It looks like President Trump was right yet again when he put Joe Biden on blast for being “very naive” about China after the 2020 Democratic frontrunner said the world’s second-largest economy “is not competition for us.”
“If Biden actually said that, that’s a very dumb statement,” Trump said in a Thursday interview with Fox News.
Considering the brewing tit-for-tat antagonisms between the American Navy and People’s Liberation Army-Navy in the Strait of Taiwan and the South China Sea, it’s hard to believe that any American politician – much less one vying to be the commander-in-chief of the American military – would write China off so easily.
But in case Biden needed more evidence that China is indeed a serious geopolitical threat to the US, the Department of Defense on Friday released a report outlining Beijing’s efforts to displace the US as the dominant power in the Pacific. To achieve this aim, Beijing is expanding its military power in the region at an alarming rate. Soon, it’s expected to deploy its second aircraft carrier in the region, along with other military advancements in power projection, stating that “ground, naval, air, and missile forces are increasingly able to project power through peacetime operations.”
It’s doing all of this with the aim of supplanting US dominance in the region, and it’s expanding its military firepower to prepare for the possibility of a “regional conflict” – i.e. a “hot war” – in the Indo-Pacific, according to Stars and Stripes, which published a summary of the report.
The aircraft carrier will greatly improve China’s ability to expand its ability to project power beyond the militarized islands and reefs – “immovable aircraft carriers”, as Steve Bannon once described them.
“China’s aircraft carrier and planned follow-on carriers, once operational, will extend air defense coverage beyond the range of coastal and shipboard missile systems and will enable task group operations at increasingly longer ranges,” the report said.
The report also warned of espionage activities by China to “acquire sensitive, dual-use, or military-grade equipment,” including “dynamic random-access memory computer technology, aviation and anti-submarine warfare technologies and military communication jamming tools.”
Of particular interest in the report is its description of China’s plans to dominate the Arctic, a plan the report described as a “polar silk road.”
It also mentioned China’s growing interest in the arctic, referring to a “polar silk road” initiative. Beijing has invested in icebreaker vessels and last year published its first arctic strategy.
The report warned of a possible strengthened military presence in the Northern Sea Route, “which could include deploying submarines to the region as a deterrent against nuclear attacks.”
The report said China increasingly sees the U.S. “as adopting a more confrontational approach, reflecting China’s long-held perception that the United States seeks to contain China’s rise.”
The 2018 National Defense Strategy listed China as a competitor and a threat for its expanding influence in the Pacific and militarization of islands and reefs in the South China Sea.
“China sees recent U.S. actions on trade and the public releases of U.S. defense and national security strategies as indicative of this containment strategy,” the report said.
What’s more, the report warned, China’s expanding reach is increasing the risk that an “accident” could set off an armed conflict between the two superpowers. Because of the this, the DoD recommended that the US continue to work “from a position of strength” while seeking to reduce risk and “prevent misunderstandings” in a time of rising tensions.
via ZeroHedge News http://bit.ly/2JdadaI Tyler Durden
After taking an honest look at the facts, I don’t know how anyone can possibly claim that the U.S. economy is “booming”. I really don’t.
We hear this sort of rhetoric from the mainstream media all the time, but it doesn’t make any sense. As I discussed yesterday, nobody should be using the term “booming” to describe the state of the U.S. economy until we have a full year when GDP growth is 3 percent or better, and at this point we haven’t had that since the middle of the Bush administration. And as you will see below, the latest numbers are clearly telling us that the U.S. economy is not even moving in the right direction. Economic conditions are getting worse, and they weren’t that great to begin with. According to the calculations that John Williams has made over at shadowstats.com, the U.S. economy is already in a recession, but of course the Federal Reserve will continue to tell us that everything is just fine for as long as they possibly can. Unfortunately for them, they can’t hide the depressingly bad numbers that are coming in from all over the economy, and those numbers are all telling us the same thing.
The following are 19 facts about our current economic performance that should deeply disturb all of us…
#1 In April, U.S. auto sales were down 6.1 percent. That was the worst decline in 8 years.
#9 Apple iPhone sales are falling at a “record pace”.
#10 Facebook’s profits have declined for the first time since 2015.
#11 We just learned that CVS will be closing 46 stores.
#12 Office Depot has announced that they will be closing 50 locations.
#13 Overall, U.S. retailers have announced more than 6,000 store closings so far in 2019, and that means we have already surpassed the total for all of last year.
#14 A shocking new study has discovered that 137 million Americans have experienced “medical financial hardship in the past year”.
#15 Credit card charge-offs at U.S. banks have risen to the highest level in nearly 7 years.
#16 Credit card delinquencies have risen to the highest level in almost 8 years.
#17 More than half a million Americans are homeless right now.
#19Nearly 102 million Americans do not have a job right now. That number is worse than it was at any point during the last recession.
But at least the stock market has been doing well, right?
Actually, the Dow Jones Industrial Average has been down for two days in a row, and investors are getting kind of antsy.
Hopes of a trade deal with China had been propping up stocks in recent weeks, but it looks like negotiations may have hit “an impasse”…
The latest round of US-China trade talks may have hit an impasse, raising doubts about the chances of an early trade deal between the world’s two leading economies, Chinese official media reported on Thursday.
Unlike the previous negotiations, the 10th round of high-level economic and trade talks, which concluded here on Wednesday, had fewer details about specific discussions and results, state-run Global Times reported.
I warned my readers repeatedly that this would happen. The Chinese are going to negotiate, but they are going to drag their feet for as long as possible in hopes that the U.S. will free Meng Wanzhou.
Of course that isn’t going to happen, and so at some point the Chinese will have to decide if they are willing to move forward with a trade deal anyway.
But if the Chinese drag their feet for too long, Trump administration officials may lose patience and take their ball and go home.
In any event, the truth is that the U.S. economy is really slowing down, and no trade deal is going to magically change that.
And a lot of other pundits are also pointing out that a substantial economic slowdown has now begun. For example, the following comes from Brandon Smith’s latest article…
The bottom line is, the next crash has already begun. It started at the end of 2018, and is only becoming more pervasive with each passing month. This is not “doom and gloom” or “doom porn”, this is simply the facts on the ground. While stock markets are still holding (for now), the rest of the system is breaking down right on schedule. The question now is, when will the mainstream media and the Fed finally acknowledge this is happening? I suspect, as in 2008, they will openly admit to the danger only when it is far too late for people to prepare for it.
Hopefully things will remain relatively stable for as long as possible, because nobody should want to see a repeat of 2008 (or worse).
Unfortunately, we can’t stop the clock. We are already more than a third of the way through 2019, and we will be into 2020 before we know it.
It has been an unusual year so far, but I have a feeling that it is about to get much, much more interesting.
via ZeroHedge News http://bit.ly/2PN1sWc Tyler Durden
The Fed’s tweak to the funding markets failed to take back control…
As The Fed’s IOER cut left EFF still 6bps rich…
And so, a ‘murder’ of Fed Speakers were unleashed today and they managed to inch the market’s rate expectations in a dovish direction, but on the week, thanks to Powell’s “transitory”
The key message was obvious:
Chinese markets remain on holiday (and will be through Tuesday) but Chinese stocks remain the leader in 2019…
European stocks were very mixed with Germany’s DAX leading and UK and Spain lagging…
An epic short-squeeze ramped US equities back into (or near) the green for the week…
With Small Caps and Trannies leading… Nasdaq and S&P were levitated almost perfectly into the green for the week…
Nasdaq up 6 week sin a row and 16 of the 18 weeks in 2019.
Nasdaq soared today on the back of Berkshire buying some Amazon shares… (FANG stocks managed to get back to breakeven on the week only though after the GOOGL drop)
For The Dow, this is the same panic-bid we saw last Friday… Dow down for 2nd week in a row – first time since Dec 2018
VIX has now risen for 3 straight weeks (albeit marginally) – the longest streak since Oct 2018
Treasuries were bid today, shifting the long-end yields back to unchanged on the week, while the short-end remain notably higher in yield…
The yield curve flattened dramatically on the week (after a brief spike initially on the Fed statement)…This was the biggest weekly flattening in 5 months
Roller-coaster week for the dollar surging back to unchanged on the week after The Fed, then tumbling today after payrolls…
Yuan ended the week unchanged (after a big bounce back today) even with China closed…
The peso surged today ahead of Cinco de Mayo…
Big week for Cryptos with Bitcoin and Bitcoin Cash leading…
As Bitcoin tests $5800…
Strong bounce back day for commodities today was unable to get them green on the week but gold outperformed as copper lagged…
Gold bounced off its 200DMA once again…
WTI fell for the 2nd week in a row – the biggest 2-week drop since 2018…hugging the 200DMA…
Finally, as BofA notes, ISM’s collapse (which everyone seemed to ignore this week) is a major warning signal for US EPS growth…
Which is already lagging the market’s enthusiasm for free money…
Global money supply better start picking up again soon…
via ZeroHedge News http://bit.ly/2H0pr11 Tyler Durden
A raging anti-semite who was stockpiling tactical weaponry and Nazi paraphernalia has been arrested for sending death threats to Jared Kushner, Donald Trump Jr. and Ben Shapiro, TMZ reports.
Barely a week after a deranged 19-year-old shot up a synagogue in Poway, Calif., claiming the Christchurch Shooter as his inspiration, Chase Bliss Colasurdo was arrested Wednesday in Washington State after the FBI and Secret Service uncovered multiple death threats against Trump’s family members.
Authorities were acting on a tip filed in March alerting them to Colasurdo’s threatening social media posts, where he apparently targeted Kushner and Trump Jr. by name. In case his intentions hadn’t been made clear enough, he also sent emails to 5 different media outlets warning of his plans: “I’m going to personally Execute [Kushner] for his countless treasonous crimes,” according to TMZ.
Colasurdo then proceeded to taunt law enforcement, posting a photo on Instagram of himself holding a gun with the caption: “I made a death threat against [Kushner] yesterday and I have not been arrested yet.”
As if that weren’t enough, Colasurdo posted a photo of Donald Trump Jr. with the caption: “I would just like to let the secret service know that I am going to Execute this fa***t.”
When FBI and Secret Service agents visited Colasurdo at his home in March, he claimed he’d been hacked, but also told agents that he had been diagnosed with mental health issues.
Still, his online death rants continued. The very next week, Colasurdo posted a photo of himself holding a handgun with the caption: “It’s Time To Start Bombing Synagogues,” and later referenced the Poway bombing.
In April, the FBI discovered that Colasurdo had been loading up on ammunition, weapons and kevlar armor, which set off alarm bells and led to a raid that resulted n Colasurdo’s arrest. During the raid, agents discovered an expansive arsenal, Nazi flags and Hitler memorabilia.
It was later reported that Colasurdo also made death threats against conservative writer Ben Shapiro and his family.
via ZeroHedge News http://bit.ly/2J03LEG Tyler Durden
Florida’s House of Representatives passed a bill on Wednesday allowing full-time teachers to carry guns in the classroom – expanding on a program launched in the wake of the deadly Parkland high school shooting in February, 2018.
The bill, passed by a vote of 65 to 47 after two days of debate in which Republicans thwarted Democratic legislators’ attempts to amend, stall or kill the measure. It was approved by Florida’s Senate last week by a vote of 22 to 17, and now heads to the desk of Republican Governor Ron DeSantis who is expected to sign it into law, according to Reuters.
Teachers who complete a 144-hour training course as part of the voluntary guardian program will be allowed to carry.
On Feb. 14, 2018, a former student armed with a semiautomatic rifle opened fire at Marjory Stoneman Douglas High School in Parkland, Florida, killing 17 people and wounding 17 others.
President Donald Trump and the National Rifle Association have argued an armed teacher could provide the best defense against a shooter bent on mass murder.
Opponents questioned whether the solution to gun violence should be the presence of even more guns and warned of the danger of a teacher misfiring during a crisis or police mistaking an armed teacher for the assailant. –Reuters
Gun rights advocates have hailed the bill’s passage as a victory.
Following the Parkland shooting, lawmakers in Florida quickly passed legislation requiring schools to place at least one armed staff member or law-enforcement officer on each campus, as well as a three-day waiting period to legally purchase a gun. The state also raised the age limit for buying rifles from 18 to 21.
Backers of the new bill argue that school shootings occur too quickly for law enforcement to respond, while opponents say the measure could lead to accidental shootings or misfirings.
Expecting the bill to pass, school employees in 40 of Florida’s 67 counties have already enrolled or planned to enroll in the 144-hour course, according to a spokesman for the Speaker of the House. Other counties have resolved not to participate in the Guardian program.
via ZeroHedge News http://bit.ly/2H0z4Nh Tyler Durden
“Impeachment is too good for him,” Nancy Pelosi declared of the president on Thursday after “his lapdog” – as she styled Attorney General William Barr – refused to be whipped by grandstanding Democrats on the Senate Judiciary Committee. What did Madam Speaker have in mind then? Dragging Mr. Trump behind a Chevy Tahoe over four miles of broken light bulbs? Staking him onto a nest of fire ants? How about a beheading at the capable hands of Rep. Ilhan Omar (D-MN)?
Mr. Barr’s stolid demeanor during the Wednesday session was a refreshing reminder of what it means to be not insane in the long-running lunatic degeneration of national politics.
Of course, the reason for the continued hysteria among Democrats is that the two-year solemn inquiry by the august former FBI Director, Mr. Mueller, is being revealed daily as a mendacious fraud with criminal overtones running clear through Democratic ranks beyond even the wicked Hillary Clinton to the sainted former president Obama, who may have supervised his party’s collusion with foreign officials to interfere in the 2016 election.
Mr. Barr’s hints that he intends to tip this dumpster of political subterfuge, to find out what was at the bottom of it, is being taken as a death threat to the Democratic Party, as well it should be. A lot of familiar names and faces will be rolling out of that dumpster into the grand juries and federal courtrooms just as the big pack of White House aspirants jets around the primary states as though 2020 might be anything like a normal election.
In short and in effect, the Democratic Party itself is headed to trial on a vector that takes it straight into November next year. How do you imagine it will look to voters when Mr. Obama’s CIA chief, John Brennan, his NSA Director James Clapper, a baker’s dozen of former Obama top FBI and DOJ officials, including former AG Loretta Lynch, and sundry additional players in the great game of RussiaGate Gotcha end up ‘splainin’ their guts out to a whole different cast of federal prosecutors? It’s hardly out of the question that Barack Obama himself and Mrs. Clinton may face charges in all this mischief and depravity.
It’s surely true that the public is sick of the RussiaGate spectacle. (I know readers of this blog complain about it.) But it’s no exaggeration to say that this is the worst and most tangled scandal that the US government has ever seen, and that failing to resolve it successfully really is an existential threat to the project of being a republic. I was a young newspaper reporter during Watergate and that was like a game of animal lotto compared to this garbage barge of malfeasance.
It’s a further irony of the moment that the suddenly leading Democratic candidate, Joe Biden, is neck-deep in that spilled garbage, the story unspooling even as I write that then-Veep Uncle Joe strong-armed the Ukraine government to fire its equivalent of Attorney General to quash an investigation of his son, Hunter, who received large sums of money from the Ukrainian gas company, Burisma, which had mystifyingly appointed the young American to its board of directors after the US-sponsored overthrow of Viktor Yanukovych.
That nasty bit of business comes immediately on top of information that the Hillary campaign was using its connections in Ukraine — from her years at the State Department — to traffic in political dirt on Mr. Trump, plus an additional intrigue that included payments to the Clinton Foundation of $25 million by Ukrainian oligarch Viktor Pinchuk. That was on top of contributions of $150 million that the Clinton Foundation had received earlier from Russian oligarchs around 2012.
Did they suppose that no one would ever notice? Or is it just a symptom of the desperation that has gripped the Democratic Party since the stunning election loss of 2016 made it impossible to suppress this titanic, bubbling vessel of fermented misdeeds? It seems more than merely possible that the entire Mueller Investigation was a ruse from the start to conceal all this nefarious activity. It is even more astounding to see exactly what a lame document the Mueller Report turned out to be. It was such a dud that even the Democratic senators and congresspersons who are complaining the loudest have not bothered to visit the special parlor set up at the Department of Justice for their convenience to read a much more lightly redacted edition of the report.
The mills of justice grind slowly, but they grind exceedingly fine. The wheels are in motion now and it’s unlikely they will be stopped by mere tantrums. But the next move by the desperate Resistance may be to create so much political disorder in the system that they manage to delegitimize the 2020 election before it is even held, and plunge the nation deeper into unnecessary crisis just to try and save their asses.
via ZeroHedge News http://bit.ly/2UYDxnx Tyler Durden
Just how much power do central banks have to manipulate and direct what by now should be clear to anyone is the world’s most centrally planned “market” in history? Here is a number from Bank of America’s Chief Investment Officer demonstrating just that: 215.
As BofA writes this morning, “once upon a time (between 7th Sept 1929 & 22nd Sept 1954) it took 9,146 days for the S&P500 to reach a new high following a >20% bear drop.” Fast forward to 2019, when the S&P 500 took just 215 days to recover and surpass its old high.
So now that the Fed has made it clear it will never allow the market to drop materially – as any significant drop and/or recession will jeopardize what little faith is left in the wealth effect and the Fed’s powers – there is another number to keep in mind: 3,498.
Why? Because as of 2018, the S&P500 bull market was already the longest ever; however for the S&P500 to become longest and largest of all-time – which it may have no choice but to do in a world where every central bank is now all in on reflating risk assets – it will have to hit 3,498.
What is ironic is that with the S&P at all time highs, investor skepticism that anything about this rally is real continues to grow, and instead of fund flows into stocks, last week was another week of big inflows of $9.6BN but into bonds; meanwhile equities saw yet another week of redemptions ($0.3 billion), with total outflows from equities now a staggering $95 billion (more than all coming out of Long Only active equity funds), offset by $140 billion in bond inflows.
It’s not just institutions: BofA’s high net worth private clients also sold stocks and bought bonds over the past 8 weeks (0.2% & 1.2% of asset class AUM respectively); As BofA further explains, its high net worth clients’ETF portfolio (14% AUM) shows rotation from EM debt & HY to IG, Eurozone & Japan equities to EM, cyclicals to bond proxies (Chart 4).
Explaining who is buying, and who is selling, Hartnett writes that “Capitalists front-run populists“, and explains:
S&P reports Q1 buybacks up 12.1% YoY, almost 1/3 US companies boosting their YoY EPS growth by >4pps thanks to share count reduction;
The punchline “corporates rather than private clients & institutions driving equity prices.”
And since they are not buying stocks, investor flows are almost entirely into IG bond funds & EM funds (both equity & debt) both are currently at cumulative all-time highs, showing how powerful the “yield” theme has been for the past decade.
So with all that, where does the market stand in terms of the three Ps – positioning, policy and profits? Here is the answer from BofA:
On positioning: BofAML Bull & Bear Indicator up to 5.1 (Chart 2), highest since Feb; surge to sell-signal of >8.0 requires a. $50bn inflows to EM equity, EM debt & HY bond funds (vs. just $10bn past 6 weeks), b. overbought equity indices (>80% above 50- & 200-DMA vs. 42% today), c. May BofAML Global FMS cash levels dropping <4.3%; these all suggest investor “greed” is in credit, not stocks.
On policy: past 10 days Fed & PBoC failed to “out-dove” rate expectations, impeding the “breathless” rally in assets this year; universal complacency on endless low rates evident in record low MOVE index; but PBoC to remain easy until China labor market recovers (China employment PMI currently lowest since 2012), and Fed stays easy until US inflation picks-up; bottom line: we expect monetary policy to remain easy and for dips to be bought; tomorrow’s inflation data that could hurt fixed income = wages (AHE) >0.4% MoM & non-manufacturing ISM price index >60.
On profits: rise in EPS expectations likely in coming months; estimate of BofAML Global EPS model (currently -7%) has turned higher on China financial conditions, Asian exports & global PMIs; but MSCI ACWI PE has already jumped 2.4ppt YTD (from 12.9x to 15.2x) and rare for this to occur without higher EPS;
… poor ISM report showed US order-to-inventory ratio at lowest since 2012 = a likely harbinger of weaker US EPS growth (Chart 1);
So today’s latest spike higher on “goldilocks” labor market data, here is the BofA bottom line: SOX needs to hold 1400, and the CRB commodity price index needs to hold 400 to prevent investor “selling cyclicals in May”.
via ZeroHedge News http://bit.ly/2vzHGDZ Tyler Durden
Whenever I hear words like “market makers say this is the largest skew they can remember”, my ears perk up. Even if they are incorrect, even if the distortion has been higher in the past – it’s clear something is not quite as it should be. As Han would say, “I have a bad feeling about this…“
What am I talking about? Options on eurodollar futures. No, not the euro currency, but the 3-month US dollar denominated interest rate futures contract. It’s not quite the same as Fed Funds as there is some credit risk (it’s the rate at which banks lend US dollars to one another offshore), yet it tracks closely enough that for all intents and purposes, it’s betting on future Fed policy.
The market for Eurodollar futures is big. And liquid. The open interest is over $1.65 trillion. Yup. Trillion with capital “T”. Most contract months are half a tick wide with more often than not, a 100 million on the bid or offer. The Eurodollar futures contract is the ultimate institutional market and all too often gets completely ignored by the financial news media.
And when it is mentioned, it’s rarely an article about the skew in the option market. But it’s an important story, so I will take some time to explain (or at least try) the intricacies in the eurodollar option market and then speculate on what they might mean.
Elvis-Presley smirk
Most everyone understands the Elvis-Presley half-smile in the equity index option market.
What’s that expression? Stocks go up the escalator but come down the elevator. This tendency for stocks to be more volatile on the downside creates a situation where option players price out-of-the-money puts with a much higher implied volatility than the rest of the curve.
But what about eurodollar futures? What sort of skew should they trade with? If we think back to the past few decades, most of the surprise large moves were from the Fed doing an emergency rate cut, not a raise. Eurodollar contracts are priced off an index which is 100 minus the LIBOR rate. This means that rate cuts result in the eurodollar futures contract rising in price.
We would therefore expect the skew on the eurodollar futures option contract to be tilted in the opposite manner to the equity index market. Market participants should pay higher implied volatilities for strikes that are out of the money on the upside.
And that is exactly how the market is currently set up.
Here is the current bid-offer for the option series on the December 2019 eurodollar futures contract. Pay special attention to the column labeled IVB – that stands for Implied Volatility Bid. This is the calculated implied volatility based on the bid.
Let’s backtrack to the original comment from the market makers. You know, the one about this being the largest skew they can remember. What do they mean?
They are talking about the stunning difference between the implied volatility of the upside calls and the downside puts. Look at the out-of-the-money calls. They are bid in the 20%’s. Then compare it to the out-of-the-money puts. They are giving those puts away with implieds in the low teens.
This skew has been created through a relentless institutional order flow of players buying upside gamma and sell downside protection over the past couple of months.
If we knew the forward price volatility for the eurodollar futures contract would be normally distributed – that there would be no tendency for the up moves to be any larger or more frequent than the down moves, then this option skew would be an absolute phenomenal opportunity. An option market maker would sell the out-of-the-money calls for 20% vol and buy the out-of-the-money puts for 12%. After delta hedging through the life of the option, and assuming the price volatility was normally distributed and didn’t have a fat tail to the upside, the 8% vol difference would be pure profit.
However, we don’t know for sure what the forward price distribution will look like. Yet we can deduce the message the marketplace is sending based on this pricing.
The market overwhelmingly believes the next move for the Federal Reserve is to cut. And even though the curve is already pricing in some easing, participants are concerned there will be a dramatic downside surprise move in rates. That’s why they are willing to pay this record skew in eurodollar futures options.
The pros are bearish
This fits with my narrative that professional investors are increasingly bearish on both the economy and risk assets (”One Group will be Spectactularly Wrong”). Money managers are demanding protection against lower rates. And they are bidding for that protection at levels of skew that is either unprecedented, or close enough to a record to not matter.
Don’t underestimate the signal this eurodollar option skew is sending. Market participants will not be surprised with lower rates. That is what they are expecting. Professional market participants have convinced themselves the economy is rolling over. The business cycle has turned and it’s only a matter of time before Powell is panicking by slashing rates lower. If this scenario does not come to pass, then they will have bet incorrectly.
However, and this is where it gets nuanced, given the record skew even if they are correct about the direction of rates, it might be all priced in. Trading is all about the difference between expectations and reality. Sometimes it’s difficult to judge expectations. Yet other times the record skew screams out loud which way the professionals are leaning.
Not everyone is in that camp
I am less bearish on the economy than most professional investors. Maybe I just don’t get it. Maybe I am a fool for believing the tax cut stimulus has not yet finished making its way through the economy. Perhaps I am not knowledgeable enough to understand that regardless of Powell’s violent flip-flop the Fed cannot extend the business cycle. Yeah, I can understand why you might ignore my ramblings.
However, it might be easy to dismiss my ridiculous world-will-not-end-tomorrow call, but what about Guggenheim’s Scott Minerd’s forecast?
Scott believes the Fed’s next move is a hike! Talk about an out-of-consensus view.
This goes against what almost everyone else believes.
It’s above my pay grade to predict if the Fed’s next move is a hike or a cut, but I know one thing for certain – the market will react violently differently between those two scenarios.
Assuming the Fed is not cutting because of some geopolitical disaster, but rather because the economy has simply rolled over, an easier Fed policy move would be welcomed by the market. But make no mistake – it would be largely priced in. It would be met with muted price changes and most likely disappointment the Fed was not even more aggressive.
However if the Guggenheim view ends up playing out, the violence in the short end of the fixed-income market will be epic.
We have rallied hard off the lows from when Powell was leaning heavily hawkish with his “we are a long way from neutral” comments.
But have we rallied too much? Doesn’t the fact that even with this rally, market participants are gobbling up record amounts of out-of-the-money calls, not cause you pause?
I can tell you one thing for sure – when all the pros are leaning one way, I wouldn’t want to be in their camp.
Cheap way to bet
Yet if you believe that Scott Minerd is correct and that the next move is a Fed hike, there is probably no better way to play that outcome than snapping up some of these cheap puts. The distorted skew means they are practically giving them away.
Getting long cheap gamma in out-of-the-money eurodollar puts is probably the best way to express the view that the American economy is not quite as late-cycle as the market suspects. And here is a thought I would like to leave the economic bears with; given the record steep skew, hedging a long eurodollar futures position with protective puts is probably a strategy to seriously consider.
via ZeroHedge News http://bit.ly/2DKhUSg Tyler Durden
A whistleblower in an FCPA case involving Teva Pharmaceuticals is now taking the SEC to federal court, claiming that the agency is taking too long to grant him a reward, according to the WSJ. The tipster filed a petition on Monday asking the court to compel the agency to make a preliminary decision within 60 days.
According to the petition, it has now been 2 years since the tipster applied for compensation from the SEC – a time period the whistleblower’s lawyers claim is “unreasonable”.
The amount of time it takes the SEC to pay out on whistleblower awards has been a growing concern among those who offer tips. Often, the SEC takes around 2 years to make a determination and awards can sometimes amount to several million dollars for large cases.
Between 2014 and 2017, the agency’s average was “more than two years” to make a determination, according to an analysis by The Wall Street Journal. This is twice as long as it took the agency in 2012 and 2013, while the program was still in its infancy. Suing the SEC to compel for an award isn’t something new: another tipster did the same in 2015 but the case was dismissed within 60 days after the SEC ultimately made a decision. In that respect, the strategy worked.
Last year, the SEC took in 5,282 whistleblower tips, an increase of 18% from a year earlier. It’s also about twice the number received in 2012, according to a report the SEC recently made to congress. There has been “a flood of requests for awards” over the last few years.
Under law, tipsters are entitled to between 10% and 30% of the monetary penalties paid by companies as a result of SEC enforcement actions. As it relates to this case, Teva wound up paying $519 million in 2016 to settle charges that it violated FCPA laws in Mexico, Ukraine and Russia.
Sean McKessy, a lawyer at Phillips & Cohen LLP, who previously served as chief of the SEC’s whistleblower office says that suing the agency may not be the best idea: “The agency often faces factors outside of its control that can delay the decisions it makes on awards. In some cases, the SEC has to make a determination on several applications for a single award.”
He continued: “If you’re going to blow up a relationship when you know you’re going to need some help from that entity in the future, it doesn’t make sense to me.”
via ZeroHedge News http://bit.ly/2PMJAdV Tyler Durden
Beto O’Rourke, a Democratic presidential candidate, has signed a pledge to not accept any campaign donations from the oil and gas industry, and to return donations received since the start of his campaign that do not fit in with the requirements of the pledge.
The Hill quotes the initiators of the pledge, a youth climate group, Sunrise Movement, as urging candidates and other politicians to “reject contributions from fossil fuel executives, lobbyists and their front groups and protect our health, climate, and democracy instead.”
The group has now applauded O’Rourke, who, according to media reports, had earlier refused to sign the pledge and was quoted by Bloomberg as saying:
“If you work in the oil fields, you answer the phones in the office, if you’re one of my fellow Texans in one of our state’s largest employers, we’re not going to single you out from being unable to participate in our democracy.”
There is something to be said about the difference between a roughneck and an office administrator at an oil company and the executives and lobbyists for the industry, so it would be interesting if the candidate will continue accepting individual donations from people working in the oil and gas industry.
Sunrise Movement praised the hopeful for his move in a tweet.
The group also boasted that “So far, over 1400 candidates have signed the No Fossil Fuel Money pledge nationwide, including 12 of 20 presidential candidates. Any candidate who wants to be taken seriously by our generation needs to sign the pledge and back the Green New Deal.”
O’Rourke last week released a climate change plan that aims to make the United States a net zero emitter by 2050 for the price of US$5 trillion. At the time, O’Rourke said if he was elected he would introduce a “legally enforceable” rule that Americans remove an amount of greenhouse gases equal to the amount they produce.
via ZeroHedge News http://bit.ly/2Lm5INM Tyler Durden
