• Tag Archives Bank Of America
  • Bank Of America: “This Could Send The Nasdaq To 10,000”

    Last weekend, One River’s CIO Eric Peters explained what he thought would be the nightmare scenario for the next Fed chair, who as we now know will either be Jerome Powell or John Taylor, or both (with an outside chance of Yellen remaining in her post). According to the hedge fund CIO, the “worst case scenario” is one in which despite an improving economy, yields simply refuse to go up, leading to the final asset bubble and Fed intervention that “pops” it:
    ‘if we don’t see a sustained cyclical jump in wages, then yields won’t go up. And if yields don’t go up, then the asset price ascent will accelerate,’ continued the strategist. ‘Which will lead us into a 2018 that looks like what we had expected out of 2017; a war against inequality, a battle for Main Street at the expense of Wall Street, an Occupy Silicon Valley movement.’ He paused, flipping through his calendar. “Then you’ll have this nightmare for the next Federal Reserve chief, because they’ll have to pop a bubble.’ While Peters never names names in his pieces, the “strategist” in the weekend letter was BofA’s Michael Hartnett, who several days after Peters penned the above, followed up with some thoughts of his own on precisely this topic, and in a note released this week, described what he believes is the “biggest market risk” for the market. Not surprisingly, it is precisely what Peters was referring to in the above excerpt.

    This post was published at Zero Hedge on Oct 20, 2017.

  • Why US Tax Reform Will Put Even More Pressure On Dollar Funding Markets

    On Wednesday, we noted the renewed tightness developing in dollar funding markets. Ignoring embryonic signs of stress in the financial ‘plumbing’ can be dangerous. The divergence of LIBOR from Fed Funds on 9 August 2007, which occurred two months prior to the peak in the Dow, always comes to mind. Fast-forwarding to the present when Mark Cabana, Bank of America’s head of US STIR, has been fielding client questions about the impact of proposed US tax reform. In particular, clients asked for Cabana’s view on what effect dollar repatriation by US corporates might have on funding markets if favorable tax treatment is forthcoming.
    Spoiler alert – negative for dollar funding markets (and of course positive for the dollar).
    Cabana explains ‘As Washington has increasingly focused on tax reform, clients have asked questions about how repatriation might impact the front end of the US rates curve. While there are still many unknown elements of the plan, we believe repatriation could provide modest upward USD funding pressure for foreign banks but likely leave the overall stock of commercial paper outstanding little changed.’

    This post was published at Zero Hedge on Oct 20, 2017.

  • BofA Beats Despite 22% Plunge in FICC Revenue, Credit Loss Provision Jumps 15%

    Mirroring the pattern set by JPM and Citi yesterday, Bank of America reported revenue and earnings that modestly beat expectations, with Q3 revenue of $21.8BN and $22.1BN on an adjusted, FTE basis, just above the $21.9BN consensus estimate, generating net income of $5.6 billion (up 13% Y/Y), and EPS of $0.48, above the $0.46 estimate, and higher than the $0.41 reported Y/Y, even as sales and trading revenues slumped, and FICC revenue tumbled by 19%.
    Net interest income increased 9% for the second consecutive quarter, or $1.0B, to $11.4B. BofA achieved this as its Net Interest Yield (i.e. NIM) rose fractionally from 2.34% in Q2 to 2.36% in Q3, a number just barely higher than the 2.35% expected. As the bank explained, the Net Interest Income increased “reflecting the benefits from higher short-end interest rates, loan growth and one additional interest accrual day, partially offset by higher deposit pricing in GWIM and the full quarter impact from the sale of the non-U. S. consumer credit card business.”
    BofA also gave the following interest rate sensitivity as of Sept 30: “+100bps parallel shift in interest rate yield curve is estimated to benefit NII by $3.2B over the next 12 months, driven primarily by sensitivity to short-end interest rates.”

    This post was published at Zero Hedge on Oct 13, 2017.

  • Global Stocks Hit New Record High, Dollar Mixed After Dovish Fed

    In a trend observed every day this week, S&P futures are slightly in the red ahead of a post-open ramp with the VIX rising to 9.91, as Asian shares climb, European stocks are little changed. WTI crude pares recent gains, slipping below $51 after API showed an unexpected crude build. Earnings season launches with bank earnings reports from JPMorgan and Citigroup, while Economic data include PPI figures, jobless claims.
    As Reuters notes, broader investor risk sentiment has improved this week after Catalonia dialed back plans to break away from Spain, with MSCI’s 47-country world stocks index reaching a record high. Global equities now appear to be taking geopolitical developments such as the secessionist push in Spain and tensions on the Korean peninsula in their stride, to reach those record tops.
    Analysts will be keeping a close eye on banks Q3 reports: Trading probably dropped from the same period a year earlier. Executives from JPMorgan, Citigroup and Bank of America Corp. told investors last month to expect declines ranging from 15 percent to 20 percent. Goldman Sachs Group Inc., coming off its worst first half for the trading business in more than a decade, said the third quarter remained challenging. Subdued volatility, especially compared with the turmoil from Brexit and the U. S. election a year earlier — made the period particularly tough.

    This post was published at Zero Hedge on Oct 12, 2017.

  • October Realized Volatility Is Now The Lowest On Record

    After September was declared the lowest volatility month on record, October is starting auspiciously, if only for the vol sellers.
    After last week stocks rose again on renewed hopes of a Trump tax deal and following a payrolls report which showed the hottest wage inflation since the financial crisis, the S&P 500 closed the week 1.19% higher, while the Russell 2000 added 1.30%, the NASDAQ 100 increased 1.43%, and the Dow gained 1.65%.
    And while implied vol limped up slightly week-over-week as the VIX increased 0.14 points to 9.65 last Friday, this was the eighth consecutive close below 10. However, on Thursday the VIX closed at 9.19, the lowest close of all time. The trend appears set to continue, because as Bank of America’s derivatives expert Benjamin Bowler writes while October tends to have the highs volatility of all months of the year, this time is different and currently the annualized month-to-date realized vol for the S&P is 5.22%, the lowest October we’ve seen on record spanning back to 1928. For comparison, the median SPX realized vol in October is 17.22%, while the 1st percentile is 6.15%. Interestingly, the other four lowest vol Octobers were all in the 1960s (’61, ’64, ’65, and ’68), the period prior to “The Great Inflation” and rapidly rising rates of the 1970s.

    This post was published at Zero Hedge on Oct 10, 2017.

  • Meet The Next Fed Chair: The Definitive Cheat Sheet

    With the race for the next Fed chair in its final stretch as Trump is now expected to make his decision over the next few weeks, and following recent reports from Bloomberg, Politico and the WSJ, the three frontrunners to replace Yellen, according to PredictIt, are Kevin Warsh, Jerome Powell, Gary Cohn and unexpectedly, Neel Kashkari, following yesterday’s endorsement by Jeff Gundlach…

    … Bank of America has put together a handly cheat sheet laying out a summary of the major views by the 4 key contenders.
    Focusing on the top four candidates, BofA, predictably, sees Warsh as the most hawkish and most likely to change the way the Fed conducts monetary policy, leaning toward rules-based policy. BofA also thinks Warsh would favor a lower ultimate size of the balance sheet but would be a strong proponent of deregulation. Meanwhile, Powell is the establishment candidate who won’t ‘rock the boat’ as his stance is consistent with the current framework of the Fed. As for Cohn, he would likely lean a bit more dovish and emphasize putting in place monetary policy to complement fiscal policy reform.
    Here is the full breakdown, according to BofA, which shows just how “unconventional” Warsh is in the context of his peers.

    This post was published at Zero Hedge on Oct 4, 2017.

  • “The End Of The QE Trade”: Why Bank of America Expects An Imminent Market Correction

    Last Friday, when looking at the historic, record lows in September volatility and the daily highs in US and global equity markets, BofA’s chief investment strategist Michael Hartnett said that the “best reason to be bearish in Q4 is there is no reason to be bearish.”
    That prompted quite a few responses from traders, some snyde, a handful delighted (some bears still do exist), but most confused: after all what does investors (or algo) sentiment have to do with a “market” in which as Hartnett himself admits over $2 trillion in central bank liquidity has been injected in recent years to prop up risk assets.
    To explain what he meant, overnight Hartnett followed up with an explainer note looking at the “Great Rotation vs the Great DIsruption”, in which he first reverted to his favorite topic, the blow-off market top he dubbed the “Icarus Rally”, which he defined initially nearly a year ago, and in which he notes that “big asset returns in 2017 have been driven by big global QE & big global EPS.”
    But mostly “big global QE.”
    And with global QE continuing, Hartnett, who two months ago predicted a volatile fall (and winter), now sees that Icarus ‘long risk’ trade extended into autumn “by low inflation, big liquidity ($2.0tn central bank buying), high EPS, and promise of US tax reform.”

    This post was published at Zero Hedge on Oct 2, 2017.

  • Look Who Kalanick Just Appointed To The Uber Board Without Consulting Anyone

    It looks like Travis Kalanick is preparing for all-out war in the Uber boardroom.
    The Uber co-founder and former chief executive officer – who retains control over three board seats, including his own – has finally filled his long-vacant seats. And guess whom he picked to fill them? Former Xerox Corp. Chairwoman and CEO Ursula Burns…and former Merrill Lynch Chairman and CEO John Thain, “ratcheting up a Machiavellian battle for control of the world’s most valuable startup” as Bloomberg put it. Uber immediately challenged the appointments, calling them “a complete surprise.”
    ‘I am appointing these seats now in light of a recent board proposal to dramatically restructure the board and significantly alter the company’s voting rights,’ Kalanick said in a statement emailed to Bloomberg. ‘It is therefore essential that the full board be in place for proper deliberation to occur, especially with such experienced board members as Ursula and John.’
    As many may remember, Thain was the last CEO and chairman of Merrill Lynch before it was absorbed by Bank of American during the financial crisis. The last leader of an independent Merrill Lynch was roundly criticized for the same venal behavior as other too-big-to-fail CEOs – BOA paid a $16.7 billion fine in 2014, at the time the largest single settlement in US history, partly for Merrill’s witholding of crucial information (namely, that the products were stuffed with garbage subprime loans while being marketed as AAA) to buyers of its MBS and CDO products. There was, of course, also the whole $35,000 “commode on legs” incident as part of Thain’s $1.2 million office redecoration (which also included $17,100 traveling toilet boxes and a $15,000 dog umbrella stand).

    This post was published at Zero Hedge on Sep 30, 2017.

  • Bank of America: “The Best Reason To Be Bearish Is…There Is No Reason To Be Bearish”

    Back in mid-July, Bank of America chief investment strategist Michael Hartnett wrote “The Most Dangerous Moment For Markets Will Come In 3 Or 4 Months” in which he warned that “further upside in risk assets will create problems later in the year” and concluded that “ultimately, we believe the extremely strong performance by equities and bonds in H1 is very unlikely to be repeated in H2” because “monetary policy will have to tighten to raise volatility, reduce Wall St inflation, and reduce inequality. There are two ways to cure inequality: you can make the poor richer, or you can make the rich poorer. The Fed will reduce its balance sheet in the hope of making Wall St poorer.”
    Or maybe not, because almost three months later, the same Hartnett today writes that the “best reason to be bearish is…there is no reason to be bearish.” and admits that the “Icarus ‘long risk’ trade extended into autumn (Humpty-Dumpty “great fall” postponed a tad longer) by low inflation, big liquidity ($2.0tn central bank buying), high EPS, and promise of US tax reform”, noting that the “monster rally in credit and equity markets began 18 months ago when best reason to be bullish was there was no reason to be bullish.”
    And with the VIX approaching all time lows as the S&P hits another daily high, the BofA strategist reiterates that his “Icarus Rally” price targets for Q4 remains 2630 in the S&P, 6666 on the Nasdaq, and the 10-year Treasury hitting 2.85%, as the rising dollar pushed the EURUSD down to 1.15. So what will prompt Q4 peak in the market? According to the BofA strategist, the catalyst will be a “Q4 “top” driven by tax reform, i.e. “peak Policy, a rise in MOVE index, and a peak RMB.
    As Hartnett details further, here are the three catalysts that could end the current period of record complacency. Tax reform = “peak policy” = buy rumor, sell fact…but too early to sell fact; tax reform = quicker Fed balance sheet reduction and less share buybacks if capex accelerates (since 2009 lows S&P equity market cap up $15.3tn, Fed’s balance sheet up $4.5tn, share buybacks up $3.5tn) Big jump in the MOVE index of US Treasury market volatility (i.e. “bond shock”) catalyst for cross-asset vol, but requires inflation to rise

    This post was published at Zero Hedge on Sep 29, 2017.

  • The Killing of History ~John Pilger

    One of the most hyped ‘events’ of American television, The Vietnam War, has started on the PBS network. The directors are Ken Burns and Lynn Novick. Acclaimed for his documentaries on the Civil War, the Great Depression and the history of jazz, Burns says of his Vietnam films, ‘They will inspire our country to begin to talk and think about the Vietnam war in an entirely new way’.
    In a society often bereft of historical memory and in thrall to the propaganda of its ‘exceptionalism’, Burns’ ‘entirely new’ Vietnam war is presented as ‘epic, historic work’. Its lavish advertising campaign promotes its biggest backer, Bank of America, which in 1971 was burned down by students in Santa Barbara, California, as a symbol of the hated war in Vietnam.
    Burns says he is grateful to ‘the entire Bank of America family’ which ‘has long supported our country’s veterans’. Bank of America was a corporate prop to an invasion that killed perhaps as many as four million Vietnamese and ravaged and poisoned a once bountiful land. More than 58,000 American soldiers were killed, and around the same number are estimated to have taken their own lives.
    I watched the first episode in New York. It leaves you in no doubt of its intentions right from the start. The narrator says the war ‘was begun in good faith by decent people out of fateful misunderstandings, American overconfidence and Cold War misunderstandings’.

    This post was published at 21st Century Wire on SEPTEMBER 22, 2017.

  • Three Reasons Why Retail Sales Are About To Disappoint Bigly

    On Friday the Department of Commerce will report August retail sales, a material report which all else equal, may influence whether the Fed proceeds with its plans to unveil balance sheet tapering in its upcoming FOMC meeting. However, as we discussed last week, the report, together with virtually all other high frequency economic reports, will be materially distorted by the destructive aftermath of hurricane Harvey (Irma’s impact will be felt in the September retail report).
    While Goldman recently showed the historical impact of hurricanes and other natural disasters on virtually every economic data series…
    … of particular interest in the coming days will be the biggest driver behind the US economy, namely retail spending, and specifically whether the recent natural disasters led to a sharp – and potentially sustained – slump. According to internal Bank of America credit and debit card spending data released as usual just days ahead of the official government report, there does appears to be a substantial adverse impact. The question is how much of this is secular, and how much is a continuation of recent weakness in retail spending. Further complicating matters is a seasonal quirk, with the August spending report coming at the peak “back to school” spending period, coupled with the recent Amazon Prime Day which led to further distortions in retail spending patterns.

    This post was published at Zero Hedge on Sep 14, 2017.

  • “Dr.Copper”‘s Contango Crushes Economic Hype

    We warned two weeks ago that China’s “Bronze Swan” was looming as the crackdown on leverage in the system by Chinese authorities may be forcing unwinds of the CCFDs – thus putting upward pressure on Copper futures (unwinding short positions) and selling physical copper (which would mean procuring the physical metal before passing it on). Those effects were exactly what we had been seeing in the market until the end of August.
    And now, it appears, as StockBoardAsset.com notes, exhaustion has started to set in across industry metals…
    Barclays has also called the copper rally overhyped, while Bank of America Merrill Lynch said it’s the metal most at risk of a reversal, with the optimism of investors in financial futures disconnected from slow conditions in the physical market.
    ‘When you look at the state of the refined copper market, you certainly question why prices have risen so significantly,’ Snowdon said by phone from London.

    This post was published at Zero Hedge on Sep 14, 2017.

  • Bank of America Stumbles On A $51 Trillion Problem

    At the end of June, the Institute of International Finance delivered a troubling verdict: in a period of so-called “coordinated growth”, total global debt (including financial) hit a new all time high of $217 trillion in 2017, over 327% of global GDP, and up $50 trillion over the past decade. Commenting then, we said “so much for Ray Dalio’s beautiful deleveraging, oh and for those economists who are still confused why r-star remains near 0%, the chart below has all the answers.”

    Today, in a follow up analysis of this surge in global debt offset by stagnant economic growth, BofA’s Barnaby Martin writes that he finds “that as global debt has been mounting to more than $150 trillion (government, household and non-financials corporate debt), global GDP is just above $60 trillion.” His observation is shown in the self-explanatory chart below.

    This post was published at Zero Hedge on Sep 13, 2017.

  • How Harvey And Irma Will Slam The US Economy: A Complete Walk Thru From BofA

    Last week, before the full devastation from Hurricane Harvey was unveiled, Goldman and JPM were the first banks to suggest that the storm’s impact on US GDP would be modest: a slight decline in Q3 growth, offset by a similary modest rebound in Q4 and further as emergency funds “trickled down” through the economy. Now, with more clarity on just how destructive the storm has been, other banks are coming out and they are not nearly as confident that the damage from Harvey will be “modest” – in fact, according to a just released analysis from Bank of America, Harvey will result in at least a 0.4% hit to Q3 GDP, which has reduced BofA’s Q3 GDP estimate to 2.5%…. and that excludes Irma.
    Here’s Michelle Meyer explaining why in just a few weeks, all the economic misses will be blamed on, you guessed it, hurricanes.
    First came Harvey, next comes Irma Hurricane Harvey crashed down on the shores of Texas, leaving behind record flooding and destruction. According to early estimates, Harvey may end up being the most expensive natural disaster in the US since 1980, costing $70-108bn (Table of the day). Thousands of people have been impacted. We are now actively monitoring Hurricane Irma, which threatens to hit the coast of Florida over the weekend.

    This post was published at Zero Hedge on Sep 8, 2017.

  • ‘Things Have Been Going Up For Too Long’ – Goldman CEO

    – ‘Things have been going up for too long…’ – Goldman Sachs’ CEO
    – Lloyd Blankfein, Goldman CEO ‘unnerved by market’ (see video)
    – Bitcoin bubble is no outlier says Bank of America Merrill Lynch
    – Bubbles are everywhere including London property
    – $14 trillion of monetary stimulus has pushed investors to take more risks
    – We are now in a new era of bigger booms and bigger busts – BAML
    – ‘Seeing signs of bubbles in more and more parts of the capital market’ – Deutsche Banks’ John Cryan
    – Global debt bubble and China very vulnerable too – warns Steve Keen
    – Bubbles, bubbles everywhere … lots of potential pins … got gold?
    Editor: Mark O’Byrne
    The B word is something which is almost whispered in financial circles. To acknowledge there might be a bubble somewhere is like admitting the proverbial elephant is in the room.
    But, like many taboo words, it seems the mainstream are coming around to the idea that it is ok to mention the word ‘bubble’ and express their concerns about the possibility of at least one existing.

    This post was published at Gold Core on September 7, 2017.

  • Bank of America; “This Could Get Ugly, We Think”

    Instead of finding new and creative ways of BTFD, overnight the BofA credit team did something so few finance professionals bother with these days: they looked at fundamental data to reach a conclusion that is independent of how much AAPL stock the SNB will have to buy to send the Dow Jones green. Specifically, the bank looked at the liquidity situation in the bond market (specifically the IG space), and found that while for the time being there is little to worry about, once the central bank put melts away, that’s when the real test will take place. And, as BofA puts it bluntly, “this could get ugly, we think.”
    As the bank’s credit strategist Hans Mikkelsen explains, high grade corporate bond trading has doubled over the post-crisis years (Figure 1). However, as the size of the market tripled that means the overall market has become less liquid due to a number of post-crisis changes, including financial regulation and most prominently the Volcker Rule, but also less leverage in the system. For example, while annual trading volumes in the HG corporate bond market were 135% of the size of the market back in 2006, that same tracking statistic is only 86% for 2017 (figure 2).

    This post was published at Zero Hedge on Aug 29, 2017.

  • Negative interest rates have come to America

    One of the truly mind-boggling absurdities in modern finance has been the creation of ‘negative interest rates’ around the world.
    Negative interest rates are particularly prominent in Europe.
    Starting back in 2014, the European Central Bank (ECB) slashed its main interest rate to below zero.
    One bizarre effect of this policy is that some banks have passed on these negative interest rates to their retail depositors.
    This trend has persisted across Europe, Japan, and many other parts of the world.
    Yet at least Americans were able to breathe a sigh of relief that negative interest rates hadn’t crossed the Atlantic.
    Well, that’s not entirely true.
    Recently I was reading through Bank of America’s most recent annual report; it’s filled with some shocking facts about the -real- level of wealth in the Land of the Free… which I’ll tell you more about next week.

    This post was published at Sovereign Man on August 25, 2017.

  • The Cost Of Market Crash Insurance Just Hit A Record High

    With the VIX surging, and then quickly getting pummeled on two occasions in the past three weeks, dizzy traders could be forgiven to assume that any latent “risk off” threat, whether from North Korea or the US political front, has been taken off the table. However, a deeper look inside the vol surface reveals something very different: with increasingly more analysts and traders warning that volatility is set for a sharp return this fall, equities have already been adjusting to the increased probability of a “tail event.” However, instead of buying VIX futures, call or ETPs, they have been doing so by bidding up the price of OTM equity put options, or equivalently, by steepening the S&P 500 put skew and.
    As a reminder, a put skew shows how much more expensive it is to buy deep OTM puts vs puts that are in the money or in other words, a levered bet on (or hedge against) a market crash.
    And as the following chart from Bank of America shows, the S&P put skew is now at the highest level on record, making the relative price of tail hedges the highest in 13 years as traders are quietly bracing for a sharp market crash.

    This post was published at Zero Hedge on Aug 24, 2017.

  • S&P Futures, Euro, Stocks Fall After Fed’s Low Inflation Warning

    S&P futures, European stocks and bond yields all fell in early trade alongside oil and the euro after the latest Fed minutes expressed concern over weak U. S. inflation, while Asian equities rose overnight ahead of WalMart earnings and the latest ECB minutes. Gold rose as high as $1,290 before fading most gains as the USDJPY rebounded. Fund futures are now pricing in about a 40% chance the Fed will raise rates by December, compared to 50% before the Fed’s minutes.
    Last week’s market turmoil and resultant near record jump in volatility in the wake of heightened tensions between the U. S. and North Korea has continued to ease, bringing down gauges of equity and bond volatility and repairing most of the damage done to stock markets, in fact as Bank of America showed, the retracement in the VIX on Monday was among the fastest on record.

    This post was published at Zero Hedge on Aug 17, 2017.

  • Record Number Of Fund Managers Say “Stocks Are Overvalued” As They Rush To Buy Nasdaq

    Another month, another paradox emerges in the latest Bank of America Fund Managers Survey, which on one hand reveals that a record number, or 46%, of Wall Street respondents say stocks are “overvalued”…
    … even as the number of investors expecting a “Goldilocks” economic scenario of above-trend growth and below-trend inflation, hit a record high 42%…

    This post was published at Zero Hedge on Aug 15, 2017.