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The backup in European yields and Yellen’s comments on market froth
Two notable events regarding stock and bond markets have occurred in the last twenty-four hours. One is comments from Fed Chair Janet Yellen that suggest she sees U.S. equity prices as elevated. The...
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Thinking about the Third Avenue fund freeze as BNP Paribas from 2007
Last week, the high yield market seized up, in part due to jitters surrounding a high profile freeze of funds at the Third Avenue Focus Credit fund. The big problem for Third Avenue was energy high...
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The Saudis as the driving surplus oil producer
As Brent crude hits 11-year lows, it’s worth thinking about why it is so low and what the likely outcomes will be. Warren Mosler has a view I think works regarding the Saudis as swing producer,...
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The oil price cliff dive will end the prospect of double-barrelled tightening
A pause is being considered at the Fed, even by hawkish FOMC members. The oil price crash now gathering steam makes this pause more likely. Maybe Bullard’s infamous low dot on the Fed’s Summary of...
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Policy divergence revisited
Three years ago, the Fed had begun tightening and all other central banks were still on easy street. Now, we are at an inflection point where other central banks are likely to tighten more than the...
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Overbought
“I had to cover my shorts.” That’s what my friend Matt told me after the company came out with its quarterly earnings and issued upbeat projections. I asked Matt, “how long are you going to keep...
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Market jitters and fake liquidity in leveraged loans and high yield
With the US treasury yield curve flattening to almost 60 basis points between 2 and 10-year maturities, we need to ask where are the vulnerabilities in the market if this spate of good news ends. I...
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1 Big Idea: Signs of a 2018 top are everywhere
The big idea in today's daily newsletter is that 2018 is as good as it gets. There is also commentary on the manufacturing sector, yield curve flattening, and bond market liquidity This website is now...
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A mental model for thinking about tail risk
Earlier today, yields for 10-year bonds in Greece shot up 200 basis points as investors contemplate the risk associated with a potential government transition. European Commission head Jean-Claude...
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Candidates for tail risk in 2015
Having just given you a mental model for thinking about tail risk, the natural next analysis is where the tail risk might be. Here are a few candidates. This website is now reader-supported via...
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Natural gas and the strong dollar as headwinds into 2015
Yesterday, I planned to write this piece as a compilation of narratives for individual countries in the global economy: India, the US, the UK, Spain, etc. However, some of these narratives are more...
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The crashing oil price is now a market crisis problem
While I try not to be too alarmist here, it is clear now that the drop in oil prices has been both precipitous enough and long-enduring enough that we should start talking about this as a crisis in the...
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US jobs, high yield covenant-lite issues and the Greek restructuring negotiation
Two topics are dominating the news of late: the decline in energy prices and the upheaval in Greek sovereign debt due to the upcoming general election. On the first issue, I have been generally...
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The faltering US economy and emerging market contagion
Today, we got a pretty shaky US jobs report. Non-Farm Payrolls were up only 142,000, well below the 190-203,000 range of median expectations I have seen quoted. But the previous month was also revised...
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When market contagion occurs, this is how it will happen
I have been pretty sanguine about the markets and the US economy. Yes, the commodities complex is worsening, but that doesn't mean this feeds through enough into other sectors to force the market down....
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RBS: The bears have killed Goldilocks
Last week I was talking about the Goldilocks scenario for the US. I think it is achievable. But this week, RBS tells us that the bears have killed Goldilocks. They say we should “sell everything”. Of...
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When will the Fed’s rate hikes hit US credit markets?
A lot of people are still watching the flattening yield curve and distress in EM. And while I think both of these events are important, I am looking at a lot of other market signals, particularly US...
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Credit Writedowns Daily Newsletter 2018-10-03
There are a lot of different things on my radar screen right now. And below is the list of news items I want to touch on in that context. As I've been saying recently, I'm fairly bullish on the US...
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On the yield curve’s bear steepening in a period of cyclically low credit...
I was off last week when the Fed raised rates a quarter percentage point. But I promised to comment on the Fed's action when I returned. I am doing so now. This website is now reader-supported via...
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More on the impact of bear steepening on risk assets
Shares are down today as the FANG stocks retreat due to investor concern about growth companies in a period of rising rates. This is only a one-day impact though. The question is whether the caution...
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