This post was published at World Alternative Media
The many new integrated non-USD platforms devised and constructed by China finally have critical mass. They threaten the King Dollar as global currency reserve. Clearly, the USDollar cannot be displaced in trade and banking without a viable replacement for widespread daily usage. Two years ago, critics could not point to a viable integrated system outside the USD realm. Now they can. The integration of commercial, construction, financial, transaction, investment, and even security systems can finally be described as having critical mass in displacing the USDollar. The King Dollar faces competition of a very real nature. The Jackass has promoted a major theme in the last several months, that of the Dual Universe. At first the USGovt will admit that it cannot fight the non-USD movement globally. To do so with forceful means would involve sanctions against multiple nations, and a war with both Russia & China. Their value together is formidable in halting the financial battles from becoming a global war. The United States prefers to invade and destroy indefensible nations like Libya, Iraq, Ukraine, Syria, and by proxy Yemen. The USMilitary appears formidable against undeveloped nations, seeking to destroy their infra-structure and their entire economies, in pursuit of the common Langley theme of destabilization. In the process, the USMilitary since the Korean War has killed 25 million civilians, a figure receiving increased publicity. The Eastern nations and the opponents to US financial hegemony will not tolerate the abuse any longer. They have been organizing on a massive scale in the last several years. Ironically, the absent stability can be seen in the United States after coming full circle. The deep division of good versus evil, of honest versus corrupt, of renewed development versus endless war, has come to light front and center within numerous important USGovt offices and agencies.
The shape of the US nation will change with the loss of the USDollar’s status as global currency reserve. The starting point for the global resistance against the King Dollar was 9/11 and the onset of the War on Terror. It has been more aptly described as a war of terror waged by the USGovt as a smokescreen for global narcotics monopoly and tighter control of USD movements. Then later, following the Lehman failure (killjob by JPMorgan and Goldman Sachs) and the installation of the Zero Interest Rate Policy and Quantitative Easing as fixed monetary policies, the community of nations has been objecting fiercely. The zero bound on rates greatly distorted all asset valuations and financial markets. The hyper monetary inflation works to destroy capital in recognized steps. These (ZIRP & QE) are last ditch desperation policies designed to enable much larger liquidity for the insolvent banking structures. Without them, the big US banks would suffer failure. They also provide cover for the amplified relief efforts directed at the multi-$trillion derivative mountain. In no way, can the global tolerate unbridled monetary inflation which undermines the global banking reserves.
This post was published at GoldSeek on 26 December 2017.
As we’ve pointed out time and time again, the biggest problem with the Trump tax cuts is that they overwhelmingly benefit the rich. In fact, shortly after the initial nine-page outline of the program was unveiled by Gary Cohn and Steven Mnuchin, the nonpartisan Tax Policy Center released an analysis that showed the wealthiest 1% of Americans would accumulate more than 80% of the benefit from the tax bill.
One need only glance at this chart from JP Morgan to see how shabbily middle- and working-class voters are treated by the tax bill.
This is a big problem – particularly if the administration hopes to come anywhere near the 2.9% rate of GDP growth sustained over the next 10 years, a feat that would amount to the longest period without a recession in US history. That’s because when the wealthy receive tax breaks, they tend to save the money instead of putting it to productive use – at least at first – as we discussed last week.
This post was published at Zero Hedge on Dec 24, 2017.
There is a fascinating table in JPMorgan’s 2018 year-end outlook released overnight, previewed yesterday by head quant Marko Kolanovic: it shows that a funny thing happened as the so-called experts were looking for signs of retail euphoria (and repeatedly were unable to find it): everyone went “all-in” stocks, and not just retail investors and US households, but mutual funds, hedge funds, pensions, systematic, and sovereign wealth funds.
The table below breaks down equity positioning in percentile terms by investor type: it shows that never investors have never been more long equities, or more “all-in” stocks.
This post was published at Zero Hedge on Dec 15, 2017.
Barely two months after JPMorgan’s Marko Kolanovic previewed the next financial crisis, which he dubbed the “Great Liquidity Crisis”, and which would be catalyzed by the following liquidity disrupting elements:
Decreased AUM of strategies that buy value assets Tail risk of private assets Increased AUM of strategies that sell on ‘autopilot’ Liquidity-provision trends Miscalculation of portfolio risk Valuation excesses … the quant wizard is back in a more conventional form, this time summarizing JPM’s 2018 outlook for equities, volatility and tail risk.
Starting at the top, it may seem otherwise paradoxical – although in the new normal nothing surprises any more – that JPM which holds a near apocalyptic long-term forecast for the world in a derivative context, is also the bank with the highest 2018 S&P target among its bank peers. Here’s Kolanovic:
This post was published at Zero Hedge on Dec 14, 2017.
The rationale for creating WeWork, the eco-friendly serviced workspace provider, was simple as co-founder Adam Neumann explained to the New York Daily News.
‘During the economic crises, there were these empty buildings and these people freelancing or starting companies. I knew there was a way to match the two. What separates us, though, is community.’ It wasn’t a bad idea since the company was recently valued at $20 billion. The first WeWork location was established in New York’s fashionable SoHo district (above) in 2010. Only four years later, Wikipedia notes that WeWork was the ‘fastest growing lessee of new office space in New York’. The company currently manages office space in 23 cities across the United States and in 21 other countries including China, Hong Kong, India, Japan, France, Germany and the UK.
WeWork’s growth has been little short of stratospheric, and investors have included heavyweight financial names such as JP Morgan. T. Rowe Price, Goldman, Wellington Management and Softbank. As Bloomberg reports, WeWork is about to repeat its success in New York and other cities by becoming the largest private lessee of office space in London. However, some old-school property developers are predicting that WeWork’s break-neck expansion is ill-timed.
This post was published at Zero Hedge on Dec 8, 2017.
Hackers have managed to get $70 million worth of Bitcoin, revealing the risk of all electronic forms of money to which cryptocurrencies are not exempt. The prices keep soaring and requests to add it to Socrates have been coming in so we are complying. With the futures about to begin, this should make it a more transparent market. The problem now is a single trade can be registered just buy one coin to put up prints that do not reflect volume. A future contract will help reveal the true depth of a market.
If we accept the quotes as real, then Bitcoin’s market capitalization is now larger than that of major US banks Citigroup or JP Morgan standing at about $ 220 billion. The problem that emerges is the reclassification legally of Bitcoin. Because it is pretending to be a currency rather than a stock, governments can simply take the latest print and declare that to be a profit and tax you on that number. If the governments would accept Bitcoin as legal tender in payment of taxes, that would be fine. However, if they demand their own currency (dollars) which then forces one to sell Bitcoin to pay the tax, then the price will collapse and they will force you to pay the tax on the inflated number. You can claim you lost money selling it below that figure and they then allow a tax credit but spread out over 10 years. Bitcoin should swap everything to shares and that will eliminate the clash with the government.
This post was published at Armstrong Economics on Dec 8, 2017.
While the prevailing outlook by the big banks for 2018 and onward has been predominantly optimsitic and in a few euphoric cases, “rationally exuberant“, with most banks forecasting year-end S&P price targets around 2800 or higher, and a P/E of roughly 20x as follows…
Bank of Montreal, Brian Belski, 2,950, EPS $145.00, P/E 20.3x UBS, Keith Parker, 2,900, EPS $141.00, P/E 20.6x Canaccord, Tony Dwyer, 2,800, EPS $140.00, P/E 20.0x Credit Suisse, Jonathan Golub, 2,875, EPS $139.00, P/E 20.7x Deutsche Bank, Binky Chadha, 2,850, EPS $140.00, P/E 20.4x Goldman Sachs, David Kostin, 2,850, EPS $150.00, P/E 19x Citigroup, Tobias Levkovich, 2,675, EPS $141.00, P/E 19.0x HSBC, Ben Laidler, 2,650, EPS $142.00, P/E 18.7x … there have been a small handful of analysts, SocGen and BofA’s Michael Hartnett most notably, who have dared to suggest that contrary to conventional wisdom, next year will be a recessionary, bear market rollercoaster.
And then, there are those inbetween who expect a good 2018, but then all bets are off in 2019. Among them is JPM’s chief economist Michael Feroli who has published a special report, aptly titled “US outlook 2018: Eat, drink, and be merry, for in 2019…”
Here are the seven main reasons why JPM believes that the party will continue until December 31, 2018 or thereabouts:
Growth momentum at the end of 2017 is solid and global headwinds are unusually mild
This post was published at Zero Hedge on Nov 28, 2017.
One week ago, Jan Loeys – the person who wrote “The JPMorgan View” for 15 years – announced his exit, as he transitioned from tactical asset allocation to longer-term strategy, and that he would be handing over the authorship to John Normand, and soon Nikos Panigirtzoglou and Marko Kolanovic, but not before summarizing what he has learned in 30 years of investing in a must-read bulletin which he published last week.
In any case, this weekend it was Normand’s turn to regale JPM’s countless retail and institutional clients with a preview of the upcoming key “spoilers” which according to Normand boil down to 3: a reality check on US tax reform, weaker-than-expected China data, and a Russian rethink on extending oil cuts. Not surprisingly, JPM focuses on the first issue, because as Norman writes, “tax overhaul seems the most complicated market driver given its fluid composition and tortuous legislative process.”
By contrast, China’s slowdown looks familiar and was already part of our economists’ baseline; hence, our neutral recommendation on base metals ex aluminum. The November 30th oil producers’ summit is not a drop-dead date for extending their year-old agreement, but we took profits anyway on a long Brent trade last week because oil’s geopolitical premium looked excessive.
For those curious what the largest US bank thinks will be dominant events over the balance of the month, here it is straight from the horse’s mouth.
This post was published at Zero Hedge on Nov 19, 2017.
Score one for the poetic irony pages.
Two months after JPMorgan CEO Jamie Dimon lashed out at bitcoin, calling it a “fraud” which is “worse than tulip bulbs, warning it won’t end well”, will “blow up” and “someone is going to get killed” and threatened that “any trader trading bitcoin” will be “fired for being stupid” as it was merely a tool for money-laundering, today Swiss daily Handelszeitung reported that the Swiss subsidiary of JPMorgan was sanctioned by the Swiss regulator, FINMA, over money laundering and “seriously violating supervision laws.”
As the newspaper adds, the Swiss sanctions relate to breaches of due diligence in connection with money laundering standards. In other words, JPMorgan was actively aiding and abeting criminal money laundering.
This post was published at Zero Hedge on Nov 17, 2017.
One of the most popular JPMorgan analysts, traders and commentators, Jan Loeys, head of global asset strategy and author of the weekly “The JPMorgan View” piece is moving on (to a different, non-client facing part of the company), and is using his last weekly address to JPM clients to recap the main lessons he has learned over his 30 year career.
For those carbon-based traders who still trade on the basis of fundamental analysis, inductive reasoning, and discounting, and forecasting the future – instead of merely relying on the fastest laser-based algos to react to the news or hoping for central bank bailouts – we have excerpted the entire piece, and are excited to note that while Loeys may be leaving, he will be replaced by two of our favorite JPM analysts and commentators, Nikos Panigirtzoglou and Marko Kolanovic, who under John Normand will take over as JPM’s new Cross-Asset Strategy team.
So, without further ado, here is the latest, and last, from JPM’s Jan Loeys, explaining “What have I learned?” after 30 years of doing this…
What have I learned?
How to forecast markets?
The theory and empirical literature of Finance are the best starting point as they deal directly with asset prices. Next are macro economics and statistics. Markets are not Math or Engineering, but a forever learning and adapting system with all of us observing and participating from the inside. Quantitative techniques are indispensable, though, to deal with the complexity of financial instruments and the overload of information we face. Empirical evidence counts for more than theory, but you need theory to constrain empirical searchers and avoid spurious correlations.
This post was published at Zero Hedge on Nov 12, 2017.
Here’s a live transmission from the Texas courtroom where JP Morgan Chase & Co’s lawyers are asking a judge to throw out one of the largest punitive judgments in legal history…
…Instead, the bank’s lawyers say the $8 billion judgment should be reduced to zero.
‘The law and evidence do not support any claim against JPMorgan, much less the unprecedented multi-billion-dollar punitive damage award, which the heirs have already admitted is unconstitutionally excessive,’ the bank said in a filing in Dallas probate court according to Bloomberg.
This post was published at Zero Hedge on Nov 12, 2017.
According to data from the Federal Reserve, US consumer credit grew by 5.5% annualized during Q3 the fastest quarterly pace this year. Credit now tops $1 trillion after a multi-year splurge by consumers on auto debt funded by rock-bottom interest rates and relaxed lending criteria. However, now that interest rates are starting to rise again, investors, analysts, and banks are beginning to vent concerns about the state of the American consumers’ balance sheet and credit card losses are among the largest of those concerns, but maybe there is some room for optimism on that front?
Credit Card Losses Rising
Banks have enjoyed years of declining losses from fewer consumers defaulting on debts, but this trend is now starting to reverse. Synchrony Financial was the first major issuer to issue a profit warning on rising losses earlier this year when it announced first quarter provisions for loan losses surged 21% to $1.3 billion compared with the prior quarter — $300 million more than expected. Management expects the write-off rate for the full year to be around 5% or slightly higher according to Bloomberg.
Citi came next reporting $1.2 billion in losses at its consumer lending business in North America for the third quarter. Most of the losses stemmed from its credit cards division. To add insult to injury, management set aside a further $500 million to cover additional losses. At the same time Citi announced its losses, JP Morgan also told investors that it was increasing provisions for unsecured credit losses.
This post was published at FinancialSense on 11/10/2017.
JP Morgan, at least according to the daily Comex warehouse report, added over half a million ozs of silver to its ‘historic’ stash of silver at the Comex: TF Metals Report. It would be even more interesting to see an actual independent accounting of that specific metal which would track the serial numbers on the bars to the legal owner of title.
I’ve been hedged in my mining stock portfolio since early September. The signal for me to hedge is the reliable Comex bank ‘net short’ position as reported in the weekly Commitment of Traders report. Since late summer, the bank net short position, and the corresponding hedge fund ‘managed money’ net long position, has been at an extreme level.
Historically this is the signal that the Comex banks will implement what I call a ‘COT open interest liquidation’ take-down of the gold/silver price using Comex paper to trigger hedge fund stop-loss positions. This enables the Comex banks to cover their shorts and print huge profits. It’s also illegal trading activity but that’s for another day.
In early September, in ‘eyeballing’ the gold chart in conjunction with the historical COT data I have set up in a spreadsheet back to 2004 , I figured that the open interest – which was in the high 500,000’s at the time – needed to come down at least 100-150k contracts. I thought it would take a price take-down from $1320 to $1230/$1240.
This post was published at Investment Research Dynamics on November 8, 2017.
During his trip to London this week, US Commerce Secretary, Wilbur Ross, wasn’t only defending revelations in the Paradise Papers that he’d invested in a shipping company with ties to the Putin family. He also attended a ‘closed-door meeting’ with executives from JPMorgan, Goldman, HSBC and other banks. The meeting took place over lunch in the exclusive St James’s District (hedge fund land these days) at Wiltons restaurant. Wiltons, if you’re not familiar with it, started as an oyster stand in 1742 before developing a clientele of English aristocrats and foreign dignitaries and latterly, bankers. Ian Fleming, creator of the James Bond novels and bon vivant, listed it as one of his top 10 restaurants in the 1950s.
During lunch, the banks warned Ross that time is running out for the UK government. The failure to provide clarity on Brexit means that they will be forced to start moving jobs out of London. According to the FT:
A group of large financial institutions with big London operations, led by Wall Street’s pre-eminent banks, have told the US commerce secretary that Britain’s unstable government and slow progress in Brexit planning may force them to start moving thousands of jobs out of City in the near future. The warnings came on Friday during a closed-door meeting between executives from the banks, which included JPMorgan Chase, Goldman Sachs and HSBC, and Wilbur Ross during the US commerce secretary’s visit to London, according to people briefed on the discussions.
This post was published at Zero Hedge on Nov 8, 2017.
While the Fed may still be confused by the lack of inflation, if only in the “real economy”, if not in financial assets, increasingly more analysts have realized that what the Fed has done is tantamount to blowing an roaring inflationary bubble, if largely confined to the realm of asset prices. And while we used a Goldman chart to demonstrate this divergence a little over a month ago…
… now it’s JPMorgan’s turn to undergo the proverbial epiphany.
In a note from JPM’s Jan Loeys, titled “Financial overheating a problem yet?”, the strategist writes that “growth-sensitive assets, such as equities, credit, cyclicals, and commodities continue to gain and outperform, keeping us comfortably in the Growth Trade. Growth prospects have been rising and accelerating over the past two months from the only slow and dispersed upgrades of the previous 12 months. By now, we are in a full-fledged and globally synchronized move up in growth optimism.” Perhaps, but there is a catch as JPM unwillingly concedes:
The speed of these upgrades and asset price rallies is both exhilarating and scary. The faster we rally, the greater the joy, but the more one should be worried about the eventual reckoning. How far from now is that and what should we do about it?
This post was published at Zero Hedge on Nov 5, 2017.
When previewing today’s FOMC announcement, we said that at least according to some, this morning’s refunding announcement may have a bigger impact on the market as there is less consensus (and more confusion) about what would be unveiled. As JPM analyst Jay Barry told Bloomberg, the quarterly refunding announcement at 8:30am ET Wednesday ‘has the possibility to be a bigger event for markets in the morning than the Fed statement in the afternoon’ as participants are divided on whether the Treasury will announce increases to coupon auction sizes Wednesday, or wait until the 1Q refunding announcement in February:
‘There’s a dispersion of views because of the pivot the Treasury Department has had over last few years,’ specifically toward portfolio metrics and aiming to extend the weighted average maturity of the portfolio. Merely reversing the cuts that have been made to 2Y and 3Y auctions since 2013 wouldn’t serve that objective. ‘If they don’t get announced tomorrow, it’s a muted rally, and if they do, it’s a muted steepening.’
Furthermore, as Bloomberg summarizes, going into today’s announcement, market participants were divided leading into the announcement with most seeing no increase immediately to auction sizes just yet, seeing only bill auction changes for now: Barclays, NatWest, Bank of America, Credit Agricole, Jefferies, Stone & McCarthy Research Associates and Citigroup all saw no change; JPMorgan Chase, among other, looked for small increases across maturities.
Well, moments ago the US Treasury reported the breakdown of the refunding auctions, which led to Treasuries promptly paring some early losses (and leading to the predicted muted curve flattening) after the Treasury Department maintained its coupon auction sizes over the next three months, while the refunding statement did not comment on ultra-long issuance.
This post was published at Zero Hedge on Nov 1, 2017.
While normally Wednesday’s Fed meeting would be the week’s biggest market-moving event, this time – smack in the middle of the busiest earnings week of the year – it may not even make the top three, buried ahead of the coming news of the next Fed Chair (in which Trump is set to unveil Jerome Powell on Thursday), and the GOP tax bill (which just saw its Wednesday release delayed by one day). One can make the argument that tomorrow’s fully priced in FOMC announcement is also secondary to not only Friday’s jobs report, which may help decide who is right, the Fed’s “dots” or the market, but also to tomorrow’s Treasury refunding announcement.
In fact, the latter is precisely what JPM analyst Jay Barry claimed earlier today, saying the “quarterly refunding announcement at 8:30am ET Wednesday ‘has the possibility to be a bigger event for markets in the morning than the Fed statement in the afternoon’ and since market are ‘priced for a December hike,’ the FOMC meeting isn’t likely to alter expectations in a way that would move the market. Where there is confusion is in the Treasury market, where market participants are divided on whether the Treasury will announce increases to coupon auction sizes Wednesday, or wait until the 1Q refunding announcement in February: ‘There’s a dispersion of views because of the pivot the Treasury Department has had over last few years,’ specifically toward portfolio metrics and aiming to extend the weighted average maturity of the portfolio. Merely reversing the cuts that have been made to 2Y and 3Y auctions since 2013 wouldn’t serve that objective.
‘If they don’t get announced tomorrow, it’s a muted rally, and if they do, it’s a muted steepening, but I think it’s all small because the numbers we’re talking about are only $1 billion month, and because Treasury has been clear in communicating that financing needs are moving higher over the medium term’
This post was published at Zero Hedge on Nov 1, 2017.
Crackdown efforts by bank regulators are put on hold.
The volume of leveraged loans – the riskiest loans Wall Street banks provide – has surged 38% year-over-year and has already beaten the full-year record set in 2013, according to Dealogic. Total of leveraged loans outstanding has reached $1.25 trillion.
Nine of the 10 largest banks in the leveraged-loan business have already surpassed their respective 2016 full-year totals, according to Bloomberg data, cited by the Financial Times, including Bank of America (about $120 billion in leveraged loans so far this year); JP Morgan (about $110 billion), Goldman Sachs ($79 billion); and Barclays ($72 billion). Of the top ten, only Wells Fargo ($69 billion) is still lagging behind last year.
The fees that the banks are raking for putting these loans together are also record-breaking: $8.3 billion so far this year, just 6% below the full-year total of 2016.
This post was published at Wolf Street on Oct 30, 2017.