Powerful Financial Media HERE!

Be waned, a June hike is still very much in the Fed's tables just as we've warned before, even though the futures market is only pricing in a mere 4% chance of it happening. There in lies the risk.


#Forex #Stocks #Trading #Investing #FOMC #Economy

Goldman just upgraded #Tesla to a "Buy" and targets $250 on its recommendation. Here's why:

"Putting in our reservation for the Model 3; upgrading TSLA to Buy

Source of opportunity

We upgrade shares of Tesla to Buy from Neutral with 22% upside to our 6-month price target of $250. While we believe the volume targets are ambitious, Street and investor expectations seem more grounded and following a 23% decline in the share price post the Model 3 unveil, we do not believe Tesla shares are fully capturing the company’s disruptive potential. This combined with a more stable macro backdrop (relative to January/February) and increased confidence in Model 3 demand (from orders and our competitive benchmarking) drives attractive risk/reward. The company has publicly stated it might look to raise capital, and our detailed capex analysis points to capital needs of $1bn.

Catalyst

There are admittedly fewer visible catalysts than before, with the next Model 3 update potentially not until next year. We think the introduction of a mobility service is a possibility, though timing is uncertain as management comments on this have been limited. Ultimately we think the biggest fundamental near-term catalyst will be the ramp of the Model X. While progress appears to have been limited since the 1Q16 update (based on the cadence of April/May deliveries), expectations are low in our view with many on the Sell/Buy sides expecting a cut to Tesla’s 80-90k delivery target. While we acknowledge this risk we view it as discounted and think any positive news on X production would strongly support the shares.

Valuation

Our unchanged 6-month price target of $250 is derived from five probability weighted automotive scenarios plus stationary storage optionality, all of which embed a 20% cost of capital."

We're not too sure if the #Model3 will indeed follow in the footsteps as Ford's world changing Model T, some 100 years back, but we do wish #ElonMusk the best of luck!

#Forex #Stocks #Trading #Investing #Tech #Cars #Future

Drivers will attest to this. When oil prices crashed more than 50% since 2014, did gasoline (petrol) prices at the pump also fall by 50%. Nope. Not a single chance. The is perhaps the biggest ripoff that big energy stages on consumers. There is not a reason why pump prices cannot decline as much (if not more) than spot prices. We all know the only available reason — Big energy marks up prices for consumers. Consumers are cheated.

In fact, as you can see from this chart, gas prices were 50% higher than their spot-implied price when crude bottomed in February this year. While this premium has decreased since that 2x highs, it still remains at 1.36x more expensive than they should be, assuming gas prices traded in tandem with spot.

Well, it's never the case. Lesson learned. Consumers, you are not better off when oil prices crash. You won't be paying as much less than you think.

#Forex #Stocks #Trading #Investing #Money #Car #Ripoff #Oil #OPEC

Opinion polls (online & phone) paint a vague picture of how Britain will vote during the 23 June EU membership referendum. As of now, "Brexit" has a slight lead over "Bremain" in online polls, while "Bremain" has a larger lead in phone polls. We note that although "Bremain" takes the lead over the phone, that lead has been narrowing for the past few months.

So whatever Britons vote for in about a month's time, there will be consequences that Cable traders will be savagely feasting on.

#Forex #Stocks #Trading #Investing #Brexit #UK #EU #Europe

China's high-end property market bubble is huge. So huge that it puts everything else out of focus. How huge? 30% price gains each year. That's more than most stock markets can achieve!

Tier 1 properties are the highest end, most expensive and exclusive, and therefore regarded as investment properties. It's where the uber rich park their monies, and where flippers punt in. This unnatural activity has sparked the mother of all bubbles. As we've said in the past, the U.S. subprime mortgage and property market bubble doesn't even hold a candle to what China is brewing in its proverbial teapot.

Take a look at how Tier 2, 3, 4 property prices have hardly gained over last year, managing only +7% for Tier 2, +2% for Tier 3, and 0% for Tier 4 (most recent YoY price changes). For the same period, Tier 1 prices rose an eye watering 30%.

When we look at the monthly figures. the trend remains the same, just with more variance. Acceleration in Tier 1 monthly price growth remains high, while price inflation itself is just ticks below their all time highs (+2.8% MoM). Tier 2 monthly price growth came in at +1.3% in April, more than half less than the high end market.

And if you noticed, while the upside swings in Tier 1 prices are much larger than the rest of the market's, its downside swings are hardly any larger. This means that if you had bought a Tier 1 home, you could essentially reap much higher upside with just about the same downside risk as the broader market. More rewards, same risk!

Sounds too good to be true? Just wait and see. While China can keep manufacturing its unicorns, nothing this obnoxious can and will go on forever.

Which leaves one to fantasize about the consequences once the party is over. Carnage would be too light a description. Because remember that what China essentially is a the world's biggest creator of credit (debt). Like the U.S. subprime bubble in 2005-2008, home prices surged like they could continue on forever, fueled by cheap credit, refinancing, home equity loans, rampant flipping and speculate excesses. Once the bubble in prices burst, so does the credit bubble that helped pump the balloon. Mass defaults, writedowns, government bailouts... You name it.

We are hoping China puts on a great show worthy of the history books. Enjoy it while it lasts.

#Forex #Stocks #Trading #Investing #Money #China #Property #Bubble

The best way to stop a stock market from falling in the U.S.? Break it. Literally. With an almost impeccable track record, breaks (outages) in the NYSE (the largest most centralized) stock exchange have almost always led to retardation in price declines and effect reversals. Markets these days...

#Forex #Stocks #Trading #Investing #WTF

Despite a build in last week's total DoE crude stock, American production continues to decline for the 17th straight month now. Refer to our post from last week where we talked about a potential NEP (New Energy Paradigm) Never seen before crash in rig count, and persistently rapid fall in production. Keep watching this area.

#Forex #Stocks #Trading #Investing #Oil #OPEC #Energy

We're now 5 minuses away from the release of April's FOMC minutes, where the market will be scrutinizing every word of the document for any hints of what the Fed may do during the upcoming June meeting.

Here, we have the price chart of the September Eurodollar future contract (not EURUSD). Eurodollars are money market rates; future prices rise when rates fall and vice versa.

During the last week or so, Eurodollars have fallen hard, which implies a greater discount on higher FF rates. This is after a strong rally post the April FOMC meeting which yielded no hike.

What happens next? More chop perhaps.

#Forex #Stocks #Trading #Investing #FOMC #Economy #Money

April FOMC minutes: Fed likely to hike rats in June should data improve.

Dollar is higher post release.

Bulletin headlines:

• MOST FED OFFICIALS SAW JUNE HIKE `LIKELY' IF ECONOMY WARRANTED
• FED: RANGE OF VIEWS ON WHETHER DATA WOULD SUPPORT JUNE HIKE
• FED: MANY OFFICIALS NOTED GLOBAL RISKS NEED `CLOSE MONITORING'
• FED: OFFICIALS WANTED TO KEEP `OPTIONS OPEN' FOR JUNE

Key pointers:

• Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June.

• Many participants noted that downside risks emanating from developments abroad, while reduced, still warranted close monitoring. For these reasons, participants generally saw maintaining the target range for the federal funds rate at ¼ to ½ percent at this meeting and continuing to assess developments carefully as consistent with setting policy in a data-dependent manner and as leaving open the possibility of an increase in the federal funds rate at the June FOMC meeting

• Some members expressed concern that the likelihood implied by market pricing that the Committee would increase the target range for the federal funds rate at the June meeting might be unduly low

• Many participants noted that downside risks emanating from developments abroad, while reduced, still warranted close monitoring

• Regarding the possibility of adjustments in the stance of policy at the next meeting, members generally judged it appropriate to leave their policy options open and maintain the flexibility to make this decision based on how the incoming data and developments shaped their outlook for the labor market and inflation as well as their evolving assessments of the balance of risks around that outlook.

• Some participants noted that global financial markets could be sensitive to the upcoming British referendum on membership in the European Union or to unanticipated developments associated with China’s management of its exchange rate

• A few cited concerns about rapidly rising prices of CRE, including multifamily properties, or about illiquidity of the assets of some mutual funds

#Forex #Stocks #Trading #Investing #FOMC #Economy

We made money post-FOMC, as did our clients. Pretty good week so far. As usual, FOMC was a bug mover across all asset classes, including equities and FX. A June rate hike seems probable now, despite the U.S. economy not performing exactly spectacularly. What immediate effects this had on the markets are shown below:

The aftermath post April's FOMC minutes: Stocks down (risk off), USD strength (as we forewarned), yield curve flatter (rate hike discount), gold down (again, as we forewarned).

Most importantly, June rate hike odds per the FF futures market is currently above 30%, from lows of 4% immediately after 28 April's FOMC statement.

Still, too early to say "told ya so", more waiting. Portfolio long USD exposure doing well.

It's good to be right again. This time, we were right about just about everything we were expecting. Yesterday's release of the April FOMC minutes cemented the strong dollar (weak everything else) trend for the short term, leading to a storing selloff in the precious metals complex, with silver crashing in Thursday trading and gold following suit.

We published a article titled "Sell In May & Play it Safe" this past Sunday, when we advocated derisking, and staying liquid (buy cash, safety, and shun risk). We also commented that should technical factors align, we would be willing sellers of the precious metals. In short, we had already turned bearish risk, gold, oil and most commodities, while bullish the U.S. dollar. We couldn't be more right.

Article: http://www.businessoffinance.com/ins...d-play-it-safe
http://www.forexfactory.com/data:app...krLS8xnyYhADs=


To wit: "downside skews in risks make a derisking maneuver potentially more rewarding than chasing beta...

As such, we have shifted our bias to the short side of risk. The positions in our portfolio have partially reflected this change in view and will continue to do so as the situation evolves.

... on a beta-adjusted basis, we expect equities, precious metals, and the dollar (USD FX crosses) to be hit the hardest. A highly levered play would be to short the PMs on momentum..."

Following massive strength in the U.S. after today's release of the hawkish April FOMC minutes, China has once again fixed the yuan lower (USDCNY sharply higher). This led to massive strength in USDCHN (offshore traded yuan vs. USD).

What China really wants is strength in the greenback, because it allows it to mask some of its direct devaluations (as seen in the top pane) where since November 2015, the PBoC has been weakening its currency secretly against an undisclosed basket of (mostly Asian) currencies. This happened when on the surface, USDCHN traded lower (CHN strength) from February to April.

This seems like another renewed round of lower fixes and weakness in the yuan (outright or otherwise).

Is the S&P 500 about to do a "Death Cross"? We'll find out soon.

#Forex #Stocks #Trading #Investing #Money

China may be the worst of all liars when it comes to fabricating macro economic and financial data, but it's a master when it comes to tactics and strategies. Case in point. While Japan's BoJ has struggled to bring the Japanese yen lower via NIRP (negative rates) and an even larger QQE program over the past 12 months, China has not held back any punches to let the yuan weaken against a soaring yen. This made Chinese exports to the world much more competitively priced than their rival's.

Last week's initial jobless claims improved from the previous' albeit missing expectations by 3,000 claims. This is the 3rd week in a row claims have been higher than consensus expectations and the 4-week average remains near 13-month highs. This comes after yesterday's publication of April's FOMC minutes which stated that the U.S. labor market was seen as improving.

The latest Business Outlook Index from the Philadelphia Fed was once again negative, absent February's outlying spike (which we seem as an anomaly), this indicator has been contracting for the last 8 out of 9 months, the longest streak since 2012.

Remember, the Fed has primed the markets to be much more sensitive to macro, so watch the step!

It's good to be right again. This time, we were right about just about everything we were expecting. Yesterday's release of the April FOMC minutes cemented the strong dollar (weak everything else) trend for the short term, leading to a storing selloff in the precious metals complex, with silver crashing in Thursday trading and gold following suit.

We published a article titled "Sell In May & Play it Safe" this past Sunday, when we advocated derisking, and staying liquid (buy cash, safety, and shun risk). We also commented that should technical factors align, we would be willing sellers of the precious metals. In short, we had already turned bearish risk, gold, oil and most commodities, while bullish the U.S. dollar. We couldn't be more right.

Article: http://www.businessoffinance.com/ins...d-play-it-safe
http://www.forexfactory.com/data:app...krLS8xnyYhADs=


To wit: "downside skews in risks make a derisking maneuver potentially more rewarding than chasing beta...

As such, we have shifted our bias to the short side of risk. The positions in our portfolio have partially reflected this change in view and will continue to do so as the situation evolves.

... on a beta-adjusted basis, we expect equities, precious metals, and the dollar (USD FX crosses) to be hit the hardest. A highly levered play would be to short the PMs on momentum..."

Here's how Goldman Sachs, the world's most notorious vampire squid destroys its clients:

Remember yesterday when we posted about Goldman's recommendation to "Buy" Tesla with a price target of $250? We had our reservations, not because we knew about what Goldman was about to do, but because we didn't buy the basis of that upgrade.

Regardless, Tesla shares surged at the open, up some +7% on Goldman's upgraded call. It was all goodness for the electric carmaker, and we can imagine Elon Musk ringing up Goldman's head of equity research, thanking the bank for making him couple of million dollars "richer".

And then came the truth of the moment. After the close of the market, Tesla announced a nearly $2bn stock offering to finance production of its flagship Model 3 (ironically the very core of Goldman's upgrade), to the utter dismay of existing stockholders.

Fore such an offering, Tesla needed an underwriter, which was none other than Goldman itself. All this would had been way in advance, well before Goldman made that upgrade call on #TSLA yesterday morning. As a result, Tesla shares are plunging today, down some -3% right at the open.

So let's get this straight. Goldman issued a "Buy" recommendation on Tesla yesterday morning. TSLA rallies.

7 hours later, Goldman is revealed as the underwriter for Tesla's $2bn stock offering, which wasn't made known to the public until then but was definitely a planned event.

Stock plunges when markets open on Thursday.

Now, do you see how conflicted the practices of the world's second largest and perhaps the most influential investment bank there is? Its clients must be a bunch whose investment and trading accounts are constantly dwindling in size.

Top top of the week: Whatever Goldman says, do the opposite.

Did you know that the U.S. has the highest number of credit cards with more than 2.9 cards per person, while #China has the highest number of debit cards at 3.28 cards per person? #Singapore ranks highest in the world for proportion of total consumer transactions being cashless, at 61%, above the Netherlands, France, Sweden , and the UK. In 2014, there were an estimated 390bn cashless transactions made, and this figure is set to rise exponentially as more of the developing and emerging world catches on to the cashless trend. However, there is still a long way to go before cashless becomes the biggest method of payment; cash still forms 85% of total transactional value across the world.

Structural declines in trading activity across most major asset classes has led to much lower productivity for the financial sector, especially when it comes to high finance. ICAP data shows daily FX trading volume declining almost constantly since peaking in 2008. Daily FX volumes are now less than half they were during 2008, despite markets more volatile now than during back then.

All this means that jobs in the finance industry are at risk. At risk of being lost, and at risk of being marginalized by computer technology, where black boxs and algos can generate many times more profits than an average asset manager will ever do.

In short, the old finance industry is changing, and old jobs are being replaced by new ones. It's no longer prestigious or something to be proud of if you were a true investment banker (or any banker for that matter). Income and bonus trends for banking show that this profession is very much out of trend.

Hedge funds are at the verge of tipping over to the same camp as banking is in.

The only bright spot remains asset management and private equity, where we feel the former will also soon suffer the fate of hedge funds and ultimately, banking. Private equity should remain the in thing for some time, as long as the global unicorn club of million and billion dollar startups keeps growing.

Plan wisely if you're a green shoot.

Here's what stocks the top 50 largest American hedge funds sold and bought in the first quarter, courtesy of the just released 13-F SEC filings.

#Facebook (#FB) was the largest purchase collectively, seeing some $3bn in net buys in 1Q16. #Google (#GOOG), or more formally Alphabet, also saw net buys to the tune of a much smaller $900mn.

Contrasting, and still in tech, #Apple (#AAPL) was the largest sale collectively, seeing a huge $7bn in net sales in 1Q16, more than twice the amount for FB. We have been talking about how investors have lost their love for Tue Fruit for some time now, and hedge funds have just confirmed this speculation. Apple might just have seen the end of its golden age.

In broader sight, hedgies generally sold info tech and bio techs, they were net sellers of equities and have reduced equity exposure for the last 6 months. With the market going nowhere for the past 5 months, we wonder how hedge funds are going to justify charging their investors 2 and 20...