"Not only do the five largest financial institutions in the US have a higher concentration of assets than they did before the financial crisis but it’s the largest concentration ever. So we’ve made the too-big-to-fail-problem worse because we have bigger, more systemically important financial institutions now than we did in 2007 – and nobody seems to know what to do about it... [EU banks] are acting irrationally. They’re not acting that way because they don’t believe it or they don’t understand it. So we’re still all trying to feel around in the dark as to what this means. And that means that the chance of an accident is very high."
James Rickards, economic and monetary expert, joined Bloomberg’s Francine Lacqua on Tuesday to discuss the gold “chart of the decade”, his new book “The New Case for Gold,” why gold is money and why gold is going to $10,000/oz in the coming years.
The banquet of consequences is about to be served.
Low interest rates attempt to buy time. The idea is to bring consumption forward until the economy heals on its own as capital projects are completed. But those projects never began this time. The end result is ever-higher debt that borrows more and more from the future. Unfortunately, it borrows from the future without making the future any brighter through solutions to root causes of economic ailments. At some point, the “future” becomes “today”.
This week's preceding 2 and 5 Year auctions, both tailing, were nothing to write home about, or as we characterized them "mediocre." We also said that a big part of the reason may have been the overhang from yesterday's Fed decision. But now that the Fed is out of the picture for 2 months, the real shape of the primary TSY market could show itself and sure enough it did with blistering demand for today's $28 billion in 7 Year paper.
Yesterday's 2 Year auction was surprisingly poor because, among other things, it was the first tailing auction since 2014. Moments ago the US Treasury sold $34 billion in another lackluster auction which saw the high yield print at 1.41%, tailing 0.2 bps through the When Issued.
Outside of an exogenous geopolitical event - which given the way the world is tilting is becoming an increasingly likely occurrence - BofAML believes a bear market case is strongly supported by the probability of an economic shock most likely be tied to credit where signs of stress are building the most.
"The US stock market seems egregiously overvalued versus other stock markets... you are going to see declines in the US stock market and since the correlations are so high this means that probably the junk bond market will go back down, too. Negative interest rates are the dumbest idea ever. It’s horrible.... Gold is doing fine. It’s preserving capital in the US, it’s been making money over the last couple of years for European investors. That’s why I own gold.... Trump is going to win. I think Clinton and Sanders are both very poor candidates."
Who’s afraid of the big bad bear? No one, it seems.
The reason why NFLX stock is crashing in the afterhours session is (mostly) because of the company's guidance of its widely followed international expansion. Here, instead of guiding to or above the consensus estimate of 3.45 million subs, Netflix disappointed dramatically and now anticipates only 2 million international streaming net adds, down from both the 2.37 mm a year ago, and certainly from the 4.51mm net adds last quarter.
Your view of the broader significance of this weekend's failed Doha summit directly relates, in all likelihood, to your pre-existing view on asset markets.
This morning another troubled energy producer, Goodrich Petroleum announced a prepackaged Chapter filing meant to implement a financial reorganization after struggling to restructure its debt amid declining energy prices. This follows the filing of Energy XXI just 24 hours ago. Since the start of 2015, about 50 oil and gas producers have gone bankrupt, owing more than $17 billion, according to law firm Haynes & Boone LLP.
Yesterday's strong 3Y auction was a harbinger. Despite the relentless risk on rally, moments ago the US Treasury had no problems to sell $20 billion in 10 Year paper which priced at a high yield of 1.765% (98.5% allotted), stopping through 1.6 bps through the 1.781% When Issued, the biggest gap since last spring, and well below March's 1.895%. The bid to cover jumped from last month's 2.49, rising to 2.75, well above the 6 month average, and the highest since January.
One month ago, when the Treasury sold 3 Year paper the reception was rather lukewarm when ahead of the March FOMC there was some concern that the Fed may actually hike. Now that any speculation of a rate hike has been shelved indefinitely, there was no problem for the US Treasury to sell this month's batch of 3 Year paper. With the WI trading at 0.894% at 1pm, the high yield printed 0.890%, stopping 0.4 bps through the When Issued.
The stock surge from February is at risk, warns BofAML's Stephen Suttmeier as a plethora of bearish divergences could cap further gains from here. 2044-2022 are key nearby S&P 500 support for April, but a loss of 2022 is required to break the last higher low from 3/24 and suggest a deeper decline for the S&P 500. The following 15 risk-factors - from VIX term structure steepness to Dow Theory Sell signals - all point to a retest of the recent 1810-1820 lows.