Pricing in a Recession, Liquidity Crunch, Or...

Tyler Durden's picture

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snowball777's picture

Freight trains don't start out very fast, but once they get going...

Josh Randall's picture

This Baked Alaska is about to get  a blowtorch put to it

GeneMarchbanks's picture

Credit event for $1000 please Alex. "Why that's the DAILY DOUBLE!"

SheepDog-One's picture

I conclude Bernank's 'Grand Plan' involves a giant jar of Vaseline.

nyse's picture

Yeah, right... He's like, "Fuk that; I'm going in dry."

buzzsaw99's picture

the bernank will buy them.

fuu's picture

They call him cumulonimbus because you know he makes it rain.

Village Smithy's picture

Nicely done Mr. Tchir!

LawsofPhysics's picture

Just so I understand this, the article is saying that the retail investor is betting on a weak rally, while the professionals are positioning for a sell-off.  Well duh, that is why they are professionals.  Did I miss anything?

lolmao500's picture

October 24, something big will happen that will cause a collapse in the markets.

DeadFred's picture

Dang, options expire the 21st!

nyse's picture

Pole shift? Mayan calendar running out? Santa Clause suicide? WHAT IS IT???!!!

fdisk's picture

Why even talk about US bond Market? It's controlled and manipulated
by the FED. It showing what the FED does and nothing else.

CrashisOptimistic's picture

This is not bad analysis, but lacks a bit of depth.

HYG and JNK are traded vehicles.  They are not lockstep with their index.

Managed funds like FHIFX and PRHYX have such extensive holdings that they capture the variance of the universe of all HY bonds.  In other words, they are likely as good as an index themselves, even as the managers maneuver the portfolio.  When sample size of a universe is large, it's difficult not to be a representative sample.

Point being, FHIFX is still up YTD.  The S&P is down 7%.  The enormous monthly payout by HY conceals a lot.

I'd also suggest a retail vs professional perspective for the HY space is pretty shaky.  Not a lot of retail trading in that space.  Retail pursuit of an asset allocation niche would be via HYG or a managed fund, not individual trades.


oogs66's picture

4% of that portfolio is Icahn Enterprises.  Biggest holding is AMD.  Both decent companies - by high yield standards.  That manager has done a good job positioning for the problems by owning higher quality credits.  HYG and JNK will own the worst of the worst and do tend to search for big coupons at expense of safety.

I think retail is HYG - doing okay.  Bonds are professional - trading worse than even reflected by the indices.

CrashisOptimistic's picture

True, but the AMD issue got smacked this week and FHIFX is still up.  PRHYX is outperforming the S&P, too.

That monthly payout is powerful stuff.

CrashisOptimistic's picture

Another point is "safety".  Safety in the HY space is measured by default %, and it simply is not high.  Recession could raise it, but overall it's just not high.  Companies have too much cash on the balance sheets borrowed at very low rates to actually fold.

And that cash has to pay interest before anything else.

oogs66's picture

the move in ccc credits seems to indicate that default risk is growing

Robslob's picture




Speaking of "junk vehicles" my I interest you in some stocks today?

fdisk's picture

Interesting to see how you guys thinking on Hourly basis. Like, if he was in the Market 2 days ago when Market was up 300 points? Then it's ok, I guess. Today DOW down 120 and no good to be in the stocks Who are you? 5min scalper? People buying stocks for 5-10 years outlook, usually. Who f*cking cares about 1 or 3 hours from now.

CrashisOptimistic's picture

Perhaps someone who doubts there will be a stock market in 5-10 years.

fdisk's picture

And what you think? Stone age, cave man?

Or your Silver/Gold junk will make you a KING in woods?

I can guarantee you there always going to be a Stock Market,

perhaps not for people like you.

MFL8240's picture

Probably so for the shorts but upward momentum, not gonna happen didnt happen in the 30's either.

Quinvarius's picture

Why are paper money junkies always so bitter?  Of course real money makes you rich and paper money always dies.  You guys act like every little intervention in the metals markets is some big crash.  Gold will continue to rise until it backs the money supply.  It is the law of the markets.

Henry Chinaski's picture

End of September.  Quarterly and FY close out.  Next week could be ugly. 

fdisk's picture

Or could be good, that's why there is a Market.

I think Market will break to the Upside finally, simply because

90% of the people thinking otherwise.

Henry Chinaski's picture

Yes. That is a possibility also and your reasoning is good.  I stopped trading stocks while back and don't plan to get back in the market any time soon.  If I want to gamble, I prefer a good casino where pretty girls bring me free drinks and it is commonly understood that the house always wins in the long run.

slewie the pi-rat's picture

yep!  H_China_ski!

you think like slewie, you poor bastard! 

and, yes, according to the meanderings of large numbers, the house always "wins" but those pretty girls, dealers, pit bosses, floor managers, players' reps, bus bonuses, slot machines, electricity, taxes, techs, free dirinks & comps, security, surveillance, cashiers, cooks & bartenders, entertainment, drawings, valets, and back office & custodial staff aren't free! and they gotta pay their lenders, too, b4 "profits for equity"

besides, you get a "fair game":  something even the swiss have now abandoned in "the markets"!!!  now, it may be the modern equivalent of faro in dodge under the earp brothers, but winners seek a + EV anywhere they can, even in divergency from the norm of the random # (or event) generators, and the implied risk/reward in soaring slot bonuses

besides, the "wall street casino" has quite a bit of "overhead" too, doesn't it?  not to mention the "overhang"  which is a wonderful mcchesney martinism, isn't it?  maybe from tee many martoonies at the fuking "punchbowl"...? 

Ricky Bobby's picture

Market? Where is that. I see intervention, manipulation, corruption and lies, so where is this market you speak of?

ISEEIT's picture

For all of the wrong reasons, you might be right. Here in the rabbithole up is down and left is right and so might you be.

disabledvet's picture

we really need to move beyond "risk" and whatever the hell "de-risking" is. All that's happening (which in the Age of Information is "a good") is that "risk is getting priced." It seems to me when treasuries soar in value "the price of riskiness" may rise in the sense that "money is in the debt not the equity" but this isn't the same as what happens when a debt market collapses ala Greece. (Can risk even be priced over there?) It need not mean Armageddon but it certainly can be a symptom of it. To be clear however "the market is not waiting for the outcome of the Normandy Invasion" here. What we might be waiting for is something that hasn't happened (a break up of the EU for example.) Should we PRICE that in? Is this PRICED in already? There is always risk---and equites "refuse to collapse" because i imagine ultimately "the price" is not the Sum of All Fears but something "we" are working through. I happen to agree with the latter and am not surprised that the market keeps catching a bid. On the other side of course are "the window dressers" apparently. Who knew "window dressing" was such a terrible behavioral trait? I'll have to get the bino's out to see "what they're really up to over there."

ivars's picture

Here is comparison chart between my feb 6th chart of DJIA and actual prices. After 8 months with mistakes in the middle, its for last 2 months within 0-5% of actual DJIA:


In original chart, the trend continues to go down with increasing speed.

Stuck on Zero's picture

Everyone I know who has any cash is jumping in to property.  They get zero interest in the bank yielding -10% after tax and inflation.  They can get a solid few percent in a rental property and hope to get some appreciation some day. 

virgilcaine's picture

Credit is pricing in Armageddon.  Equites are just waking up with a six month lag and big declines on the way.

AAA Corp Bond yld @ 4% today means the S&P is overvalued by around 50%!

slewie the pi-rat's picture

"pros" just shorting the etf's maybe?

when liquidity is a 'problem', what a freaking "solution" that can be for the junksterz! 


Quinvarius's picture

What we are seeing is the paper money crash being expressed via fixed income and slightly masked by the Fed buying Treasuries.  If Treasuries matched other credit declines, you would have no doubt that was the case.

virgilcaine's picture

Tyler may I be so bold to say that the S&P trading at 600 .. is within the realm of possibility in 2012.

virgilcaine's picture

Quinvarius the credit markets are much deeper than that I respectfully submit.

winningfastball's picture

I'm seeing this retail buying everyday with my own eyes.  My discretionary retail PM's have been hesitant to deploy cash in bonds for the past 18 mos.- 24 mos. and now with equites plummeting off the side of a cliff they are starting to look for other opportunites and many are moving into the HY space.... thanks to the -ve real rates on gov't/ Prove/Muni/bonds and the management fee ontop,  the pressure invest to find "Yield" in what is preceived to be "Moderate" Risk relative to equities is starting to get to my guys.  Although yields seem attractive on some equites their clients have been scared to the 'safe haven" of bonds and by default forcing my guys into the HY space to appease(keep) cleints.... Mjr. Payne ahead

msmith's picture

The currency markets are definitely a key driver for equities, especially EURUSD.  It appears the EURUSD may rebound in the very short term, but the pair has much further to drop. Here is an interesting analysis of the EURUSD