• Tag Archives Credit Suisse
  • “There Were No Calls, That’s Absolutely Crazy”: How The Stock Market Died

    Something unexpected happened on the market’s relentless trek to all time highs: the market died.
    At least that is the impression one gets from walking around Wall Street’s formerly busy trading desks (certainly the formerly biggest trading floor in the world, that of UBS, now hauntingly empty) where these days one can hear a pin drop. Take the Credit Suisse Prime Brokerage desk in Manhattan for example: here, as BusinessWeek reports in its 1987 anniversary issue, “the phones hardly seem to ring anymore.” In fact, if one didn’t know better, one could assume that instead of all time highs, the market has just experienced another spectacular crash resulting in a universal trading revulsion.
    Credit Suisse’s hedge fund clients don’t call about Donald Trump’s tweetstorms and the stock market or ask what to do when terrorists attack. And there was barely a whiff of panic when North Korea erupted in August. ‘Two rockets flew over the land mass of Japan and nothing happened,’ says Mark Connors, Credit Suisse’s global head of risk advisory.
    Connor’s assessment, in not so many words, the market has died: ‘There were no calls. That’s absolutely crazy.

    This post was published at Zero Hedge on Oct 16, 2017.


  • Quant Fund Run By Three 20-Somethings Trades $1 Billion A Day

    Financial markets are increasingly being dominated by quantitative and passive traders (even as quant forms have underperformed this year).
    We highlighted this dichotomy earlier this year in a post titled ‘Quants Dominate The Market; Unexpectedly They Are Also Badly Underperforming It:’
    ***
    ‘Two days ago, JPM’s head quant made a striking observation: “Passive and Quantitative investors now account for ~60% of equity assets (vs. less than 30% a decade ago). We estimate that only ~10% of trading volumes originates from fundamental discretionary traders.” In short, markets are now “a quant’s world”, with carbon-based traders looking like a slow anachronism from a bygone era.
    Bloomberg confirmed as much today, when looking at another divergence between quant funds and traditional, discretionary managers: “systematic strategies have barely budged from near-record participation in U. S. stocks. Meanwhile, fundamental equity long-short managers can’t afford to be anything but picky, considering the market’s narrow leadership. The result: the largest gap on record between humans’ and computers’ gross exposure to U. S. equities, data compiled by Credit Suisse Group AG show.’
    This year is shaping up to be a dismal one for so-called quant funds. Still, even as quants have failed to capture record-setting equity gains, they’ve held on to their status of Wall Street darlings, attracting the lion’s share of inflows, not to mention flattering press coverage, like this profile of one quantitative fund published by Forbes.

    This post was published at Zero Hedge on Sep 7, 2017.


  • WHY are banks Too Big to Fail & Too Big To Jail

    There is something much more sinister going on behind the curtain. I have warned that you really are taking your life in your hands doing business in New York City with a bank because NOBODY ever wins against the bankers no matter what they do. This begs the question about why are banks paying huge fines, yet nobody goes to jail, and there is never a trial while class action suits are summarily dismissed? Something is seriously wrong here. To discover the answer, as always, just follow the money!
    Back in 2003, Judge Milton Pollack dismissed two class action suits against Merrill Lynch for putting out bogus research during the DOT. COM Bubble after the investment bank plead guilty and paid huge fines. Judge Pollack wrote a 43 page decision protecting banks even when they produce intentional fake research. The judge said that investors were eager to take that risk and were to blame for their own losses. Pollack then dismissed another 25 lawsuits against the bankers. Similarly, another judge dismissed suits against Credit Suisse First Boston, Goldman Sachs, and Morgan Stanley. Why is it impossible to sue the bankers in America where justice is supposed to exist for all?

    This post was published at Armstrong Economics on Sep 4, 2017.


  • Mo’ Momo, Mo’ Worries – Quants Fear Hedge Funds’ “Outsized Exposure” To Market Momentum

    Better lucky that smart? Managers of active funds are now extremely concentrated in the strongest parts of the US equity market with ‘momentum’ massively outperforming the market in August (and ramping higher off the North Korea missile launch lows).
    ***
    Bloomberg’s Dani Burger notes that with more than half of their bets on high flyers like technology and online retailers, hedge funds have near-record exposure to momentum trades, a strategy that’s up 2.6 percent in August even as the S&P 500 heads for its worst month since the election. The resiliency of the bet was on display Tuesday, when Alphabet and Amazon opened nearly 1% lower before rebounding along with Apple to deliver the S&P 500’s biggest intraday reversal in 10 months.
    ‘It’s like these things are like gold — it’s almost like a safe haven,’ said Mark Connors, the global head of risk advisory at Credit Suisse Group AG.
    ‘This resilient price action in equities is commensurate with the constructive positioning we see across hedge fund strategies and speaks to the persistent positive sentiment in 2017.’

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


  • Cash-Strapped Qatar Unexpectedly Cuts Credit Suisse Stake

    Is the ongoing Qatar blockade starting to seriously squeeze the finances of the tiny, but rich (or maybe not so rich any more) Gulf nation?
    Overnight, Credit Suisse’s largest shareholder, Qatar, announced it has lowered its direct shareholding in the largest Swiss bank to 4.94% through the nation’s sovereign wealth fund – the Qatar Investment Authority – marking a rare sale of the Swiss bank’s stock. The QIA previously owned 5.01% in voting rights and is reporting a sale of shares for the first time since 2008. Qatar’s overall holding – including convertible bonds – declined to 15.91% from 17.98% after a rise in the number of outstanding Credit Suisse shares because of its capital increase.
    In June, Credit Suisse, which is halfway through a three-year strategy revamp, raised about CHF4.1 billion after tapping shareholders for a second time since CEI Tidjane Thiam took over in mid-2015, Bloomberg reported. The fresh funding would boost its common equity Tier 1 capital to 13.4% of risk-weighted assets, up from 11.7% in the first quarter.

    This post was published at Zero Hedge on Aug 16, 2017.


  • SNAP Stock Just SNAPPED: Down 29% From Its March IPO

    SNAP just reported earnings and plunged after hours after missing everything. It burned through $288 million in cash. The more it spends, the more it loses. An operational Ponzi scheme of sorts.
    The SNAP IPO was led by Morgan Stanley, Goldman Sachs, JP Morgan, Deutsche Bank, Barclays, Credit Suisse and Allen & Company. All the usual criminal cartel banks aside from Allen & Company. Allen & Company is a financial ‘advisor’ – i.e. sleazy stock broker – driven firm based in Florida. I don’t know how Allen & Co. was put on as an underwriting manager other than it’s likely that one of SNAP’s co-founders is buddies with one of the owners at Allen & Co.

    This post was published at Investment Research Dynamics on August 10, 2017.


  • BoJ Keeps Rates Unchanged, Postpones 2% Inflation Deadline

    The Bank of Japan kept its monetary stimulus program unchanged even as it pushed back the projected timing for reaching 2 percent inflation for a sixth time.
    The downgraded price outlook will raise more questions about the sustainability of the BOJ’s stimulus at time when other major central banks are turning toward normalizing their monetary policy. The European Central Bank, which is said to examine options for winding down quantitative easing, concludes its own governing council meeting later on Thursday.
    By again delaying the timing for hitting its price goal, the BOJ acknowledged the need to continue easing for at least several more years, probably beyond 2020 because of a sales-tax increase scheduled for late 2019, said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG and a former BOJ official.
    “Going forward, there will be even more attention on the sustainability of the stimulus from market participants and lawmakers,” Shirawaka said.
    BOJ Governor Haruhiko Kuroda said it was regrettable the central bank needed to push back its inflation goal again, saying it hadn’t intentionally made its forecasts too optimistic. He noted that central banks in the U.S. and Europe had also overestimated inflation.

    This post was published at bloomberg


  • “We’re selling life jackets to the Titanic“: Inside the U.K.’s only high street gold bullion store

    For those who deal in it, gold evokes emotions like no other financial asset.
    Ross Norman, CEO of Sharps Pixley and a 30-year veteran gold trader at Rothschilds and Credit Suisse, says he’s “had a strange relationship with gold.”
    “It’s a bit like having an older brother, where you sit down for a drink and think ‘Godammit if he wasn’t my brother, he’d be my friend.’”
    Norman’s own relationship with gold comes from an Italian uncle, who was lost and dying of hunger in Russia during the Second World War. The soldier had no possessions left apart from the gold cross around his neck, which he sold for enough food to save his life.
    Sharps Pixley, which opened trading last year in the plush St. James area of London, is the U.K.’s only high street gold bullion shop.

    This post was published at Business Insider


  • BOJ Plans To Drop Inflation Target At Thursday’s Meeting

    The Bank of Japan is finally acknowledging something that Federal Reserve policy makers like San Francisco Fed President John Williams acknowledged months ago, when he published a paper highlighting the growing disconnect between the tightening labor market and consumer prices. As Credit Suisse strategist Burkhard Varnholt explained two months ago, the growing heft of e-commerce companies like Amazon represents a new disinflationary paradigm, weighing on the costs of consumer goods. Meanwhile, the intensifying three-way battle between Amazon, its chief brick-and-mortar rival Wal-Mart and discount grocers like Aldi have helped keep consumer prices anchored, while rent, tuition and medical costs have continued racing higher.
    And now that the company is preparing to take over Whole Foods Market, fire the grocers’ human employees and replace them with kiosks and sensors, allowing customers to walk out of the store with their items without waiting in a checkout line, the disinflationary trend is expected to continue. In fact, as the Washington-based e-commerce giant expands aggressively in other major developed and emerging economies, price pressures are expected to abate as the Bezos behemoth tightens the screws on its rivals.

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


  • There Has Been Just One Buyer Of Stocks Since The Financial Crisis

    When discussing Blackrock’s latest quarterly earnings (in which the company missed on both the top and bottom line, reporting Adj. EPS of $5.24, below the $5.40 exp), CEO Larry Fink made an interesting observation: ‘While significant cash remains on the sidelines, investors have begun to put more of their assets to work. The strength and breadth of BlackRock’s platform generated a record $94 billion of long-term net inflows in the quarter, positive across all client and product types, and investment styles. The organic growth that BlackRock is experiencing is a direct result of the investments we’ve made over time to build our platform.”
    While the intention behind the statement was obvious: to pitch Blackrock’s juggernaut ETF product platform which continues to steamroll over the active management community, leading to billions in fund flow from active to passive management every week, if not day, he made an interesting point: cash remains on the sidelines even with the S&P at record highs.
    In fact, according to a chart from Credit Suisse, Fink may be more correct than he even knows. As CS’ strategist Andrew Garthwaite writes, “one of the major features of the US equity market since the low in 2009 is that the US corporate sector has bought 18% of market cap, while institutions have sold 7% of market cap.”
    What this means is that since the financial crisis, there has been only one buyer of stock: the companies themselves, who have engaged in the greatest debt-funded buyback spree in history.

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


  • Moody’s Warns That Private-Label Credit Card Issuers Will Be Crushed By Retail Implosion

    We’ve spent a lot of time of late talking about the retail implosion currently underway in the United States courtesy of a massive oversupply of retail square footage and a simultaneous shift in demand toward more online purchases. In fact, we recently highlighted a report from Credit Suisse which suggested that nearly 9,000 retail locations could permanently close their doors in 2017, the most since at least 2000.
    According to the Swiss bank’s calculations, on a unit basis, approximately 2,880 store closings were announced YTD, more than twice as many closings as the 1,153 announced during the same period last year. Historically, roughly 60% of store closure announcements occur in the first five months of the year. By extrapolating the year-to-date announcements, CS estimates that there could be more than 8,640 store closings this year, which will be higher than the historical 2008 peak of approximately 6,200 store closings, which suggests that for brick-and-mortar stores stores the current transition period is far worse than the depth of the credit crisis depression.

    This post was published at Zero Hedge on Jun 28, 2017.


  • Dan Loeb Is Now Nestle’s 6th Largest Shareholder; Goes Activist On World’s Biggest Food Company

    Dan Loeb has returned to his earthshaking activist roots, and in a letter released moments ago, Third Point announced it is now targeting the world’s largest food company, with its biggest bet on a public company in its history, amounting to $3.5 billion.
    In the letter, Third Point announced that it currently owns roughly 40 million shares of Nestle, and that its stake, which is held in a special purpose vehicle raised for this opportunity including options, currently amounts to over $3.5 billion. Putting this number in the context of Nestle’s market cap of $264 billion, Loeb may have an uphill battle though that never stopped him before.
    Loeb’s stake of 40 million shares makes him the 6th largest holder of Nestle, above Credit Suisse Asset Management with 38 million shares and below Massachusetts Financial Services Company with 56.8 million. The Top 4 holders are BlackRock, CapRe, Norges Bank, and Vanguard.
    Third Point writes that “despite having arguably the best positioned portfolio in the consumer packaged goods industry, Nestl shares have significantly underperformed most of their US and European consumer staples peers on a three year, five year, and ten year total shareholder return basis. One year returns have been driven largely by the market’s anticipation that with a newly appointed CEO, Nestl will improve.”
    While the problems are clear, why did Third Point go activist? To maximize value of course, as It explains:

    This post was published at Zero Hedge on Jun 25, 2017.


  • “Robots, Drones” Mean Mass Layoffs For Whole Foods Employees

    When describing the logic behind Amazon’s blockbuster acquisition of Whole Paycheck Foods, a deal that made the “greedy bastards” over at Jana Partners $400 million richer in just a few months, Credit Suisse analyst Stephen Ju explained that he views this acquisition as “an offensive expansion move to accelerate its progress in the largest consumer spend category. In other words, Amazon is paying roughly 3% of its enterprise value for an improved position in an addressable segment that amounts to ~$1.6 trillion according to the US Dept. of Agriculture’s ERS, especially as progress at Amazon Fresh (in terms of regional rollout) has been admittedly slower than we expected.”
    He may be correct in the long-run but in the medium-term, Amazon Foods faces major hurdles, including a significant slowdown in how much Americans spend at food and beverage stores…

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


  • Quants Dominate The Market; Unexpectedly They Are Also Badly Underperforming It

    Two days ago, JPM’s head quant made a striking observation: “Passive and Quantitative investors now account for ~60% of equity assets (vs. less than 30% a decade ago). We estimate that only ~10% of trading volumes originates from fundamental discretionary traders.” In short, markets are now “a quant’s world“, with carbon-based traders looking like a slow anachronism from a bygone era.
    Bloomberg confirmed as much today, when looking at another divergence between quant funds and traditional, discretionary managers: “systematic strategies have barely budged from near-record participation in U. S. stocks. Meanwhile, fundamental equity long-short managers can’t afford to be anything but picky, considering the market’s narrow leadership. The result: the largest gap on record between humans’ and computers’ gross exposure to U. S. equities, data compiled by Credit Suisse Group AG show.”

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


  • Which States Have Suffered The Biggest Retail Losses

    With the great retail bankruptcy tsunami claiming its latest victim on Thursday, when Gymboree announced it wouldn’t make its June 1 interest payment guaranteeing a Chapter 11 bankruptcy filing in the next month, the signs continue to mount that the next “big short” – either in the form of REITs, CMBS, CMBX, or single name stocks as discussed here – is shorting America’s bloated retail sector in general, and that staple of US “bricks and mortar” retailers in particular, the mall.
    As a reminder, last week Credit Suisse made the remarkable prediction that over the next five years, no less than 25% of US mall will close, which in light of the record store closures in just the first five months of the year…

    This post was published at Zero Hedge on Jun 3, 2017.


  • The Internet Helped Kill Inflation In America, Says Credit Suisse

    Whether or not San Francisco Fed President John Williams is right about US inflation and employment being about as close to the central bank’s targets as investors have seen – as he told CNBC two days ago – is irrelevant: The central bank is going to raise interest rates two more times this year no matter what happens to consumer prices, says Credit Suisse Chief Investment Officer for Switzerland Burkhard Varnholt.
    That’s because it’s pointless waiting around for prices to rise when the real reason inflation is low – and will likely remain low – has nothing to do with the Fed, but with a structural shift in the US economy that’s being driven by technology giants like Amazon and Uber. Burkdard says these companies have ‘turned most companies and sectors into price takers rather than price makers.”
    ‘Well look, inflation has been gone for quite some time and what’s really killed inflation clearly isn’t the Federal Reserve’s monetary policy but the Internet – it’s the sharing economy, the network economy it’s the uber-deflationary companies like Uber, Amazon, Airbnb and the like who have transformed most companies and most sectors into price takers rather than price makers.’

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


  • These Eleven Retailers Will File For Bankruptcy Next, According To Fitch

    One month ago, we presented a stunning fact from Credit Suisse: barely a quarter into 2017, [annualized] year-to-date retail store closings have already surpassed those of 2008.
    According to the Swiss bank’s calculations, on a unit basis, approximately 2,880 store closings were announced YTD, more than twice as many closings as the 1,153 announced during the same period last year. Historically, roughly 60% of store closure announcements occur in the first five months of the year. By extrapolating the year-to-date announcements, CS estimates that there could be more than 8,640 store closings this year, which will be higher than the historical 2008 peak of approximately 6,200 store closings, which suggests that for brick-and-mortar stores stores the current transition period is far worse than the depth of the credit crisis depression.

    Another striking fact: on a square footage basis, approximately 49 million square feet of retail space has closed YTD. Should this pace persist by the end of the year, total square footage reductions could reach 147M square feet – or just over 5 square miles – another all time high, and surpassing the historical peak of 115M in 2001.

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


  • The Case of the Missing U.S. Stocks

    In the last 20 years, the U. S. stock market has undergone an alarming change that too few people are aware of or talking about. Between 1996 and 2016, the number of listed companies fell by half, from 7,300 to 3,600, according to a recent report by Credit Suisse. This occurred despite the U. S. economy growing nearly 60 percent over the same period.
    What’s even more flummoxing is that the U. S. seems to be the only developed country that lost so many stocks. Most other countries actually gained around 50 percent.
    This matters because the U. S. stock market accounts for a little over half of the entire global equity market, meaning a huge (and growing) number of investors and fund managers now have fewer options to choose from than they did only a couple of decades ago.
    So why’s the pool of publically-traded companies shrinking? We can point to a few different culprits.
    For one, merger and acquisition (M&A) activity has strengthened in recent years, and when an M&A takes place, a company is consequentially delisted (if it was listed before the deal). The same thing happens, of course, when a company goes out of business.
    Another reason could be the growth of private capital, which allows companies to raise funds without having to go public. Between 2013 and 2015, the amount of private money invested in tech start-ups alone tripled from $26 billion to $75 billion, according to consulting firm McKinsey. As a result, more and more software firms are managing to reach $10 billion in value before their IPO. Think wildly successful companies like Dropbox, Airbnb, Pinterest, Uber – all of which, for now, have avoided selling shares to public investors.

    This post was published at GoldSeek on 10 May 2017.


  • S&P: These Ten Retailers Will File For Bankruptcy Next

    Three weeks ago, we reported that Fitch had put together a list of 8 retailers who were likely next in line to file for bankruptcy. The rating agency speculated that distressed legacy “bricks and mortar” outlets such as 99 Cents Only, rue 21, Gymboree and True Religion would follow what has already been a historic surge in retailers filing for Chapter 11 protection and/or shuttering stores. The Fitch list is below:
    Sears Holdings Corp (roughly $2.5 billion); 99 Cents Only Stores LLC; Charming Charlie LLC; Gymboree Corp.; Nine West Holdings Inc.; NYDJ Apparel LLC; rue21, Inc.; and True Religion Apparel Inc. Putting this list in context, over the weekend we presented a chart from Credit Suisse showing that on an annualized basis, some 8,640 – or more – stores would be closed in 2017, the highest number on record.

    This post was published at Zero Hedge on Apr 26, 2017.


  • “The Retail Bubble Has Now Burst”: A Record 8,640 Stores Are Closing In 2017

    ‘Thousands of new doors opened and rents soared. This created a bubble, and like housing, that bubble has now burst.’
    – Richard Hayne, Urban Outfitters CEO, March 2017
    The devastation in the US retail sector is accelerating in 2017, and in addition to the surging number of brick and mortar retail bankruptcies, it is perhaps nowhere more obvious than in the soaring number of store closures.
    While the shuttering of retail stores has been a frequent topic on this website, most recently in the context of the next “big short”, namely the ongoing deterioration in the mall REITs and associated Commercial Mortgage-Backed Securities and CDS, here is a stunning fact from Credit Suisse:“Barely a quarter into 2017, year-to-date retail store closings have already surpassed those of 2008.”
    According to the Swiss bank’s calculations, on a unit basis, approximately 2,880 store closings were announced YTD, more than twice as many closings as the 1,153 announced during the same period last year. Historically, roughly 60% of store closure announcements occur in the first five months of the year. By extrapolating the year-to-date announcements, CS estimates that there could be more than 8,640 store closings this year, which will be higher than the historical 2008 peak of approximately 6,200 store closings, which suggests that for brick-and-mortar stores stores the current transition period is far worse than the depth of the credit crisis depression.

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