A little housekeeping before the videos. This site will be down for the next week because I will be away.
Please feel free to chat amongst yourselves in the comments section.
I will chime in when I get a free moment, and I might try and put up a post at some point. No promises though...
Scott Bleier
We actually heard the truth from someone on Wall St yesterday. Scott Bleier of Create Capital came out and basically told it like it is.
If we continue down this economic path we will most assuredly loook like Japan when it's all said and done.
There will be no recovery until the "digital debt" that we created with various credit Ponzi schemes is either defaulted on or marked to market.
Great stuff here...
Enjoy and have a safe week in the markets. I'll be back next Friday.
J
Part 2
Friday, September 10, 2010
Thursday, September 9, 2010
Bondzilla Returns!
What an interesting day today.
There are lots of things to talk about so let's get right to it. Let's start with the ugly 30 year treasury auction today. Here was the recap from the link above:
"This week's government debt sale ended on a sour note, with investors unfriendly toward a sale of long bonds.
The $13 billion sale of 30-year bonds fetched a high yield of 3.82 percent, 0.042 percentage points above the "when issued" expectations. Bidders put up 2.73 times the amount bid, a measure known as the bid-to-cover ratio.
Foreign demand also was soft, with indirect bidders making up just 36 percent of total buyers."
Needless to say the bond market didn't like the news. Notice the sharp spike in 30 year yields at 1:00 when the auction results were released:
My Take:
This afternoons bond sale was very disappointing considering the flight to safety we are currently seeing into bonds. The fact that only about a third of the auction was bought by foreigners is also pretty disturbing.
When you really think about it: Should we really be surprised at these results?
I mean investors are scared to death right now. The idea of holding a bond that doesn't mature for 30 years must sound daunting when we can't even predict how the economy will look 6 months from now.
Foreigners have to be concerned about our ability to keep rates this low as our deficits continue to soar. There is also the risk of inflation that could be triggered if we saw the dollar collapse or a devaluation of the currency by the Fed.
I think there is another developing threat to the bond market that is starting to get a lot of press. This is the emergence of corporate debt. Take a close look at the video below:
My Take:
Buying corporate debt is beginning to look like a much better bet moving forward.
Think about it:
Why buy treasuries that pay nothing and expose you to the serious threats of the USA's deficits when you can invest in a corporate bond of a company that has a stronger balance sheet and pays a higher yield?
Sounds like a no brainer idea to me. There are plenty of solid companies that will survive our depression. I agree with the bond trader above: If you are comfortable with the duration of the bond and the yield then go for it!
You can see why companies are swarming to the bond market with debt offerings. They know they will likely never see today's perfect combination of strong demand for corporate debt and low borrowing costs ever again in their lifetime.
Market Volume
I wanted to end with a little piece on the market volumes and sentiment before I get to the bottom line.
Bob Pisani had another interesting statistic today on the trading volume in early September:
"In the first 5 trading days, September consolidated trading volume at the NYSE was down 31 percent compared to the same period last year. August volume was also 31 percent below the same period last year."
Quick Take:
Where are all of the bulls? I thought this was recovery summer?
Basically the volume tells you that you can hear the crickets chirping on the trading floors of the stock market. This doesn't bode well for equities.
The video above that began with a hedge fund trader who called for the death of "cult of equity had a good take on it:
Here is the link to the article that the CNBC referred to.
Some tidbits from the piece:
"The “cult of equity” is dead as dividend yields in most of the west have risen above bond yields, according to one of Europe’s leading equity fund managers.
Alister Hibbert, a fund manager in European equities at BlackRock, told the Financial Times in a video interview that the cult started when dividend yields fell below bond yields about 60 years ago.
“We have now moved decisively the other way ... and that seems to be in relatively normal market times. So I think the cult of equity is dead,” he said.
They suggest that many equity professionals are admitting defeat after a poor decade for share prices has seen investors move away from equities and into bonds.
The cult of equity is widely regarded as starting in the 1950s as institutional investors piled into shares, pushing the dividend yield below the bond yield."
Quick Take
This was actually a bit too bullish for me at the end. I think he is right but way early. Nonetheless, he does make a good point about the psychology of investors who have taken a beating in equities over the past 10+ years.
The Bottom Line
Keep an eye on this huge shift into corporate bonds. This will not bode well for stocks or treasuries in my opinion.
I say this because the massive flight into corporate bonds suggests that there are now three viable competitors for investors.
Corporate bonds have always been around.
However,they were never really a real threat to government bonds because they were considered "risky" versus investing in a treasuries that were backed by the full faith and credit of the United States Government.
This investor sentiment has now changed because investors are now questioning the solvency of the US. They are then questioning treasuries as a result.
It will be interesting to see how stocks and treasuries react to their new corporate competition.
Remember, there is only so much money that can be spread around so both stocks and treasuries could suffer as money finds safer places to hide.
Disclosure: No new positions taken at the time of publication.
There are lots of things to talk about so let's get right to it. Let's start with the ugly 30 year treasury auction today. Here was the recap from the link above:
"This week's government debt sale ended on a sour note, with investors unfriendly toward a sale of long bonds.
The $13 billion sale of 30-year bonds fetched a high yield of 3.82 percent, 0.042 percentage points above the "when issued" expectations. Bidders put up 2.73 times the amount bid, a measure known as the bid-to-cover ratio.
Foreign demand also was soft, with indirect bidders making up just 36 percent of total buyers."
Needless to say the bond market didn't like the news. Notice the sharp spike in 30 year yields at 1:00 when the auction results were released:
My Take:
This afternoons bond sale was very disappointing considering the flight to safety we are currently seeing into bonds. The fact that only about a third of the auction was bought by foreigners is also pretty disturbing.
When you really think about it: Should we really be surprised at these results?
I mean investors are scared to death right now. The idea of holding a bond that doesn't mature for 30 years must sound daunting when we can't even predict how the economy will look 6 months from now.
Foreigners have to be concerned about our ability to keep rates this low as our deficits continue to soar. There is also the risk of inflation that could be triggered if we saw the dollar collapse or a devaluation of the currency by the Fed.
I think there is another developing threat to the bond market that is starting to get a lot of press. This is the emergence of corporate debt. Take a close look at the video below:
My Take:
Buying corporate debt is beginning to look like a much better bet moving forward.
Think about it:
Why buy treasuries that pay nothing and expose you to the serious threats of the USA's deficits when you can invest in a corporate bond of a company that has a stronger balance sheet and pays a higher yield?
Sounds like a no brainer idea to me. There are plenty of solid companies that will survive our depression. I agree with the bond trader above: If you are comfortable with the duration of the bond and the yield then go for it!
You can see why companies are swarming to the bond market with debt offerings. They know they will likely never see today's perfect combination of strong demand for corporate debt and low borrowing costs ever again in their lifetime.
Market Volume
I wanted to end with a little piece on the market volumes and sentiment before I get to the bottom line.
Bob Pisani had another interesting statistic today on the trading volume in early September:
"In the first 5 trading days, September consolidated trading volume at the NYSE was down 31 percent compared to the same period last year. August volume was also 31 percent below the same period last year."
Quick Take:
Where are all of the bulls? I thought this was recovery summer?
Basically the volume tells you that you can hear the crickets chirping on the trading floors of the stock market. This doesn't bode well for equities.
The video above that began with a hedge fund trader who called for the death of "cult of equity had a good take on it:
Here is the link to the article that the CNBC referred to.
Some tidbits from the piece:
"The “cult of equity” is dead as dividend yields in most of the west have risen above bond yields, according to one of Europe’s leading equity fund managers.
Alister Hibbert, a fund manager in European equities at BlackRock, told the Financial Times in a video interview that the cult started when dividend yields fell below bond yields about 60 years ago.
“We have now moved decisively the other way ... and that seems to be in relatively normal market times. So I think the cult of equity is dead,” he said.
They suggest that many equity professionals are admitting defeat after a poor decade for share prices has seen investors move away from equities and into bonds.
The cult of equity is widely regarded as starting in the 1950s as institutional investors piled into shares, pushing the dividend yield below the bond yield."
Quick Take
This was actually a bit too bullish for me at the end. I think he is right but way early. Nonetheless, he does make a good point about the psychology of investors who have taken a beating in equities over the past 10+ years.
The Bottom Line
Keep an eye on this huge shift into corporate bonds. This will not bode well for stocks or treasuries in my opinion.
I say this because the massive flight into corporate bonds suggests that there are now three viable competitors for investors.
Corporate bonds have always been around.
However,they were never really a real threat to government bonds because they were considered "risky" versus investing in a treasuries that were backed by the full faith and credit of the United States Government.
This investor sentiment has now changed because investors are now questioning the solvency of the US. They are then questioning treasuries as a result.
It will be interesting to see how stocks and treasuries react to their new corporate competition.
Remember, there is only so much money that can be spread around so both stocks and treasuries could suffer as money finds safer places to hide.
Disclosure: No new positions taken at the time of publication.
Wednesday, September 8, 2010
Why doesn't our media get it?
Long day so I will be brief tonight.
The Fed released its Beige Book today. The whole report was pretty much a snooze fest.
Here is the one statement from the report that the traders focused on:
The balance of the report was filled with the usual Fed spin on the economy as they discussed "pockets of strength" in various areas of the country.
"Pockets of strength"....Please...Spare me the details....It's such a joke. I am sure there were pockets of Rome that didn't burn when the Empire collapsed.
The bottom line here folks is nothing has changed. The market looked directionless today as it wobbled around in slightly green territory.
I will close today with a CNBC commentary followed by another soundbite I picked up from the RT on the US housing crash.
FYI, expect to see more reports from other parts of the world on this blog because it's becoming increasingly more difficult to find anything that even resembles the truth from our own financial media.
Who would of thought 25 years ago during the peak of the Reagan era Cold War that Americans would have to read the Russian media in 2010 in order to get accurate financial reporting on Wall St.
I searched CNBC today and what I found was a joke.
For example:
Cramer was out with his "Four signs that the bull could prevail".
He rattled on:
"The bears need to spread these negative stories to stop the bullish advance and they do it because it works," said Cramer. "The bears have been incredibly effective at spreading innuendo and fear."
"Things are still looking better for the bulls," said Cramer. "Today's action could be merely the death throes of a bearish defense that’s on its last legs."
Quick Take:
Surely you jest JC. Your first comment is the exact opposite of what is really going on. For Cramer to suggest this is ludicrous.
How many "green shoots" pieces are seen on CNBC every day versus "gloom and doom"?
How many bulltard talking heads do you see on this network every hour telling you to buy stocks?
The reality here is CNBC viewers are baited into buying stocks 90% of the time the network is live on the air.
If CNBC wanted to be fair and balanced then why don't they give Dr. Noriel Roubini a time slot after Cramer and let him interview the ever growing list of bears that now reside on Wall St?
Investors have had stocks shoved down their throats by this network ever since the late 1990's and they now have NOTHING to show for it.
Why hasn's CNBC changed with the times and realized that the smartest guys on the street no longer are in stocks?
The only ones left playing in stocks are the HFT's and the hedge funds. The institutional guys are only there because they are forced to put money to work, and trsut me, they are not happy about being forced to play in the sandbox.
In fact, they have recently started to complain because they find themselves getting fleeced by the predatory traders who sit in the shark tank waiting for them as they put bids in for stocks.
Anyone network that's telling you to jump into this tank must be ignored at this point.
If you are must watch some TV during the day then I suggest you change the channel over to "Judge Judy".
At least there you will be able to find something that represents truth and justice.
Here is the RT blip I promised above:
Enjoy!
The Fed released its Beige Book today. The whole report was pretty much a snooze fest.
"The overall U.S. economy was still growing in late summer, but there were "widespread signs of deceleration," the Fed said."
The balance of the report was filled with the usual Fed spin on the economy as they discussed "pockets of strength" in various areas of the country.
"Pockets of strength"....Please...Spare me the details....It's such a joke. I am sure there were pockets of Rome that didn't burn when the Empire collapsed.
The bottom line here folks is nothing has changed. The market looked directionless today as it wobbled around in slightly green territory.
I will close today with a CNBC commentary followed by another soundbite I picked up from the RT on the US housing crash.
FYI, expect to see more reports from other parts of the world on this blog because it's becoming increasingly more difficult to find anything that even resembles the truth from our own financial media.
Who would of thought 25 years ago during the peak of the Reagan era Cold War that Americans would have to read the Russian media in 2010 in order to get accurate financial reporting on Wall St.
I searched CNBC today and what I found was a joke.
For example:
Cramer was out with his "Four signs that the bull could prevail".
He rattled on:
"The bears need to spread these negative stories to stop the bullish advance and they do it because it works," said Cramer. "The bears have been incredibly effective at spreading innuendo and fear."
"Things are still looking better for the bulls," said Cramer. "Today's action could be merely the death throes of a bearish defense that’s on its last legs."
Quick Take:
Surely you jest JC. Your first comment is the exact opposite of what is really going on. For Cramer to suggest this is ludicrous.
How many "green shoots" pieces are seen on CNBC every day versus "gloom and doom"?
How many bulltard talking heads do you see on this network every hour telling you to buy stocks?
The reality here is CNBC viewers are baited into buying stocks 90% of the time the network is live on the air.
If CNBC wanted to be fair and balanced then why don't they give Dr. Noriel Roubini a time slot after Cramer and let him interview the ever growing list of bears that now reside on Wall St?
Investors have had stocks shoved down their throats by this network ever since the late 1990's and they now have NOTHING to show for it.
Why hasn's CNBC changed with the times and realized that the smartest guys on the street no longer are in stocks?
The only ones left playing in stocks are the HFT's and the hedge funds. The institutional guys are only there because they are forced to put money to work, and trsut me, they are not happy about being forced to play in the sandbox.
In fact, they have recently started to complain because they find themselves getting fleeced by the predatory traders who sit in the shark tank waiting for them as they put bids in for stocks.
Anyone network that's telling you to jump into this tank must be ignored at this point.
If you are must watch some TV during the day then I suggest you change the channel over to "Judge Judy".
At least there you will be able to find something that represents truth and justice.
Here is the RT blip I promised above:
Enjoy!
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