• Tag Archives Bloomberg
  • Bond Market Bulls Embrace China Debt Downgrade

    It appears credit ratings agencies simply get no respect…
    Four months after Moody’s downgraded China to A1 from Aa3, unwittingly launching a startling surge in the Yuan as Beijing set forth to “prove” just how “stable” China truly is through its nationalized capital markets, S&P followed suit this week when the rating agency also downgraded China from AA- to A+ for the first time since 1999 citing risks from soaring debt growth, less than a month before the most important congress for Chiina’s communist leadership in the past five years is set to take place. In addition to cutting the sovereign rating by one notch, S&P analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt. Following the downgrade, S&P revised its outlook to stable from negative.
    ‘China’s prolonged period of strong credit growth has increased its economic and financial risks,’ S&P said.
    ‘Since 2009, claims by depository institutions on the resident nongovernment sector have increased rapidly. The increases have often been above the rate of income growth. Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent.”
    According to commentators, the second downgrade of China this year represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector, Bloomberg reported. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.
    The cut will ‘have a relatively big impact on Chinese enterprises since corporate ratings can’t be higher than the sovereign rating,’ said Xia Le, an economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. ‘It will affect corporate financing.’

    This post was published at Zero Hedge on Sep 23, 2017.


  • Japan’s Lonely Single Men Are Settling For Virtual Reality “Wives Of The Future”

    In a country where over 70% of unmarried men between 18 and 34, and 60% of women, have no relationship with a member of the opposite sex, and where birthrates are among the lowest in the world after Japanese women gave birth to fewer than one million babies in 2016 for the first time since the government began tracking birth rates, Bloomberg reports on an industry that’s profiting off the reluctance of young Japanese men and women to find a human partner.
    ***
    What Bloomberg calls the ‘virtual love industry’ in Japan has blossomed into a multi-million-dollar concern as unmarried men and women increasingly turn to simulated digital offerings for companionship. Inventors create applications that essentially allow users to build a ‘virtual wife’ or ‘virtual husband’. While we imagine virtual companions bring badly needed comfort to millions of lonely Japanese, as Bloomberg notes, the industry does have a dark side: Some virtual-reality offerings promote unrealistic and even damaging portrayals of women as submissive. And men as domineering and menacing.

    This post was published at Zero Hedge on Sep 22, 2017.


  • WTI Hovers Above $50 As US Oil Rig Count Slides To 3-Month Lows

    With crude production rebounding back to pre-Harvey levels, and refinery demand coming back on-line, WTI has trod water around $50 all week. The US oil rig count dropped for the 6th straight week (down 5 to 744), back at its lowest level since early June.
    *U. S. OIL RIG COUNT DOWN 5 TO 744 , BAKER HUGHES SAYS :BHGE US *U. S. GAS RIG COUNT UP 4 TO 190 , BAKER HUGHES SAYS :BHGE US As Bloomberg reports, it looks like shale billionaire Harold Hamm might be right in saying U. S. producers are being more cautious than government output forecasts seem to imply.
    At least that’s what the Baker Hughes weekly drilling report suggests, showing producers idled five oil rigs this week, adding to 19 parked over the previous five weeks.
    The numbers released every Friday increasingly make it look like the drilling boom might have peaked, and that should impact output down the road.

    This post was published at Zero Hedge on Sep 22, 2017.


  • Hewlett Packard Enterprise to Lay Off 10% of its Staff

    Master of share-buybacks and revenue-shrinkage does what it does best.
    Hewlett Packard Enterprise, which blew nearly $2 billion on debt-funded share buybacks over the three quarters of its fiscal year 2017, even as revenues fell 7%, will do the only other thing that, in addition to share buybacks and revenue-shrinkage, it has been doing really well for years since it was still the full-blown Hewlett-Packard: Mass layoffs.
    The company will ax about 10% of its employees. That would amount to at least 5,000 workers of its workforce of about 52,000. The cuts will hit employees, including managers, in the US and abroad, ‘people familiar with the matter’ told Bloomberg.
    CEO Meg Whitman has been redoing the company since she took the job in 2011, after she lost out in her efforts to become governor of California. At the time, Hewlett-Packard, as it was still called, had 350,000 employees. After serial layoffs came some big divestitures: PCs, printers, business services, and some software units had to go. This includes the largest breakup in US corporate history, spinning off the PC and printer division to create two companies, her HPE and the PC business, HP Inc.

    This post was published at Wolf Street by Wolf Richter ‘ Sep 22, 2017.


  • Toys R Us Bankruptcy: It’s Not All About Amazon

    Toys R Us filed for bankruptcy earlier this week, a wicked head-shot to a retail sector that’s been reeling for months.
    The TRU filing ranks as the second-largest US retail bankruptcy ever, according to S&P Global Market Intelligence.
    Toys R Us had $6.6 billion in assets at the time of filing. Only Kmart was bigger. It had $16.3 billion in assets when it went bankrupt in 2002. Crushing debt pulled the giant toy seller under. According to a Bloomberg report, the company has piled up more than $5 billion in debt. Toys R Us reportedly pays more than $400 million a year on debt service alone.
    The company says it plans to continue operating and secured a$3.1 billion operating loan to stabilize operations.
    This is the biggest and perhaps most visible retail bankruptcy of the year, but Toys R Us is far from alone. To say the retail sector is struggling would be an understatement of epic proportions. Bloomberg summed up the retail landscape pretty succinctly.

    This post was published at Schiffgold on SEPTEMBER 21, 2017.


  • A Look At How Nestle Makes Billions Selling You Groundwater In A Bottle

    A few weeks ago we shared with readers a lawsuit filed in Connecticut against Nestle Waters North America, Inc. alleging that the water they marketed as Poland ‘Natural Spring Water’ was actually just bottled groundwater…the same water that runs through the taps of many American households.
    Now a new investigation from Bloomberg Businessweek reveals how large water bottling companies choose their plant locations based not on the steady supply of pristine, natural drinking water, as their labels and other marketing campaigns would lead you to believe, but based on which economically depressed municipalities offer up the most tax breaks and have the most lax water laws.
    As an example, even in the drought stricken state of California, Bloomberg notes that Nestle was able to strike a sweetheart 20-year supply agreement with the U. S. Forest Service to pay roughly $0.000001 for the water in each bottle that consumers blindly drop a couple bucks to purchase.

    This post was published at Zero Hedge on Sep 21, 2017.


  • “So What Did We Learn From Yellen?”: Deutsche, Goldman Explain

    For those still unsure what Yellen’s rambling, disjointed press conference meant yesterday, or are still in shock over the Fed’s admitted confusion by the “mystery” that is inflation, here is a quick recap courtesy of Deutsche Bank and Goldman, explaining what we (probably) learned from the Fed and Yellen yesterday.
    First, here is DB’s Jim Reid:
    So what did we learn from the Fed and Yellen last night? Firstly we learnt that stopping reinvestment is a sideshow for now and that the market still cares more about the probability of a December hike and where the Fed thinks inflation is heading. Just briefly on the balance sheet run-off, they have committed to the plan from the June meeting of $10bn per month ($6bn USTs and $4bn Mortgages) with an incremental increase every 3 months until we get to $50bn. However on the rates and inflation outlook the committee and Yellen were on the hawkish side. As DB’s Peter Hooper discusses in his note, barring negative surprises in the months just ahead, the Fed is on track to raise rates once more this year and three times in 2018. Yellen recognised that inflation has been running low recently but put a higher blame on one-off factors than was perhaps anticipated. At the same time she noted that monetary policy operates with a lag and that labour market tightness will eventually push inflation up.
    The complication for markets though is that beyond 2017, the FOMC will see a huge upheaval in its membership which could easily mean current member’s thoughts are meaningless in a few months time and also that Mr Trump’s fiscal plans (or lack of them) have the ability to completely change the debate. So its difficult to read too much into the current FOMC’s forecasts. However for now December is very much live with the probability of a December rate hike moving from a shade under 50% to 64% by the US close (using Bloomberg’s calculator).

    This post was published at Zero Hedge on Sep 21, 2017.


  • Japan’s “Deflationary Mindset” Grows As Household Cash Hordes Reach Record High

    After being force-fed more stimulus than John Belushi, and endless rounds of buying any and every asset that dares to expose any cracks in the potemkin village of fiat folly, Japan remains stuck firmly in what Abe feared so many years ago – a “deflationary mindset.”
    As Bloomberg reports, cash and deposits held by Japanese households rose for 42nd straight quarter at the end of June as the nation’s consumers continued to favor saving over spending.

    The “deflationary mindset” that the Bank of Japan is battling to overcome was also evident in the money laying idle in corporate coffers, which stayed near an all-time high, according to quarterly flow of funds data released by the BOJ on Wednesday.

    This post was published at Zero Hedge on Sep 21, 2017.


  • S&P Downgrades China To A+ From AA- Due To Soaring Debt Growth

    Four months after Moody’s downgraded China to A1 from Aa3, unwittingly launching a startling surge in the Yuan as Beijing set forth to “prove” just how “stable” China truly is through its nationalized capital markets, moments ago S&P followed suit when the rating agency also downgraded China from AA- to A+ for the first time since 1999 citing risks from soaring debt growth, less than a month before the most important congress for Chiina’s communist leadership in the past five years is set to take place. In addition to cutting the sovereign rating by one notch, S&P analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt. Following the downgrade, S&P revised its outlook to stable from negative.
    ‘China’s prolonged period of strong credit growth has increased its economic and financial risks,’ S&P said. ‘Since 2009, claims by depository institutions on the resident nongovernment sector have increased rapidly. The increases have often been above the rate of income growth. Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent.”
    According to commentators, the second downgrade of China this year represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector, Bloomberg reported. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.
    The cut will ‘have a relatively big impact on Chinese enterprises since corporate ratings can’t be higher than the sovereign rating,’ said Xia Le, an economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. ‘It will affect corporate financing.’
    ‘The market has already speculated S&P may cut soon after Moody’s downgraded,’ said Tommy Xie, an economist at OCBC Bank in Singapore. ‘This isn’t so surprising.’

    This post was published at Zero Hedge on Sep 21, 2017.


  • Traders Yawn After Fed’s “Great Unwind”

    One day after the much anticipated Fed announcement in which Yellen unveiled the “Great Unwinding” of a decade of aggressive stimulus, it has been a mostly quiet session as the Fed’s intentions had been widely telegraphed (besides the December rate hike which now appears assured), despite a spate of other central bank announcements, most notably out of Japan and Norway, both of which kept policy unchanged as expected.
    ‘Yesterday was a momentous day – the beginning of the end of QE,’ Bhanu Baweja a cross-asset strategist at UBS, told Bloomberg TV. ‘The market for the first time is now moving closer to the dots as opposed to the dots moving towards the market. There’s more to come on that front. ‘
    Despite the excitement, S&P futures are unchanged, holding near all-time high as European and Asian shares rise in volumeless, rangebound trade, and oil retreated while the dollar edged marginally lower through the European session after yesterday’s Fed-inspired rally which sent the the dollar to a two-month high versus the yen on Thursday and sent bonds and commodities lower. Along with dollar bulls, European bank stocks cheered the coming higher interest rates which should help their profits, rising over 1.5% as a weaker euro helped the STOXX 600. Shorter-term, 2-year U. S. government bond yields steadied after hitting their highest in nine years.
    ‘Initial reaction is fairly straightforward,’ said Saxo Bank head of FX strategy John Hardy. ‘They (the Fed) still kept the December hike (signal) in there and the market is being reluctantly tugged in the direction of having to price that in.’
    The key central bank event overnight was the BoJ, which kept its monetary policy unchanged as expected with NIRP maintained at -0.10% and the 10yr yield target at around 0%. The BoJ stated that the decision on yield curve control was made by 8-1 decision in which known reflationist Kataoka dissented as he viewed that it was insufficient to meeting inflation goal by around fiscal 2019, although surprisingly he did not propose a preferred regime. BOJ head Kuroda spoke after the BoJ announcement, sticking to his usual rhetoric: he stated that the bank will not move away from its 2% inflation target although the BOJ “still have a distance to 2% price targe” and aded that buying equity ETFs was key to hitting the bank’s inflation target, resulting in some marginal weakness in JPY as he spoke, leaving USD/JPY to break past FOMC highs, and print fresh session highs through 112.70, the highest in two months, although it has since pared some losses.

    This post was published at Zero Hedge on Sep 21, 2017.


  • Ahead Of The Fed, A Reminder: Gross Vega On VIX ETFs Just Hit A “Staggering” All Time High

    What if the Fed surprised today, and instead of only announcing a reduction in its balance sheet, it also sent an uber-hawkish signal by hiking rates 25 bps, something which virtually nobody expected? While stocks would certainly suffer an adverse reaction, as the Fed confirmed that its intention was to burst one or more asset bubbles, it may be just what many in the market desire.
    The reason for that is the active trader community has been growing increasingly bearish in recent weeks, and in anticipation of a potential downside shock as stocks trade at all time highs, it has been aggressively putting on hedges. One place where this is visible is in S&P 500 options where the put to call ratio has climbed to its highest level in more than two years according to Bloomberg.

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


  • Finnish Politician Tells Women ‘Be Patriotic, Have More Babies’ As Birth Rates Crashes To 150 Year Lows

    For years, the Japanese government has been desperately trying to encourage its citizenry to have more sex to combat the collapsing demographics the nation faces, trying guilt (blasting their “sexual apathy”) and punishment (imposing a “handsome tax” to make lief more even for ugly men), to no avail.
    Now it appears Finland is suffering a similar fate. As Bloomberg reports, Finland, a first-rate place in which to be a mother, has registered the lowest number of newborns in nearly 150 years.

    The birth rate has been falling steadily since the start of the decade, and there’s little to suggest a reversal in the trend.
    Demographics are a concern across the developed world, of course. But they are particularly problematic for countries with a generous welfare state, since they endanger its long-term survival.

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


  • Why This Time Is Different: “Fed Guidance Really Matters”

    From Bloomberg macro commentator Marc Cudmore
    Today’s Fed meeting is critical for all financial assets. A large part of the framework for how to trade the year ahead will be clarified between Wednesday’s statement, the dot plot and subsequent FOMC member speeches in coming days.
    Fed meetings are often overhyped, particularly by financial commentators. Don’t dismiss the hype this time. And because the Fed’s decision is so crucial for the path of FX and rates, every other asset hinges on the outcome by extension.
    It’s not that Fed guidance has never mattered before, but it’s vital now that we have moved beyond the data dependence that was the key theme for the last few years.
    Previously, those traders who believed in higher yields bought into the idea of inflation accelerating, whereas those who were most bullish Treasuries feared for the strength of the economy.

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


  • Toys ‘R’ Us to File for Bankruptcy ‘as Soon as Today,’ Bonds Collapse

    Brick-and-mortar meltdown: another retailer owned by private equity firms goes bust.
    The bonds of Toys ‘R’ Us, the largest toy retail chain in the US, are getting crushed, as word is spreading that it is preparing to file for bankruptcy as soon as today, ‘according to people familiar with the situation,’ cited by Bloomberg. Standard & Poor’s rates the bonds a merciful CCC-. This is deep into junk, but still two notches above D for ‘default.’
    The a $208 million issue of senior unsecured notes due in October 2018 with a coupon of 7.375% had plunged to 46 cents on the dollar on Friday, from 65 on Thursday. Today, according to FINRA data, they dropped to 44 cents on the dollar.
    They have now plunged 55% since September 4, when they were still trading at 97 cents on the dollar. The plunge of those notes began in earnest on September 6, when it became known that the company had hired law firm Kirkland & Ellis, whose bankruptcy-and-restructuring practice is considered a leader in the industry [see… Brick & Mortar Meltdown: Toys ‘R’ Us Hires Bankruptcy Law Firm].
    At the time, ‘sources familiar with the situation’ said that bankruptcy was one of the options. And all heck broke loose for those bonds. Now bankruptcy seems to be the only option.

    This post was published at Wolf Street on Sep 18, 2017.


  • Debt Limit Gums Up Treasury’s Plan for Supply Bump as Fed Tapers

    (Bloomberg) – The U. S. Treasury has been planning for years how to deal with the funding gap set to open up when the Federal Reserve begins unwinding its $2.5 trillion hoard of the government’s debt.
    Now there’s a new wrinkle to prepare for, as the latest deal to extend the nation’s debt limit complicates matters for Treasury Secretary Steven Mnuchin just as the Fed is expected to unveil the start of its balance-sheet reduction.
    With the debt-cap suspension expiring Dec. 8, there’s a growing sense among investors and analysts that Treasury will have to slow or hold off on the inevitable – increasing note and bond sales to deal with the shift in Fed policy and rising federal deficits. Most strategists had predicted that long-term tilt toward more coupon issuance would start in November, so a delay may provide a boost for bond bulls betting yields can stay near historic lows.
    ‘The debt-limit issue will in the near-term affect what Treasury does with coupon issuance,’ said Gene Tannuzzo, a money manager at Columbia Threadneedle, which oversees $473 billion. ‘At the end of the day, Treasury will have to do a lot more coupon sales. On the margin, for now, if there is less coupon issuance it is a modestly positive technical’ for Treasuries.

    This post was published at Wall Street Examiner on September 18, 2017.


  • Pine River Closing Master Fund Following Surge In Redemptions

    Back in January 2016, we reported that Pine River Capital Management, then run by noted hedge fund investor Steve Kuhn, was shuttering its Fixed Income fund, and returning roughly $1.6 billion to investors. The wind down was surprising for one of the industry’s most prominent names: Kuhn was one of four managers who helped the Pine River Fixed Income Fund score some of the industry’s biggest gains. They included a 93% return in 2009, fueled largely by bets on the housing market.
    Unfortunately, the hedge fund had remained unable to replicate its profitable ways in recent years, and according to both Reuters and Bloomberg, Pine River is closing its master fund following a wave of client withdrawals that would bring assets below $300 million.
    The fund, which started in 2002, had about $1 billion in assets prior to the latest redemption schedule. Because the withdrawals would cause the portion of illiquid assets to increase relative to the overall fund, the managers discussed placing those investments in a segregated account called a side pocket.

    This post was published at Zero Hedge on Sep 18, 2017.


  • Global Stocks Storm To New Record High Ahead Of Historic Fed Announcement

    Last week’s bullish sentiment that sent the S&P not only to a new all time highs, but a burst of last-second buying pushed above 2,500 for the first time ever, has carried through to the new week, with European and Asian shares rallying across the board, US futures again the green, and world stocks hitting a new record high on Monday ahead of a historic Fed meeting in which the FOMC is expected to announce the start of the shrinkage of its balance sheet.
    ***
    ‘The FOMC’s latest verdict will be of special interest,’ said Daniel Lenz, an analyst at DZ Bank in Frankfurt. ‘The Fed could well set the balance-sheet-reduction process in motion.’
    MSCI’s index of world stocks hit a new all-time high, adding to gains seen on Friday when Wall Street set its own record level, while Europe’s main stock index opened at a six-week high on Monday and MSCI’s broadest index of Asia-Pacific shares ex-Japan rose to heights not seen since late 2007.
    As DB’s Jim Reid summarizes the week’s key events, this week will be dominated by 3 of the most powerful women in the world “and I’m not talking about Daenerys Targaryen, Cersei Lannister and Sansa Stark. Instead we have our real world version with Mrs Yellen likely to announce the end of Fed reinvestment on Wednesday, Mrs Merkel firm favourite with the pollsters to see a big election win on Sunday and Mrs May set to outline her latest Brexit vision in Florence on Friday. Of the three, Mrs May’s speech is currently the least predictable but after a big week for the UK last week (GBPUSD +2.98%, GBPEUR +3.75%, 10yr Gilts +32bps, and the November hike probability from 18.4% to 64.5% according to Bloomberg’s calculator), Sterling assets are seeing some significant volatility at the moment.”

    This post was published at Zero Hedge on Sep 18, 2017.


  • Weekly Commentary: Monetary Disorder

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    Global Credit, Bubble and market analysis is turning more interesting.
    China August Credit data were out Friday. Total (aggregate) Social Financing jumped to 1.48 TN yuan ($225bn), up from July’s 1.22 TN and above the 1.28 TN estimate. New Loans were reported at a much stronger-than-expected 1.09 TN (estimates 750bn yuan), up from July’s 825bn. New loans expanded 13.2% y-o-y. Through August, Total Social Financing is running 18% above 2016’s record pace. Total system Credit growth (‘social financing’ plus govt. borrowings) appears on track to surpass $4.0 TN. While ‘shadow banking’ has of late been restrained by tighter regulation, household (largely real estate) borrowings remain exceptionally strong.
    It was the weaker Chinese economic data that made the headlines this week. Retail sales (up 10.1% y-o-y), industrial production (up 6.0%) and fixed investment (up 7.8%) were all somewhat below estimates. At the same time – and I would argue more importantly – Chinese inflation is running hotter than forecast. Considering the scope of the ongoing Credit expansion, inflationary pressures should come as no surprise.
    September 10 – Bloomberg: ‘Inflationary pressure emanating from the factory to the world is proving more resilient than economists have anticipated. China’s producer-price inflation accelerated to 6.3% in August from a year earlier, exceeding all but one of 38 estimates… That data… followed 5.5% readings in the prior three months… The surprise strength gives support for global inflation spanning from metals to fuel and shows the effects of resilient domestic demand and reduced supplies of some commodities.’

    This post was published at Wall Street Examiner by Doug Noland ‘ September 16, 2017.


  • Algeria Officially Launches Helicopter Money Amid Sliding Oil Revenue, Budget Crisis

    One year ago, the imminent arrival of helicopter money among endless discussions of pervasive lowflation was all the rage within high-finance policy circles. Then, everything changed as if on a dime, and in recent months the dominant topic has been global coordinated tightening – and in some cases even revisions to central bank mandates and the lowering of inflation targets – perhaps as a result of central banks’ realization that monetizing debt by central banks leads to bad outcomes, not to mention global asset bubbles.
    But not everywhere.
    On Sunday, Algeria’s prime minister unveiled a plan to plug the country’s budget deficit as the the OPEC member state looks to offset lower oil revenue by directly borrowing from the central bank, while avoiding international debt markets. In other words, direct monetization of debt, which bypasses commercial banks as a monetary intermediate, and is better known as “helicopter money.”
    According to Bloomberg, the five-year plan presented by Prime Minister Ahmed Ouyahia aims to balance the budget by 2022, and reverse a deficit that ballooned with the plunge in global crude prices, which also cut foreign reserves by nearly half.
    “If we turn to external debt, as the IMF suggests, we will need to borrow $20 billion a year to repay the deficit and within four years we will be unable to repay the debt,” Ouyahia said. ‘This is what made the government look at non-traditional financing.’

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