‘It’s Like A Death Wish’: Jeff Gundlach Takes Aim At Toxic Policy Mix, Demands You ‘Respect’ The Curve

By Heisenberg Report

When last we checked in on bond king for the post-Gross world, exposer of WSJ conspiracies, and man who showed up at Sohn dressed in a Jack Nicholson Joker costume, Jeff Gundlach, the DoubleLine boss was busy explaining how the U.S. was mixing up a toxic cocktail of Fed hikes and deficit spending.

Specifically, Jeff said the following during his latest webcast:

Increasing the size of the deficit while we’re raising interest rates almost seems like a suicide mission.

Right. And you can trust him on that, because any man brave enough to wear a purple corduroy halloween costume in late April is a man who knows something about “suicide missions”.

Here’s the chart, although there’s nothing at all unique about it:

risingdeficits

Continue reading ‘It’s Like A Death Wish’: Jeff Gundlach Takes Aim At Toxic Policy Mix, Demands You ‘Respect’ The Curve

$247 Trillion and (Rapidly) Counting

By Doug Noland

I chronicled mortgage finance Bubble excess on a weekly basis. Relevant data were right there in plain sight, much of it courtesy of the Federal Reserve. Yet only after the Bubble burst did it all suddenly become obvious. Flashing warning signs were masked by manic delusions of endless prosperity and faith in the almighty “inside the beltway”. These days, data for the global government finance Bubble is not as easily-accessible, though there is ample evidence for which to draw conclusions. It will all be frustratingly obvious in hindsight.

The Institute of International Finance is out with their latest data that, unfortunately, is not made available in detail to the general public. Global debt ended the first quarter at a record $247 Trillion, or 318% of GDP. Even after a decade of historic Credit inflation, global debt continues to expand at (“Terminal Phase”) double-digit rates (11.1% y-o-y).

Global debt growth accelerated during the first quarter to $8.0 Trillion – and surged $30 Trillion over just the past five quarters. In a single data point not to be disregarded, Global Debt Has Expanded (a difficult to fathom) $150 Trillion, or 150%, Over the Past Ten Years. Actually, the trajectory of Bubble-period Credit expansion may seem rather familiar. It’s been, after all, a replay of the reckless U.S. mortgage Credit episode, only on a much grander global scale.

Continue reading $247 Trillion and (Rapidly) Counting

Friday Reveals Event Risk Complacency

By Tom McClellan

Friday up days stock market SP500

The SP500’s higher close on Friday was one of several up Fridays we have seen recently.  Moving up or down on a Friday can convey a message about investor sentiment, especially when multiple Fridays see the market go in the same direction.

To be a buyer on a Friday, one has to accept that you cannot get out again until Monday.  So it takes some degree of confidence that “event risk” won’t be a problem over the weekend.  When people are feeling fearful, Fridays are more likely to see a lower close.  And by the same token, bidding up the market on Fridays can be a sign of confidence.

Continue reading Friday Reveals Event Risk Complacency

A Macro (Amigos) Update for Mid-Summer

By NFTRH

You have better things to do than read droning macro analysis or long, drawn out investment theses. It is a weekend in the dead of summer and for that reason we go easy this week; real easy.

The 3 Amigos are here to simply say that things are as they have been, with Amigo #2 (long-term yields) getting home and pulling back on cue, and the other two (SPX/Gold ratio & Yield Curve) still in process and indicating risk ‘on’ and ‘boom on’, respectively.

Amigo #1 (Stock Market vs. Gold)

While gold bug sentiment, Commitments of Traders and the historical seasonal pattern all indicate a good potential for a gold rally coming soon, the stock market’s ratio to gold continues to indicate that risk is on and the play has certainly not been to be hiding in precious metals from the stock crash that never arrives. Quite the contrary.

Continue reading A Macro (Amigos) Update for Mid-Summer

Wall Street Competes With Unregulated Banks for the Riskiest Loans

By Anthony B. Sanders

Fewer Mortgage Originations, More C&I Lending From Banks

When compared to the 2000s, commercial banks have largely changed their mix of lending from single-family mortgage originations to business (commercial and industrial) lending. “Unregulated” entities like Quicken and PennyMac Mortgage Investment Trust have picked up share in the single-family mortgage origination space.
On one side are major banks, which are diving back into high-risk corporate lending now that U.S. regulators have loosened up.On the other are so-called shadow lenders — private equity shops, boutique banks and other financial players that muscled in on this business when regulators restrained the big banks five years ago.The result: ever-growing competition to provide junk-rated debt used in corporate takeovers. It could turn out to be a “race to the bottom,” said Frank Ossino, a senior portfolio manager at Newfleet Asset Management in Hartford, Connecticut.For the $2.3 trillion-plus market in junk bonds and leveraged loans, the question is whether all this competition ultimately brings new, greater risks. Underwriters have already been piling more and more leverage onto companies and watering down various protections for investors. Much of that debt is being packaged into complicated structured investments at a pace reminiscent of the subprime boom a decade ago.

shadows

Continue reading Wall Street Competes With Unregulated Banks for the Riskiest Loans

Trade Tariffs Create Risks and Opportunities in Base Metal Stocks

By Rob Bruggeman

If you’re not familiar with the Visual Capitalist, I highly recommend that you check out the website and signing up for the daily email.  Content is always visually stunning and covers a broad range of topics.  Yesterday’s post – The Base Metal Boom: The Start of a New Bull Market? – by Nicholas LePan is an excellent one, although the timing was unfortunate.  Base metal prices took it on the chin overnight as The Donald announced that the US will potentially slap tariffs on another $200 billion of goods from China after August 31.

While I agree with the Visual Capitalist article that the electric vehicle boom and electrification of everything will drive the next metals boom, the immediate reality is that base metal consumption growth is totally driven by China.  This growth isn’t from the Chinese making lots of EVs and installing solar panels everywhere; for the time being, it is still primarily from infrastructure growth and economic expansion.  The chart below, extracted from the Visual Capitalist piece, shows China’s dominance in metal consumption.

Source: visualcapitalist.com

Continue reading Trade Tariffs Create Risks and Opportunities in Base Metal Stocks

Excellon Resources (EXN.to): I want to believe

By Otto Rock

Excellon Resources (EXN.to) is a stock I held from late 2016 to early 2018, finally giving up the position (for a minor profit, but considering the plan it was basically a wash) after one disappointing quarter too many. But it’s one I’ve kept watching, not least because if it does get its act together and start producing the way it could now the La Platosa mine is dry it could be a sudden big winner. So it was good to see its 2q18 production numbers today because…


…that’s a distinct improvement. However, but but buttybut but, I’m not in a hurry to race back into the stock because it has a few things to prove yet, starting with the financials from that production number. When they get filed in mid-August I’ll be looking for lots of things, including…

Continue reading Excellon Resources (EXN.to): I want to believe

It’s Taking Too Long, the Boom Didn’t Boom

By Jeffrey Snider

At some point, the boom had to have boomed. We are moving into the past tense for all this now, inflation hysteria almost certainly tucked away into the economic ledger alongside four other false dawns. Data is coming in for June 2018, meaning half of this year already recorded and analyzed. It’s not what it was supposed to have been.

Even in terms of inflation, there are only regrets. The US CPI registered 2.87% year-over-year last month, but for still another month there is nothing else but energy inside that number. There is what may seem like an unfair (from the point of view of central bankers) asymmetry to oil. When it’s down that’s deflation and often consistent with the textbook description of what accompanies it.

Continue reading It’s Taking Too Long, the Boom Didn’t Boom

Tank de la Bank

By Tim Knight

As I trust I have made clear, the financial sector is a favorite right now for shorting. This chart of the XLF is, based on over 30 years of staring at charts, one of the most exciting and enticing opportunities I have ever laid eyes on. The analog and breakdown have, thus far, been spot-on.

As the earnings season kicks off, some of the earliest reporters are big banks like Wells Fargo and Citigroup. I was thus eager to see this morning how pre-market trading was going now that their earnings are released. It’s a step in the right direction.

Continue reading Tank de la Bank

Why The Fed Will Be Forced To Halt QT Early And Expand The Balance Sheet In 2020, According To Morgan Stanley

By Heisenberg

The longer the current U.S. expansion drags on, and the more unapologetic Jerome Powell’s Fed comes across, the more obsessed the market becomes with curve inversion.

And when I say “curve inversion”, I mean “pick a curve, any curve.” Swaps, corporates or the old standbys in the Treasury complex. It all works if you’re running down stories. Anything to put the word “inverted” next to the word “curve” in a headline. “It’s provocative. It gets the people goin’!

2s10s

On Thursday, Morgan Stanley is out with an expansive new note that flags mid-2019 for inversion. To wit:

Continue reading Why The Fed Will Be Forced To Halt QT Early And Expand The Balance Sheet In 2020, According To Morgan Stanley

Post-CPI Summary

By Michael Ashton

Below is a summary of my post-CPI tweets.

  • OK, 15 minutes to CPI. Here goes.
  • Last mo, we had an 0.17% on core m/m, exactly on expectations but after a weak 0.10% in April.
  • The Dec/Jan 0.24%/0.35% seem far away, but even farther away are the 0.14%s of last June and July. That is, comps remain relatively easy.
  • Really no big surprises last month. Still haven’t seen core goods acceleration or any sign of tariff effects. Core ex-housing is rising but still quite low.
  • In fact, I think the big story going forward, not this month per se but for the balance of the year and 2019, is what happens to core goods prices. With trucking prices rising aggressively, tariffs up and globalization down, I’d expect to see movement there.
  • In that vein, keep an eye on Apparel, which though small is an important signal on core goods.
  • This month, economists are looking for 0.18% on core, pushing y/y JUST BARELY to 2.3% with rounding. The consensus nailed it last month.
  • My thesis is that we should be seeing more core inflation than that going forward. So far, that thesis has been unrewarded but I really didn’t expect a whole lot to come through until the second half. This first half was just catching up from base effects of 2017.
  • You can see that median is basically back on the slow uptrend from 2014-15-16-17. Inflation will keep rising. The only question (which would be a scary outcome) is whether it accelerates past that former trend into a new self-feeding inflation cycle. No sign of that yet.

Continue reading Post-CPI Summary

I Hear 1987 New Wave is Back

By Kevin Muir

[biiwii comment: I prefer 1977 punk, personally; and as for new wave, Joy Division over New Order any friggin’ day of the week…]

I don’t know about you, but I’m worried. The economic cycle is long in the tooth. Equity valuations are stretched. The yield curve is flattening. Emerging markets and other liquidity-sensitive markets are sagging. The Federal Reserve is raising rates while also attempting the never-before-accomplished feat of reversing a decade of quantitative easing – seemingly oblivious to the hornet’s nest they are walking into. And President Trump seems determined to antagonize as many trading partners as possible before the summer holidays begin in earnest.

Continue reading I Hear 1987 New Wave is Back