Credit Bubble Bulletin

Credit Bubble Bulletin2020-05-20T17:01:05-06:00

Presented by Doug Noland

Daily Commentary

Thursday, January 27, 2022

[Yahoo/Bloomberg] U.S. Stocks Advance as Dip Buyers Come Back: Markets Wrap

[Yahoo/Bloomberg] Fed Fallout Triggers Global Yield Spike as Tighter Policy Looms

[CNBC] Japan and South Korea lead declines across Asia-Pacific as investors digest Fed remarks

[Reuters] China shares drop amid heavy selling by foreign investors

[Yahoo/Bloomberg] Record Commodity Prices Bolster Case for Fed’s Hawkish Tilt

[AP] US economy grew 5.7% in 2021 in rebound from 2020 recession

[CNBC] GDP grew at a 6.9% pace to close out 2021, stronger than expected despite omicron spread

[Yahoo/Bloomberg] U.S. Durable Goods Orders Post First Decline in Three Months

[AP] US weekly jobless claims fall for the first time in a month

[Reuters] Evergrande shares fall as restructuring roadmap disappoints creditors

[Yahoo/Bloomberg] China Weighs Breaking Up Evergrande to Contain Property Crisis

[Yahoo/Bloomberg] China Weighs Breakup; Property Stocks Slide: Evergrande Update

[AP] US response on Ukraine offers little optimism, Russia says

[Reuters] Russia keeps door open after U.S. rejects key security demands

[AP] Ukraine crisis updates: What to know as tensions rise

[Reuters] U.S. State Department ‘condemns’ North Korea missile tests

[Bloomberg] El-Erian: Fed Does What’s Expected, Not What’s Needed

[Bloomberg] China’s Local Government Bond Sales Fall Short of Expectations

[Bloomberg] China Allows LGFVs in Poor Province to Negotiate Debt Extensions

[Bloomberg] Turkey to Raise Inflation Forecast As Lira Rout Hurts Outlook

[NYT] Russia’s Military, Once Creaky, Is Modern and Lethal

[WSJ] Fed Grabs the Market’s Punch Bowl

[FT] ‘No more Mr Nice Guy’: Fed chair signals tougher stance on inflation

Weekly Commentary

January 21, 2022: Market Structure in the Crosshairs

Please join Doug Noland and David McAlvany Thursday, January 27th, at 4:00 pm Eastern/ 2:00 pm Mountain time for the Tactical Short Q4 recap conference call, “Things Went Wild. Now What?” Click here to register.

Markets will on occasion reveal subtle hints, clues that can be critical when nearing inflection points. Last week’s CBB discussed the elevated correlations between the cryptocurrencies, technology stocks, and some financial conditions indicators. This suggested heightened risk of a bout of “risk off” selling that could presage illiquidity, panic and bursting speculative Bubbles. Not subtly, this dynamic gained important momentum this week.

Bitcoin’s 11% Friday drop boosted losses for the week to 15.6%. Etherium dropped 28% this week, Litecoin 27%, and Binance 28%. It was a technology bloodbath, with the Semiconductors sinking 11.9%. There was an element of panic in many of the online trading community’s favorite stocks. A Friday afternoon Bloomberg headline: “Nasdaq 100’s Unrelenting Declines Ring a Dot-Com Bust Alarm Bell.” While there are notable similarities, the nineties was a rather petite Bubble in comparison to today’s gross obesity.

Markets this week provided inklings of a potentially far-reaching Critical Juncture. Wednesday trading deserves special attention. Stocks opened the session higher, only to reverse sharply lower. “Risk off” was gaining momentum, with technology stocks and the cryptocurrencies appearing particularly vulnerable. But even in the face of faltering risk market Bubbles, Treasury yields were marching higher – trading Wednesday to 1.90%, the high since year-end 2019.

Meanwhile, Gold surged $27 during the session. Buying went beyond the “shiny metal”. Silver jumped 67 cents, or 2.8%, Platinum $41, or 4.2%, and Palladium $104, or 5.4%. And gains were not limited to the precious metals. Nickel jumped 4.9%, Copper 1.7%, Tin 1.4%, and Aluminum 1.0%. In the soft commodities, Cotton rose 2.4%, Sugar 2.2%, Coffee 2.0%, and Cattle 1.1%. In hot energy markets, Crude added another 94 cents to close at the high since 2014 ($85.80).

The Bloomberg Commodities Index advanced 1.3% Wednesday, while the Nasdaq100 fell 1.1%. The dynamic was new and not all that subtle, though barely a peep was uttered from the punditry on such a potentially momentous development: The emergence of Bubble vulnerability in Financial Assets spurring heightened demand for Hard Assets.

The Bloomberg Commodities Index’s 1.8% gain for the week boosted early-2022 gains to 6.2%. Meanwhile, the Nasdaq100 dropped 7.5%, pushing y-t-d losses to 11.5%. So-called “safe haven” Treasury bonds (the TLT ETF) ended Wednesday’s session with y-t-d losses already approaching 5% (after losing 4.6% in 2021). (more…)

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