There is one thing riskier than investing in a free market: investing in a rigged market when you think the central bank has your back. At some point, the free market returns with a vengeance, like a coiled spring made out of pure risk. That time may be coming soon. When you devalue money and distort the supposed risk-free rate, you devalue every aspect of the capital structure, and of society itself.
The great irony of free-market capitalism is that the only way to establish an enduring security is to embrace innovation and adaptation, the very processes that generate short-term insecurity. Attempting to guarantee security leads to risk being distributed to others, or concentrated within the system itself. When the accumulated risk manifests, the system collapses.
As with everything in life, there are winners and losers, and the recent rout in the oil market is no different. The four flip sides below should be closely monitored in the coming months, for the oil market will be impacted by these factors – regardless of if they change their tune, or become a broken record.
With NIRP having turned traditional risk-free assets into guaranteed losers, investors have poured more than $9 billion into junk bond ETFs YTD, and while common sense dictates that buying at the top of an epic HY bubble just ahead of a rate hike cycle and against a backdrop characterized by disappearing liquidity in the secondary market for corporate credit is a fool's errand, most investors feel they have little choice.
Ben Bernanke’s skin is as thin, apparently, as is his comprehension of honest economics. The emphasis is on the “honest” part because he is a fount of the kind of Keynesian drivel that passes for economics in the financially deformed world that the Bernank did so much to bring about.
Gas prices at the pump have not risen this dramatically at this time of year since 2007. The last 3 months have seen pump prices soar almost 30%. The last 7 times that gas prices have accelerated this fast, stocks have corrected. Given the plethora of excuse-makers saying hoiw low gas prices were "unequivocally good" for everyone, we can only assume that surging gas prices are "unequivocally bad" for everyone?
Despite the exuberant surge in crude oil prices (as Yemen-Saudi tensions rise), Energy stocks are tumbling off the opening squeeze. In a delayed reaction, Shale stocks are now all in shambles as Einhorn's presentation seems to be sinking in...
Americans might be quite surprised to know that even with all the U.S. Government sanctions and threats of war with Russia, America still imports a significant amount of petroleum from the former communist country. How much petroleum does the United States import from Russia? Actually, a lot more when we focus on net imports...
For the first time in 4 years, Appaloosa Management's David Tepper is not the highest-earning hedge fund manager in the world. Plunging from No.1 to tied-for-11th (with a mere $400 million earned last year) Tepper appears to have suddenly found investing difficult now that The Fed has stopped printing money (up just 2.2%). What is more ironic, perhaps, is that the other alleged beneficiary of Fed largesse (and recent hirer or blogger Ben Bernanke) - Citadel tops the list with Ken Griffin making $1.3 billion last year.
No one stays on top forever, and to be sure, when Bill Gross' long reign at the top of the fixed income universe finally came to a sudden and rather unceremonious end last October, the race to lay claim to the inevitable outflows from PIMCO's Total Return Fund was on. Now, a winner has emerged — and it's not Jeff Gundlach.
We can officially confirm that the gold redemptions from the world's (allegedly) largest gold vault have continued, and another 10 tons of gold was put on a ship (or plane) in March in an unknown direction. Since Germany and the Netherlands started repatriating a portion of their gold held in Manhattan, some 217 tons of gold has been redeemed starting in February 2014 and just under 200 tons in the past 12 months.
On the heels of Monday's news that the IMF may demand a write-off of Greek debt by European creditors before the organization will disburse its portion of a €7.2 billion aid tranche to Athens, it now appears the situation has deteriorated further with unnamed Greek officials reporting "serious disagreements" between the IMF and the EU which may make a compromise "impossible" by the critical May 12 deadline.
Despite a good start, since early March when The ECB began its bond-buying bonanza, things have not been going the way Mario Draghi had hoped. While inflation data inflected modestly higher (cough oil cough), European bond yields (and peripheral bond spreads) have widened notably. Whether this is "sell the news" trading, Gross-Gundlach-driven unwinds, or Greek "serious disappointment" contagion (Greek 10Y bond yields are up over 200bps from the announcement in January of ECB QE) is unclear... but what is clear is that if ECB bond-buying is not pressuring yields lower then how can they hope to contain real Grexit contagion?
This morning's collapse in the trade balance combined with weak export orders in the survey data suggests the decoupling meme is blowing up. However, it seems investors are losing faith in The Fed as there is broad-based selling in stocks, bonds, and the dollar (with commodities bid). Stocks are now in the red post-FOMC.