According to Bloomberg 30% of all investment grade securities now bear subzero yields.  In other words lenders are paying borrowers to own $17 trillion of debt.  In my view this is the ultimate bubble perhaps greater than the infamous tulip bulb frenzy of 500 years ago, eclipsing the dot com era of 1998-2000.  To remind all the NASDAQ fell about 80% in the proceeding two years.

One of my greatest concerns is the lack of concern and the casual explanation about today’s environment.  It is being viewed as normal and should be expected.  Today will end and in my view will end violently as in all past cases of the Greater Fool Theory. Volumes will be written about today.

Speaking of which, Bloomberg has commented thus far in 2019 there have been 38 S & P 500 companies that have plunged over 15% in a single day.  Wow!  The primary reason for these dramatic declines is missed earnings that are amplified by technology based trading whose only parameter is momentum.

As inferred above, it is easy to argue the sovereign debt trade is the most crowded in history and I shudder to think what will happen when everyone decides to sell.  The recent declines in the 38 S & P 500 companies would viewed as nothing.

Equites were mixed Friday perhaps the result of mixed consumer sentiment.  Spending however rose more than expected, rising two times higher than it did in July.

This week economic calendar is comprised of various top tier indicators including various employment statistics and manufacturing indices.  The data can potentially influence economic perceptions and interest rates.

Last night the foreign markets were mixed.  London was down 0.34%, Paris down 0.46% and Frankfurt down 0.36%.  China was up 0.21%, Japan up 0.02% and Hang Sang down 0.39%.

The Dow should open moderately lower on trade angst.  Dorian is not a market factor and at this juncture will only remain a media event.  The 10-year is up 2/32 to yield 1.49%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.