14Jul2015 Market Close: Averages Close In The Green For Third Day, WTI Oil Recovers Morning Losses, Greece Still Not Out Of The Woods

IMF calls for Greece debt relief as Germany talks tough

ATHENS/BRUSSELS (Reuters) – A secret International Monetary Fund study showed Greece needs far more debt relief than European governments have been willing to contemplate so far, as Germany heaped pressure on Athens on Tuesday to reform and win back its partners’ trust.

Short sellers curb Intel bets ahead of second quarter results; tone cautious

SAN FRANCISCO (Reuters) – Wall Street expects bad news when Intel Corp reports its second-quarter results on Wednesday although a few short sellers appear to believe the worst is over for the chipmaker’s recently sinking stock.

How The Fed Almost Admitted HFTs Are Illegal

Yesterday, in “How High Frequency Traders Broke, And Manipulated, The Treasury Market On October 15, 2014” we showed, with empirical evidence thanks to none other than the joint-staff (the Fed, Treasury, SEC and CFTC), precisely how algos broke the Treasury bond market in the morning of October 15, 2014, and specifically how at 9.34 am a blast of quote stuffing and HFT-generated volume…

… sent Treasury prices soaring:

… while crashing market depth and killing liquidity.

We had, of course, know the why and the whot, and had previously already shown most of the above last year, when we explained the events of October 15 almost verbatim to what the joint-staff report noted yesterday. However while we knew the “strategy” we did n …

J.P. Morgan: Curb Your Enthusiasm

J.P. Morgan’s second-quarter results were solid but uninspiring, with profits rising 5.2% but net revenue falling by 3%.

Honda’s U.S. auto finance arm to pay $24 million over loan pricing problems

WASHINGTON (Reuters) – A U.S. auto finance arm of Honda Motor Co will pay $24 million in restitution over allegations that its loan pricing practices caused minority customers to pay higher interest rates than white borrowers did, U.S. regulators said on Tuesday.

GM to spend $1.4 billion to modernize Arlington SUV factory

ARLINGTON, Texas (Reuters) – General Motors Co is raising the stakes on its bet that sales of fuel-thirsty sport utility vehicles will keep driving its global profits as Chinese and other markets sag.

Tsipras Interviewed, Sticks Foot In Mouth: “I Signed A Deal I Do Not Believe In But Am Willing To Implement”

Here is the punchline and the only thing the German, Finns, Dutch, Slovenians, Slovaks, and the Baltic states will hear:

GREEK PM TSIPRAS SAYS I SIGNED I DEAL I DO NOT BELIEVE IN BUT I’M WILLING TO IMPLEMENT AND WILL ASSUME RESPONSIBILITIES

And now over to Schauble.

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Greek Prime Minister Alexis Tsipras is being interviewed on Greek TV:

TSIPRAS SAID MERKEL HAD DENIED THERE WAS GERMAN GREXIT PLAN

TSIPRAS: SCHAEUBLE HAD TOLD VAROUFAKIS OPTION WAS DEAL OR EXIT

TSIPRAS SAID MERKEL HAD DENIED THERE WAS GERMAN GREXIT PLAN

TSIPRAS SAYS WILL TRY TO KEEP PARTY, LAWMAKERS UNITED

TSIPRAS SAYS DEFAULT, RETURN TO DRACHMA WAS NOT A VIABLE OPTION

TSIPRAS SAYS NIGHT OF GREEK DEAL WAS BAD NIGHT FOR EUROPE

TSIPRAS SAYS EU SUMMIT RESULT WAS RESULT OF PRESSURE TO GREECE

TSIPRAS SAYS DEAL INCLUDES HARSH STRUCTURAL REFORMS

TSIPRAS SAYS HAD TWO OPTIONS: DEAL OR EXITING THE EURO

TSIPRAS SAYS DEAL COVERS ALL OF GREECE’S MID-TERM FISCAL NEEDS

TSIPRAS SAYS DEAL INCLUDES DEBT RESTRUCTURING AFTER 2022

TSIPRAS SAYS AGREEMENT GIVES GREECE OPPORTUNITY TO EXIT CRISIS

TSIPRAS SAYS GREECE WILL NOT HAVE TO CUT WAGES, PENSIONS

TSIPRAS SAYS SALES TAX INCREASE IS IRRATIONAL BUT HAD TO ACCEPT

Greek Bad Loans Soar To 100 Billion

Just when you thought it was safe to buy Greek Banks (which it is not!) based on the mainstream media narrative that Greece is now fixed, ekathimerini reports that not only are deposits flying out the door at unprecedented pace (albeit stalled by capital controls) but non-performing loans have increased dramatically in the last few weeks as hundreds of households and enterprises have stopped making their repayments either due to a genuine inability to pay or because of the general uncertainty in the economy that has seen transactions freeze.

Data from banks show that repayments declined to between 20 and 50 percent of performing loans, creating the conditions for a major increase in bad loans. This trend is in line with the estimates of the Bank of Greece, according to which NPLs amounted to 40 percent of the total at the end of 2014, with the likelihood they will grow further in the first half of the year.

As a reference point, there is a little over 210 billion in total Greek loans, both performing and non-performing, currently and about 120 billion in deposits. There is also about 90 billion in Emergency Liquidity Assistance from the ECB.

The total amount of bad loans (those which have remained unserviced for at least 90 days) has reached 100 billion euros, and the BoG data show that 70 percent of the loans that have entered payment programs remain nonperforming.

This is a major problem for the Greek Banks but even more so for The ECB as there is not much it can do to ‘control’ NPLs and given provisions for bad loans are a mere EUR40bn – there is a big hole here that no one is accounting for.

JPMorgan profit beats estimates as tax bill and expenses fall

(Reuters) – JPMorgan Chase & Co , kicking off the second-quarter earnings season for U.S. banks, reported a stronger-than-expected rise in profit on Tuesday, helped by a drop in legal and restructuring expenses and a smaller tax bill.

Why A Hedge Fund That Has Been Short For Three Years, And Wildly Profitable, Remains Short

One of the most flawed misconceptions about the New Paranormal in which central bank intervention to levitate markets and protect from plunges is not only heretical but demanded (to paraphrase Rick Santelli) is that one has no choice but to be long stocks (and judging by all the equity “experts” opining on fixed income for the past 5 years, short bonds) in order to generate profits.

That is utterly false as the simple case study of $2.2 billion in AUM Horseman Capital Management clearly shows.

As can been seen in the following chart showing the fund’s gross and net exposure, the hedge fund flipped net short at about the ttime the recession started (and long before Bear and Lehman) then went long in early 2010 and flipped back short in 2012, where it has remained for the past 3 years.

Suicide? Not at all. In fact ever since going net short, the fund has returned on average 16% per year, outperforming about 98% of its peers.

But how can one maintain such a stunning track record with a preponderance of shorts in a market in which central banks have injected $22 trillion in liquidity to prop it up (an …

Wells Fargo profit drops for second straight quarter as costs rise

(Reuters) – Wells Fargo & Co, the largest U.S. mortgage lender, reported a drop in profit for the second straight quarter as employee costs and other expenses rose at a time when it is struggling with slow revenue growth.

Small Business Optimism Crashes To 15 Month Lows

With all hopes and dreams of economic renaissance in America pinned on small businesses (see ADP’s recent gains), today’s data from the NFIB will strike fear in the heart of the wealth-effect-creating Fed. The NFIB small business optimism index disappointed expectations in June (94.1 vs. consensus 98.5), falling to its lowest level since March 2014 – the biggest drop since 2012. All components were weaker but most notably hiring and plans to raise worker compensation tumbled.

As Goldman details,

All components were weaker, with the largest declines seen in earnings trends (-10pt to -17) and plans to increase inventories (-8pt to -4).

The net percent of firms raising worker compensation (-4pt to +21) and planning to raise worker compensation (-3pt to +11) reached their lowest levels so far this year.

Forward-looking capex plans also declined (-2pt to +23) to its lowest level this year. The index has trended lower since reaching its post-recession high last December.

However, it gets worse. As Yahoo reports, American CFO’s are worried,

Varoufakis: Greek Deal Is “Coup”, Turns Greece Into “Vassal” State, And Deals “Decisive Blow” To European Project

Yanis Varoufakis, fresh off a few relaxing days at his island getaway, will be back in the Greek parliament this week to weigh in on the “compromise” deal his successor Euclid Tsakalotos and PM Alexis Tsipras struck in Brussels over the weekend.

Considering the eyewitness accounts of the highly contentious Eurogroup meeting – out of which came the exceedingly punitive term sheet which would serve as the basis for Greece’s agreement with creditors – one can only imagine what might have unfolded if Varoufakis had been present for the “crazy kindergarten” finance minister free-for-all which reportedly took place on Saturday night.

For those curious to know what Yanis thinks about the deal, below are some “impressionistic thoughts” from the man himself. Highlights include the characterization of the Greek deal as a “decisive blow against the Euorpean project”, a “statement confirming that Greece acquiesces to becoming a vassal of the Eurogroup”, and the “culmination of a coup”.

* * *

On the Euro Summit’s Statement on Greece: First thoughts via Yanis Varoufakis

In the next hours and days, I shall be sitting in Parliament to assess the legislation that is part of the recent Euro Summit agreement on Greece. I am also looking forward to hearing in person from my comrades, Alexis Tsipras and Euclid Tsakalotos, who have been through so much over the past few days. Till then, I shall reserve judgment regarding the legislation before us. Meanwhile, here are some first, impressionistic thoughts stirred up by the Euro Summit’s Statement.

Wall St. higher as healthcare, energy stocks rally

(Reuters) – Wall Street was higher in early afternoon trading on Tuesday, led by a rally in healthcare stocks and as energy stocks rose after oil prices recovered on easing fears of higher crude supplies due to the Iran nuclear deal.

Twitter confirms purported Bloomberg story is false

(Reuters) – A report claiming that Twitter Inc received an offer to be acquired for $31 billion attributed to Bloomberg LP is fake, Twitter and a spokesman for the news and financial data provider said on Tuesday.