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Stocks Battered To Black Monday Lows Amid Credit Crash, Biotech Bloodbath, & Commodity Carnage
Just because...
The epicenter of today's earthquake was Biotech and Corporate Bonds...
Biotechs were bloodbath'd - IBB dropped almost 8% today alone - the biggest drop since August 2011 - testing back to Black Monday lows and now unchanged since October 2014...
This is the longest losing streak for Biotechs since Lehman
Investors should not worry though...
IBB Update pic.twitter.com/S6jQOysMiW
— Stalingrad & Poorski (@Stalingrad_Poor) September 28, 2015
High yield bond prices have fallen for 12 of the last 13 days and today's decline was the biggest daily drop since Nov 2011, breaking towards Nov 2011 spike lows...
In context - this means HYG is unchanged since Lehman!!
* * *
All the major US Equity Indices are at or below Black Monday Lows...
Some context in The Dow futures...
So what did the major equity indices do?
Cash indices show Small Caps and Nasdaq were the biggest losers...
With everything now red post-QE3...
The decoupling between XIV (inverse VIX ETF) and SPY (S&P ETF) has begun to rapidly converge...
Financials dropped 2% on the day (with homebuilders, materials, energy and healthcare all battered)...
More worryingly, US financials made new 2015 lows (below Black Monday lows) as they continue to catch down to credit risk (as Glancore counterparty risks rise)...
There were some other total collapses in stocks that are widely held by hedge funds today...
SUNE crashed another 17% to 2 year lows... (breaking the Black Monday Lows)
Not so valiant Valeant after getting a pricing subpoena...
And of course - Glencore...
* * *
Treasury yields started the day off higher but as data, and fed speak hit along with US Open selling pressure, safe-haven flows flooded into equities... 30Y -9bps is the biggest absolute drop since early July... NOTE: 2s30s has flattened to 4 week lows
High yield bond spreads crashed wider today (after the CDX roll) - this was the worst day in at least a year for CDX HY...
as Energy credit risk spiked to near record highs...
The USDollar was sold after the US Open - having been bid through the Asia, European day...
Commodities were mugged all day as we suspect commodity group liquidations and counterparty risk reductions weighed on the whole complex...
Silver had its worst day in a month...6 waterfalls...
Charts: Bloomberg
Bonus Chart: All The FedSpeak has confused markets even more with 2015 rate hike odds now at record lows...
Bonus Bonus Chart: It's all priced in...
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The Bear Video and Doc Watson-type music was a true treat. It doesn't get funnier than that. Tyler and his pals must have laughed their assess off coming up with that. Must have laughed as hard as those original Warner Bros. cartoonists who originally did Bugs Bunny and all those Warner Bros. characters. Bugs Bunny as the Barber of Seville was the classic.
The video was a laugh.
I'm proud of our Albertan bears.
Wonderful. Continue pounding the fake capitalism of USA.
"They'd better hurry, the any Pizza Hut pizza for $10 sale (carry-out only) is over at the end of this month."
It will carry over to the next month. Personally I like the Dominoe's $5.99 large carry out. 3 limit I think?
Hit the Pizza Hut lunch buffet right before they pull it at 1:30 and be nice to the waitresses. They'll give you all you can carry for free.
And double punch your card.
Biotechs were bloodbath'd - IBB dropped almost 8% today alone
Biotech has been sold to investors heavily now for many years. It was sold as THE new revolution that would replace the big computer and Internet drive stock Bonanza of the past decade. But, given it's limited success compared to stock valuations, the real business itself is less than spectacular. Of course it's been a stock owners dream if played right, but that is due to Fed Printing and Pumping, not core business success. Biotech is not delivering the revolution to drive the world economy. Who cares about their handful of success. The real story has been market bubble manipulation with trillions of fiat looking for a home, Biotech! A home for printed trillions, but not a game changer for the real economy.
At least the world didn't end today :)
It was a beautifull weather and I talked to a few friendly people.
And lunch and dinner where great.
All I need now is getting laid and this has actually been a perfect day!
GDX looks like its going to zero.
When is the last time a major ETF went out of business?
http://realmoney.thestreet.com/articles/09/28/2015/bear-market-carnage-w...
Bear Market Carnage: Who Will Be Hit First?
By Jim Collins
September 28, 2015
Carnage. It's a one-word description of what's going on in the markets. To really understand the force and violence of selling pressure, one must look beyond the three "major" indices. The DJIA, S&P 500 and Nasdaq composite are all trading in correction territory, as of today's noontime pricing. All three major indices were down at least 10% from the recent mid-July market highs.
That's all well and good, but if you lift the hood, you are going to find many sub-indices, non-US indices and asset classes that waved goodbye to correction territory. They are now being gripped by the jaws of the bear.
A bear market is generally defined as a decline of at least 20% from recent highs, so twice as damaging as a correction. But there's a subtext to these words that you might not find by Googling them.
The term correction implies a temporary condition that is followed by a return to an uptrend.
The term bear market implies an extended period of lower stock prices. That's the difference. Bear markets last; corrections don't.
And it is the duration of bear markets that makes them so darn unpleasant. The ramifications are felt widely, and so much more so, when there is absolutely no yield anywhere else in the world, but for high-yield and emerging markets bonds -- markets that are experiencing declines worse than those felt in the U.S. stock market.
But can't an investor just wait it out? If you are an individual, you might be able to, but remember that individuals represent (according to Goldman Sachs) only 34% of direct U.S. stock ownership. Institutions own the rest of the shares outstanding, and many of them -- for different reasons -- need equities to perform well in order to meet their obligations.
That's the problem with this Fed-QE, marshmallow-world fantasyland that has been in effect since the end of 2008. Capital gains have replaced yield as a means of generating required returns, and that is just not sustainable.
This environment has encouraged risk-taking, and as risk is removed, the nominal wealth of the world's economy is lowered. Simply put, people are worse off.
Who gets hit first?
Investment banks. Lower equity prices lead to less deal flow, and the bulge-bracket banks have supported themselves through fees generated from stock and bond offerings. That can -- and will -- dry up very quickly.
State and local governments. The perilous finances of some of America's most populous cities and states has been well-reported. But the key point isn't that deficits are being run -- although they are, and cities like Chicago are implementing draconian measures to try and stem the bleeding -- it's that long-term liabilities are unfunded to an even greater degree when fund returns don't meet their benchmarks. An example would be the Teachers' Retirement System of Illinois. TRS had 41.2% of its assets in stocks as of March 31. The recent pullback in equity prices could put their already underfunded pension plan into serious financial jeopardy.
This is the nut : what everyone must remember if investing in wall street: "Institutions own the rest of the shares outstanding, and many of them -- for different reasons -- need equities to perform well in order to meet their obligations."
and .gov debt, must have value. as we all know bonds are a much bigger market.
so janet will never let the markets sell off to dangerous levels, the fed put.
our whole society is dependent on some jewish witch knowing how far to let things fall to keep the investors thinking there is a real market and the fact that: all those institutions and governments must be protected.
let it burn is not an option.. btfd.
Glad I have a tent, sleeping bag, dehydrated food, canteen, rifle and ammo. (And all paid for, owned free and clear.)
This is all quite bullish ...
Get beyond the "negative awareness" man ...
(meditate on 'love' man)
(focus on goo-gaa thinking)
https://www.youtube.com/watch?list=PLxLk3KS85hy7penKw9HR73tv7ZiHQLQ-c&v=...
Glencore will be just a memory - Global economic recovery ???- LMFAO - All wealth comes from the planet and the planet has nothing more to give - it's over !!! Over mined - Over drilled - Over fished - Over poisoned !!!
Anyone else ever noticed that Yellen always looks like a granny who gambled on a fart and lost?
DOW 10000 is probably fair value.
I would probably be a buyer at DOW 12000.
I wouldn't buy at any price - It's corrupt, it stinks AND it is headed to oblivion !
No VIX over full moons chart? What kind a quackery are you guys teachen.
Here are some more signs of a coming recession.
http://michaelekelley.com/2015/09/27/vix-predicts-pits-while-pundits-have-fits/
http://www.zerohedge.com/news/2015-07-27/when-will-we-ever-learn/
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
http://michaelekelley.com/2015/02/24/would-you-pay-39-more-than-asked/
Here is how to respond.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
Now I can buy all the silver for $15/oz. Where did it go?
According to VTB Capital:
https://app.box.com/s/to11bysjl4r6o4op1n97y2uv3yxnmkq8
Growth concerns
It has been a volatile few weeks for the financial markets, with investors’ main issues being the health of the global economy, especially the Chinese economy, concerns that deflationary forces might be quite intense and uncertainty over the intentions of the Fed as regards its monetary stance.
For most investors, the base case is a disinflationary economic recovery with the US leading the way, the Eurozone gradually recovering and China avoiding a hard landing. Inflation remains generally subdued, with the major central banks managing to meet their 2% inflation targets and with the Fed gradually lifting the fed funds rate commencing at the December FOMC meeting. A divergent monetary policy between the US and the rest of the world means a stronger US dollar. The US is the only economy that can cope with a stronger economy because of better economic growth prospects while everyone else, including China, prefers currency depreciation, albeit not in the form of an outright currency war. Policymakers prefer to stay within the confines of the G-20/G7 policy umbrella, despite there being little sign of any policy co-ordination.
The disinflationary economic recovery scenario is probably what is priced into markets at the moment. Investors do not want to deviate from the ‘Buy The Dip’ equity market mantra on the basis that Fed policy will still remain accommodative so that equities will outperform bonds and cash. BoAML points out that this might be the first year since 1990 that cash outperforms both equities and bonds.
The S&P500 index is down 6.2% year-to-date, with the global equity index down over 2% while a global government bond index is down a similar amount over the same period. The MSCI World Equity Index (MXWO) peaked in May this year but is now at its lowest level since late 2014. The MXWO has to defend current levels, in other words, investors have to retain conviction and buy here if a global recession and deflation scenario really is not on the agenda. For the S&P500 index, this translates into levels around 1,850 holding (the low in October 2014 and in August 2015). For the MSCI EM Equity Index (MXEF), this means that the August low at 762 also has to hold. A global recession and deflation scenario could easily plunge MXEF back to the 2008-09 low around the 445 level. Corresponding signals of recession-recovery risk are to feature in oil and other commodity prices, such as iron ore, steel and cooper. Recent lows have to hold up otherwise this too would reflect a move into global recession. Watch the Glencore share price as a commodity indicator and Caterpillar as a China play.
In terms of economic indicators, most investors watch the monthly purchasing manager indices, the PMIs. China’s PMI for the manufacturing sector (47.0 in September) already points to recessionary conditions, though the service sector PMI is slightly more resilient. Japan’s PMI is just above 50 and this week’s Tankan survey is an important indicator of business confidence. The global PMI stands at 53.7. It has to drop below the 50 level for recession concerns to intensify.
Against this backdrop of global economic uncertainty, it is no surprise that more recently there has been a focus on how policy-makers might respond. This includes the possibility of fresh ‘unconventional’ monetary policy measures such as ‘helicopter money’, negative interest rates in the UK, QE4(-ever) in the US and explicit debt monetisation.
Whether more QE is the answer is debatable, though the main central banks such as the Fed, ECB and BoE would probably prefer to extend or renew existing QE programmes before venturing into the uncharted waters of ‘helicopter money’. China has scope to cut interest rates and reduce the banks’ reserve requirements ratio (RRR) before resorting to outright QE, though some argue that there has been implicit QE through the official underwriting of local government debt. The latest data, out this morning, shows that Chinese industrial profits fell 8.8% year-on-year in August.
However, we would be concerned from a general perspective that implementing such policies just perpetuates a financial cycle which has already inflated financial asset prices, increased leverage and distorted savings and investment decisions in the real economy. Japan is a classic case where a quite aggressive QE programme has failed to spark an economic recovery or meet the BoJ’s inflation objective of 2%. There are a number of Fed speakers this week including Janet Yellen, Stanley Fischer and Bill Dudley who might inject some clarity into the Fed’s policy intentions. The key US economic data release this week is Friday’s nonfarm payroll report and the market is discounting an increase of 200k in jobs, with the unemployment rate just above 5.0%. So far, wage inflation has remained subdued, but in the UK it has started to pick up even though the market still thinks that the BoE will defer a rate increase until February 2016.
One thing that caught our attention in Janet Yellen’s speech on inflation dynamics last week was the fact that she believes that inflation is determined by an ‘Expectations-augmented Phillips Curve’. In her inflation model, there is no role for money supply growth. Readers who recall their economics education will remember the quantity of theory money and Milton Friedman’s adage that “inflation is always and everywhere a monetary phenomenon.” Yellen might be looking at the wrong inflation model.
The problem facing the main central banks is that by delaying the normalisation of monetary policy, especially in the US and the UK where economic growth has actually been quite good (3.9% real GDP growth in the US in the latest data), the central banks become boxed in and at the mercy of external developments. Investors might start to become concerned that the central banks are running out of ammunition with which to combat the next recession and/or financial crisis. Certainly, the use of fiscal policy is constrained, in some cases, by the increase in government debt-GDP ratios since the crisis. In the US, there is also a renewed concern that there might be a repeat of a federal government shutdown (at the end of this month) as well as a fresh debt ceiling crisis in October-November. The US presidential election in November 2016 has the potential to create some degree of policy paralysis even though, in principle, the US has scope for an expansionary fiscal policy given that the US budget deficit is now at 2.5% of GDP, compared with the peak of 10% in 2009.
In the Eurozone, through the course of this year, there has been evidence of a gradually improving if unexciting economic recovery. Money supply growth in the Eurozone is picking up and bank loans to households and corporates are increasing. However, the VW scandal has just seen the ECB limit its funding which might have adverse knock-on effects on corporate bonds elsewhere in the auto sector. The slowdown in the Chinese economy had already adversely affected the car sales of the big European manufacturers. European small caps have outperformed large caps, reflecting this China/EM exposure. Euribor futures are pricing in a cut in interest rates. On top of this, there is growing political uncertainty as evident in the Catalan elections yesterday where separatists won 72 out of 135 seats. Catalonia accounts for 20% of Spanish GDP. Wolfgang Munchau writes in the FT today that Europe is juggling five simultaneous crises: the migrant crisis, Eurozone periphery debt, a global downturn, Russia and the VW scandal, which all limit Germany’s fiscal space. Problems indeed.