Friday, December 9, 2016
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
14,875 Blog Posts

Nomura’s Top 10 Potentionally Market Roiling Events for 2017

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Predictions are always fun. Nomura has a top 10 list of ‘gray swan’ events that can roil markets in 2017.

Not to take away from their thunder, here are a few of my own.

Rates keep soaring, disabling Trump from any significant fiscal stimulus.
Yellen resigns.
Someone attempts to assasinate Trump.
December rate hike causes FX fuckery in Asia; panic ensues.
China devalues yuan.
We go to war with Iran.
Oil plunges; petrol credit crisis resumes.
Spiking mortgage rates causes another housing collapse.
Dollar strength fucks our exporters.
Trump starts trade wars with Mexico and China.
Italy and France move to leave EU.
The new AG prosecutes Hillary Clinton.

Source: Bloomberg

1. Russia on the warpath
A staple of gray swan lists since Vladimir Putin’s annexation of Crimea two years ago, Russian military aggression in eastern Europe remains one of the big risks for 2017. While an actual military invasion is unlikely, the foundations may be laid next year through anything from changes to U.S. foreign policy to the election of populist leaders in Europe, according to Nomura. Position for risk by going long credit-default swaps of any of the Baltic nations, shorting credit and trading Poland as a negative proxy.

2. A surge in U.S. productivity
As Fed officials make the case that the president-elect’s fiscal stimulus should be targeted at increasing productivity, Nomura says a pick-up in research and development investment could already be laying the groundwork. Like the tech boom of the 1990s it would catch forecasters unaware, but could have implications ranging from a faster series of rate hikes to a sustained boost to equities if it materializes.

3. China floats the yuan
As recent outflows suggest, a balance-of-payments shock could follow hasty moves to liberalize the currency regime of the world’s second-largest economy. The probability China gets to that goal in the next 12 months is “very low,” Nomura analysts assert, but prepare for yuan weakness if it happens.

4. An exit from Brexit
U.K. Prime Minister Theresa May said she’ll trigger the process of leaving by March of next year, and her favored “Brexit means Brexit” catchphrase makes it sound like she means it. But there are two big upsets that could appease the 48 percent: the case being heard by the U.K.’s Supreme Court might trigger a general election, were it to galvanize pro-EU sections of parliament, while — in an attempt to assuage further break-up — the EU could also grant the country face-saving concessions.

5. Capital controls in emerging markets
Emerging markets may face “pronounced outflows” in 2017 if Trump’s planned stimulus spending sends U.S. yields higher and further strengthens the dollar. That could prompt policy makers to take action, and they might even coordinate in a collective rebellion against the U.S. Countries most at risk are those with volatile currencies, low currency reserves and relatively low rates.

6. Japanese inflation jumps
What if the market is wrong to price in a moderate pick-up in Japanese inflation next year? A sharp rise — potentially triggered by the collision of higher oil prices and a weaker yen — could prompt the Bank of Japan to take action by lifting its 10-year yield target of zero percent. Such a shift could have a global impact because both inflation and global core bond yields are highly correlated.

7. A clearing house crisis
The systemic risks that stem from the clearing houses that were themselves introduced to contain systemic risks aren’t new to regulators: financial stability watchdogs are already taking measures to deal with any potential fallouts. “The interplay between struggling banks, collateral squeezes, sharp market moves in an overpriced market with central counterparties at the center” could potentially lead to a crisis, in Nomura’s worst-case scenario.

8. Trump takes fight to the Fed
The Fed chair has indicated that she’ll stay her term. Yet Janet Yellen was on the receiving end of some harsh invective during the future president’s campaign, and Nomura considers a change to the bank’s mandate to be among 2017’s outlying risks. More likely is that Trump could name sympathetic board members when present appointments expire. Higher policy rates could ensue.

9. Abenomics comes unstuck
The most likely outcome of a general election in Japan is that Prime Minister Abe’s support will be solidified. That means that anything fracturing this stability will come as a big shock to the market. A weakening of Abe’s hold on power could cause Abenomics trades to be unwound, with Japenese equities bearing the brunt of the pullback.

10. The end of cash
It seems inevitable that electronic payments will replace notes and coins at some point, but Nomura picks up on one reason why it might happen sooner rather than later: negative yields. Electronic money would prevent potential savers stashing money under their mattresses to avoid sub-zero interest rates. The risk to this scenario is of course that savers get hurt and consumers start inventing new hard currencies.

Feel free to drop a few of your own in the comments.

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DRAGHI SURPRISES MARKETS WITH MORE QE; EUROPEAN SPREADS BLOW OUT

FILE - In this Thursday, Jan. 22, 2015 file photo, President of European Central Bank Mario Draghi waits for the beginning of a news conference in Frankfurt, Germany, following a meeting of the ECB governing council. A sustained economic recovery is finally arriving in the 19-country eurozone, European Central Bank head Mario Draghi said Monday, March 16,2015 - a recovery he says must be used to complete the euro currency union and fix its problems for good. (AP Photo/Michael Probst, File)

In a surprise move, the ECB announced they would not end QE, as scheduled, in March of 2017 — but instead extend it through December of 2017 — albeit at a slightly slower pace. Instead of tossing 80b euro per mo into a flaming barrel of garbage, they’ll toss just 60.

The subsequent result is a profound blowout between short duration govt bonds and long — a widening of the yield curve if you will. This is extremely bullish for European banks.

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Additionally, the euro is down 1% v the dollar and bank stocks are raging higher.

The Eurostoxx 50 is higher by 1.7% — led by BBVA +5.2%, Intesa +5%, Santander +4.6% and Deutsche Bank +3.1%.

Italian banks are soaring too. Banca di Milano Scarl +8.8%, Banco Popolare +8% and Unicredit +5.8%.

Bear in mind, the primary driver for the US bank rally was the widening of the yield curve, the spread between the 2s and 10s, from 70bps to 128bps. Right now in Germany, the spread is around 113bps — with the 2yr bogged down at -0.71%.

And this.

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China to Fine or Shut Down Websites That Publish Fake News

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Reuters is reporting that new ‘fake news’ fighting policies are being enacted in the Xinjiang province of China,  in an effort by the Chinese to push back against those who like to post ‘harmful’ information online, which do not adhere to government rules.

The new rules include, thou shall not post information that might be construed as “harmful to national security”, “destructive of religious harmony”, that “spreads ethnic hatred and division” or “seeks to overthrow the socialist system.” 

If, in fact, this were to happen and the website owner was cited for violating the law, said website owner would be subject to fines up to $72,700 and a total shut down of the site.

China will fine anyone who spreads fake news in its western region of Xinjiang, state media has reported, as part of new measures to maintain stability in an area prone to ethnic unrest.

China says it faces a serious threat from separatist Islamist militants in Xinjiang, which borders central Asia, Afghanistan and Pakistan, and is home to the largely Muslim Uighur minority group.

Hundreds of people have been killed in violence there in recent years, but rights groups say at the root of the trouble are government policies that repress the religious and economic freedoms of the people.

The new rules, adopted by Xinjiang’s regional parliament, allow for fines of as much as 500,000 yuan ($72,700) for website operators who create, compile, spread, release or copy information considered harmful or false.

The regulations, which go into effect on Saturday, aim to “prevent and punish the online spread of false news” that might “disturb social stability”, the newspaper said.

After riots in Xinjiang’s capital, Urumqi, in 2009, the government cut off internet to the city, only restoring full access 10 months later.

The buzzwords ‘fake news’ have been all the rage ever since Donald Trump upset H. Clinton during the elections — something no one in the main stream media saw coming — fueled by rigged polls. Immediately after he won, Obama and the main stream media blamed disinformation, through socials like Twitter and Facebook, as one of the primary causes of Hillary’s defeat. In recent days, the rhetoric surrounding fake news has reached a new fevered pitch, after an alleged gunman walked into Comet Pizza to investigate Pizzagate. Both Facebook and Twitter have said they will do their part to fight this new evil force, through the explicit censorship of their platforms.

Interestingly, after the elections, the Chinese state media published an ‘I told you so’ oped , pushing for the U.S. to censor news and to regulate the information flowing freely across the internet. Shortly thereafter, as if taking orders from above, the fake news narrative took off in the U.S.

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Fake News searches, Google Trends

The truth is, branding news as ‘fake’ and creating rules to censor it, by using the excuse of  ‘protecting the people’, is just another scheme by governments to control the narrative by regulating what information its citizens consume. Some serious examples of fake news, disseminated by government controlled media organizations in America, but not reported as such, include the following.

  • The attack on the Benghazi Embassy was because local head cutters in the region were pissed off over a youtube video.
  • Saddam Hussein had weapons of mass destruction.
  • Hillary Clinton had a 99% chance of beating Donald Trump.
  • Obamacare would lower the cost of healthcare and you could keep your Doctor.
  • The Russians were interfering in our elections.
  • The ‘rebels’ in Syria were the good guys.
  • Saudi Arabia did nothing wrong.
  • The Iran nuclear deal was good.
  • The Clinton Foundation was a great charity.
  • Globalism helps middle class Americans.
  • Trump supporters are racist klansmen.
  • The ‘Hands Up, Don’t Shoot’ narrative in Ferguson that started Black Lives Matter movement.

The list goes on and on. Feel free to add your own in the comments section.

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Attention iBankCoin: Bannings Have Been Banned; Feel Free to Do as You Like

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Since the beginning of this journey in blogging excellence, I’ve taken a primordial approach in dealing with the savage swine in the comments section — always on the offensive in a neverending game of circular chess that has resulted in thousands of the very worst kind of people being forlorn and banished from the site.

In the spirit of pagan X-mas, in light of a wretched fortnight of shopping mall escapades, coupled with my unbridled generosity, I hereby pardon and release all prisoners from the iBC cells. Feel free to do as you like. There will be no bannings henceforth. Even acrimonious attacks upon my person will be viewed as minor acts of indiscretion, perfectly legal — like Taliban hordes blowing up ancient relics in Afghanistan.

However, direct threats will be dealt with accordingly, as well as indecorous displays of troll-like behavior. Please remember, iBankCoin is an esteemed establishment of many halls — with a rich history of intolerance and wanton acts of violence. Do not wake up the barbarous owner you see in that gigantic oil painting in the main hall. For if you do, he’s sure to cut you in half and grind your bones into dust, before he parlays for a sip of brandy and a good smoke from his pipe.

This is a momentous occasion, a celebration of liberty and grave injustice. Enjoy your newly found freedoms and bountiful careers as fry cooks.

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Boris Johnson Redpills the World on Saudi Involvement in Proxy Wars

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Britain’s new foreign secretary, Boris Johnson, had a candid moment at the Med 2 Conference in Rome — telling the audience “there are politicians who are twisting and abusing religion and different strains of the same religion in order to further their own political objectives. “That’s one of the biggest political problems in the whole region. And the tragedy for me – and that’s why you have these proxy wars being fought the whole time in that area – is that there is not strong enough leadership in the countries themselves.”

He then upped the rhetoric, injecting a giant fucking redpill into a cucked audience, saying the Middle East lacked ‘big characters’ who could transcend their retarded religious sects and work towards peace.

Then he dropped the gauntlet, saying “that’s why you’ve got the Saudis, Iran, everybody, moving in and puppeteering and playing proxy wars.”

Boom.

Correspondents from the BBC shit their diapers over the comments. James Landale said the comments were “awkward if not embarrassing for the foreign secretary”.

Landale continued “once again Mr Johnson’s use of language is causing headlines that his diplomats will need to explain.”

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Tucker Carlson Triggers Liberal in Vicious Beat Down Over Trump is Like Hitler Claim

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Jesus Christ this was brutal.

Gents,

This is the face of defeat.
tucker

This one had all of the classic trimmings of a vicious beat down. In this episode of ‘You Can’t Cuck the Tuck’, Tucker, from House Swanson, made this poor woman look like a drooling fool, over her Time Magazine cover comparison of Trump to Hitler, by suggesting ‘we should fucking examine this shit, to avoid making mistakes.’ Tucker was relentless in his assault and offered no quarter, only the black flag.

She delved into Trump’s EPA pick as being a shill for BIG COAL and how Bannon is a white supremacist and how HATE CRIMES are on the rise again — in lieu of Trump.

Perhaps she’s right. Last I checked, all of the hate crimes being committed were from the tolerant left. Even still, this was another magnificent display of verbal annihilation.

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Trumpism: U.S. Steel Wants to Bring Back 10,000 Jobs to America

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The CEO of U.S. Steel, Mario Longhi, announced on CNBC today that he’s prepared to bring back 10,000 jobs to the United States. Bear in mind, I’m prepared to do the same thing too — but actually have no plans, whatsoever, to do so.

The case of U.S. Steel, however, is a bit more complex — being that Trump can turn X into a fucking jackpot with one sweep of the pen — imposing harsh tariffs on shitty Chinese steel coming into the country.

On May 26th of 2016, the U.S. Department of Commerce slapped China with 500% duties on cold rolled steel — after years of complaints from the industry.

In other words, this is an industry that would benefit greatly from protectionism and making sure the Chinese government isn’t offering subsidies to their producers in order to steal market share in America.

Since then, the steel industry has been on fire — with shares of X up 376% for the year. Quarter over quarter sales growth is picking up and the specter of a gigantic southern border wall has hedge fund managers tripping over themselves to get long.

This, along with the homebuilders, are perfect America first plays, which should benefit from an entrepreneurial Trump administration.

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BEHOLD: THE CENTURY OLD DOW THEORY SIGNAL HAS BEEN TRIGGERED

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An ancient market signal has been triggered today, one that was used by men riding on horseback to work, 100 years ago to this very day. As you sit there, in your pleather chair, analyzing charts and what not, you should know that the Dow Jones Industrial Average and the Transports, aka “The Trannies”, both closed at record highs today. This sweet concoction of market ambrosia is called The Dow Theory Signal, and you should behold it.

This is widely revered as a bullish signal for stocks. After all, if the truckers and trains are doing well, at the same time the industrials are hitting on all cylinders, one has to believe the economy is growing at 3-4%, never mind what the actual data suggests.

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Let’s examine the last time this “Dow Theory” signal was triggered and what occurred immediately thereafter.

Dow Theory triggered in November of 2014: SPY +2.75%

December: -0.25%

January 2015: -2.96%

February: +5.62%

March: -1.57%

Prepare for an immediate drawdown of 3%+, followed by gains of 0.84% over the next 4 months.

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Markets Have Soared Again; All Prisoners of iBC Have Been Released

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The forlorn supplication of an otherwise group of despisable people has reached the lurid stages of entertainment. This coming from a person, such as myself, whose entire life was dedicated towards the annihilation of such a cadre of individuals has made the recent ebullience in markets all the more ravenous to me. Not only on the sideline, but also short and long bonds, my ‘sitting out’, as some might call it, is a riotous act of supreme comedy.

Whenever downcast about your mode of living, always remember the long days of 2016 when “The Fly” had been cracked asunder under a Kafkaesque bureaucratic style of miserabilism — one only matched by Hillbots storming the streets, burning them down, because a pussy grabbing orange clown had stolen the election.

Many of the frog faces here, traversing the comments section of iBankCoin, are my sworn enemies. But, and as vaudeville as this might seem, sacrifices must be made in order to right the ship of SS Titanic Fly. Even though the prisons of iBC are replete and over-brimming with criminals of a deranged type, the sordid type of person that you’d want to hit upon seeing, I have no choice but to free everyone from their chains and to permit the zoo animals to run freely about the site again.

Christmas has come early this year.

For whatever reason, iBC is an obstreperous place of recalcitrant assholes. Often times I feel like I’ve slept in a barn all night, discussing politics and the markets with drunken and retarded sheep and horses.

There is an ineradicable hostility in the country that I intend to harness and propel my person to new heights with. In the meantime, all prisoners inside of iBC’s facilities, dubbed Black-Fag-Box (no racism), will be released shortly.

God speed.

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Unbelievable: Vinyl Record Sales Outpace Digital Downloads for the First Time Ever

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I used to scoff and scowl at people who collected vinyl records, thinking it was complete horseshit. But then I got into it, almost by accident. Being an avid collector of old newspapers and antique books, I was naturally attracted to finding and collecting old vinyl records. My preference is 1940s jazz, or maybe some Stan Getz from the 1960s, during the bossa nova era. Now, I have a small, but growing, collection of vinyls and I love them. You can find stuff that is unavailable on digital and they sound better.

Much to my surprise, vinyl sales actually outpaced digital last week for the first time ever. Wow.

Source: BBC
More money was spent on vinyl than downloaded albums last week, for the first time.

Vinyl sales made the record industry £2.4m, while downloads took in £2.1m, the Entertainment Retailers Association (ERA) said.

It marks a big shift in music consumption. In the same week last year, vinyl albums made £1.2m while digital ones made £4.4m.

Downloads have been in sharp decline as consumers switch to streaming services.

The ERA has suggested the surge in vinyl sales could be attributed to the popularity of vinyl as a Christmas gift and the growing number of retailers – including supermarkets such as Sainsbury’s and Tesco – which now stock vinyl.

“It’s not so long ago that the digital download was meant to be the future. Few would have predicted that an album format, first invented in 1948 and based on stamping a groove into a piece of plastic, would now be outselling it in 2016.”

The format has now shown eight consecutive years of growth since facing near extinction in 2007, although it still represents less than 2% of the overall music market.

I don’t consider myself an audiophile, just someone who likes quality. I found it to be very difficult to buy a new vinyl record player, since most are made in China and complete crap. If you’re looking for a gift this Xmas, and I get nothing out of this recommendation, try Uturn Audio, based out of Boston. After a lot of research, I chose to buy my turntable through them and have been very happy ever since.

It’s worth noting, I used to spend no less than $40 per mo on iTunes music, but have cut that down to zero. Primarily, I listen to music via my Alexa device, using Amazon music through my Prime account. Since I don’t listen to new music and prefer music from antiquity, this is perfect for me and has just about everything I want for free, save the annual fee I pay for prime.

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