- Just How Leaky Is the Fed? More Than You May Realize (BBG)
- Republican Presidential Candidates Spar Over Party’s Future (WSJ)
- Euro Area Seeks Greece Roadmap to May Agreement (BBG)
- The $320 Billion Bogey Needed to Placate U.S. Stock Market Bulls (BBG)
- Seeking Obamacare alternative, Republicans eye tax credits (Reuters)
- Gundlach Says Market Hasn’t Seen Full Impact of Fed Moves (BBG)
- EU meets on migrant crisis as shipwreck corpses brought ashore (Reuters)
- Canada’s Own Oil Pipeline Problem (WSJ)
"A slow start to the week has become customary, as Monday appears to have become the new Friday," Barclays says, noting that the humans simply aren't trading in a credit market where opportunities are scarce. Meanwhile, the robots do not rest, and on the Monday they simultaneously decide that some random data point or unduly hawkish/dovish soundbite out of an FOMC voter is cause for all the algos to chase down the same rabbit hole sending ripples through a fixed income market devoid of any real liquidity, the humans will be in for a rude awakening when they get to work on Tuesday morning.
“In my 30-year career, it’s one of the most unattractive risk-return propositions that I’ve seen,” DoubleLine's Bonnie Baha says. Between abysmally low yields, heightened rate sensitivity heading into a rate hike cycle, and balance sheet re-leveraging on the part of US corporations, it’s a bad time to be betting on corporate credit.
History is on the market’s side, says DoubleLine's Jeff Gundlach, noting the Fed’s forecast for how much benchmark rates will rise is still too high, even after central bankers lowered their estimates last month. BlackRock’s Jeffrey Rosenberg says the bond market’s too complacent and is poised for a correction, claiming The Fed has "a tremendous ability" to send bond yields higher. But as Bloomberg reports, "if the burden of proof is on anybody, it’s on the Fed," and for now, as Gundlach exclaims, The Fed has "been wrong for so long," that their forecasts have been literally of no value, "the market’s pricing has been closer."
As market participants slowly make their way back to trading desks around the post-Easter world, and especially the US where a truncated session on Friday morning ended in tears for anyone hoping for a 2015 US recovery following an abysmal March nonfarm payrolls print, they find that unlike on previous occasions, the equity futures liftathon is nowhere to be found this morning, with the S&P set to resume trading in the red for 2015. Away from Greece, whose future remains in limbo, the biggest development over the holiday weekend was a Goldman note in which the central-bank friendly firm said that "the right policy would be to put hikes on hold for now."
In all the annals of investing, few seemingly innocuous phrases incorporate as much by way of grave implication as those four words, “a shift to banknotes”. 2008 was bad. With central bank policy now at the outer reaches of the possible and even of the theoretical, the outlook is certainly uncertain. Not wishing to participate in the terminal stages of a momentum-driven bubble is not bearish so much as simply sane.
"...The negative divergence of the markets from economic strength and momentum are simply warning signs and do not currently suggest becoming grossly underweight equity exposure. However, warning signs exist for a reason, and much like Wyle E. Coyote chasing the Roadrunner, not paying attention to the signs has tended to have rather severe consequences."
While the dollar strength this morning, which has pushed it to a fresh 13 year high and has accelerated the EURUSD plunge to under 1.06 - a drop of over 300 pips since the start of the week - has been a recap of yesterday's trading action, the main difference is that unlike yesterday, the USDJPY has managed to find a strong bid in the overnight session, pushing not only the Nikkei up by 0.4%, but also lifting US equity futures as the entire global marketplace is now merely a sandbox in which the central banks try to crush their currencies as fast as possible.
It's that time in the quarter when DoubleLine's Jeff Gundlach holds one of his trademark open webcasts with anyone who cares to check in, this one titled Blockhead. In it "Mr. Gundlach will be discussing the economy, the markets and his outlook for what he believes may be the best investment strategies and sector allocations for the DoubleLine Total Return Bond Fund."
Jeff Gundlach Warns "The Fed Is About To Make A Big Mistake" (& That's Why Bond Yields Are Crashing)Submitted by Tyler Durden on 01/28/2015 23:06 -0400
Since The FOMC's "hawkish" statement, bond yields have utterly cratered as near-record speculative short positioning in bonds unwind the long-end (and worries about international problems - "and readings on financial and international developments"). However, fundamentally speaking, DoubleLine's Jeff Gundlach explains, the Federal Reserve is on the brink of making a big mistake simply put, "if Fed Chair Janet Yellen goes ahead with this plan (to raise rates for 'philosophical reasons'), she runs the risk of having to quickly reverse course and cut interest rates."
It has been a rough start to a new year as all of the gains following the end of the Federal Reserve's flagship "QE-3" campaign have been erased. There is currently little concern by the majority of Wall Street analysts that anything is currently wrong with the markets. While earnings estimates are rapidly being guided down, it is likely only a temporary issue due to plunging oil prices. However, not to worry, the economy is set to continue its upward growth trajectory. Maybe that is the case. But as investors we should always have a watchful eye on the things that could possibly go wrong that could lead to a rapid decline in investment capital.
Our question is this: if indeed the shale boom is now turning to bust, and if indeed the vast majority of jobs created were thanks to the shale revolution (which is about to go in reverse), what happens to the primary source of high-paying jobs: the energy sector? Before you answer, take a look at the following chart, courtesy of the Dallas Fed.
- U.S. Index Futures Decline on Commodities Slump, Growth Concerns (BBG)
- Al Qaeda claims French attack, derides Paris rally (Reuters)
- Charlie Hebdo With Muhammad Cover on Sale With Heavy Security Precautions (BBG)
- How an Obscure Tax Loophole Brought Down Obama's Treasury Nominee (BBG)
- ECB’s bond plan is legal ‘in principle’ (FT)
- Charlie Hebdo fallout: Specter of fascist past haunts European nationalism (Reuters)
- DRW to acquire smaller rival Chopper Trading (FT)
- Oil fall could lead to capex collapse: DoubleLine's Gundlach (Reuters)
By now, it is no secret that the one state that conventional wisdom expects to suffer the most as a result of the crude collapse is the one state that through the Great Recession was the primary provider of (well-paying) job creation, the same state which is now expected to enter into a full-blown recession. But is it really Texas that will be impacted the most? The answer, at least according to a recent Pew report, is a resounding no.
With Bill Gross still in cross-asset limbo, it appears the undisputed fixed income crown, for now, goes to DoubleLine's Jeffrey Gundlach who recently opined, "something is not right." Shortly, the monarch of money markets will be discussing the economy, the markets and his outlook 2015, in his latest webcast titled, rather ominously, "V". Given Gundlach's concerns about the "health of the economy and financial system," we suspect the V-for-Vendetta climax anology may well be more what he had in mind... Full presentation below