Business

Height Securities’ Daniel Hanson is “deeply skeptical” about the viability of Puerto Rico’s proposal for restructuring the island’s $70 billion in debt.

Hanson, in a note out late last week, said Governor Alejandro Padilla was “significantly unlikely” to present a “credible” plan and that the commonwealth’s offer to creditors may be “laughably low.”

As a reminder, Puerto Rico defaulted on some of its non-GO debt last month, presaging more missed payments this year as creditors come calling in May and July.

Back before everyone became a junk bond expert, we repeatedly showed what in our opinion was the scariest chart for not only the US, but global stock markets: the unprecedented divergence between the stocks and junk bonds, suggesting that if the recent past is prologue, then the S&P 500 is in for a world of pain as it tracks HY credit far lower.

Since then, these fears have been realized and the market tumbled, unleashing even more central bank jawboning and intervention.

Last summer we outlined how Chinese banks obscure trillions in credit risk.

The powers that be in Beijing aren’t particularly keen on allowing the banking sector to report “real” data on souring loans - especially given the fragile state of the country’s economy. In some cases, the Politburo will pressure banks to simply roll over bad debt, effectively kicking the can.

In addition, banks carry around 40% of their credit risk outside of “official loans.” Here’s what Fitch had to say last year:

There will be two key themes for investors seeking to shake off the abysmal "as goes January" blues:

Amid denied rumors of production cuts (and Goldman's dismissal), crude oil prices have jumped "August 2015 Andy Hall squeeze style" to 3-week highs. This 'change' in trend has hedge funds calling the bottom once again adding to bullish oil bets at the fastest pace since 2010 in the last week. However, most ironically, it appears the weak longs are being squeezed today as WTI crashes 6%.

Still, it seems many are looking for a short-squeeze initiated bottom here... (as Bloomberg reports)