This is just the beginning. The bond bubble will take months to completely implode. And eventually it will consume even sovereign nations.
If you believe the global economy is doing great and stocks are cheap, stop reading now; this post is not for you. We promise to write one for you at some point when stocks are cheap and the global economy is breathing well on its own - we just don’t know when that will be. But if you believe that stocks are expensive - even after the recent sell-off - and that a global economic time bomb is ticking because of unprecedented intervention by governments and central banks, then keep reading.
A technical analysis update on the markets today.
China’s devaluation will be just the tip of the iceberg as every fiat currency in the world derives a portion of its value based on where the US Dollar trades. What’s happening in China will be rippling throughout the system taking down entire countries/ currencies/ and stock markets.
Investors have yet to realize this because it runs completely contrary to their faith in Central Banks. The illusion of Central Banking omnipotence is so great, that it is going to take months for the world to begin to digest what happened last week.
How overoptimistic are Wall Street forecasts year in and year out? On average, forecasts were wildly bullish, even with the gains in recent years with results no better than a coin toss as to whether the S&P came in above or below the average forecast. Nonetheless, every year had one thing in common: Not once did a consensus predict a down year.
With the price of protecting against dramatic downside in equities soaring to record highs, it appears market participants are turning to a cheaper alternative in size...
What's wrong with this picture?
Since 1928, there have been 22 Presidential Elections. In 14 of them, the S&P 500 climbed during the three months preceding election day. The incumbent President or party won in 12 of those 14 instances. However, in 7 of the 8 elections where the S&P 500 fell over that three month period, the incumbent party lost. Statistically, the market has an 86.4% success rate in forecasting the election!
Earlier today, Art Cashin summarized most (very desperate) traders' thoughts when he said that as a result of today's market crash, "the Fed will try anything" to prop up the wealth effect it had so carefully engineered with seven years of central planning in the aftermath of the financial crisis. Yet one person who is far less sanguine abou the latest in a long series of central bank bailouts of the stock market is Macro-Allocation's Paul Brodsky, who believes that instead of the Fed Put, the time of the Fed Call has come.
This is just the beginning. The bond bubble will take months to completely implode. And eventually it will consume even sovereign nations. Globally the bond bubble is $100 trillion in size: larger than even global GDP.
EM debt bubble... emaciated, FX Carry... crucified, Crude...crushed, High yield bonds... burst, Chinese equities... blown, Trannies... trounced, Small Caps... slammed, Biotechs... busted, and FANGs finally FUBAR! But there is one big (very big) bubble left in the world that no one is talking about, and a rather large liquidity-busting pin beckons...
Globally the bond bubble has grown by more than $20 trillion since 2008. Today it is north of $100 trillion, with an additional $555+ trillion in derivatives trading based on it.
The Fed almost always gives Wall Street extra money to play around with during options expiration. $9 billion and change to be exact.
Some very troubling charts for the stock bulls to consider.