Tuesday, September 13, 2016

Today's links

1--Leaky bond bubble??

Stocks sank Tuesday as oil prices fell. Treasury yields rose to three-month highs after comments from major investors at the CNBC/ Institutional Investor's Delivering Alpha conference and a weak 30-year auction. LMM's Bill Miller said he's shorting the 10-year, and Elliott Management's Paul Singer said the long end of the bond market was a bubble and Treasurys and other developed market bonds are not safe havens. "I think rates are no longer going down," said Lindsey Group chief market analyst Peter Boockvar.

"Yesterday's weak 10-year [auction] was followed by the weak 30-year. A weak bond auction followed by a fragile state in the market is enough to trigger it. The market is handing investors the highest yields in three months and people aren't biting," said Boockvar. ...

Boockvar said a key to the markets will be whether the Japanese 10-year sovereign returns to positive yields, now that 10-year German bund yields have turned positive. "The 10-year could turn positive for the first time in many, many months. That's what I'm going to be watching for. Japan is the epicenter of all this [quantitative easing]," he said. U.S. yields have fallen to stunningly low levels and traded in a tight range all summer as buyers found them attractive compared to negative and low yielding sovereigns from elsewhere.
Strategists said the move in the bond market was also more related to the European Central Bank than the Fed. ECB President Mario Draghi did not reveal further easing plans last week, as was expected

2--Americans are not prepared for retirement.

In fact, "nearly half of families have no retirement account savings at all," the Economic Policy Institute (EPI) reported.

Just how much has the average American family saved up? According to the EPI, the mean retirement savings of all families is $95,776.

But that number doesn't tell the whole story. Since so many families have zero savings and since super-savers can pull up the average, the median savings, or those at the 50th percentile, may be a better gauge. The median for all families in the U.S. is just $5,000, and the median for families with some savings is $60,000

3--Best Available Evidence: Hillary Clinton Has Parkinson's

4--Hanjin Fall Is Lehman Moment for Shipping, Seaspan CEO Says

"It has never happened in the past..a nuclear bomb"

The fall of South Korea’s biggest container line Hanjin Shipping Co. is similar to the 2008 collapse of Lehman Brothers Holdings Inc. and has materially impacted the shipping industry, Seaspan Corp. Chief Executive Officer Gerry Wang said.

Seaspan, the Hong Kong-based container-ship leasing company that has three vessels chartered to the distressed line, is evaluating all options and examining systemic risks resulting from Hanjin’s bankruptcy filing, Wang said in an interview with Bloomberg Television. In June, Wang had rejected Hanjin’s requests for charter-rate cuts before the shipping line filed for court receivership last month.

“The fallout of Hanjin Shipping is like Lehman Brothers to the financial markets,” Wang said. “It’s a huge, huge nuclear bomb. It shakes up the supply chain, the cornerstone of globalization.”

5--Leverage Soars to New Heights as Corporate Bond Deluge Rolls On

(stocks are risky, bonds are safe, er, not anymore...Fed's low rates fuel debt feeding frenzy..any move in rates will send defaults skyrocketing paving the way for another financial crisis)

Here’s a gut check for bond investors: corporate America is now more leveraged than ever.
As this year’s corporate bond sales raced past $1 trillion on Wednesday -- marking the fifth consecutive year of trillion-plus issuance -- Morgan Stanley published a report Friday highlighting the growing strains on company balance sheets. The report, which estimated US companies’ collective debt at a record 2.4 times their collective earnings as of June, comes at a time of growing angst in global bond markets

“The investment-grade ‘safe’ part of the market is becoming the most dangerous,” said Ashish Shah, chief investment officer at AllianceBernstein LP. “There are so little returns out there. People are crowding into whatever they can.”

The debt metric, which doesn’t include banks and other financial companies, has climbed for five straight quarters as corporate profits decline at the same time companies load up on the increasingly cheap borrowings, Morgan Stanley analysts led by Adam Richmond wrote in a note to clients. In 2010, when the U.S. economy started recovering from the longest recession since the Great Depression, the ratio fell to 1.7 times.

The weakening balance sheets could become more worrisome if investors lose confidence that central banks will keep extending their unprecedented stimulus efforts that have driven yields to record lows. Those concerns flared up the past week, and rates on 30-year Treasuries recorded their biggest two-day selloff in more than a year.

Corporate-bond issuance this year is on pace to exceed last year’s record $1.3 trillion, data compiled by Bloomberg show. That would push sales during the past five years to more than $6 trillion. Companies that sold dollar bonds this week included Home Depot Inc., Cox Communications Inc. and TJX Cos.
Total debt at companies grew steadily at about 10 percent year-on-year since 2009 and accelerated to 16 percent year-on-year at the end of 2015. As that happened, Ebitda fell 4 percent for twelve months through the end of 2015, according to the report.

Debt loads are swelling across most all industries, the analysts said. But it’s been most pronounced among energy and healthcare companies. Companies have also borrowed to buyback stock rather than investing, a factor that contributed to weak productivity in the U.S. economy, and that does not “bode well for earnings,” the analysts wrote.

6--Bankruptcies so far this year are double last year’s total

U.S. oil bankruptcies haven’t been this “catastrophic” for lenders in a long time, in what may be the worst bust of any industry this century, according to Moody’s Investors Service....

Defaults in the oil and natural gas industry have been rising through a market slump that has exceeded two years as companies lacked the cash to make interest payments on their debt. Bankruptcies among U.S. producers so far this year are about twice the number among companies rated by Moody’s in all of 2015, the report said. The oil and gas figures have helped propel U.S. corporate defaults to the highest since 2009....

7--Libor’s Reaching Point of Pain for Companies With High Debt

(How can interest rates rise when the Fed hasn't raised them? Because the market sets rates too)

Short-term borrowing rates are rising to the point where some heavily indebted U.S. companies can no longer ignore them

8--'Plan B': Washington Still 'Seeking to Divide Syria Into Separate Enclaves'

9--    Military Success in Syria Gives Putin Upper Hand in U.S. Proxy War (archive) NYT admits US arming and training jihadists

10---Governments may boost fiscal stimulus as central banks step back

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