July 20. Stocks at new highs; nothing else to worry about

–Stocks making new highs this morning.  Must be because we can now drop ‘presumptive’ and say that Trump is the official nominee.  So, I guess that’s good, as VIX fell below 12  yesterday, lower than any level since prior to last August when the Chinese devalued.  It’s not as though we can expect another shock devaluation out of China, just a slow grind lower in the yuan.  However, that’s not to say there couldn’t be some sort of surprise.  This morning US Chief of Naval Operations John Richardson said “The U.S. Navy will continue to conduct routine and lawful operations around the world, including in the South China Sea, in order to protect the rights, freedoms and lawful uses of sea and airspace guaranteed to all. This will not change.” Seems to be on a collision course with this, from China: ‘Freedom of navigation patrols carried out by foreign navies in the South China Sea could end “in disaster”, a senior Chinese admiral said over the weekend. ‘ (Business Insider)

–Pressure continues on front end of the market, after a Hilsenrath article yesterday suggested the Fed could hike in September.  Additionally, an EU court yesterday ruled that Slovenia acted legally in enforcing “burden sharing” on junior debtholders.  In other words, no bailout for Italian banks by taxpayers;  apparently a lot of subordinated debt is held by retail investors, who are now on the hook for a bail-in. No easy way out for the european banking system even though the ECB is buying everything.  At the margin, this likely leads to dollar funding concerns; EDU6 traded a post-brexit low of 9923.0.

–Pressure continues on GBP (though up this morning) and on the Turkish Lira, and EUR also looks to test post-Brexit lows as the chance of a Fed hike increases, while the ECB looks for more forceful ways to depreciate the currency.

–Corn and wheat sold off yesterday and remain at extremely depressed levels.  Beans sold off as well.

–In one of the dumbest things I’ve seen in a while, comes a report from the Council of Economic Advisors that student debt is great, because it leads to a better educated workforce.

“Federal student loan programs help expand access to high-quality education, which has long-lasting benefits to individuals as well as the overall macroeconomy through higher labor productivity and faster GDP growth,” said the report from the CEA.

The Council of Economic Advisers said in a report on Tuesday that the growing mountain of student debt is, in fact, good overall for the US economy.

So I guess, the blazing economic growth we’ve been experiencing, and the fact that the workforce is growing mostly for those over 55, is due to the massive expansion of student debt.  Huh?

Posted on July 20, 2016 at 5:28 am by alexmanzara · Permalink
In: Eurodollar Options

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