Business

Last week, when equities were still blissfully hitting daily record highs, we showed the one "chart that everyone is talking about", or if they weren't they soon would be: the sharp, sudden disconnect between the junk bond and stock market ...

... a disconnect which - as we showed at the time - was last observed in mid-August 2015, just days before the infamous ETFlash crash. Fast forward to day, with stocks suddenly hitting air pockets around the globe and rapidly catching down to junk yields...

US equity markets have rebounded aggressively off their opening plunge on the heels of a sudden magical bid...

Can you guess where from...

Now that Europe is closed - what happens next?

Ever since 2012 (see "How The Fed's Visible Hand Is Forcing Corporate Cash Mismanagement")  we have warned that as a result of the Fed's flawed monetary policy and record low rates, corporations have been incentivized not to invest in growth and allocate funds to capital spending (the result has been an unprecedented decline in capex), but to engage in the quickest, and most effective - if only in the short run - shareholder friendly actions possible, namely stock buybacks.

Something changed...

Futures were weaker overnight but dumped at the cash open...

As the collapse in HY credit accelerated... worst day for HYG in 3 months

HYG is now negative year-to-date...

With spreads crashing back abopve 400bps...

USDJPY was unable to save stocks and VIX is now topping 14...

VIX is starting to catch up to credit...

Authored by Charles Hugh Smith via OfTwoMinds blog,

Needless but highly profitable forced-upgrades are the bread and butter of the tech industry.