Delusional UBS: Fed to Hike Twice in 2016, Buy Stocks, Sell Bonds

The CIO from UBS, Mark Haefele, believes we’re all a bunch of Nancies for buying bonds. He believes stocks will trade up, the Fed will jack rates twice, and that bonds will sell off.

Perhaps he took a few qualudes before penning this missive? Anything is possible, EXCEPT the notion that the Fed will hike twice in 2016, in an election year, whilst the economy is slowing and most of the western world is fucked and mired, mired and fucked, in a negative interest rate panorama of stupidity.

Despite the recent weak labor report, the Federal Reserve still appears on course to raise interest rates relatively soon. Economic data on jobs, wages, and inflation, as well as financial market conditions, will influence the Fed’s decision.
We think it is unlikely that the Fed will raise rates this month but we expect two rate hikes of a quarter percentage point each this – in September and December.

Federal Reserve Chair Janet Yellen recently clarified her thinking on the economy and the outlook for Fed policy following last Friday’s surprisingly weak labor report, which showed payroll growth in May slowing to its lowest level since 2010. While Yellen called this “concerning” and repeatedly noted the uncertainty in the economic outlook, overall she was cautiously optimistic. In our view, if the incoming data are reasonably good, then the Fed will be hiking rates in the not-too-distant future.

When thinking about monetary policy, it’s important to focus on the Fed’s dual mandate: maximum employment and price stability, where stability is defined as a 2-percent inflation rate. Yellen stated, “I believe we are now close to eliminating the slack that has weighed on the labor market since the recession,” and “I expect inflation to move back to 2 percent” as the impact of lower oil prices and the strong dollar fades. The big picture, then, is that the Fed is still on track to fulfilling its mandate.

A July hike is still possible if the economic data between now and the meeting are very strong. In either case, another hike should follow in December, as long as the economic recovery remains on track.

We recognize that Fed officials may struggle to communicate this without disrupting markets. Still, we believe risk assets can continue their recent improved performance. We maintain an overweight on U.S. equities, given our expectation for bottom-line growth to recover. We are underweight U.S. government bonds, which we expect to produce a modest negative return over the coming six months, as markets adjust to a somewhat faster pace of rate hikes by the Fed.

If my rantings about the Chinese culture being one that is born through trickery and piracy, look no further than the statements from the head of their top company, Jack Ma, from Ali Baba.

In an unbelievable candid interview, Ma pointedly said that fake items were better and cheaper. After all, most of the OEMs are located in China. The IP for our products aren’t respected. These people are pirates, salivating to steal from the ingenuity of others, siphoning off respected brands that have been developed and perfected by professionals.

This is the result of a policy that opted to utilize cheap Chinese labor, where laws for IP do not exist. They have fake Apple, McDonald’s and Starbucks stores for fucks sake. Do you think they’d, for a second, hesitate to rip off your brilliant idea once they had the blueprint for them?

“The problem is the fake products today are of better quality and better price than the real names. They are exactly the [same] factories, exactly the same raw materials but they do not use the names,” he said during a speech on Tuesday at Alibaba’s headquarters in Hangzhou.

“We have to protect [intellectual property], we have to do everything to stop the fake products, but OEMs are making better products at a better price,” he added, referring to original equipment manufacturers that typically make products for branded sellers.

In May,Alibaba was suspended from the International Anticounterfeiting Coalition, a watchdog for the retail industry, over similar concerns about knock-offs.

“You can’t stop Alibaba for two hours otherwise it’s going to be a disaster for China. You can stop Tencent for two days, you can stop Baidu for two weeks and everything will still be OK,” he said referring to Alibaba’s two closest competitors.

“The way of doing business has changed for the brands. It’s not the fake products, its not the IP that is destroying them. It’s the new business model that’s revolutionised the whole world,” said Mr Ma.

In April 2015, Alibaba launched a programme to help Chinese factories develop their own brands dubbed “Zhongguozhizao” or “Quality made in China” in an effort to discourage them from producing counterfeits.

Upon birth, each Chinese citizen is taught to steal and lie, to manufacture goods and dump them onto the shores of America at cut throat prices.

Absolutely disgraceful.

In a conference call today, the new bond King (fuck B. Gross) laid waste to the Fed and other central banks, mocking the Fed for calling the June meeting a live one– besmirching them as zombies.

Moreover, the negative rate experiment is going very poorly wherever implemented, backed up by massive drawdowns in global markets from the highs.

Does any one disagree?

A great man once said ‘it’s gonna be a hot summer.’ An even greater one just said the summer will be one of the rocky varietal.

“Central banks are losing control and they don’t know what to do … just like the Republican establishment and Donald Trump,” Gundlach told Reuters in a telephone interview, referring to the Republic Party’s unpredictable presumptive nominee for U.S. President.

“The Fed is confused and their confusion spills into investor psychology,” said Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine.

“The Fed changes its tone so frequently, it seems every other week the message is different. They’ve turned into the ‘Zombie Fed.’ They say the meeting this week is ‘live,’ but investors all know it isn’t at all.”

Gundlach said it is a “dangerous price appreciation game” to purchase German Bunds at current levels and that gold and gold miners are still an attractive place to put money to work.

On a webcast for investors later on Tuesday he said negative interest rates implemented by some major central banks, notably in Japan, were backfiring. “Negative interest rates don’t do what they’re theoretically supposed to do,” he said, noting the appreciation in the Japanese yen.

He added that negative interest rates “aren’t leading to higher economic growth.” He said world gross domestic product could be averaging around just 1 percent against the backdrop of aggressive global monetary policies.

Gundlach also noted the dramatic “drawdowns” from the highs in several stock markets. Germany is down 22 percent, Japan is down 23 percent, China is down 45 percent, the United Kingdom market is down 15 percent and France is down 20 percent.
“Negative rates do not prop up stock markets,” Gundlach said on the webcast.

“This summer is going to be a rocky ride,” Gundlach said, summarizing his outlook.

Go buy some Chinese stocks you degenerates.

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.