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. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. 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. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.