Stocks Reversing Slightly Higher into Final Hour on Central Bank Hopes, Yen Weakness, Less Eurozone Debt Angst, Biotech/Insurance Sector Strength
Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.09 +1.85%
- Euro/Yen Carry Return Index 145.81 unch.
- Emerging Markets Currency Volatility(VXY) 7.23 +.28%
- S&P 500 Implied Correlation 53.11 -2.78%
- ISE Sentiment Index 97.0 +27.63%
- Total Put/Call .71 -23.66%
Credit Investor Angst:
- North American Investment Grade CDS Index 61.87 -.46%
- European Financial Sector CDS Index 71.50 -.92%
- Western Europe Sovereign Debt CDS Index 34.65 -1.41%
- Asia Pacific Sovereign Debt CDS Index 79.90 +.11%
- Emerging Market CDS Index 256.08 +.72%
- China Blended Corporate Spread Index 318.80 -1.37%
- 2-Year Swap Spread 13.75 +.25 basis point
- TED Spread 20.0 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -10.0 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 221.0 +2.0 basis points
- China Import Iron Ore Spot $94.60/Metric Tonne +2.27%
- Citi US Economic Surprise Index -13.70 -11.6 points
- Citi Emerging Markets Economic Surprise Index -21.60 +1.0 point
- 10-Year TIPS Spread 2.17 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +100 open in Japan
- DAX Futures: Indicating +7 open in Germany
Portfolio:
- Higher: On gains in my biotech/medical/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
1 comment:
Aggregate Credit, AGG, traded unchanged, as Emerging Market Corporate Bonds, EMCD, traded to a new rally high; while European Credit, EU, traded lower.
The investor’s trust in the monetary policies of the world central banks to continue to stimulate investment gains, as well as to continue global economic growth, has been the basis for World Stocks, VT, US Stocks, VTI, Eurozone Stocks, EZU, Asia Excluding Japan, EPP, and the Emerging Markets, EEM, rallying strongly from January 2014 through May 2014, as is seen in their combined ongoing Yahoo Finance chart.
Support for the bull market in Equity Investments has been underwritten by Major World Currencies, DBV, such as the Euro, and Emerging Market Currencies, such as the Brazilian Real, BZF, which have now fallen lower.
And support for the bull market in Equity Investments has been underwritten by the major types of Credit Investments, as seen in the combined ongoing Yahoo Finance Chart of Distressed Investments, FAGIX, US Ten Year Notes, TLT, Junk Bonds, JNK, 30 Year US Government Bonds, EDV, Mortgage Backed Bonds, MBB, European Credit, EU, and Emerging Market Local Currency Bonds, EMLC, all of which except for Distressed Investments are now trading lower.
An inquiring mind asks, will investors faith in the monetary policies of Mario Draghi be shaken by the ECB Policy Statement of Thursday, June 5, 2014? Will there be a strong stock market reversal?
Credit Writedowns posts Repairing The Transmission of Monetary Policy Through Asset-Backed Securitisation
I comment that there is nothing wrong whatsoever wrong with the transmission of monetary policy of the ECB. To frame the conversation as Credit Writedown posts, is a distraction from reality, and drives the communication suggesting that the ECB’s policies are for economic growth; frankly they are not, just as the FED’s policies are not, and the BOJ are not, and the PBOC are not.
The policies of the world central banks, through Global ZIRP, have been investor centric, and any economic growth has been secondary in nature.
To suggest that the ECB’s Asset Backed Securities Monetary Policy will reverse economic deflation, or stimulate the EU economy is ludicrous; and as a result, a strong trade lower in Equity Investments and Nation Investment, and Small Cap Nation Investment, and Global Financial Institutions, and Yield Bearing Investments, coming on investor disappointment, on June 5, 2014, is fait accompli.
Thursday, June 5, 2014, will mark an inflection point in mankind’s history as the paradigm and age of investment choice will terminate, as investors derisk out of debt trades, and deleverage out of currency carry trades, on awareness that the monetary policies of the world central banks no longer support investment gain, or global growth and trade.
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