Shares of European Banks Collapse, Post Stress Test

Our markets are pretty much belching off the rout in Europe. But it’s serious over there now, especially with the banks.

In every European country, post stress test results, which showed how fragile the entire European banking system is, shares are getting ramshackled.

Santander -5%

Unicredit -9%

Commerzbank -12%

The company reported earnings today and spoke about how truly awesome they were.

“In general, Commerzbank is one of the most un-riskiest stocks in banking that you can currently get. We are well-capitalized, we have a strong leverage ratio, we have an extremely low NPL (non-performing loan) ratio and in that sense, that is a good reason to invest,” Stephan Engels, chief financial officer of Commerzbank told CNBC on Tuesday.

“Secondly, we are still the second biggest bank in the fourth biggest economy in the world which is still growing so there is a lot of good argument to go for the stock.”

And I borrowed this gem from Zerohedge. DB is doing great today, down only 4%

UBS -8%

Banco Popolare -10%

At the end of the day, a pig is a PIGS and the Bundesbank isn’t interested in spending inordinate euros there anymore.

The ECB is reporting a stark drop in bond purchases in Italy, Portugal and Spain, during the month of July. This is exactly the opposite of what was being reported in July too, by the way. Remember when they said bond purchases would focus on size of the nation’s debt and not the size of the nation? Investors took that news and bought the shit out of periphery debt.

Overall purchases fell 3.3% from June, with Portuguese bond purchases falling to a record low of just $1.1b, significantly below target.

Related, European markets are being shattered, off in excess of 1.5% and sinking quickly.

The Japanese yen is rising again, now up 0.7% v the dollar.

Happy Tuesday!

Look at those yield jumps in JGBs. This is some serious distribution taking place in the Japanese bond market. Ever since they announced their bullshit stimulus program, the value of the yen has been driven, the fuck, higher, while bonds have been sold en masse. I don’t know what to make of it really, other than the fact that people are disappointed in Kuroda’s QE swag game. It’s important for the elite to feel comfortable with front running government sponsored QE projects. We all know, to be perfectly blunt, Japan is a nation is dead. Their demographics are dreadful. Their people are more sexually aroused by anime and robots than each other. And, lastly, their fiscal situation, stemming from two plus decades of failed QE programmes, is in shambles.

There’s no reason to ever lend the Japanese govt money when their debt/gdp is in excess of 200%, let alone for a negative yield. At first glance, I’d say JGB yields rising is a good thing for Japan. It signals potential inflation. However, the other side to that coin is the death of Japan will never happen while yields are low. When the end comes, yields will fucking skyrocket and the Bank of Japan will explode.

I suppose that’s a little extreme for a 12:37am post, while markets are at record highs.

For now, I believe yields rising is a good thing, until they rise too high, naturally.

On October the 14th, 2016, new rules to prevent a run in money market funds will take hold, courtesy of the government, which will force massive purchases of U.S. Bills. In other words, firms who manage money market funds ($600b) will need to float their NAV and abandon their fixed $1 a share price.

So now all of these fund managers will be forced into a funnel, there to bow down and to purchase U.S. Bills. To feed into this frenzy and raise a little extra dough in the process, the government will boost supply by $250b, far below the estimated $400b that analysts say is needed.

Gone are the days when old men could sashay in and out of money market funds as if they were cash. These fuckers will need to bend the knee and buy government funds only, else deal with NAV volatility and liquidity risk.

“When it comes to Treasurers and their roles and responsibilities, the last thing they want is uncertainty,’’ said Brandon Semilof, a managing director at StoneCastle Cash Management, which manages more than $10.6 billion and works primarily with the nation’s community banks.

“The inflows to government funds should mean relatively lower Treasury bill yields and repo rates,” said William Marshall, an interest-rate strategist at Credit Suisse Group AG.

“We expect some fairly large outflows,” said Peter Yi, director of short-term fixed income at Northern Trust Corp., which manages $906 billion. “We don’t want to find ourselves selling credit instruments into a distressed market.”

God bless the United Steaks of America and its $20t in super-duper safe debt.

Like him or hate him, all he did was post a link to this article.

The word ‘muslim’ should be stricken from Face’d Book, unless it discusses how very peaceful 99.999999% of its practicing members are.

Forget about the market for a second and just focus on oil. Oil sub $40 will begin to truly wreak havoc on some energy credits out there, especially the high yield junk. At the moment, the high yield market is completely ignoring the dip in oil. This cannot last for too much longer.

One of the preferred methods of judging this is via HYG. As you can see, it has a bit of a rolling over look to it.

There are numerous ways to play this. I will formulate a strategy tonight.

Thank heavens I came across this note from Citi. All this time I was wondering why crude was going lower and it didn’t affect the overall market. Now I know. The drop is simply a case of stupid as shit bears, unfamiliar with the basic laws of mathematics. According to this sage at Citi, supply is coming in and demand is very high. It’s only a matter of time before prices fucking skyrocket.

For leisurely reading.

Worldwide oil supply is at record highs. Rig count has gone up for 5 consecutive weeks.

OPEC supply at record highs.

Citi is an ass.

Much to Frederick Wilson’s delight, Citi came out with a bullish note on Etsy this morning, citing ‘stickiness’ amongst other nonsensical things. The stock is higher by 17%, mostly by people who’ve never attempted to do business on that PIECE OF SHIT WEBSITE.

“We have confidence in the stickiness of the seller-base despite the fact roughly half of them sell via other channels,” Kelley wrote Monday in a note initiating coverage of the company. “We also believe Etsy has built a fairly well-established brand when it comes to creating a marketplace where people can find truly unique items.”

A few months ago, I purchased a table on that asshole site, made by some dipshit from down south. I paid a fairly large sum of cash and never received my table. I emailed the person and she never bothered to get back to me. After looking for a way to complain to Etsy, I found it to be nearly impossible, so I gave up. My next course of action is to file a complaint through my bank and have them deal with it. Out of all the websites I’ve done business on, Etsy is by far the worst. They offer zero protection to the buyer. If the seller wants to rip you off and never have to deal with you again, they can! Also, there’s no way for me to even leave a review for this person, to warn others of the scam. I suppose it’s because I’m not a star member of the service and haven’t done enough business. Who the fuck knows?

All I know is ETSY is a rotten hamburger, while Amazon is the dry aged prime rib.

Fourteen new cases of Zika have been reported in Miami, which is causing officials in that city to panic. The Governor of Florida, Rick Scott, has officially asked the CDC for emergency assistance.

“We may well see other infections in that area,” CDC Director Tom Frieden said during a conference call with reporters where he issued the warning. The CDC has sent an emergency team to the state to assist in efforts to fight the virus, and Frieden said that pregnant women who have been in the area after June 15 should talk to a doctor and get tested.

Florida Department of Health officials said Monday they’ve identified at least 14 cases of Zika in Miami that were transmitted by mosquito. They’re the first known cases of local mosquito transmission in the U.S., where most cases have been traced to travel outside the country. The state said that all of the known transmissions are thought to have occurred in an area of Miami about a square mile in size.

The virus can cause birth defects when pregnant women become infected, though most adults have only mild symptoms, if they know they’re sick at all. The CDC recommended that women who’ve visited the area not get pregnant for 8 weeks after returning.

There isn’t a cure for Zika, or even a treatment. Investors seem hopeful that XON can come up with something and have been bidding the stock up. INO is another play. On the downside are the airlines. Who the fuck wants to travel to Florida now?

There are two schools of thought at play here. One lies in the fact that markets are dislocated from reality, ignoring the slack in the global economy and deleterious effects the decline in WTI will have on the heavily invested energy sector. The other side of that coin is pervasive central bank planning that will succor asset prices, which will, inevitably, lead to higher prices.

If you’re into buying gold stocks, due to the central bankers, it’s hard to buy them here–following a 1 week 15% gain.

If you’re looking to buy equities, it’s a little scary to do so, as oil breaks $40 to the downside.

REITs, UTES? That’s a hard trade too, since those sectors have been bid up to new highs.

Where is a lad to place his hard earned cash?

For me, the sole destination for all of these questions is the ark, via TLT. Also, I just added a short position, which was mentioned in Exodus today. On the long side, I like nothing–but Exodus is spitting out oversold signals for some key names.

Bottom line: Ignoring the drop in crude over the past month has proven to be a profitable course of action. Whether this trend will continue is anyone’s guess. With my money, I prefer to sell short the basic materials and remain idle in treasuries and cash.

This is the ebb tide. Time to make a move.