Dubai Crude Price Crashes To Lowest Since 2004, Stocks Hit 2 Year Lows

Dubai Light Crude prices have plunged overnight, crashing the spot price below the 2008 lows for the first time, to its lowest since 2004. This is continuing to weigh on Dubai's once-exuberant equity market which just hit fresh 2-year lows as financials and property companies plunge.

All The World's Debt (And Yield)

Define irony: a world in which the past 7 years have been characterized by an unprecedented "search for yield." Well, now that junk debt is finally dumping, and yields are suging (over 8% blended average at last check) virtually nobody wants any of this so highly yielding junk.

People Are Finally Worried About People Being Worried

We won't be shocked if the Fed actually follows through and hikes rates this week. If they put off hiking every time the market has a little hissy fit, they’ll never get off zero. On the other hand, the stress in markets right now is real and growing. Raising interest rates doesn’t seem likely to improve those conditions. With a riot in the junk bond market, a complete lack of inflation and an already weakening economy, we won't be shocked if they pass either. For the first time in years, it appears people are actually worried about people being worried.

Key Events In The Coming "Fed's First Hike In 9 Years" Week

While this may well be the most important week for capital markets in the past 9 years, when the Fed is widely expected to hike rates on Wednesday, precisely 7 years to the day since it cut rates to zero, here are the other key events to watch out for.

SocGen Looks At The Devastation Across Markets, Sarcastically Concludes It Is "Time For A US Rate Hike"

"The solution to uncertainty is cheaper valuations. If problems are priced in, investors can afford to look through near terms concerns and focus on the longer term. Worryingly, we have exactly the opposite situation today. Average stock valuations are close to historical highs – so we have lots of risk and little in the way of valuation cushion.... Time for a US rate rise then?"

Bulls Have One Last Trump Card Up Their Sleeve...

"Our bond fund took a sizeable “hit” on Friday following the news of the refusal on the part of the Third Avenue fund to allow for immediate redemptions where those unable to sell their positions in Third Avenue sold what they could and where they could to gain access to liquidity."

High Yield ETFs Are Already Tumbling In The Pre-Market

Small doors, large crowds. Amid yet more liquidations (Brazilian Bank BTG flushing its European credit exposure and Lucidus US HY fund), the large high-yield bond ETFs are tumbling in pre-market as two years worth of under-water easy-money trend-followers head for the exits from the "highly liquid" ETFs.. . and crush what little liquidity there is in the underlying. When will The Fed step in and buy US HY debt to stymie "fire-sale" prices?

Frontrunning: December 14

  • Oil prices drop towards 11-year lows on worsening glut (Reuters)
  • Third Avenue Seen by Top Investors as Fueling More Carnage (BBG)
  • Lucidus Has Liquidated $900 Million Credit Funds, Plans to Shut (BBG)
  • Investor nerves tested with yuan, oil, Fed in play (Reuters)
  • Junk Bonds Stagger as Funds Flee (WSJ)
  • Seattle lawmakers set to vote on allowing Uber, other drivers to unionize (Reuters)

Why Stocks Have So Far Ignored The Carnage In Credit: Goldman's Five Reasons

Despite the decline in stock valuations, US equities have performed far better than credit, causing investors to ask us, “What does the credit market see that the equity market does not?” Credit markets are reacting to a real deterioration in corporate balance sheets that the equity market has yet to digest. High yield (HY) credit spreads have widened dramatically since June and are currently in territory typical of recessionary environments. In contrast, the S&P 500 is just 6% below its all time high of 2131 reached in May of this year. Here are five observations...