Loading ...March 25 – Bloomberg (Katherine Doherty): “The amount of distressed debt in the U.S. has quadrupled in less than a week to nearly $1 trillion, reaching levels not seen since 2008 as the collapse of oil prices and fallout from the coronavirus shutters entire industries across the globe. In total, the tally has ballooned to $934 billion of U.S. corporate bonds that yield at least 10 percentage points above Treasuries and loans that trade for less than 80 cents on the dollar… That’s nearly double the amount from less than a week ago.”
“Federal Reserve Chairman Jerome Powell’s whatever-it-takes moment arrived Monday
March 23 – Wall Street Journal (Nick Timiraos): “Federal Reserve Chairman Jerome Powell’s whatever-it-takes moment arrived Monday. The central bank signaled it would do practically anything—extending loans to big and small businesses and purchasing unlimited amounts of government debt—to help an American economy in a race against time. After firing its arsenal at funding markets last week to prevent a public health crisis from morphing into a financial crisis, the Fed said it would throw another kitchen sink this week at credit markets that have broken down. The central bank unveiled a new generation of lending facilities to prevent a liquidity crunch from turning into a solvency crisis for American businesses. ‘This is the first time they’ve really basically turned into a commercial bank instead of a central bank,’ said Michael Feroli, chief U.S. economist at JPMorgan.”
Got gold 3=Unlike some past grand statements from central bankers promising to do ‘whatever it takes’ to solve a crisis, this one was accompanied with actions matching the scale of the words.”
the Fed will do anything it needs to, on any scale imaginable, to end this shortage. Its announcement was phrased in the dry bureaucratese typical of statements from a central bank. But it contains a powerful idea. The Fed, the one entity in the world with the power to create dollars out of thin air, has every intention of doing so at whatever magnitude is necessary to try to reduce the severity and limit the duration of the coronavirus economic crisis. ‘The Federal Reserve is committed to using its full range of tools to support households, businesses and the U.S. economy over all in this challenging time,’ the statement begins. Unlike some past grand statements from central bankers promising to do ‘whatever it takes’ to solve a crisis, this one was accompanied with actions matching the scale of the words.”
Goldie – No
The Koreatown store owners were never arrested for defending their property. Maybe they would be now, but that might depend on the outcome and how many, if any they killed in self defense.
There were a lot of store owners that were “black-owned” and put those signs on their store windows. In some cases they were spared, in others they were not. The owners with the guns were far more successful than those with just signs.
Captain? Anyone? Riddle me this?—so why was the “big breakout” of the $ above 1.00 definitively reversed this week?
Global Bubble Watch:
March 22 – Bloomberg (Chris Anstey and Enda Curran): “The global rush for dollars that’s been roiling the $6.6 trillion a day foreign-exchange market has showcased a missing piece of financial-safety architecture that world policy makers never addressed in the aftermath of the 2008 crisis. The financial system’s reliance on one keystone currency proved to be an amplifier of shocks more than a decade ago. Yet since then, the greenback’s role has climbed even further as borrowers outside of America ramped up dollar-denominated debt. That’s again adding an enormous layer of stress on markets. ‘It’s precisely what the global economy does not need at this moment,’ Alexander Wolf, head of Asia investment strategy at JPMorgan Private Bank… said of a strong dollar. ‘It tightens financial conditions, make servicing dollar debt more expensive, and can cause pass-through inflation just when that is not needed.’”
The inevitability of gold
March 25 – Bloomberg (Bill Austin): “Investors withdrew from equity and fixed income mutual funds in the week ended March 18 for the third straight week of outflows, according to the Investment Company Institute. Outflows totaled $135 billion, compared with $27.9 billion the prior week. Investors withdrew $175.5 billion from mutual funds year-to-date.”
March 26 – Bloomberg (Andy Kostic and Olivia Raimonde): “U.S. corporate investment-grade funds reported a record $38 billion outflow, extending an unprecedented rout as investors flee for havens assets amid the global market meltdown. That exceeds the prior record of $35.6 billion set just last week as the selloff from the spreading coronavirus intensified.”
Like other asset classes, gold was hit hard in the recent scramble for US dollars [That’s a lie}
March 24 – Financial Times (Neil Hume and Henry Sanderson): “Gold continued to push higher on Tuesday as a recent wave of selling dried up and Goldman Sachs told its clients the time had come to buy the ‘currency of last resort’. Like other asset classes, gold was hit hard in the recent scramble for US dollars, falling more than 12% from its early March peak… The yellow metal started to see a resurgence on Monday, rising by more than 4% after the Federal Reserve said it would buy unlimited amounts of government bonds and the US dollar fell… ‘We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policymakers act to accommodate shocks such as the one being experienced now,’ said Jeffrey Currie, head of commodities at the Wall Street bank.”
The “opportunity cost” of holding gold is zero–got gold? WTF?=Greek 10-year yields sank 87 bps to 1.53% (up 10bps y-t-d). Ten-year Portuguese yields fell 28 bps to 0.67% (up 22bps)
. Italian 10-year yields dropped 30 bps to 1.33% (down 9bps). Spain’s 10-year yields fell 19 bps to 0.54% (up 7bps). German bund yields declined 15 bps to negative 0.47% (down 29bps). French yields dropped 17 bps to negative 0.06% (down 17bps). The French to German 10-year bond spread narrowed two to 41 bps. U.K. 10-year gilt yields sank 20 bps to 0.37% (down 56bps). U.K.’s FTSE equities index recovered 6.2% (down 26.9%).
While markets enjoyed a recovery this week, EM debt is turning toxic. Energy-related debt is already toxic. Risk of general business and real estate debt turning toxic is growing rapidly.
It’s a different world now. And while “whatever it takes” can accommodate speculative deleveraging and generally support market liquidity, The Solvency Problem will prove a historic challenge. The global economy has commenced a major downturn, hitting an already impaired global financial system. While markets enjoyed a recovery this week, EM debt is turning toxic. Energy-related debt is already toxic. Risk of general business and real estate debt turning toxic is growing rapidly.
As I posited last week, I see an environment hostile to speculative leverage. This ensures a fundamental tightening of financial conditions and attendant downward pressure on global asset markets – securities and real estate, in particular. And with Bernanke’s 40-year bond yield “ski slope” at the end of a historic run, central banks have today little capacity for using rate cuts to reflate asset prices.
The U.S. economy is in trouble. Europe is in greater trouble. EM economies face a disastrous combination of financial and economic hardship. And just as China moves to restart its economy, its massive export sector is confronting collapsing global demand. How long Beijing can hold things together is a critical issue. In the theme of bursting Bubble economies and unfolding Solvency Problems, no country faces greater challenges than China (with its deeply maladjusted economy and gargantuan financial sector).
Credit Bubble Bulletin-Unfortunately, there will be no speedy economic recovery
It’s a different world now. And while “whatever it takes” can accommodate speculative deleveraging and generally support market liquidity, The Solvency Problem will prove a historic challenge. The global economy has commenced a major downturn, hitting an already impaired global financial system. While markets enjoyed a recovery this week, EM debt is turning toxic. Energy-related debt is already toxic. Risk of general business and real estate debt turning toxic is growing rapidly.
Unfortunately, there will be no speedy economic recovery. Let’s hope the change of season offers some relief. But then there’s the loaming prospect for a second wave next fall and winter. Various experts, including Bill Gates, say a vaccine is a year to 18 months out. There’s going to be a hell of a battle in deciding how best to move the economy forward from here.
As for the markets: markets will do what markets do. And global market dynamics are incredibly unsound. Count me skeptical that the biggest three-day rally (in the DJIA) since 1931 is a sign of health. I fully appreciate that “buy the dip, don’t be one” has been richly rewarding for a long time now. “There couldn’t be a better time to start investing [than] right now… Fortunes are going to be made out of this time… I can guarantee you that if you stay in and you just stick with it, three years from now you will be very, very happy that you did.” I’d be especially cautious with guarantees. Suze Orman (and most) have little appreciation for what is now unfolding. The younger generation has yet to experience a grueling protracted bear market. “Buy the dip” and “buy and hold” are poised to dishearten.
Buygold
Wow! Didn’t know that. Yeah think your right, I remember something about they were Asian. I heard one store was spared because the guy put black owned on it.
I hope they dismissed the charges. They abandoned them then pressed charges for defending themselves???
A lot of these next generation gang bangers moved up here some speculated they were sent up north. It was wild, a mess fir awhile. Drive buys, robberies, car jacking and one tried that with me in a hospital parking lot to get away after robbing a store and in pursuit in foot but I wasn’t cooperating but don’t know what was going on anyways but he wasn’t getting in my car. I should if got out when I locked the doors though but drove away. Hindsight
It took a few years but most were either shot or wound up in jail.
Goldie – yeah, maybe
after the riots are over they’d attempt to arrest the store owners.
The LAPD was fleeing the scene of the riots when it got too hairy because they were so outnumbered. Those store owners were on their own and guess what? The looters stayed away from their shops after a few shots were fired.
Mostly Koreatown if I remember correctly.
Buygold
Yeah that was pretty bad and they were going after other citizens or innocent people. Reminded me of the Watts riots. I was way up north to get my kids away from S Cal anyways. Although one of my friends daughters fiancé was caught up in it because he went down there to look for a job and they were going to have a baby. He was attacked and last I heard cuz I moved south more was he was brain dead in a long term hospital.
Imagine that happening now with all the antigun laws and propaganda today. They’d probably be arresting the guys on the roof protecting their property.
North Cal their not gonna care. Lots of guns here.
Looks like the 10 yr. sold off a bit after the SM close
rates rose from .69 (CNBS) to .75% – at least that’s what the CNN market site is showing
https://money.cnn.com/data/premarket/
Not sure what that’s about or why.
edit: BTW – Light volume selloff in the shares I follow yesterday. This was algo driven drip selling IMHO. Doesn’t mean it won’t happen again Monday or panic some folks out, but definitely wasn’t a mass exodus.
Morning Goldie
Imagine if all those Chinese were private gun owners like we are in the U.S. and what those riots would look like.
I guess we had a taste in the Rodney King riots in L.A. in the early 90’s when store owners were on their rooftops with their rifles defending from looters.
Maya
If they weren’t locked down like anywhere else it wouldn’t be as bad. Bad but not this bad.
All on unemployment will get a extra 600 a week on top of unemployment to help hold them through. After a week they’ll also know how many grains of rice are in their bags and if it’s the same as the other one.
I heard the Demos gave themselves a raise while they were at it while they give the public a whole one time 1200. Plus millions for refugees and other things that that have nothing to do with this.
Goldi – Hawaii on lockdown
We are under ‘stay at home’ orders. Essential business only open. Total incoming quarantine for 14 days for any incoming resident or visitor. Airlines flying in empty planes for positioning outbound flights. Now we wait for the numbers to stop going up. Today’s noon report from HDOH:
Total cases: 120 (14 new)
Hawai’i County: 7 (2)
Honolulu County: 87 (10)
Kaua’i County: 5 (0)
Maui County: 16 (2)
Hospitalized: 8 (0)
My Big Island (Hawaii County) has two new ones.
We get over 10 million visitors annually. The tourist trade here brings in hundreds of millions of dollars to support EVERYTHING here. All closed. Over half of Hawaii is unemployed at this point, wondering where their next money will come from.
Maya
I saw Hawaii on the news tonight but missed initially why but guessing they shut down visitors. They showed them at the stores buying toilet paper and more in long lines. Maybe there’s something in buying it. I went to the store last week but not initially looking for food or paper but a appliance. Decided to check to see most was replaced of once empty shelves EXCEPT the toilet paper was still gone.
“We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it.
It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.”
Sir Eddie George, Governor Bank of England in conversation with Nicholas J. Morrell, chief executive of Lonmin Plc, 1999