Vigilantes

Here We Go Again - Stockman Warns Of August 2007 Redux

Nearly everywhere on the planet the giant financial bubbles created by the central banks during the last two decades are fracturing. The latest examples are the crashing bank stocks in Italy and elsewhere in Europe and the sudden trading suspensions by four UK commercial property funds. If this is beginning to sound like August 2007 that’s because it is. And the denials from the casino operators are coming in just as thick and fast.

Price Discovery - R.I.P.!

But the destruction of price discovery in the sovereign debt market is not simply an academic curiosity to be jawed about by the few remaining fiscal scolds in the world. To the contrary, it is already having massive toxic consequences in the arenas of fiscal governance and capital markets alike.

Pound Plummets To New Lows; 10Y Gilts Slide Under 1%; British Banks Halted After Crashing

Things are going from bad to worse for the UK. "We’ve seen so many developments around Brexit over the weekend since the FTSE closed and things are now looking even more concerning," Angus Nicholson of IG Ltd., said. "It’s hard to have any idea about where fair value for the pound should be when you look at the fact that Scotland and Northern Ireland could no longer be part of the U.K. within the next year or two."

Tyranny Of The PhDs

Sad to say, you haven’t seen nothin’ yet. The world is drifting into financial entropy, and it is going to get steadily worse. That’s because the emerging stock market slump isn’t just another cyclical correction; it’s the opening phase of the end-game. That is, the end game of the PhD Tyranny.

The Message From The Collapsing Yield Curve

The FOMC is tightening monetary policy because Fed officials believe that the US economy is showing more signs of sustainable growth with inflation rising back near their 2% target. Yet the yield curve is warning that the Fed’s moves could slow the US economy and halt the desired upturn in the inflation rate. Most worrying for the Fed's narrative is the fact that the yield curve spread on a weekly basis has been highly correlated with the y/y growth rates in both the forward revenues and forward earnings of the S&P 500. The recent narrowing of the spread isn’t a good omen for either of them.

ZARpocalypse Now? BofAML Warns "Summer Of Shocks" Looms

The mysterious ZARJPY indicator of global turmoil is flashing red once again as BofAML's Michael Hartnett warns of soaring sentiment into a potential "summer of shocks." Wall Street/Fed continues to play "cat and mouse" and (hedge fund) redemption, (central bank) repression, (market) regulation risks remain very high as the flash crash/pain trade era to continue.

On The Impossibility Of A Soft Landing

Mind the terminal growth assumption. The warning signs are everywhere that what lies on the other side is not a world of 24.3X valuations.

Is This The Debt Jubilee?

The two concepts - NIRP and deficits - dovetail in a fairly terrifying way: All the new debt we take on to rekindle growth will have to be refinanced in the future. So the more we borrow now the more we’ll have to roll over then — and the bigger the impact on government budgets of an eventual rate normalization. Unless the ultimate plan is to never raise rates to old-school positive levels, in which case the world of the future is so different from that of the past that we may as well toss existing theories of market dynamics and individual freedom out the window.

Frontrunning: March 17

  • Global Stocks Slip Following Fed’s Cautious Tone (WSJ)
  • Oil rallies towards $41, near 2016 high, on producer meeting (Reuters)
  • Hamptons luxury home sales soften as Wall Street weakness takes a toll (Reuters)
  • Obama picks centrist high court nominee; Republicans unmoved (Reuters)
  • Allies See Challenges for Hillary Clinton in a General Election Campaign (WSJ)

Bond Bears Bewildered - The Case For US Treasuries

While conventional wisdom suggests that US government bond yields have nowhere to go but up, we believe the economic fundamentals will continue to weigh on interest rates for the foreseeable future.

Bears Exit Hibernation As Rally Fizzles On Dismal Chinese Trade Data; Commodities Slide; Gold Higher

Those algos who scrambled to paint yesterday's closing tape with that last second VIX slam sending the S&P back over 2,000, forgot one thing - the same thing that China also ignored - central bankers can not print trade, something we have repeated since 2011. The world got a harsh reminder of this last night when China reported the third largest drop in exports in history, which crashed by over 25%, the third biggest drop on record, and no, it was not just the base effect from last February's spike, as otherwise the combined January-February data would offset each other, instead it was a joint disaster, meaning one can't blame the Lunar New Year either.  In short, one can't really blame anything aside from the real culprit: despite all the lipstick that has been put on it, global trade is grinding to a halt.

Sexual Assaults Soar At Swedish Swimming Pools After Refugee Influx

"What the Afghans are doing is not wrong in Afghanistan, so your rules are completely alien to them... If you want to stop Afghans from molesting Swedish girls, you need to be tough on them. Making them take classes on equality and how to treat women is pointless."

Frontrunning: February 26

  • Fight night: Rubio, Cruz gang up on Trump in debate ploy (Reuters)
  • Laid Bare in Shanghai: G-20 Tensions Over How to Spur Growth (BBG)
  • China Flags Scope for Policy Stimulus, Tweaks Monetary Stance (BBG)
  • Global Stocks Rise With Commodities as China Sees Room to Ease (BBG)
  • Greece seeks to stem migrant flow as thousands trapped by border limits (Reuters)