Oct 28. Go Cubs go

–Just because it ‘can’t’ happen, doesn’t mean it won’t happen.  Interesting day in global markets yesterday with yields pushing higher in a bear market steepener.  Ten year yield rose 5.3 bps to 184.1.  2/10 treasury spread rose 4.3 bps to a new high of just over 96.  As pointed out yesterday, in euro$’s the red/gold pack spread rose 4.875 bps to 58, also a new high.  In fact, one year euro$ calendars edged to new highs from March17/18 on back, though most remain below 20 bps.  Many think that over-indebtedness will prevent rates from rising because the pain will be too great for both gov’t and corporates.  For example, Hoisington’s latest missive still calls for lower rates, and it has certainly been the case that they’ve been right all along.  But from these low vol and flat curve levels, a rush to the exits can clearly cause months of angst.  By the way, vol jumped as well, most notably in bunds, bobls.

–Today is Advance Q3 GDP expected +2.5%.  Current dollar GDP is around $18.45T.  Yesterday the Atlanta Fed released its GDP Now forecast at 2.1%, and Atl has been rather accurate, so I would assume that any ‘miss’ on today’s data will be on the weak side.

–As noted yesterday, the Russell2000 small cap index is breaking down, and yesterday closed at the low, breaking down from a 3 month sideways topping formation; clearly there is divergence across equity indices.  AMZN’s results yesterday were disappointing, and as colleague JA notes, the move to brick and mortar seems misguided.  The stock p/e is around 200…hard to maintain with delivery vans and physical stores.  I would also mention that its market cap is around $390b or about 2% of GDP.  (Total equity mkt cap to GDP is about 120%). Who is AMZN selling to?  The people that own and work for companies in the Russell index.  Sure, I’m simplifying, but the divergence between big tech and the rest of the market/economy is stark.

–I can’t help but include this snippet.  A Tesla car was defaced in the most “San Fransisco crime ever”.  Someone spray painted the car with Tesla’s after hours stock price.  http://www.sfgate.com/crime/article/Tesla-defaced-in-most-San-Francisco-crime-ever-10417569.php?utm_source=fark&utm_medium=website&utm_content=link&ICID=ref_fark

–Interesting piece from Bloomberg: Charts that scare Wall Street.  Well worth review.

http://www.bloomberg.com/news/articles/2016-10-27/these-are-the-charts-that-scare-wall-street

www.bloomberg.com
Charts that go bump in the night.
Posted on October 28, 2016 at 5:21 am by alexmanzara · Permalink
In: Eurodollar Options

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