While Carl Icahn's latest ramblings have brought attention to the 'bubble' in high-yield debt, we would note that the HY market has already dramatically diverged from the ongoing bubble in US equities and as we have been discussing for the past year, this is exactly the pattern we saw in 2008. However there is another aspect of the HY market that is flashing red, High yield debt downgrades are the highest since Lehman and the upgrade / downgrade ratio has tumbled to its lowest since the crisis... The last time this happened, Bernanke unleashed QE3 - are we about to see the same in a massive surprise to markets?
Assuming "growth" will fund all promised pensions and entitlements is magical thinking. We're going to have to do better than indulge our Spoiled Brat Economy mindset because "we wuz promised." What we were promised based on faulty assumptions, faulty projections and wishful thinking no longer matters.
While "Greece doesn't matter," the comments by The IMF that Greece needs its debt restructured and thus the creditors' proposals should be implicitly said "Oxi" to, has spooked US equity markets on this quiet illiquid day...
According to a report prepared prior to capital controls and the banking sector meltdown, any deal that included creditor concessions on fiscal reforms would mean Greece's debt load would have to be written down.
It would appear the most transparent administration ever is in trouble with an 'ally' once again. Following its wrist-slap from France last week, and its previous quasi-admission of spying on Merkel and her senior officials (which we are sure President Obama said would never happen again - better to ask for forgiveness than permission?), The Guardian reports Angela Merkel’s chief of staff has asked the US ambassador for a meeting to discuss the latest reports of alleged US spying on Germany.
Americans Not In The Labor Force Soar By 640,000 To Record 93.6 Million; Participation Rate Drops To 1977 LevelsSubmitted by Tyler Durden on 07/02/2015 - 10:53
The devastation of the US labor force continues.
While Russia has been quiet on the sidelines of the Greco-European austerity-for-cash wrestling death match, offering assistance if it is needed and making new friends, it appears Putin is now getting more vocally involved:
*RUSSIA URGES EU TO RESPECT GREECE'S CHOICE IN REFERENDUM: RIA
*RUSSIAN ENVOY SEES NO THREAT OF GREEK EXIT FROM EURO AREA: RIA
A well-timed show of support for Greece from its potential alternate big brother may just be the ammo that Tspiras needs to reassure the people that they should vote without fear. With 3 days to go, we suspect fearmongering will rise.
Presented without comment.
There are two narratives, according to WSJ's Fed whisperer Jon Hilsenrath, that need to be considered when judging the Fed's next steps. First is, the economy stumbled in Q1 but everything will be awesome going forward (so we should hike rates); and a second newer narrative is the turmoil overseas which could be exaggerated by Fed actions. Hilsenrath hints today that despite the miss in jobs data, it remains above 200,000 and "suggests the U.S. economy finished the first half of the year with a solid foundation to weather turbulence from overseas," giving The Fed room to hike.
This has never happened outside of recession... Year-over-year, factory orders dropped 6.3% (adjusted) but 8% non-adjusted, the most since the financial crisis. Against expectations of a 0.5% drop MoM, manufacturers saw new orders tumble 1.0% and previous months were revised dramatically lower. Factory orders has now missed 10 of the last 11 months.
The composition of the US labor force once again deteriorated rapidly with part-time jobs added in June surging by 161,000 while the number of full time jobs tumbled by 349,000.
The ECB has expanded the list of PSPP-eligible SSA bonds, setting the stage for more ECB QE and turning one more conspiracy "theory" into conspiracy "fact."
The news from the recent St. Petersburg Economic Forum, which took place from June 18 to 20, inspired a torrent of speculation on the future direction of energy prices. But the real buzz at the conference was the unexpected but much publicized visit of the Saudi Deputy Crown Prince, as an emissary of the King. The unusually high level delegation from a long-time ally and protectorate of the U.S., like Saudi Arabia, visiting a Russian sponsored economic conference, in a country sanctioned by the U.S. was news enough but could be the first sign of an emerging partnership between the two greatest global oil producers.
The kneejerk reaction to the "miss" in jobs data is that it is great news... and reduces the probability of rate hike being imminent. Stocks are bid (hovering at yesterday's highs), bonds rallied (yields down 4-6bps), gold popped (after being dumped into the print) and the Dollar is tumbling (though seeing a bid and bouncing back)... bad news is good news it seems...
According to the BLS, in June the US added 223K payrolls, less than the expected 233K, even as the the US unemployment rate dropped to 5.3% from 5.4%. Worse, the previous number was revised from 280K to 254K. Worst of all, average hourly earnings were flat despite expectations of a 0.2%, and a big drop from last month's 0.3%.