Author Archive for Zero Hedge

Did Capital One Run Into A Commodity Prepay Wall?

ourtesy of ZeroHedge View original post here.

Submitted by Jacques Simon,

In our last post we touted a too-big too fail return in the commodity-sector (a name nobody dare to pronounced. Today prices are down but market volatility is up (VaR is up, prices are down). Capital one, a FDIC-insured bank is allowed to skip a $1B margin call related to energy exposure of an undisclosed nature.

Zero Hedge suggested that the CFTC (Fed by extension) was quietly bailing out Capital One.

`As part of that business, Capital One enters into commodity swaps with its commercial oil and gas clients to help them mitigate the risk of energy price swings and the related borrowing risks. Typically, those trades do not bring Capital One’s swaps exposure anywhere close to the CFTC’s registration threshold, according to the CFTC’s Friday notice“.

But the 50% plunge in crude oil prices caused by the coronavirus and a flood of supply by top producers has seen its exposure on those swaps balloon, putting it on course to hit the threshold by the end of this month, the CFTC said.

As Reuters details, the threshold kicks in if a bank has $1 billion in daily average aggregate commodity swap exposure that is not secured by collateral, such as cash margin. Which, it appears, was the case with CapitalOne.

Why was Capital one spec-ing long crude anyway” asked a trader?

He noted that they cannot really call it a “hedge“ as they are directly hurt by falling prices…

– Capital One is not registered as a swap dealer, nor is a major swap participant with the CFTC. -How in the course of normal lending can they be long the equivalent of 50,000 Nymex contracts.

“The cumulative exposure facing Capital One would be many billions, and could potentially render the bank insolvent“.

The Virginia-based lender with less than a 1.5% exposure to the U.S energy and 3-sig worst case scenario prints a $1B loss or (is it more a $2B). These inputs can be left for further scrutiny.

  • Moreover raising the risk ceiling instead of triggering a margin call shows that FED-BIS enacted rules (VaR, minimum capital requirements) are malleable.

  • In other words, the people in charge of stability


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As Europe Looks For Lockdown Exit Strategy, WHO Urges ‘Don’t Ease Measures Too Early’

Courtesy of ZeroHedge View original post here.

Europe is finally seeing signs that its lockdowns are working, as over the weekend Europe's epicenter of Italy finally saw its smallest daily increase in deaths since March 19, and Spain – with more total infections than Italy – also saw its daily number of deaths cut in half. France and Germany are also seeing slowdowns. And Denmark and Austria become the first European countries Monday to announce detailed plans to open back up.

Meanwhile China is opening its economy and even tourist sites back up again, though Beijing officials remain worried about a premature flood of lockdown-weary crowds to popular sites and the potential for a second wave of asymptomatic spreaders.

CNBC reports on the perceived slowdown in many parts of the world: "The figures are prompting European leaders to look for an exit strategy to national lockdowns." Yet they are still cautiously "urging the public to maintain discipline while the apparent recovery from the outbreak is in its infancy."

WHO file image, via AFP

 

This prompted the World Health Organization (WHO) on Tuesday to warn governments against easing restrictions to early.

While saying it can't issue any blanket recommendations for countries slowly easing measures, it warned against lifting restrictions on population movement prematurely.

“One of the most important parts is not to let go of the measures too early in order not to have a fall back again,” WHO spokesman Christian Lindmeier said, according to Reuters.

“It’s similar to being sick yourself if you get out of bed too early and get running too early you risk falling back and having complications,” he added.

Via The Guardian/Johns Hopkins CSSE

 

Monday witnessed glimmers of hope, however:

Austria today became the first country to set out detailed plans for ending the standstill,


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Not Even The End Of The Beginning…

Courtesy of ZeroHedge View original post here.

Authored by Bill Blain via MorningPorridge.com,

“I bet it was Carole Baskin that gave the Tigers C-19!”

As predicted, yesterday’s vague indications the numbers are improving turned into a spectacular rally as markets’ high-fived themselves, anticipating imminent victory against the Coronavirus. Markets appear to be way too excited. 

Maybe markets know something governments don’t – at what point do we actually win? If you think the Market Rally means economies are going to open tickety-boo and dandy over the next few days… you really need to change your dealer.

Nope.. What Markets know is that Global Central banks are going to do whatever it takes… to keep markets high… The reality gap between financial assets and the real word grows ever wider…

Meanwhile…

I doubt Downing Street is going to be terribly happy with an interview the UK’s celebrity epidemiologist Neil Ferguson gave to the FT:We don’t have a clear exit strategy”. 

Published this morning, it’s a long and rambling piece that traces the decision making that’s got us thus far in the UK. It concludes the future will involve los of testing and ramping up contact tracing, highlights the risks of second waves of infection, and designing “an optimal strategy which keeps the NHS functioning, allows more economic and social activity… and gets us through the next 18 months.” He added: “We don’t have a clear exit strategy at the moment.”

The reality this morning is Markets have declared Victory. Government hasn’t decided what victory conditions are. The problem is how do we make sure we don’t win this first battle, but go one to lose the war if subsequent waves of C-19 overwhelm the medical services, and break the will of the people to resist. This is not over yet.

It’s like a scene from a Godzilla movie where the crowds think the monster has been slain as its body sinks into the Ocean deeps. As we walk away, there is a bubbling noise behind us.. We turn, and the Monster springs up; stronger, angrier and more devasting than before…

The bottom line for markets is the global economy is


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Kudlow Claims Fed Still Has “Ultimate Bazooka”

Courtesy of ZeroHedge View original post here.

Having increased its balance sheet by the most ever, directly monetizing Treasury issuance, unleashing unlimited swap lines, and started buying everything from bond ETFs to personal loan paper, and promised implicitly to do the now-proverbial 'whatever it takes' to save the world (markets), it appears The Fed has something else under its Kimono that it's not quite ready to share

As senior Trump Administration officials fanned out across the major market-news channels to try and keep the market's fire burning this morning with some well-timed and appropriately un-subtle jawboning, one comment stood out by far.

While both Treasury Secretary Steven Mnuchin and Larry Kudlow have insisted that President Trump is looking to re-open the US economy "as quickly as possible" – though not before health officials have had their say – Kudlow took things a step further by dismissing worries about another drop to new lows by saying the Fed is sitting pretty with what he called -  "the ultimate bazooka."

While it is not completely clear as to what Kudlow is alluding, many suspect – especially following former Fed Chair Yellen's comments yesterday on the need for Congress to address The Fed's ability to "buy more things" – including stocks – as the 'Ultimate bazooka'.

This is something we have long warned about, warnings which have occasionally been dismissed as "conspiracy theories." Of course, speculating about CBs buying equities is anything but a 'conspiracy', as the BoJ has shown us. And now, some very credible people are talking about the Fed buying stocks after the central bank already took the unprecedented step of buying corporate debt (ETFs).

As Bob Rodriguez recently noted, this is the end of the capital markets as we have known them.

We have now entered unlimited QE and MMT where there is no escape.

It is the Roach Motel all over again.

In Chairman Bernanke‘s 2010 Washington Post op-ed, he argued that QE would lead to a virtuous economic cycle; therefore, the Fed


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Rabobank: “There Is Really Only One Headline Today – That PM Boris Johnson Is In Intensive Care”

Courtesy of ZeroHedge View original post here.

Submitted by Michael Every of Rabobank

ICU

There is really only one headline today – that UK PM Boris Johnson is in intensive care. Indeed, as several medical experts have attested, given the critical shortage of ICU beds he is likely to be on a ventilator very soon.

Of course, he isn’t the first world leader to get the disease, and we have already seen Prince Charles and UK Health Secretary Matt Hancock fully recovery, for example. Nonetheless, the sudden deterioration in his condition comes as a major shock: last week he was clapping on the door step to praise the NHS and was still leading cabinet meetings online; yesterday afternoon we were told he was only staying at home because of an annoyingly persistent temperature; then it was a cough too – but that he was still actively Prime Minister; then he was going to hospital (by car) for some tests; and then he was in an ICU and, apparently, struggling to breathe.

For the UK, this obviously hits confidence and raises questions over leadership given Boris is going to be out of it for some time, even in the best case. (And naturally everyone wishes him a full and speedy recovery.) Yet there are also key global implications here.

Equity markets rallied again yesterday, partly on a short squeeze, but partly on hopes that we are indeed flattening our virus curves and we can all go back to normal soon. Crucially, however, this bullishness presupposes that we have a strategy for once the curve has been flattened – do we, post-Boris?

Clearly, COVID-19 is not just potentially deadly for the elderly and vulnerable, but even for the relatively young and fit -Boris cycles regularly, is in his 50s, and unless underlying health conditions are being suppressed by No 10, is NOT a classic potential victim at all. That should immediately dent and/or shatter confidence in what is yet again emerging as a potential economic exit from this tragedy – ‘herd immunity’.

This plan, doing the rounds in the press again, is that when we flatten the virus curve in developed countries all we need to do next is to then keep the vulnerable locked down and everyone


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Small Business Optimism Crashes By Most Ever

Courtesy of ZeroHedge View original post here.

The NFIB Small Business Optimism Index fell 8.1 points in March to 96.4, the largest monthly decline in the survey’s history and ending a historic run of 39-months of strong small business optimism above 100.

Nine of the 10 Index components declined, which is evidence that economic disruptions are escalating on Main Street as small businesses struggle to keep their doors open. The small business sector is anticipating and bracing for continued economic disruptions going forward.

“Small businesses are living through the coronavirus pandemic right now and it’s hard to say what the severity of the disruption will be, but we do know they’re feeling the urgency,” said NFIB Chief Economist William Dunkelberg. “It is vital that these businesses have access to federal funds that are made available through the CARES Act to keep the doors open on Main Street.”

The financial markets saw substantial change in March, with the stock market indices losing 22% of their value and jobless claims rising to a record 10 million in the last two weeks of the month. The NFIB survey collected the majority of responses in the first half of the month, so the sharp decline in employment is not reflected in the March survey data. You can find NFIB’s split write-up here.

The main takeaways from the March survey include:

  • The NFIB Uncertainty Index rose 12 points in March to 92, the highest level since March 2017.
  • Reports of better business conditions in the next six months declined 17 points to a net 5%, which is the largest monthly decline since November 2012.
  • Real sales expectations in the next six months declined 31 points to a net negative 12%, the largest monthly decline in the survey’s history.
  • Thirteen percent of firms thought it was a good time to expand, a decline of 13 points from last month.
  • Job openings fell three points to 35%.

As reported in NFIB’s monthly jobs report, prior to the COVID-19 outbreak, the small business labor market reported strong hiring, elevated levels of open positions, and historically high employee compensation. However, hiring plans


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Downing Street Says BoJo Hasn’t Been Diagnosed With Pneumonia; PM In “Good Spirits”

Courtesy of ZeroHedge View original post here.

As all of Britain (with the possible exception of a handful of extremely bitter remoaners) wishes Prime Minister Boris Johnson a speedy recovery, his spokesman told reporters on Tuesday that the PM hasn't been diagnosed with pneumonia, and although he has received supplementary oxygen, he likely won't be needing a respirator.

Following a handful of alarming comments from doctors and other medical experts last night, James Slack, the Downing Street spokesman, added that the PM's condition was considered "stable". The PM "remains in good spirits," they added.

That's the official line, at least: We won't really know whether Johnson is in the clear until he's well enough to leave the hospital.

Johnson is receiving standard oxygen treatment and is breathing without any other assistance. He has not received mechanical ventilation or non-invasive respiratory support”

Slack says Johnson’s de facto deputy, Foreign Secretary Dominic Raab, is "fine" and will handle pressing national security decisions if the PM is incapacitated. If Raab were to fall ill, Chancellor of the Exchequer Rishi Sunak would be next in line to lead. "There is an established order of precedence," Slack said.

Earlier on Tuesday, the government confirmed that the PM was moved to the ICU mostly as a precautionary measure, and that his oxygen threshold was higher than most patients admitted to the ICU.





Exxon Cuts 2020 Capex By 30% On Expectations For 25-30% Demand Drop

Courtesy of ZeroHedge View original post here.

With oil trading at prices that are uneconomical even for the world's biggest majors, on Tuesday morning Exxonmobil announced it cut its 2020 Capex by 30% and cash Opex by 15% as the CEO said he expects a record 25-30% demand drop this year.

The company said that the largest share of Capex reductions, or roughly 30% of total, would be in the Permian Basin. As a result of the spending cuts, the company will a production hit of 100,000 to 150,000 barrels/day from the Permian Basin in 2021 due to its spending reductions, CEO Darren Woods says on call with reporters, adding that in 2020 the production cut would be a modest reduction of only 15,000 barrels, which will hardly be enough an OPEC+ demanding US shale producers join the global production cuts now not in one year.

Among the other Exxon announcements:

  • Expects to meet projected investments of USD 20bln on US Gulf Coast manufacturing facilities
  • Expects to reach proposed US investments of USD 50bln over 5yrs announced in 2018
  • Mozambique project, expected later this year, has been postponed
  • Current operations onboard Liza Destiny production vessel are undisturbed
  • Capital allocation priorities remain unchanged
  • Long-term fundamentals that underpin Co's business plans are unchanged
  • Globally, the company sees industry refinery output declining in-line with demand and storage available

We’re in a “capital-intensive commodity business that’s used to ups and downs in price cycles. However, I have to say we haven’t seen anything like what we’re experiencing today" the CEO said, concluding ominously that "these are definitely challenging times for all of us."

Exxon's stock price rose by 7% on the news, although it remains about 40% below levels it traded at at the start of the year. The company's dividend yield remains a above 8% – a staggering number for what was not that long ago one of the world's largest companies.





Futures, Global Markets Soar For Second Day As Virus Fears Fade, Dollars Slides

Courtesy of ZeroHedge View original post here.

Global markets rallied for the second day as signs of progress against the coronavirus in both Europe and the United States and more aggressive helpings of stimulus kept investors charging back in.  US index futures bounced for a second straight day on Tuesday as risk appetite returned on tentative signs that the coronavirus outbreak was starting to plateau in hard-hit U.S. states.

At 0730 ET, Dow e-minis were up 816 points, or 3.7%, S&P 500 e-minis were up 83.75 points, or 3.1% and Nasdaq 100 e-minis were up 235 points, or 2.9%. Tuesday's rally followed a 7% surge on Monday after the governors of New York and New Jersey said their states, hot spots of the COVID-19 disease, were showing early signs of a “flattening” of the outbreak. But they warned against complacency as the nationwide death toll approached 11,000 and global infections surged past 1.3 million.

“Even if we have reached the peak, the lockdowns around the globe may be extended for a while more as governments may want to ensure that the virus has indeed been contained,” said Charalambos Pissouros, senior market analyst at JFD Group. “We believe that the global economy may start recovering well after the peak of the pandemic.”

Worldwide, the virus has infected more than 1.3 million people and killed over 74,000, and though the numbers are still rising in many highly-populated countries, some tentative improvements have given hope. In hardest-hit Italy and Spain, authorities have started looking ahead to easing lockdowns after steady falls in fatality rates. In the United States too, the daily number of deaths in the country’s worst-affected area, New York, has also shown signs of steadying.

There was an added boost from commodity markets as oil climbed nearly 3% on supply cut hopes, after Russian Tass reported that OPEC+ is discussing an output cut for 3 months, while currency markets also came alive as a tumbling dollar saw the euro race out of a six-session rut of falls. Exxon Mobil, Marathon Oil and Apache Corp rose between 4% and 10% in premarket trading as oil prices rallied amid hopes the world’s main oil producers including Saudi Arabia and Russia would agree to cut output at


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US Outbreak Worsens, European Numbers Continue To Fall, As Global COVID-19 Infections Near 1.5 Million: Live Updates

Courtesy of ZeroHedge View original post here.

Summary:

  • Russia reports another concerning jump in cases
  • Downing Street offers update on Johnson's condition
  • Abe kicks off Japan's 1-month state of emergency
  • Spain reports jump in deaths following drop over the weekend
  • US cases accelerate faster than Europe's
  • 12 NYPD officers have died of COVID-19
  • India closes hospitals after cases confirmed
  • China reports no daily deaths for first time
  • German health ministry unveils app to help track COVID-19 patients
  • France prepares to ban jogging as lockdown tightens

*    *    *

Just as we suspected as we watched futures surge out of the gate on Sunday evening, the drop in New York's reported deaths that filled investors (not to mentioned President Trump) with hope that a week which Surgeon General Jerry Adams had said would be like 'Pearl Harbor, but across the entire country' might not be all that devastating.

Unfortunately, those numbers now appear to have simply a blimp, based on a quirk in data collection and presentation, as one medical researcher pointed out yesterday.

Actually, across the US, the outbreak worsened on Monday as more cases were reported in the US than all of Europe. Overall, there were 73,135 cases of COVID-19 confirmed, bringing the global total to roughly 1.35 million as of Tuesday morning. Deaths rose slightly as well on Monday, as 5,227 people lost their lives around the world, bringing the 'official' death toll to 74,799. After Sunday's drop in new cases, the US once again reported more than 30,000 new cases on Monday, with New York State being the hardest hit, adding nearly 9,000 cases and 600 fatalities. 10 other states reported a daily jump of more than 1k cases. While Europe is finally seeing signs that its lockdowns are working, for the US, with roughly a dozen states still with no mandatory stay at home order in place, it's still too early, according to the FT.

That said, some European states are doing better than others. Spain, which reported a drop in deaths


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ValueWalk

Investors urge pharmas to develop treatments for COVID-19

By Jacob Wolinsky. Originally published at ValueWalk.

Investors urge pharma companies to work collaboratively on developing treatments for COVID-19

Global pandemic calls for urgent and collective action to heal the sick and to prevent further contagion.

Q1 2020 hedge fund letters, conferences and more

NEW YORK, NY, TUESDAY, APRIL 7TH, 2020 - Investor members of the Interfaith Center on Corporate Responsibility have sent ...



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Phil's Favorites

The Mood of Traders Darkens on Wall Street

Courtesy of Pam Martens

New York Stock Exchange Shutters Its Trading Floor on March 23, 2020 as Two Employees Test Positive for Coronavirus

By Pam Martens and Russ Martens: April 7, 2020 ~

It’s become your life or your trading bonus at some Wall Street firms.

On November 10 of last year, Lesley Stahl of the CBS investigative news program, 60 Minutes, interviewed Jamie Dimon, the Chairman and CEO of JPMorgan Chase. As part of the interview, Dimon strolled Stahl around one of his trading floors...



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Zero Hedge

Did Capital One Run Into A Commodity Prepay Wall?

ourtesy of ZeroHedge View original post here.

Submitted by Jacques Simon,

In our last post we touted a too-big too fail return in the commodity-sector (a name nobody dare to pronounced. Today prices are down but market volatility is up (VaR is up, prices are down). Capital one, a FDIC-insured bank is allowed to ...



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Kimble Charting Solutions

DAX Index Hits Two 18-Year Support Lines, Creates Large Bullish Reversal

Courtesy of Chris Kimble

Has the DAX index from Germany experience a large decline of late? Yes, it has!

Has the decline broken long-term rising support lines? Not so far!

This chart looks at the DAX index on a monthly basis over the past 25-years. Over the past 6-years, it has traded sideways inside of the blue rectangle at (1).

The decline this year saw the DAX hit two 18-year rising support lines at (2) last month, where a large bullish reversal took place.

Until broken, important support remains in play at (2), which is bullish for this key index....



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Biotech/COVID-19

Here's how scientists are tracking the genetic evolution of COVID-19

 

Here's how scientists are tracking the genetic evolution of COVID-19

Why do scientists care about mutations on the coronavirus? Alexandr Gnezdilov Light Painting

Niema Moshiri, University of California San Diego

When you hear the term “evolutionary tree,” you may think of Charles Darwin and the study of the relationships between different species over the span of millions of years.

While the concept of an “evolutionary tree” originated in Darwin’s “...



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Chart School

The Big Short movie guides us to what is next for the stock market

Courtesy of Read the Ticker

There is nothing new in WallStreet, it is only the players that change. Sometimes a market player or an event gets ahead of the crowd and WallStreet has to play catch up.

Previous Post Dow 2020 Crash Watch Dow, Three strikes and your out!

It is important to understand major WallStreet players do not want to miss out on a money making moves.  







...

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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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The Technical Traders

Founder of TradersWorld Magazine Issued Special Report for Free

Courtesy of Technical Traders

Larry Jacobs owner and editor of TradersWorld magazine published a free special report with his top article and market forecast to his readers yesterday.

What is really exciting is that this forecast for all assets has played out exactly as expected from the stock market crash within his time window to the gold rally, and sharp sell-off. These forecasts have just gotten started the recent moves were only the first part of his price forecasts.

There is only one article in this special supplement, click on the image or link below to download and read it today!

...

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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.