Deutsche Bank: Bank of America is Most Exposed to Low Rates

DB is out talking very greasy about US banks and how earnings will be onerously impacted by declining rates. In short, BAC is bad and JPM is good.

Some things never change.

Here is their note.

This comes as no surprise to me. However and apparently so, everyone seemed to think this was a foregone conclusion. The caitiffs and the scoundrel dog eaters in China have been denied entry into the heavily traded MSCI index, based around the narrative that China is a fucked up place that doesn’t permit people to repatriate money (20% annual cap) out of the country.

“International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index,” said Remy Briand, global head of research at MSCI

MSCI announced today that it will delay including China A shares in the MSCI Emerging Markets Index.

Over recent months, Chinese authorities have introduced significant improvements in the accessibility of the China A shares market for global investors. These improvements touch the major categories previously cited as impediments to inclusion: (1) resolution of the issues regarding beneficial ownership, (2) enhanced regulations on trading suspension, which was flagged as the most critical by investors, and (3) QFII policy changes aimed at addressing quota allocation and capital mobility restrictions.

“International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index. In keeping with its standard practice, MSCI will monitor the implementation of the recently announced policy changes and will seek feedback from market participants.

The 20% monthly repatriation limit remains a significant hurdle for investors that may be faced with redemptions such as mutual funds and must be satisfactorily addressed.

Finally, the local exchanges’ pre-approval restrictions on launching financial products remain unaddressed.

Hence, MSCI will retain the China A shares inclusion proposal as part of the 2017 Market Classification Review. MSCI does not rule out a potential off-cycle announcement should further significant positive developments occur ahead of June 2017.

Aside from repatriation concerns, the Chinese A-share market is 90% plus traded by pitched forked wielding farmers, who’ve traveled by rickshaw to buy a few shares in one of many scam stocks traded on the exchange. This denial was a no brainer for the MSCI, and a clown-slap to the faces of all of those rice paddy farmers who relished the idea of getting liquid on large Asian-Pacific asset managers.

Forget about the commodity sector and inane shopping mall plays; they’re red herrings. Your truest focus should lie on the banking sector, as they are the key to our survival.

Over the past week, foreign banks have been lit on fire and kicked into dumpsters.

DB -14%
BCS -13%
CS -12%
SAN -12%
LYG -11%
BBVA -12%
SBRCY -11%
IBN -10%
NMR -10%
RBS -8%

Over in the states, the carnage has been less pronounced, albeit concerning, nonetheless.

MS -7%
GS -5.5%
KEY -8%
C -8%
BAC -8%
WFC -6.5%
TREE -18%

In addition to the above names, there are scores of regional banks with similar returns. Again, the crux of the issue is growth concerns, commingled with BREXIT fears, which is precipitating a monstrous rally in bonds, globally. The enemy is the ark.

The stated goal for the bull camp should be to focus their efforts on destroying the ark, forcing its inhabitants to flee from the purported safe haven of bonds, in exchange for shares of DB, BAC and GS.

Good luck with that!

Wouldn’t it be nice to have a large scale war again, preferably with China or Russia? The stone throwing relics in the middle east aren’t really up to the task, apparently. After a decade plus of trying to arm and equip them with the means to fight a real war with us, they’ve been reduced to targeting gay clubs in Florida.

Alas, the new world order architects at NATO intend to sabre rattle a little bit more, trying to lure Dictator Putin into making a grave error.

A multinational group of 4,000 troops will be deployed in Poland and the three Baltic nations, all of which border Russia, following an agreement by North Atlantic Treaty Organization defense ministers at a meeting in Brussels on Tuesday. The decision is designed to provide reassurance to eastern European governments on top of a rapid-response force that NATO set up last year.

“This is not that NATO wants to fight a war or that we want to provoke a conflict but that we know that strong deterrence is the best way to prevent a war,” Secretary General Jens Stoltenberg told reporters at the conclusion of the meeting’s first day. “This decision sends a clear message: if any of our allies is attacked, the whole alliance will respond as one.”

Everyone should seek refuge in their nuclear bomb shelters at once.

Over the past week, markets have sold off a bit, scaring people with BREXIT and negative German bund yield headlines. What has gone up is now coming down. After feverish rallies in commodity sectors, some of the air is coming out from them. This is 100% normal. In spite of the fact that I enjoy to post large, red headlines, accompanied by pictures of skeletons, this sell off has been pedestrian.

As a matter of fact, only one industry is down more than 10% this past week and that industry is the ever-lastingly retarded tankers–off by 11.4%.

Most of the selling has been done in basic resources. Here is a brief summary.

Basic Materials wholesale -9.6%
Copper -9.3%
Foreign Banks -9.2%
Electronic Stores -8.8%
Aluminum -8.8%
Shipping -8.6%
Steel -8.6%
Airlines -8.5%
Refiners -8.4%
Solar -8%

The upside sectors include:

Reits and utilities.

The truth is, I entered into this post trying to offer a semblance of light at the end of the very dark and dangerous tunnel. But I’ve failed. The tunnel is long, dark, and filled with terrors. Run for cover, lads, the waters are rising and the life rafts have been occupied by the oligarch class of gentlemen, who’ve boarded the ark several months ago.

The blokes over at Deutsche Bank have a predictive model for American recessions that they’d like to share with you. Moreover, the model is more bearish now than at any time during this ridiculously absurd 7 year expansion–suggesting we’re about to dive–HEADLON–into economic recession.

The gist of this doom filled prediction lies with the yield curve and the spread between the 2s and 10s. They are, as you readily know, at its narrowest spread since 2007.

Deutsche Bank banking analyst, Steven Zeng, says the model portends a 55% chance of sweet delicious recession inside of 12 short months.

Over in the states, if you’re a farmer who uses genetically modified seeds, which are patented by the Monsanto corporation, you will pay a hefty fine or Monsanto will force the government to shut your fucking farm down, even if that seed errantly swept into your fields by accident. It doesn’t matter. You’re getting kicked out of your farm, left on the streets like a vagabond-hobo hybrid.

The good folks over at Monsanto have exported this wonderful culture to Argentina, a denizen of corrupt and evil farmers–who skirt the law by not paying Monsanto their fair share. Very soon, the ARGENTINE SEED INSTITUTE (INASE) will be regulating the soybean seed supply, via delegating it out to the private markets. Upwards of 6 million sample tests will be needed to find out who is stealing from Monsanto, for this season alone–which is forecasted to be 56 million metric tonnes of soybean possible criminality.

Those who are found guilty of using Monsanto’s seeds without paying a royalty will be ‘contacted’ by INASE. All subsequent appeals shall be met with the Polymerase Chain Reaction test–demonstrating the DNA structure to the farmers and how it belongs, inexorably, to the Monsanto Corporation.

Steve Ricchiuto broke down the current economic situation in America, summarizing that share buy backs have been holding up the “E” in the PE equation and how the only way to sustain earnings now will be to fire people. Hence, the unemployment rate will begin to rise. He also said the Fed’s ‘dot plot’ was entirely useless.

Art Cashin sums up today’s narrative.

There are many stocks that will go higher as a result of a construction guy getting into the White House. However, if there’s one singular focus for The Donald, it would have to be to preside over the complete destruction of the wayward Mexico peso. It’s a very stupid currency anyway. We’re gonna make many billions shorting it.

Even if Trump were to ultimately opt against pursuing these policy ideas once elected, the peso would still be vulnerable until he made his intentions clear. “Listening to his rhetoric, you can tell the first country that would probably be affected would be Mexico,” said Andres Jaime, a foreign-exchange strategist at Barclays in New York. The peso would be “a good hedge,” he said.

The peso is down by 23% over the past year v the dollar.