High-yield credit markets saw spreads widen 12bps on the week and high-yield bond prices fell notably as energy stocks faded after Monday's exuberant dead-cat-bounce. Trannies tumbled today off early exuberance gains, ending the week the biggest loser despite lower oil prices. Today's jobs data sparked initial "good news is bad news" weakness, was ramped to Europe's close then faded with Nasdaq and S&P red post-Payrolls. Treasury yields rose on the day (and week) with dramatic flattening as 2Y-7Y maturities up 17-20bps on the week and 30Y only 7bps higher. 2Y yields exploded 17bps for the worst week since Feb 2011 to Apr 2011 highs. The USDollar closed higher today (up 1.25% on the week) led by dramatic JPY weakness (and EUR fading). Despite USD strength, gold gained 2% on the week and silver +5.4% (best week in 6mo) even as oil lost 0.75% for its lowest close since July 2009. VIX tested down to an 11 handle but closed peeking back into a 12 handle, lower on the week. For the 3rd day of the last 4, internals created a Hindenburg Omen cluster.
... higher oil prices! Because when it comes to propaganda, a year certainly makes all the difference.
One of the great myths about investing that we’re told by the mainstream investment education is that we should “buy and hold” for the long term. Let's look at the numbers...
For the 3rd month in a row, Consumer Credit growth rose less than expected. At $13.226 billion (against expectations of a $16.5bn gain), this is the smallest growth since Nov 2013. This is the first 3-month miss since June 2009. Once again, as expected, the rise is all student and auto loans (which now face 27% delinquency for the subprime borrowers). However, perhaps the most notable facet is a 66% collapse in revolving credit growth from a year ago.
'We' are all individuals...
It appears the growth-is-back-just-look-at-the-jobs-number meme is not flowing through to the oil complex. WTI just broke below $66.00 (having earlier broken below and bounced back above) and is now down almost 1% on the week having retraced most of Monday's kneejerk dead-cat-bounce. This will be the lowest weekly close since July 2009 and down 9 of the last 10 weeks.
December 5th 1996: After rising 210% off the 1987 crash lows, Alan Greenspan speaking at the American Enterprise Institute in Washington, asks: "But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?" The next day, the Dow Jones Industrial Average slumps by 1% to close at 6,381.94; over the next three years, the market nearly doubles...then crashes...then doubles... then crashes... and then triples in the last five years... "rational exuberance"
Over two years later, it is good to see our old friend is still right there and that SkyNet still reigns supreme, because as the following chart of CTRP, courtesy of Nanex, shows "new normal" algo-controlled stocks appears to have just two default modes: a relentless ramp higher (courtesy of a VWAP buyback programs or just momentum ignition), or a far more "nuanced" sinewave oscillation up and down in what only a Princeon economist could call "price discovery."
As long as corporations continue borrowing money to buy back their own stocks and the yen keeps dropping, the SPX will continue lofting higher.
Things for Ukraine are going from bad to worse. As the central bank reported overnight, the country's foreign-currency (and gold reserves) dropped by over 21% in one month, to under $10 billion in November for the first time in nearly a decade due to large payments for debt and gas, from $12.6 billion to $9.966 billion.
Hydraulic fracturing, or fracking, has come full circle in Denton, Texas after a controversial ban on the practice entered into effect on Tuesday. Denton is one of several cities located on top of the massive Barnett shale formation, regarded as the birthplace of modern fracking. The ban, while incomplete, gives strength to what is a growing anti-fracking movement in the United States.
With today's shenanigans in USDJPY focusing everyone's attention on the nation's collapsing currency, Citi's FX Technicals group suggests it could perhaps be time to fade the trend and fight the consensus in the near-term.
By now everyone has heard of the NY Fed's most famous employee (who did not work at Goldman Sachs previously): Kevin Henry, who according to his latest LinkedIn profile was recently promoted to Senior Associate at the Capital Markets desk at the NY Fed (and if they haven't, a refresh can be found here, here and here). Which is fine: Kevin deserves all the recognition and accolades that are due to anyone who manages to centrally-plan the world's biggest bond market. Because after all that's what the Fed does: it intervenes in the bond market. Nothing strange about that. And yet we have one question: why does Kevin seem to exhibit an absolute fascination when it comes to equity ETFs?
In the great fiscal scheme of things, October 22, 1981 seems like only yesterday. That’s the day the US public debt crossed the $1 trillion mark for the first time. It had taken the nation 74,984 days to get there (205 years). What prompts this reflection is that just a few days ago the national debt breached the $18 trillion mark; and the last trillion was added in hardly 365 days.
The world economy is slowing down and the authorities are fretting.