Five Years into this ‘Recovery’, Champagne or Bourbon now?

  • Written by David
  • August 8, 2014 at 9:33 pm
  • 0
  • Welcome to our eNewsletter originally published on July 4th 2014 where we ask the above question.

    Click here to read the full eNewsletter Five Years into this ‘Recovery’, Champagne or Bourbon now?

    Since publishing this letter, several key issues discussed in the newsletter have either come to fruition, or have been amplified. Some of the issue are listed below.

    We are a bit surprised at the rapidity of development of some of these news stories since the publication of Five Years into this ‘Recovery’, Champagne or Bourbon now?

    1. Bank Bail-ins: Starting around July 8th,  the countries of Germany, Austria, Canada and England have all begun to adopt language that would allow their banks to confiscate creditor assets (the bank’s liabilities) in order to shore-up their balance sheets to include unsecured creditors and depositors.

    2. Higher Market PE Ratios.

    3. Slower GDP, Italy back in recession

    4. Corporate Stock buyback programs: Slowing down

    5.  Corporate Debt higher than before 2007 peak.

    6. Geo-political news dictating 24 hour news cycle/market direction

    7. High Yield/Junk bond market sell-off; Markets re-pricing risk. Six Sigma Event in HY.

    8. Further news on Poland’s takeover of their private pension system.

    9. Portugal Bank Espirito Santo bankruptcy/bail-out.

    10. SEC Adopts Money Market Fund Reform Rules. (We actually discussed proposed limits on institutional bond mutual fund redemptions, not Money Market Funds.)

    11. Fed Vice Chair Fischer remarks on U.S. Bank bail-in language Aug 11th in Stockholm, Sweden “As part of this approach, the United States is preparing a proposal to require systemically important banks to issue bail-inable long-term debt that will enable insolvent banks to recapitalize themselves in resolution without calling on government funding”

    Much of these topics are covered in our twitter feed at @gratkewealth over the weeks since July 4th.

    UPDATED October 15, 2014: Welcome to an overvalued market meeting global uncertainties!

    The headlines… (from the most extreme levels-Source

    • VIX over 31 (highest since Dec 2011)
    • Dow Industrials -4% Year-to-date (nears correction, -8.6% from highs)
    • Nasdaq -10.5% from highs (correction, -1% Year-to-date)
    • Dow Transports -11.6% from highs (correction)
    • Russell 2000 -14.4% from highs (correction, -9.6% Year-to-date)
    • S&P -1.5% Year-to-date (nears correction, -9.8% from highs)
    • S&P 500 futures volume highest in 3 years
    • High-Yield Credit +20bps to 417bps (13 month wides)
    • Treasury yields down 16-18bps (multi-year low yields and multi-year high sized moves)
    • Gold at one-month high
    • WTI Crude hits $80.01 (lowest since June 2012)

    Thanks for reading..


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