dinsdag 14 augustus 2018

Dead Cat Bounce?

This...


Emerging Market FX rallied broadly on the day (after the biggest 4 day drawdown since Lehman), its best day in three weeks...


The Argentine Peso slipped lower in the late day...


Of course, all eyes were on the Lira as it rallied back up to unchanged from Friday's close. After its biggest single-day loss ever, the lira rebounded most since 2001...


Chinese stocks gave back a little of Monday's surge gains...


After dismal macro data...


European stocks gave back Monday's gains, despite the lira support...


And of course, if the Lira is fixed then panic-buy US equities (The serious panic-bid as the nasdaq dared to go red in the first 30 minutes)...


Futures show the real chaos across the US open, rip back higher, and then closing fade (Futs could not break above their overnight highs)...


Of course, 'ye olde' opening short-squeeze is back...


FANG Stocks continued the pattern of early gains and late weakness...


Treasury yields limped higher on the day...


But 10Y Yields remain well below the 3.00% level still...


The Dollar Index managed to scrambled back up to new cycle highs...


All was not well though as EURCHF continued to tumble (very defensive)...


Offshore Yuan limped back to unchanged on the day, near cycle lows...


Cryptos continued to plunge, withe Ethereum drastically underperforming Bitcoin...


Bitcoin did drop back below $6000...


And Ethereum fell to 8-month lows relative to Bitcoin...


Copper was the big commodity loser today, along with crude...


WTI remains rangebound (ahead of tonight's API inventory data)...


Finally, we note that since Larry Kudlow was unleashed, King Dollar has crushed the barbarous relic...

US Household Debt Hits Record $13.3 Trillion

Total household debt hit a new record high, rising by $82 billion to $13.29 trillion in Q2 of 2018, 3.5% higher than a year earlier according to the NY Fed's latest household debt report. It was the 16th consecutive quarter with an increase in household debt, and the total is now $618 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008. Overall household debt is now 19.2% above the post-financial-crisis trough reached during the second quarter of 2013. Mortgage balances, the largest component of household debt, rose by $60 billion during the second quarter, to $9.00 trillion. Credit card debt rose by $14 billion to $829 billion; auto loan debt increased by $9 billion in the quarter to $1.24 trillion and student loan debt hit a record high of $1.41 trillion, an increase of $2 billion in Q2...


Balances on home equity lines of credit (HELOC) continued their downward trend, declining by $4 billion, to $432 billion. The median credit score of newly originating mortgage borrowers was roughly unchanged, at 760...


Mortgage originations edged up to $437 billion in the second quarter, from $428 billion in the first quarter. Meanwhile, mortgage delinquencies continued to improve, with 1.1% of mortgage balances 90 or more days delinquent in the second quarter, versus 1.2% in the first quarter. Most newly originated mortgages continued went to borrowers with the highest credit scores, with 58% of new mortgages borrowed by consumers with a 760 credit score or higher...


Outstanding student loan debt was mostly unchanged in the second quarter and stood at a record $1.41 trillion as of June 30. Auto loan balances also hit an all time high, as they continued their six-year upward trend, increasing by $9 billion in the quarter, to $1.24 trillion. Meanwhile, credit card balances rose by $14 billion, or 1.7%, after a seasonal decline in the first quarter, to $829 billion. Despite rising interest rates, credit card delinquency rates eased slightly, with 7.9% of balances 90 or more days delinquent as of June 30, versus 8.0% at March 31. The share of consumers with an account in collections fell 23.4% between the third quarter of 2017 and the second quarter of 2018, from 12.3% to 9.4%, due to changes in reporting requirements of collections agencies...


Meanwhile student loan delinquencies remain stubbornly just above 10%, a level they hit 6 years ago and have failed to move in either direction...


In some good news for the student loan debt seriously delinquent student loans, those 90 days or more behind, declined in the second quarter to 8.6% from 8.9% in the prior quarter...


"Aggregate household debt grew for the 16th consecutive quarter in the second quarter of 2018," said Wilbert van der Klaauw, New York Fed senior vice president. "While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student debt over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans"....

Traders Have Never Paid So Much For Crash Protection

Until very recently, tech stocks were soaring to record highs and a slump in volatility suggested investors brushing aside market risks, trade war concerns, and Central Bank tightening. However, amid all this calm, there is at least one gauge of investor sentiment that is at full panic '11' levels. The CBOE Skew Index, which tracks the cost of tail-risk equity protection, has jumped to its highest level ever. The rise signals options traders are growing wary of wild swings, just weeks after the International Monetary Fund warned financial markets seem complacent to mounting risks in the global economy. Generally, a rise in skew indicates that 'crash protection' is in demand among institutional investors (institutional/professional investors are the biggest traders in SPX options)... 


But an unusual move in the skew index (which historically has tended to oscillate approximately between a value of 100 and 150) is especially interesting when it diverges strongly from the VIX, which measures at the money and close to the money front month SPX option premiums...


Basically what a 'low VIX/high skew' combination is saying is: 'the market overall is complacent, but big investors perceive far more tail risk than usually, a record in fact' (it is exactly the other way around when the VIX is high and SKEW is low). In other words, a surprising increase in realized volatility may not be too far away. Perhaps this is one reason why, based on the uncertainty of economic policy, VIX should be trading north of 40...

Lira Briefly Erases Monday Losses As Turkey Halts Mark-To-Market Accounting

Update: It's not working...


Endless headlines from Erdogan and his son-in-law this morning did nothing to shift the Lira but the beleaguered currency is bouncing back to unchanged from Friday after reports that lenders will be allowed to restructure loans with no mark-to-market impact to their balance sheets. Just like America did in 2009. And the Lira is 'fixed'...


Specifically, as Bloomberg reports that Turkish banking regulator BDDK has approved new rules on loan restructurings. Banks can extend maturities, refinance, lend new loans, seek new collateral and sell debtors’ assets against receivables under the new regulation which will allow lenders to temporarily (there's that word again) suspend reflecting the negative impact of mark-to-market security losses on their capital adequacy ratio calculations. Long way to go yet...

Bitcoin Tumbles Below $6,000 Support As Xapo President Fears Altcoin "Extinction Event"

# Bloomberg reports that the total market capitalization of virtual currencies dropped to $193 billion. “The big story in the market today is the huge weakness in Ethereum,” Timothy Tam, chief executive officer of CoinFi, a cryptocurrency data analysis company, said in a phone interview. “Bitcoin has held up relatively well versus Ethereum. It’s still quite weak versus the U.S. dollar.” At the height of Ether’s rally last year, the digital coin comprised 32 percent of cryptocurrency market capitalization, coming within striking distance of Bitcoin’s 39 percent. Ether now makes up about 14 percent, while Bitcoin accounts for 54 percent after falling less quickly than its smaller peers, according to Coinmarketcap.com. “ICOs that have raised a lot of money are really feeling a lot of pain” as their crypto holdings lose value, Tam said. Ether has tumbled about 40 percent this month, while Bitcoin has dropped about 26 percent...


“Most cryptocurrencies have been overvalued for a very long time,” said Samson Mow, chief strategy officer at blockchain developer Blockstream Corp. “It’s hard to pin this move on any particular factor, but it feels like the opposite of last year when money piled in as people felt FOMO. Now it’s piling out as they sense panic.”
# Via CoinTelegraph; Bitcoin (BTC) prices fell back below $6,000 overnight for the first time since the end of June Tuesday, August 14, as the cryptocurrency community remains resilient, but has just faded back below that level after a morning bounce. Data from Cointelegraph’s price tracker and Coin360 depict a gloomy environment for traders Tuesday, with all major assets in the red as Bitcoin falls almost 5 percent in 24 hours. Top ten coins are seeing as much as 17 percent losses on the day, with top fifteen coins are down as much 20 percent over the same period...


At press time, BTC/USD traded just above the significant barrier around $6,100, capping weekly losses of 14 percent; Bitcoin’s 7-day price chart...


The pair has come full circle since mid-July, when a sudden bull market took over to bring prices to a peak around $8,450 across major exchanges. Progress then reversed as August began, meaning investors have seen monthly gains to date of just 3 percent. The figures nonetheless set Bitcoin apart from altcoins, and specifically Ethereum (ETH), losses of which extend to 16 percent on the day and almost 35 percent on the week. Over the past 30 days, ETH/USD has slipped almost 40 percent; Ethereum’s 30-day price chart...


On social media, commentators were eyeing the knock-on effect Bitcoin prices volatility traditionally has on altcoin markets, producing higher moves both up and down in those assets. As Bitcoin dominance, or the percentage of total crypto market cap that is Bitcoin’s, hits highs not seen since December 2017, Twitter analysts are similarly calling for a repeat of the altcoin bull market which began in the latter half of that month. Higher Bitcoin market dominance, they claim, is apt to produce a U-turn in altcoins’ downtrend. Since Friday's close, Ether is down 25%, Bitcoin down just 3%... 


Others were altogether less sure. In comments Monday, Xapo president Ted Rogers considered current conditions conducive to producing an “extinction-level event” for cryptocurrencies en masse. “90%+ of CoinMarketCap list will disappear eventually, might as well happen now,” he warnedMonday. Elsewhere, other major assets have shed 10 to 15 percent of their value, these including Ripple (XRP), Litecoin (LTC), EOS (EOS), and Cardano (ADA). But as Bloomberg notes, there remains some hope, as Cboe Global Markets wants to be the first to list a Bitcoin exchange-traded fund, though there’s still a lot of work needed to win approval from the U.S. Securities and Exchange Commission.
# “As we chip away at their issues to make them less concerned, at some point they’ll be comfortable with an ETF,” Chris Concannon, the Chicago-based exchange operator’s president and chief operating officer, said. 
The SEC has been wary of bringing crypto to the masses with an ETF despite speculation one would be endorsed as early as this month. It postponed a decision last week on a proposal that would allow the fund from VanEck Associates Corp. and SolidX Partners Inc. to list on Cboe. The SEC earlier rejected an ETF proposal by Tyler and Cameron Winklevoss, who run the Gemini Trust Co. cryptocurrency exchange. The regulator is concerned about manipulation in the mostly unregulated digital currency markets. “The SEC is likely to delay until February of 2019 and the chances of a Bitcoin ETF approval in 2018 have always been low,” Hany Rashwan, chief executive officer of crypto startup Amun Technologies Ltd., said last week....

Bullishness In US Stocks Hits 3 Year High As FAANG Lovefest Continues

The latest Bank of America monthly institutional investor survey, which was conducted between Aug. 3 and 9 among 243 investors with a total $735 billion under management, revealed that as stocks slumped around the globe, investors flocked to the US, which has become the world's safe haven: allocations to U.S. stocks jumped 10% to a net 19% overweight, "the biggest overweight since January 2015 and the top equity region for the first time in 5 years"...


That makes America the most popular equity region for the first time in five years, Chief Investment Strategist Michael Hartnett said and added that "With investors telling us they are long the U.S., the Fed and cash, our view remains: peak profits, policy and returns." As investors flooded into the US, they fled from what they said was the "biggest tail risk" for the third month in a row, and 5 of the past 6: trade war...


With Quantitative Tightening and China Slowdown in distant 2nd and 3rd position...


Adding to America's allure, 67% of respondents said that the US profits outlook was the most favourable, a record 17-year high...


Some concerns remain, however, with 32% of investors seeing US growth decelerating...


Offsetting slowdown fears, however, was the ongoing lovefest with growth/tech in the form of FAANG+BAT stocks, which for the 6th consecutive month was seen as the "most crowded trade"...


It's not just tech as stocks continue to rise in sectors beyond tech. Meanwhile, the overall outlook is still bullish as the S&P500 continues to hold above 2,800 and more money available to buy stock, as the average cash balance among the investor community rises 0.3% to 5%, above the past 10 year average of = 4.5%...


According to Hartnett, "August rotation shows survey participants are buying banks and continue to flock to perceived safe havens like US equities and cash; they are selling commodity sectors and defensive sectors/regions like materials, energy and UK equities"...


And speaking of the UK, amid growing concerns of a No Brexit deal, allocation to UK equities saw the biggest one-month drop since May '16, down 10ppt to net 28% underweight...


Looking ahead, Hartnett said that "rising corporate leverage concerns say bonds should outperform stocks, while a weaker profit outlook suggests defensives could outperform cyclicals"....

Two Canaries To Keep An Eye On

The Lira is up (still below Friday's close)...


And The Dow is up (thanks Home Depot), but if everything is awesome, why are copper futures and EURCHF tumbling?


Copper is at one-month lows...


And EURCHF (safe haven flow signal) is back at 13-month lows...