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The combination of a stronger dollar, terrorism bullishness fading, and Jim Bullard’s hawkish chatter have sparked modest carnage in commodities this morning. Copper has plunged, gold has been slammed twice, and silver flash-crashed (again).
Close-up, this happened to Silver…
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The campaign for Britain to leave the European Union has taken a 2 percentage point lead, according to an ICM poll, to 43%, up 2 percentage points from a similar poll a week ago and the highest proportion in favour of a British exit since ICM started its referendum tracker in May 2015. Bearish bets on GBP have soared to record highs as a split within the governing Tory party and the atrocities in Brussels have sent bookies odds to their highest yet.
As Reuters reports, support for Britain to leave the EU rose to 43 percent, up 2 percentage points from a similar poll a week ago and the highest proportion in favour of a British exit since ICM started its referendum tracker in May 2015.
Three months before a June 23 referendum, the poll of 2,000 people carried out March 18-20 showed the "In" campaign on 41 percent, down from 43 percent a week ago.
Cameron faces one of the deepest crises of his decade-long leadership of the Conservatives after senior cabinet minister Iain Duncan Smith, who opposes EU membership, resigned last week over plans to cut spending on welfare.
Divisions over EU membership – an issue that helped sink the Conservative premierships of Margaret Thatcher and John Major – have amplified such disputes within the party.
"The Tories are overtly split and that is never a good look," Martin Boon, director at ICM, said.
"It’s possible that the split and the budget is creating EU dissatisfaction by proxy but equally it could be the public moving toward a more pro-Brexit position or just normal sampling variation in the polls. Only time will tell," he said.
The cost of hedging against sharp swings in sterling surged to its highest ever on Wednesday as investors stepped up to protect themselves from the uncertainty of Britain's upcoming vote on whether to stay in the European Union.
And, as Reuters adds, the odds of Britain voting to leave the European Union in a June referendum narrowed on Tuesday as attacks in Brussels that killed at least 34 people were seen boosting the 'Out' campaign.
Bookmaker Paddy Power narrowed its odds on a Brexit to 7/4, or 36 percent, from 2/1, or 33 percent, on Monday. Betting website Betfair also shortened its odds to 36 percent, while four major bookmakers, including Bet 365 and Sky Bet, narrowed their odds to 6/4, or 40 percent, following the attacks.
PredictIt, a political prediction website run by Victoria University in Wellington, New Zealand, said the chances of an 'Out' had increased to 45 percent.
"What we've seen today in Brussels … may sway people (toward voting to leave the EU), so I think that's why the bookies have shortened the odds," said Chris Hawkes, a currency trader at ETX Capital in London.
"The average man on the street doesn't really understand the ins and outs of a Brexit, and border control seems to be one of the primary concerns, so when we see attacks that we've seen today this is going to make people more staunch on their standpoint," he added.
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Hold your real assets outside of the banking system in one of many private international facilities –> http://ift.tt/1M1FiG5
Posted with permission by Rory Hall, The Daily Coin (CLICK FOR ORIGINAL)
The public has learned that the political Establishment represents the 1% and they have no chance with any Establishment candidate, either Republicans or Democrats…They’re supporting them less for their stance on issues and more on the fact that maybe there’s a chance that they [Trump/Sanders] would do something for the 99%. – Dr. Paul Craig Roberts, Shadow of Truth.
Aside from the fact that Hillary Clinton is allowed to run for President rather than spend all of her time defending herself from criminal charges for treasonous political crimes, the most horrifying aspect of the 2016 Presidential Campaign is watching the Republican Establishment contemptuously disregard democracy and spend millions in an attempt to defeat Trump, is the people’s choice to be the Republican Presidential candidate.
I don’t think the Establishment will allow Trump or Sanders if they can prevent it to win the Presidential election. We already have prominent Republicans stating that if Trump wins the nomination they’ll vote for Hillary. – Paul Craig Roberts, Shadow of Truth
The wealthiest businessmen and corporations who fund politicians in order to control the political process are lining up like pigs at the trough to throw as much money as is needed to try and derail Trump’s candidacy. The same is true with Hillary Clinton, as her biggest donors are George Soros and the big Wall Street Banks.
Paul Craig Roberts gained experience and insight on this subject as a member to the Reagan Administration. The Republican Establishment didn’t like Reagan because he was an outsider.
If Trump gets the nomination, the Republican Establishment is more threatened by him than they are by Hillary winning the election because an outsider disrupts their loss of control. – Paul Craig Roberts, Shadow of Truth.
The Shadow of Truth hosted Dr. Paul Craig Roberts for a discussion about the election, the rise of Putin and Russia’s military withdrawal from Syria and the economy/precious metals. Part One below starts off with Dr. Roberts’ assessment of the effort being made by the Establishment of both Parties to deny Trump and Sanders a chance to be their party’s Presidential candidate:
They don’t like Trump because he says he’ll work things out with Putin…Trump also says we’ve got to reinvestigate 9/11 – well this drives the neocons wild. You have to ask yourself, if the 9/11 story was true, why would the neocons care if it was reinvestigated? But they are so opposed to it that there has to be something wrong with the story.
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US equities are stumbling this morning, giving their bullish terrorism gains, as oil slides and voting FOMC member Jim Bullard appears to raise the spectre of mutiny in the Eccles Building. Speaking on Bloomberg TV, he suggested he wanted to withdraw from the dot-plot forcecasts adding that he believes Fed policy is merely “in reasonably good shape.” Finally, following Lockhart and Evans, Bullard also warned that April was “live,’ as it appears The Fed wants to talk back some exuberance in the market.
Headlines:
And it appears the market is not happy about that uncertainty…
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The sun is about to set on SunEdison.
Once upon a time SunEdison was one of the most popular hedge fund hotel stocks, which however, just like Valeant, has led all of the hedge funds who were long the name (and still are) to ruin.
Case in point: yesterday the stock plunged another 25% following a DebtWire report that the company was in DIP loan negotiations with lenders, the final step before filing for bankruptcy, after talks to reach an out of court solution with 2nd lien lenders had failed.
This morning, the stock is down another 15% following ever louder concerns that a bankruptcy is imminent, and following a note from Axiom’s Gordon Johnson, arguably the most accurate forecaster in the name, who overnight lowered his 2016 year-end price target adjusts lower to $0.22/shr (85% downside from yesterday’s closing price) vs. $0.39/shr prior.
More importantly, he also notes that “should SUNE be forced to liquidate projects out of its 5.5GW backlog in a Bankruptcy, the impact to US solar market project fundamentals (incl. rooftop) could be detrimental.” This means that none other than Elon Musk may be slammed after SUNE has no choice but to file.
Here is Axiom’s full note”
The Beginning of the End?
Debtwire (“DW”) Report Suggests SUNE in Debtor-in-Possession (“DIP”) Negotiations with $725mn LIBOR +1,000bps A-1 & A-2 2018 Second Lien Term Loan Holders. Yesterday, DW (link) reported that SUNE, after talks failed to reach an out-of-court solution with second lien holders around resolving liquidity/leverage problems, entered into DIP discussions with creditors. By way of background, in general, we remind our readers that DIP financing is typically “put into play” after out-of-court resolutions fall apart. That is, if a company needs a loan, but a potential lender is unwilling to make it (due, mainly, to concerns around legal challenges), the Bankruptcy Code offers a way in which the lender can circumvent legal challenges from other creditors. This is typically done via a Chapter 11 Bankruptcy, whereby the lender(s) is granted a first priority security interest, a market/premium interest rate, approved budget, and other lender protections. Stated differently, via a Chapter 11 Bankruptcy filing, a distressed company who is unable to obtain a new loan outside of bankruptcy, may use DIP financing to get the liquidity necessary to run a sale process or finance a formal Chapter 11 restructuring. In our view, assuming SUNE is successful in acquiring DIP funding, we believe this likely shifts lower the priority of the majority of their capital structure (with equity holders the least likely to be made whole); it also suggests, as we’ve warned extensively, that SUNE’s current cash position is dire, if not completely compromised. We maintain our SELL rating and adjust our price target lower.
SUNE “Mum” when Asked for Comment, But Impact to US Solar Market Could Prove “Debilitating”. We reached out to SUNE regarding the validity of DW’s report, yet did not hear back. However, should SUNE be forced to liquidate projects out of its 5.5GW backlog in a Bankruptcy, the impact to US solar market project fundamentals (incl. rooftop) could be detrimental. Finally, according to DW, SUNE is seeking $300mn in new post-petition DIP liquidity.
Valuation. Using our sum-of-the-parts, where the key point of differentiation is our view that SUNE will develop just 1.95GW of projects in 2016 (vs. guidance of 3.3-3.7GW), our 2016 year-end price target adjusts lower to $0.22/shr (85% downside from yesterday’s closing price) vs. $0.39/shr prior – due to lower TERP/GLBL shr prices.
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It appears The IEA has come to the same reasoning as we have been pointing out for weeks – "freezing" production at what is already the highest output levels ever is "meaninglesss." As Reuters reports, Saudi Arabia is the only country with the ability to increase output, a senior executive from the International Energy Agency (IEA) said on Wednesday. This reality check appears to have stalled crude's exuberant run as WTI pushed below overnight API "build" lows.
As Reuters reports, a deal among some OPEC producers and Russia to freeze production is perhaps "meaningless" as Saudi Arabia is the only country with the ability to increase output, a senior executive from the International Energy Agency (IEA) said on Wednesday.
Brent crude futures are up more than 50 percent from a 12-year low near $27 a barrel hit early this year, bouncing back after Russia and OPEC's Saudi Arabia, Venezuela and Qatar struck an agreement last month to keep output at January levels.
Qatar has invited all 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and major non-OPEC producers to Doha on April 17 for another round of talks to widen the production freeze deal.
"Amongst the group of countries (participating in the meeting) that we're aware of, only Saudi Arabia has any ability to increase its production," said Neil Atkinson, head of the IEA's oil industry and markets division, at an industry event.
"So a freeze on production is perhaps rather meaningless. It's more some kind of gesture which perhaps is aimed … to build confidence that there will be stability in oil prices."
Libya has joined Iran in snubbing the initiative, and the absence of the two OPEC producers – both with ample room to increase output – would limit the impact of any success in broadening the freeze at the April meeting.
The rise in output from Iran in the first quarter post-sanctions has been in line with IEA's expectation of 300,000 barrels per day (bpd), Atkinson said, adding that Tehran's output could rise again by the same amount by the third quarter.
"Iran has not exactly been flooding the market with lots more oil. It seems to be far more measured," Atkinson said.
So the supply side of the equation remains a drag on prices. Meanwhile, on the storage side, things are worse than ever…
Trading houses are betting on oil markets remaining oversupplied for at least two more years even as crude prices stage a recovery driven by early signs of falling production.
Ian Taylor, chief executive of top oil trader Vitol, said on Tuesday that "stocks of crude and products continue to build and these will weigh upon the market".
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When last we checked in on Credit Suisse, things weren’t going so well.
The bank had just reported a $6 billion loss – in the fourth quarter. The red ink for 2015 totaled some $3 billion, representing the firm’s first annual loss since the financial crisis. Shares promptly plunged 13% to their lowest level in nearly a quarter century.
That was the first time the market got a look at a report issued under CEO Tidjane Thiam’s new structure which aims to increase the bank’s focus on wealth management while scaling back investment banking where revenues fell 17% last year thanks to market “volatility.” Fixed income revenue plunged by two-thirds.
Thiam is planning on cutting some 4,000 jobs in the restructuring. Actually no, scratch that. As of Wednesday morning, Thiam is planning on cutting 6,000 jobs. On a call with reporters, the CEO – who took the reins last summer – announced the firm’s second restructuring plan in five months (“restructuring-er-er”) as trading revenue is now projected down a horrific 45% in Q1.
“We’re cutting deeper, there will be more restructuring costs,” Thiam told Bloomberg this morning. “What we’ve announced today is really pushing the cost-cutting program further,’ Thiam said in the interview. “If you look at markets, January was the worst January ever.”
Yes, “the worst January ever” as IBCM posted a Q1 loss as a dearth of primary market activity hurt underwriting revenues. Thiam has requested a 40% cut in his own variable pay. “Credit Suisse plans to exit most of the distressed credit, European securitized product trading and long-term illiquid funding, while equities will remain ‘a core area of focus,’” Bloomberg reports.
Here’s Goldman with a summary of what Thiam announced this morning:
Ok, so let’s just break all of the above down in the simplest possible terms: 1) Thiam is cutting 50% more jobs than he was before, 2) trading revenue is a disaster and has basically been cut in half, 3) the bank is trying to get out of anything that even sounds like it might be dangerous in a stressed scenario, including distressed credit and anything that’s securitized.
Who’s fault is it that the bank was overextended in distressed credit and securitized products? Why, rogue traders’ fault of course. “The firm’s traders had ramped up holdings of distressed debt and other illiquid positions without many senior leaders’ knowledge, helping lead to a first-quarter loss in the markets business,” Thiam told Bloomberg, pulling a UBS. “This wasn’t clear to me, it wasn’t clear to my CFO and to many people inside the bank” he said. “There needs to be a cultural change because it’s completely unacceptable.”
Right. Thiam also said there would be “consequences” for those responsible. We assume they will be included in the 2,000 employees who are now set to be fired. “A lot of the problems in the investment bank have been that people have been trying to generate revenue at all costs,” Thiam continued. “People were reluctant to reduce it because it would’ve exposed their cost problem.”
Or maybe they were “reluctant to reduce it” because head of global markets, Timothy O’Hara said in October that the bank “intends to defend [its] highly profitable securitized products and credit franchises, the former being “one of the strongest client positions of any business in the firm, while also being one of our most consistently profitable businesses within global markets.”
Global markets will incur a “big loss” in Q1. It’s also where all 2,000 of the new job cuts are coming.
Anyway, quarterly losses and layoffs are good news, which is why the stock is up on Thiam’s latest grim projections:
Thiam said he’s “confident” going forward, although he doesn’t want to get ahead of himself. “But really this is a very dislocated market, my natural caution makes me say that this is it for the moment. I don’t want to be hostage to fortune.”
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In the aftermath of the FBI’s surprising request on Monday to postpone a hearing in its legal crusade to unlock Apple cellphones, many wondered who it was that had succeeded in penetrating the supposedly unhackable smartphone. Earlier today Reuters provided the answer: the FBI’s effort is being assisted by Israel’s Cellebrite, a provider of mobile forensic software, which is now helping the Feds in their attempt to unlock an iPhone used by one of the San Bernardino, California shooters, the Yedioth Ahronoth newspaper reported on Wednesday.
If Cellebrite succeeds, then the FBI will no longer need the help of Apple Inc, the Israeli daily said, citing unnamed industry sources. It will also mean that the entire Apple “stand” for privacy and consumer rights was one big theatrical spectacle as both parties involved clearly were aware the iPhone can be penetrated with the right tools. Aptly enough, said tools have been found in Israel.
Cellebrite officials declined to comment on the matter.
Cellebrite, a subsidiary of Japan’s Sun Corp, has its revenue split between two businesses: a forensics system used by law enforcement, military and intelligence that retrieves data hidden inside mobile devices and technology for mobile retailers.
For those who are not familiar with the story, Apple is engaged in a legal battle with the U.S. Justice Department over a judge’s order that it write new software to disable passcode protection on the iPhone used by the shooter.
The two sides were set to face off in court on Tuesday, but on Monday a federal judge agreed to the government’s request to postpone the hearing after U.S. prosecutors said a “third party” had presented a possible method for opening an encrypted iPhone.
The development could bring an abrupt end to the high-stakes legal showdown which has become a lightning rod for a broader debate on data privacy in the United States, coincidentally right after Apple’s latest big product announcement which was for all intents and purposes, a major dud.
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Data from the volatility market suggests that expectations in the near-term may have finally gotten a bit too complacent.
For the duration of this post-February stock rally, we have been consistent in noting the tepid, or even skeptical, sentiment readings being generated along the way. Along with strong breadth and momentum measures, this lack of belief in the rally has actually been one factor that has enabled its persistence. About 6 weeks in now, however, we are finally getting some preliminary signs of complacency toward the rally on the part of traders.
One such example comes from the volatility market where expectations for near-term volatility have dropped to a historically low level. Most market observers have heard of the VIX, or the S&P 500 Volatility Index. They may not know that the VIX specifically measures the options market’s expectation for S&P 500 volatility over the next month. Another measure, the VXV, indicates volatility expectations over the next 3 months.
Understandably, the VIX normally trades below the VXV as volatility expectations should be lower for a 1-month period than for a 3-month period. However, at rare times, the VIX will trade higher than the VXV. This typically occurs during times of heightened anxiety in the equity markets, i.e., during a decline. Very often, when the VIX has climbed above the VXV (i.e., the ratio of VIX/VXV is greater than 100%), it is an indication that traders are paying up too much on near-term volatility and the stock market is liable to put in a near-term bottom in short order.
Conversely, when the VIX drops to a very low level relative to the VXV, it can be a sign of complacency in the market. While the VXV has only been around since 2007, a possible complacency “trigger” level that has emerged is roughly the 80% mark. That is, when the VIX has dropped to below 80% of the VXV, the stock market has been susceptible to near-term weakness. Over the past 2 days, the ratio has dropped to 78%
As mentioned, the VXV has been around only since 2007. Over that time, the VIX/VXV ratio has dropped to 78% on 4 prior distinct occasions:
Now there is no guarantee that stocks are about to hit an air pocket. However, given the (albeit limited) precedents, the track record in the short to intermediate-term following such readings has not been a positive one. In fact, following the prior 15 days with VIX/VXV readings below 79%, the S&P 500 was lower 3 months later 14 of the days by a median of -3.7%. The only positive return was the 1 point gain following the March 2015 occurrence.
All in all, this may not be a Defcon 5 level red flag for the market. However, for a rally that has seen scant evidence of exuberance, this is at least one of the first indications of complacency.
More from Dana Lyons, JLFMI and My401kPro.
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There was more than a little confusion on Wednesday morning when Belgian media reported that ISIS bomb maker Najim Laachraoui had been arrested in Anderlecht.
Laachraoui is now Europe’s most wanted man after being identified as the third suspect shown in a screengrab from CCTV footage recorded in Brussels airport before Tuesday’s terrorist attacks that killed 11 and wounded dozens more.
The 25-year-old is a known accomplice of Paris suspect Salah Abdeslam and is believed to have deep ties to the Belgium terror cell once run by Paris mastermind Abdelhamid Abaaoud. Now, like Abdeslam and like Abaaoud before him, Laachraoui finds himself the target of a frantic manhunt. All we know for sure is that police arrested someone on Wednesday morning. Here to explain are Belgian officials.
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