04Jun2015 Pre-Market Commentary: U.S. Futures Down, Expect Volatility As Markets To Open 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%.

30 May 2015 Initial Unemployment Claims Rolling Averages Again Marginally Worsen

Weekly Initial Unemployment Claims

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.

Hedge Funds Have Never Been Longer, Short Exposure 25% Less Than Before Last Market Peak

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.

Japan: Is the JPY Heading to 140 by Year-End? (+ More)

By Chris at www.CapitalistExploits.at

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 …

Greek left vents fury at creditors as Tsipras nears deal

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.

Tsipras Sticks To “Red Line” Rhetoric Cornered By Party Radicals

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.

Gold’s Peak Doesn’t Mean New Price Heights

Predictions that gold production is approaching its limits are again in vogue. But “peak gold” doesn’t necessarily mean peak prices.

Dish and T-Mobile US in merger talks – WSJ

(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.

Oil Related Job Cuts Subside. Job Cuts Decline by 33% in May 2015

from Challenger Gray and Christmas

After reaching a three year high in April, planned job cuts announced by U.S.-based firms declined sharply in May, falling by 33 percent to 41,034.

Futures fall on global bond selloff

(Reuters) – U.S. stock index futures were sharply lower on Thursday as a selloff in bond markets shook the confidence of investors and the dollar fell to its lowest level in about three weeks.

Frontrunning: June 4

China stocks fall, led by ChiNext, on margin tightening; Hong Kong down too (Reuters)

Bond market sell-off rumbles on, stocks feel the pinch (Reuters)

Bond Rout Wipes Out 2015 Gains as Traders Stay Glued to Screens (BBG)

Greek Groundhog Day Continues With Talks Failing to Break Impasse (BBG)

Greece and Its Creditors Agree on Some Measures in Bailout Talks (WSJ)

How OPEC Hurt Big Oil (WSJ)

‘Bellingcat Report Doesn’t Prove Anything’: Expert Criticizes Allegations of Russian MH17 Manipulation (Spiegel)

GE Said to Hire Banks to Start Sale on $20 Billion Assets (BBG)

Alibaba Pictures plans $1.6bn share sale (FT)

How Companies Justify Big Pay Raises for CEOs (

Volatility Explodes: China Crashes Then Soars; Bund Tumble Continues With Yield Touching 0.99%

For once, Mario Draghi was right.

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 …

Fund Managers Cut Oil Bets Ahead of OPEC Meeting

The number of positions taken by hedge funds and other big investors on the global oil benchmark Brent has fallen to its lowest level in nine months.

Bond market sell-off rumbles on, stocks feel the pinch

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

Airbus wins 247 aircraft orders in January-May

PARIS (Reuters) – European planemaker Airbus said it won orders for 247 aircraft in the first five months of the year and delivered 243 planes to customers.

Greece: Out Of Cash, Out Of Time, Out Of Options

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 …