Yesterday, just before the open, to help allay any confusion about what the market would do and how to trade it, we provided the perspective of the biggest fade in market history, Dennis Gartman, who was quite bearish.
Clearly we wish that we had had the presence of mind to have been aggressively net short of equities, but we did not, nor are we that lucky. We shall, however, look upon any intra-day rally in the market as a point at which to become modestly shorter of the market. That is, given the range thus far with the low in the S&P futures just below 2000 in early trading, and given that the futures are now 2015, this is sufficient to sell into to become slightly net shorter of the market. This shall be especially worthy of selling into given that the futures “gapped” lower of course and given that the “gap” has been closed on this modest rally from the lows.
As we further said, “we note this just in case the BOJ needed one more reason to buy a few yards of USDJPY and send the S&P right back up to 2100.” Continue reading »
The world’s biggest hedge fund, Ray Dalio’s Bridgewater Associates got into some hot water in the past few months when it was accused by many members of the underperforming “hedge fund hotel” club for being the “risk parity” catalyst that sent the market tumbling in August, and perhaps for being the catalyst for the August 24 market crash.
And while the bulk of Bridgewater’s asset are in various commodities and futures, most of which are never reported to the public, earlier today it did disclose its long holdings in public equities when it filed its latest 13F. Perhaps those accusing Bridgewater of being the market-moving catalyst did have a point, because after posting a total AUM of $10.8 billion at June, this total declined by a whopping 31% to just $7.5 billion as of September 30.
Here is what Brigewater was dumping (and adding). Continue reading »
So many of the exact same patterns that we witnessed just before the stock market crash of 2008 are playing out once again right before our eyes. Most of the time, a stock market crash doesn’t just come out of nowhere. Normally there are specific leading indicators that we can look for that will tell us if major trouble is on the horizon. One of these leading indicators is the junk bond market. Right now, a closely watched high yield bond ETF known as JNK is sitting at 35.77. If it falls below 35, that will be a major red flag, and it will be the first time that it has done so since 2009. As you can see from this chart, JNK started crashing in June and July of 2008 – well before equities started crashing later that year. A crash in junk bonds almost always precedes a major crash in stocks, and so this is something that I am watching carefully.
And there is a reason why junk bonds are crashing. In 2015 we have seen the most corporate bond downgrades since the last financial crisis, and corporate debt defaults are absolutely skyrocketing. The following comes from a recent piece by Porter Stansberry… Continue reading »
Having told the world that it will borrow billions (and cut capex) to “return all free cash to investors,” it appears ratings agency S&P just needed to remind McDonalds that Shareholder-friendly releveraging no longer comes for free…
*S&P LWRS MCDONALD’S RTG TO ‘BBB+’ ON SHR BUYBACK PLANS
Who could have seen that coming?
Why won’t the American people listen to the warnings? David Stockman was a member of the U.S. House of Representatives from 1977 to 1981, and he served as the Director of the Office of Management and Budget under President Ronald Reagan from 1981 to 1985. These days, he is running a website called “Contra Corner” which I highly recommend that you check out. Stockman believes that a global “debt super-cycle” that has been building for decades is now bursting, and he is convinced that the consequences for the U.S. and for the rest of the planet will be absolutely catastrophic. His findings are very consistent with what I have been writing about on The Economic Collapse Blog, and if Stockman is correct the times ahead of us are going to be exceedingly painful. Continue reading »
Overnight, the SNB which unlike the Fed and the other “serious” central bank hedge funds, released a 13-F updating on its latest stock portfolio. We learned that in the quarter in which AAPL stock tumbled to $92 during the August 24 ETFlash crash, the Swiss money printing authority which reported a record $20 billion loss in the second quarter, and a record $52 billion in the first half, added another 909,000 AAPL shares, bringing its new grand total to 10.3 million shares,
The 1st of October came and went without financial armageddon. Veteran forecaster Martin Armstrong, who accurately predicted the 1987 crash, used the same model to suggest that 1 October would be a major turning point for global markets. Some investors even put bets on it. But the passing of the predicted global crash is only good news to a point. Many indicators in global finance are pointing downwards – and some even think the crash has begun.
Let’s assemble the evidence. First, the unsustainable debt. Since 2007, the pile of debt in the world has grown by $57tn (£37tn). That’s a compound annual growth rate of 5.3%, significantly beating GDP. Debts have doubled in the so-called emerging markets, while rising by just over a third in the developed world. Continue reading »
Last night we reported the shocking news that none other than “China’s Carl Icahn” (or its “Warren Buffett” depending on the news source), Xu Xiang – who has ranked China’s 188th richest man with $2.2 billion in net worth according to the Hurun rich list – had been arrested in what was the latest crackdown against “malicious short sellers”, with Bloomberg adding that Shanghai police raided hedge fund Zexi Investment on Sunday, taking away computers and other materials, “in the latest attempt by Chinese authorities to crack down on strategies blamed for exacerbating a $5 trillion stock-market rout.”
Norway’s $860 billion sovereign wealth fund (tasked with managing the country’s vast oil wealth) just had its worst quarter in 4 years and its first back-to-back quarterly loss since 2009 after an array of EM bets went awry. Meanwhile, the government is set to start making withdraws from the fund as slumping crude prices have effectively reduced inflows to zero.
Earlier this month, it was reported that less than two weeks before the economic collapse of 2008, several members of Congress took their money out of the stock market. Many high ranking government employees were given a heads-up about the impending market crash in secret meetings with the Federal Reserve and the Treasury Department. Then they used that information to engage in insider trading.
It was revealed that Senator Shelley Capito and her husband sold $350,000 worth of Citigroup stock at $83 per share, just one day before the stock dropped to $64 per share. Another shady trader was Congressman Jim Moran, who had his biggest trading day of the year days after the secret meeting, sellings stock in nearly 100 different companies. Continue reading »
Have you noticed that things have gotten eerily quiet in the month of October? After the chaos of late August and early September, many had anticipated that we would be dealing with a full-blown financial collapse by now, but instead we have entered a period of “dead calm” in which things have become exceedingly quiet in almost every way that you can possibly imagine. Other “watchmen” that I highly respect have made the exact same observation. Even though the economic numbers are screaming that we have entered a global recession, they aren’t really make any headline news. A whole host of major financial institutions around the planet are currently in danger of collapsing and creating the next “Lehman Brothers moment”, but none of them has imploded just yet. And of course Barack Obama seems bound and determined to start World War III. On Monday, it was announced that he is sending a guided missile destroyer into Chinese waters in the South China Sea. The Chinese have already stated that they might just start shooting if this happens, but Barack Obama doesn’t seem to care. But until the shooting actually begins, that is not likely to upset the current tranquility that we are enjoying either. Continue reading »
Now that Mario Draghi has telegraphed more easing from the ECB come December, the question is what exactly the bank will announce. Will Draghi cut the depo rate further into negative territory? How long into 2017 will PSPP be extended? Given the scarcity of purchasable paper, will the ECB expand the universe of eligible assets and if so, will Draghi go full-Kuroda knowing full well that you never, ever go full-Kuroda?
H/t reader squodgy:
“Beyond comprehension, is somebody extending the cliff edge on a daily basis?
A 15% increase in motor vehicle inventories means only one think, nobody is buying.
But it’s ALL durables AND non-durables.
That means nobody is buying anything.
This is classic stagnation, but essential goods prices continue to rise, which is stagflation, the classic pre-cursor to a crash.
Why can’t they get it over with? What is their real agenda?
Are they waiting for something? It can only be a false flag big event as predicted by so many.”
This was a data set we didn’t need. Not one bit. It mauled our hopes. But the US Census Bureau dished it up anyway: wholesales declined again, inventories rose again, and the inventory-to-sales ratio reached Lehman-moment levels.
In August, wholesales dropped to $445.4 billion, seasonally adjusted. Down 1.0% from July and down 4.7% from August last year. Continue reading »
With VIX collapsing 10 days straight (for the first time since October 2010), one might be forgiven for thinking “everything is awesome.” However, as always, the real news is in the nuance that the mainstream often misses. As VIX has plunged (complacency about ‘normal’ risk), Skew (which measures extreme tail risk) has exploded to its highest ever…
Skew measures the perceived tail risk of the market via the pricing of out-of-the-money options
Generally, a rise in skew indicates that ‘crash protection’ is in demand among institutional investors (institutional/professional investors are the biggest traders in SPX options).
Sometimes less is more (less good data is moar good for stocks) and in the case of Marc Faber’s recent appearance on Bloomberg’s “What’d You Miss”, 66 seconds of honesty was all that the hosts could take.
The Gloom, Boom & Doom report editor notes “we have had a meaningful decline in many stocks already,” and warns it is far from over as market face two possibilities of “longer-term unattractiveness”: “a 1987-style collapse,” or a 1973-74-style slow “sliding slope of hope.”
Financial writer and analyst Bix Weir is not surprised by the Federal Reserve’s policies because it is all part of the long term plan. Weir explains, “The goal, since we went off the gold standard in 1971, has been to run the financial system as long and as hard as possible, sucking up all the benefits of fiat money, and there are very few attempts to slow this mess down. The idea is to put as much money as you can . . . until you have printed so much money the system implodes. This was a Nobel Prize winning paper in the 1960’s called “On the Road to the Golden Age.” It basically says if you have this freedom and flexibility with the monetary system, run it as hard as you can until people stop accepting the unbacked fiat money, then crash the system and go back to something safe and sound after it all blows up. . . . What they need is a big enough bubble so when it crashes, it take out all the derivatives, the malfeasance of the banks, the good guys and the bad guys and all the things going on behind the scenes. They need the bubble so big, and that’s what they are doing right now is blowing the bubble so big everybody feels the effect of a crash.”
When is the next crash coming? Weir says it will all unwind before “the end of this year.” Weir contends, “The decision will need to be made this year. The banks will, once again, come to Congress and say we need money for a bailout. That decision will be made by the U.S. people, not by Congress, not by the Fed and not by the banks. It’s going to come to the people, and I believe they will say no to bailouts.” Continue reading »
After taking a its biggest step lower since 2011 in the past month, why has the selling in the S&P500 stalled? Because, well, hope may not be a strategy but now with the Fed’s credibility rapidly evaporating, it is all investors have, or as Gundlach puts it: “The reason the markets aren’t going lower is people are holding and hoping.” Incidentally, there is a reason why hope is not a strategy: in the end, it always fails.
If anybody takes solace from the recent surge in the markets, they just kid themselves.
World demand is through the floor, corporate share buy backs are endemic to shore up the misleading share prices, profits are non existent, the BDI has been dragging along the sea bed for four years, order books are non existent, production based jobs have been continuously replaced by service jobs in restaurants, bars & hotels, even the retail sector has bombed.
How can anybody with a modicum of logic or common sense find these facts encouraging? This is a reality check.“
Since the start of June, global equity markets have lost over $13 trillion. World market capitalization has fallen back below $60 trillion for the first time since February 2014 as it appears the world’s central planners’ print-or-die policy to create wealth (and in some magical thinking – economic growth) has failed – and failed dramatically. To rub more salt in the wounds of monetray policy mumbo-jumbo, despite endless rate cuts and balance sheet expansion around the world, the last 4 months have seen an 18% collapse – the largest since Lehman.…
Update: And there it is: GLENCORE DEBT INSURANCE COSTS SURGE TO RECORD HIGH; 5-YR CREDIT DEFAULT SWAPS RISE 207BASIS POINTS FROM FRIDAY’S CLOSE TO 757 BASIS POINTS
Those who listened to our reco to buy Glencore CDS at 170 bps in March 2014 can take the rest of the year off. As of this moment, GLEN Credit Default Swap were pushing on 600 bps, 4 times wider, and on pace to take out the 2011 liquidity crunch highs. After that, it’s smooth sailing to all time wides and the start of a self-fulfilling prophecy which leads to the Companys’s IG downgrade and the collapse of trillions in derivative notionals as what may be the trading desk of the biggest commodity counterparty quietly goes out of business.
Glencore is in total free-fall across all markets today. Most worrying for systemic risk concerns is the rush into credit protection that has occurred, as counterparties attempt to hedge their exposures. Forthe first time since 2009, Glencore CDS are being quoted with upfront pricing (something that happens as firms become seriously distressed). Based on the latest data, it costs 875bps per year (or 14% upfront) to buy protection against a Glencore default (which implies – given standard recoveries – a 54% chance of default).
You would think that the simultaneous crashing of all of the largest stock markets around the world would be very big news. But so far the mainstream media in the United States is treating it like it isn’t really a big deal. Over the last sixty days, we have witnessed the most significant global stock market decline since the fall of 2008, and yet most people still seem to think that this is just a temporary “bump in the road” and that the bull market will soon resume. Hopefully they are right. When the Dow Jones Industrial Average plummeted 777 points on September 29th, 2008 everyone freaked out and rightly so. But a stock market crash doesn’t have to be limited to a single day. Since the peak of the market earlier this year, the Dow is down almost three times as much as that 777 point crash back in 2008. Over the last sixty days, we have seen the 8th largest single day stock market crash in U.S. history on a point basis and the 10th largest single day stock market crash in U.S. history on a point basis. You would think that this would be enough to wake people up, but most Americans still don’t seem very alarmed. And of course what has happened to U.S. stocks so far is quite mild compared to what has been going on in the rest of the world.
Right now, stock market wealth is being wiped out all over the planet, and none of the largest global economies have been exempt from this. The following is a summary of what we have seen in recent days… Continue reading »
For USD investors, the collapse in German stocks has crushed returns to the lowest in 2 years. DAX’s collapse this week leaves it closing at Black Monday lows, the lowest since Dec 2014. Perhaps most stunning is German stocks down over 20% since Q€ began…
The DAX is down 3,8% today!
The man who made a billion dollars on Black Monday sums up his strategy perfectly in this excellent FOX Business clip with the money-honey, “I’m a hedge fund manager that actually hedges for his clients. This is something of an old fashioned idea in this day of just gambling on the next Fed bailout.” Spitznagel, who is wholly unapologetic in his criticism of The Fed (and any central planner), unleashes eight minutes of awful truthiness on what is going on under the surface of the so-called ‘market’, concluding ominously, “if August was scary for people, they ain’t seen nothin’ yet.” Continue reading »