Bear Market

Frontrunning: June 21

  • Republican Handel Wins Georgia House Seat, Dashing Democrats’ Hopes (BBG)
  • Uber CEO Kalanick Quits as Investors Revolt (WSJ)
  • Saudi King’s Surprise Shakeup Clears Son’s Path to the Throne (BBG)
  • After weeks of secrecy, U.S. Senate to unveil healthcare bill (Reuters)
  • Latest Election-Hacking Hearings to Focus on State-Level Events (WSJ)

Oil Bear Market Sends Global Stocks, Yields Sliding; Chinese MSCI Addition Fizzles

In an eventful overnight session which saw a historic transition in Saudi Arabia, an unexpeted Republican victory in the Georgia Special Election, China's inclusion in the MSCI EM index and Travis Kalanick's resignation, S&P futures continued to fall, alongside stock markets in Asia and Europe, while oil prices extended their drop despite a larger than expected draw reported by API on Tuesday.

WTI Plunges To 7-Month Lows - Enters Bear Market As HY Bonds Crater

WTI Crude has entered a bear market (down over 20% from its highs) amid concerns OPEC-led output cuts won’t succeed in rebalancing the market (and not helped by the fact that Libya is pumping the most crude in 4 years). Furthermore, HY Bonds are getting hit led by a spike in HY Energy risk...

Mark Hanson: Housing Bubble 2.0 - The End Is Nigh?

"If, the past 8-years of a Fed in Armageddon-mode created the 'everything bubble', what will shifting monetary policy into reverse do to said asset price levels? ..Remember, a 'house-price recovery' and 'housing market recovery' are two vastly different things."

The Rise Of Robots & The Risk To Passive

"...things like “Robo-advisors” and “ETF herding” are symptomatic of a lengthy bull market advance where the pain of previous losses has finally been erased... but when the 'robot trading algorithms' begin to reverse, it will not be a slow and methodical process but rather a stampede with little regard to price, valuation or fundamental measures as the exit will become very narrow."

The Blow-Off Top Is Here: Second Largest Weekly Inflows To Wall Street In History

For confirmation that the market is now in its "blow off top" phase, look no further than the latest BofA "flow show" in which Michael Hartnett reports that capital markets just saw their biggest week of equity inflows since the US election ($24.6bn), another chunky inflow to bonds ($9.0bn), which combines to "the second largest week of inflows to Wall Street ever (largest was $35.5bn in Dec'2014)."

Valuations: It Is Different This Time

"Stock investors have been waiting on the Godot of growth for most of this century and one can’t help but wonder at what point they’ll get up and leave the theater..."

The Tech-Wreck - A Shot Across The Bow For "Passive Indexers"

Once prices fall enough the previously “passive indexer” becomes an “active panic seller.” With the flood of money into “passive index” and “yield funds,” the tables are once again set for a dramatic and damaging ending.

A Record Number Of Market Participants Says The Market Is Overvalued, Surpassing 1999 Bubble Highs

The latest monthly Fund Managers (FMS) survey from Bank of America is out, and continuing the trend noted in previous months when the number of active managers who said that stocks are overvalued hit the highest in nearly two decades, the latest version reveals that the number of respondents saying that equities are overvalued has just hit a record high, surpassing the all time high set during the 1999 bubble.