"Present conditions create an urgency to examine all risk exposures. Once overvalued, overbought, overbullish extremes are joined by deterioration in market internals and trend-uniformity, one finds a narrow set comprising less than 5% of history that contains little but abrupt air-pockets, free-falls, and crashes."
The central bankers have truly been the markets best friends and Draghi and Kuroda-san have been taking over where Ms Yellen has all but left off, but even they can do little in the face of protest and dissent by various members of the global populace and the continuing stupidity and arrogance of our “democratically” elected representatives.
There’s really no point in trying to convert anyone to our viewpoint. Somebody will have to hold stocks over the completion of the present cycle, and encouraging one investor to reduce risk simply means that someone else will have to bear it instead... In any event, be careful in believing that a market advance “proves” concerns about valuations wrong. What further advances actually do is simply extend the scope of the potential losses that are likely to follow. That lesson has been repeated across history.
A major coal mining company has announced another round of layoffs as declining demand for coal continues to depress the industry. The closures will put 261 people out of work. The news has a familiar refrain; more than 20,000 coal miners have lost their jobs since 2011. Compare that to the solar industry, which employs around 143,000 people, according the Solar Energy Industries Association. The fortunes of the two energy industries will only diverge further in coming years. Sadly, many political leaders in coal producing states have not planned for a future without coal. Rep. David McKinley (R-WV) and Rep. Peter Welch (D-VT) have introduced a bill in Congress to help out-of-work coal miners providing a year’s worth of benefits, including training and support for relocation.
"The Ingredients Of A Market Crash": John Hussman Explains "Why Take The Concerns Of A Permabear Seriously"Submitted by Tyler Durden on 09/28/2014 19:39 -0500
"I should be clear that market peaks often go through several months of top formation, so the near-term remains uncertain. Still, it has become urgent for investors to carefully examine all risk exposures. When extreme valuations on historically reliable measures, lopsided bullishness, and compressed risk premiums are joined by deteriorating market internals, widening credit spreads, and a breakdown in trend uniformity, it’s advisable to make certain that the long position you have is the long position you want over the remainder of the market cycle. As conditions stand, we currently observe the ingredients of a market crash." - John Hussman
This is just too delightfully ironic to pass by.
In a world in which nobody has any faith in the capital markets because over $10 trillion in central bank liquidity has been injected to prop out a fragile house of risk asset cards the one place one should have faith (because let's face it: monetarism is the only religion that matters in today's world) is that money will be printed for the foreseeable future, certainly metaphorically and also quite literally. Alas, things did not quite work out that way for the company which, well, prints money (but sadly is not a central bank) when earlier this morning the shares of De La Rue, the company responsible for printing Bank of England banknotes, plunged a record 30% after it issued a profit warning.
Sad but true. Current owner of the Twinkies and Ho-Ho brands, Mexico's Grupo Bimbo, had planned to take advantage of an exuberant public stock market by bringing a secondary stock offering to reduce its leverage. Everything was good-to-go on Friday, but with the market now down a stunning 1.5% from pre-BABA IPO levels, they have pulled the offering:
*MEXICO’S BIMBO SAID TO POSTPONE FOLLOW-ON SHARE OFFER: REUTERS
No comment as yet on the reason, though we assume "market conditions" will be cited as the fickleness of capital markets' animal spirits is once again exposed for all to see. Perhaps Grupo Bimbo should rename themselves Grupo Bimbaba?
With the snoozer of an FOMC meeting in the rearview mirror, as well as Scotland's predetermined independence referndum, last week's key events: the BABA IPO and the iPhone 6 release, are now history, which means the near-term catalysts are gone and the coming week will be far more relaxed, if hardly boring. Here is what to expect.
"The HFT Act will add the following clarification to the rules specifying the prohibition of market abuse: The placing of purchase or sale orders to a market by means of a computer algorithm which automatically determines the parameters of the order could be considered market abuse provided the placing of orders occurs without a trading intention, but (a) to disrupt or delay the functioning of the trading system, (b) to make it more difficult for a third party to identify genuine purchase or sale orders in the trading system, or (c) to create a false or misleading signal about the supply of or demand for a financial instrument."
It has been a story of central banks, as overnight Asian stocks reversed nearly two weeks of consecutive declines - the longest stretch since 2001 - and closed higher as the same catalysts that drove US equities higher buoyed the global tide: a combination of Chinese liquidity injection (for the paltry amount of just under $90 billion; "paltry" considering Chinese banks create over $1 trillion in inside money/loans every quarter) and Hilsenrath leaking that despite all the "recovery" rhetoric, the Fed will not be turning hawkish and there will be no change in the Fed language today (perhaps not on the redline but Yellen's news conference at 2:30pm will certainly be interesting), pushed risk higher, if not benefiting US equities much which remains largely unchanged.
"It is a bad sign for the market when all the bears give up. If no-one is left to be converted, it usually means no-one is left to buy.” The extraordinarily low level of "bearish" outlooks combined with extreme levels of complacency within the financial markets has historically been a "poor cocktail" for future investment success.
The high-yield credit market remains stressed. An active week ended poorly as a heavy pipeline saw Vistaprint pull its deal citing "market conditions" as perhaps both a re-awakening of liquidity fears (Fed hawkishness concerns), price/spread moves, potential downgrades soar, and outflows signal the flashing red light that HY markets are shining is as red as ever. With buybacks having dwindled already - removing a significant leg from the equity rally - it seems CFOs are realizing that maybe they should have used some of that easy money to build as opposed to buy as they face weak growth, a lack of liquidity, and a wall of maturing debt in the next few years that will have to be refinanced at higher yields and spreads.
History teaches clear lessons about how this episode will end – namely with a decline that wipes out years and years of prior market returns. The fact that few investors – in aggregate – will get out is simply a matter of arithmetic and equilibrium. The best that investors can hope for is that someone else will be found to hold the bag, but that requires success at what I’ll call the Exit Rule for Bubbles: you only get out if you panic before everyone else does. Look at it as a game of musical chairs with a progressively contracting number of greater fools.