Obscenely overpriced.
Sunday, October 30, 2022
Saturday, October 29, 2022
We have to draw a straight line from Bernie Sanders to the Republican Congressional baseball shooting where progressive James T. Hodgkinson tried to kill 24 Republicans
There is no Wikipedia page for James T. Hodgkinson.
Distressed debt reaches $271 billion after five straight weeks of growth
Growing Pile of Distressed Debt Signals Coming US Default Wave
(Bloomberg) -- A heap of distressed debt is expanding in the US corporate bond market and investors worry that a burst of defaults will follow. The amount of dollar-denominated bonds and loans trading at levels indicating distress is the largest since September 2020, reaching $271.3 billion last week after five straight weeks of growth, according to data compiled by Bloomberg. ... the supply of distressed debt is still a fraction of the almost $1 trillion peak level in 2020 . . ..
With long-term Treasury investments down 32% year to date, and long-term investment grade down 30%, you can imagine what's happening downstream and behind the scenes.
Bloomberg cites Carnival Corp. as an example, which had to pay 6% for loans in 2021 but is paying 10.75% now. That's 79% more expensive for Carnival.
Have you tried to buy a house?
A 30-yr fixed rate mortgage would have cost you on average 3.14% one year ago. Today it'll cost you 7.08%, an increase of over 125%.
Do you own stocks?
You are still down over 18% year to date despite the 7% rebound in October.
The recent stock market rally can be rightly viewed as part of an orderly selling process which has been underway all year. The March high failed the January high, and the August high failed the March high. The current rally is unlikely to succeed the August high. It has to be remembered this is all occurring in the context of a rising interest rate environment, which is negative for stocks, housing, and bonds.
Bull market advocates, who have stocks to sell to you, don't forget, have persistently ignored the distorting effects of Fed interest rate suppression. In fact, they've counted on that suppression. They call it the Fed Put. They laugh at these puny Fed rate hikes, and make gazillions off the inflation trade. Now they're ignoring the unwind, too, which is affecting all debt. Stocks are debts, too, don't forget. Up or down, they make money off the direction. The bull market cheerleaders are worse than used car salesmen.
October 31 marks the end of the fiscal year for investment companies, who have dividends to distribute by calendar year's end to avoid taxation as registered investment companies. In an already down year, they have had a huge incentive to finish the fiscal year on as strong a note as possible. That may account for the strong October for stocks.
Normally the investment companies would be selling their losers by October 31 for tax-loss harvesting purposes. If that's happening you wouldn't know it from the monthly view of the S&P 500 in October. The DOW and the Russell 2000 were up even more. Even the NASDAQ is up in October.
But the S&P 500 low of the year did occur on October 12 at 3577, ringed by heavy selling on Sep 30 and Oct 14, after which it has been elevator up. That was probably the tax-loss harvesting for fiscal 2022.
In any event rising interest rates remain negative for the bond market, the housing market, and for stocks. The consequences of massive debt repricing are only just beginning to be felt. Stocks will hold out the longest because they can. First the bonds, then the housing, then the stocks. The rest of us are just collateral damage.
The expected 0.75 point Fed interest rate decision is Wednesday, November 2, less than one week before the election. Don't expect the Fed to do more than this, even though they damn well ought.
Friday, October 28, 2022
Thursday, October 27, 2022
Fed Chair Ben Bernanke once famously said on 60 Minutes that if inflation ever got out of control they could raise interest rates in 15 minutes
The first Fed rate hike under Powell came in March when inflation was already way out of control, and Americans began loading up their charge cards at 18-28% interest to cope.
That's even more insane to me than the inflation.
The main Fed interest rate is still at 3.08% today, the rate available only to the banks, the same guys who pay you 0% interest, with inflation just cruising along up there above 8%.
It took the Fed over a year to move. A year. And then by just 0.75 points at a time, which the stock market parasites screamed bloody murder about.
Pretty amazing to me that ordinary folks aren't screaming, aren't mad as hell, and seem to be prepared to just swallow and take it some more.
I guess the fight has been bred out of the American people.
Sad!
Wednesday, October 26, 2022
The Treasury yield curve compresses narrowly into a thin thread before recessions, so it looks like one is imminent
Yield across the board right now is in the 4s except for one and two month money. The one year is the leader, roughly in the middle of the pack, around which the other rates have been organizing.
Interestingly enough, compound annual growth of nominal GDP since the year 2000 22 years ago has come in at 4.18% through 2Q on 2Q. The 30-yr tonight is yielding 4.19%. This looks like rate normalization to me because rates are compressing in that vicinity, finally commensurate with actual economic growth, after the pitiful all-time-low average annual 30-yr yield in 2020 at 1.56%. We haven't had a 4% average 30-yr yield since 2010.
Given the extraordinary interventions by the US Federal Reserve over the period to suppress interest rates, we may see them explode the other way given the length and depth of the distortions. Trillions upon trillions of US Dollar denominated debt was sold at those repressed prices. In 2020 alone we're talking about $2.9 trillion in 2-10yr Treasury notes, not counting the short end bills and the long end bonds, all yielding well under 1%. It could get really ugly.
Recession doesn't always happen right away, but the signal is pretty clear. It seemed to take forever in the late 1990s.
As always, click images to enlarge.
Recessions are in gray.
And as always, this is not investment advice.
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| daily view through 10/25/22 |
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| monthly view through Sep 2022 |
Tuesday, October 25, 2022
The entire US Treasury yield curve bows and worships at the feet of the 1-year Treasury for an eighth day now, and you know what that means
When the upstart 1-year tries to compete with the long end, you in for a heap a trouble boy.
Yippee-ki-yay.
Sunday, October 23, 2022
Sunday morning comedy from CNBC
Detroit, Tulsa, Memphis, and Oklahoma City
Pack the bags, honey! We're moving!
Saturday, October 22, 2022
Friday, October 21, 2022
Thursday, October 20, 2022
The US Treasury crash is epitomized by what's happened to Vanguard's long term Treasury mutual fund VUSTX
The fund is down to $8.36 tonight, 2 cents away from its all time low set on October 19, 1987 at $8.34. That was 35 years ago last night, when the stock market fell 20% in one day.
The 30-year US Treasury back then paid 10.25% on that date. Tonight it pays just 4.24%.
This Vanguard fund, which invests in such securities, year to date has returned -33%. Given the yield discrepancy, it would seem foolhardy to believe that the bottom is in. I wouldn't be surprised if the fund makes dramatic new lows, never before seen.
Meanwhile imagine losing money like that on America's safest of investments.
It's truly appalling and ranks right up there with America losing its AAA status under Barack Obama. I guess it's fitting that it's happening under his former Vice President.
Wednesday, October 19, 2022
This is a bitter anniversary of fear, and a day of loathing
Exactly 35 years ago tonight this fund marked its all time low at $8.34 when stocks crashed 20% in one day, October 19, 1987.
It happened because it was a flight to safety, the US long bond being the safest haven in the world. Prices move inverse to yields. The price crashed because everyone plowed into it, and the yield soared to 10.25% as a result. As such, the all time price low is meaningless for bonds, but full of meaning for stocks.
At $8.49 tonight, however, the price is just $.15 higher than it was 35 years ago, but for an entirely different reason.
In 1987 the price crashed due to stock market fear; in 2022 it's due to bond market loathing, in particular, loathing of existing US debt which pays too little for the risk being taken. At 4.15% tonight, yield on the long bond has a long way to go to credibility. More importantly, the market is SHOUTING that trillions of dollars of existing US debt pays its holders a reprehensible sum.
People should think hard about what that means.
Faith in America hangs in the balance and is found wanting.
The COVID-19 emergency continues to Jan 11 despite Biden saying the pandemic's over in September on 60 Minutes: They keep kicking the can down the road to avoid implications for vaccines
The FDA would have to use the normal process for approving the vaccines, and based on the corners cut to get the vaccines to market, that looks unlikely.
Furthermore, removal of the emergency authorizations would then expose the manufacturers to lawsuits.
I agree with the guy in the last paragraph below.
Expect indefinite emergency use authorization, at least until Republicans take over the federal government in 2025.
The FDA’s ability to issue emergency authorizations for vaccines, drugs and medical devices would not necessarily end when the Covid public health emergency is lifted. These authorizations rely on a separate determination made by the U.S. health secretary under the law that governs the FDA.
But it could become increasingly difficult for HHS and FDA to justify
clearing vaccines and treatments through an expedited process that
shortcuts the normal system of approval when the emergency declaration
is no longer in place.
Trump administration Health Secretary Alex Azar activated the FDA’s emergency authorization powers in March 2020, about two months after first declaring the public health emergency.
“It could affect emergency use authorization, where you couldn’t give these EUAs and so the FDA would have to fully approve the drug,” Gostin said. “It could have enormous knock-on effects that need to be very carefully thought through,” he said of ending the public health emergency.
But James Hodge, an expert on public health law at Arizona State University, said the PREP Act declaration that supports Covid vaccinations at pharmacies and the FDA’s power to grant emergency use authorizations will probably remain in place for years to come.
More.
Hey look, Biden throws another last minute Hail Mary to buy votes with less than 3 weeks to Election 2022!
Biden has cut the emergency reserve from 33 days supply to 20 days, with more cuts to come.
"Wouldn't be prudent". -- Bush 41
Hey look, another inflation trade!
Fewer units sold at higher prices yields . . . profits!
We are at the bottom of this food money chain.
Tuesday, October 18, 2022
Jay Powell is only appearing to be serious about battling inflation
The only thing Jay is doing about inflation is making sure everyone thinks he's doing something about it, while making sure there remains plenty of spread for his pals to trade off it.
Currently the spread is 5.12: Inflation at 8.2 minus an effective funds rate of 3.08. This is a golden opportunity for the banksters and everyone down the food chain until it reaches you. The banks are getting rich off it. Wall Street is getting rich off it. Corporations are getting rich off it. And, of course, the stock market investor parasites are getting rich off it.
You get left holding the bag of all the price increases jacked up under the guise of the general condition.
Three years ago there was no spread: -0.03. Nothing there to exploit.
The banksters LOVE LOVE LOVE this inflation:
Bank of America said Monday that quarterly profit . . . topped expectations on better-than-expected fixed income trading and gains in interest income . . . third-quarter profit fell 8% to $7.1 billion.
The bond market is not happy.In Rama a voice is heard, lamentation, weeping, and great mourning . . ..
Monday, October 17, 2022
Through Oct 14 the traditional 60/40 401k portfolio is down a net 21% in 2022, not counting inflation
Bonds are supposed to perform well as the safe haven asset when stocks fall, reducing the net impact to the portfolio when equities decline.
But not this year!
Bonds have actually crashed on the long end, down even more than stocks, as stocks entered a bear market.
The bond crash is a market statement rebuking the spending those bonds have represented: Not enough return for the risk.
So far the spendthrift Congress remains tone-deaf, leaving it to the Fed to raise interest rates . . . ever so feebly.
No one in his right mind believes raising interest rates 300 basis points is going to have much impact on inflation raging at 800 basis points.
Sunday, October 16, 2022
Saturday, October 15, 2022
You can't get this kind of information just anywhere, and you know why
Wawa shuttering two Philadelphia stores amid city's retail crime surge:
Retail theft is up more than 50% in Philadelphia
Friday, October 14, 2022
Jim Cramer's stupid people who made a lot of money on Oct 13 weren't stupid until today, when they gave it all back, lol
Jim thought the market would tank on the inflation news. Instead it rallied.
But the market took it all back today.
Jim is nothing if not entertaining, as are other market cheerleaders.
Gayed meanwhile fully expected the rally to continue today.
Tonight there is much weeping and gnashing of teeth behind the brave faces.
Thursday, October 13, 2022
Tuesday, October 11, 2022
Payback is a bitch, or why everything sucks
Debt stopped buying economic growth, if it ever did in the first place, way back in 1982, but no one has seemed to notice.
Prosperity based on debt is not prosperity.
Debt draws forward prosperity, and then when you get forward, there's no prosperity there because you already made off with it.
It's like the polar explorer who starved and froze to death because he ate the food caches on the way to the pole instead of saving them for on the way back.
Monday, October 10, 2022
Ben Bernanke wins Nobel Prize in Economics for 495 bank failures under his leadership as Federal Reserve Chair Feb 2006-Feb 2014
The 495 failures were a huge improvement over the 9,000 bank failures during The Great Depression of the 1930s, his specialty of study in the 1980s, experts said under their breath.
Sunday, October 9, 2022
Saturday, October 8, 2022
US homes were at least 84% overvalued in 2021
Rounding out the Unholy Trinity of Big Ticket Asset Inflation, Housing joins Stocks and Bonds in similar overvaluation territory in 2021 at about 84%.
In Feb 2012 when housing bottomed after The Great Financial Crisis, a previous inflation-adjusted Case-Shiller home price index chart no longer updated for present years showed that prices had fallen into the top range of US house prices which had prevailed throughout the post-war from the 1950s to the late 1990s. Mind you, the top range of those inflation-adjusted prices.
Thanks to Democrats and Republicans, including Bill Clinton and Newt Gingrich, the American Dream, the nest of the American future, was turned into a mere commodity in the late 1990s, to be churned in the markets for profit.
Long-suppressed long term interest rates have conspired with commoditization to produce valuations which have exploded, making houses unaffordable as nests, which is why your kid is still living in your basement.
The chart below shows the nominal price figures, on an average annual basis through 2021. The blow-off tops in 2022 are even worse (the index topped 308 in June), and are not shown because the year ain't over, and prices are falling.
At an average index level of 260 in 2021, prices were inflated from 141 in 2012 by about 84%, not far below the overvaluation of stocks and bonds at 90% and higher.
The percentage holding full-time jobs through September 2022 held above 50%, disappointing the ubiquitous advocates of a Fed interest rate pivot
Full time as a percentage of civilian population in September was 50.3%, and for 2022 through September averaged 50.15%.
Not bad, considering.
The Fed will see little evidence in this figure that its interest rate increase policy is harming employment.
Stocks on Friday collapsed after a head fake to start the week to within 1.5% of the 52-week lows set a week ago.
Long term investment grade bonds and US Treasury securities also revisited lows from 9/27/22, coming within pennies of those benchmarks.
30-year yield for UST is back up to 3.86%. It was 3.87% on 9/27. At the beginning of 2022, yield was a paltry 2.01% by comparison.
UK gilts are experiencing the same action despite the Bank of England intervening to buy bonds.
The bond crisis is not over.
With yields soaring across the board no one wants to own the lower paying outstanding issues, which are legion, destroying their value.
But everything in the global economy is based on those, piled up in earnest after The Great Financial Crisis of 2008, and in orgiastic frenzy afterwards during the late pandemic.
Bond yields in 2022 are telling you that they are overvalued by 92%.
Stock market valuation is telling you a similar thing.
From 1938 through 2019 the median ratio of the S&P 500 to GDP is 81. In 2020 we averaged 154, or 90% overvalued.
This is the major deflationary headwind facing the world, the other side of the COVID-19 inflationary shock coin.
Push here, it comes out over there.
Modern central banking cannot escape this conundrum any more than the gold standard could.
The only thing the individual can do in this situation is to owe nothing and save everything, preferably in your hands.
Good luck.
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