Faber News Flow

A 'funny' thing happened on the way to record high equity markets... the credit market started to crack, and now that pain is spreading and escalating. Starting from the weakest of the weak,  spreads on CCC U.S. junk bonds have jumped above 1,000bps for the first time in more than three years  as a sell-off in energy weighs on the lowest-rated debt. Source: Bloomberg Trade Deal Will Create 10% 'Pop' in Stocks, Wharton's Siegel Says Blowing the CCC market's risk out to its widest against single-B since April 2016... Source: Bloomberg The weakness in the low-rated debt is dominated by energy firms as investors run, don't walk, away, despite oil's "stable" price (ahead of the Aramco IPO)... Source: Bloomberg But another key market for demand of 'junky' loans is starting to flash very red... Source: Bloomberg The broader U.S. junk bond market has posted negative returns this month... as stocks have soared... Source: Bloomberg ...and is nota...

We just witnessed one of the most monumental events of the entire decade, and yet most Americans still don't understand what has happened.  In recent months, the global economy and stock markets around the world have been buoyed by the hope that the U.S. and China would soon sign a new trade agreement.  Unfortunately, there is no way that is going to happen now.  On Tuesday, the Senate unanimously passed the  "Hong Kong Human Rights and Democracy Act of 2019" , and the House of Representatives passed the same bill by a 417 to 1 vote on Wednesday. Needless to say, the Chinese are beyond angry that Congress has done this.  China is warning the U.S. to "rein in the horse at the edge of the precipice" and that there will be "revenge" if this bill is allowed to become law.  And it looks like this bill will actually become law, because  Bloomberg is reporting  that President Trump is fully expected to sign it… President Donald Trump is expected to s...

European equity investors, especially those betting on banking stocks, are gearing up for the new ECB President Christine Lagarde's first public speech, at a banking conference today.  The central bank's lower-for-longer rates have hit lenders' margins in recent years, and Lagarde's words will be scrutinized for any signs of potential changes on that front. Beyond potential clues on rate policy, investors will specifically look for any comments on banking integration, which could potentially provide fresh impetus to the banking sector's rebound that has stalled this month. The rally has been fueled by expectations that there are no more cuts to the deposit rate on the table, as well as by comments from German Finance Minister Olaf Scholz that progress toward a European Union banking union is gaining momentum. Having a well-connected politician like Lagarde at the helm of the ECB might turn out useful,  according to Fidelity Investments CIO Romain Boscher. It could h...

◆ Moody's has issued a debt downgrade warning to the entire world on fears that severe political turmoil from London to Hong Kong poses a threat to the global economy ◆ A World Debt Downgrade Warning (WDDW) has been issued by credit rating agency Moody's due to deepening global geopolitical uncertainty and risks   ◆   Moody's have a bleak outlook for government debt amid political instability in a report published just this Monday ◆ Moody's said political and geopolitical turbulence is exacerbating a slowdown in national and global GDP growth, aggravating structural 'bottlenecks' centred on massive banking and sovereign debt and increasing the risk of economic or financial shocks ◆ Moody's identified the emergence of influential "populist" movements and suggested this is undermining the effectiveness of domestic policy, weakening institutional strength and compounding social and governance risks ◆ "Overall, the global environment is becoming l...

John Williams, President of the Federal Reserve Bank of New York According to the most recent statistical release from the Federal Reserve, the average annual interest rate on 90-day AA-rated financial commercial paper has risen from 2.18 percent in 2018 to 2.27 percent through November 15 of this year. The rise in the average annual interest rate on 90-day commercial paper contrasts with the fact that since May of this year, the 90-day (3-month) Treasury bill's yield has moved sharply lower, from 2.4 percent to yesterday's closing yield of 1.56 percent – a decline of 35 percent. The Federal Reserve Bank of New York has effectively become the repo market – pumping out upwards of $3 trillion to that market since September 17. Can we expect the Fed to turn on the money spigot to the commercial paper market next? We raise this scenario because that's exactly what the Fed did to the tune of almost $1 trillion from the fall of 2008 to February 1, 2010 during the financial crisis...

One of the recurring themes that emerged since the start of September, is that not only will an economic recession be avoided (thanks to the Fed's three recent rate cuts and $60 billion in monthly QE) but the global economy is now on an upswing.  To see Wall Street's recent bullish reversal in thinking on this critical issue look no further than the latest piece from Goldman's David Kostin who starts his latest Weekly Kickstart piece by saying that "The performance of the US equity market during the past three months suggests the pace of US economic growth will improve in the near future" adding that "recent data releases have supported the market's expectation for a rebound in the US economy." Additionally, as we   reported over the weekend , perennial market bear Morgan Stanley finally threw in the towel and after downgrading global stocks to a Sell in July, turned Neutral (after what we assume were countless complaints by its clients who accused t...