Jim Chanos - Easier to Find Short Ideas as Bull Market Goes On

I've mentioned Jim Chanos before in this blog, and he's out again with some telling examples of late stage 'exuberance'

While Mr. Chanos is almost never perfectly timed with the market's current mood, he is rarely wrong longer term.

http://www.bloomberg.com/news/videos/2016-06-15/chanos-easier-to-find-short-ideas-as-bull-market-goes-on

Hugh Hendry talking macro and China

It's been a while since I've mentioned Hugh Hendry but he's popped back up on YouTube recently.  After his positively raucous returns in the depth of the crisis he had a long period of very underwhelming returns and from his manner in this broadcast I'd guess a tough few years.

ft.com describes the decline in assets under management in 2014

As always I find him entertaining to watch.   He provides some of the reasons for his reversal of opinion on China as well.  Regardless whether you agree with him or not I suggest you listen.

source: http://www.macrobusiness.com.au/2016/04/hugh-hendrys-long-dark-night-of-the-soul/

You don't buy the last bounce, especially when Mars Attacks

I don't usually comment on the price of the equity markets but considering what I'm seeing I thought I'd bend one of my self imposed guidelines. Remember you are hearing this from someone who does not see any positive forces influencing the market right now.

The markets have been pretty much stuck in a rut since early August and seems to be driven by the constant stream of contradictory rumors coming out of Europe. Will they save Greece? (no, they can't) Will the European banks be nationalized?  (no idea, but I'm not hanging out to find out)  Meanwhile China's negative real rate maneuver and excessive credit creation is coming back to haunt them.  And America is slowing down.

Stuck in a rut for the last two months.

Here are some of the indicators I look at to assess financial market risk and as you can see all of them are going the wrong way.

Ted Spread

Notice how the TED (Treasury - Eurodollar spread, an indicator of banking stress) peaked and started healing before the market bottomed in early July 2010; showing a positive divergence.

Emerging market bond spreads, dollar denominated

The spread for emerging market bonds also shot up before the correction in 2010 and also showed a similar positive divergence. Right now spreads continue to widen.

My own proprietary indicators are not showing any sort of improvement either, again the opposite of 2010.

Note how in 2010 risk stopped going up.

Compare to 2011 where the RiskMeter keeps going up. 

Do I think the market is going to crash? I can't answer that question.  If the European situation looks like it can be truly resolved we could get a serious rally. I'm waiting to see what my fundamental indicators of market health tell me before I get back into the stock market.

Right now they are saying wait.

Remember, no matter what happens there's someone out there who'll be trying to convince you to buy stocks right now.

Video scene from Mars Attacks

Additional Reading:

http://www.businesscycle.com/news_events/event_details/1476/4 - He's been calling for a slowdown for a while and he just upgraded to calling for a recession this week.

Humble Student of the Market - Germany engaging in expensive can kicking. We may get a bounce but it does not fix the fact Greece has too much debt. Who owns it is immaterial.

Volatility measure goes bonkers

One of the indicators I follow just hit multi year lows and that's not a positive sign for the equity markets.  (Stockcharts link)

Scroll back through history and notice when this ratio of short term volatiliy to longer term volatility was so low . . .

The Humans are dead -- At least to the HFT computers

For those of you who aren't knee deep in the markets, you may not know about the HFT (high frequency trading by computers) and their affects on the markets. HFT was implicated in the May 'flash crash' and with the declining volume in the stock market it appears most trading is between computers.  In that spirit I present a more humorous slant on the entire situation:



Here's the acoustic version:
http://www.youtube.com/watch?v=WGoi1MSGu64

And some news regading HFT systems getting fined (Zero Hedge)

Update: The Reformed broker has some new HFT toys for Christmas! :)

China PMI comes in below expectations. Overnight stock futures down.

The Chinese Purchasing Managers Index (PMI) came in at 52.1 as reported by Chinadaily and looking at the market reaction it was below expectation.

SP 500 overnight futures are down ~0.8%
Gold down
Copper down
Bonds up
You can see delayed CME futures quotes if you want to watch the action tonight.

A head and shoulders on the stock market?

The market action today did some technical damage.  As you can see from the chart below (provided by Stockcharts.com) a classic 'head and shoulder's' pattern appears to be forming in the S&P 500.  If the market goes down much further the technicians may consider the pattern formed and they'll sell sell sell.

Overall it was an ugly day for risk assets with stocks, energy and base metals falling.  The dollar, gold and US Treasuries were all positive.   The quarter ends tomorrow so the exciting market action may be not be over with.

Hugh Hendry on Chinese Yuan, gold, stocks, potash, and agriculture

It's a busy Hugh Hendry day.  Here's some video interviews from this morning.

Hugh Hendry on Chinese Yuan (CNBC, 2009 October 16)  - China doesn't and or can't free the yuan from the dollar and how this creates stress on Europe and Japan.  Lower dollar values are improving China's trade position.

Hugh Hendry on Agriculture and Potash (CNBC, 2009 October 16)

Hugh Hendry on Gold and Stocks (CNBC, 2009 October 16) -- Hugh states stocks and gold are very crowded trades.


Some very different perspectives.