Monday, June 27, 2016
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British Banks to Get Credit Rating Downgrades Today by Moody’s (Skynews)

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Skynews is reporting that several major British banks have been informed of an imminent credit downgrade, post BREXIT.  Moreover, the forecast will be, inexorably, bleak, as Moody’s swashbuckles their outlook to ‘negative’.

If forced to guess, I’d say BCS, RBC, HSBC and LYG will endure the lion share of the post BREXIT wrath. As you can already see, the establishment is quite perturbed over these developments and endeavor to make this a very onerous experience for the Isle of Great Britain.

 

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Here Are the Hardest Hit Stocks, Post BREXIT

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The billion dollar question is, which has been asked for hundreds of years during market spells, are these buying opportunities or a red flag for further pain to come?

FINANCIALS: LYG -32% RBS -32% BCS -32% GNW -21% PUK -21% LAZ -21% FDC -21% EVR -19% IVZ -19% CS -19% ING -18% VOYA -18% LINC -16% SAN -16% SCHW -16% DB -15% BASIC RESOURCES: WLL -28% HBM -19% AKS -19%  HUN -18% MT -17% ATI -17% OAS -17% CRZO -17% EPE -16% CF -16% BTE -15.5% SM -15% CONSUMER GOODS: BWA -20% KS -20% TEN -17% LEA -16.5% COT -16.5% PVH -16% AXL -16% THRM -16% OI -15.8% WBC -15.7% FCAU -15.5% DLPH -15.3% TSE -15.2% DAN -15.1% HEALTHCARE: EBS -30% ACAD -19% AGIO -18% VRX -17% PRTA -17% INDUSTRIAL GOODS: ATU -20% X -17% RXN -16% TGI -15.7% MCRN -15.3%  SERVICES: LBTYA -22% MAN -20% GWR -18% XPO -17% AER -17% KFY -15.7% TECHNOLOGY: AV -25% GSAT -20% BT -20% IPHI -18.5% TI -17.6% YY -17.5% ACIA -16.2% ANET -16%

 

Having fun yet?

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Morgan Stanley and UBS Warns of Heightened Risk of U.S. Recession and to Avoid Corporate Credit

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The cheery folks out of both Morgan Stanley and UBS are telling clients to fear the end of the BREXIT blade, for comes with it is an undeniable storm that is bound to rip credit markets to pieces. They’re talking corporate credit here, the type of sordid horseshit that almost tipped over in February of this year–only to revive with the uptick in crude.

“Despite the urge to step in and buy U.S. credit at modestly wider levels than a few days ago, we recommend patience,” Morgan Stanley strategists led by Adam Richmond wrote in a note to clients Monday. “While the full impact of the U.K. leave may not be known for some time, the U.S. economy is not in a position to withstand a large shock.”

High yield debt has been widening–because they truly do suck. More than that, the vast majority of it is in the basic resource space–a sector of the market which has enjoyed the lionshare of gains since the March lows.

According to Exodus, there is upwards of $150 billion in distressed basic resource debt. But right behind it is another $450 billion, which will become distressed should their share prices continue to slide. In other words, the BREXIT issue, although concerning, pales in comparison to the type of ripple effect a large scale credit event in the oil and gas space could impose.

UBS’s Stephen Caprio is advising investors to resist deploying new cash to buy bonds on the cheap for now as Brexit increased the likelihood of a U.S. recession to 34 percent. That along with a stronger U.S. dollar, low oil prices and banking sector stress could upend vulnerable credit markets. In that case some high-yield and investment-grade companies may struggle to access debt markets, according to UBS.

“We do not believe investors should be buying Friday’s dip in credit yet,” Caprio wrote in a note to clients. “It is not often that an exogenous shock has hit so late in the credit cycle with central banks already at the zero bound.”

The U.S. economy and company creditworthiness are already weak enough that it may not take much to spark a deeper sell-off in corporate bonds, according to Morgan Stanley’s Richmond.

There were signs economic risks were rising even before the Brexit vote: U.S. corporate profits are down 15.5 percent from a peak in the fall of 2014 and business investment has deteriorated, Richmond wrote.

What’s more, companies — even large blue-chips — are about the least creditworthy they’ve ever been as they’ve borrowed rampantly in the face of weak earnings, according to Morgan Stanley.

“A catalyst is here,” Richmond wrote. “The worry that global growth is weakening and central banks can’t do much about it, which was prevalent earlier this year, won’t be far behind.”

There you have it, folks. The BREXIT vote has created an environment that is onerous to the increase of crude prices. In turn, there is an increased likelihood of a large scale credit event in the oil and gas space, one that is teetering on the brink of destruction. Should this occur, a recession is all but a forgone conclusion.

I haven’t even mentioned China in this post, something we’ll leave for another article.

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S&P Takes Britain’s Credit Rating Down Two Notches, Cites Political Uncertainty as the Rationale

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If you tried to be more condescending than Mssr. Moritz Kraemer, Chief Sovereign Ratings Officers at S&P, you could not. In a somewhat high strung interview, with the BBG hosts hammering Moritz for the reasoning behind the downgrade, the S&P company made one thing indelibly clear: they are in the business of affecting political change via pressuring governments to bend the knee to their will–which is the same as the globalist, oligarch, elite.

S&P cut the UK two notches to AA, citing political uncertainty and an increased funding risk for British institutions, because of BREXIT.

Listen to the tone and tenor of this empty vessel. The EU has every intention of being punitive to the UK, punishing them for not agreeing to be their subject.

I found it ironic that the chief sovereign ratings officer happened to be a German national. This downgrade, like the one given to the US, is pure politics.

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Perhaps You Rue the Day You Stopped Listening to Me Now?

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Markets are clinging to the lows of the day. For months you were subjected to torture here at iBankCoin, forced to read news items that spoke to a storm on the horizon, one that promised disaster. Le Fly was adamant about his bearish position, a stance not taken since before the credit crisis (yes, I called that too). Some of you went out of your way to email me, discussing how annoyed you were with me and that my forboding commentary weighed on your delicate conscience. You just wanted to read pleasant things, because, well, the world was your oyster and you enjoyed shucking in it.

After two days of tumult, and -30% drops in a myriad of stocks, finally, you’ve found religion. NOW you believe me, at least until the markets uptick and you are provided another life line.
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The funny thing about this drop, it isn’t even the reason why we’re gonna fall hard. Oh, you thought I was in bonds and gold because England was destined to leave the UK? Pfffff.

Go dig deep into my archives from January and February of this year and read about some of the real reasons to be scared, stemming from China and the complete collapse of the EU.

BREXIT was the tipping point, the salient moment in time when everyone stopped doing lines of blow, stood up and paid attention to the world crumbling around them. Traders felt a sense of danger, a mortality if you will, and began to sell.

We know how these squalls play out. Selling begets more selling, until the facade which was hiding the true hideous face of this market is exposed and then panic sets in.

Others will wonder why no one saw it coming. But you will remember and rue the day you stopped listening to the one who knew, the crazy man aboard the ark.

Now go in peace. The sermon has ended.

Note: my gameplan for this tape is up in the Exodus blog now.

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Let’s Check In On the Only Publicly Traded FOREX Broker, $FXCM

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Shares are getting fucking harangued again. After dropping by 13% on Friday, FXCM is off another 9 today, based on suspicions that the company is getting gorilla raped on a sundry of fucked forex trades.

You’d think the extra volume in FOREX would help business. But anyone who knows FOREX and the boiler room culture at many of these firms understands that these people are morons of the first magnitude. I am sure as FOREX moves rattle through factors of standard deviations, accounts are getting zeroed out and swimming into negative equity.

Via Briefing

10:24 | FXCM | (7.62 -0.77)
FXCM follow-up: Forex broker FXCM seeing notable weakness today; down 9% today and 13% in past two days post-Brexit
As mentioned on Friday morning, forex broker FXCM was a name to watch on currency volatility after the British Pound saw a record move.

FXCM issued a statement on Friday morning, noting that FXCM systems and operations functioned without any material adversity during Brexit. This statement helped the stock recoup its initial losses on Friday.

However, FXCM stock has weakened again today, currently lower by 9% with continued volatility in the currency market.

As noted, FXCM was severely impacted by FX losses following the Swiss National Bank announcement of early 2015.

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We’re all programmed to believe where there’s smoke, there’s fire. Well, this stock is smoking now.

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The Carnage in the Banking Sector is Palpable; Shares of $LAZ Collapse

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The contagion is spreading. Board the ark. Save yourselves from an unseemly demise.

The carnage in the European banking sector is very reminiscent of the financial collapse of 2008, judging purely from price action. That sickness is spreading like wild fire, hitting US banking institutions with vigor.

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Shares of LAZ are of particular interest to me, as well as EVR, BAC and C. These stocks are behaving like something terrible is on the horizon, or someone just got entangled in a horrible margin call.

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Jefferies Slashes UK Bank Estimates, Barclays Headed for the Gallows

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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.

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In Lieu of Negative Rates, Institutions Begin to Store Cash in Vaults

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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.

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