Yahoo hangs the 'for sale' sign

Yahoo just officially hung up a "for sale" sign.

Company chairman Maynard Webb writes that Yahoo is "exploring additional strategic alternatives" to the four-point growth plan the company laid out in a press release.

The company's stock is down nearly 2% after-hours, despite its fourth-quarter earnings revenue beat.

Here's Webb (emphasis added):

The Board also believes that exploring additional strategic alternatives, in parallel to the execution of the management plan, is in the best interest of our shareholders. Separating our Alibaba stake from our operating business continues to be a primary focus, and our most direct path to value maximization. In addition to continuing work on the reverse spin, which we've discussed previously, we will engage on qualified strategic proposals."

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The End Of Plan A: The Big Reset & $8000 Gold

Willem Middlekoop, author of The Big Reset – The War On Gold And The Financial Endgame, believes the current international monetary system has entered its last term and is up for a reset. Having predicted the collapse of the real estate market in 2006, (while Ben Bernanke didn't), Middlekoop asks (rhetorically) -can the global credit expansion 'experiment' from 2002 – 2008, which Bernanke completely underestimated, be compared to the global QE 'experiment' from 2008 – present? - the answer is worrisome. In the following must-see interview with Grant Williams, he shares his thoughts on the future of the global monetary system and why the revaluation of Gold is inevitable...

And now today, Middelkoop has some even more ominous concerns about the end of Plan A and where Plan B begins...

"By revaluing gold to a much higher level, to over $8000 an ounce, central bankers solve quite a lot of problems"

17:00 - "But we know Plan A - the current financial system - will end soon, we can't go on this way... so we need a monetary reset... and a revaluation of gold has helped central bankers in the past, such as Roosevelt in the 1930s. It would help to restore the balance sheet of The Federal Reserve."

But there are problems...

21:00 -  "It always ends in inflation.. certainly in 2016, we can expect more QE... and when that does not defeat deflation (driven by global over-indebtedness), further unorthodox measures will be taken (helicopter money).. and eventually a gold revaluation."

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"This Is Much Larger Than Subprime" - Here Are The Legendary Hedge Funds Fighting The Chinese Central Bank

One month ago, we first revealed that for one prominent winner from the subprime crisis, Hayman Capital's Kyle Bass, "the greatest investment opportunity right now" is to short the Chinese Yuan: as he explained "given our views on credit contraction in Asia, and in China in particular, let's say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there's one thing that is going to happen: China is going to have to dramatically devalue its currency." He even went so far as to give a timeframe: "we think it's going to be in the next 12-18 months."

Then, during the Davos boondoggle, none other than the man who broke the Bank of England, George Soros, noted that he too is shorting the Yuan, which in turn prompted China's communist party mouthpiece, the People's Daily to officially warn Soros to back off adding in a petulant, schoolyard bully-ish voice "You Cannot Possibly Succeed, Ha, Ha." Yes, China really said that.

Then, just last week, in a sad letter in which Bill Ackman blamed everyone and everything for his pathetic performance in 2015, most notably hedge fund herding and hotels, which he was so eager to exploit on the way up with presentation-filled idea dinners, and so eager to blame for dumping his names on the way down, we found out that Ackman had also decided to put on a Yuan devaluation trade just days before the Yuan devaluation announcement (perhaps he read our post from August 8, which said that a devaluation is imminent 3 days before it was revealed):

"Last summer, we built large notional short positions in the Chinese yuan through the purchase of puts and put spreads in order to protect the portfolio in the event of unanticipated weakness in the Chinese economy...Two days after we began to build our position in the Chinese yuan, China did a 2% surprise devaluation which substantially increased the cost of the options we had intended to continue purchasing. We continued to build the position thereafter by buying slightly more out of the money puts and selling further out of the money puts so as to keep the cost and risk/reward ratio of the position attractive."

Sadly, Ackman has still to make money on this trade.

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"The BoJ's NIRP Will Result In More Currency Wars And Global Growth Slowdown"

As reported previously the Bank of Japan, which not even the most optimistic central bank watchers had expected would unleash anything remotely as aggressive to prevent price discovery, stimulate asset prices and boost the exporting of deflation, became the latest central bank who, after a 5 to 4 vote, unleashed the monetary neutron bomb of Negative Interest Rates in the process pulling an anti-Draghi and shocking markets, even if admitting it can no longer boost QE due to previously discussed concerns it would run out of monetizable bonds in the very near future.

The initial market reaction was one of shocked surprise, with the Yen crashing and risk soaring, subsequently followed by disappointment that QE may be now be officially over and the BOJ will be stuck with negative rates, and then euphoria once again regaining the upper hand if only for the time being as yet another central banks does all it can to levitate asset prices at all costs, even if in the long run it means even more deflationary exports from all other banks and certainly China which will now have to retaliate against the devaluation of its "basket" of currencies.

The BOJ's excuse was simple: everyone else is doing it: as Kuroda said quickly after the NIRP announcement, the BOJ’s monetary policy is “just the same as central banks in the U.S. and Europe,” and “doesn’t target currencies.” Well, it does target currencies, but he is right: it is the same as policy in Europe and the US, where as a reminder, NIRP is coming next.

The Japanese government loved it, of course, since recent Japanese data has been ugly and getting worse, and since it allows Abe to punt all reform policies to the BOJ. Sure enough, moments ago Chief Cabinet Secretary Yoshihide Suga spoke to reporters in Tokyo. He said that the BOJ made the appropriate decision and that he welcomes BOJ’s new method aimed at achieving 2% inflation target, adding that he "can sense the BOJ’s strong determination." He said that a delay in hitting price target due to factors such as lower oil prices than expected.

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The Federal Reserve Just Made Another Huge Mistake

As stocks continue to crash, you can blame the Federal Reserve, because the Fed is more responsible for creating the current financial bubble that we are living in than anyone else.  When the Federal Reserve pushed interest rates all the way to the floor and injected lots of hot money into the financial markets during their quantitative easing programs, this pushed stock prices to wildly artificial levels.  The only way that it would have been possible to keep stock prices at those wildly artificial levels would have been to keep interest rates ultra-low and to keep recklessly creating lots of new money.  But now the Federal Reserve has ended quantitative easing and has embarked on a program of very slowly raising interest rates.  This is going to have very severe consequences for the markets, but Janet Yellen doesn’t seem to care.

There is a reason why the financial world hangs on every single word that is issued by the Fed.  That is because the massively inflated stock prices that we see today were a creation of the Fed and are completely dependent on the Fed for their continued existence.

Right now, stock prices are still 30 to 40 percent above what the economic fundamentals say that they should be based on historical averages.  And if we are now plunging into a very deep recession as I contend, stock prices should probably fall by a total of more than 50 percent from where they are now.

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Track the Fed's Unraveling

Dominant Social Theme: The Fed needs to be reined in. Its actions need to be calibrated. Its results need to be further focused. 

Free-Market Analysis: Here's an analysis by The Hill that is half right. The part that is wrong we'll mention later in this analysis. The part that is right we'll discuss now. 

The Hill is not exactly a muckraking publication but in this exposé it provides us with a good history lesson. 

In fact, we learn the Fed's dual mandate is actually a triple mandate and that the third part of the mandate is simply ignored by the Fed. 

The Humphrey-Hawkins Act ... decreed that the inflation rate should be brought down to zero by 1988; that the federal government should achieve and maintain a balanced federal budget; and that the United States should promote a "sound and stable international monetary system." 

The legislative language amending the Federal Reserve Act explicitly directs the Fed to aim its efforts at achieving not two, but rather three objectives, i.e., "to promote the goals of maximum employment, stable prices, and moderate long-term interest rates." 

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Former BIS Chief Economist Warns of Massive Debt Defaults, Need for Debt Jubilee; Fingers Europe as First in Line

When you hear an orthodox economist, particularly one who was early to warn of the dangers of real estate bubbles around the world, speaking of a debt jubilee as the best of bad option, you know a crunch is coming. Here is the key quote from William White, former chief economist of the Bank of International Settlements, in an exclusive interview with Ambrose Evans-Pritchard of the Telegraph:

The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 years, as far back as the Sumerians.

White gives a dire set of underlying causes, and one of them is what economists would call a lack of policy space, which in layspeak means “no remedies available to treat the disease.” Yet even though White is almost certainly correct as to the endgame, which is that many people who hold financial assets will find that they are worth a lot less than they believe, one of the reasons is that even people like White, as he exhibits in this interview, subscribe to economic beliefs that are part of the problem. In other words, there are treatments that would work, even now, but mainstream economist reject them and thus look as if they will have to relearn the lessons of the Great Depression.

Mind you, White is largely correct, most of all in his pointing out that debts need to be written down, and if they aren’t in a formal manner, they will be forcibly written down, via default. But where he errs is in deeming debt always and ever bad, and in further not acknowledging (or recognizing) that for a fiat currency issuer like the United States, using debt to finance government spending is a political requirement, not an economic one. The federal government could simply deficit spend, but our funding procedures are a holdover from the gold standard era. Thus some of the lack of policy space he complains about is due to self-imposed constraints, like the perverse and self-destructive fear of running deficits in economies that are tipping into deflation and have plenty of underutilized resources.

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Why Junk Bonds Will Sink Stocks

“Some very critical things are hidden.”

After the white-knuckle sell-off of global equities that was finally punctuated by a rally late last week, everyone wants to know: Was this the bottom for stocks? And now Moody’s weighs in with an unwelcome warning.

If you want to know where equities are going, look at junk bonds, it says. Specifically, look at the spread in yield between junk bonds and Treasuries. That spread has been widening sharply. And look at the Expected Default Frequency (EDF), a measure of the probability that a company will default over the next 12 months. It has been soaring.

They do that when big problems are festering: The Financial Crisis was already in full swing before the yield spread and the EDF reached today’s levels!

And so, John Lonski, chief economist at Moody’s Capital Markets Research, has a dose of reality for stock-market bottom fishers:

For now, it’s hard to imagine why the equity market will steady if the US high-yield bond spread remains wider than 800 basis points [8 percentage points]. Taken together, the highest average EDF metric of US/Canadian non-investment-grade companies of the current recovery and its steepest three-month upturn since March 2009 favor an onerous high-yield bond spread of roughly 850 basis points.

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The Next "Significant Risk For The S&P 500" - Kolanovic Reveals "The Macro Momentum Bubble"

Yesterday when we presented Tom DeMark's latest technical forecast, which anticipates a 5-8% bounce in risk before the next leg lower in equities, we said to "look for the next few days to see if DeMark still has his magic" adding that "we, on the other hand, would rather wait for "Gandalf" Kolanovic' next take."

We didn't have long to wait: moments ago JPM's head quant, whose uncanny track record of predicting every major market inflection point has been duly documented here, laid out his latest thoughts on the negative feedback loop that is "becoming a significant risk for the S&P 500" but also showed what he thinks is an odd divergence between various asset classes, to wit: "as some assets are near the top and others near the bottom of their historical ranges, we are obviously not experiencing an asset bubble of all risky assets, but rather a bubble in relative performance: we call it a Macro-Momentum bubble."

His warning: beware the bursting of the macro-momentum bubble.

Here is the latest warning from the man whose every single caution so far has played out virtually as predicted:

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The U.S. Is At The Center Of The Global Economic Meltdown

While the economic implosion progresses this year, there will be considerable misdirection and disinformation as to the true nature of what is taking place. As I have outlined in the past, the masses were so ill informed by the mainstream media during the Great Depression that most people had no idea they were actually in the midst of an “official” depression until years after it began. The chorus of economic journalists of the day made sure to argue consistently that recovery was “right around the corner.” Our current depression has been no different, but something is about to change.

Unlike the Great Depression, social crisis will eventually eclipse economic crisis in the U.S. That is to say, our society today is so unequipped to deal with a financial collapse that the event will inevitably trigger cultural upheaval and violent internal conflict. In the 1930s, nearly 50% of the American population was rural. Farmers made up 21% of the labor force. Today, only 20% of the population is rural. Less than 2% work in farming and agriculture. That’s a rather dramatic shift from a more independent and knowledgeable land-utilizing society to a far more helpless and hapless consumer-based system.

What’s the bottom line? About 80% of the current population in the U.S. is more than likely inexperienced in any meaningful form of food production and self-reliance.

The rationale for lying to the public is certainly there. Economic and political officials could argue that to reveal the truth of our fiscal situation would result in utter panic and immediate social breakdown. When 80% of the citizenry is completely unprepared for a decline in the mainstream grid, a loss of savings through falling equities and a loss of buying power through currency destruction, their first response to such dangers would be predictably uncivilized.

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"What To Own In An Equity Death Spiral"

Just one month ago, BofA's excited head equity strategist Savita Subramanian told Barron's that storm clouds would disperse and that the S&P would close out 2016 at 2,200, incidentally the same level as her year ago forecast for where 2015 would close. Fast forward to today and things are far less euphoric.

This is what Savita writes in a note released overnight:

Correction or bear market? The S&P 500 is in correction territory, the Russell 2000 and almost 80% of regional stock indices are in bear markets. The average S&P 500 stock is in a bear market - down more than 25% from its 52-week high. Stocks are down a lot. Let’s move on.

Ok moving on.

Let's focus just on energy, where things are a disaster: "Energy is in a profits recession but Energy stock prices have fallen by more than the market falls during a recession (-44% vs. -40%), the Energy recession has lasted twice as long as a typical recession, and Energy earnings have seen 2x the cut that the S&P 500 typically sees (-65% vs. -29%)."

What about the economy?

Same story for the economy: should we care whether or not the NBER will one day deem this slowdown an official recession, if PMIs suggest that manufacturing sectors have been in a recession in the three biggest economies (China, US, India) and Energy has been in a profit recession that has lasted twice as long as a typical economic recession.

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The Oil Crash Of 2016 Has The Big Banks Running Scared

Last time around it was subprime mortgages, but this time it is oil that is playing a starring role in a global financial crisis.  Since the start of 2015, 42 North American oil companies have filed for bankruptcy, 130,000 good paying energy jobs have been lost in the United States, and at this point 50 percent of all energy junk bonds are “distressed” according to Standard & Poor’s.  As you will see below, some of the big banks have a tremendous amount of loan exposure to the energy industry, and now they are bracing for big losses.  And the longer the price of oil stays this low, the worse the carnage is going to get.

Today, the price of oil has been hovering around 29 dollars a barrel, and over the past 18 months the price of oil has fallen by more than 70 percent.  This is something that has many U.S. consumers very excited.  The average price of a gallon of gasoline nationally is just $1.89 at the moment, and on Monday it was selling for as low as 46 cents a gallon at one station in Michigan.

But this oil crash is nothing to cheer about as far as the big banks are concerned.  During the boom years, those banks gave out billions upon billions of dollars in loans to fund exceedingly expensive drilling projects all over the world.

Now those firms are dropping like flies, and the big banks could potentially be facing absolutely catastrophic losses.  The following examples come from CNN…

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The Financial Apocalypse Accelerates As Middle East Stocks Crash To Begin The Week

It looks like it is going to be another chaotic week for global financial markets.  On Sunday, news that Iran plans to dramatically ramp up oil production sent stocks plunging all across the Middle East. Stocks in Kuwait were down 3.1 percent, stocks in Saudi Arabia plummeted 5.4 percent, and stocks in Qatar experienced a mammoth 7 percent decline.  And of course all of this comes in the context of a much larger long-term decline for Middle Eastern stocks.  At this point, Saudi Arabian stocks are down more than 50 percent from their 2014 highs.  Needless to say, a lot of very wealthy people in Saudi Arabia are getting very nervous.  Could you imagine waking up someday and realizing that more than half of your fortune had been wiped out?  Things aren’t that bad in the U.S. quite yet, but it looks like another rough week could be ahead.  The Dow, the S&P 500 and the Nasdaq are all down at least 12 percent from their 52-week highs, and the Russell 2000 is already in bear market territory. Hopefully this week will not be as bad as last week, but events are starting to move very rapidly now.

Much of the chaos around the globe is being driven by the price of oil.  At the end of last week the price of oil dipped below 30 dollars a barrel, and now Iran has announced plans “to add 1 million barrels to its daily crude production”…

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Lowest Ever: The Baltic Dry Index Plunges To 394 As Global Trade Grinds To A Standstill

For the first time ever, the Baltic Dry Index has fallen under 400.  As I write this article, it is sitting at 394.  To be honest, I never even imagined that it could go this low.  Back in early August, the Baltic Dry Index was sitting at 1,222, and since then it has been on a steady decline.  Of course the Baltic Dry Index crashed hard just before the great stock market crash of 2008 too, but at this point it is already lower than it was during that entire crisis.  This is just more evidence that global trade is grinding to a halt and that 2016 is going to be a “cataclysmic year” for the global economy.

If you are not familiar with the Baltic Dry Index, here is a helpful definition from Wikipedia…

The Baltic Dry Index (BDI) is an economic indicator issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides “an assessment of the price of moving the major raw materials by sea. Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain.”

The BDI is one of the key indicators that experts look at when they are trying to determine where the global economy is heading.  And right now, it is telling us that we are heading into a major worldwide economic downturn.

Some people try to dismiss the recent drop in the Baltic Dry Index by claiming that shipping rates are down because there is simply too much capacity out there these days.  And I don’t dispute that.  Without a doubt, too many vessels were built during the “boom years”, and now shipbuilders are paying the price.  For example, Chinese shipyards reported a 59 percent decline in orders during the first 11 months of 2015…

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Why Larry Summers is Wrong and Bernie Sanders is Right on Glass Steagall

Since Clinton and her operatives have become aggressive in trying to discredit Bernie Sanders on issues where he both has a better track record and better proposals, it’s time for a wee reality check, in this case, on Sanders’ financial reform package.

There’s a lot to like, for instance his insistence that executives be prosecuted for serious misconduct and his backing of a Post Office Bank. There are also some things that need to be reworked, like his usury ceiling proposal. Classical economists like Adam Smith were keen supporters of usury ceilings because they could see the consequences of letting lenders charge whatever interest rate they could get. Creditors targeted wealthy gamblers first and foremost, and the rates they were willing to pay was punitively high compared to what productive enterprises could support. Thus Smith and his colleagues saw usury limits as key to forcing lenders to find the best targets at a reasonable rate of interest, rather than search out the most reckless, who tended also not to be socially beneficial users of funds either. The failing with the Sanders proposal is that he sets as fixed limit of 15.9%; it should be set in relationship to prevailing interest rates, as well as the length of the loan.

Larry Summers, acting as a proxy for Team Clinton, took a swipe at the Sanders’ views in a Washington Post op-ed at year end. Admittedly this was a case of dueling op-eds; Summers was responding to a Sanders article in the New York Times which outlined his reform priorities.

However, one of Summers arguments, and one that Clinton has taken up now that Sanders has set forth his plan in more detail, is that Sanders’ “Glass Steagall” reform idea is all wet.

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