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Risk Appears Seriously Wounded
Submitted by Jeffrey Snider via Alhambra Investment Partners,
Stocks aren’t quite as immune to financial disruption in the middle of 2015 as they had been previously. The last major, comprehensive selloff was also in tandem with “dollar” disorder back last October 15. This time, the motion was more erosion than “event”; at least until the past week. Just like crude oil, stocks lost their momentum back in early May (and broader index price indications dating back to last July and the first “dollar” rumble) and had more or less been stuck like the yuan doing nothing until the open break recently.
What may, in the intermediate term, be much more significant is that the S&P Buyback Index has been sinking during the whole of that interim period. Whether or not that indicates less actual buyback activity is not clear, but the suggestion is more than reasonable given the buyback scheme as a separate equity liquidity junction. That it has continued since really March brings up more economic and corporate cash flow factors (another facet in the “dollar”, both as earnings and debt opportunity) in these companies than financial issues with the “markets” more broadly.
Whatever the case, for the first time since 2012, after today’s robust selling, the S&P 500 is negative on a yearly basis. The Buyback Index is likely showing the same lack of momentum, though that is an assumption as the final index value for today’s trading hasn’t been posted.
The broader NYSE Composite is down 7.2% on a yearly basis and 8.2% since last July 3 at the “dollar’s” outset.
That brings stocks back into the same discussion as the corporate credit bubble. Junk prices continue to sell down, both retail and institutional. The HYG mutual fund broke to a new low again today, down over 10% since its high back on June 25, 2014. There are clear liquidity indications in that price as well as a fundamental shift in overall risk perceptions.
The Leveraged Loan Index, as HYG, continues to drop to new multi-year lows. The last time the market value component was at 953 was January 5, 2012! As usual, since these are the most liquid 100 names in leveraged loans, it is almost certainly the best case for the class; with leveraged loan prices elsewhere likely much more dramatic.
I think we are starting to see the legend of QE fade into nothing more than memory, exposing all these “markets” to the very real dangers of the fundamental economy, globally, that never joined the hype. As noted this morning, it was perhaps a bit “easier” to ignore the first “dollar” wave as it crashed into January as though it were just a bump on the road to sufficiency, but this second crash is both more severe and constraining; not the least of which because, as it takes on new and greater proportions than the first, it demonstrates pretty conclusively all that was wrong about the suppositions that supported rationalizations for so long.
Does that mean QE5? It might, but at this point is there any illusion left? After all, this broad selloff comes just as this week market perceptions turned the FOMC supposedly “dovish” once more. In the past that would have been at least a more than one-day rally, and a sharp one, but again I think the entire focus has changed from “accommodation” even in potential to simple confirmation of the no longer abstract economic and financial danger. I have no idea if that means a top, but this market increasingly looks very, very tired if not seriously wounded.
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The entire US economy was being sustained by the wealth effect from a rising stock market. Old Yeller will not let this market fall. QE forever.
chinese market opens in 1hr and 30 min (8:30EST time), we shall see
I just got a new bag of popcorn CNBS is on in full effect why is everyone on teevee right now? Emergency?
even LIESMAN is on
It's just a small correction that is long overdue. Please do not get excited. If you are a long term investor this will not impact your portfolio.
Good one!
Yes
No
Time for SPXU and SQQQ?
Wall St. will try to throw a temporary patch on it and hope the FED throws more money at the problem. Of course it will make things worse, but they just want it to hold together till their bonus checks clear....
Yellen has an obligation to keep rents sky-high in San Francisco. Hamptons crowd deserves a bailout. Tesla needs customers. More QE on the way.
CNN smears Trump with ‘white power’ allegation
http://tinyurl.com/pssdxpq
The economy was not sustained by this so-called wealth effect. The rising stock market made the rich richer, the economy was left on it's own and has never recovered.
Economic statistics treat the financial industry as equal to the real economy. The flat reality was masked by the hyperinflation in the money world.
I think we are starting to see the legend of QE fade into nothing more than memory, exposing all these “markets” to the very real dangers of the fundamental economy, globally, that never joined the hype...
OMG!!! HAHAHAHAHAHAHA!!
QE4EVAHahhahahahahahahhahahahahahhahah
The federal reserve pushed grandma and grandpa savers further out the risk curve in search of yield with their insane ZIRP policy, and now they are going to pay a price. If people don't storm the fed and start hanging bankers after this third round of theft in 15 years then the U.S sheeple deserve everything that's coming.
they already deserve it. this is a country full of assholes.
Do they really deserve it or have they been deceived?
And a trillion to you as well buzz...
Hell why not when Janet keeps printin it for "free"!!!
Haha. And you and I think we don't fit in here.
Yup. Lots of weak hands hold stocks as a result of Fed policy.
Oops.
+ 1 trillion to your sentiments on the situation Dr!
China has its foot on the US economy's neck.
And if debt doesn't matter to communists like Krugman, this game is over.
IMF will either change its mind or else China will continue buying gold and silver.
Dumping US treasury trash when possible.
Smiling at Goldman as they say paper gold has real value.
Oh man. 401k fleecing will spark a shit storm this time around. Or are people so dumb that they just look at the negative six-figure for the year and say, "Oh well, market goes up and it goes down, hee-yuk."
I wish I had their wealth with my mind.
It's been 7 years since Spock got laid right??? Sure hope he gets some trim soon or this 7-year Shemitah/Vulcan thing is going to erupt!
.
Too many chartz. BTFD, or not?
Wounded. Yep, it's wounded.
Now it'll start floppin' around a little more before it goes even higher...
Then its dead.
Would it even matter if the FED raised rates? I am tired of hearing about that bullshit.
Yes. A methodical campaign of rising rates will feed upon itself and prices will rise for general goods. And again and again, the reverse of the lowering of rates.
Cool logo, but are peace and money opposites?
Trillions of dollars of junk financed at next to zero percent means they are snookered there will probably be a false flag to justify no rise eventually.
Hell bent on financial armageddon, tensions rising between nuclear superpowers and gold is up two bucks... lol Just hilarious after awhile.
Does that mean QE4,5, or 6? (YES) It might, but at this point is there any illusion left? (NO) but there's plenty of delusion with a huge amount of dilution to come.
QE4EVA. Well it's "worked" for 6 years, might have enough left to swing another election their way, so why not? Meantime buy bonds, flip profits into PM's.
Mark it zero.
The "Fed" was going to raise rates by .25% which only affects people leveraged 250:1 which means the geek squad alog-bots. The algo- traders are going to be taken down hard.
Well what the hell did you expect would happen if the money changers got hold of the press as well as allowed FRAUD to go on unprosecuted.
The people in control are murdering war criminals. Scum. Arrest them before it is too late.