I said a long time ago that what's going to take down this market is a string of defaults in the energy sector sparked by plummeting oil prices. This wave of defaults negatively affects the high-yield junk bond market.
At the time I recieved a lot of opposition. People bashed my character, my integrity, people mocked me for not being in this business as long as them. To the masses it was a sure thing that oil was going to head right back up to $100/barrel.
Well let's take a look at what has happened since...
At the time I recieved a lot of opposition. People bashed my character, my integrity, people mocked me for not being in this business as long as them. To the masses it was a sure thing that oil was going to head right back up to $100/barrel.
Well let's take a look at what has happened since...
After recieving the proverbial 'dead cat bounce' oil prices have once again resumed their down-trending Bear Market.
Junk Bonds held up much longer than I originally anticipated. However, finally now that oil has resumed it's downtrend we are already beginning to see the early stages of defaults in the oil patch.
According to Fitch, the U.S HY Default rate is anticipated to be 3% for August. At end-July 2015, Fitch's overall TTM default rate stood at 2.5%, up from 2.3% at end-June. The TTM default rates for energy, exploration/production, and metals/mining stood at 2.5%, 5% and 7.1%, respectively, at end-July. Hmmm, I think I see a trend here..
According to Fitch, the U.S HY Default rate is anticipated to be 3% for August. At end-July 2015, Fitch's overall TTM default rate stood at 2.5%, up from 2.3% at end-June. The TTM default rates for energy, exploration/production, and metals/mining stood at 2.5%, 5% and 7.1%, respectively, at end-July. Hmmm, I think I see a trend here..
The Weekly Chart of the Barclays Junk-Bond ETF appears to be putting in a double top.
China has gotten involved in the global race-to-the-bottom currency war and made moves in their currency 4 times in 4 days last week. The stock market took it with unbelievable complacency. However, in the junk-credit sector it was pure fear as investors ran to the exits to dump their useless paper/ spiking yields of CCC & below rated bonds...
The BDI is back on the decline...
The Breadth/Momentum of the Stock Market continues to weaken...
It is truly unbelievable the complacency that investors lay about with in this market environment. We have the credit market and a $1Trillion Fracking Industry blowing up before our eyes. There are still plenty of Bulls out there, eyes blinded with greed, more than willing to buy any and every dip. The only explanation I can think of is a function of where we are in the market cycle....
Investors are in Denial.
RSS Feed