"I’m speechless,” Brkan adds."
August 10, 2017
This could be ‘the scariest chart in the financial markets right now’
By VICTOR REKLAITIS
Marketwatch.com
The Korean missile crisis is sharing the spotlight today with retailers and darlings-turned-duds Snap and Blue Apron, as those companies reveal their earnings.
That’s after Disney’s latest update ended up doing more damage to the Dow yesterday than any North Korean angst.
Investors could be taking comfort in the muted reaction so far to the U.S.-N.K. tensions, seeing the market’s shrug of its shoulders as a sign that a “Cuban Missile Crisis-type showdown might not be the most likely outcome,” says CFRA’s Sam Stovall.
Others are grouchier about how traders have responded. The “reaction to the first meaningful nuclear threat in nearly three decades is simply another sign of the complacency in the market,” argues JonesTrading’s Michael O’Rourke.
In a similar vein, trader Tiho Brkan warns that complacency among investors is continuing as warnings mount. He frets about small caps underperforming, chip stocks stalling, bad breadth and more.
“The majority of risky assets look as if they are priced for perfection in the short to medium term,” and “possibly even for the longer term,” Brkan says in a post at his Atlas Investor blog, for our call of the day. He says he is anticipating a correction, though he concedes the market has in the past ignored red flags and kept marching higher.
Brkan is particularly keyed up about what he sees as warnings signals from the bond market.
“The scariest chart in the financial markets right now is European high yield (junk bonds) relative to the yield of U.S. Treasuries,” he writes, offering the chart below.
“As investors go ‘kookoo’ for risk assets, they have pushed (with the help of ECB) the yield of European junk bonds towards that of the U.S. Treasury yield. Honestly… I’m speechless,” Brkan adds.
Another one worried about low yields for European junk bonds is Wolf Street blogger Wolf Richter, who notes they offer around 2.42%, while the U.S. 10-year pays out about 2.24%. And Bank of America Merrill Lynch’s credit strategists are concerned, highlighting the “eye-watering levels that European high-yield has now reached.”
On the flip side, Calafia Beach Pundit’s Scott Grannis argues “credit spreads tell a bullish story.”
Key market gauges
Futures for the Dow, S&P 500 and Nasdaq-100 are moderately lower, after the Dow, S&P and Nasdaq Composite all edged down yesterday.
Europe and Asia have largely seen selling, as caution over the geopolitical tensions lingers. Gold is gaining again.
http://www.marketwatch.com/story/this-could-be-the-scariest-chart-in-the-financial-markets-right-now-2017-08-10
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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