Another Heavy Hitter Calls Bond Bear


See, the headline says so. You can click it for the article.

Hedge-fund veteran Paul Tudor Jones has joined the growing chorus of big hitters in the fixed-income world warning that bonds are well and truly in a bear market.

Well, they truly are not in a bear market sir. They are in a bull market. At significant issue is whether or not they will enter a secular bear market after the decades-long bull funded and nurtured all manner of bullish asset market excesses since the early 1980s.

The 30yr ‘long bond’ is not in a bear market because it is in an unbroken uptrend. Ugly 2014-2018 pattern? Sure. Concerning upside overshoot (attn: stock market, you did the same recently) that could trigger an equal and at least opposite response? Sure. Bear market? Easy boyz, stop making headlines for people to get hysterical over and watch the market.

30 year bond

The 30yr yield is only now approaching our anticipated target.

Continue reading Another Heavy Hitter Calls Bond Bear

KPMG Reports on Risks Faced by Top Mining Executives

By Otto Rock

TORONTO, March 1, 2018 /CNW/ – Overbooking at quality lunch establishments is the top risk facing mining and metals companies this year, finds an annual survey of Canadian mining executives by KPMG in Canada.  As volatility re-emerges in reservations markets, shifting prices will be a key theme as mining industry participants from around the world gather in Toronto next week for the 86th annual Prospectors & Developers Association of Canada convention to get absolutely lathered.

The latest issue of Insights into Mining shows a relatively consistent risk landscape compared to previous years as Canadian and global mining businesses continue to navigate Michelin three star restaurants in a highly competitive industry. Booking risk and the average price for Dom Perignon returned to the Top 10 this year, while access to private rooms, AMEX rhodium cards, controlling bowels and trying to drive Ferraris while drunk, maintaining an antisocial right to talk loudly and managing walking instability also figure high on the list of top risks.

“Restaurant booking risk is once again the leading challenge facing mining executives as they consider the downside of the recent upswing in prices,” says Heather Cheeseman, GTA Mining Leader and Partner, Audit and Risk Consulting, KPMG in Canada. “With weed and crypto stocks making gains, the competition for the best tables at lunch is now fierce and PAs are under pressure to secure the best lunch spots without going on long waiting lists, else incur the wrath of the utter pieces of shit who pay their monthly salaries.”

Below are the Top 10 risks facing Canadian mining and metals companies in 2018:

1. Restaurant lunch reservation risk
2. AMEX rhodium availability (includes risk of embarrassment in using a  mere Platinum or Black card in front of peers)
3. Access to best tables
4. Having to be pleasant to “the staff” else face discrimination lawsuits
5. Dom Perignon price risk
6. Private room availability
7. PDAC hangover risk
8. Ability to drive back to office without DUI arrest
9. Controlling bowels
10. Capital allocation of lunch on expense account without anyone noticing the line item

Each year, KPMG in Canada updates the market with critical insights into the risks, challenges and multi-year trends that are top of mind for Canadian miners. Learn more by accessing the Insights into Mining report.

The Authority Fallacy, Or The Quarles Quandary

By Jeffrey Snider

In early September 2007, just a month after the eurodollar system broke and still weeks before the FOMC would finally see the need to do something, anything, private equity firm Carlyle Group added six new “senior investment professionals” intending on making investments in global banking and insurance. The timing was, well, suspect.

Among those added to the firm was Randal Quarles, a former Treasury official in the Bush administration who had become Undersecretary for Domestic Finance. In that position, Quarles had delivered a speech in New York in May 2006 addressing the irregularities becoming undeniable throughout markets. It was, to say the least, an auspicious time to be talking his book.

It was, in reading it this much later, a far more realistic assessment than most that had been offered particularly by anyone in any official capacity. He addressed the potential issues with the GSE’s starting with their role in the then housing bubble mania, admitting quite frankly, “The concentration of risk inherent in these portfolios along with the GSEs’ thin capital structure are an important policy concern and a high priority for the Treasury.”  Priority in name only, apparently.

Continue reading The Authority Fallacy, Or The Quarles Quandary

The Big Dollar Question: Is This The Turning Point?

By Heisenberg

As noted on Wednesday afternoon, the dollar managed its first monthly gain in four in February, leading some to wonder if we’ve seen a turning point for a greenback that’s been more “beleaguered” than Jeff Sessions after a Trump Twitter tirade.


Of course the dollar story is complicated these days. On one hand, you’ve got a ballooning deficit in the U.S. and worries that the Trump administration is still angling for a weak dollar policy to bolster U.S. trade. On the other hand, you’ve got rising U.S. yields and a Fed chair who delivered a hawkish surprise earlier this week during his first public testimony on Capitol Hill.

Continue reading The Big Dollar Question: Is This The Turning Point?

Mortgage Refinancing Applications Tank 11.11% From Previous Week As Fed-or Mortis Sets In

By Anthony B. Sanders

Fed Futures Forecast 3 Rate Increase This Year

Yes, The Fed’s version of Rigor Mortis (aka, Fed-or Mortis) is setting in.

Mortgage applications increased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 23, 2018. This week’s results include an adjustment for the Washington’s Birthday (Presidents’ Day) holiday.


The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 3 percent higher than the same week one year ago. The Refinance Index decreased 11 percent from the previous week.


Continue reading Mortgage Refinancing Applications Tank 11.11% From Previous Week As Fed-or Mortis Sets In

They’ve Done Studies You Know…

By Heisenberg

Ok, so we got through the first of two Powell testimonies, and it went ok, all things considered. The message was mildly hawkish on balance and the result for yields, the dollar and secondarily, for stocks, was predictable.

The comments that set the tone came early on when Powell suggested that his outlook on the economy had improved of late and although he said he “wouldn’t want to prejudge” anything about the rate path, he noted that for him, the data “add some confidence to the view that inflation is moving up to target.”

“We’ve also seen continued strength around the globe, and we’ve seen fiscal policy become more stimulative,” he added.

 Treasurys dropped on those comments as 10Y yields quickly moved above 2.90.


Zooming in on 2Y yields just as the comments excerpted above hit, you can really see the impact:

Continue reading They’ve Done Studies You Know…

China PMI and Copper

By Callum Thomas

With the end of February, China puts itself in the spotlight with the first major PMI results of all the major economies, and major economy is the key word as China’s influence across global markets only grows by the year.  The February manufacturing PMI came in at 50.3 (51.2 expected, 51.3 previous), and the Non-manufacturing PMI at 54.4 (55.0 expected, 55.3 previous).  So, some pretty soft results.  The timing of Chinese new year no doubt played some role (taking place in the middle of February – and hence shutting things down for a couple of weeks around the 1-week national holiday), so we’d need to see March data to confirm, but it still a weak result nonetheless.

On the details, within the manufacturing PMI large firms were down -0.4pts to 52.2 vs small firms down a sharp -3.7pts to 44.8 – highlighting the pressure facing smaller firms which receive less support from the government and are generally more sensitive to changes in economic activity.  Within the non-manufacturing PMI, the Services PMI was down -0.6pts to 53.8, while the Construction PMI was down -3.0pts to 57.5 – which lines up with the slowing in property price gains.  So overall, within the data there was not much to get excited about.  And looking at a key China-sensitive market, the outlook for copper prices is left with some looming questions…

The key takeaways from the February China PMIs are:

-The February China PMI data was materially weaker vs January and consensus expectations.  Chinese New Year likely had some impact, but it was still a weak result.

-The soft data, even if it proves to be temporary, leaves question marks looming on the outlook for copper prices.

-Looking at the copper and government bond markets there are a couple of key divergences, which highlight double-edged risks in copper prices and bond yields.

1. China Manufacturing PMI: This chart shows the breadth of the components that make up the NBS China manufacturing PMI.  You can clearly visualize the moment China stepped up stimulus measures in early 2016, while the rebound in global trade and commodities and weakening CNY also helped. Whereas now you can see the impact of waning stimulus tailwinds (which were already in play) and with the latest results accentuated to the downside by Chinese new year distortions.

Continue reading China PMI and Copper

Interview Just Like Gartman

By Tim Knight

One of the most frequent guests in the world of financial media is the “commodity king” Gartman TuxDennis Gartman. In spite of his moniker, he chimes in far more on equities than commodities, and his nearly daily appearances on Fox Business, CNBC, Bloomberg, the trade show circuit, or whoever else will have him, have made him a glowing success story. At least if you measure success by being repeatedly invited back to share market opinions.

As has been pointed out ad nauseam in the comments section of many a blog (particularly ZeroHedge), Mr. Gartman, in spite of his efforts, appears to be wrong far more often than right. Many would say his percentage of being wrong is something approaching 100%, although my own informal analysis puts the figure at a kinder 70% or so.

Oh, and allow me to say this before going further: those of you who feel it clever to comment that people should just do the opposite or whatever Gartman says, or that there should be a triple-inverse Gartman Fund – – you should know the identical comment has been made, oh, thousands of times already, so what may seem clever and saucy to you is, in fact, tired and boring. So save your typing, because the thought you just had isn’t original.

Continue reading Interview Just Like Gartman

Bi-Weekly Economic Review: One Down, Three to Go

By Joseph Calhoun

Economic Reports

Economic Growth & Investment

We pay particular attention to broad based indicators of growth. The Chicago Fed National Activity Index and the Conference Board’s Leading Economic Indicators are examples. We watch them because we are mostly interested in identifying inflection points in the broad economy and aren’t as interested in the details.  Why? Because, while bear markets do happen outside of recession, it is rare and unpredictable. Our best chance of acting in advance of a bear market is to identify the onset of recession. And concentrating on the details of the economic data can cloud one’s judgment about the overall economy which is what matters to the market as a whole.

But we also think you have to be careful in interpreting these indexes. You don’t want to overreact to noise or not react to a real warning. So it is interesting, in the case of the LEI, to see what factors are moving the index. The most recent release showed a rise of 1% in the LEI, quite a bit stronger than expected. But what drove the rise? Building permits, stock prices and ISM new orders, none of which, by themselves, are very informative about future growth. All of them are, to some degree, measures of sentiment rather than actual hard data about the economy. Building permits are not a commitment to actually build anything even if they do show intent. Stock prices, as the old Wall Street saying goes, have predicted nine of the last five recessions. And the ISM report has been showing robust growth for over a year that quite simply refuses to show up in the hard manufacturing data. So don’t get too excited about the LEI; it isn’t as strong as it appears.

And no, the positive ISM and regional Fed sentiment still hasn’t found its way into the industrial production report, down 0.1% in January with the manufacturing part of the report flat. December was revised down significantly as well. One can’t help but wonder if the Trump administration’s honeymoon period is about over; sentiment works for a while but at some point the growth has to actually show up.

One recent big bright spot was the Quarterly Services survey which showed an 8% rise in information services spending. That’s a huge improvement over last quarter which was up just 1.1%.


Continue reading Bi-Weekly Economic Review: One Down, Three to Go

The Albatross Of Debt: The Stock Market’s $67 Trillion Nightmare, Part 4

By David Stockman

The Donald seems to think that the 37% gain in the stock market between election day and the January 26th high was all about him, and in one sense that’s true.

Donald Trump is all about delusional and so are the casino punters. They keep buying what the robo-machines are buying, which, in turn, persist in feasting on the dip because it’s there and because it’s worked like a charm for nine years running.

So doing, the punters have become downright reckless. After all, the market was already sky high last January—-trading at 23X earnings on the S&P 500 and resting precariously on a record $554 billion of margin debt . Yet in order to load up on even more of these ultra risky shares, punters have since added $112 billion to their already staggering margin accounts, thereby helping to propel the S&P index to a truly ludicrous 27X by the end of January 2o18.

Continue reading The Albatross Of Debt: The Stock Market’s $67 Trillion Nightmare, Part 4

The Pricking of the Canadian Real Estate Bubble?

By Kevin Muir

First of all, sorry for the lack of posts lately. Long story, but rest assured, I am back on track and the old ‘tourist regular postings have resumed.

Next up, today I will write about Canadian real estate. I know, many of you find that about as exciting as watching Winter Olympic curling, but give me a chance – after all, we Canadians have a way to make even curling entertaining.

The Canadian real estate bubble

As most everyone knows, over the past decade, Canada has experienced a massive real estate boom.

Continue reading The Pricking of the Canadian Real Estate Bubble?

Treasuries: Too Far Too Fast?

By Callum Thomas

Since the September low point last year US 10-Year bond yields have risen 90bps, this compares to 125bps from the low point in July 2016 through to March 2017, or if you count it as one big move they’ve gone up 158bps.  What ever way you put it the move in bonds has been substantial, so a logical question to ask is “have bond yields gone too far too fast?”

I talked about the tactical outlook bond yields a couple of weeks ago in the Weekly Macro Themes report, and a key chart from that was the one below – bond market sentiment.

 The chart shows our composite treasuries sentiment index.  The index derives signals from bond market implied volatility, bond fund flows, speculative futures positioning, and sovereign bond market breadth.  The combined signal has provided some truly insightful leads on the market, particularly when it reaches an extreme.  I have lined it up with the US 10 year bond yield to give an intuitive display of the swings in investor sentiment.

When it comes to sentiment indicators and incorporating them into a broader process, my view is that sentiment indicators typically contain ‘momentum information’ through the range, and ‘contrarian information’ at extremes.  Thus I would say at this point we are swiftly transitioning from momentum to contrarian information, and the risk of a stabilization or pullback in yields is elevated at this point.

My medium term view remains that bond yields go higher.  This view is informed by bond valuations still being at expensive levels, a positive growth/inflation outlook (strong cyclical picture), and a turning of the tides in monetary policy (specifically, with quantitative easing being gradually phased out globally and the Fed starting QT).  Short-term, seasonality is also consistent with higher bond yields (through until about May-June).

So if I had to guess, I would say there is a decent risk of a short-term pull back in bond yields (i.e. rebound in bond prices), but that this will be a brief interlude as the medium-term trend will likely resume shortly thereafter.