Jefferies Slashes UK Bank Estimates, Barclays Headed for the Gallows

How ironic would it be if Barlcays ended up being the next Lehman, when in fact they were the ones who bought Lehman? Both Jefferies and Barclays took a serious ax to Barclays estimates, cutting its price target in half, and calling into question the very existence of its investment bank. This is truly and unbelievable situation that is developing.

Both RBS and Lloyd’s aren’t fairing much better.

Joseph Dickerson, analyst at Jefferies Group LLC, cut Royal Bank of Scotland Group PLC to ‘hold’ from ‘buy,’ and lowered Barclays PLC to ‘underperform’ from ‘buy’. He also took an ax to his share price target for Lloyds Bank PLC.

“We cut 2016-2018 earnings estimates by 17 percent, 46 percent, and 72 percent for LLOY, RBS, and BARC respectively,” writes Dickerson. “The decline in earnings reflects a slow growth scenario in the U.K. characterized by lower loan growth, higher impairments and increase risk-weighted assets density.”

The U.K.’s potential exit from the European Union calls into question “the structure, profitability, and, indeed, existence of BARC’s investment bank,” he asserts.

Meanwhile, Royal Bank of Scotland is “73 percent owned by a government in turmoil,” he adds.

Jefferies lowered its price target on RBS to 227p from 370p, and slashed its price target on Barclays to 115p from 287p.

Separately, analysts at Bank of America Merrill Lynch cut Barclays to neutral from buy and reduced RBS to underperform from neutral, cutting their price targets by 21 and 41 percent, respectively.

BCS is lower by 20%, RBS is off by 14% and LYG is down 15% today.

This is deflation. This is the very thing these negative rates were supposed to stop, the explicit hoarding of cash, a wanton perversion of finance through the reduction of the money supply. It has been widely reported in Japan that negative rates have caused a surge in vault sales, especially amongst the elderly.

Now I’m reading news that some institutions are locking cash away in vaults, in order to avoid paying some asshole bank the pleasure for holding it for them.

“Storing physical cash as an alternative to paying negative interest rates does look increasingly attractive,” Chief Financial Officer Immo Querner said in an interview.

“The negative-yield terrain now spreads toward 10-year maturities,” Querner said. “So at some point, one may also be talking about the incentives of storing cash for medium-term euro-assets.”

Talanx had 102 billion euros ($113 billion) of investments at the end of March, with 90 percent in fixed-income assets such as government, covered and corporate bonds. Investment income is being squeezed by low interest rates and to help cushion the impact, the Hanover, Germany-based insurer has invested in alternative assets such as renewable energy and infrastructure where returns are typically higher.

Other financial institutions have also tested or considered storing physical cash as an alternative to paying negative interest rates. Nikolaus von Bomhard, Munich Re’s chief executive officer, said in March that the reinsurer will store at least 10 million euros in two currencies so it won’t have to pay for the right to access the money at short notice. Allianz SE, Europe’s biggest insurer, considered the move but so far has decided against it.

Soon enough, the Pinkertons will make a comeback, protecting large cash transports making its way across the country, via horse and wagon.

xBritish 10 yr gilts are down 15bps to 0.94%

German bunds are down 6bps to NEGATIVE 0.105%

French 10 yr are down 8bps to 0.316%

Japanese 10 yr are down 2bps to NEGATIVE 0.205%

Swiss 10 yr are down 5bps to NEGATIVE 0.54%

Lastly, the US 10 yr are down 10bps to 1.478%

American treasuries represent an outsized opportunity, especially when surveying the sovereign bond landscape in just about every western nation–all thanks to QE.

The ark floats.

Perhaps they were cut out of the last FB investment banking deal? Needham is out with a research note praising domestic tech, while deriding those with exposure to filthy Europeans.

Estimates are coming, the fuck, lower for FB, NFLX and AAPL.

Via Briefing.com

Needham notes for their Internet names, Brexit adds risk and uncertainty to their rev growth rates, profit projections & valuation multiples. For firm’s media names, they recommend cos that have a larger portion of their rev from US demand and denominated in US dollars (ie, CBS, SNI, FOXA). These should outperform companies with large exposure to European demand fundamentals and currency translation risk as the US dollar strengthens (ie, DISCA, VIAB, NLSN, SCOR). FB — rev ests fall owing to European demand slowing OR currency translation issues, this has a heightened negative impact on FB’s valuation. NFLX — as profit ests fall owing to European demand slowing OR currency translation issues, this has a heightened negative impact on co’s valuation. AAPL — earnings impact is negative as new phones sold are the primary driver of the share price and the Europeans may push off their iPhone upgrades by 12 months if the UK and/or the EU go into recession.

Barclays is off another 24% this morning. Good morning and welcome to the end of the world. This is your Captain speaking aboard the ark, presiding over financial Armageddon.

In other news, LYG, DB, CS and UBS are all diving lower, as the pound drops another 3.7% in a genteel morning session.

These losses are starting to get scary, the sort of moves that’ll make you start writing stories about their credit default swaps next. Several of these fuckers are down by half, over the past two days.

European markets are getting hammered to pieces. NASDAQ futs are off by 55.

Jim isn’t seeing the forest through the trees, as is often the case with Americans who’ve gotten too rich and moved to the orient in order to teach their children mandarin.

Rogers favors gold over dollars because gold has already moved higher. But he’s viewing this in a very binary manner. He’s obsessed with the inflation boogeyman, something that hasn’t existed since the 1980s. Gold isn’t going up because of inflation, but because it is viewed as a safe haven. The same can be said about treasuries, bitcoins, and the dollar.

At any rate, Rogers fears if dollars go higher, gold will go lower. It’s an entirely rational train of though if it weren’t for the case that gold has become the defacto asset of choice for hedge funds everywhere, as they shift assets out from stocks into the anointed safe havens.

Rogers on gold and the dollar.

“Gold has been staggering this year, went straight up, and I don’t like to buy anything that’s run straight up,” Rogers said. “I would prefer to buy the dollar as a haven than gold.”

Rather than selling his gold, Rogers said he would take some some short positions as a hedge against his holdings. “I own plenty of gold, I assure you,” he said, adding that he’s “extremely optimistic” about agricultural commodities.

“I can’t get too optimistic about something that’s been going straight up,” Rogers said, referring to gold. “The dollar hasn’t done that, and often in history, when the dollar goes up, gold is weak.”

The near term fate of global markets lie in the currency crosses of dollar-pound, dollar-yen and dollar peso. Most of you are looking at me stupid now, after telling you the fucking peso holds the keys to your new cayenne. But currency traders know that the peso is the most liquid of all the piece of shit EM currencies and is, pretty much, a proxy for emerging markets.

As of right now, the pound is 2% lower v the dollar, the yen is off by 0.4% and the peso is lower by 0.35%.

US futs are moderately lower and commodity markets remain slightly biased towards risk off.

It looks like another arduous trading session lies ahead for global markets. DAX futures have swung lower and continue to swing (extra sweet chariot), now off by 1.5%.

Dow futures are down 100, and the is getting hammered v the dollar, off by 1.6%.

Gold is the preferable safe haven, along with fucking Bitcoins and bonds, now higher by almost 1%.

It’s real early and the traders clad in their pajamas haven’t even had supper yet. Prepare for a long night of pain and misery, as the NIKKEI moves towards the edge of the cliff, into the fires of hell.

Last week I discussed the overbought condition of Exodus coupled with the oversold status of several inverse ETFs. In the past, overall market overbought conditions had led to rallies. Markets like to run into momentum. But I sensed something was different this time around and correctly said as much.

Here are the last two oversold dates for TWM. The back test track record is flawless over the past 12 months.

Here’s my Exodus blog post from Monday of last week, delving into the cross currents.

I am pleased with the performance of the system last week and will be doing a special edition blog inside Exodus today, trying to make sense of this market.

As you can see by my position sheet below, I was unaffected by Friday’s drop, making more than 5% for the day.

Here on ibc, I’ll be hammering away at the news and important items to keep note of in the week ahead. Inside Exodus, I will be discussing shop and potential positions, in addition to any new buys or sales. For members, stay tuned for a somewhat controversial blog post inside Exodus today.

It should be a delightfully harrowing week.

Carter Braxton Worth, straight from the Nantucket ferry to the CNBC studies, took a few minutes out from his summering to warn the world of impending doom. All he had to do was take the golf cart to the ferry, slap on a gold buttoned blue blazer, and he was automatically telegenic. He didn’t even need to comb his hair, the Nantucket trade winds did it for him. Some people are hideous monsters who need to be fixed before making it to the silver screen, others are Carter Braxton Worth.

In this super short clip, prior to one of Braxton’s prosecco and speck breaks, he discussed the divergence between foreign markets and the US, pointing towards a complacency which has led to panic in the past.

My only exception to his quick little research note was the fact that the nations he’s comparing us to are inexorably FUCKED with negative interest rates. I believe the negative rate environment, which is the very essence of deflation, is the main reason for share price underperformance.