Global Bond Yields Continue To Get Jiggy With It
Equities start the day lower as Global bond yields continue to get jiggy with it. Why are bonds selling off all over the place after people couldn’t buy enough 0.1% yields? Well you know why…because crowded trades will get punished, and they will get punished hard. AOL got bought today! How about that? (I decided against using “You got Sale” because it felt played out) VZ acquired them for $4.4B ostensibly to get their ad-tech and content. Ad-tech? You got me, I’ll have to defer to tech blogs on that one. Did you know AOL still has over 2 mil dial up subscribers? How is that possible…who is using dial up to check AOL mail? (I actually know one person with an aol.com email! He’s a legend!) All morning long twitter was obsessed with the oldies but goodies. AOL, Compuserve, even Prodigy. Who remembers Prodigy? I do, it was my very first email service out of college (late 90s). Here it is in all its horrible low resolution glory. How I long for the days when big blocky letters and “flash” video was the rage. These millennials and their instachatsnapgram…bah. In my day we played “Where in the world is Carmen San Diego” and checked stock quotes with 1hr delays. Web browsing? Please…we were lucky to be able to find the weather and sports scores in under 15 minutes. And this wasn’t even that long ago you whippersnappers! Anyway, futures were down about 10 pts at the open because people can’t puke bonds fast enough. I mean this is basically what we are dealing with right now (found on Twitter @stocktwits, so good). Let’s see what happened next..
After the open it looked like we were going much lower. Down 0.5%...then 1%....it felt like all of Friday’s gains were going to be erased in violent fashion. But stocks turned around about an hour into the session because bonds also turned around. Bonds…how many times can we write about bonds in a stock market recap? I guess a lot, and I need you to check out this article because it’s important to what we do here. “It doesn’t take much to cause a rout in the bond market these days”…great title…and you know what? It could be written about stocks too. Sitting in my chair I see it day in and day out, names you think are liquid can turn illiquid in a hurry. Large caps, heck even mega caps, can trade like butter spread over too much bread. The Global markets are prone to crazy jitters nowadays so I’m a tad concerned how they will act in a panic. Bond markets are supposed to be as deep as the Marianas trench yet we’ve seen 10yr UST and German Bunds move like a small cap printing company in Dubuque. Anyway, today was not a panic, yields reversed their course so stocks reversed their course. By lunch we had rallied all the way back to unchanged, 2,102. I mean who doesn’t love range bound markets? I sure do! What’s better than writing about a market that bounces between two lines ENDLESSLY! Winners were AOL / PLL (selling themselves), DISCA, RIG, EW, and HUM. Losers FMC, IFF, GPS, and RAX.
The afternoon was nothing special and we closed just shy of where we were at lunch, 2,100, down 0.2%. The recap is going to be absent the next few days, its author is moving homes and needs to pack 18tons of toys into boxes. Honestly, I need to write a recap about moving homes because there are relevant market lessons to be learned about consumption, planning, excess, and frustration. Brutal. The market is still range bound yet appears to be oddly sensitive to wacky moves in debt markets right now. That kind of stuff warrants caution, bond markets are no joke and even someone hip deep in bubble wrap doesn’t want to risk injury here. Weird tape my friends. Let me get my robo-advisor on the horn and see what he says about sentiment right now, I need someone to bounce a few ideas off of. Oh wai..…
Final Score: Dow -21bps, S&P500 -30bps, Nasdaq -35bps, Rus2k -22bps.
- Succinct Summation of the Day’s Events: Bonds were puking. Then they drank some Pepto Bismol and felt better. Once they stabilized the selling in equites ceased and we managed to close unch on the day.
- Don’t say you weren’t warned: Gabriel Wildau at the Financial Times has the story of Shanghai Duolun Industry, which jumped 10 percent on Monday (the maximum daily limit allowed on the Shanghai exchange) after it announced that it had changed its name to P2P Financial Information Service Co. and purchased the URL, www.p2p.com. The thing is, Duolun is not a peer-to-peer lending company and it reportedly has no plans to become one. It admitted as much in a filing. The website doesn't have any information on P2P lending either. It doesn't have anything at all except a few stock photos of attractive people and a reminder in several languages that "This domain is worth $100 million."
- Mossberg on the AAPL watch…about what I expected him to say: But it’s a fledgling product whose optimal utility lies mostly ahead of it as new watch software is developed. I got the strong feeling that third-party app developers taking their first swing at the thing simply hadn’t yet figured out how best to write software for it — especially since Apple, for now, is requiring that watch apps basically be adjuncts of iPhone apps.
- Bespoke looked at our current trading range: this type of range-bound market is really uncommon. Outside of the two periods of occurrences in the last year, the only other times that we saw this was in 1995, and then at various points between late 2005 and mid 2007. It is not uncommon for periods of range bound trading to be followed by a big break in the market as the pendulum swings from one extreme to the other. The big question is which way? Unfortunately, these prior occurrences don’t provide much insight into that answer. In 1995, the market kept going along on its merry way, while in the last decade, the market ultimately broke down hard after multiple periods of range bound trading. I agree with them, whichever way this market breaks it’s gonna go HARD in that direction.
- What is wrong with people like this?
- I am thankful for…
- Health Tips backed by actual science! The “avoid bright lights before sleep” one is a problem for me. What about my sweet sweet ipad?
- London sure loves to mix styles right?
- Selll in May…everything? The economist wonders: WHEN both bonds and equities sell off, something interesting is going on. At the time of writing, the DAX in Frankfurt is down more than 2% and the Nasdaq and S&P 500 off around 1%. Meanwhile the 10-year Treasury bond yield is around 2.3% and the equivalent German yield is 0.68%; until recently the latter seemed to be heading for zero. It can't be that economic conditions are deteriorating; that would be good for bonds. And it can't be because conditions are improving; that would normally be good for equities
- I got a good idea Mikhail…let’s use a public bus to tow the car!
We’ll end tonight with a total bro video. I mean this is as bro as bro gets right? Looks like fun but its all bro’s. I can’t stop saying bro bro!
Have a good night.