Saturday, October 7, 2017

Da bulls have pushed the S&P:VIX price into uncharted territory this year.

The REAL test for sustained market euphoria is now occurring, as the ratio probes a two decade ascending diagonal (red) line responsible for past market tops.

After 8-9 years of a central bank induced bull market, and pushing +2803% gains from lows, investors are making the fatal decision to get back in, as the final stages are here explained in the ratio.



*  *  *

And for some more color, here are some bonus charts...

On a reward-to-risk basis, investors have not been this 'offside' since 1994...


And remember VIX speculators have never been more short...

And, uncertainty about VIX (VVIX) has never been higher relative to the uber-complacent level of VIX...



And finally, one wonders why, as Small Caps are bid to the moon on the heels of tax-reform-hype, investors are buying protection with both hands and feet...



Is time up?


And all this is happening as the one main driver of global financial markets is dropping the most in a year...

Which does not bode well for stocks...

But then again, it's probably different this time.




Thursday, September 28, 2017


It appears that "subdued volatility" is hurting not only bank trading revenues. Two years after CNBC announced that it would no longer rely on Nielsen ratings to measure its daytime audience (just after we reported its viewership had tumbled the most on record), turning to rival Cogent Reports instead, the latest data reveals that the decline for the financial channel has continued, and in the past quarter CNBC delivered 152,000 total daily viewers, its lowest viewership since 1991 for the 28-year-old network.

At the time when CNBC switched away from Nielsen, it complained that the media tracking company failed to track "out of home" viewing in locations such as airports, gyms, restaurants and offices. Well, with all viewers taken into account, the picture, pardon the pun, deteriorated further, and in the past quarter, CNBC delivered its lowest rated quarter since 1991, and in total viewers, had its lowest rated quarter in 22 years, dating back to 1995

And while the reason for CNBC's ongoing decline is unclear, an unexpected winner has emerged in Fox Business News, which continued its winning streak against CNBC by drawing more viewers for the fourth consecutive quarter, and in the last quarter average 187,000 total viewers across the business day (9:30am-5pm), up 26%, while the same category at CNBC saw a 14% decline to 152,000 total viewers. For the month of September, FBN averaged 195,000 total Business Day viewers, 23% higher than CNBC, which had 158,000 total viewers, which was its second lowest rated month ever.


It may come as a surprise to some, but "Lou Dobbs Tonight" continues to be the top-rated program on business television in both total viewers and in the 25–54-year-old demographic. Furthermore  Dobbs, a longtime CNN anchor before jumping to Fox Business in 2011, has led the way in total viewers on business TV for 57 straight weeks.

With markets hitting new record ignoring natural disasters like Hurricanes Harvey and Irma, and rising tensions with North Korea, FBN closed out the month of September with its 11th monthly win over CNBC. Curiously, CNBC remains the only business channel showing yearly declines, while all other networks have double-digit gains across the board for the year, notably down 14% in Business Day viewers over their performance last year, with 177,000 total viewers. 




Wednesday, September 20, 2017

It wasn’t always this way. We never used to get a giant, speculative bubble every 7–8 years. We really didn’t.


In 2000, we had the dot-com bubble.


In 2007, we had the housing bubble.


In 2017, we have the everything bubble.

I did not coin the term “the everything bubble.” I do not know who did. Apologies (and much respect) to the person I stole it from.


Why do we call it the everything bubble? Well, there is a bubble in a bunch of asset classes simultaneously.

And the infographic below that my colleagues at Mauldin Economics created paints the picture best.



I don’t usually predict downturns, but this time I bet my reputation that a downturn is coming. And soon.

When there’s nothing left but systemic risk, everyone’s portfolio is on the line.




Friday, September 15, 2017






The 'wall of worry' is gone...

A record high 65% of respondents in UMich's consumer survey believe stock prices will be higher in 12 months...


So much for the "most hated" rally narrative.

Friday, September 8, 2017

In late July, Oaktree Capital Management co-chairman Howard Marks issued several market warnings in "There They Go Again ... Again," which I extensively highlighted in my Diary.


"There is plenty more food for thought in this must-read 22 pages of observations. Howard closes his musings with this advice:


"If you refuse to fall into line in carefree markets like today's, it's likely that, for a while, you'll (a) lag in terms of return and (b) look like an old fogey. But neither of those is much of a price to pay if it means keeping your head (and capital) when others eventually lose theirs. In my experience, times of laxness have always been followed eventually by corrections in which penalties are imposed.


It may not happen this time, but I'll take that risk. In the meantime, Oaktree and its people will continue to apply the standards that have served us so well over the last [thirty] years."


From my perch, greed reigns today.


As Howard relates, investors make the most -- and safest -- money when they do things that other people don't want to do. But when most investors are unworried and taking unusually high risks, asset prices are typically elevated, risk premiums are low and markets are risky.


It's what happens when there is too much money and too little fear."


--Kass Diary, "There They Go Again ... Again," July 27, 2017

In that July memo Howard made these principal points in evaluating current conditions:


* The market uncertainties are unusual in terms of number, scale and insolubility.


* In the vast majority of asset sectors, prospective returns are about the lowest they have ever been.


* Asset prices are high and almost nothing can be purchased at a discount to intrinsic value. In general, the best we can do is find asset classes that are less overvalued than others.


* Pro-risk behavior is commonplace as most investors are embracing increased risk.


In the commentary Howard admitted he was likely issuing a premature warning because it is better to be cautious too early than to be too late in evaluating opportunities and conditions.

Howard is no stranger to cautionary memoranda. Back in 2005, in "There We Go Again," he shared some non-consensus concerns that were most prescient, as they would precede the worst economic contraction since The Great Depression. Reading that memo would have saved an investor a boatload of money.


I find most of Howard's commentaries as extraordinarily important in understanding market conditions and reward versus risk. His body of work always makes me think and it is invariably logical in argument and characterized by a heavy dose of analytical dissection.

Fast forward to yesterday's newest (and another value-added) memorandum from Howard Marks, "Yet Again?"

Howard starts his latest commentary with the following introduction:

More Entries