29Sep2015 Market Update: Markets Remain In Sideways Trading Channel, World Growth Worries Investors, Tomorrow Sunny With Scattered Clouds

Here is the current market situation from CNN Money

North and South American markets finished sharply lower today with shares in U.S. leading the region. The S&P 500 is down 2.57% while Brazil’s Bovespa is off 1.95% and Mexico’s IPC is lower by 1.28%.

Glencore fightback over debt fears lifts shares

JOHANNESBURG/LONDON (Reuters) – Glencore said on Tuesday it was strong enough to ride out current volatility in commodity markets which helped to lift the mining group’s shares by a fifth.

AB InBev in talks to raise up to $70 billion for SABMiller: Bloomberg

(Reuters) – Anheuser-Busch InBev SA is in talks with lenders including Bank of America and Banco Santander to raise as much as $70 billion as it prepares to approach rival SABMiller Plc for a takeover, Bloomberg reported.

Volkswagen to refit cars affected by emissions scandal

BERLIN (Reuters) – Volkswagen announced plans on Tuesday to refit up to 11 million vehicles and overhaul its namesake brand following the scandal over its rigging of emissions tests.

Step Aside Detroit: There Is A New “Worst” City For Housing In The U.S.

While the Case-Shiller index reported earlier was weaker than had been expected, and the 20 City composite index posted its third monthly decline in a row, the headline hid a wide dispersion of home prices beneath the surface.

Perhaps just to underscore this point, Case-Shiller also provided a handy chart showing the best and worst cities for home prices in the US.

It will come as no surprise that the west, with San Diego, is where the gains are still frothiest: after all the Chinese “hot money” exporters are rushing to park their funds before the exit door slams shut, and are doing so as close to home as possible.

What was surprising is the other end of the spectrum, because as Case-Shiller clearly shows, Detroit – after staging a brief dead cat bounce in the aftermath of its bankruptcy and since sliding once again – may no longer be the worst city for home prices in the US. It has now been displaced by a city which many speculate will be nothing short of the “next Detroit.”

The silver lining: while Chicago home prices have been sliding for the past 4 months, they are still up compared to last year… if only for the time being.

Did The Bank Of England Rig Emergency Liquidity Auctions During Crisis?

Late last year, the Bank of England followed in the venerable footsteps of virtually every sellside firm on the planet when it moved to dismiss its chief currency dealer Martin Mallett. Through his participation in central bank meetings with traders Mallet, who had worked at the bank for three decades, was aware of the possibility that the world’s largest banks were conspiring to manipulate the $5 trillion a day FX market but apparently failed to take the proper steps to escalate those concerns. The dismissal was of course accompanied by a cacophony of nonsense from the BOE. Here’s an amusing excerpt from our coverage of the story for those who need a refresher:

But back to the Bank of England, which it turns out, lied about its involvement in FX rigging. According to Bloomberg, alongside the FX settlement announcement, the Bank of England fired its chief currency dealer – the abovementioned Martin Mallett – a day before he was faulted in an independent investigation for failing to alert his superiors that traders were sharing information about client orders.

Martin Mallett was dismissed by the Bank of England yesterday for “serious misconduct relating to failure to adhere to the Bank’s internal policies,” according to a statement by the central bank today.

Mallett, who worked at the bank for almost 30 years …

U.S. consumer confidence rises in September

(Reuters) – U.S. consumer confidence rose and was higher than expected in September, according to a private sector report released on Tuesday.

BofA to cut ‘a couple of hundred’ jobs: WSJ

(Reuters) – Bank of America Corp is planning “a couple of hundred” job cuts at its global banking and markets unit, the Wall Street Journal reported.

This Bear Is Just Waking From Hibernation

Submitted by Jim Quinn via The Burning Platform blog,

“Every man has a right to his own opinion, but no man has a right to be wrong in his facts” ? Bernard M. Baruch

“The main purpose of the stock market is to make fools of as many men as possible.” ? Bernard M. Baruch

As the market drops 200 to 300 points daily on a fairly frequent basis these days, and has now dropped 13% in the last four months, John Hussman’s valuation analysis based upon historical facts is proving to be accurate. He’s not an “I told you so” type of person, but I am. The MSM stories follow the same old storyline – this is just a correction, time to buy the dip, stocks are undervalued, the Fed won’t let the market fall. We’ve been here before, twice in the last fifteen years. Wall Street and their media mouthpieces attempted to spread misinformation about the nature of the markets in 2000 and 2007, as epic bear markets were just getting underway. John Hussman cut through their crap then and he is cutting through it now.

“Is our profession really so lazy that we would advise people to risk their financial security based on tinker-toy models and pretty pictures that we don’t even have the rigor to test historically? Investors appear eager to ‘scoop up’ so-called ‘bargains’ on the belief that stocks are ‘cheap relative to bonds.’ All of this is predicated on the belief that profit margins will remain at record highs, that the Fed Model is correct, and that …

AT&T may take $1.1 billion charge on DirecTV’s Venezuela assets

(Reuters) – AT&T Inc may take a charge estimated at $1.1 billion related to DirecTV’s Venezuela assets in what is the latest U.S. company to confront the South American country’s currency woes.

Wall Street higher as health care stocks bounce back

(Reuters) – U.S. stocks were higher in late morning trading on Tuesday as shares of health care companies bounced back and data showed consumer confidence was at its highest since January.

Forget Glencore: This Is The Real “Systemic Risk” Among The Commodity Traders

Back in July, long before anyone was looking at Glencore (or Asia’s largest commodity trader, Noble Group which we also warned last month was due for a major crash, precisely as happened overnight) which everyone is looking at now that its CDS is trading points upfront and anyone who followed our suggestion last March to go long its then super-cheap CDS can take a few years off, we had a rhetorical question:

Which will be first: Trafigura, Mercuria or Glencore

— zerohedge (@zerohedge) July 22, 2015

Judging by what happened less than two months later, it appears that we have our answer: for now at least, Glencore, which is now flailing and which Bloomberg reported moments ago is set to meet with its bond investors tomorrow (supposedly to allay their fears of an imminent insolvency), is firmly the “answer” to our rhetorical question.

And yet, something stinks.

First, a quick look at Trafigura bonds reveals that the contagion from the Glencore commodity-trader collapse, which “nobody could possibly predict” two months ago and which has rapidly become the market’s biggest black swan, has spread and we now have a new contender. And while Trafigura’s equity is privately held, it does have publicly-traded bonds. They just cratered:

Yahoo rises on decision to proceed with Alibaba stake spinoff

(Reuters) – Yahoo Inc shares rose as much as 6 percent on Tuesday after the company said it would proceed with the spinoff of its stake in Chinese e-commerce company Alibaba Group Holding Ltd despite the risk that the deal might not be tax-free.

Big Bank Pink Slip Pandemonium Continues As Bank Of America To Cut “Hundreds” Of Jobs

Two weeks ago, Deutsche Bank announced it was set to fire “roughly” 23,000 people, or around a quarter of its workforce as new CEO John Cryan aims to cut costs as part of a reorganization undertaken in the wake of the ouster of Anshu Jain and Jürgen Fitschen.

Anyone who might have assumed that the massive layoffs at Deutsche Bank spoke solely to the bank’s individual circumstances and thus aren’t reflective of either the abysmal state of the European “recovery” or of broader industry trends, was disappointed when just hours later, Reuters reported that UniCredit, (Italy’s largest bank by assets) was now set to lay off 10,000 across its Italian, Austrian, and German operations.

In all, 33,000 pink slips in a single day. As we noted at the time, “the layoffs don’t say much for Europe’s recovery from the debt crisis and may also suggest that far from creating jobs, the persistence of ZIRP has crimped margins forcing banks to make up the difference by getting leaner.”

Today, we learn that Bank of America is set to shed hundreds of jobs as Brian Moynihan looks to offset poor performance by cutting costs. Here’s WSJ with more:

Bank of America Corp. is expected to announce layoffs in its global banking and global markets unit as early as Tuesday, according to people familiar with the mat …

Oil ticks up with Wall Street shares; awaits U.S. storage data

NEW YORK (Reuters) – Oil prices rose more than 2 percent on Tuesday as higher stock prices on Wall Street and expectations of lower U.S. crude inventories lifted the market from the previous day’s slide.

Carl Icahn Says Market “Way Overpriced”, Warns “God Knows Where This Is Going”

To be sure, no one ever accused Carl Icahn of being shy and earlier this year he had a very candid sitdown with Larry Fink at whom Icahn leveled quite a bit of sharp (if good natured) criticism related to BlackRock’s role in creating the conditions that could end up conspiring to cause a meltdown in illiquid corporate credit markets. Still, talking one’s book speaking one’s mind is one thing, while making a video that might as well be called “The Sky Is Falling” is another and amusingly that is precisely what Carl Icahn has done.

Over the course of 15 minutes, Icahn lays out his concerns about many of the issues we’ve been warning about for years and while none of what he says will come as a surprise (especially to those who frequent these pages), the video, called “Danger Ahead”, is probably worth your time as it does a fairly good job of summarizing how the various risk factors work to reinforce one another on the way to setting the stage for a meltdown. Here’s a list of Icahn’s concerns:

Low rates and asset bubbles: Fed policy in the wake of the dot com collapse helped fuel the housing bubble and given what we know about how monetary policy is affecting the financial cycle (i.e. creating larger and larger booms and busts) we might fairly say that the Fed has become the bubble blower extraordinaire. See the price tag attached to Picasso’s Women of Algiers (Version O) for proof of this.< …

Cargolux may buy five 747s, says China gloom overstated

LUXEMBOURG (Reuters) – Cargolux is in talks with Boeing to buy five more 747-8F freighter jets, the head of Europe’s largest all-freight carrier said on Tuesday.