S&P Futures Open on Friday’s Lows, Italy Pulls a Hank Paulson Bailout

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“Central banks around the world are having more and more influence on the markets. Many people are trading off of anticipated policy moves and the crowded trades are even more profound. However, the sentiment of investors making bets on the “great divergence” has reached a fever pitch.  Fed funds futures are expecting at 78% of a 25bps rate hike, far too many people are on one side of the boat.  We believe credit risk will veto the Fed policy path next year.  We do not see rate hikes coming in 2016. We implore you to buy the gold miners GDX and long U.S. Treasury bonds.”

The Bear Traps Report, December 9, 2015

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Italy’s banks we’re substantial under-performers Friday, off nearly 20% over the last 3 trading sessions.  As we stressed last year to subscribers, zombie banks in Europe hold over $1T of bad debts, Italy’s stake of smelly loans is near $400B.

Italy is considering a 40 billion euros ($44 billion) bailout of it’s banking system. 

Fresh capital for the country’s banks, Il Fatto Quotidiano reported Monday, citing government and financial sources it doesn’t identify. – Bloomberg

The government would sell debt to fund the capital injections and is talks with the European Commission, Il Fatto said. Governments can provide funds directly to banks in exceptional circumstances of systemic stress, which Italy would cite as a reason for its intervention in the aftermath of Brexit, the Italian daily newspaper reported.

Italy’s lenders are over-loaded with 360 billion euros of bad debt, while profit is also squeezed by record-low interest rates and sluggish economic growth.


The plunging in financial markets continued Monday.

The pound extending its record one-day selloff after the U.K.’s vote to exit the European Union threw British politics into turmoil, fueling anxiety over the decision’s impact on the wider global economy.

– Wall St has gone from entirely Yen Bears to Bulls: the Yen Brexit Surge is Seen Testing 95 in Threat to BOJ Stimulus Goals.
– Brexit vote was like a ‘Black Swan event,’ PineBridge
– In panic mode, HSBC changes their year-end dollar-yen target to 95 from 115, Goldman had a 125 dollar yen target in December, she touched 100 on Friday.


Every 1 handle move in the yen’s stronger currency, costs companies in Japan nearly $15m, the Bank of Japan will be forced to act, yet again.

China weakened its currency fixing by the most since last August as global market turmoil spurred by Britain’s vote to leave the European Union sent the dollar surging.

The People’s Bank of China set the reference rate 0.9 percent weaker at 6.6375 a dollar. A gauge of the greenback’s strength jumped 2.4 percent in the past two days, the most since 2011, as the British pound and the euro tumbled. The yuan dropped 0.3 percent to 6.6473 as of 6:44 p.m. in Shanghai, heading for its weakest close since December 2010. – Bloomberg


Central Bank Bal Sheets

After levering up for 8 years, central banks have brought the world on the brink of recession.

Bank of Japan sets emergency meeting tonight.

Hillary Clinton, speaking in Indianopolis at Conference of Mayors, said U.S. will also recover “from all the other shocks that are in the system” after saying Americans lost about $100b from their 401ks following the U.K.’s Brexit vote.

Front Month VIX Futures surged up to 22.50 while 8 months out stand at 22.67, the curve is nearly inverted, a classic sign of severe panic.

S&P Futures

The rout in riskier assets picked up where it left off Friday, with the Australian dollar slipping with the euro as as U.S. and Japanese index futures fell with New Zealand shares. The Norwegian krone tumbled more than 2 percent as oil dropped a second day. Sterling sank beyond $1.35, extending losses near weakest level since 1985 as investors face months of uncertainty over Britain’s future amid turmoil within the two major political parties and Scotland agitating anew for independence. Angst boosted the yen and gold, amid demand for havens following the worst day for global stocks in almost five years.

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One thought on “S&P Futures Open on Friday’s Lows, Italy Pulls a Hank Paulson Bailout”

  1. Long on U.S. T Bills is the correct strategy as inflation will rear its ugly head. GDX Gold stocks a nice spread of juniors could bring profits; Especially if there is a merger or hostile bid for a junior gold mining company. When gold is high enough; The mining companies use the float to dig in and pull more gold out of their mines. Columbia made a deal with FARC to cease hostilities;So mining projects can go unhindered and the wealth of their country will progress. Canadian Treasury sold off all of its gold thus making gold more scarce and a positive option tantamount to to like TheBREXIT, Geo political upheavals and possible forecast incidents and disasters. Alibaba opened up its UK Group center the other night. AliPay introduced. Jack Ma says he doesn’t have to open stores like WALMART; all he does is open up 2 new servers for his company. Gold backed Yuan recently on deck.

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