Bubble Finance, Cheap Junk Debt And The Private Equity Massacre in Retail
Mall traffic is sagging. Department store sales have been in decline since 2001. Most retailers are loaded up with debt. Many have been losing money. Now they’re running out of options. Store closings numbered in the thousands last year. This year they promise to get much worse. “Zombie malls” have become reality, their vast parking lots rented to car dealers to store their excess vehicle inventory…….Over-indebted retailers are notoriously difficult to restructure and many end up being liquidated. Unsecured creditors, such as suppliers and junior bond holders, are often left out in the cold. Even secured creditors can end up holding the bag. April so far is huge for brick-and-mortar meltdown.
They’re Back—More “Short Gamma” Cockroaches Artificially Jacking The SPX Futures
The same dynamic at play during our last equities ‘melt-up’ is seemingly back ‘in-play.’ Remember the hypothetical story on the multi-billion dollar open-ended futures fund which found itself ‘synthetically short’ size SPX due to its strategy where it sells multiple upside calls for every in-the-money long call? Well the macro ‘relief rally’ yesterday reintroduced that very same ‘gap risk’ which this type of strategy hates. Well, we are now getting closer to ‘launch’ as the same situation is speculated to be ‘out there’ again. There was some covering in 2330s and 2370s yesterday, while most of the size seemingly sits at the 2400 level. As the market is sniffing out the upper strikes that such a strategy might be short, there is a self-fulfilling ‘short gamma’ as we push ever-closer to the pain-points. Of course, today’s +++ earnings run is only further feeding into the anxiety, with strong #’s from CAT, DD, BIIB, MCD etc squeezing futures higher. The fact of the matter is, the closer to actualizing these (short) upper strikes, the more likely we are to see that ‘itchy trigger finger’ on their delta-hedging. I would keep an eye out on 2380 / 85 levels for possible next ‘breakpoints’ which could induce further forced covering.
Mind Mr. Market’s Disconnect—–There’s a Huge Disagreement Between Bonds and Stocks
Markets are taking sides when it comes to the direction of the U.S. economy. In the green corner are stocks. The Standard & Poor’s 500 index is just 0.2 percent away from a record high reached in March on bets that Donald Trump’s administration will push through tax-code changes to spark growth. In the red corner sit U.S. government bonds, where benchmark 10-year Treasury yields have unwound almost half of their post-election increase, suggesting a far more pessimistic view the economy.
Not Again! Will the Next War Erupt in the Balkans?
As the world focuses on the Middle Eastern and Korean flashpoints, the next war may not occur in either region, but rather in a replay of an old conflict that has been largely forgotten. In an interview with Politico’s European edition, Albanian Prime Minister Edi Rama threatened war if Kosovo is denied entry into the European Union: “Albania’s prime minister said a union between Albania and Kosovo cannot be ruled out if EU membership prospects for the Western Balkans fade. “In an interview with Politico … Prime Minister Edi Rama said Europe would face ‘a nightmare’ if the Balkans ‘go crazy’ because EU accession is off the agenda, with the region becoming a ‘gray zone in which other actors have more influence than the European Union.’”
Central Banks’ Ode to Investors: Super Size Me!
As it pertains to central banking, we had this to say: “Lessening the consequences of risky financial behavior encourages greater carelessness about risk down the road as investors come to count on benign intervention. By intervening in a financial crisis, the Fed doesn’t allow markets to play their natural role of judge, jury and executioner. This raises the specter of setting a dangerous precedent that could prompt private-sector entities to take additional risk, assuming the Fed will cushion the impact of reckless decision-making.”
French Selection Ritual, Round Two
The nightmare of nightmares of the globalist elites and France’s political establishment has been avoided: as the polls had indicated, Emmanuel Macron and Marine Le Pen are moving on to the run-off election; Jean-Luc Mélenchon’s late surge in popularity did not suffice to make him a contender – it did however push the established Socialist Party deeper into the dustbin of history. That was very Trotskyist of him (we can already picture a future Weekly World News headline: “French socialists discover giant alien dust mites”).
The Immutable Laws Of Economics And The Pointless Pretensions of FERBUS
Economics is a pretty simple framework of understanding, at least in the small “e” sense. The big problem with Economics, capital “E”, is that the study is dedicated to other things beyond the economy. In the 21st century, it has become almost exclusive to those extraneous errands. It has morphed into a discipline dedicated to statistical regression of what relates to what, and the mathematical equations assigned to give those relationships some sort of meaning. The immutable laws of economics care nothing of ferbus and the other DSGE models that try to make enough sense of a complex economy so as to fool policymakers into thinking they know both the precise as well as correct amount of some factor to achieve optimal results. There is so much wrong with that foolish idea it is often difficult to know where to begin.
Red Ponzi Update: China’s Hidden Debt Stirs Investor Angst as Defaults Rise
Rising defaults in China are unearthing hidden debt at companies across the country. Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains.
Einhorn Warns Of Bubble With Tax Reform Prospects Fading Fast
Stock market valuations have become divorced from reality as the likelihood of tax policy changes to drive company earnings has slipped, according to David Einhorn’s Greenlight Capital. “The bulls explain that traditional valuation metrics no longer apply to certain stocks,” the New York-based firm wrote in a letter to clients Tuesday that was seen by Bloomberg News. “Perhaps as the prospects for tax reform have dimmed, the market has regained enthusiasm for profitless companies that aren’t at risk of paying taxes.Einhorn has warned previously of inflated equity prices caused by central bank easing but the firm said earlier this year that tax reforms pushed by President Donald Trump could be a boon for economic growth and favorably affect some positions. The latest letter revived the more cynical outlook.
The United States of False Flags
The United States government is the world leader in purveying false flags and propaganda stunts. Or, more generally, downright, systematic lies. To justify the outrageous violation of international law, wars and aggression…..Current president and Commander-in-Chief, Donald Trump, is himself the object of fraudulent US intelligence, accused of “collusion with Russian agents.” In a rare admission, the Washington Times this week described the US intel dossier against Trump as “riddled with fiction.” Yet, ironically, Trump, in turn, serves as a shameless conduit for US propaganda to fuel conflict with Syria and North Korea.
