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By Tyler Durden

It appears the sugar-high from holiday celebrations is still running through president-elect Trump's veins as his tweets took an even more narcisistic tone on this oh-so-aptly-named 'Boxing Day' in America.

First Trump decided to take credit for the unprecedented short-squeeze in US stock markets – and the Christmas spending numbers…

The world was gloomy before I won – there was no hope. Now the market is up nearly 10% and Christmas spending is over a trillion dollars!

— Donald J. Trump (@realDonaldTrump) December 26, 2016

We just wonder what he will sat if/when Goldman Sachs stops rising and stocks tumble (“never gonna happen”), but perhaps even more importantly, how does he feel about the $1.2 trillion of value he has erased from global capital markets since his election?

The drop in global debt and equity values in Q4 2016 is very reminiscent of the drop into 2015's Fed rate hike… which did not end well…

But, the last time that global stocks and global bonds decoupled so aggressively was following the end of QE3… here's what happened next…

But it's probably different this time, right? China is fine (oh wait, failed auctions and liquidity crisis), Europe is fine (oh wait, Italian banks are collapsing), and the US economy is great (oh wait, automakers are shuttering plants due to credit-created excess inventory).

* * *

But Trump was not done there, he took on the arrogance of Obama, as we detailed earlier…

President Obama said that he thinks he would have won against me. He should say that but I say NO WAY! – jobs leaving, ISIS, OCare, etc.

— Donald J. Trump (@realDonaldTrump) December 26, 2016

Invincible politician and stock market savior…Let's just hope nothing goes wrong to break that narrative in the next 4 years (or 4 weeks).

…read more

Source: Did Donald Trump Just Jump The ‘Dow 20,000’ Shark?

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By Tyler Durden

While the big news last week was that Italy’s third largest bank, Monte Paschi, had been nationalized after JPM destroyed the bank’s chances of securing a private-sector rescue, and that Italy would issue up to €20 billion in public debt to fund the bailout of this, and other insolvent Italian banks, it appears there may be more moving parts to the story.

Recall that as we warned, the biggest danger for both Monte Paschi, and Italy’s banking system in general, is that retail depositor confidence in the Siena bank is shaken enough to lead to a bank run either in the world’s oldest bank, or worse, across the entire Italian banking sector, leading to a worst case probability outcome of falling bank dominoes as bank funding needs explode, resulting in even more deposit outflows, and so on in a toxic feedback loop.

To be sure, Monte Paschi’s deposit run is hardly new, and as the bank itself admitted last week, it had already suffered roughly €14 billion in deposit outflows, or 11%, in the first nine months of the year as shown in the chart below.

It turns out that the bank run not only continued but accelerated.

As Reuters reports this afternoon, the ECB has told Monte dei Paschi it needs to plug a capital shortfall of €8.8 billion, 76% greater than the previous €5 billion gap estimated by the bank, and which hole the entire recently failed bank recapitalization was aimed at plugging, the lender said on Monday.

Meanwhile, for those who missed the last few episodes in the dramatic third bailout, and nationalization, in as many years involving Monte Paschi, here is a recap from Reuters:

Last Friday the Italian government approved a decree to bail out Monte dei Paschi (BMPS.MI) after Italy’s No. 3 lender failed to win investor backing for a desperately needed 5 billion euro capital increase. The bank said on Monday it had officially asked the ECB last Friday for go ahead for a “precautionary recapitalisation”.

A precautionary recapitalisation is a type of state intervention in a struggling bank that is still solvent. It means only a modest bail-in of investors though the government can buy shares or bonds only on market terms endorsed by EU state aid officials in Brussels.

In its reply, the ECB said it had calculated the capital it believed the bank needed on the basis of a shortfall emerging from European stress test of large lenders earlier this year. In those tests Monte dei Paschi was the only Italian bank to come short under an adverse scenario.

The ECB said the lender was solvent but signaled the bank’s liquidity position had rapidly deteriorated between the end of November and December 21, Monte dei Paschi said.

In other words, depositors yanked even more billions from the bank – a perfectly reasonable course of action in light of concerns about the bank’s viability – which in turns has led to an even worse liquidity situation at Monte Paschi.

The Siena bank …read more

Source: The Italian Bank Run: Monte Paschi Capital Shortfall Surges 75% To €8.8Bn Due To "Rapid Liquidity Deterioration"

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for latest details. …read more

Source: 2016: A tipping point for self-driving cars

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By Tyler Durden

Submitted by Nick Cunningham via OilPrice.com,

The U.S. is beginning to wind down one of the core energy security policies of the past half century as the boom in domestic drilling eases concerns about supply.

(Click to enlarge)

The U.S. Department of Energy could begin to sell off some of its strategic petroleum reserve (SPR) as soon as January, the beginning of a multi-year process to shrink the nation’s stockpile of oil. Congress has authorized DOE to sell off $375.4 million worth of oil in its recent budget resolution. The DOE said that such a sale could be held in January 2017.

To be sure, part of the motivation to sell crude is to finance upkeep for the SPR itself. The reserves are held in salt caverns in Louisiana and Texas, setup decades ago in the aftermath of the Arab Oil Embargo in 1973. The SPR system can hold more than 700 million barrels of oil, the largest strategic stockpile in the world. The idea is that the SPR holds 90 days’ worth of oil supplies, which could be released in the event of a global outage. A release has only occurred a handful of times, such as the Persian Gulf War, Hurricane Katrina and the Arab Spring.

Some of the storage systems are rusting and corroding after decades of use. In September, the DOE issued a report to Congress, which came to a dire conclusion about the condition of the reserve. “This equipment today is near, at, or beyond the end of its design life,” the report said. The sale “will allow the Department to take necessary steps to increase the integrity and extend the life” of the reserve, a DOE spokesperson said in December after the budget resolution was passed.

It is hard to overstate the significance of the SPR to U.S. energy policy. In fact, some analysts would argue the U.S. does not really have a comprehensive energy security policy. There is no coherent theory, policy or philosophy driving U.S. energy security concerns, other than the U.S. military policing the world to ensure the security of supply, a mission that has governed American actions abroad since the Carter administration at least.

The one cornerstone of energy security policy has been the SPR. As long as the U.S. had 3 months’ worth of supply, it could weather unexpected disruptions. The International Energy Agency was setup in the 1970s as well, and participating members – in addition to the U.S., the group includes Europe, Japan, Korea, Australia and New Zealand – also have pledged to hold a 90-day supply.

But U.S. policymakers no longer view the SPR is all that important. Even the more hawkish members of Congress have been lulled into a sense of security from the surge in U.S. oil production and the resulting crash in oil prices. The world is awash in oil, so why does the U.S. need to stockpile such a massive volume of oil at great expense? The ostensible reason of selling off oil from the SPR is …read more

Source: U.S. Prepares To Sell Off Its Oil Reserves

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By Tyler Durden

Submitted by Nick Cunningham via OilPrice.com,

The U.S. is beginning to wind down one of the core energy security policies of the past half century as the boom in domestic drilling eases concerns about supply.

(Click to enlarge)

The U.S. Department of Energy could begin to sell off some of its strategic petroleum reserve (SPR) as soon as January, the beginning of a multi-year process to shrink the nation’s stockpile of oil. Congress has authorized DOE to sell off $375.4 million worth of oil in its recent budget resolution. The DOE said that such a sale could be held in January 2017.

To be sure, part of the motivation to sell crude is to finance upkeep for the SPR itself. The reserves are held in salt caverns in Louisiana and Texas, setup decades ago in the aftermath of the Arab Oil Embargo in 1973. The SPR system can hold more than 700 million barrels of oil, the largest strategic stockpile in the world. The idea is that the SPR holds 90 days’ worth of oil supplies, which could be released in the event of a global outage. A release has only occurred a handful of times, such as the Persian Gulf War, Hurricane Katrina and the Arab Spring.

Some of the storage systems are rusting and corroding after decades of use. In September, the DOE issued a report to Congress, which came to a dire conclusion about the condition of the reserve. “This equipment today is near, at, or beyond the end of its design life,” the report said. The sale “will allow the Department to take necessary steps to increase the integrity and extend the life” of the reserve, a DOE spokesperson said in December after the budget resolution was passed.

It is hard to overstate the significance of the SPR to U.S. energy policy. In fact, some analysts would argue the U.S. does not really have a comprehensive energy security policy. There is no coherent theory, policy or philosophy driving U.S. energy security concerns, other than the U.S. military policing the world to ensure the security of supply, a mission that has governed American actions abroad since the Carter administration at least.

The one cornerstone of energy security policy has been the SPR. As long as the U.S. had 3 months’ worth of supply, it could weather unexpected disruptions. The International Energy Agency was setup in the 1970s as well, and participating members – in addition to the U.S., the group includes Europe, Japan, Korea, Australia and New Zealand – also have pledged to hold a 90-day supply.

But U.S. policymakers no longer view the SPR is all that important. Even the more hawkish members of Congress have been lulled into a sense of security from the surge in U.S. oil production and the resulting crash in oil prices. The world is awash in oil, so why does the U.S. need to stockpile such a massive volume of oil at great expense? The ostensible reason of selling off oil from the SPR is …read more

Source: U.S. Prepares To Sell Off Its Oil Reserves

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Oracle CEO Safra Catz made a hefty $41 million last year. What other women executives make big bucks? …read more

Source: Top-paid women executives

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By Tyler Durden

When it comes to propping up the stock market in the US, the Federal Reserve does so with a certain degree of nuance, keeping at least one layer of disintermediation between itself and the market, which usually involves “advising” Citadel to intervene when it comes to acute moments of market stress, granting the HFT-heavy hedge fund a green light to stop and reverse and violent selloffs, or more traditionally, allowing companies to repurchase their own stock thanks to (until recently) record low interest rates.

This is nothing new: as Goldman has repeatedly pointed out, in 2016 corporations have been the largest source of equity demand, purchasing $450 billion of US equity through buybacks and cash M&A (net of share issuance). Outside of the Great Recession, corporates have been the primary source of US equity demand (see Exhibit 1).

Furthermore, Goldman recently predicted that as a result of Trump’s proposed repatriation tax holiday, buybacks in 2017 will surge even more, to wit:

Buybacks ($780 billion, +30%) will rise sharply in 2017. Our economists expect tax reform legislation will pass during 2H 2017. President-elect Trump and House Republicans have expressed support for a one-time tax on previously untaxed foreign profits as part of their tax reform proposals. We forecast that S&P 500 firms will repatriate $200 billion of their total $1 trillion of cash held overseas in 2017 and spend $150 billion of the repatriated funds on share repurchases. Managements generally remain committed to buybacks, which will benefit from 2% US GDP growth and ex-Energy earnings growth of 6%.

None of that should be news to regular readers, however it is worth repeating that the primary source of demand for US equities are the stock-issuing corporations themselves, who – in a page right out of Baron Munchausen – continue to pull themselves up by their bootstraps with the blessings of the Federal Reserve’s cheap money. That may soon be changing, however, now that rates have spiked higher and announced buyback have tumbled 28% Y/Y according to FactSet.

Meanwhile, in Japan, the BOJ had taken a less “stealthy” approach, and as has been the case for years, the Japanese central bank under Kuroda has had far fewer qualms about intervening directly in the equity markets by purchasing either ETFs, REITs or single name securities.

Did we say “less stealthy?” We meant the central bank is now intervening directly in the stock market with all the finesse of a stock bull in a china store (just not Chinese china, it’s a patriotic thing), and according to a report by the Nikkei, the Bank of Japan is set to become the biggest buyer of ETFs in 2016 for the second straight year, in the process masking a srecent surge in foreign investor selling.

According to data through Thursday, the value of the BOJ’s ETF purchases this year has topped 4.3 trillion yen ($36.5 billion), up 40% from 2015. Last year, the central bank bought more than 3 trillion yen worth of ETFs. The data …read more

Source: The Bank of Japan Was The Top Buyer Of Japanese Stocks In 2016

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