26Jan2016 Pre-Market Commentary: U.S. Futures Flat, Crude Trending Upward, China’s Markets Closed Down 6%, European Markets Trading In The Red

Here is the current market situation from CNN Money

European markets are mixed. The DAX is higher by 0.07%, while the FTSE 100 is leading the CAC 40 lower. They are down 0.24% and 0.11% respectively.

Lockheed seals services deal with Leidos; quarterly profit rises

WASHINGTON (Reuters) – Lockheed Martin Corp said on Tuesday it reached a deal to combine its information systems and government services business with Leidos Holdings Inc , and reported higher-than-expected quarterly profit and revenue.

Hurdles remain as Iran seeks aviation investment

TEHRAN (Reuters) – Iran courted Western aviation firms this week with a blueprint of regulatory reforms aimed at setting aside 40 years of sanctions and rebuilding its airways with new jets.

AIG to spin off mortgage insurance unit in sweeping overhaul

(Reuters) – American International Group Inc said it would spin off its mortgage insurance unit and sell its broker-dealer network as part of the sweeping changes it has been promising shareholders as it fends off activist investor Carl Icahn.

P&G second-quarter profit beats estimates on cost-cutting measures

(Reuters) – Procter & Gamble Co reported better-than-expected second quarter profit, helped by cost cutting measures, but said a stronger dollar would take a bigger chunk out of full-year sales.

Sprint’s losses shrink on cost cuts, subscriber gains

(Reuters) – Sprint Corp, the No. 4 U.S. wireless carrier, reported a smaller-than-expected quarterly loss, helped by cost-cutting measures and higher subscriber additions.

DuPont doubles down on cost cuts ahead of Dow Chemical merger

(Reuters) – Chemicals and seed producer DuPont’s quarterly profit topped analysts’ estimates as the company intensifies its cost-cutting efforts ahead of its merger with Dow Chemical Co .

Oil rises further above $30 on hopes of deal to tackle glut

LONDON (Reuters) – Oil rose further above $30 a barrel on Tuesday, lifted by hopes that OPEC and non-OPEC producers may be edging closer to a deal to tackle one of the biggest supply gluts in decades.

JPMorgan to pay Ambac $995 million to settle RMBS-related claims

(Reuters) – Bond insurer Ambac Financial Group Inc said JPMorgan Chase & Co will pay the company $995 million in cash to settle disputes and litigation related to mortgage-related securities.

Why Dip Buyers Will Get Clobbered: The US Economy Isn’t Doing “Just Fine”

Submitted by David Stockman via Contra Corner blog,

As of June 2008 no Wall Street banking house was predicting a recession, yet by then the Great Recession – the worst economic downturn since the 1930s – was already six months old, as per the NBER’s subsequent official reckoning.

Actually, it was already several years old if you concede that the phony housing boom of 2005-2007 was generating merely transient “statistical” GDP, not permanent gains in main street wealth. Even the movie houses now showing “The Big Short” have some pretty palpable reminders on that point——not the least being the strip club dancer who owned 5 residential properties, with two adjustable rate mortgages on each.

In fact, by then main street America was crawling with strippers. That is, equity strippers who were repeatedly doing “cash out” refinancings in order to generate between $20,000 and $100,000 or more of mortgage proceeds to spend on vacations, cars, man caves, aspirational leather goods, shoes and apparel, among much else.

At the peak in 2006-2007, upwards of 10% of personal consumption expenditures were accounted for by MEW (mortgage equity withdrawal). The utter unsustainability of that kind of Potemkin prosperity goes without saying, but the point here is that it was no deep dark secret buried in the economic entrails.

In fact, Chairman Greenspan went to great lengths to publicize the facts of MEW on an up-to-date basis. But he wasn’t trying to warn that the end was near. Unaccountably, he and his Wall Street acolytes concluded that the US economy had become virtually recession proof because of the extra firepower being accorded to household consumption by MEW …

John Paulson Puts Up Personal Holdings To Secure Credit Line As AUM Plunges

Back in August we noted that John Paulson managed to get himself and his investors involved in two rather dubious “firsts” in 2015: Puerto Rico became the first US commonwealth in history to default, and Greece became the first developed country to default to the IMF.

œ[Paulson] is one of a handful of bold hedge fund investors who poured hundreds of millions of dollars into Greece in a wager that the country’s economy would recover after years of economic crisis, the New York Times wrote late last summer, on the way to explaining why the wealth management arm of Bank of America Merrill Lynch was liquidating its clients’ money from one of Paulson & Company’s funds. œMr. Paulson is also one of Puerto Rico’s biggest hedge fund investors, betting that the commonwealth will emerge from its own debt crisis, The Times continued.

Besides Greece and Puerto Rico, Paulson also managed to tie up money in Mallinckrodt, which is down sharply since last summer.

Now, amid a client exodus, the billionaire is putting up his own holdings to secure a longstanding line of credit with HSBC. œThe billionaire pledged his personal investments in four of his firm’s hedge funds as additional collateral for a credit line Paulson & Co. has had with HSBC Bank USA for at least five years,

Frontrunning: January 26

China shares end at 14-month lows after late selling frenzy (Reuters)

China Dec gold imports through Hong Kong highest since 2013 (Reuters)

China Contagion Fades as European Stocks Pare Drop, Oil Rises (BBG)

Apple set for slowest ever iPhone sales growth (Reuters)

Saudis, Russia Seen by Iraq as More Flexible on Oil-Output Cuts (BBG)

China Probes NEV sector for subsidy fraud (China Daily)

J&J forecasts 2016 sales below analysts’ estimates (Reuters)

Wider China-Hong Kong Discrepancy Revives Fake Trade Doubts (BBG)

German two-year yields hit new low as March ECB cut almost priced in (Reuters)

AIG to Sell Broker-Dealer Network (WSJ)

At $3.68 Million, This California Home Has Everything But Buyers (BBG)

Pimco to Vanguard Step Into Credit Fray to Buy High-Grade Bonds (

Not Even Bloomberg’s Analyst Is Buying The “Saudi Production Cuts”

The reason why oil has stormed higher from down over 3% to up well over $30 in the span of hours (and dragging futures higher with it), was – as observed earlier – news that Iraq’s Oil Minister Adel Abdul Mahdi said that both Saudi Arabia and Russia, the world’s biggest oil producers, “are now more flexible about cooperating to cut output as crude prices have fallen to levels that hydrocarbon-rich nations didn’t foresee.”

œThis flexibility should be finalized, and we should hear some solid suggestions coming from all parties, Abdul Mahdi told reporters at a conference in Kuwait City. He didn’t give details about what the increased Saudi and Russian flexibility entailed, nor did he say how he knew about it.

There is one problem with this: it wasn’t the Saudis saying the Saudis should (or would) cut, and in fact, while Aramco’s CEO said that there is an even greater glut than expected at 3MM b/d, he made precisely zero mention of Saudi Arabia cutting production at all in the near future.

And sure enough, moments ago Bloomberg’s own oil strategist, Julian Lee explained that comments that Saudi Arabia, Iraq, Russia have become more willing to consider production cuts need to be viewed with caution.

What else he said:

Saudi Arabia has said it would cut output as part of broader OPEC, non-OPEC agreement ever since current mkt share policy was introduced. There’s no indication that position has changed.

Aramco Chairman Khalid Al-Falih said in Davos last wk that country won’t reverse course unless non-OPEC nations play their part in production cuts

Iraq only willing to reduce output if others also cut

Russi …

U.S. Stock Futures Point Slightly Higher

U.S. stock futures pointed slightly higher Tuesday as oil prices bounced in and out of the red and investors appeared to shrug off another steep plunge in Chinese markets.

Oil Prices Remain Volatile

Oil prices hovered around $30 a barrel in volatile trading, as traders speculated about supply cuts that could alleviate the global glut of crude.

Shanghai Market Wipes Out Early 2015 Surge

The Shanghai stock market has completely erased its gains from the first half of 2015 after shares plunged to their lowest level in more than a year.

Capitol Report: Inversions like Johnson Controls-Tyco to hit corporate tax collection, CBO says

The nonpartisan Congressional Budget Office said it expects corporate tax revenue as a percentage of the economy to fall to 1.6% in 2026 from 1.8% in 2016, and blamed ˜inversions’ partly for the lost receipts.

Need to Know: Here’s the chart that predicts Apple shares are headed for the $70s

Apple reports Tuesday and a lot is on the line, both for investors in the stock and those in the S&P 500. The gloomsters won’t be silenced. Here’s one call that says the stock is headed to $70.

Hate the government? You’re not alone

Americans’ satisfaction with the government hits record low.