The first to suffer Beijing’s crackdown against China’s private merger-crazy conglomerates, wave was the acquisitive “insurance” behemoth, Anbang, whose CEO Wu Xiaohui briefly disappeared as the Politburo made it clear that the “old way” of money laundering – via offshore deals – is no longer tolerated. Then, several weeks later and shortly after the stocks of the “famous four” Chinese conglomerates plunged after China officially launched a crackdown on foreign acquirers amid concerns of “systemic risk”, it was HNA’s turn, which as we described last week, risks becoming a “reverse rollup from hell”, as HNA’s stock tumbled, sending the LTV of billions in loans collateralized by the company’s shares soaring and in danger of unleashing an catastrophic margin call among the company’s lenders.
What has been an open secret across the Arab world is not a secret anymore even in the US: What happened last month in the deep recesses of the House of Saud with the ascension of Crown Prince Mohammad bin Salman, aka MBS, was in fact a white coup.
The most expensive rental markets, median asking rents have fallen from their peaks, and in several markets by the double digits, including Chicago (-19%!), Honolulu, San Francisco, and New York City. And it has an impact on the prices of these buildings. Apartments are a big part of commercial real estate. They’re highly leveraged. Government Sponsored Enterprises such as Fanny Mae guarantee commercial mortgages on apartment buildings and package them in Commercial Mortgage-Backed Securities. So taxpayers are on the hook. Banks are on the hook too. This is big business. And it is now doing something it hasn’t done since the Great Recession. The Commercial Property Price Index (CPPI) by Green Street, which tracks the “prices at which commercial real estate transactions are currently being negotiated and contracted,” plateaued briefly in December through February and then started to decline. By June, it was below where it had been in June 2016 – the first year-over-year decline since the Great Recession.
Today, in his latest market musings chartpack, we present the key reasons why Rosenberg has never been more convinced that all those calling for an end to the secular bond bull market, are wrong and why despite the Fed’s best intentions to create the impression that the global economy is stabilizing, what is about to be unleashed on the global economy is at least 5 years of accelerating deflationary pressures. As the main catalysts for his gloomy outlook, Rosenberg lists the obvious ones, debt and deflation, but by far the most important factor that prompted Rosenberg to revert to the “dark side”, the one about which Rosie says “nothing is more important than this if you are looking at what will fundamentally influence the financial markets for the next decade-plus”… is demographics.
You see, the Russian lawyer—often carelessly presented as a “Russian government lawyer” with “close ties to Putin”—Natalia Veselnitskaya, who met with Trump, also worked recently with a Washington, D.C. “commercial research and strategic intelligence firm” that is also believed to have lobbied against the Magnitsky Act. That firm, which also doubles as an opposition research shop, is called Fusion GPS—famous for producing the Russia dossier distributed under the byline of Christopher Steele, a former British intelligence agent for hire.
As of the first quarter, credit card loss provisions at Capital One were above 5 percent, a six-year high. The company recorded some improvement for the second quarter, yet Fed stress tests of the bank’s overall loan portfolio in a deep downturn show losses topping 12 percent. That explains Capital One’s “conditional” passing score, a black eye that prompted a reduced share buyback plan and no increase in its dividend. Most economists today applaud the resilience of the current recovery, which has stretched into its eighth year, the third-longest in postwar history. Resilience and rising household defaults, though, don’t tend to go hand in hand.
The people of the respectable east coast press loathe the president with an amazing unanimity. They are obsessed with documenting his bad taste, with finding faults in his stupid tweets, with nailing him and his associates for this Russian scandal and that one. They outwit the simple-minded billionaire. They find the devastating scoops. The op-ed pages come to resemble Democratic fundraising pitches. The news sections are all Trump all the time. They have gone ballistic so many times the public now yawns when it sees their rockets lifting off.
Wall St. was gushing over CMG’s Q1 2017 performance as it exceeded expectations with revenues up 28% vs. Q1 2016 and net income $46 million vs a loss in 2016. But don’t forget that Chipotle’s Q1 2016 was hammered by the e-coli scare. The more appropriate analysis is to look at Q1 2017 vs. Q1 2015. It’s an entirely different story if you compare Q1 2017 to Q1 2015, where Q1 2015 was on the books before the e-coli problem. Revenues in Q1 2017 were $1.07 billion vs. $1.09 billion in Q1 2015. Net income in Q1 2017 was $46 million, or $1.60 vs $122 million in Q1 2015, or $3.98/share. If we consider Q1 2017 and Q1 2015 to be more of an “apples to apples” comparison, Q1 2017 was not good. Furthermore, CMG had 2,291 stores open at the end of Q1 2017 vs. 1,831 at the end of Q1 2015. Looked at on a revenues per store basis, Q1 2017 was a total failure vs. Q1 2015. But Wall St and company management will not discuss this type of comparison and the morons buying the stock will not look for it.”
They believe the market moves are at odds with an economy that remains lukewarm as it enters its ninth year of growth, stock valuations that are historically high and a delay of business-friendly policies in Washington like tax cuts and infrastructure spending. “There seems to be an overall view that people are invincible, that things will always go up, that there are no risks and no matter what goes on, no matter what foolishness is in play, people don’t care,” said Marc Cohodes, whose hedge fund focused on shorting stocks closed in 2008.
In a tirade against Russia based news outlets RT and Sputnik, Donald Trump’s CIA Director Mike Pompeo blasted Russia for interfering not only in the 2016 US Presidential election but “the one before that and the one before that”. This would imply that Russia helped install Barack Obama in the White House even after his severely anti-Russian foreign policy became well known.