Yesterday, it was Goldman who said to "sell" stocks for the next 3 months. Today it is JPM's turn which urges clients not to "overstay their welcome" in cyclical stocks, saying that "medium-term upside for equities is limited and equities are likely to keep underperforming most other asset classes" before concluding that "longer term picture is not very attractive; one should use current rally to ultimately sell into."
“I think we can let go of the idea that if builders build more homes, then somehow homes overall will be more affordable... We have a permanent housing inflation problem that started four decades ago and will not be easily cured by dithering with the inventory of larger homes.”
JPM's former permabull, Tom Lee, needs no introduction: any time he appears on CNBC, his advice has been simple: buy it all. Which is why we were surprised to read that while Lee remains generally bullish on central planning, and its most direct manifestation, new all time highs, he writes in his latest commentary that he is "scared about the month of August."
The global meltup continues with the S&P set to open at new all time highs, some 20 points higher from yesterday's close, however the driver for the latest rally is not so much the imminent BOE announcement which is expected to cut rates by 25 bps from 0.50%, but a dramatic surge in the USDJPY just after 1am Eastern when Bloomberg revealed more details about Ben Bernanke's masterplan for Japan's helicopter money.
In an otherwise quiet overnight session, which among other things saw Germany sell 10Y Bunds with a zero coupon and a negative yield (-0.05%) for the first time ever (despite being uncovered with just €4.038BN sold below the €5.00BN target) anyone hoping for a confirmation that China will be able to prop up the world economy once more, was left disappointed when earlier this morning China reported June exports and imports that once again dropped substantially in dollar terms as soft demand at home and abroad continued to weigh on the world’s largest trading nation.
With the key event of the week flying largely under the radar, which as previewed here last week was Bernanke's visit to Japan which has already led to another global market spike, here are the rest of the week's events.
"The economy is nervous, shaky and uncertain. Fed policy has us locked into a lethargic and tenuous position. It appears the Fed doesn’t know how to get off the horse it created. The Fed talks interest rate increases but looks for every reason not to do it. Until the Fed backs out of trying to manage the economy, we will be stuck on the cusp of slow growth and a recession."
"We fully recognize and appreciate that low global yields and the need to stay invested creates a positive technical that is difficult to fight against. But fight we do.... We find it incredible that 76% of the most important economic indicators from the selloff are worse today but yields are about 200bp lower."
"The average and median lead times between the peak in margins and the onset of recession are nine and eight quarters, respectively. This would imply that the economy could enter recession as soon as the second half of this year."
Now that the market's fascinated dream with the regime of Brazil's new president Michel Temer is quickly turning into a nightmare, following two immediate resignations of his closest ministers over the ongoing Carwash corruption scandal, including ironically that of the country's anti-corruption minister, Fabiano Silveira, attention is gradually returning to what is truly the cause of Brazil's woes: an unprecedented economic depression.
One does not have to be financial wizard to to know that a firm which has to borrow more than it can generate from core operations is not a sustainable business model, and yet today's CFOs, pundits and central bankers do not. But more are starting to pay attention as the corporate debt pile hits epic proportions. As Bloomberg writes this morning, when it also issued a stark warning about the next source of credit contagion, while "consumers were the Achilles’ heel of the U.S. economy in the run-up to the last recession. This time, companies may play that role."
When it comes to Wall Street cover page superstitions, nothing beats the Barron's front page article jinx: just when you think something will never happen, Barron's confirms it on the cover, virtually assuring that it does. In which case, be afraid bulls, be very afraid, because if past is prologue Barron's just green-lit the next crash.