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We Just Witnessed The Biggest U.S. Bond Crash In Nearly 2 Years – What Does This Mean For The Stock Market?

October 4, 2018

We Just Witnessed The Biggest U.S. Bond Crash In Nearly 2 Years – What Does This Mean For The Stock Market?

U.S. bonds have not fallen like this since Donald Trump’s stunning election victory in November 2016.  Could this be a sign that big trouble is on the horizon for the stock market?  It seems like bonds have been in a bull market forever, but now suddenly bond yields are spiking to alarmingly high levels.  On Wednesday, the yield on 30 year U.S. bonds rose to the highest level since September 2014, the yield on 10 year U.S. bonds rose to the highest level since June 2011, and the yield on 5 year bonds rose to the highest level since October 2008.  And this wasn’t just a U.S. phenomenon.  We saw bond yields spike all over the developed world on Wednesday, and the mainstream media is attempting to put a happy face on things by blaming a “booming economy” for the bond crash.  But the truth is not so simple.  For U.S. bonds, Bill Gross says that it was a lack of foreign buyers that drove yields higher, and he says that this may only be just the beginning…

And, according to Gross, the carnage may not end here: “Lack of foreign buying at these levels likely leading to lower Treasury prices,” echoing what we said last week. And as foreign investors pull back from US paper, look for even higher yields, and an even higher dollar, which in turn risks re-inflaming the EM crisis that had mercifully quieted down in recent weeks.

I believe that Gross is right on target.

And Jeffrey Gundlach has previously warned that when yields get to this level that it would be a “game changer”…

…click on the above link to read the rest of the article…

Satyajit Das: This Is Why You Can Expect Another Global Stock Market Meltdown

February 26, 2016

Satyajit Das: This Is Why You Can Expect Another Global Stock Market Meltdown

Authored by Satyajit Das’, author of the new book “The Age Of Stagnation” (via MarketWatch),

The mispricing of assets across world markets has reached epidemic proportions.

Stock prices have made strong advances over the past several years, yet market analysts see further gains, arguing that the selloffs of August 2015 and early 2016 represent a healthy correction.

But this rise in stock values has been underpinned by financial engineering and liquidity — setting the stage for a global financial crisis rivaling 2008 and early 2009.

The conditions for a crisis are now firmly established:overvaluation of financial assets; significant leverage; persistent low-growth and deflation; excessive risk taking reliant on central banks for liquidity, and the suppression of volatility.

Steve Blumenthal, CEO of CMG Capital Management Group, tells Barron’s funds writer Chris Dieterich that his firm has been clinging to ultra-safe bonds and utility stocks during the market storm.

For example, U.S. stock buybacks have reached 2007 levels and are running at around $500 billion annually. When dividends are included, companies are returning around $1 trillion annually to shareholders, close to 90% of earnings. Additional factors affecting share prices are mergers and acquisitions activity and also activist hedge funds, which have forced returns of capital or corporate restructures.

The major driver of stock prices is liquidity, in the form of zero interest rates and quantitative easing.

To be sure, stronger earnings have supported stocks. But on average, 70% to 80% of the improvement has come from cost-cutting, not revenue growth. Since mid-2014, corporate profit margins have stagnated and may even be declining.

A key factor is currency volatility. The strong U.S. dollar is pressuring American corporate earnings. A 10% rise in the value of the dollar equates to a 4%-5% percent decline in earnings. Rallies in European and Japanese stocks have been driven, in part, by the fall in the value of the euro and yen  respectively.

…click on the above link to read the rest of the article…

It’s Not If But When

September 29, 2015

It’s Not If But When

Since the 2008 crash there has been much talk about how the fundamentals have not been dealt with and the fact that the can has only been kicked down the road. Political mavericks and commentators such as Ron Paul have frequently pointed out that nothing has really changed and that we are heading for even bigger disasters ahead if we continue to play ostrich.

Likewise, the economic doom and gloom pundits – such as Peter Schiff, Marc Faber and Gerald Celente have been banging the drum for an unprecedented collapse that will make the 1929 western economic slump look like a tea party. First it was to be 2010, 2012, then 2013 and so on, but here we are still, in the tail end of 2015 and the dreaded collapse has still failed to materialise.

So, I’m sure that some people are probably wondering if these people are just carpet baggers, making a swift buck out of fear of an economic downturn. The truth is that we never left the economic downturn – we are currently in a period of manipulation that’s sole purpose is to mask the fact that there has not been a boom (or recovery if you like) to trigger the next bust.

The world economy is largely sustained by confidence and belief that pieces of paper (or digital records) have some inherent value relative to each other and relative to the physical realities of the world. In truth a paper note is worthless if people do not recognise its symbolic value or believe that the relationship between its value and the value of real-world objects (e.g. commodities) has been perverted or destroyed.

…click on the above link to read the rest of the article…

 

The Elite Have Prepared For The Coming Collapse – Have You?

September 7, 2015

The Elite Have Prepared For The Coming Collapse – Have You?

New Zealand - Public DomainWhy are the global elite buying extremely remote compounds that come with their own private airstrips in the middle of nowhere on the other side of the planet?  And why did they start dumping stocks like crazy earlier this year?  Do they know something that the rest of us don’t?  The things that I am about to share with you are quite alarming.  It appears that the global elite have a really good idea of what is coming, and they have already taken substantial steps to prepare for it.  Sadly, most of the general population is absolutely clueless about the financial collapse that is about to take place, and thus most of them will be completely blindsided by it.

As I discussed the other day, the only way that you make money in the stock market is if you get out in time.  The elite understand this very well, and that is why they have been dumping stocks for months.  This is something that has even been reported in the mainstream news.  For example, this comes from a CNBC article that was published on June 16th…

The so-called smart money is pulling back from market risk, with fund managers taking down exposure to stocks, increasing cash holdings and buying protection against a sharp selloff.

About two weeks before that, I discussed the same phenomenon on my website.  The article that I published on May 30th was entitled “Why Is The Smart Money Suddenly Getting Out Of Stocks And Real Estate?”

Did the “smart money” know what was about to happen?  Since the peak of the market, the Dow has already lost more than 2200 points.  All of the gains since the end of the 2013 calendar year have already been completely wiped out.

 

…click on the above link to read the rest of the article…

Big Natural Gas Driller Bites Dust, ‘Smart Money’ Gets Crushed

August 12, 2015

Big Natural Gas Driller Bites Dust, ‘Smart Money’ Gets Crushed

Natural gas driller Samson Resources is planning to file for Chapter 11 bankruptcy by August 15, when a $110 million interest payment comes due on $2.25 billion of senior unsecured junk bonds, Bloomberg reported, citing “two people with knowledge of the matter.” Samson doesn’t have the money, can’t pay, and won’t pay.

The 9.75% bonds maturing February 2020 aren’t traded anymore. The last trade was on July 29 for a quarter of a cent on the dollar. They’re part of the vast high-yield bond pile, and they have become worthless. These kinds of bonds are nicknamed “junk” for a reason.

Stockholders – private equity firms, the ultimate “smart money” – are getting wiped out too.

Samson was acquired in 2011 by a KKR-led group of private equity firms for $7.2 billion. They invested $4.1 billion of equity in the deal. Debt piled on the company made up the rest. Then Samson went on to drill this cash into the ground to produce lots of natural gas and sell it below cost, losing money all along. Now its cash is running out, and new cash to drill into the ground isn’t readily forthcoming.

In the pre-packaged bankruptcy filing, these stockholders would lose their equity stakes in the company, and their shares would become worthless.

Then there are the holders of $1 billion of second-lien covenant-lite term loans. “Covenant-lite” because the debt doesn’t provide creditors the classic protections. During the credit bubble, purposefully constructed by the Fed via its zero-interest rate policy, yield-hungry investors take on just about any risk to earn a discernable yield. Borrowers gobble up the fresh cash and set the terms. And when realty hits, this “covenant-lite” debt leaves investors twisting in the wind.

Holders of these second-lien covenant-lite term loans won’t get their money back either. But their proposal to restructure the company in court and gain control over the company is beating out a competing proposal by holders of the $2.25 billion of unsecured junk bonds that are now going up in smoke.

 

…click on the above link to read the rest of the article…

The Stock Market Will Start To Fall In July? The Dow Plummeted More Than 500 Points Last Week

July 27, 2015

The Stock Market Will Start To Fall In July? The Dow Plummeted More Than 500 Points Last Week

Falling - Public DomainWas last week a preview of things to come? There are quite a few people out there that believe that the stock market would begin to decline in July, and that appears to be precisely what is happening. Last week, the Dow Jones Industrial Average fell by more than 530 points. It was the biggest one week decline that we have seen so far in 2015, and some are suggesting that this could only be just the beginning. By just about any measurement that you might want to use, the stock market is overvalued. But we have been in this bubble for so long that many people have come to believe that this is “the new normal”. In fact, earlier today someone that I know dropped me a line and suggested that our financial overlords may be able to use the tools at their disposal to get this current bubble to persist indefinitely. Unfortunately, the truth is that no financial bubble ever lasts forever, and right now some very alarming things are starting to happen behind the scenes. Over the past couple of weeks, the smart money has been dumping stocks like crazy, and the lack of liquidity in the bond markets is beginning to become acute.  Could it be possible that another great financial crisis is just around the corner?

Last week took a lot of investors by surprise. The following is how Zero Hedgesummarized the carnage…

-Russell 2000 -3.1% – worst week since Oct 2014 (Bullard)
-Dow -2.8% – worst week since Dec 2014
-S&P -2.1% – worst week since Jan 2015
-Trannies -2.8% – worst week since Mar 2015
-Nasdaq -2.2% – worst week since Mar 2015

The talking heads on television were not quite sure what to make of this sudden downturn. On CNBC, analysts mainly blamed the usual suspects…

…click on the above link to read the rest of the article…

 

 

 

 

Grant Williams: Why The Smart Money Is So Nervous Now

March 1, 2015

Grant Williams: Why The Smart Money Is So Nervous Now

And selling out to “dumber” hands

If you drop anybody into any momentous period in history, it’s really tough to perceive it at the time. It’s only when you look back on these things with the benefit of hindsight that you really see how historic they really are. But for many people right now who can forget the narrative and can forget what they’re being told by various interested parties, if you can stand back far enough and take a practical look at what’s happening, I think it’s much easier to see certainly how far from normality things are today.

So believes, Grant Williams, portfolio and strategy advisor for Vulpes Investment Management, and proprietor of the economic blog Things That Make You Go Hmmm.

In this weeks’ podcast, Grant and Chris discuss the growing anxiety they see among experienced investors. More and more, those who have made long, successful careers in money management are realizing that the system has morphed into a strange beast they no longer recognize, nor trust. Fear of epic, perhaps historic, dislocations in price when the current market reverses is causing more and more of the “smart money” to sell out now and seek safe harbor:

We don’t know how it will end, but something has to give. It’s a question of what it will be. Because when you start playing with the forces of nature you can suppress them for a while, but they will eventually overwhelm you. We’ve seen this constantly throughout history. I’m a big reader of and a big follower of history because I think the answers to everything lie in there somewhere if you pay attention to the signals.

…click on the above link to read the rest of the article…

 

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