Archive - May 7, 2015

It's a little early to judge her stock-timing skills but, just as we saw with Biotechs last year, the market appears quite happy to ignore Janet Yellen's stock valuation calls (while still believing her every word - as if set in stone from on high - that the economy is recovering, that weakness is transitory, and that everything will be awesome)...

Based on the most mainstream of mainstream overbought/oversold indicators (a 14-day RSI), the 30Y Treasury bond has not been this oversold since June 2007 - 9 years ago and a very memorable peak in yields. Over the next month, the yield had fallen 16 basis points. Over the next 3 months, the yield had fallen 61 basis points, 6 months, 74 basis points. Finally, this big movement culminated in about a year and a half, as the yield had fallen 280 basis points to the financial crisis low of 2.55% on 12/18/2008.

Yes, well, sort of – and they have for some time now. The truth is, the US uranium industry as its currently built isn’t all that American. In fact, it’s mostly Canadian. Qualms over perceived threats to national security are misplaced, though not entirely dismissible. The deal further illustrates an already pronounced trend of the decline of US nuclear capabilities and influence at all stages of the nuclear fuel cycle.

Last week we revealed that the Swiss National Bank is the proud owner of an equity portofilio that sums to $100 billion, or around 15% of Switzerland's GDP. Courtesy of the bank's latest SEC filing, we now know just what the Swiss were buying in Q1...

"Those who might want to borrow are no longer creditworthy due to excessive debt and/or stagnant income, or those who qualify to borrow more are not interested in borrowing more at any interest rate: they are done with debt." The Fed can push interest rates down and make it easy for banks to loan more money, but it can't (yet) force us to borrow money we don't want or need.

But just two days ago everything was awesome after the biggest inventory draw since 2014: Einhorn didn't know what he was talking about, the energy sector's 28x Fwd P/E was 'fine' and oil prices were on their way back to levels that save the US Shale industry... now, not so much...

If there is one thing more worrisome for the world's central planners than a stock sell-off, it is a bond rout 'proving' that they have lost control. The overnight carnage across global bond markets appears to have triggered someone (or someones) to step in - in dramatic size - to rescue bonds and save the world once again.

It would appear America's transformation into a "Big Brother" police state is not endorsed by every branch of the government after all.

An interesting article has neatly encapsulated the global (but primarily Western) “bond bubble”:

Greek FinMin Varoufakis and German FinMin Schaeuble are cross-talking again this morning:

*GREECE'S VAROUFAKIS SAYS 'GREXIT' IS 'NOT AN ISSUE' (well the market & ECB thinks it is)
*SCHAEUBLE SAYS EXPECTATIONS FOR EUROGROUP MEETING NOT VERY HIGH (oh ok)

As next week's meeting and deadlines loom, hope is running high today in Greece... even though Schaeuble warns "don't expect spectacular Eurogroup results."

"... part of the problem today is that over the last 15-20 years, capitalism has been propped up every time it’s about to go through one of the cyclical creative destruction phases. Compounded up that's left us with a big mess to clear up across the globe and a lot of sub optimal resource allocation. So across a lot of the Western World we're left with too much debt, too much inequality, low real wage growth, limited conventional tools to help the economy to de-lever, QE and ZIRP and a political backlash against the mainstream."

Initial jobless claims rose very modestly from last week's 15-year low levels and hovers at a stunning 262k - indicating everything is as awesome as it can possibly be. Which is odd... because as Challenger-Gray notes, April saw the biggest rise in job cuts since 2011 (and the worst YoY increase for April in at least a decade). Job cuts were concentrated in the energy sector on an unprecedented scale.

Overnight "manic-selling" in global bond markets (and turmoil in stock markets) has been met - suddenly - this morning by "panic-buying" as mysteriously liquid buyers lift stocks back into the green and send bond yields plunging (right after Euronext breaks)... As one trader noted, the market is in a mode of “high volatility with no dealer liquidity and easy excuses."

The politicians like the bankers and the central bankers, are happy to kick the can down the road and let their successors and future generations pick up the tab and pay for the economic mess that they refuse to address.