Tag: finance

On Wednesday the Federal Reserve is set to vote on proposals that would further ease capital requirements for banks with assets of $700 billion or lower, expanding on Trump’s promise to deregulate Wall Street.

The biggest benefits will come to banks with between $100 billion and $250 billion of assets – or the bulk of regional banks – who would no longer have to adhere to liquidity coverage ratio and proposed net stable funding ratio, according to prepared remarks by Fed Vice Chairman of Supervision Randal Quarles. Firms between $100 billion and $250 billion would also face stress tests every two years, instead of annually

“A reduction of this magnitude is appropriate because most U.S. banking firms in this group are not engaged in complex activities and have more stable funding than systemic banks given their relatively traditional business models,” said Quarles.

At the same time, Non-Wall Street banks that have more than $250 billion of assets would move to a “calibrated” liquidity coverage ratio that is in the range of 70% to 85% of full LCR, Bloomberg notes.

Meanwhile, large banks will generally see little benefits from today’s deregulation: Quarles said that large bank holding companies now have about $1.3 trillion of capital, and the Fed proposals would reduce that by only $8 billion.

Curiously, Fed Governor Lael Brainard said she plans to vote against proposals, arguing they would raise “the risk that American taxpayers again will be on the hook” to bail out banks.

“I see little benefit to the institutions or the system from the proposed reduction in core resilience that could justify the increased risk to financial stability and the taxpayer,” Brainard says in prepared remarks.

Her caution is warranted in light of the recent earnings shock unveiled by Bank OZK which unveiled a deeply distressed commercial real estate portfolio, which sent its stock plunging and prompted questions whether banks are covering up deterioration in some of their CRE holdings. 

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Following API’s bigger than expected crude build, WTI’s ‘odd’ jump has been erased, trading back below $66 as DOE data prints. Crude inventories rose for the sixth week in a row (as did Cushing stocks) but WTI popped back above $66 on the heels of big drawdowns in Gasoline and Distillates.

 

Bloomberg Intelligence Senior Energy Analyst Vince Piazza notes that “market sentiment seems to have come around to the view that U.S.-China trade tensions will weigh on global economic growth, suppressing demand for oil.”

Last week’s DOE report showed an increase in refinery utilization, which “could have been indicative of the end of turnaround season. If we have that occur again this week, it will probably confirm that,” says Thomas Finlon, director of Energy Analytics Group.

 

API

• Crude +5.69mm (+3.2mm exp)

• Cushing +1.44mm (+2.1mm exp)

• Gasoline -3.5mm

• Distillates -3.1mm

DOE

• Crude +3.22mm (+3.2mm exp)

• Cushing (+2.1mm exp)

• Gasoline -3.16mm (-2.25mm exp)

• Distillates -4.05mm – biggest draw since Oct 2017

6th weekly rise in Crude and Cushing stocks and 6th weekly decline in Distillate inventories…

 

US Crude Production jumped notably on the week, back to record highs, rebounding after hurricane interruptions…

 

WTI sank back to a $65 handle ahead of today’s DOE inventory data but bounced back up to pre-API levels on the smaller than expected crude build…

“You’re approaching a level where a lot of traders are looking at value,” said Josh Graves, senior market strategist at RJO Futures in Chicago.

“The market is looking at growth potential in the future and trading off of earnings announcements and anything that can give an outlook on what oil prices might be down the road.”

Today’s angst in the oil complex is not over though, as the EIA-914 monthly crude production report is due at 12ET and may show a big jump for August (according to Rystad), and The Petroleum Supply Monthly will come out around 2pmET with the latest look at demand, crude by rail and exports.

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Authored by Tim Daiss via Oilprice.com,

In what must seem like a nightmare scenario for Iran, not only is another U.S. president leveling sanctions against its economy, and particularly that economy’s lifeblood, its oil sector, but the current U.S. president has admittedly made it his mission to drive Tehran to its knees over what he sees as non-compliance over the 2015 nuclear accord between western powers and Tehran.

As recently as the start of this month, the oil markets narrative was that perhaps President Donald Trump had pushed a bit too hard by reimposing sanctions against Iran. Oil markets, for their part, were jittery while both global oil benchmark Brent and U.S. Benchmark West Texas Intermediate (WTI) futures hit four-year highs largely on supply concerns. Some predicted that $100 per barrel oil by the end of the year was imminent, while Tehran maintained a defiant tone, stating that neither Saudi Arabia nor OPEC would be able to pump enough oil to compensate for the loss of Iranian barrels, estimated between 500,000 bpd and 1 million bpd.

Now, what a different just a few weeks can make. Oil prices are now trending downward, falling for a third consecutive week as global stock markets tumbled and oil markets focused on a weaker demand outlook for crude going forward. Brent crude fell 2.7 percent last week and is down 10.5 percent from its October 3 high of $86.74. WTI ended the week down some 2.2 percent and has now dropped around 12 percent from its recent high of on October 3. Moreover, in a sign of things to come, hedge-fund and money managers are trimming their bets that crude oil prices will rise.

Oil market headwinds, perhaps even storm clouds are brewing over a slowdown in economic growth due to trade war tensions between Washington and Beijing, and a stronger dollar weighing on emerging market economies, with those countries seeing an exodus of currency for higher yielding, safer havens like the US Dollar and Japanese Yen. A stronger dollar also increases the price for oil import dependent countries, with India, the Philippines, Indonesia and others particularly vulnerable.

Tim Ghriskey, chief investment strategist at Inverness Counsel in New York said on Friday that “We’ve seen oil prices sell off here throughout the correction we’ve had in the broad market. The concern in the sell-off is clearly global growth, and that’s immediately reflected in oil prices.” UBS analysts, for their part, expect oil demand to grow more slowly in 2019, on higher oil prices and weaker economic growth.  Barclays currently sees the oil market flipping into oversupply in the first quarter of next year.

Nightmare scenario for Iran

How all of this plays out remains to be seen, but with a general downturn in economic growth and a slowdown in oil growth demand going forward, the loss of Iranian barrels now looks easily manageable – a scenario sure to cause consternation for Tehran.

Even Saudi Arabia is bracing for a possible return of oil supply overhang, a recent nightmarish situation for Riyadh as recently as 2015 and 2016 when it was forced to turn to Russia and form the so-called OPEC+ to trim oil production and return OECD oil inventories to five-year average while giving support to beleaguered prices that had dipped below $30 at the start of 2016.

Saudi Arabia’s OPEC governor said on Thursday the market could face oversupply in the current quarter, and after a slump in global equities clouded the outlook for demand. “The market in the fourth quarter could be shifting towards an oversupply situation as evidenced by rising inventories over the past few weeks,” Adeeb al-Aama told Reuters. Saudi Arabian energy minister Khalid al-Falih said there could be a need for intervention to reduce oil stockpiles after increases in recent months.

Amid these developments, Tehran has toned down then eliminated its defiant insistence that oil markets were headed for trouble with the loss of Iranian barrels. Now, the country needs a new narrative. Moreover, the fallout for Iran remains clear. With most major importers of Iranian crude, including India and even China, already falling into compliance with U.S sanctions, the Iranian government will have to move quickly to not only make up the shortfall in oil revenue needed for state coffers but to also appease already festering public angst over the fall of the country’s currency (the rial), high inflation, unemployment and ongoing economic problems in the Islamic Republic.

Taking it to the streets

In June, the government was caught off-guard by protests in Tehran over a plunge in the value of the rial. Crowds at one point shut down Tehran’s sprawling Grand Bazaar, an economic center and a center where the 1979 Iranian Revolution gained footing. Protests also broke out in other cities in the country. Iran’s economy was already sputtering before Trump’s announcement in May that he intended to pull out of the 2015 nuclear accord, but since then the situation has intensified.

On Saturday, Iran’s parliament approved a government economic reshuffle, according to a Reuters report. The move comes just a week before fresh sanctions will hit the country’s energy sector.

“Our main enemy, America, faces us with a drawn sword and we have to fight it and we have to unite. Regardless of factions … we are all part of the Iranian nation,” Rouhani said earlier, urging MPs to vote for his proposed ministers ahead of the cabinet reshuffle.

“Part of our economic problems has to do with the (high) rate of exchange of hard currencies, but our foreign exchange reserves are better than in any of the past five years,” he said.

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When commenting yesterday on the ongoing bloodbath in the hedge fund space, which has been far worse than the drop in the overall market, we highlighted a perverse trap that the “smart money” appears to be caught in: as a result of the recent spike in realized vol, coupled with rising redemption requests, “with every passing day, it’s only getting worse as hedge funds, forced to deleverage in this chaotic market, are unable to pick a correct side of the market and stay on it.”

With that in mind, traders will be curious if yesterday’s furious dead cat bounce melt up in stocks provided some relief to hedge funds?

As it turns out, the answer is no with the “trapped” thesis dominating, because as Nomura’s Charlie McElligott writes, despite the powerful U.S. Equities index-level rally, “the particulars of the sector- and factor- leadership meant another very large underperformance day for the buyside again, with “consensual underweights / shorts” (Materials, Oil & Gas, Energy Equip & Services, Food Beverage & Tobacco, REITs, Staples, Household & Personal, Telcos, Consumer Services, Insurance, Banks) up as much or more than “popular overweights / longs” (Software & Services, Media, Retailing, Tech Hardware, Consumer Durables).”

It gets worse: as the Nomura strategist calculates, yesterday was the 3rd largest one-day underperformance for the Equities HF L/S benchmark vs SPX since Feb 2016, and the 10th worst underperformance day vs SPX since Oct 2014

Why is this important? Because while it is generally accepted that October’s drop has been largely a function of “slow money”, active hedge fund management deleveraging, selling and liquidations, nobody has countered where the reflex knee-jerk response buying would come from (aside from buybacks of course).

We now know it won’t be from hedge funds, who are forced to delever even as the market rallies.

As McElligott further explains, “without question and worth repeating, this underperformance / “shock drawdown” within the U.S. Equities fund space weakens the basis for “performance-chasing” mentality into year-end as sentiment pivots to “defense” from “offense,” with little-to-no “ammo” across the generic fundamental / discretionary Equities space.”

That said, one possible source of buying pressure would be the tactical Macro funds, who have gotten the rates-trade “right” and have the dry-powder to put on the upside view, with some according to Nomura have already begun this pivot playing “wingy” bullish trades in index / ETF. At the same time, and with a far smaller scale now due to their own performance issues YTD, Systematic “Mechanical Rebalancers” will “by rule” need to re-leverage on a move higher as “rich vol” will be reset lower. This goes to Kolanovic’s thesis for why a bounce is overdue.

Finally, as McElligott shows in the following chart, at the end of the day, the catalyst for any day-to-day move will be global financial conditions, which have been shrinking rapidly in the past month and will continue to shrink as we enter November when global central bank liquidity flows turn increasingly more negative for the first time since the financial crisis.

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The last two days have seen Dow futures rise over 1100 points, ripping back above their 200DMA…

Dow Futs spiked from 24086 to 25145 in the last two days…

 

Send them very technically to their 200DMA…

Will it hold?

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For the third month in a row, Chicago Purchasing Managers signaled declining optimism about business. After some hopeful bounces mid-year PMI drops to 6-month lows (58.4 vs 60.0 expectations), catching down to the ‘hard’ data reality underlying the US “strongest economy ever.”

Only 3 components rose relative to last month.

• Prices paid rose at a slower pace, signaling expansion

• New orders rose at a slower pace, signaling expansion

• Employment rose at a faster pace, signaling expansion

• Inventories rose at a slower pace, signaling expansion

• Supplier deliveries rose at a faster pace, signaling expansion

• Production rose at a faster pace, signaling expansion

• Order backlogs rose at a slower pace, signaling expansion

Reality bites…

‘Hope’ was never a business strategy…

 

 

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Hours after news of the jailhouse murder of notorious Boston crime boss James ‘Whitey’ Bulger leaked to the new media, rumors began circulating that the slaying of the 89-year-old, wheelchair-confined Bulger may have been carried out with the possible tacit approval of federal authorities, who were worried that Bulger – whose long-rumored status as a government informant was laid bare during his 2013 trial – might expose corruption at the highest levels of the FBI’s witness cooperation program.

Authorities initially said a “mafia-linked” suspect was under investigation for his role in the killing. But amid an official information blackout, TMZ and the Daily Mail reported the grisly details of Bulger’s death. After being transferred to the USP Hazelton facility in West Virginia on Tuesday, Bulger was released into the general population.

But before he could even be officially booked into the prison, the former Irish mob boss was whacked by three prisoners, who reportedly wheeled him to a secluded area and savagely beat him with combination lock stuffed in a sock, before attempting to gouge out his eyes – an old school organized crime gesture of contempt for ‘rats’, or criminals who give information about their underworld associates to law enforcement. 

Freddy Geas

While those reports were based on anonymously sourced accounts, the Boston Globe appeared to confirm these accounts when it reported late Tuesday that a notorious New England mafia hitman is the prime suspect in the slaying of Bulger. Fotios “Freddy” Geas, 51, who is serving a life sentence for his involvement in the 2003 assassination of Springfield, Mass. mob boss “Big Al” Bruno, is believed to be behind Bulger’s slaying. And according to the Globe’s sources, he hasn’t disputed his role in the killing to authorities.

Geas’ friends weren’t surprised to hear that he may have been involved in the killing.

“Freddy hated rats,” private investigator and Geas’ friend Ted McDonough told the paper. “Freddy hated guys who abused women. Whitey was a rat who killed women. It’s probably that simple.”

Even Geas’ former lawyer, who represented Geas in his Mafia murder case, said he wasn’t surprised to hear that his former client had refused to dispute his role in the killing and had refused to identify any accomplices.

“He wouldn’t rat on anybody,” said attorney David Hoose. “And he had no respect for anyone who did.”

Meanwhile, the Massachusetts prosecutor who convicted Bulger offered no words of remorse for a man whom he once described as one of the cruelest killers in the criminal underworld, per CNN.

James ‘Whitey’ Bulger

A statement Tuesday from Andrew Lelling, the US Attorney for Massachusetts, was brief. It made no mention of Bulger other than he had died.

“We received word this morning about the death of James “Whitey” Bulger. Our thoughts are with his victims and their families,” the statement said.

As Geas’ involvement is looking increasingly likely, nobody in the Bureau of Prisons, or anywhere else in the federal government, has bothered to explain why Bulger was left in such a vulnerable position after a seemingly arbitrary transfer from his previous facility in Florida. 

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Exactly one week ago, “world-renowned commodity guru” Dennis Gartman called for a bounce in stocks, a call he regretted just one day later when stocks tumbled and Gartman admitted he had been “clearly wrong.”

Fast forward to today, when shortly before the the daytrading president himself opined on the stock market, channeling his internal Tom Lee and saying that the “stock Market up more than 400 points yesterday. Today looks to be another good one”, that Dennis Gartman has doubled down again, and hoping that this time he will be able to bottom tick the market, says that the market is – again – overdue for a bounce, to wit:

… the market had indeed become egregiously over-sold domestically here in the States and in broad global terms also and so this bounce has some merit and likely shall last for a few days more before the markets collectively have gotten almost as egregiously overbought… perhaps in a week or two… as they were egregiously oversold only two days ago.

Even so, not even Gartman is willing to make a full-blown bet of a year-end rally, and instead says that “we look for all of the major indices to fail well below their previous interim highs and it is there and then that we shall begin selling once more.” The reason: sellers will re-emerge shortly.

All of that said, with our International Index having risen a very brisk 88 “points” it is still down 992 “points” for the year-to-date or -8.2% and it is still down a much more material 1,692 “points” from the high made on January 29th, or -13.2% from that high. These are material and very serious losses and those who were late to the bullish party and who are now suffering those losses in real and “mental” capital terms will be the willing sellers once they are able to come near to breaking-even on their investments!

Finally, Dennis cements his bounce thesis by highlighting his near-term market targets:

How far then can we imagine the markets may rise before resistance is reborn and we are to become aggressive sellers? Given that the Global Dow Index has fallen from its last interim peak of 3,155 on the 21st of September to its recent interim low of 2,839 two days ago, a “bounce” toward 2,997-3,015 would simply take that index back into its “Box” marking the 50-62% retracement of the break. In terms of the S&P here in the US, having made its last interim peak at 2,931 on the 20th of September, and having fallen to 2,656 late last week, a “bounce” to 2,795-2,825 is reasonable. Those then are our targets; we can await them… patiently.

And with that, the algos’ daily instructions have now been programmed.

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While Presidents have traditionally shied away from commenting too much on the stock market, President Trump has been ‘unusual’ in his focus on the arbitrary measure of America’s success (or failure).

Having been quite for much of the month – as US equity markets collapse most since the financial crisis – Yesterday’s dead cat bounce along with today’s extension…

…has sparked renewed optimism in The White House:

“Stock Market up more than 400 points yesterday. Today looks to be another good one. Companies earnings are great!”

Stock Market up more than 400 points yesterday. Today looks to be another good one. Companies earnings are great!

— Donald J. Trump (@realDonaldTrump) October 31, 2018

As Bloomberg notes, Trump has commented on the stock market more than 30 times since his election, the latest on Tuesday to blame Democrats for the October “pause” in markets. (The S&P 500 is down almost 9 percent in the month and lower for the year. It’s up more than 20 percent since his election.)

Source: Bloomberg

We wonder if President Trump will comment when this bounce dies and we test February lows once again?

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Facebook has been banning accounts and pages associated with the right-wing group, the Proud Boys, following an October scuffle with Antifa in New York City. 

Twitter users reported the Facebook take-downs on Tuesday, noting that both public and private accounts associated with the Proud Boys had vanished from the social media network, including founder Gavin McInnes, and a large account with over 20,000 members. 

A spokesperson for Facebook confirmed the bannings with Business Insider, pointing to the company’s rules and adding that the removal applies to Instagram as well. 

On October 12, the Proud Boys engaged in a fight with Antifa outside of the Metropolitan Republican Club, where the 49-year-old McInnes had given a speech that evening. Left-wing activists had protested the club’s decision to invite McInnes to speak for much of the week, making threatening phone calls in an attempt to convince them to cancel the event, according to club president Deborah Coughlin.

After the event a brawl erupted after a member of Antifa threw a bottle at the Proud Boys, ultimately resulting in the arrest of nine Proud Boys and three Antifa on charges of rioting, assault and attempted assault. 

One member of the group, Geoffrey Young, 38, was taken into custody Thursday night and charged with two misdemeanors: riot and attempted assault. The Manhattan district attorney’s office said in a complaint that Mr. Young punched one victim in the face, kicked a second in the stomach and kicked a third three times in the head.

In what she described as a “vicious, unrelenting attack,” a prosecutor, Jamie Kleidman, said in Manhattan Criminal Court on Friday that Mr. Young had “charged toward” six people believed to be protesters and was joined by about 10 other Proud Boys who “kicked, stomped and punched them.” –New York Times

The Proud Boys was founded in 2016 by McInnes – also a co-founder of Vice who is no longer affiliated with the magazine. Its members describe themselves as “Western Chauvinists,” while those on the left have called them a hate group. 

In a statement reported by BI, a Facebook spokesperson said: “Our team continues to study trends in organized hate and hate speech and works with partners to better understand hate organizations as they evolve. We ban these organizations and individuals from our platforms and also remove all praise and support when we become aware of it. We will continue to review content, Pages, and people that violate our policies, take action against hate speech and hate organizations to help keep our community safe.”

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