The Fed doesn't care about Main Street. It cares about just ONE thing: the Bond Bubble.
The evidence that Yellen is clueless or a blatant liar is endless. The casino gamblers keep dancing on the edge of a live volcano in the belief that Yellen has their back. In fact, her statements this week prove once again that she is right there on the edge with them - jabbering incoherently. One of these days, even the silicon units in the casino will take notice. The dancing will then turn into diving for the doors.
Ripley's believe it or not world continues. Earlier today, Hong Kong's Hang Seng market entered a bull market, rising 20% from its February lows, just as Hong Kong retail sales plunged 20.6%, the bigest drop since 1999 and then moments ago, in a move that pushed the Chinese Yuan stronger at least initially, S&P revised its Chinese outlook to negative, saying the economic rebalancing is likely to proceed more slowly than had expected over next 5 years and warning about China's debt load.
"This Is Unprecedented": Smart Money Throws Up All Over "Rally", Sells Stocks For Eight Straight WeeksSubmitted by Tyler Durden on 03/22/2016 09:38 -0400
"Last week, during which the S&P 500 climbed 1.4%, BofAML clients were net sellers of US stocks for the eighth consecutive week, in the amount of $1.4bn—suggesting clients still doubt the sustainability of the rally. This is the longest selling streak since Oct-Dec 2010"
At the same time as the PBOC was cautioning about the dangers of excess debt (just as it injected a record amount of loans into the financial system), China's central bank warned about dangers from a stock market bubble, and perhaps just to assure the bubble gets even bigger, at the same time China eased on margin debt limits, in the process sending Chinese stocks soaring higher by 2.2%, and pushing the Shanghai Composite over 3000 for the first time in months as China now appears set to attempt another housing bubble "soft landing" while at the same time restarting its housing bubble.
The scale of China's outbound investment wave is so great that the value of deals announced in the third quarter of 2015 exceeded China's current-account surplus for the same period, according to data compiled by Bloomberg. That trick will be repeated in the current quarter, unless China puts in its best current-account performance since 2008. What is going on here? The answer is quite simple: following Beijing's ramp up in capital outflows, China has found a new and innovative way to export funds offshore.
The Biggest Threat To The S&P In The Next Month: "Only Buyer Keeping This Market Alive" Stops BuyingSubmitted by Tyler Durden on 03/15/2016 15:45 -0400
The biggest danger to the S&P500 over the short-term has little to do with what Janet Yellen may say tomorrow, and everything to do with the marginal buyer of stocks being put into a state of forced hibernation
"...in a world where corporate balance sheets are arguably the most unhealthy they have ever been (all-time high leverage in HG and HY) where companies have relied on cheap debt to fund a growth through acquisition strategy, what happens if funding is either unavailable or too expensive to make a growth through acquisition strategy make sense? Same goes for buybacks and special dividends?"
In any other case debt/EBITDA at or higher than 10x - certainly 15x - in a world in which cash flows are rapidly deteriorating would be an excuse for bondholders to take to the hills. But when you have such leverage ratios as 83x one can only quietly stand back, find a place behind which to hide, and hunker down ahead of the coming explosion.
1. who is brave enough to catch a proverbial falling knife?
2. US industrial activity is contracting and the consumer will soon follow
3. the plunge in crude will lead to further cuts in capex and a profit downturn across many industries
4. China’s economy is slowing and the RMB will soon be devalued
5. share prices need to fall further to offer an attractive risk-adjusted return given heightened economic and market risks
"The irony in this year’s batch of outrageous predictions is that some of them are “outrageous” merely because they run counter to overwhelming market consensus. In fact, many would not look particularly outrageous at all in more “normal” times – if there even is such a thing!"
Soaring junk bond redemptions; rising investment grade (and high yield) yields pressuring corporate buybacks; record corporate leverage and sliding cash flows; Chinese devaluation back with a vengeance; capital outflows from EM accelerating as dollar strength returns; corporate profits and revenues in recession; CEOs most pessimistic since 2012, oh and the Fed's first rate hike in 9 years expected to soak up as much as $800 billion in excess liquidity. To Wall Street's strategists none of this matters: as Bloomberg observes, virtually every single sellside forecasts expects "no end to the bull market."
"... a default cycle in commodity-related areas at this point is unavoidable, and the only real question here is whether it stays contained to those areas or extends itself to other sectors."
Last week we asked (rhetorically) if "something just blew up in junk?" We have the answer today, as triple-hooks (CCC-rated debt) in the junk bond market have crashed through the worst levels of 2011 and are now at the highest yields since July 2009. Amid this complacency still reigns in the equity market (just as it did when the last credit cycle turned).