The Carnage: It’s Found in the Banks, Stupid

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.

All recent polls suggest the insolent freedom loving knaves from the UK will opt to leave the suicidal catamites in the EU. As such, the ECB and the BOE are concocting schemes to deal with any market dislocations, should the 6/23 referendum fail to go their way.

The European Central Bank would publicly pledge to backstop financial markets in tandem with the Bank of England should Britain vote to leave the European Union, officials with knowledge of the matter told Reuters.
The preparations illustrate the heightened state of alert ahead of the June 23 referendum, which will help determine Britain’s future in trade and world affairs and also shape the EU. The pound and euro have lost value on fears a Brexit could tip the 28-member bloc into recession.
Such an announcement from the ECB would come on June 24 if an early-morning result showed that British voters had chosen to leave the EU, according to the sources. The aim is to underpin investor confidence across Europe and contain further market jitters.
“There will be a statement to do whatever it takes to maintain adequate market liquidity,” said one senior central bank official, who spoke on condition of anonymity.

This is all looking fairly grim right now, as are all market squalls. However, if recent history is of any use to us, this fear will dissipate and lead to yet another central bank sponsored rally. Because death and the demise of markets seems like all but a foregone conclusion, I am increasingly skeptical that it can happen in such an insidiously pre-medicated fashion.

Nevertheless, I remain steadfast in my belief that our yield curve will invert, forcing me to remain long TLT until this is realized.

The poles aren’t like the rest of Europeans. They’re more old school, a hard people who find difficulties in changing light bulbs with less than 10 people. Their central bank chief, Jerzy Kropiwnicki just gave short sellers open season on the Polish currency, which has a long rich history of fuckery.

The currency slid 0.4 percent to a three-week low of 4.4295 per euro, adding to a 0.8 percent slump yesterday after Polish central banker Jerzy Kropiwnicki suggested that after a vote for Brexit, he would tolerate a slump to a record 5 per euro before intervening. The yield premium on the nation’s 10-year domestic bonds over Germany jumped to 326 basis points, the most since 2012.

“We identify the zloty as one of the most vulnerable currencies to Brexit risks,” ING Groep NV strategists Chris Turner and Petr Krpata wrote in a report to clients. “In such an environment, yesterday’s comments from the MPC board member Kropiwnicki are not helpful.”

Brexit concerns are hurting the zloty, which plummeted to a record intraday low of 4.93 per euro during the global financial crisis in 2009, because the Polish economy is the largest recipient of EU subsidies which could partly be at risk if the U.K. exited. The pound and European stocks extended losses on Tuesday after a series of new opinion polls showed Brits may vote to leave.

Since the euro is in the deflationary vortex, by extension, Poland is not. Hence, her currency waivers, as the Germans dig themselves a deeper trench.