Requiem For A Crisis.

We drifted through a lazy summer Tuesday session blissfully (and willfully) ignorant of the political time bomb ticking beneath markets – but that’s to be expected.

And besides, the dip wasn’t sufficiently bought yet.

Stocks were mostly flat, with retail weighing (more below on that). Here’s a five-day look (S&P, Nasdaq, Dow):

Stocks

Trump’s infrastructure comments came too late to help.

The VIX has nearly retraced “fire and fury” but not quite (ticked up a 12-handle late in the session):

VIX

The dollar rose after July retail sales and the August Empire manufacturing index both beat expectations. The greenback is now sitting near 1-month highs:

DXY

Treasuries fell further after the upbeat data as yields rose on the off chance the Fed cares about an isolated retail sales beat:

10y

But those retail numbers didn’t help… well… retailers, as XRT plunged heading for its lowest close since February of 2016. Here’s a fun juxtaposition via Bloomberg:

Retail

At this point, the writing is on the wall: it’s a death spiral. Today the real drama was in Advanced Auto Parts, Coach, J.C. Penney, and Dick’s, with the latter acting like a real “dick” (white line):

Collapse

In the interest of giving you some perspective, if this keeps up XRT is going to end up having its worst year since the goddamn crisis:

XRT

Notably, USDJPY was up as much as 1.1% to 110.85 in the overnight, its strongest gain in two months, as North Korea decided not to nuke Guam (and yes, that’s just as ridiculous as it sounds, but that’s the world we now live in):

USDJPY

Sterling was on the back foot all day after a softer than expected CPI print damped rate hike expectations:

GBPUSD

Crude hit a 3-week low. Same story here. This didn’t help:

  • EIA sees crude output at major U.S. shale plays reaching an all-time high 6.15m b/d in September

“As much as oil inventories have been coming down in the U.S., which is something that is seasonally normal, the fact that U.S. shale production is very resilient and is again confirmed by this EIA Drilling Productivity Report, that is something that is weighing on the market’s mind,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas said.

Oil

Strong dollar not helping. API after the bell.

If you haven’t checked on your mom and pop HY ETF lately, you probably need to. Because while there was some respite on Monday and it hugged the flatline on Tuesday, last week’s losses wiped out YTD gains:

HYG

Spreads are at four-month wides:

HY

In IG, it’s worth noting that LQD had its second-largest outflow of the year on Friday:

LQD

Also, some folks are borrowing to buy some cars and household debt just hit a record, so that’s good (“beautiful deleveraging”):

Record

And remember, when people default on all this debt, UBS recently found that the “default” (pun intended) rationale is basically “because fuck it”:

Debt3

Oh, and please don’t forget that individual investors are all-in:

AAIICash

Kind of makes you think:

  • record high stocks;
  • record high debt;
  • absurdly tight credit spreads;
  • a Fed that’s standing by as the bubble inflates;
  • retail investors with near record-low cash allocations;
  • record complacency

Requiem for a crisis.

requiem

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3 thoughts on “Requiem For A Crisis.

  1. The household debt report also shows that serious credit card delinquencies rose for the third consecutive quarter, a trend not seen since 2009.

  2. Been short on XRT for months, short individual brick and mortar (missed JCP but cashed on M). Long select retailers with large online presence and WMT. Writings been on the wall for awhile.

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