Seemingly unwilling to risk any further damage to his already low approval ratings, Trump ultimately decided to go ahead and take the drama out of the debt ceiling debate, striking a deal with Democrats – much to chagrin of the GOP.

We’ve now got a new lease on life – until December. And even that assumes we’ll all make it that long without being drowned by flood waters from Day After Tomorrow-ish hurricanes or incinerated by one Kim’s DIY, IKEA nukes.

In any event, the fiscal can kicking allowed stocks to rebound and recover some of the losses from Tuesday, which, you’re reminded, was the worst day for U.S. equities since the Gary Cohn rumor tanked markets in mid-August.


So risk assets have dodged another bullet…

“Apparently, it’s just impossible to kill the rally”


Here’s a fun picture someone took from the bushes of Trump with his new “friend”:


Needless to say, havens were pressured as 10Y yields rose, the yen fell, and gold dropped in tandem:


October T-bill yields normalized, plunging as the can has been kicked a couple of months down the road:


So as noted above, the new doomsday date is December 15. Does that sound rather inauspicious to you? It should. And here’s why:


And although the first tranche of aid for Harvey has been approved, Irma is barreling towards Florida. You’ll want to watch the insurers as the storm approaches (recall that Tuesday was a rough day for some names). Here are some possibly useful bullets from Wells Fargo’s Elyse Greenspan:

  • Reinsurance stocks will likely be pressured until Irma’s path becomes more clear; yesterday’s pullback indicates that the sector is pricing in more than a $30 billion hit
  • Irma probably won’t have a significant impact on the capital position of the industry, which is currently at a record and could likely absorb a $100 billion hit; that said, if Irma hits Miami directly, it could generate the most-ever insured losses from a hurricane
  • Irma’s closest comparison is Hurricane Donna, which hit Florida as a Category 4 in 1960, and would cause around $35 billion of insured losses today
  • Florida-focused homeowners’ companies, such as FNHC, HCI, HRTG, UIHC, and UVE, face a significant share of the potential loss; most of them buy reinsurance at low attachment points, meaning a bigger share of the loss hits reinsurers in Florida than in other parts of the U.S.
  • Florida companies with the highest share of reinsurance loss include RE, RNR, XL, and VR; on the commercial lines side, Florida’s biggest writers include CFG, AIZ, AIG, ZURN VX, CB, UIHC, and CNA
  • Insurers could slow share buybacks in the second half of the year as they evaluate losses from Harvey and Irma

The BoC hiked rates in the face of ebullient econ data and the loonie surged to a fresh two-year high:



As noted earlier, specs weren’t going to be caught wrong-footed on this again, by God:


Oil hit a 4-week high as demand rebounds and refineries restart after Harvey:


European shares were mixed with a upward bias ahead of the ECB. As a reminder, Bloomberg reported earlier today that the Governing Council is studying options for QE in 2018 and that no decision is likely before October. Still, it will be incumbent upon Draghi to try and jawbone the euro lower tomorrow. If he doesn’t – well then look out… err… above?

South Korean shares have fallen for five straight days as Kim’s surrogates assure the world that Pyongyang is ready and willing to deliver more “gift packages.” The angst is weighing on Japanese shares as well:


The offshore yuan (which broke a 14-day winning streak versus the dollar on Tuesday, before rebounding a bit after Wednesday’s slightly stronger-than-expected fix) was mostly flat ahead of August FX reserve data which should be out overnight.

Stay tuned.


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