Paypal to the rescue!

PayPal is joining a long list of banks offering interest-free loans to unpaid federal workers affected by the partial government shutdown – providing cash advances of up to $500 per employee until they hit $25 million.  Continue reading “Paypal to the rescue!”

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Russia cant stop the oil

Due to weather and geological conditions in the cold Russian winter, Russia cannot cut its oil production too quickly, Energy Minister Alexander Novak said on Thursday, reiterating Moscow’s commitment to stick to the new OPEC+ deal and to gradually reduce production according to Bloomberg. Continue reading “Russia cant stop the oil”

Non-Hacker Tunnel in NY


New Yorkers traveling in the Holland Tunnel, a vehicular tunnel underneath the Hudson River connecting Lower Manhattan and New Jersey, are now discovering that the next generation of communication technology is being tested right outside their car windows, said Bloomberg.  Continue reading “Non-Hacker Tunnel in NY”

Wework not working?

When Saudi Arabia and Abu Dhabi successfully dissuaded the SoftBank Vision Fund from buying a majority stake in WeWork for $16 billion, CEO Adam Neumann lobbed a Trump-style smoke bomb at the news cycle by subsequently announcing that the company was changing its name to “The We Company” in recognition of its expanded vision Continue reading “Wework not working?”

Deutsche Bank Woes Again

Bloomberg reports that Germany’s financial regulators would prefer for Deutsche Bank to merge with a European rival rather than a local, and just as troubled, competitor Commerzbank, setting them apart from forces in the government keen on an all-German deal. Either way, they are not thinking of insolvency.

According to Bloomberg, the ECB is favoring a cross-border combination to drive integration in the region’s financial markets, while analysis by German regulator BaFin suggests a preference for a European deal because the two domestic banks – surprise – are currently too weak to benefit sufficiently from a merger without government stimulus.

In other words, merging one Too Big To Fail bank with another would only result in a teetering behemoth that will need an even greater bailout when the next financial crisis hits, but that’s in the future readers not now! And by “sharing” the combined liabilities of the combined entity – which would likely inherit Deutsche Bank’s tens of trillions in gross notional derivatives – with another sovereign, would at least ensure that German taxpayers would enjoy some dilution of the upcoming bailout pain with another European nation at some point in the coming years.

This cross-border merger strategy is also more aligned with the position of Deutsche Bank CEO Christian Sewing, who has asked for patience with his turnaround plan before embarking on any deal. The European preference, meanwhile, is at odds with some German government officials who patriotically want a “national banking champion.” Both banks are key partners of the companies that make up Germany’s export-oriented economy.

Following the report, DBK shares, which have plunged 48% over the past 12 months, jumped as much as 8.2% and were up 6.6% at 7.98 euros at 4:48 p.m. in Frankfurt trading. Commerzbank, inexplicably, also climbed as much as 6.7% even though the news was decidedly negative for it as it would mean it wouldn’t be “even bigger to fail.”

Some more details from Bloomberg:

Late last year, the Finance Ministry asked BaFin for its data on how different merger scenarios could play out for the German banks, said people familiar with the matter.

During a strategy retreat in September, Deutsche Bank executives concluded that a merger with Swiss competitor UBS Group AG was the most favorable option among potential European partners, though they determined that the time isn’t right due to the German lender’s weak share price, people familiar with the matter have said. BaFin’s analysis came to a similar conclusion, the people said.

Meanwhile, the German regulator BaFin has insisted that it would prefer to see both German banking titans improve profitability if they are to pursue a combination. Still, some at the banking watchdog are concerned that mergers could end up working against efforts to ensure banks are no longer too big to fail, which of course is the whole point: with both banks teetering on the verge of collapse, at least according to their stock price, the whole point of the exercise is to make sure someone picks up the tabs when both eventually keel over.

What this means to us here at BTFDClub is Financial Stimulus is on its way and Central Bankers will be working overtime to keep this from failing. So Deutsche Bank may be a bargain at these prices…

Pelosi sends an email

House Speaker Nancy Pelosi on Wednesday asked Donald Trump to delay his State of the Union address – or deliver it in writing – while the government is partially shut down according to Bloomberg.

Pointing to security concerns, Pelosi said that the partial shutdown has crippled both the US Secret Service and the Department of Homeland Security, which may compromise security measures that precede the primetime address, according to Politico.

“Sadly, given the security concerns and unless government re-opens this week, I suggest that we work together to determine another suitable date after government has re-opened for this address or for you to consider delivering your State of the Union address in writing to the Congress on January 29th,” Pelosi wrote in a letter to Trump. 

Publicly, Democrats plan to argue that the parties need to focus on addressing the shutdown, now the longest in U.S. history. But privately, they also don’t want to give Trump a major platform to blame them for the shutdown when Trump’s demand for billions in wall funding has been the main driver, according to a Democratic lawmaker close to leadership.

Staff have been discussing the idea of postponing the State of the Union for months, with some expressing concern about scheduling travel plans for lawmakers and guests as well. –Politico

Pelosi’s announcement comes before a bipartisan group of lawmakers in the Problem Solvers Caucus is set to meet with Trump on Wednesday to discuss the shutdown and border security. Democrats are trying to cobble together a solid base as the White House attempts to pick off members known for cutting deals.

Shortly before Pelosi’s announcement, she and Minority Leader Chuck Schumer attended a closed-door caucus meeting with House Democrats, where Schumer told them to remain unified in their opposition to funding Trump’s long-promised border wall. 

Crude Oil Still Has Legs?

WTI has dropped and jumped since last night’s surprisingly small crude draw and major product builds from API, but remains around the $52 level ahead of DOE data this morning.

“The Chinese are throwing everything they can” at their economy, said John Kilduff, founding partner at hedge fund Again Capital LLC.

“That’s the big key to oil markets, especially when you have OPEC and Russia starting to rein in production.”

Saudi Arabia’s energy minister said he was sure inventories will start to “return to normal averages and this will increase confidence” in the market.

API

  • Crude -560k (-2.5mm exp)
  • Cushing -796k – biggest draw since Sept 2018
  • Gasoline +5.99mm
  • Distillates +3.214mm

DOE

  • Crude -2.683mm (-2.5mm exp)
  • Cushing -743k – biggest draw since Sept 2018
  • Gasoline +7.503mm
  • Distillates +2.967mm

For the 3rd week in a row, gasoline (and distillates) inventories soared. However, crude stockpiles slipped slightly more than expected and Cushing inventories dipped most since Sept 2018. With the backing of the Chinese liquidity injection the global demand should rise for the next few quarters.

Below chart using FIB Retracements shows there is a floor at $50.50 and this rally has legs until the $55-56 area. The algos will most likely interpret this as a positive number.

Contrarian Indicator

The latest BofA Fund Managers Survey, which took place between Jan 4-10 or just after the worst December for the S&P since the Great Depression, polled a total of 234 panelists with $645bn AUM, investors’ expectations for global GDP growth continue to fall, as net 60% of those surveyed think global growth will weaken over the next 12 months, the worst outlook on the global economy since July 2008 and below the trough in Jan. 2001. In fact, as BofA’s Michael Hartnett observes, FMS Global macro expectations are “too low unless recession imminent”, which of course means that all else equal, Wall Street is now certain that a recession is imminent. As our astute readers will understand shortly, this is a contrarian indication and therefore should be buying hands over fist as the money managers will need to play catch up on their portfolios after the dismal December selloff.

As the next chart will show, inflation is negligible so the central bank will curtail its interest rate ramp in the future (also Trump is DADDY.)

Balls to the Walls

A trader made a massive bullish trade on the S&P 500 on Monday, putting at risk hundreds of millions of dollars of capital. The trade is reminiscent of, and has drawn comparisons to, Warren Buffett’s giant bet on global stocks more than 10 years ago (The king of BTFD Fags.) 

On Monday, a trader sold 19,000 S&P 500 put options that would obligate him or her to buy the index at 2100 on expiration in December 2020, according to Reuters. The index would need to drop no more than 22% from Monday’s closing level of 2582 and the bettor stands to rake in $175 million in premiums.

The move is reminiscent of Berkshire Hathaway selling billions of dollars in index options premium between 2004 and 2008, before ultiamtely being bailed out by the Treasury and the Fed. It was a broad bet that the global market would rise over the next 15 to 20 years and, although initially the trade was made anonymously, it was eventually revealed to be Buffett’s Berkshire Hathaway.

Berkshire has netted over $4 billion in premium from the sale of these options, the final chunk of which is set to expire in 2026. And even though Monday’s bet was not nearly as big as Buffett’s, it still could wind up costing the trader hundreds of millions if the market moves lower than the trader expects: should the market drop by 34%, the trader stands to lose about $558 million.

A second lot of about 3600 of the same puts traded on Monday, putting the total volume for the contract at about 24,000 on the day. On Friday, 5500 of these contracts also changed hands.

One trader guessed that the option write was a hedge against another position by a large bank.

Benn Eifert, chief investment officer at QVR Advisors in San Francisco stated: “The natural sellers of long-term downside puts are structured products desks at banks, who are hedging exposure they get from retail clients who buy structured notes that have embedded short put options. That would be my default guess on this.” As anyone’s guess, this person is definitely counting on BUYING ON THE FUCKING DIP!