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Markets still falling like whoa


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U.S. banks have long looked with pity at overseas lenders coping with negative interest rates. Now, they’re grappling with the fear they may join the crowd.

Negative rates -- especially if they persist for many years -- reduce the spread banks make between lending and borrowing because they cannot pass the negative rate onto most depositors. Coupled with surging defaults due to an economic downturn, they can sap profits out of the banking system even if they create an initial jump in lending. That toxic combination has crippled Europe’s banks in the last six years, a dreaded position their U.S. peers would like to avoid.

“Initially, there’s a sugar rush when negative rates are introduced,” said Alberto Gallo, head of macro strategies at London-based hedge fund Algebris Investments. “But ultimately, over time, you zombify the banks by lowering the velocity of money. Negative rates are a bad idea.”

Surging provisions for bad loans have already eaten into U.S. bank profits, with the top six firms seeing their first-quarter income decline by about 60%.
...

https://www.bloomberg.com/news/articles/2020-05-21/specter-of-negative-rates-is-putting-wall-street-bankers-on-edge?srnd=premium

Bold emphasis was mine. 

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Meanwhile, the nasdaq is up close to 10% on the year. seems rational. But upon further consideration, when the top 10 stocks are worth 30% of the index performance, I guess it does make sense.

Edited by Blotto
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First rule of investing is "dont fight the Fed." 

They have been a big player in markets way before twitter. 

We can argue about whether that makes sense or not but to deny it and say its unfair is folly. 

Personally I think its gone up way too far and too fast. Thats great for me but I sure as shit wouldn't be a buyer in here. Better entry points have to be coming once all the BK start rolling through. Even the Fed cant stop that. 

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On 5/19/2020 at 10:08 AM, Aqua Buddha said:

For the life of me, I can't figure out why people go with hedge funds.  

 

On 5/19/2020 at 10:20 AM, bullzak said:

In aggregate hedge funds are just fee extraction devices. Net of fee returns as a class have been shit and probably always will be. 

Those guys can apparently sell ice to eskimos.  

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4 hours ago, Brew said:

Bank call yesterday for a large regional bank said they were expecting 31% of their mortgages to be paid late or potentially go into default. They didn’t get into the background of where they came up with the numbers, but it was interesting nonetheless. Still a lot of unknowns in front of us.

Forgive me for being optimistic (it's really not like me), but this seems to be a better situation than 2008, when people who could pay their mortgages were defaulting on them because they were so underwater.  It's much easier to salvage a problem mortgage where the borrower can't pay because of temporary unemployment than one that has a 1.3 L-V ratio.

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1 hour ago, Fudge Nuggets said:

This is exactly what happened just prior to the dotcom crash.

 

J-POW PARTY LIKE IT'S 1999... BRRRRRRRRRRRRRRRRRRRRRRRRR

                                      RIP PRINCE...

 

Edited by LTtxfan
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39 minutes ago, ChiTownDoc said:

Paypal.  Was 120 July 2019...150ish today.  Can't tell me cashless isn't going to continue to gain.  They have venmo which keeps growing too. 

Overall I feel like buying - which mean shit will crash out of left field. 

PayPal is old and busted.  Square is new hotness.

 

Actually, stripe, if they ever IPO

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10 minutes ago, 52-80 said:

PayPal is old and busted.  Square is new hotness.

 

Actually, stripe, if they ever IPO

Paypal is flush with cash.  They can keep buying shit - like stripe.  The beauty is no matter wtf you buy online they offer a paypal option to pay, it's a 100x easier than filling out your credit card info.  I'm not seeing square or stripe yet - not saying they won't get there.  I think there's room for all of them to run.  And venmo is on fire...that's paypal.  

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2 hours ago, Beau Vine said:

Forgive me for being optimistic (it's really not like me), but this seems to be a better situation than 2008, when people who could pay their mortgages were defaulting on them because they were so underwater.  It's much easier to salvage a problem mortgage where the borrower can't pay because of temporary unemployment than one that has a 1.3 L-V ratio.

Also the banks have no interest in foreclosure. They ended up eating a ton of shit in 2008 on their foreclosed inventory. That model died as a bank money maker a long time ago. 

Extend and recap. Going to be a ton of that. 

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46 minutes ago, bullzak said:

Also the banks have no interest in foreclosure. They ended up eating a ton of shit in 2008 on their foreclosed inventory. That model died as a bank money maker a long time ago. 

Extend and recap. Going to be a ton of that. 

Exactly -- foreclosure is a last resort for banks, because it guarantees that they're going to lose money.

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4 hours ago, bullzak said:

First rule of investing is "dont fight the Fed." 

They have been a big player in markets way before twitter. 

We can argue about whether that makes sense or not but to deny it and say its unfair is folly. 

Personally I think its gone up way too far and too fast. Thats great for me but I sure as shit wouldn't be a buyer in here. Better entry points have to be coming once all the BK start rolling through. Even the Fed cant stop that. 

What does Burger King have to do with this? 

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1 minute ago, Tailgate said:

I’m long NVDA....absolute fan boy of their products.

if you're working from home and have a 10XX or newer GPU, you should install RTX voice for filtering out background noise on outgoing mic and incoming audio on conference calls. It's fucking miraculous

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1 minute ago, Captainant said:

if you're working from home and have a 10XX or newer GPU, you should install RTX voice for filtering out background noise on outgoing mic and incoming audio on conference calls. It's fucking miraculous

I have a 1080 in my gaming PC. Downloaded Doom Eternal a week ago...mind blown. I’ll check out RTX...thanks.

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24 minutes ago, 52-80 said:

NVDA calls have been offsetting my other options plays souring out.  Thank you nerdy overlords

CSB: 4 or 5 years ago when NVDA was at like $38/share I got one of those typical cold calls from a fresh-out-of-school kid with a strong NY accent begging me to listen to his one tip and if it worked out promise I'd give him more to invest. His whole pitch was about NVDA and for the first time ever I thought to myself, "this pitch actually makes sense." I of course did nothing.

That's probably about the same time I bought PBT, which I'm still holding. Stonks!

Edited by Baconboy
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35 minutes ago, Baconboy said:

CSB: 4 or 5 years ago when NVDA was at like $38/share I got one of those typical cold calls from a fresh-out-of-school kid with a strong NY accent begging me to listen to his one tip and if it worked out promise I'd give him more to invest. His whole pitch was about NVDA and for the first time ever I thought to myself, "this pitch actually makes sense." I of course did nothing.

That's probably about the same time I bought PBT, which I'm still holding. Stonks!

4 or 5 years ago was right before BTC went hockeystick too, which was one of the biggest drivers in NVDA's growth. RIP RIP potato chip

Guess you should buy some AyyyyyyMD just to make sure you don't miss out on that boat too 😛

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Fed Has Purchased $1.8 Billion of Corporate-Bond ETFs So Far

May 21, 2020, 3:40 PM CDT

Federal Reserve purchases of exchanged-traded funds invested in corporate debt totaled $1.8 billion in the first six days of the program, according to data published Thursday.

The ETF purchases, which are part of an emergency lending program aimed at backstopping corporate debt markets during the coronavirus pandemic, were revealed in the U.S. central bank’s weekly balance sheet update. The data also showed total assets held by the Fed rose to a record $7.04 trillion in the week through May 20.

The Fed began buying ETFs through its so-called Secondary Market Corporate Credit Facility on May 12. Under the program, it plans to make both outright purchases of corporate bonds as well as ETFs invested in the asset class, including potentially some sub-investment grade debt.

The weekly balance sheet data don’t disclose which ETFs the Fed bought, though the central bank has said it will disclose the names of borrowers participating in the program at least once a month.

https://www.bloomberg.com/news/articles/2020-05-21/fed-has-purchased-1-8-billion-of-corporate-bond-etfs-so-far

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8 minutes ago, Rusty Shackelford said:

Fed Has Purchased $1.8 Billion of Corporate-Bond ETFs So Far

May 21, 2020, 3:40 PM CDT

Federal Reserve purchases of exchanged-traded funds invested in corporate debt totaled $1.8 billion in the first six days of the program, according to data published Thursday.

The ETF purchases, which are part of an emergency lending program aimed at backstopping corporate debt markets during the coronavirus pandemic, were revealed in the U.S. central bank’s weekly balance sheet update. The data also showed total assets held by the Fed rose to a record $7.04 trillion in the week through May 20.

The Fed began buying ETFs through its so-called Secondary Market Corporate Credit Facility on May 12. Under the program, it plans to make both outright purchases of corporate bonds as well as ETFs invested in the asset class, including potentially some sub-investment grade debt.

The weekly balance sheet data don’t disclose which ETFs the Fed bought, though the central bank has said it will disclose the names of borrowers participating in the program at least once a month.

https://www.bloomberg.com/news/articles/2020-05-21/fed-has-purchased-1-8-billion-of-corporate-bond-etfs-so-far

How does buying ETFs turn into emergency loans?

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6 minutes ago, Fudge Nuggets said:

How does buying ETFs turn into emergency loans?

The ETFs they are buying are focused on buying corporate debt.  They don't want to buy the corporate debt directly because "picking winners and losers", so it's a compromise.  Many pundits have already covered the issue raising the point that buying the ETFs doesn't really solve the issue that the program was intended to solve.

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Yeah, your last sentence is what I'm thinking.  These ETFs hold corporate debt, but that debt has already been issued and the companies received the money from those bonds already.

Someone buys units of an ETF it's not like the companies are getting any more capital.  I guess it props up the overall corporate debt market to keep interest rates in check and provides a synthetic demand for more corporate debt until things get back to normal.  Is that the reasoning behind it?

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I guess it props up the overall corporate debt market to keep interest rates in check and provides a synthetic demand for more corporate debt until things get back to normal.  Is that the reasoning behind it?


What would you have them do with all the money they're printing? Buy baseball cards?

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5 hours ago, Fudge Nuggets said:

Yeah, your last sentence is what I'm thinking.  These ETFs hold corporate debt, but that debt has already been issued and the companies received the money from those bonds already.

Someone buys units of an ETF it's not like the companies are getting any more capital.  I guess it props up the overall corporate debt market to keep interest rates in check and provides a synthetic demand for more corporate debt until things get back to normal.  Is that the reasoning behind it?

Yes, it’s to support companies future bond issuance. They’re gonna need to borrow a lot more. 

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How long will equity markets keep shooting the moon when this starts picking up steam?

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The monthly tally of defaults in the U.S. leveraged loan market has hit a six-year high, data from Fitch Ratings showed, as companies are either missing payments or filing for bankruptcy because of the fallout from the coronavirus pandemic.
...

https://www.reuters.com/article/us-usa-debt-leveraged-idUSKBN22X1BD

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