03 Sep PERHAPS THE BIGGER THAN THE TULIP BULB FRENZY
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%.