The Federal Reserve disclosed Sunday afternoon the amounts and the company names of the corporate bonds that it started buying for the first time ever in the week ended Friday, June 19. They’re not even rounding errors on the Fed’s balance sheet. The purchases of individual corporate bonds amounted to $428 million (with an M). By comparison, in the week ended April 1, when the Fed was doing a lot of heavy breathing, it bought $362 billion (with a B) of Treasury securities.
In addition, the Fed said in the disclosure that it held a total of $6.8 billion in bond ETFs as of June 19, up from $1.5 billion a month ago.
These bond ETFs and individual corporate bonds combined account for 1/10th of 1% of the Fed’s $7.1 trillion in total assets.
The Fed buys these corporate bonds and bond ETFs in its Special Purpose Vehicle that it calls Secondary Market Corporate Credit Facility (SMCCF). Like the Fed’s other alphabet-soup bailout SPVs, the SMCCF is an LLC entity…CLICK for complete article
Heads up, investors: Wednesday’s selloff in the stock market may be the start of something bigger, for the five key reasons I cite below.
The good news is we’re not going to see a full retest of the March lows or anywhere near that kind of decline, thanks to several positive factors in the mix (also below).
The upshot: It’ll make sense to buy stocks after potential 5%-10% declines in the S&P 500 US:SPX, Dow Jones Industrial Average US:DJIA and Nasdaq US:COMP.
Here are some tactical suggestions. Read More
US index futures swung in an illiquid overnight session in which Bloomberg’s Richard Breslow said “volumes have been utterly abysmal”, concluding a volatile week for stocks, this time ignoring the resurgence in new virus infections across the country that sent them lower earlier in the week. European shares gained on low volumes, 10Y yields dropped by 1.5bps, while the dollar was unchanged.
And speaking of Breslow, he summarizes the overnight moves perfectly:
You know it’s going to be a tough day when the answer to the question of “why thus-and-so has done what it has, such as it has,” is simply, “because.” Ask for more color than that and you get a blank stare. Or, that the S&P 500 was up yesterday, so it’s sagging this morning.
Is it 1999 or 2007? Retail investors flood the market as speculation grows rampant with a palpable exuberance and belief of no downside risk. What could go wrong?
As Barron’s recently noted:
“Free trading app Robinhood has added more than three million retail accounts in 2020, and now has over 13 million. The median age of its retail customer is 31. The Covid-19 lockdowns and the plunge in markets in March persuaded millions of new investors to open accounts. Some of the action appears to be from people who would otherwise be gambling or betting on sports—both of which were shut down.”
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Those betting against this “absurdly overvalued” stock market are about to get paid, if Kevin Smith, Crescat Capital’s chief investment officer, has it right in his gloomy assessment.
“Markets driven by euphoria never end well,” he explained in a note to clients this week. “The U.S. stock market today is in la-la land. It is discounting a new expansion phase of the economy at the same time as a major recession has only just begun.”
Despite the skeptics, Tesla Inc broke above the significant $1,000 price level for the first time in its history this month. The new high further accelerated the bullish optimism surrounding the company.
Can Tesla stick the landing?
“There continues to be a lot of enthusiasm and upward momentum for the stock that is driven by expectations for increasing EV demand,” Ivan Feinseth of Tigress Financial said when asked about Tesla’s recent price action.
Increasing electric vehicle demand is a global trend, and not just in the U.S. Many countries are committing to cut out fossil fuels.
“There is going to be significant expansion into China. China has mandated 100% EV vehicle sales by 2030,” Feinseth said. “France also has a 100% EV mandate by 2030 as well.”
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