It never ceases to amaze (and amuse) us how much time big bank "economists" and "strategists" spend on Zero Hedge - even though we have never compensated said banks either directly or with soft dollars - instead of doing research, or spending time with their paying clients.
Just one week ago, it was CitiFX's Brent Donnelly who was "critical" why the financial media, supposedly, "highlights bearish stories" (perhaps has has missed the past 8 years of CNBC "reporting"... we don't know). This is what he said:
Give the people what they want
In an email I sent Monday, I was critical of the financial media for highlighting bearish stories but ignoring bullish ones. I was thinking about this and realized that maybe you can’t blame the commentators… People just gravitate towards bad news—humans are much more interested in watching a car crash or shooting on TV than a feel-good story.
I looked at Google searches related to the stock market. The results (Chart1) speak for themselves. My conclusion is that it’s not fair to blame Zerohedge and friends for the permabear newsflow… They’re just giving the people what they want!
To which we had a simple, and logical, response:
What people want is not bearish news, what they want is the truth, something they, for whatever reason, feel they can't get from the mainstream media, which in turn has opened up opportunities to alternative media outlets such as "Zerohedge and friends." Incidentally, these outlets are not only not permabears - we remind Mr. Donnelly that our "permabearishly enough "Don’t look down - You might find too many negatives" and which we summarized in the following post: "Citi: we have a problem."
As for whether Mr. Donnelly has a problem with "Zerohedge and friends" laying out those things which he prefers not to discuss, we would recommend he stay away from the most recent report written by his Citi co-worker, Matt King, titled permabearishly enough "Don’t look down - You might find too many negatives" and which we summarized in the following post: "Citi: we have a problem."
If Mr. Donnelly is still confused by the difference between truth and "bearish news", we are happy to explain it further. That, or maybe he should just read the following story just released by our "permabearish friends" at Bloomberg... who simply want to give people what they want:
As for the question whether Zero Hedge traffic correlates with market volatility, we would like to help Brent and everyone else who would rater extrapolate rather than use actual data, with the following self-explanatory chart.
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And just as we though that bankers had learned their lesson and gone back to actually doing what they are paid to do - i.e., forecasting the future instead of reading blogs, yesterday we found that that was not the case.
In a note released on Saturday, Jefferies' Thomas "TJ" Thornton, wrote the following epic trolling of Zero Hedge by invoking none other than Donald Trump:
US - “Lightweights like Zero Hedge might point to a sub-50 ISM as another reason to hate equities, but there’s a reason why little ZH is a choker, a reason he’s got one of the worst records in predicting markets anywhere, just a harrable record, harrable, I mean, successful people have pointed out that he’s 0 for 2600. He’s succeeded at being wrong. Success is my son-in-law, I’m successful, my daughter is both beautiful and successful. I have many successful friends.” Made up quote, but the point is that it’s hard to be successful when just reacting to backward looking information. Our work suggests that by the time the ISM breaks 50 to the downside the market is already pricing in much of the concern--actually a break through 50 to the downside tends to be quite positive for the market over the next 12M even when you include recessionary periods. When that break of 50 hasn’t been associated with an immediate recession (i.e. perhaps now), median market performance is up 11% over the next 6M, and 21% over the next 12M. This week we got a better than expected ISM, and skeptics point to the fact that it’s still below 50, but that may be a positive. See supporting chart, table and methodology below. (T.J. Thornton, US Product Management).
We are curious just what the explanation of "0 for 2600" means, since those who actually read the articles instead of regurgitating what they read about it on Twitter, know that "little ZH" does not make forecasts or predictions, as our recurring annual year end piece very clearly notes, to wit:
With all that behind us, what is in store for 2016? We don't know: as frequent and not so frequent readers know, we do not pretend to be able to predict the future and we don't try (despite endless allegations that we constantly predict the collapse of everything): we leave the predicting to the "smartest people in the room" who year after year have been dead wrong. We merely observe and try to find what is entertaining, amusing, surprising or grotesque in an increasingly sad world.
In other words, we are merely a data-conveying messenger, one which increasingly more banks feel obligated to shoot for some unknown reason, although to be honest we are grateful for the constant advertising. We couldn't hit record traffic in February with a zero advertising budget if it wasn't for their tireless efforts to namedrop.
We do know, however, who Jefferies is: for years CEO Dick Handler has been scrambling to create something more than just a middle-market broker whose bread and butter have been two things: trading and underwriting junk bonds for small and medium companies (B2/B with an EBITDA of $50MM or less is the sweetspot), and hiring recently fired UBS and other bulge bracket bankers in hopes of getting over its perpetual chip on its shoulder. Bankers such as disgraced ex-UBS healthcare banker Sage Kelly who was recently described as a "bed-pooping, cokehead." He was promptly terminated after details of how senior Jefferies bankers allegedly attract new business, namely cocaine binges interspersed with forced group sex.
Dick failed.
Jefferies, or Jeffries as it is known in all offering memos before the bank has to spend tens of thousands in hourly lawyer fees to correct the bank's official name, is also the place where novelty economists are hired to make loud noises and write hypnotically stupid sentences just to attract attention and stand out above the crowd. Case in point - the junk bond-focused bank's "chief market strategist" shown below in a recent Bloomberg interview wearing his "I Heart QE" hat.
Typical Wall Street economist: betting it all on central bank bailouts for 2600 days running pic.twitter.com/knCOTCsDve
— zerohedge (@zerohedge) February 21, 2016
That said, going back to Jefferies masterful trollery of Zero Hedge, we promptly responded with a question of our own: a tweet showcasing Jefferies revenue success in its most important group: fixed income, which to be honest was at least positive in Q4. That's more than Jefferies can say about its Q3 fixed income results when revenue was, drumroll, negative.
Visualizing Jefferies' "success" pic.twitter.com/0fbPHEqXRg
— zerohedge (@zerohedge) March 5, 2016
Oddly enough, it was these same Jefferies strategists who were supposed to react to forward looking information in 2015 when instead their lack of "vision" resulted in the worst quarter in recent Jefferies history. This is what Jefferies CEO Dick Handler said in mid-December:
"Fixed Income, which has been a solid to excellent business for Jefferies in prior years, did not perform well in 2015. Almost all our Fixed Income credit businesses were impacted by the prolonged anticipation of the lift-off in Federal Reserve rate-setting, the collapse in the global energy markets (where we have long been an active adviser, capital raiser and trader), reduced originations in leveraged finance and meaningfully reduced liquidity. There were a number of periods of extreme volatility, which were followed by periods of low trading volume."
He hopefully added that "with our exposures in distressed securities reduced to current levels, there should be no similar impact on our future results.”
Wait, isn't it the job of Jefferies' crack economists to look at "forward looking information" and make appropriate adjustments before the bank is slaughtered with its two worst trading quarters in years? It almost appears as if "TJ" was too busy reading Zero Hedge in 2015 than actually advising his boss to dump those billions in junk bonds Jefferies carried on its balance sheet and which led to "TJ" having a "junk" bonus to go with his forecasting effort.
And to think there were those who predicted, looking at "forward looking information" that with its purchase of Jefferies, the "mini Berkshire' known as Leucadia would promptly soar in value. Using "backward looking data" that appears not to have happened.
But the moment of crystal-shattering poetic justice came just hours after "TJ" trolled "lightweight choker Zero Hedge" for being too negative when Reuters reported that...
More details from Reuters:
Jefferies Group LLC will merge its junk-rated loans and bonds business with the junk debt unit of its joint venture with MassMutual Financial Group, according to people familiar with the matter, in the biggest reorganization by a U.S. investment bank since the leveraged finance markets seized up last year. As a result, Kevin Lockhart, global head of leveraged finance, and Adam Sokoloff, global head of sponsors, have left Jefferies, the sources said, asking not to be identified as the moves have not been announced.
Banks have had trouble selling debt related to leveraged buyouts since late last year. Junk bond markets seized up on concerns about the prospect of higher interest rates, the health of the U.S. economy, and how those two factors would affect companies with the shakiest financial footing.
According to the people familiar with the matter, Jefferies' leveraged finance business will be combined with the junk debt origination team of Jefferies Finance LLC, the joint venture between Jefferies and U.S. life insurer MassMutual.
The punchline: "Jefferies' management presented the changes internally as a way to boost efficiency and focus on clients, rather than a response to troubled deals, the sources said. It was not immediately clear if the combination would offer Jefferies more financial resources to increase lending."
Translation: the question is whether Jefferies "forward looking"Q1 fixed income revenues will be positive or will revert to negative for the second quarter in three.
We could continue but frankly we are starting to feel bad writing about the troubles facing the mid-tier junk bond underwriter.
As for whether a "backward looking" sub-50 PMI is irrelevant, we will let "TJ" ask his just fired former co-workers if it suggests the worst is behind us, no matter how one looks at it...