Aug 7, 2013. Reallocation in US weighs on stocks, the great counter-rotation
–Ten year auction today, followed by Consumer Credit at the end of the session.
–Japan down 4% today and US stocks opening weaker. Some attributing the sell off to more certainty about near term tapering, but perhaps the Japan sell off has something to do with RADIOACTIVE WATER CONTAMINATION from Fukishima. That situation is getting worse, to the point that the Japanese gov’t now thinks it may have to step in because Tepco isn’t quite containing the problem. It’s a global disaster.
–The US markets appear to be in the midst of allocation out of stocks and into bonds. Reasonable time for such programs to take place with stocks near highs, earnings season over, rates at relatively attractive levels, and the ten year auction which allows ease of buying the treasury side. Even though economic data out of both the US and EU has been better, bonds have been quite resilient; a counter trade against stocks will catch some shorts by surprise.
–There was a story yesterday about Passport Capital divesting all agency securities as perceived risks increase. Obama made a speech about improved housing, and has said that agencies should be private, undermining confidence in gov’t guarantees. Additionally, the agencies are supposed to pare down their portfolios…to who?
–Story on zerohedge; Only 40% Of Federal Student Loan Borrowers Are Currently Making A Payment. I think the biggest asset of the Fed’l gov’t is college loans…worth a lot less than the amount being carried on the books.
