Archive - Jul 30, 2015

With a When Issued trading at 2.013%, traders were looking for a high yield to print well inside of that. Instead they got a nearly 1 basis point, or 0.8 bps to be price tail, to 2.021%, even though the Bid to Cover was nominally above last month's 2.384, printing at 2.468. The reason for this almost certainly was the steep drop in the Indirect take down, which dipped from 56.64% in June to just 49.15%, which was the lowest foreign central bank demand since October. And with Directs relatively unchanged, at 12.01%, it mean that Dealers had to step up and take 38.8% of the issue, the most since September of 2014.

While the Puerto Rican creditors' bargaining power on the island is to put it mildly, negligible, especially after the budget director made the imminent default into a crusade of poor versus rich, saying he won’t redirect cash from its operating budget to make debt payments, an unexpected supporter has emerged thousands of miles from the beleaguered island: New York's socialist mayor Bill DeBlasio. As CBS reports "New York City Mayor Bill de Blasio demanded President Obama and Congress immediately come to the island's fiscal rescue." "It's the federal government's obligation to act, because they can't stand idly by and watch Puerto Rico fail," de Blasio told a crowd of hundreds of Puerto Rico boosters gathered on the steps of City Hall.

BTFD Stupid...

Credibility matters, it will matter even more in the near future when there seems none to be had from those who may have lost – or sold theirs.

Today, with just one day to go until Bharara deadline runs out to plead the SCOTUS to opine on redefining what "insider trading" means , we found out why Bharara had requested the extension: as Reuters reports, the U.S. Justice Department asked the Supreme Court on Thursday to reverse a federal appellate court's ruling that authorities said limited their ability to pursue insider trading cases.

"In the past 12 months investors traded $18.2 trillion worth of ETF shares. For perspective, that means the amount of dollars exchanging hands through ETFs is now more than the U.S. gross domestic product, which stands at $17.4 trillion," Bloomberg reports. Or, put differently, the financial apocalypse draws near. 

This negative breadth signal has an ominous long-term track record. The 59 occurrences all took place in 4 distinct periods, though most of them happened within 2 clusters: August 1972 (13), November 1999-March 2000 (44), September 2007 (1), July 2015 (1)

Having exposed the reality that the world's capital markets are a manipulated shell game, Janus' Bill Gross has a message for the perpetual bulls in his latest letter to investors - "say a little prayer." Gross continues, "low interest rates are not the cure – they are part of the problem," warning that ZIRP has enabled, "a host of zombie and future zombie corporations now roam the real economy. Schumpeter’s 'creative destruction' – the supposed heart of capitalistic progress – has been neutered. The old remains in place, and new investment is stifled." As he previously warned, when the central bank manipulation is removed the likely trajectory of prices is downward...

With stocks just 1-2% from record highs, because China is fixed, oil is recovering, Europe is awesome, and gas prices are low? it appears the talking heads forgot to tell the 'people' how great things are. Bloomberg's Consumer Comfort index plunged (by the most since Sept 2014) to hover at 18 month lows as 70% of Americans see the state of the economy as negative. Rather amusingly an intriguing 1% of Americans see the state of the economy as 'excellent' - wonder which 1% that is...

"The International Monetary Fund’s board has been told Athens’ high debt levels and poor record of implementing reforms disqualify Greece from a third IMF bailout of the country, raising new questions over whether the institution will join the EU’s latest financial rescue."

A look at the internals reveals a major surprise - while many said that the Q1 economy does not expose the true strength of the US consumer (instead of shopping in stores, they shopped online which wasn't captured or comparable), what actually happened was that Personal Consumption Expenditures as a % of GDP actually declined from 1.4% to 1.2% when netting out the harsh winter impact. As in the real economic driver was even weaker and this time you can't blame it on the weather!

More and more insiders are warning of a potential systemic event.

Is bad news, bad news again?

"Well, I think it will be jarring when we see an interest rate hike. People will get out the smelling salts."

"No question that low interest rates have exacerbated the wealth gap between the poor and the rich because the rich have assets."