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The Coincidences Are Just Too Eerie: This Is The Last Time CCC Yields Were Here And Rising
Yesterday, we highlighted the all too eerie coincidence that the very first hedge fund (not mutual fund) to gate investors late on Friday, was operated by none other than the two former heads of distressed/high yield trading of the bank that started it all, Bear Stearns.
Today, things get even eerier, because while we already have the Bear Stearns link, an even more curious coincidence emerged when according to the BofA-Merrill index of "CCC and below" bond yields, the index just hit 17.24%, soaring nearly 2% in just the past two weeks, and rising fast.
When was the last time the same index was at precisely 17.24% and rising? The answer: the weekend Lehman Brothers filed for bankruptcy (check for yourselves: on Sept 15, 2008, the closing effective yield was 17.27%).
What happened next? This.
And while no bank has blown up this time (to the best of our knowledge) the irony is that the catalyst driving the long, long overdue blow out in yields is the trifecta of plunging oil, the soaring dollar, and of course, fears about the tightening financial conditions as a result of the an "imminent" rate hike.
In other words, the Fed.
And while history rhymes, it usually does so in very ironic ways, and we can't wait to find out if indeed Yellen's first rate hike in 9 years this Wednesday unleashes a Lehman-like neutron bomb that leads to the full collapse of the junk bond market first, and then the shockwave spreads across all asset classes leading to the same financial devastation witnessed at the end of 2008, unleashing the longest period of "free capital markets" central planning the world has ever seen.
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It's all in the second derivative. Delta kills, not absolute level.
"Junk" is named that way for a reason.
Beware.
A big failure in the junk bond market would probably put many financial derivatives at risk.
Come on guys, first rate hike in 9 years, marking the end of the decade of intervention... You really think they are gonna let this sail into the night without both hands shovelling ample excess liquidity into the engine?
They will lift off and they will pump so much money into the system via ETF's that the markets will finish the day up.
I do not (cannot) disupute your idea that they will dump money into the markets (esp. stocks) to keep them up when they raise rates.
Junk bonds, OTOH, are a bad bet.
Speaking of junk bonds, I recently got to wondering if there has ever been a junk bond that made it all the way to maturity? Or at least what percentage of them make it across the finish line without the help of a bankruptcy judge.
just ask any mutual fund wholesaler......."the failure rate is like less than 1%" LOL
There are no coincidences, just near death experiences.
also 100% correct.............this is as much a confidence game as anything else; if anyone has been watching the central bank actions over the last several weeks they have been enacting many of the provisions set forth in the last debacle in order to stem the downside. you can sign up for the fed emails.
What better time would there be to off-load when the liquidity and buyer of last resort are into it Big Time.
So....if we know that the 25bps rise has to come from extracting up to $800 billing then exactly how will they hike rates and accomplish the money pumping at the same time?
@glen Pssssst!!! You're not supposed to ask questions like that :)
Unfortunately in this fucked-up ZIRP world, "junk" is a synonym for "yield," which makes it a go-to for desperate managers trying to show positive growth.
I don't doubt the next shitshow is well under way. Only two weeks left in the year, so the question is do they delay it enough to get into 2016 so the year-end numbers look OK or not.
I always take the time to read your comments.
And recommend to all here at Zero Hedge to do the same.
We'll see re end-2015 and what they do next year.
"so the question is do they delay it enough to get into 2016 so the year-end numbers look OK or not.?"
of course they do......this will be the most well telegraphed rally the whole year...and because everyone and their mother thinks the opposite.
its next year into the end of Q1 that will be the challenge.
Not reassuring given the above charts.
Don't worry... this time will be worse.
OBEY...
100% correct
Pull it!
Yellen, it's your move.
- Out of moves error -
This is exactly how small explosives are fired into overhanging snowbanks by TPTB to precipitate financial avalanches. Some folks mistakingly call that "smart money." Like calling an arsonist a "smart" fireman.
Hey it's too late for a lot of folks. Their mutual funds will have lost 5% by the opening bell if you take in last week's hammering. Just look at CNN's, Forbes's and CNBC's futures: Dow -333. Not to mention poor NASDAQ.
I hope y'all are out of the market awaiting freefall because it's imminent. Bitcoin, PMs and balls are king through this phase.
Zero Hedge had me Go All IN early last week.
Renfield, you idiot. This year, BTFD means Bet The Fucker Drops.
You've just gotta warn me next time!
( Cleans keyboard and screen)
Broke Thieves Free Diving
Coulda been me. But I stopped for a drink instead.
Your investment strategy should be purely orthogonal to whatever is posted on this website. If you take /any/ advice from here, you deserve to be poor.`
And while history rhymes ...... looks exactly the same to me
1920s/2000s - high inequality, high banker pay, low regulation, low taxes for the wealthy, robber barons (CEOs), reckless bankers, globalisation phase
1929/2008 - Wall Street crash
1930s/2010s - Global recession, currency wars, rising nationalism and extremism
Yep. Same circus; different clowns.
Look no further than Gen X for patterns
1987, 2001, 2008, 2015, Pop goes the weasel - I mean the bubble.
Fleece 'em and trap their money for more than three years before the upturn begins to buoy their gambling losses.
I hope somebody is keeping a close eye on BK court filings. It is Sunday, after all. Can anybody see if anything has dropped into the box yet today in Manhattan?
You must have missed Marine Le Pen and her fascist Front National party being decisively beaten in France's most recent local elections.
There will be no major institution collapse as long as we have mark to fantasy as our accounting standard. It didn't matter how much liquidity was provided to the banks, the "markets" didn't stabilize until they changed the accounting rules from mark to market back to mark to whateverthehellyouwant.
+100 for your comment. There are numerous entities out there which should already have been bankrupt, insolvent but for the fact that they are able to claim whatever they like in terms of the 'value' of various assets to offset horrendous losses.. I try to expain this to my friends and family when they say that things are better than they were.. Not only mark-to-market but also government statistics e.g. unemployement, inflation, crime statistics, even education (when SAT scores trended down after billions and billions of dollars were spent they just change the exams to make them easier)
TPTB have changed the rules every time that the numbers look bad for them. And people just buy into it and believe that they must have had a good reason to 'adjust' those numbers.
Eventually, however, we all set down to a banquet of consequences. (can't remember who said this, DH Lawrence?)
Mark to fantasy will not prevent the developing collapse in world trade and consumer demand, which will lead to new abnormal institutional failures.
The collapse is coming regardless of the mark-to-fantasy accounting. It boils down to counterparty risk. There WILL be a point where one party calls 'BULLSHIT' and refuses to trade/offer credit with the entity they know is a rotting corpse. And then that will spread thru the system, like herpes through a Turkish bath house. The only way the central banks can unwind this shit AND for the current kleptocrats to preserve their power bases to to make EVERY OTHER asset class (investment grade debt, junk debt, equities) look like shit relative to .gov bonds. Can they survive a UST yield @ 6%? Hell no. So they are very likely to smile as junk yields scream higher, followed by equities screaming lower.
Then they'll be there with their MyRa, MyRa, MyRa . . . and all that fabulous stability (and 1.5% annual yield).
The music stops when the liquidity trickles out.
FASB 157
"It didn't matter how much liquidity was provided to the banks, the "markets" didn't stabilize until they changed the accounting rules from mark to market back to mark to whateverthehellyouwant."
And to raise the Fed Funds rate, Granny has to drain liquidty. Now yer' standing on one leg again.
How 'bout a drink?
fracking is the new investment bank. When the frackers can't get any more funding so goes the whole equity market
yellen moves her breasts, the financial world sucks her milk.
What ? She has breasts
that still work ? Really, they're Boobs - as in the Federal Reserve System Boob of the Year.
Ever seen a Booby bird try to achieve liftoff ? Runs along the waves, flapping wings for a Looong time and finally gets airborne - rather like the FED itself.
i thought iasb BNP Paribas, closing redempeions that trigered 2008
Not since Lehman. Hey, somebody had to say it.
Peer to peer lending is an example of junk bonds and they're financing terrorists.
There isn't much in the world anymore that isn't funding terrorists.
Obama pretty much single handedly pillaged the Treasury to finance ISIS.... so...
If Obama is financing ISIS and Obama gets his money from the Treasury and The Treasury gets its money from the FED, and the FED gets its money by counterfeiting.
The entire govt and banking system is essentially a terrorist organization funded through counterfeiting backed by the U.S. Govt.
But somehow your neighbor lending you a few bucks is funding terrorists .... seems like small fish to me.
Non gaap only applies to AAA rated companies finally
the disintegration will continue.. and there is no power great enough to stop it.
Fingers crossed that is does, this firesale it toast already.
BTFC ... anyone ?
"buy when blood is running in the streets", so when would that be?
The markets will probably get a fed pump if there is a hike, however, oil will go down and oil stocks will go bankrupt.
Booms and busts are to capitalism what salt is to pepper, so a bust...er, a fund going belly up (which is hardly a bust)...shouldn't be a revelation to anyone.
And indeed it isn't - except for low-information Zero Hedgers.
Assuming you are trying to start a serious conversation. That may be a mistake, but here it goes...
The problem is not a fund gating exits. The problem is when the house of cards is not sufficiently stable to absorb the event.
Low information? The jury is still out, talk to me in six months and see if you have the hubris to try schooling me on me how it's different this time.
Wonder what designer securities Paulsen & Co. is holding.
Has anyone checked out Yahoo Finance lately? Judging by the comments sections it looks like the cat is out of the bag. It looks like there has been a mass realization of the scam, the one that we have discussed here in much detail for several years.
http://finance.yahoo.com/news/goldman-3-big-changes-fed-113000244.html
Willie has warmed up and is about to sing.
https://youtu.be/QoQZ0qmf-mkRun banksters, RUN!
Enough gloom. Cheer here.
If you like bourbon get a Maker's Mark 46 or two while you can. This is a definite New Year's Eve Manhattan bourbon. Distinctive bottle if you're into that.
Looks like we have another couple of weeks
This is not the credit infarcus you were looking for. /JEDI mind trick