Archive - Sep 25, 2015

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1. Peak in liquidity
2. Deflationary recovery
3. Manufacturing recession
4. Capitulation of the "strong $" & "TINA" trades

In any bull market, certain excesses are built up during its duration. The build up of these excesses, in metrics like margin debt, can serve as a tremendous tailwind for the market…as long as they continue to rise. However, when the music stops and the market declines, these tailwinds become headwinds. This is particularly true of margin debt as margin selling necessarily exacerbates the damage in a large decline. We do not know for sure if the recent margin debt retrenchment is the beginning of a longer trend. However, given the record high levels it recently achieved, should a longer, more serious decline in the stock market be starting, the large potential risk represented by record margin debt levels will turn into large actual risk.

In the aftermath of John Boehner's surprising resignation announcement, the punditry has been scrambling to opine what this departure means for the odds of a government shut down, some saying the likelihood has increased, while others, such as Goldman, confident shutdown odds are materially reduced. The truth is likely in the middle, and while the odds of a government shutdown next week are reduced as a Continuing Resolution now appears more feasible, the probability of a broader shutdown in December once the CR expires, have materially risen.

With NKE almost single-handedly holding The Dow up, the rest of the US equity market is rapidly giving back any gains from a hawkish Yellen and 'fixed' European automaker market. Notably, Dec rate-hike odds were 41% pre-Yellen, jumped to 49% earlier this morning, but have now fallen back to 42%... so the 'market' is not "embracing" a rate hike environment as one supposed expert said this morning...and the Biotech bloodbath is weighing everything down...

Now that concerns about a biotech top are in play, biotechs just can't seem to catch a bid, and as of moments ago were down over 3% dragging the Nasdaq just barely positive for the day even with the S&P up 0.8% One reason for the continuied weakness may be that, as Bank of America points out, there are signs the dreaded head and shoulders top has appeared in the Nasdaq Biotech Index.

For those unaware, a fifth of Spain's GDP is voting on whether to secede from the country on Sunday. Here is everything you need to know about the Catalan black swan.

First he folded on his decision to hold a press conference explaining why he folded as House speaker. Then he unfolded. Here is the now former US house speaker whose bout of "deyhdration" appears to have ended.

For the 4th week in a row , US oil rig counts declined (down 4 to 640) leaving the count as 10-week lows. This is the largest 4-week decline since May. Crude prices are undecided on how to react for now with stop runs higher and lower so far...

Earlier today yet another "very serious policy maker" confirmed that cash as we know it, may be on the endangered species list - again, a necessary precondition to make global NIRP effective - when overnight former Bank of England central banker, Charles Goodhart, told a London audience that bills such as the Swiss National Bank’s 1,000-franc note and the European Central Bank’s 500-euro note should be abolished, adding this "move that might also prove beneficial by trimming interest rates."

With just 3 months left on the calendar, many investors are down on the year for one simple reason: nothing is really working.  That leaves them only a short period to show a positive return, or at least a less-negative result than whatever index they track. To do that, many will have to make very specific and concentrated bets. It might be about equities generally – will they recover from the current growth scare?  Or it might be asset allocation – will bonds finally go up on the year?  For stock pickers, the key question is certainly “Play the winners, or look for laggards?” All we know is that with 69 days left to play catchup, time favors the fleet.  And the bold.

Oh, the irony. A senator of the world's largest creditor nation has demanded America's allies do 'whatever it takes' to support Ukraine in breaking international law by refusing to pay back $3bn of debt owed to Russia in December. As RT reports, US Senator Chris Murphy of the Foreign Relations Committee exclaimed, "the international community should make it clear that we should take whatever steps necessary to give Ukraine the legal cover it needs to walk away from that debt... I don’t think Ukraine should be obligated to pay Russia back a dime." One can only wonder how US's creditors will feel about this perspective (maybe China and EM are already showing theirs).

Clash of the Titans? President "we don't spy/cyberhack other nations" Obama and President "we don't devalue our currency" Xi will hold a joint press conference to show the world how much US and China love each other (despite China dumping Treasuries and looming US cybersecurity sanctions on China)... grab your popcorn as Xi is supposedly taking questions from the Western press...