The high is wearing off:
Waning speculative appetite is highly evident with cloud internet stocks. Multiple nested three wave corrections, each of smaller magnitude.
The junkies are getting restless:
Since the global coordinated monetary bailout moon-launched every risk asset into the stratosphere earlier this year, one by one they've fallen back to Earth as liquidity dries up. The "non-existent" credit crisis that no one sees coming is already well advanced. The lack of liquidity appeared in overnight repo markets during the summer, spread to momentum stocks and frackers in September, reached IPOs two weeks ago, and hit leveraged loans last week. See Marijuana Madness Turns Into Cannabis Crash. The collapse in liquidity is a function of RISK OFF speculative pullback, Treasury issuance to fund Trump's mega deficit, declining stock buybacks, cycle high insider selling, and institutions selling stocks to raise cash. So far, the Fed has stepped in to "organically" grow the balance sheet in line with the overnight repo tightening. However, they have done nothing to fund the remaining liquidity gap.
"Dallas Federal Reserve Bank President Robert Kaplan on Friday blamed U.S. borrowing to fund a growing deficit for the liquidity crunch in overnight funding markets that the central bank earlier on Friday addressed with a new program to buy Treasury bills."
Zerohedge got all lubed up on this news, but the Fed is specifically targeting the short end of the curve so that gamblers don't get lubed up over this news.
Too late:
"Worldwide holdings in bullion-backed exchange-traded funds have expanded for 17 days in a row, the longest run of inflows since 2009."
On the topic of stock buybacks, it appears that they have peaked for this cycle. History will say that stock buybacks peaked in 2007 with the market, and again in 2018 with the (broader) market:
As we see, the stock buyback ETF has gone nowhere since January 2018 despite 2x average stock buybacks. The quarter with the largest buybacks in U.S. history (4Q 2018 ) featured a -20% drop in stocks.
"In the second quarter of the year, share buybacks of S&P 500 index stocks declined to $160 million, down 20% on the quarter, and 19% lower than the previous year, according to Jefferies. That's a departure from 2018, when corporate buybacks hit a record $1.1 trillion, fueled in part by the Trump administration's tax reform."
This is the most dangerous point in the cycle, wherein gamblers are tempted to own stocks because of the deceivingly high dividends versus collapsed bond yields. Dividends that will collapse like a cheap tent in recession. Wall Street yet again predicting the future based upon the past. Remember last year when stocks rise 100% of the time after midterm elections? Unfortunately, that widely bought and believed winning streak was broken -20% to the downside.
“Stocks are a ‘no brainer’ vs. bonds,”
The reason why the S&P yield rose in 2008, is because stocks collapsed.
Last week's "trade deal" had the shelf life of a rotten banana
What China wants from this trade war is to implode Trump's chances of getting re-elected. He got played like an amateur last week.
The blood is in the water.
What we're waiting for is the last few massively overbought and overowned "safe havens" to roll over.
And then monetary crack addicts will cross the valley of earnings recession and stock buyback blackouts to "earn" their next hit of moneary heroin delivered via asset crash.
“Companies are starting to do what they do when there is rampant uncertainty, which is just stop issuing guidance”
the relative silence since their last reports means stock investors may be in for a lot of bad news all at once"
Then there’s the matter of the habitually overenthusiastic Wall Street analysts — and the predictions look increasingly divorced from reality."
