Banksters Are Loving This Decline and Why I Think Treasuries Are Dropping

The yield curve is widening today, which is providing succor to the banks. Remember, they’ve been surviving off saltine crackers and repurposed salt water for the past 5 years. Should rates go up, their margins will expand. Should H. Clinton get elected, their clout will spread like the mist in the movie The Fog.

As a result of both Draghi declining to extend the ECB’s QE, and hawkish comments out of Fed’s Rosenberg, bonds are getting hit, globally. I believe this was coordinated to get Europe out of the negative rate mud hole they were stomped into.

German bunds are now positive yielding, miraculously.

Also, in spite of the fact that the Dow is off by almost 200, most banks are outperforming.

We can make a few deductions from this price action.

1. This sell off is controlled and within the realms of reason.
2. Banks are in a position, both here and in Europe, to make more money with higher yields.
3. Markets aren’t forecasting an economic slowdown, otherwise the banks would be diving.
4. Traditional safe havens, like bonds and gold, aren’t safe today. As a matter of fact, BAC is safer.

5. The primary driver for lower treasuries is lower bunds. The two are intermingled. The bond sell off started yesterday, following Draghi’s comments, not today.

It’s a slow Friday afternoon, so I won’t read too much into it. Just keep your eye on the dollar, for it possesses the power to single handedly make a giant mess out of global trade and FOREX markets. Should you start to see buying enter the bond and gold markets, at the same time markets dive lower, then we have a real problem. Unless otherwise, this is a standard milling about the edges of the market sell off that is more likely to be viewed as constructive than destructive, even though I’d greatly prefer the latter.

Understand the set up here. A Fed hike itself shouldn’t be a concern, but what comes after it. For example, will a stronger dollar cause HIBOR to keep blowing out, amidst renewed capital flight from China? Or will the strong dollar begin to cause issues in both commodity markets and US exports? That won’t happen until after the rate hike, if it’s coming at all.

This is all about Rosengren’s speech, who notoriously is a dove.

JP Morgan believes the Fed is purposely backing themselves into a corner.

“I think the key thing here is Eric Rosengren’s speech,” said David Kelly, chief global strategist at JPMorgan Funds. “I think they are trying to box themselves into a corner where they have to raise rates in September in order to maintain credibility.”

“If the market does sell off in anticipation of a rate hike, I think it will recover pretty quickly,” Kelly added, noting a rate hike would ultimately be seen as a vote of confidence for the economy.

The result of these new Fed fears is sharply lower equities and bonds. I’ve always said longer duration bonds shouldn’t be affected by Fed policy. But TLT is getting hit today, for the second day in a row. I believe this has more to do with German bunds soaring in yield than the specter of a hike.

The usual suspects are pronounced today: lower gold, oil etc, higher dollar and volatility.

My bear thesis has always been contingent upon two things.

1. China unraveling.
2. Credit defaults in the energy space.

Fed hikes actually help towards those two headwinds gaining steam. I’m hard pressed to believe they’d be so stupid as to upset the apple cart, unless of course they’re trying to disrupt things on purpose.

It’s worth noting, my Exodus inspired ‘Fuck France‘ call ended up on the right side of the trade.

I wore my XENOPHOBE robe before I sat down to write this article.

The globalization of American industry isn’t confined to just manufacturing, but social media too. We all know the pivotal role Twitter played in allowing radical Islamists seize power in the Middle East, through their ‘Arab Spring’ offensive. But I bet most people didn’t know India will soon pass the US in FB users, many of which are likely fake accounts created to inflate their numbers.

Currently, two thirds of Facebook’s 1.7b users are from ’emerging markets’ or the shittiest parts of the world.

According to eMarketer, India, Indonesia, Mexico and Philippines are the fastest growing countries for Zuckerberg’s tyrannical warehouse of misfits.

“From a monetization perspective it’s still dominantly the U.S. but from a long-term opportunity perspective it’s definitely emerging-markets,” Charlie Wilson, the Santa Fe, New Mexico-based managing director at Thornburg Investment Management Inc., said in an interview in New York.

That’s very true, Charlie Wilson. See, like big Pharma and a sundry of US based companies doing business abroad, they still make the bulk of their profits siphoning off the rotting corpse of America. After these vampires have laid waste to us and taken all they could, they would’ve already built gigantic businesses abroad and America would, essentially, become the new emerging market or shittiest place in the world.

Alas, the circle of life (takes XENOPHOBE robe off).

Rosengren was smoking the good stuff before today’s speech, where he said, with a straight face, the Fed should start hiking rates or risk hurting the economy because it was overheating. Lolz.

Maybe he should take another gander at the ISM data?

He added that “a failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery.”

Continuing.

“My personal view, based on data that we have received to date, is that a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy.”

Overall, Rosengren sees the silver lining where others might see weakness. He is warning of asset bubbles, most likely to be found in real estate and stocks, suggesting that if the Fed fails to take away the punch bowl now, all of you stupid little fuckers out there might get drunk and crash into ravines.

“I expect some continuing drag from foreign activity,” Rosengren added. “But underlying domestic strength is likely to be sufficient to engender continued improvement.”

Commenting on risks to the outlook, Rosengren noted the presence of global concerns but said that “market indicators have so far provided little evidence of outsized risks.”

However, Rosengren cautioned that an overheated economy – one that significantly exceeds sustainable output and employment – would pose risks to maintaining full employment over time.

History shows the difficulty of slowing the economy to a sustainable rate without going too far and causing a recession.

Rosengren noted that waiting too long to tighten could lead to conditions that require more rapid increases, risking a more pronounced slowing of growth and rise in unemployment. It may also allow some asset markets to “become too ebullient,” and he reiterated previous concerns over commercial real estate prices.

“The risks to the forecast are becoming increasingly two-sided, in my view,” Rosengren explained. “Weakness emanating from abroad poses short-term downside risks to the domestic U.S. economy,” yet there are also “longer-term risks from significantly overshooting the U.S. economy’s growth.”

On one hand, the negative yield situation in Europe was inherently deflationary. It was causing all sorts of problem with asset prices and pension funds, thanks to QE. On the other, the low rates in Bunds and other sovereigns dragged down the borrowing costs of corporates, which made it easier for companies to access capital to buy back stock.

One thing is indelibly certain, the great bull rally in German bunds is over, at least for the moment.

It’s not like people are selling bunds to buy stocks. And it’s not like markets aren’t near record highs, alongside bonds either. The fact that people are selling bonds and also selling stocks is indicative of fuckery, largess, which is likely a temporary problem and will be worked out soon.

One thing is certain, when comparing Bunds and other European sovereigns to American treasuries, they’re wildly overvalued, so maybe a firm repricing is in order.

A Norwegian writer penned a story about ‘seven photographs that changed warfare’, featuring Pulitzer prize winning photo by Nick Ut, ‘The Napalm Girl’, and was banned from Facebook because of it. When Norway’s largest paper, Aftenposten, reported on it– using the photograph– the fucking drones at Zuckerberg’s palace of tyranny asked them to remove it or pixelate the nudity out.

I get it. The Facebook algos are programmed to restrict nude photos of children. However, there should be some human intelligence involved here too, especially after reaching out to Aftenposten, clearly understanding the context of their story.

Facebook wrote: “Any photographs of people displaying fully nude genitalia or buttocks, or fully nude female breast, will be removed.”

Next, the little trollops at FB deleted the Aftenposten article and then went back to skateboarding inside of their offices.

Espen Egil Hansen,  Editor in Chief and CEO of Aftenposten, penned an open letter to the oddballs at Facebook, pointing out that Facebook’s decision to remove the post was inane and troubling since they’re unable to “distinguish between child pornography and famous war photographs”, as well as an unwillingness to “allow[ing] space for good judgement”.

Hansen carried on, declaring Zuck was ‘abusing (his) power’ and was “upset, disappointed – well, in fact even afraid – of what you are about to do to a mainstay of our democratic society.”

Hansen, obviously livid with unchecked rage and venom, furthered his assault: “even though I am editor-in-chief of Norway’s largest newspaper, I have to realize that you are restricting my room for exercising my editorial responsibility. I think you are abusing your power, and I find it hard to believe that you have thought it through thoroughly.”

The incessant censoring of  content on social media networks, from Facebook to Twitter, that appeals to a PC, juvenile, culture  goes a long way to “simply promote stupidity and fail to bring human beings closer to each other”, words eloquently written by Hansen in his open letter to Zuck.

Some of Hansen’s solutions include using actual intelligence to distinguish the difference between editors and the plebians. This is somewhat funny, in an elitist, holier than thou, sort of way. Hansen was also somewhat perturbed that Facebook’s customer service reps didn’t respond to him in an agreeable time frame.

Even after fully reviewing the situation, Facebook doubled down in a statemet to the Guardian:

“While we recognize that this photo is iconic, it’s difficult to create a distinction between allowing a photograph of a nude child in one instance and not others. “We try to find the right balance between enabling people to express themselves while maintaining a safe and respectful experience for our global community. Our solutions won’t always be perfect, but we will continue to try to improve our policies and the ways in which we apply them.”

Just a week ago, a former editor, from the Facebook News division, revealed fuckery largess had been taking place at the company, pointing to a very liberal ideology being imposed by their Orwellian thought police.

Naturally, this is an emotional response from a man who is under fire by Amazon, also suffering from the pangs of an illiterate nation. On top of that, the mall is dead and no one has any money, after healthcare and groceries, to make discretionary purchases anymore.

Leonard Riggio, founder and Chairman of BKS said traffic at stores are  ‘close to a historic low point.’

Moreover, aside from retail being inexorably ‘terrible’ and miserably wretched, Riggio doubled down on his bearshitting commentary, saying  “better put, is it is one of the worst I have ever experienced in the 50 years I have been in this industry.”

Then the old fucker veered off course and tried to blame Trump for his shitty sales:

“The current trend can be traced precisely to the current election cycle, which is unprecedented in terms of the fear, anger and frustration being experienced by the public.”

Being a collector of old books, I believe BKS is an inartful experience for clowns and pseudo intellectuals who peruse soft cover books like the imbeciles they are. However, there is potential for BKS to be truly great, especially if they used their space to appeal to people like me, who’d gladly make large purchases for items worth buying.

Also, they’re vinyl record section is a fucking joke. In short, BKS is being dreadfully mismanaged.

Shares of Twitter are down more than 5.5% on news that the company is a huge piece of shit that is cutting expenses and had a board meeting today to discuss ZERO BIDS for the company. Recently banned from the platform and outspoken tech reporter at Breitbart, Milo Yannopoulos, took to CNBC to drag Twitter through the mud a little more. His main points were that Twitter has been sledding downward ever since they’ve started a totalitarian campaign to restrict free speech, opting for a more deranged business model instead of one that attempts to ensnare the maximum amount of users with a big fucking net.

Also, he said @Jack Dorsey is mailing it in and really doesn’t give a shit about the company. As far as @Jack is concerned, the company could drop dead and he’d still be combing his stupid fucking beard, playing games at Square.

Best case scenario, Europe gets out of their QE scheme without causing an event in markets that would make them rue the day they started it. Thanks to Draghi’s comments today, in regards to not extending the ECB market rigging programme, bonds are getting smashed across the globe.

Stocks aren’t getting hit too bad, so consider today a grande success.

Crude oil is through the roof, thanks to stupidity largess. Volatility is flat, indicative of a market sitting on its laurels, rich and fat and without a care in the world. Investors aren’t really pricing in the end of QE, just pretending to do so. If the market were to truly price it in, markets would be fucking nose diving, Portuguese, Spanish, Italian and Greek bonds would be blowing out–diverging from the nazis.

Enjoy the pastoral views. The fall is coming.

Jeff Osborne from Cowen is out with a long report today, describing all of the reasons why TSLA is too risky to own here. He’s particularly concerned about the Solar City integration into the model, suggesting it could increase an already onerous cash burn of $3b to upwards of 5 billion monopoly dollars.

Tesla bulls will tell you that Jeff Osborne is a fucking idiot bookworm who doesn’t understand the genius that is Musk. Bears might says Musk is a con artist who preys on the small brains of the Third Estate.

Either way, it makes for good theatre.

“In the 12-month time frame our rating contemplates, we see Tesla as a great company led by a true visionary, but must acknowledge the asymmetric risk/reward profile for the stock at the market’s current valuation,” Osborne wrote.

“Simply, we see a lot more that can go wrong than can go right as the company transitions into Mr. Musk’s greater vision.”

TSLA is off 2% today.