U.S. stock futures are down this morning, on the heels on steep declines in European stocks and losses in government bonds across the globe.
Investors scrambled to reassess their options a day after the head of the European Central Bank said markets should get used to volatility and serious concerns about the Greek debt crisis have contributed to U.S. futures selling off.
Markets expected to open sharply lower.
Here is the current market situation from CNN Money
European markets are lower today with shares in London off the most. The FTSE 100 is down 0.91% while Germany's DAX is off 0.87% and France's CAC 40 is lower by 0.82%.
The market was expecting the weekly initial unemployment claims at 270,000 to 300,000 (consensus 276,000) vs the 276,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 272,000 (reported last week as 271,500) to 274,750. The rolling averages have been equal to or under 300,000 for most of the last 7 months.
If the central banks' intention was to convert "hedge" funds into what are essentially plain vanilla long-onlies (understandable in a world in which being long the most shorted names generates outsized returns year after year), they have succeeded.
According to the latest Bank of America hedge fund holdings analysis based on 13F filings and estimated short positions of the equity holdings of 952 funds, the banks estimates "hedge funds raised net exposure to a record high of $785bn notional at the beginning of Q2 2015, up 6.1% QoQ and more than double the pre-crisis peak of $373bn (Q2 2007)."
In other words, hedge funds have never been more net long: percentage-wise, net exposure climbed slightly to 77%, also a record high and surpassed the pre-crisis peak of 59% (Q2 2007). Net exposure fell to 70% after subtracting ETF shorts, compared to 69% in the previous quarter. Cash holdings remained at the record low level of 3.3%.
Hedge funds have also rarely been less short: in Q1 short exposure was 55%, 25% lower than the Q2 2007 reading of 74%. Which means that once the dam breaks and the selling begins, the amount of short covering, that traditional emergency break in every panic selling scramble, will barely make a dent.
Some more observations:
Hedge funds increased gross exposure to $1.9tn notional as of the beginning of Q2 2015, a 5.1% QoQ increase. Percentage-wise, long exposure stood at 132%, slightly below the Q2 2007 reading of 133%. Short exposure was 55%, much lower than the Q2 2007 reading of 74% (Chart 3). When including ETF positions, gross exposure increases to 201%, compared to 200% last quarter.
We've received quite a few emails from many of you over the past few weeks. I'll answer some of the questions you've had and touch upon your comments here as I think they might be relevant for the others to read about. Let's just dive right into it, shall we?
Question: Dear Chris. For some 5 years now I've had a sick feeling that there are more problems in the world, problems worse than that which the global financial crisis brought us, and yet I couldn't put my finger on it.
I began searching for answers and have burned through many bloggers and resources since then. I have a low tolerance threshold for BS and people selling their book. Your content is easily one of the best I've come across. You make complex matters understandable.
I literally only read you and Martin Armstrong who you've referenced before and I've subscribed to dozens of publications. Martin is somewhat difficult to understand and I find the combination of your and his work to provide me with a contextual framework on which to firstly grasp the enormity of the problems and subsequently to be able to logically and thoughtfully allocate my resources. I have noticed most bloggers writing up to once a day. I'd suggest you write more.
I actually first came across the blog from an article forwarded to me by a colleague and I couldn't agree more about your thoughts on technology and how it's killing and will kill many jobs.
My business partner and I are both relatively highly paid accountan ...
ATHENS/BRUSSELS (Reuters) - Leftists in Prime Minister Alexis Tsipras' party vented fury on Thursday at terms proposed by Greece's creditors for a last-ditch deal to stave off bankruptcy, but European officials voiced confidence that an agreement was near.
Wednesday evening's "high level" meeting between between Greek PM Alexis Tsipras, Jean-Claude Juncker and Jeroem Dijsselbloem came and went with little more than a promise to keep talking, in what has become a familiar scene for those glued to the Greek drama.
For now at least, Tsipras appears to be sticking to his party's so-called "red lines" around pension cuts and a higher VAT, a stance that is apparently incompatible with the prepackaged deal prepared for him by Merkel, Hollande, Junker, and Draghi on Tuesday. Greece presented its own proposal on Monday evening prior to an emergency meeting in Berlin and it now appears creditors may actually have to read that draft if they hope to stick to the idea that Tuesday's troika offer truly did not represent an ultimatum to Athens. Here's more via Bloomberg:
Tsipras said demands by the euro area and the IMF for cuts in the income of poor pensioners and increases in value-added tax on power are unacceptable, highlighting what have been red lines in Greece's stance since his anti-austerity Syriza party swept to power in snap elections in January.
"Ideas like cutting benefits for low-income pensioners, or raising the VAT rate for electricity by 10 percentage points, can't be a basis for discussion," he said...
"There was a constructive will from the European Commission to reach a common understanding," he said.
(Reuters) - Dish Network Corp and T-Mobile US Inc are in talks over a merger that would combine the second-largest satellite TV operator in the United States with the fourth-largest wireless carrier, the Wall Street Journal reported.
A day after the European central bank head warned of a spike in volatility, volatility did just that. Only it wasn't just the German Bund, which as we previously noted suffered its biggest two day drop since the 1990s - this time it was China, whose Shenzhen index is where Bill Gross said in a tweet would be the next "short of a lifetime (not just yet)".
And sure enough, just a few hours later, the Shenzhen suffered its biggest crash in more than two years, plunging 6.2%, with the Shanghai Composite also tumbling 5.35%. The catalyst: much as Gross would like to take credit wasn't the Bond King in absentia, but a local broker, Golden Sun, which announced shortly after the start of trading that it would suspend margin purchases of shares on Shenzhen's startup board, ChiNext. A drop, incidentally, which brought the YTD gain on the ChinExt to just over 100%.
Promptly the concerns about a long-overdue market crash emerged: "The market has seen strong gains and sentiment is turning cautious with investors worrying if the index will repeat the correction seen years ago," Shenwan Hongyuan analyst Qian Qimin told Bloomberg "It's a market built purely on sentiment, and once that sentiment changes, people will follow suit to take profit. Bocom's Hong Hao added that "Once the selling starts, it will ripple through the market especially in a highly leveraged environment."
And then, just as suddenly as the selling started, it stopped. Not only did it stop, bu ...
LONDON (Reuters) - A persistent sell-off in bond markets left financial market confidence in short supply on Thursday, with stocks lower globally and not even traditional safe havens like gold and the Swiss franc providing much of a refuge
Authored by Andrew Lilico - Chairman of Europe Economics (@Andrew_Lilico), excerpted from CapX.xom,
On Friday Greece is due to pay at least a quarter of the €1.5bn due to the IMF in June.
The creditors say they will only disburse the money if the Greek government enacts various key economic reforms and does not roll back reforms the last government agreed with the lenders and if the Greek government undertakes to run large enough budget surpluses every year in the future that Greece might have a chance of paying back the money the creditors have lent it.
The Greek government says there is no possibility of it ever paying back all the money it has been lent and the creditors need to accept that, write off some of the debt, and not insist that Greece runs large surpluses (predicated on the fantasy of paying back the debt) or cuts back on pensions or enacts other similar measures that run contrary to the Greek voters' will (as expressed in the last election).
Most commentary still appears predicated on the idea that there will be some last-minute deal - either because the creditors will back down and give Greece some more money without requiring it to be paid back or because the Greek government will back down if it understands that not doing so would ultimately mean leaving the euro.
I, on the other hand, don't believe either side is particularly interested in achieving a deal.
The Eurozone does not want to make any compromise with the current Greek government becau ...
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