UBS' recent bearish assessment of the junk bond space led to a firestorm of protests from Wall Street asset managers for whom just the selloff in itself had become a catalyst to buy. So, to clear up any confusion, here is Matthew Mish responding to the barrage of angry bulls why the $1 trillion in distressed credit - a third of the entire universe - is not just an energy story, and responding to the five most important and recurring questions
Central bankers are like alcoholics - drunk on stupidity and arrogance; and, like a suffering alcoholic, reticent to address the real problem.
While we were looking at various other Google trends, we stumbled across the following chart, which may have profound implications for not only U.S. capital markets, and what the media does or does not follow, but ostensibly the outcome of the U.S. presidential election and the overall future of the U.S.
Janet Yellen's last "data-dependent" loophole to delay a rate hike in the coming months was just revised away.
“Keeping the previous language would be very disappointing and would be viewed as either complacent or reflecting policy paralysis. [They need to] man up and tell member countries that monetary policy should be accompanied by fiscal expansion.”
Amid hype hope that China will suddenly change course and unleash all new fiscal stimulus - because just what the nation needs is more ghost cities, ghost bridges to nowhere, and ghost infrastructure - has sparked panic-buying in crude and copper this morning...
On Thursday, we got still more evidence that the market's appetite for junk is waning when Goldman ran into trouble trying to get the financing done for the Vista/Solera deal. Solera - which is being sold to PE Vista Equity Partners - didn't have any trouble with a $1.9 billion leveraged loan offering last week (it was actually oversubscribed), but when Goldman tried to price $2 billion in bonds intended to help fund the LBO, things got dicey.
Fr all those who were positive that Dimon's bottom - set when Jamie bought some $26 million in JPM stock two weeks ago - can not possibly be penetrated, keep a close eye on this chart.
The severe stress case "could force lenders to cut dividends, sell shares or take measures to preserve capital. The six biggest banks would see losses of C$5.56 billion ($4 billion) in a moderate scenario, while losses in a severe scenario would reach C$12.9 billion, or about 1.5 times the lenders’ combined quarterly profits."
In a market where fraud is tolerated or even encouraged, no amount of capital will suffice to maintain investor confidence.
"Capital markets seem to be pricing in a 50% or higher probability of a US recession. Our rates team has developed an adjusted yield curve measure that signals a 68% probability of recession."
At the worst possible time.
Zero. None. Nada... that is how many Tech IPOs there has been in 2016 - the worst start to a year in recent record. "A lot of these companies are going to have to rein in their costs in order to survive,"
Our governments and central banks have created a financial environment where traditional savers receive little to no interest on their cash deposits, and an economic environment whereby sophisticated investors are slowly withdrawing investment. This combination is creating deflationary trends around the world, and it is causing the Velocity of Money to plummet. Ironically, this central-bank induced economic combination, is causing central banks and governments to do even more of the same. Insanity at its best.
"Over the past 100 years, when defaults have risen above 4%, they have typically continued to rise close to 10% (i.e. a full default cycle). This is because of the tendency for credit stress to become self-fuelling: a rise in expected defaults pushes up financing costs, which tips some marginal borrowers over the edge, further increasing defaults and so on.