Faber News Flow

We didn't really need any more confirmations. In recent weeks, as the US economy came to a screeching halt because of the coronavirus pandemic, we have seen banks   take over $20 billion in reserves   in anticipation of a looming default wave (a five-fold increase if not nearly enough based on historical precedent)... ... Moody's predicting that as many as 30% of Americans with home loans – about 15 million households – could stop paying their mortgages if the U.S. economy remains closed through the summer or beyond... ... with the number of households that have  already stopped paying their  loans soaring by 1,496% in just six weeks... ... and even JPMorgan in the process of shutting down its entire net interest margin origination platform, by getting out of new loans and HELOCs and boosting the standards on new loans. These are all clear signs that a wave of mass defaults has started and is about to break all across America as tens of millions of household suddenly lose their...

The economic collapse triggered by COVID-19 lockdowns across America has torpedoed the municipal bond market, which has come under severe stress in the last 4-6 weeks. The Federal Reserve has  expanded  a bailout facility to make sure liquidity continues to flow to crucial states and municipal money markets. However, it appears a tidal wave of muni defaults is nearing.  About 22 million Americans have lost their jobs in the last four weeks, the quickest ever period of job loss in the country's history, as it now appears turmoil is about to be unleashed deep inside the $3.9 trillion muni bond market. Bloomberg notes, "hospitals, airports, stadiums and speculative ventures like the Virgin Trains USA railroad in Florida" have survived over the years through debt sales via government agencies, and much of this debt is backed by the revenue received from the asset.  What If There Was No Money? And now it becomes increasingly evident with much of the country in lockdown, millio...

The economic collapse triggered by COVID-19 lockdowns across America has torpedoed the municipal bond market, which has come under severe stress in the last 4-6 weeks. The Federal Reserve has expanded a bailout facility to make sure liquidity continues to flow to crucial states and municipal money markets. However, it appears a tidal wave of muni defaults is nearing.  About 22 million Americans have lost their jobs in the last four weeks, the quickest ever period of job loss in the country's history, as it now appears turmoil is about to be unleashed deep inside the $3.9 trillion muni bond market. Bloomberg notes, "hospitals, airports, stadiums and speculative ventures like the Virgin Trains USA railroad in Florida" have survived over the years through debt sales via government agencies, and much of this debt is backed by the revenue received from the asset.  And now it becomes increasingly evident with much of the country in lockdown, millions out of work, and an economi...

Vol liquidity is in shatters.  Lower absolute vol levels have led to a phantom perception that market liquidity has recovered from last month's stress. Nothing could be farther from the truth. While top of the book spreads are tighter,  there is no depth to support the market in anything larger than social amounts. Combination of reduced investor activity and skeleton staffing in dealing rooms means the pool of participants in implied space is appreciably smaller . Publicly reported volumes support this argument. For example, in March volumes were ~ +27% higher from the same time last year. Based on MTD data April is projected to be ~-19% lower than 2019!  If you are fortunate to have the right price for the position you want consider it a gift.  It's never a good time to be 'penny-wise' and 'dollar-foolish' – not the least now.

In what is sure to be a fast-moving, chaotic week, in which attention will focus on every marginal development in the war against Coronavirus (and Chinese exports thereof),   Q1 earnings will step up a notch with 88 S&P 500 companies reporting this week and Europe joining the fray with 64 companies.  In terms of the highlights to look out for, proceedings kick off today with IBM. Then tomorrow we'll hear from The Coca-Cola Company, Netflix, SAP, Philip Morris International, Lockheed Martin, Texas Instruments and BHP. On Wednesday, we'll then get AT&T and Thermo Fisher Scientific. Thursday sees releases from Intel, Eli Lilly and Company, NextEra Energy, Union Pacific, Credit Suisse and Hyundai. And finally on Friday we'll hear from Verizon Communications, Sanofi, T-Mobile and American Express. Going back to the virus epidemic and ongoing responses to the current economic depression,  Thursday is the key day this week with the EU leaders summit a potentially big event...

Bubbles always burst, and the confidence that "this isn't a bubble" and "the Fed has our back" are counter-indicators. Here we go again: stocks have once again reached nosebleed valuations completely disconnected from reality--in other words a repeat of the speculative-frenzy bubble that reached its peak on February 19.  Once again, stocks are sporting delusional GDP-to-valuation and P-E (price-earnings) ratios, all based (again) on the belief that nothing--certainly not revenues, profits, debt levels, etc.--matters; the only thing that matters is the Fed pimping stocks. What might observant punters have learned from the February 19 bubble popping?  For one thing, the complacent belief that every technician's target is guaranteed is suspect: at this writing, the vast majority of technical-analysis targets are much higher. What's the basis for these higher targets? Nothing but the implicit quasi-religious faith in the Fed. For another, the belief that the...