Stocks, bitcoin moving higher as volatility is quelled

Please excuse the sporadic posting, still in great pain as a result of my spinal surgery.

Stock markets around the world are back to rally mode with the exception of Japan.

The Olympic euphoria has even creeped into the cryptos with bitcoin up 10% for the day. Continue reading

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Wall Street eyeing bitcoin after putting in a bottom

Some Wall Street analysts and traders like what they see it bitcoin on Thursday.

But say you can’t look at it like a stock because with bitcoin there is always another shoe that can drop. Continue reading

Hmmm, global markets say ciao to Italeave

Italian voters on Sunday rejected constitutional changes backed by the government, prompting Prime Minister Matteo Renzi to announce his resignation and handing populists a victory in the heartland of Europe.
Despite this seemingly  disastrous news for the future of the euro, global markets moved higher. The euro is slightly stronger on Monday, with global stocks rallying and US Treasuries selling off.
The news of the third-largest EU country beginning the process of exiting has investors shrugging off the idea that Italy’s vote could imperil the European Union and the euro, unlike Brexit.
I see this for what it is:  A massive Central Bank intervention across the globe to stabilize economic collapse since most of the Italian banking firms are teetering with shares across the sector falling 46% this year. Monte Paschi’s shares are down 86% for 2016.
There is no way for this market reaction to have any other invisible hand working behind the scenes. All the tell-tale signs of massive intervention are there.
Stock futures were off 2% an hour before trading and in the manner of 20 minutes prior to the open turned positive and soared 1.5% into the open.
Here in the US the President’s Plunge Protection Team almost always intervenes in the futures market when needing to step in a provide support.
The futures allow them to make large stakes without a huge expenditure and leaves very little fingerprints to their actions.
This appears to be the MO of Monday’s fix on a much broad and coordinated effort across Europe, Asia and the US.
Let’s see if it has legs as European markets close midday here and the US goes into its close?

Market turns on a dime, but who's dime?

Yesterday’s market moves need to be examined.
The way the markets turned around on a dime after the Dow fell over 220 points on the news the Deutsche Bank was being squeezed due to liquidity concerns was the stuff that the Plunge Protection team dreams of.
While the percentage moves were small, the direction was abrupt and had all the earmarks of the NY Fed — through proxies — of coming in hard and fast.
In 18 minutes, beginning just before 2pm EDT the S&P 500 and the Dow erased almost half the losses.
But after 3pm EDT, the indices took another leg down. This occurs because allegedly the Plunge team cannot intervene in the last hour.
Not sure whether that’s true since there’s no official playbook on this group’s rules, but market mavens believe that to be the case.
As we are all aware, we can’t have a market crash thisclose to an election and still proclaim we are in the midst of an economic miracle.
Let’s see if investors have any appetite to hold on to their positions over the weekend.

As I wrote earlier this week Deutsche Bank’s  CEO John Cryan is taking a page out of ex-Lehman Bros. chief Dick Fuld’s playbook.
He should look to how Morgan Stanley’s CEO John Mack handled Wall Street’s attack on his firm back in 2008. Mack did slam the vultures on TV saying his firm was solid and that it had plenty of liquidity, just like Fuld.
But the difference was he went out and raised additional money to shore up the balance sheet without giving away the firm.
Cryan in a letter dated Friday, told staff speculators are spreading false rumors to “distorted perception” and “damage” the bank.
A leader does not deride mysterious market forces for trying to take down the bank, nor does he explain that the fire sale going on inside the bank will shore up the balance sheet.
No you need to get fresh cash into the bank to turn market sentiment around.
This way investors can “trust” you will be there on Monday morning.
Here is the letter below:
Dear Colleagues,

You will have seen speculation in the media that a few of our hedge fund clients have reduced some activities with us. That is causing unjustified concerns. We should consider this in the context of the bigger picture: Deutsche Bank overall has more than 20 million clients.

I understand if you feel concerned by the extensive coverage on this issue. Our bank has become subject to speculation. Ongoing rumours are causing significant swings in our stock price.

It is our task now to prevent distorted perception from further interrupting our daily business. Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.

Deutsche Bank has strong fundamentals. Let me mention some of the most important facts at this point:

1. We fulfil all current capital requirements and our restructuring is well on track. We completed the disposal of the British insurer Abbey Life this week and the sale of our stake in the Chinese Hua Xia Bank will be finalised soon. This will further improve our capital ratio.

2. We have significantly decreased our market and credit risk in recent years. At no point in the last two decades has the balance sheet of Deutsche Bank been as stable as it is today.

3. Despite low interest rates and a difficult environment we posted a pre-tax profit of about 1 billion euros in the first half of 2016. Before extraordinary items like restructuring costs, we earned about 1.7 billion euros. This demonstrates the operating strength of Deutsche Bank.

4. In a situation like this, the most important factor is our liquidity reserves. Currently they still amount to more than 215 billion euros. This is an extremely comfortable buffer. This is clear proof of how conservatively we have planned. This is acknowledged by numerous banking analysts.

There is therefore no basis for this speculation. Nor can uncertainty about the outcome of our litigation cases in the US explain this pressure on our stock price, if we take the settlements of our peers as a benchmark.

You have all done a tremendous job over the past few days. You are the ones who are in constant contact with our clients and making it clear how Deutsche Bank is really doing. You are Deutsche Bank – that is impressively clear. All of us in the Management Board highly appreciate it.

You will hear back from me soon. Please keep working as you have been doing so far. We are and we remain a strong Deutsche Bank.

Yours sincerely,
John Cryan

What does it say when Dalio & Griffin get it wrong

News that two well-connected hedge funds — Bridgewater Capital and Citadel — were having a very bad 2016 caught the market by surprise Thursday.

Bridgewater Associates lead by Ray Dalio and Citadel’ Ken Griffin are both the consummate inside money managers on Wall Street. Both are highly regarded and very private in their personal lives.

So when news came out this week that both shops had funds that were down low double digits the Street took notice.

Citadel is reportedly one of the main shops dealing with the Plunge Protection Team‘s market activity. When the group need to make market saves they are said to use Griffin’s shop to mask their activities through his trading desks.

That’s how inside these funds are, so to be caught flat-footed on the December rate hike seems unlikely at best.

Yet Dalio, who manages $150 billion, has been out talking about the Fed returning to easing sooner than later. This tells me he was on the other side of the December rate hike and is now talking his book.

Griffin, who just settled a very contentious divorce in October, can’t be hurting too bad from the market downturn, he just plunked down $500 million for two pieces of art this week and also just spent $200 million on a condo overlooking Central Park in the last two months or so.

Citadel, which manages $26 billion, operates out of Chicago HQ, but has offices in NYC, just announced 14 staff would be laid off at the firm.

Reports also came out earlier this month that Dalio feuding with his heir apparent at the firm, Greg Jensen. In reportedly got to the point where Jensen asked senior employees and shareholders to vote on their character and conduct in a bid to resolve the dispute. Dalio denied that there was animosity between the two and that the firm was fine.

Given the newly reported loses, one could guess that Jensen did not agree with Dalio on the Fed continuing to leave rates at zero in December and began jawboning to staff in January that Dalio was wrong and look at the losses we are taking now.

That would be the only reason for the very private Dalio to be out in the press recently talking up his “easing” scenario recently.