Archive - Oct 29, 2015

Those were just excuses, it’s not like any of those factors suddenly changed and were fixed magically on October 1^st.

Here is our question: on May 7, the Price-to-Sales ratio of the stock market was 1.8264x. As of this moment it is higher at 1.8408x. So, dear Janet, can you please confirm what the attached chart shows, namely that "equity market valuations" are now even higher than when you said they were "generally quite high", and if so, should we still be buying stocks and why?

For generations, single family housing development was a driver of US economic growth. Today, there is no single family housing industry to speak of. These 7 charts derived from this week’s release of new house sales data from the Census Bureau illustrates just how bad things are.

Stagnation is but a small price to pay, Europeans think, to achieve the goal of everyone being taken care of. 

For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.

The latest batch of European consumer confidence data is a very mixed bag. On the weak side, the French continue to be miserable, notable outliers to the rest of the majors, and German confidence has now fallen for 7 straight months. However, Italians have not been this confident since 2002 and for the first time since 2009, both Italian and Spanish consumer confidence is higher than Germany's. So if everyone is so damn confident, why does Draghi continue to push for moar emergency easing?

Haruhiko Kuroda owns 52% of all Japanese ETFs. And now he wants more. Facing a lack of willing JGB sellers, the BoJ now faces the possibility that ramping up its easing efforts will entail expanding the bank's already elephantine equity portfolio. "At a fundamental level, I don’t support the idea of central banks buying ETFs or equities. Unlike bonds, equities never redeem. That means they will have to be sold at some point, which creates market risk."

"The rise in household savings rates amid so much central bank support is paradoxical to us, and mimics what we highlighted in the credit market earlier this year. Companies in Europe are deleveraging, not releveraging"

Back at the beginning of 2014 - when commercial traders were net long nearly 40,000 options and futures contracts on the US long bond - it marked the peak in yields and preceded a 13 month rally in bonds that took 30-year treasury rates from 4% to 2.25%. Now, as Gavekal Capital's Bryce Coward notes, the commercial traders, aka "smart money," were net long about 61,000 contracts, or 50% more contracts than the peak in 2014. If recent history is any guide then a 1 handle on the 30-year treasury bond could be a reality!

The great buyback manio of the past 3 years may soon be ending, for two key reasons.

Having received the support of the various warring (and whining) factions within the Republican Party, Paul Ryan has just garnered enough votes to become the 54th House Speaker. As CNN reports, Ryan began turning the page on Wednesday, telling reporters after his party's internal vote that, "we are not going to have a House that looks like it's looked the last two years. We are going to move forward. We are going to unify. Our party has lost its vision, and we are going to replace it with a vision."

For the past few weeks we have been detailing the tightening of China capital controls and what that may mean for Bitcoin (most recently here). It appears the outflows (that offshore Yuan weakness relative to onshore Yuan suggests) are accelerating as Bitcoin just traded above $314 (up from around $200 when we first warned about China) - near the highest since December 2014.

A bursting of property bubbles in London and New York would be expected to have an impact on national economies and indeed on national property markets. Sentiment would be badly impacted. Caution should be the order of the day.