Defaults and Restructuring Next for Retailers

It’s getting tough for our over-indebted, junk-rated LBO queens.
As so many times, there’s a private equity angle to it: the cycle of LBOs, debts, and defaults.
Many retailers are over-indebted, junk-rated LBO queens, some dating from the LBO boom that ended so spectacularly in 2008: luxury chain Neiman Marcus, supermarket chain Albertsons, J. Crew Group, 99 Cents Only Stores, Bon-Ton Stores, jewelry and accessory retailer Claire Stores….
They’re now bogged down in the current brick-and-mortar retail quagmire. Strip away booming auto sales and soaring internet sales: the rest of retail is tough. And many of these retailers are trying to balance precariously above their heads the pile of debt thrown at them over the years by their private equity owners.
The vast majority of retailers are junk-rated, with the ‘B’ category dominating the rating scale, according to S&P Capital IQ Global Credit’s retail report.
It was already tough last year: of the Standard & Poor’s rated US retailers, 11 defaulted – the most since crisis-year 2009. And for 2016, we already have this to look forward to: 24 S&P-rated retail and restaurant bond issues (which S&P lumps together) have plunged so much that they’re now trading at ‘distressed levels’ and are included in the Standard & Poor’s Distress Ratio.
The ratio (more, including the chart here) is the proportion of junk-rated bonds with yields that exceed Treasury yields by at least 10 percentage points. This category of retailers and restaurants is now in third place in the Distress Ratio, behind the doom-and-gloom categories of ‘Energy’ and ‘Metals, Mining, and Steel.’
So 2016 is going to be even tougher for retailers. And it might drag out. Thanks to refinancings at the tail end of the great credit bubble when everything was possible, and thanks to the still low interest rate environment, liquidity is ‘adequate’ for many retailers for 2016. But the report sees a number of risks beyond liquidity this year, among them:

This post was published at Wolf Street by Wolf Richter ‘ January 6, 2016.

Gold and Silver Market Morning: Jan-6-2016

Gold Today -The New York gold price closed Monday at $1.078.50. In Asia it held there but in London it broke higher to see the LBMA price set at $1,083.85 up from yesterday’s $1,078.00 with the dollar index higher at 99.42 up from 98.94 yesterday. The euro was at $1.0741 down from $1.0902 against the dollar. The gold price in the euro was set at 1,009.03 up from 1,001.86 as the euro continued weakening. Ahead of New York’s opening, the gold price was trading at $1,086.25 and in the euro at 1,011.08.
Silver Today -The silver price in New York closed at $13.99 up 13 cents. Ahead of New York’s opening the silver price stood at $14.00.
Gold (very short-term) The gold price will be stronger in New York today.
Silver (very short-term) The silver price will be stronger in New York today.
Price Drivers
Please note that gold continues to rise with the dollar as the euro’s fall is heavy again! We continue to watch the Dollar Index and euro support at $1.07. It could slip to $1.05 which remains support as does $1.07.

This post was published at GoldSeek on 6 January 2016.

Bank Bulls Bust As Fed “Error” Boosts Bearish Bets

Just as we saw in the August collapse, US financial stocks appear to be facing the harsh reality that other markets already recognize. While US financial credit markets have been anything but exuberant for weeks, equity options markets have now turned their bullish backs on the banks as Bloomberg reports theratio of bearish to bullish options on the S&P Financials ETF has climbed to the highest level in a year this week, reflects rising demand for protection against losses as NIM hopes collapse and Fed “error” probabilities increase.

This post was published at Zero Hedge on 01/06/2016.

Betting on Deflation May Be a Huge Mistake. Here’s Why…

Precious metals investors heading into 2016 worry the dollar will continue marching ahead, right over the top of gold and silver prices. The Fed is telegraphing additional rate hikes throughout the year, and commodity prices – led by crude oil – are falling. There have been tremors in the biggest beneficiary markets of all when it comes to the Fed’s QE largesse – U. S. equities and real estate. And the possibility of a recession is growing, both in the U. S. and around the world.
There are plenty of reasons we might see even lower official inflation numbers and a stronger dollar in 2016. But don’t think for a second that consumer prices or living costs will fall. They haven’t, they aren’t, and they never will in a sustained way – thanks to the Fed’s creation in 1913. This is where thedeflationists have it wrong.
The impact of further disinflationary forces or even a deflationary episode on precious metals prices is a bit harder to predict.
The bear case for precious metals is rather simple. Should metals trade like commodities, they are likely to follow other raw materials lower. If we get a liquidity crunch akin to the 2008 financial crisis, just about everything will be sold as investors raise cash to meet margin calls or flee to the dollar as a perceived safe-haven.

This post was published at GoldSilverWorlds on January 5, 2016.

Will Weak Closes Drag Markets Down?

Our Gavekal Capital Net Close Indicator is designed to help get a sense of investors’ conviction level. It is calculated by subtracting the value of the Weak Close Indicator from that of the Strong Close Indicator, each of which counts the number of times (over the previous six months) that stocks closed in the bottom (or top, respectively) quartile of their daily trading range. Typically, the Net Close Indicator expands during a rising market (as strong closes dominate) and falls as prices decline.
Currently, however, the Net Close Indicator appears to be struggling to move up from levels last seen during 2011 and, before that, 2008 – all while the S&P 500 remains within 5% of the highs it reached in 2015:

The large gap between index price levels and our Net Close Indicator is not unique to the U. S., either – other major stock markets around the world are exhibiting varying degrees of internal weakness.

This post was published at Zero Hedge on 01/06/2016.

Reader Asks About “Limited Supply of Homes”; Home Hunting in California

Reader Brendan from California has some questions about housing. He writes …
Hello Mish
I have messaged several Certified Financial Advisors and housing experts about the pending housing outlook for 2016 and 2017. Many suggest housing is related to oil and the stock market. Others say employment outlook and QE play a role.
According the NAR, “there is a limited supply of homes” thus the demand will continue.
What do you think?
We are saving to buy a home, but continue to get priced out of the market. I am doing everything possible to make a good family decision.
Thanks
Brendan
Don’t Rush!
Hello Brendon. First off I commend you for seeking multiple opinions and not rushing into anything.
That said, please recall the alleged shortage of homes in 2005 and 2006. There was no shortage was there?
Rather, there was an increasing number of people willing to pay any price to get in.

This post was published at Global Economic Analysis on January 06, 2016.

Liberland

Global Gold Talks to Vt Jedlika, the President of Liberland
Vt Jedlika is a Czech politician, publicist and activist. He received his Bachelor’s degree from the University of Economics, Prague in 2009 and his Master’s degree from CEVRO Institut in 2014. Since 2009, he has been a member of the Free Citizens Party, where he was elected the first Regional President in the Hradec Krlov Region. Vt Jedlika considers himself a libertarian with liberal views on individual freedom and has described himself as a Bastiat-influenced anarcho-capitalist.
Jedlika is also a Eurosceptic and highly critical of the European Union as an institution, as well as the general conduct of some of its member states. On 13 April 2015, he founded and proclaimed the Free Republic of Liberland on land between Serbia and Croatia unclaimed by either nation and became its first president.
Claudio Grass Interviews Vt Jedlika
Claudio Grass, Global Gold: Vit, it is a pleasure to have this opportunity to talk to you. Let’s dive right in and start with the topic that made headlines this year: Liberland. Can you tell us when you first envisioned the idea of creatingLiberland? Could you explain to us the ideas and events that led you to take this step and how this project came to life?
Vt Jedlika: Most people that come to this world wonder how they can make it a better place. I was no exception. When I started understanding the world at the age of around six, we had the Velvet Revolution in the Czech Republic. Lots of things dramatically changed for the better. That convinced me that things could be improved even more. When I was 13, I read ‘The Law’ by Frdric Bastiat. This book motivated me to get politically involved and to stand up for more economic freedom in the world. I spent the last five years campaigning in the Czech Republic for lower taxes and less regulation. Our Libertarian party now even has one member in the European Parliament, but to me this simply is not enough. Libertarian and free market concepts are often dismissed, because as the argument goes ‘they don’t work in the real world’. I created Liberland to create an example of how these concepts can be implemented in reality.
Global Gold: What would you consider the core values that the state of Liberland is built on to be?

This post was published at Acting-Man on JANUARY 6, 2016.

A MUST-SEE INTERVIEW WITH EX-MARINE TURNED ANTI-WAR ACTIVIST, KEN O’KEEFE

You might just know me as the Dollar Vigilante, but in my spare time I’m also the host of the world’s largest anarcho-capitalist program, Anarchast, with millions of views on Youtube and broadcast on dozens of radio stations in the US and around the world via satellite radio.
And, while I rarely mention it or post any of the shows here, I had to post this one.


This post was published at Dollar Vigilante on JANUARY 6, 2016.

6/1/16: BRIC Composite PMIs: December

In recent posts, I covered Manufacturing sector PMIs for BRIC economies based on monthly data and Services Sector PMIs here.
Now, let’s consider Composite PMIs for BRIC:

Brazil Composite PMI fell from 44.5 on November to 43.9 in December, As the result, the economy posted 10th consecutive month of sub-50 readings, and since April 2014, Brazil’s economy registered above 50 readings in only three months, with none of these three readings being statically significantly different from 50.0. The last time Brazil’s Composite PMI posted reading statistically consistent with positive growth was in February 2013.
In December, both Manufacturing and Services sectors indicated contracting activity, with Markit concluding that ‘Private sector activity in Brazil continued to plunge in December as a deepening economic retreat contributed to a further contraction in new business. The seasonally adjusted Composite Output Index fell from 44.5 in November to 43.9 at the year end, pointing to a sharp and stronger rate of reduction. Whereas the downturn in manufacturing production eased (though remained severe), services activity declined at a quicker pace.’
Over 4Q 2015, Brazil Composite PMI averaged 43.7 which is about as bad as the average of 43.6 achieved in 3Q 2015 and much worse than already contractionary average of 49.0 posted in 4Q 2014.

This post was published at True Economics on January 6, 2016.

Gold Daily and Silver Weekly Charts – Gold Shines in Flight To Safety

A very obvious flight to safety today as global economic news sparked further market declines, although as remarked in the stock commentary the declines are still low volume and very controlled.
Silver can’t seem to get out of its own way, which is not surprising in a flight to safety. Silver’s higher beta and industrial component hold it back a bit in this kind of environment.
When silver joins in, we might start thinking of a big cyclical bottom in precious metals. This bear market leg in a generational bull market is getting very long in the tooth and the free float of gold in New York and London is getting light.
The US dollar slumped a bit, again shining the light on gold even more.
The Bucket Shop was quiet yesterday with no precious metal deliveries, and some cursory movement in the warehouses.
After the close it was announced that Greg Fleming, the President of Morgan Stanley, will be leaving the company in an unplanned manner. Morgan Stanley is a bacterial culture even amongst the moral swamp pits of Wall Street. Let’s see if there is any followup news. Perhaps he just wanted to spend more time with his family. Or he is entering presidential politics so he can spend more time with his firm’s money.

This post was published at Jesses Crossroads Cafe on 06 JANUARY 2016.

DVA Is Dead: Banks Will No Longer “Profit” From Collapsing

Nearly 7 years ago, shortly after Mark-to-Market was indefinitely suspended, and Mark-to-Unicorn as we first dubbed it was revealed, we described an odd accounting peculiarity which in the coming years would take the financial world by storm: the so-called “Fair Value Option“, and its practical offshoot, the Credit/Debt Value Adjustment (CVA or DVA).
Here was our quick and dirty explanation from April 2009:

This post was published at Zero Hedge on 01/06/2016.

JAN 6/TURMOIL IN LIBYA AS ISIS SET TO TAKE THEIR OIL FIELDS/OIL NOW IN THE 33 DOLLAR COLUMN/CHINA DOES ANOTHER DEVALUATION LAST NIGHT/GOLD BREAKS OUT OF THE 1080-1085 RESISTANCE LEVEL/SILVER HELD…

Gold: $1091.90 up $13.50 (comex closing time)
Silver $13.96 up 1 cent
In the access market 5:15 pm
Gold $1094.00
Silver: $14.02
Today, gold broke above the critical resistance level of 1080.00 and once that level was cleared, gold was off to the races. But not silver.
At the gold comex today, we had a poor delivery day, registering 0 notices for nil ounces. Silver saw 0 notices for nil oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 199.48 tonnes for a loss of 103 tonnes over that period.
In silver, the open interest fell by 674 contracts even though silver was well up in price to the tune of 13 cents with respect to yesterday’s trading and without a doubt we had more short covering. We have an extremely low price of silver and a very high OI. However we moved back into backwardation in silver at the comex up until March. The total silver OI now rests at 167,520 contracts. In ounces, the OI is still represented by .838 billion oz or 120% of annual global silver production (ex Russia ex China).
In silver we had 0 notices served upon for nil oz.
In gold, the total comex gold OI rose by 3860 contracts to 413,688 contracts as gold was up $3.30 in yesterday’s trading.
we had a 1.90 tonnes withdrawal in gold inventory at the GLD, and his gold headed straight for Shanghai / thus the inventory rests tonight at 640.97 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold, after they deplete the GLD will be the FRBNY and the comex. In silver, we had huge changes in inventory at the SLV/we had massive withdrawals of 4.28 million oz /Inventory rests at 317.797 million oz.
First, here is an outline of what will be discussed tonight:

This post was published at Harvey Organ Blog on January 6, 2016.

Just Out From Evercore ISI: “Sell All Rallies Down To 1900”

First JPM, then Citi, then UBS, then Gartman, and now, moments ago, Evercore ISI jumped on the “sell all rallies” bandwagon.
Sell All Rallies Down to 1900
China’s ill-fated decision to prop up stocks and let their currency collapse is a Titanic error in judgement with broadly bearish cross asset implications for the rest of the world. With the macro backdrop more vulnerable today than at any time since the financial crisis, and the S&P 500 and NASDAQ still near all-time highs, we anticipate a downside move to 1900 on the S&P within the first two months of the year.

This post was published at Zero Hedge on 01/06/2016.

Another 2% Yuan Devaluation Coming Up? What Are the Risks? Explaining Chinese Capital Flight

Another Yuan Devaluation Coming Up?
Currency trends suggest another yuan devaluation is coming up. Specifically, the gap between the mainland China yuan (renminbi) to the US dollar, vs. the offshore floating rate of the yuan to the US dollar is now at a record high.
The reason there are two rates is China has tight controls on the range the yuan trades in China, but the yuan floats outside China.
In contrast to previous years where traders bet the value of the yuan would rise vs. the US dollar, traders are increasingly betting China will devalue.
Explaining Chinese Capital Flight
If China had no capital controls, the onshore and offshore rates would have to be identical otherwise there would be an instant guaranteed free money arbitrage opportunity in virtually unlimited size were China to maintain a peg the market did not agree with.

This post was published at Global Economic Analysis on January 06, 2016.