the Prices index in March somehow posted a miraculous drop from 68.4 to 33.9. The only series that was contracting, and unchanged at 49.5, was supplier deliveries, even as inventories increased once again, from 53.4 to 54.0. And if the ADP report was enough to give traders a headache whether or not more QE is coming, today's final economic data point, refutes the latest jobs strength ahead of the NFP, once again leaving everyone into the dark as to the Chairman's true intentions.

Bank of America On Why, Contrary To Popular Delusion, America Is Not Decoupling

Everyone's favorite stock pitchman, Bob Pisani, who lately apparently has the capacity to learn just one line and just regurgitate it ad nauseam, was on CNBC earlier screaming how gold is down because the US is so much better than the world, when in reality gold is once again being sold to fund early margin calls (yes, institutionals are that levered right now). As for the US decoupling story, which time after time is dragged out, only to be shelved once the impact of trillions in liquidity fades, and which is never different this time, here is none other than Bank of America explaining to the likes of Pisani why "the US economy is likely to prove a faulty engine of global growth." Read - no decoupling, despite what the market may be trying to say. And yes, the market, and especially the Russell 2000 is never the economy.

US And European Equities Retrace To Credit's Pessimism

In the last week, both European and US equity markets have valiantly attempted to extend their rally into the stratosphere while the credit market has summarily dismissed this exuberance as 'oh those silly algo-driven momo monkeys'. Yesterday and today we have seen equities in both regions retrace aggressively to the much more realistic, liquidity spigot-lacking margin-compressing growth-slowing reality that credit has been pricing in.

Art Cashin On The End Of The "LTRO Effect"

We have previewed the phasing out of the LTRO effect previously here on several occasions. Now, courtesy of Art Cashin, everyone is aware that the eye of the European hurricane has officially passed, especially in the aftermath of this morning's horrendous Spanish bond auction, which shows that reality is back with a bang.

Hope Fades As London 'Superstar' FX Trader Is Arrested

How the self-described 'mighty' have fallen. It was a month ago when we first heard of this mysterious British FX trader who dropped $300k in a Liverpudlian nightclub on a bottle of champagne that weighed more than the models he was 'dating' that night. The 'talented, charismatic, and likable' Alex Hope has been arrested by London's Financials Services Authority (FSA) in connection with an investigation into a suspected unauthorized FX trading scheme. As City A.M reports this morning, Hope's publicist confirms he is the 23 year old in question - though he 'obviously' denies all allegations. The schadenfreude on London's FX 'trading' desks (as opposed to bucket-shop retail-mauling FX 'brokerage' shops) is palpable from what we hear as 'it couldn't have happened to a nicer guy' echoes off the City's pub ceilings. As yet no charges have been filed - we await with baited breath for the sad truth to be outed.

Live Mario Draghi Press Conference Webcast

The Mario Draghi press conference, in which the Goldman alum will spin tall tales of recovery, is set to begin. Watch it live here. If there are any notable changes to ECB policy, which is not expected, we will be sure to note.
Key highlights:

• ECB'S DRAGHI SAYS ECONOMIC OUTLOOK SUBJECT TO DOWNSIDE RISKS
• DRAGHI SAYS `DOWNSIDE RISKS' PREVAIL ON REGION'S GROWTH OUTLOOK
• DRAGHI SAYS ECB SEES INFLATION UPSIDE RISKS PREVAILING IN 2012
• DRAGHI SAYS NON-STANDARD MEASURES WILL NEED TIME TO SHOW IMPACT
• DRAGHI SAYS IMPORTANT FOR BANKS TO STRENGTHEN BALANCE SHEETS
• DRAGHI SAYS BANKS SHOULD RETAIN EARNINGS TO STRENGTHEN - And nationalize losses?

 

 

ADP Comes Right On Target

And... goldilocks. The ADP report, which was expected to print at 206K came just where it was expected, at 209K, almost magically so, in what is probably the closest number to consensus in a long time. The previous number was revised to 230K, which means this was the 2nd drop in 3 months, and the first drop of the 3 month rolling average in the past 6 months: peak private jobs? And while the ADP has historically been a horrendous predictor of the NFP headline, this gives no actionable hint to those wishing to trade the payroll data, which in turn means that if Bernanke wants to undo his "New QE" skepticism, the decision will have to wait until Friday when equities are closed.

ECB Keeps Rates Unchanged As Expected

No surprise in today's ECB announcement. The Press conference in 45 minutes is also expected to be largely a non-event, although we will be delighted to hear Mario's response to the quality of Europe's collateral backing the trillions in fresh discount window borrowings spent on buying up Spanish and Italian bonds, which are gradually going underwater.

Man Commits Suicide In Broad Daylight On Athens' Syntagma Square To Protest "Occupation Government"

The Arabian Spring started after the self-immolation of a 26 year old fruit vendor in Tunisia to protest a life he could no longer live. Will the European Summer set off with a suicide as well? News are crossing that a few hours ago, a 77 year old Greek has killed himself in broad daylight on Athens' symbolic and inappropriately named Syntagma square to protest the "occupier government" and not wanting to be a burden to his child. As Kathimerini reports, "an elderly man committed suicide on Friday morning in Syntagma Square in Athens, in front of Parliament. Some reports said witnesses claimed the man shouted «I don't want to leave debts to my children,» before he shot himself in the head. According to Skai TV, witnesses said the man did not say anything. The incident occurred shortly before 9 a.m. when the square was full of people and commuters using Syntagma metro station. The man had positioned himself next to a big tree and was not in view of most people in the square. Two people who were sitting on a bench some 10 meters away have been questioned by the police." Will this latest tragedy provoke a groundswell popular response? We doubt it - alas the status quo appears set to continue chugging along as per usual, taking advantage of appathetic and welfare addicted societies around the world.

Sentiment: Deep Red As Europe Is Back With A Thud

Oh where to begin. The weakness in the markets started late last night when Australia posted a surprising second consecutive deficit of $480MM on expectations of a $1.1 billion surplus (with the previous deficit revised even higher). This is obviously quite troubling because as we pointed out 3 weeks ago when recounting the biggest Chinese trade deficit since 1989 we asked readers to "observe the following sequence of very recent headlines: "Japan trade deficit hits record", "Australia Records First Trade Deficit in 11 Months on 8% Plunge in Exports", "Brazil Posts First Monthly Trade Deficit in 12 Months " then of course this: "[US] Trade deficit hits 3-year record imbalance", and finally, as of late last night, we get the following stunning headline: "China Has Biggest Trade Shortfall Since 1989 on Europe Turmoil." So who is exporting? Nobody knows, but everyone knows why the Aussie dollar plunged on the headline. The shock sent reverberations across Asian markets, which then spilled over into Europe. Things in Europe went from bad to worse, after Germany reported its February factory orders rose a modest 0.3% on expectations of a solid 1.5% rebound from the -1.8% drop in January. But the straw on the camel's back was Spain trying to raise €3.5 billion in bonds outside of the LTRO's maturity, where the results confirmed that it will be a long, hard summer for the Iberian country, which not only raised far less, or €2.6 billion, but the internals were quite atrocious, blowing up the entire Spanish bond curve, and sending Spanish CDS to the widest in over half a year.

 

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