Nobody beats the fizz? From The Wall Street Journal:

Robert F. Kennedy Jr. wants to take sugary drinks out of the shopping carts of food-stamp recipients. Coca-Cola, PepsiCo and Keurig Dr Pepper are mobilizing to stop him. 

Kennedy, the president-elect’s nominee to run the Health and Human Services Department, aims to remove soda and processed foods from federal programs such as the Supplemental Nutrition Assistance Program, also known as food stamps. The move could have big repercussions for the beverage industry.

Lobbyists for Coke and its biggest rivals are pressing their case on Capitol Hill, highlighting the fact that the soda companies are selling more zero-sugar drinks. These, combined with clear calorie labels on beverages, allow consumers to make healthier choices, they say. 

Gentlemen, start your engines. Continued economic growth is a cinch in 2025, Torsten Slok predicts, per the Apollo chief economist’s newly minted list of risks to global markets for next year. 

Tariffs, an earnings-related disappointment from Nvidia and a consensus-defying rate hike for the Federal Reserve each feature in that collection of so-called gray swans, though Slok assigns precisely a zero percent probability of a recession.

That eye-catching call evokes a recent exercise in misplaced certainty. Utilizing a model composed of 13 macroeconomic and financial indicators, a pair of Bloomberg economists concluded in October 2022 that the odds of a downturn over the following 12 months had reached 100%. Instead, quarterly GDP growth registered at a 3.2% annualized rate over the four quarters through Sept. 2023.

It’s a probabilistic world, though Tuesday does follow Monday – for certain.  

The fixed is in:  Global bond funds attracted a net $617 billion in the year-to-date through mid-December, EPFR-compiled data show, blowing past 2021’s near $500 billion haul to mark the largest full-year influx on record dating to 2007.  Investors’ shine towards the asset class is no fair-weather friendship, as the Bloomberg U.S. Aggregate Bond Index has eked out a 1.3% total return in the year-to-date, leaving its five-year performance at minus 1.4%.  Over those periods, the S&P 500 has returned 27% and 100%, respectively. 

 “U.S. equities have been sucking up flows like there’s no tomorrow, but as interest rates have normalized investors have started to move back into traditionally safer bets,” James Athey, a bond portfolio manager at Marlborough, told the Financial Times. “Inflation has come down pretty much everywhere, growth has softened pretty much everywhere. . . and that’s a much more friendly environment to be a bond investor.”

Fattening coupon income likewise brightens the backdrop, after 10-year Treasury yields climbed to 4.59%, their highest in more than six months and nearly double the 2.5% average level seen over the past decade. “The market views bonds as cheap, certainly relative to stocks, and sees them as representing insurance against an economic slowdown,’ Citadel Securities global head of rates trading Michael de Pass mused to Bloomberg. “The question is, how much to you have to pay for that insurance?” 

Memo to those of a bullish bent: See “the other side of the boat” in current edition of Grant’s Interest Rate Observer dated Dec. 20 for a look at one capital efficient way to position for lower rates ahead.

Meanwhile, the sharp post-Covid updraft in borrowing costs makes for an uneasy companion with today’s booming equity market backdrop, some observers believe. “The last time U.S. [valuations] were this high was in 2021 when the 10-year yield was a supportive 1%,” writes Société Générale global strategist Albert Edwards. “Any further rise in yields would be problematic for stocks."

Santa Claus is back in town, as stocks forged higher by a further 0.6% following Friday’s 1% bounce to recoup roughly half of steep selloff seen in the middle of last week. Treasurys remained under pressure with 2- and 30-year yields rising three and six basis points, respectively, to 4.34% and 4.78%, while WTI crude remained stuck just below $70 a barrel and gold edged lower at $2,613 per ounce. Bitcoin retreated below $94,000 and the VIX settled south of 17, continuing to rapidly retrace Wednesday’s spike higher.

- Philip Grant

Santa Claus rally interrupted: Wednesday’s stock market rout reverberated to the North Pole and beyond, as the broad averages turned in their worst one-day showing since the mini market meltdown on Aug. 5.

When looking beyond the dominant mega-cap complex, the reversal stands as the most substantive of this bulled-up 2024. Thus, the S&P 500 Equal Weighted Index remains some 7% below its all-time high, topping its 5% drawdown logged during that summer event (hat tip to Charles Schwab senior investment strategist Kevin Gordon). The CBOE Volatility Index, meanwhile, vaulted nearly 13 points to 28 and change, its second-largest one day move on a relative basis since at least 1990. 

Yet the ferocious rebound in asset prices from that mid-summer swoon plainly remains front of mind for Mr. Market. Bloomberg’s Jan-Patrick Barnert points out that January VIX futures settled south of 20 Wednesday, indicating that “the move looks to be far more about immediate concerns than anything longer term.”  

Concerns of a different sort – the fear of missing out, that is – pervade in the crypto realm. Fartcoin (unofficial tag line: hot air rises) sported a $1.25 billion valuation as of noon EST per Coinmarketcap.com, up 39% over the past two days. Trailing 24-hour trading volumes registered at $246 million, compared to $88 million at lunchtime Tuesday.

No celebration at this centennial. The Federal Reserve’s latest 25 basis point rate cut, which brings the post-August downshift in the funds rate to an even percentage point, elicited the following caveat from chair Jerome Powell: “from here, it’s a new phase, and we’re going to be cautious about further cuts.”  

Such regime change is on display in the Fed’s freshly updated Summary of Economic Projections, which points to a 3.875% funds rate and 2.5% growth in the inflation-measuring Personal Consumption Expenditures Price Index by the end of next year. That compares to prior guesstimates of 3.375% and 2.2%, respectively, issued three months ago.  

Alongside the monetary mandarins, America’s creditors reconsider their options. Ten-year Treasury yields reached as high as 4.58% Thursday, up 93 basis points from the day before the Fed opted to lop one-half point from the funds rate on Sept. 18. As Bianco Research eponym Jim Bianco relays, that’s by far the largest upside lurch to begin the eight easing cycles seen over the past four decades, with 10-year yields remaining flat or lower after three months on all but one of those prior occasions.

“We believe the market is rejecting the rate cutting and sees it as unnecessary,” writes Bianco, citing the brisk 3.2% rise in fourth quarter output as measured by the Atlanta Fed’s GDPNow output tracker, along with stimulus-minded Donald Trump’s imminent return to the Oval Office.

Apollo chief economist Torsten Slok took that argument a step further Thursday, floating 40% odds that the Fed will be obliged to pivot to rate hikes next year owing to “the strong economy. . . potential for lower taxes, higher tariffs and restrictions on immigration.” Such an outcome could spell trouble for a standard asset allocation formula, Slok believes: “the bottom line is that there are significant downside risks to the 60% stocks and 40% bonds portfolio as we enter 2025.”

Might more idiosyncratic positions prove a remedy for today’s suddenly fraught backdrop?  See the current edition of Grant’s Interest Rate Observer dated Dec. 20 for a bullish analysis of one “cheap, profitable and obscure” niche industry mainstay enjoying a commanding competitive position and potential bullish catalysts ahead.

Reserve Bank credit ticked lower by a modest $2.8 billion from a week ago, leaving the Fed’s portfolio of interest-bearing assets at $6.853 trillion. That’s down $40 billion from this time last month, and 23.2% below the high-water mark logged in early 2022.

Pronounced steepening in the Treasury curve headlined Thursday’s action, with the long bond ratcheting to 4.74%, up a further nine basis points after yesterday’s seven basis point increase, while the two-year note ebbed to 4.33% from 4.35% Wednesday. Stocks were unable to hold an early bounce as the S&P 500 finished flat after jumping near 1% at the cash open, while WTI crude and gold each remained under pressure, settling at $69 a barrel and $2,594 per ounce, respectively.

- Philip Grant

Here’s President-elect Donald Trump channeling former Federal Reserve chair William McChesney Martin (“we can never recapture the purchasing power of the dollar that has been lost”) in an interview with TIME Magazine:

(Q) If the prices of groceries don’t come down, will your presidency be a failure?

(A) I don't think so. Look, they got them up. I'd like to bring them down. It's hard to bring things down once they're up. You know, it's very hard. 

Now is the winter of our discontent. As calendar 2024 winds towards the finish line, asset prices have exceeded the wildest dreams of all but the most bulled-up observers.  Then again, there’s always something to complain about.    

The initial public offerings market stirred on Thursday, with business-manager software firm ServiceTitan pricing 8.8 million shares at $71 for its Nasdaq debut, topping the initial price range of $65 to $67.  The newsworthiness of such an outcome is telling. Year-to-date IPO fundraising stands at a feeble $28.8 billion per Renaissance Capital, well below the $43 billion average seen over the three years through 2019, let alone 2021’s $142 billion haul.

Then, too, ServiceTitan’s improved pricing picture comes with caveats: as CNBC’s Bob Pisani points out, today’s deal represents a roughly 15% discount to a private funding round undertaken in 2022.  For now, at least, that second-derivative improvement marks sufficient progress in the eyes of some practitioners. “A year ago, ServiceTitan might not have gone public . . . [or] they may have had to take a 40% haircut,” Renaissance Capital senior strategist Matt Kennedy told the news channel. This time, “it is still a down round, [but] the price is more palatable.”

As rampaging stocks have done little to rouse animal spirits within equity capital markets, so the narrowest junk bond spreads of the post-Lehman Brothers era have failed to coax much activity to the fore.  Refinancings have represented nearly 80% of domestic transactions this year, analysts at Barclays found last week, leaving the sum of new high yield note sales at $59 billion through Dec. 4, undercut only by 2022’s $54 billion for the weakest such figure since at least 2010. Total domestic junk bonds outstanding stand at $1.39 trillion per data from Bloomberg, down from $1.59 trillion in fall 2021.

“High-yield bonds will keep losing market share until investors grow concerned about illiquidity, transparency and credit quality,” Scott Kimball, chief investment officer at Loop Capital Asset Management, predicts to Bloomberg. To what or whom have junk bonds given way? Private credit is that interloper, more than doubling over the past five years to a $1.7 trillion market.  

Yet even the flavor of the cycle in speculative-grade credit is suffering a hint of adversity. Fundraising within private credit totaled only $118 billion over the first nine months of 2024 according Preqin, tracking far below the roughly $217 billion logged during each of the prior two full years. Average management fees for direct lenders likewise receded to 1.42% over the three months through September, down from 1.7% in the same period in 2023.

Meanwhile, Franklin Templeton Investments CEO Jenny Johnson lamented the state of private valuations at a Bloomberg-hosted conference earlier this week, noting that some investment- and junk-rated direct loans are priced at similar spreads to conventional high- and speculative-grade corporate bonds. “You get no premium for illiquidity,” she said. “That worries me,”.

There’s always 2025.

Stocks had cooled down from yesterday’s torrid rally as of mid-afternoon, with the S&P 500 nursing a 0.4% loss with one hour left in the session, while a soft long bond auction headlined another selloff in Treasurys, with yields ranging higher by about three to seven basis points across the curve.  WTI crude held steady at just above $70 a barrel, gold took a breather from its recent runup at $2,683 per ounce, bitcoin toggled back below $100,000 and the VIX rebounded towards 14.

- Philip Grant

Almost Daily Grant's will resume on Tuesday, Dec. 17

Even if we miss, we can’t miss. A striking bulletin from Bloomberg:

The Bank of England will hide the identities of any pension funds, insurers or hedge funds bailed out under a new financial stability tool to prevent a wider crisis [from] engulfing the economy, deputy governor Dave Ramsden said.

The BoE has accepted submissions by so-called shadow banks that “revealing too much information could create stigma” about using the bail-out tool, which would undermine any rescue effort and risk creating more financial stability, he said in a speech on Monday. . .

“We are looking at the insurance companies, the life assurers, the liability-driven investment funds. That’s where we started. But it’s certainly not where we can stop,” be said in a question-and-answer session following the speech.

A light governance touch may be back on the menu in Washington, as Donald Trump’s pick to head the Securities and Exchange Commission is known for more than his affinity for cryptocurrency.

The Wall Street Journal points out today that Paul Atkins, who served as an SEC commissioner under George W.  Bush, has long staked out an antagonistic stance towards the Public Company Accounting Oversight Board, arguing that the entity sports a bloated budget – including unwarrantedly generous salaries for its senior leadership – and operates within an excessively broad remit. “Overly prescriptive standards can rob [audit firms] of the ability to apply [their] professional judgement,” Atkins said in a 2005 speech.

Next month’s inauguration will indeed mark a new day for the audit board, which has stepped up its activities under the Biden administration, increasing fines and expanding its remit to inspect registered accounting firms in mainland China and Hong Kong.  That activist era may now be by the wayside: “I don’t expect this to be good for the PCAOB,” former PCAOB chief auditor turned Southern New Hampshire University adjunct accounting professor Martin Baumann told the WSJ, adding that Atkins had previously shown disdain towards the regulator in past meetings.

Momentum for such a downshift may already be building, as current SEC commissioner Mark Uyeda told attendees at a D.C. accounting industry conference Monday that “all options ought to be on the table” for PCAOB reform. “We need to do a deep dive into what’s working what’s not.”

Though the merits of such a regulatory rollback are up for debate, the accounting industry at large hasn’t been covering itself in glory in 2024. Citing data from Ideagen Audit Analytics, the Financial Times reports that 140 U.S. public companies were obliged to restate results between January and October, up from 122 such do-overs in the first ten months of last year to mark the highest comparable figure since 2015 (this tally excludes special purpose acquisition companies).

New accounting standards covering relatively murky topics such as expected credit losses factor in that uptick, relays former PwC partner and University of Texas associate professor Jeffrey Johanns, as does growing corporate complexity, as evidenced by the increased use of financial instruments classified as neither debt nor equity.  

Then, too, Covid-19 and associated associated lockdowns, with the subsequent rise in work-from-home, likewise continue to reverberate for corporate America. “Auditors need to sit across the table from the client, walk around the warehouse,” Johanns told the pink paper. “So much work being done remotely could lead to poorer audit quality.”

Stocks remained under modest pressure with the S&P 500 retreating another quarter of a percent, while Treasury yields ticked mostly higher across the curve ahead of tomorrow’s November CPI print. WTI crude remained above $68 a barrel, gold powered higher towards $2,700, bitcoin slipped below $97,000 and the VIX held steady near 14.

- Philip Grant

Beginning tomorrow, the Federal Reserve will commence its so-called quiet period ahead of the December 18 rate decision.  Prior to that fleeting pause in so-called forward guidance, the monetary mandarins held forth Friday in prolific fashion. A sampling of Bloomberg headlines:

*BOWMAN: INFLATION REMAINS UNCOMFORTABLY ABOVE FED'S 2% GOAL

*GOOLSBEE: INFLATION IS DECLINING OVER THE 'LONG ARC'

*HAMMACK: `AT OR NEAR' THE POINT WHERE FED SHOULD SLOW RATE CUTS

*DALY: UNCERTAINTY CALLS FOR MORE THOUGHTFUL, CAUTIOUS APPROACH

Interest rate futures now price near 90% odds of another 25-basis point downshift to the funds rate, compared to 66% a week ago.

Escape velocity achieved! A brave new world is at hand, BlackRock contends in its newly released 2025 Global Economic Outlook: “we are not in a business cycle. Historical trends are being permanently broken in real time as mega forces, like the rise of artificial intelligence, transform economies.”  Accordingly, the asset management behemoth concludes thus: “we stay pro-risk, starting with our confidence in U.S. corporate strength and outperformance.”

You don’t have to tell Mr. Market twice, as evidenced by recent developments in speculative-grade credit. Sixty-two leveraged loan deals totaling $74.3 billion launched over the three days through Wednesday by LCD’s count, easily eclipsing the prior full-week record of $57.8 billion established in January 2020.  Repricing deals accounted for $55.3 billion of this week’s tally, as issuers continue to capitalize on fair-weather conditions to trim their interest expense.

LCD’s Marina Lukatsky notes that, of the 39 firms that launched a repricing, nearly half had already undertaken such a move in 2024, lowering their borrowing costs by nearly one percentage point, on average.  Instructively, that cadre includes “plenty” of borrowers rated single-B-minus, a half-dozen notches below investment grade.

Issuers are likewise finding fair weather conditions in the fixed-rate realm, as Bloomberg reports that Hertz Global Holdings sold $500 million in first-lien, senior secured notes Thursday at a 10% all-in yield, supplementing its June offering at a 12.625% coupon after the bonds have since rallied to just under 109 cents on the dollar. The rental car mainstay, which filed for bankruptcy in 2021, will pay down a revolving credit facility with proceeds from that deal.

With option-adjusted spreads on the ICE BofA U.S. High Yield Index remaining south of 270 basis points, levels unseen in the post Lehman Brothers era, pickings are slim for price-conscious creditors.  Marty Fridson, chief investment officer at Lehmann Livian Fridson Advisors LLC, relays today that the tally of bonds identified by his model as undervalued contracted to 47 from 116 over the past month.

Indeed, the performance tilt towards marginal credits makes for a fitting bookend with BlackRock’s post-business cycle hypothesis. Thus, the triple-C rated portion of the Bloomberg high-yield gauge has returned 15% in the year-to-date, roughly double that seen in the single- and double-B-rated components. On a similar note, Bank of America credit strategist Oleg Melentyev delivered a striking finding Friday:

Imagine a portfolio where the management team has nailed every future upgrade: on Jan 1, 2024, their holdings included only the names that were about to get upgraded or [ascend to] investment-grade over the course of 2024, and not a single defaulter. Such a portfolio would have returned 9.0% so far this year, beating the index by 30 basis points.

Now imagine the exact opposite portfolio, where no credit decisions were made. It consisted only of [the bottom decile of quality] names and was responsible for 95% of all year-to-date defaults. This basket would have returned 13.4% year-to-date, leaving the index in the dust.

A five-basis point drop in two-year yields to 4.1% headlined a low-wattage session, while stocks caught a modest bid to leave the S&P 500 green by just under 1% on the week. WTI crude slipped to $67 a barrel, gold traded flat at $2,631 per ounce, bitcoin flipped back above $101,000 and the VIX retreated below 13.

- Philip Grant

Your latest reminder that value is a relative term, via the New York Post:

This is a whole new meaning to “drawing a blank.” A barren white canvas, valued at more than $1.5 million, is up for auction in Germany this week.

The 1970 piece by minimalist American painter Robert Ryman — titled “General 52″ x 52″,” a nod to its dimensions — will be up for grabs by art enthusiasts at the Ketterer auction house in Berlin on Dec. 6 and 7. . .

Just last month, Maurizio Cattelan’s art piece of a banana duct taped to a wall, titled “Comedian,” sold for $6.2 million at auction — and was promptly eaten by the crypto entrepreneur that purchased it — inciting debate, especially because the fruit stand vendor only earned pennies for his contribution.

Santa’s got a brand-new bag, or two. U.S. consumers did what they do best over the long weekend, shelling out a record $10.8 billion on Black Friday according to Adobe Analytics, up a brisk 8.2% year-over-year.  Spending on so-called Cyber Monday rose more than 13% to $13.3 billion, while total holiday season expenditures will reach $240.8 billion if Adobe’s forecasts are on point, representing an 8.4% uptick from 2023. 

Largely stable household debt levels further color those impressive growth rates, with the total tab rising a modest 3.8% year-over-year in the third quarter per Moody’s, trailing the 4.9% and 4% expansions in nominal GDP and nonfarm wages, respectively, over the same period.  Credit card balances rose at an 8.1% annual clip to a record $1.17 trillion, though Bloomberg notes that such borrowings as a share of income stand at 8%, in line with the pre-pandemic ratio. 

Yet while rollicking asset prices and low unemployment have served to underpin today’s sanguine spending backdrop, the cumulative impacts of the pronounced post-Covid price pressures take their toll among the less well-off.  Thus, an October study from the Federal Reserve found that, since the middle of 2021, households earning $100,000 and above have increased their real spending levels by nearly 7%, while those taking home $60,000 and below have pulled back their outlays by about 2% on an inflation-adjusted basis.  Prior to the pandemic, those spending patterns moved in relative lockstep. 

Evidence of such a squeeze is on further display in the New York Fed’s latest Quarterly Report on Household Debt and Credit. The share of credit card balances which are at least 30 days delinquent stood at 8.79% as of Sept. 30, well above the 5% to 7% range seen between 2013 and 2019, let alone the 4.1% nadir logged in the stimulus-drenched last three months of 2021. 

Political and regulatory shifts likewise serve to pile the pressure on the cash-strapped lower income cohort: A Tuesday bulletin from CNBC shines a light on the credit card industry’s response to Consumer Financial Protection Bureau rules rolled out in March, which capped late fees at $8 per incident rather than the industry average of near $32. 

Issuers such as Barclays, Citigroup, Synchrony and Bread Financial, which cater to customers with weaker credit scores via co-branded cards with the likes of Banana Republic, Home Depot, Verizon and JCPenney, have since bumped their annual percentage rates by three to five points on average, leaving some APRs as high as 35.99%. Synchrony and Bread have also subsequently introduced monthly fees of up to $2.99 for paper statements. 

Yet with Donald Trump and Republican congressional majorities set to take office next month, “the consensus, now, however, is that the rule isn’t going to happen,” KBW analyst Sanjay Sakhrani told the network. More broadly, Adam Rust, the director of financial services for the Consumer Federation of America, anticipates “a deregulatory approach on rules and also efforts to dismantle the [CFPB] itself.”

Might such red-tape rollbacks translate into reciprocal relief for those encumbered shoppers? Don’t hold your breath. Synchrony CFO Brian Wenzel put it this way on his firm’s Oct. 16 earning call: “People use the term ‘rollback.’ As a company, we haven’t spent any real time thinking about that.”

No backsies. 

Long-dated Treasurys came under some pressure with 30-year yields rising four basis points to 4.3%, while the two-year note finished unchanged at 4.17% following dovish commentary from the Fed’s Waller late Monday. Stocks fluttered through a flat showing on the S&P 500 with the Nasdaq 100 managing a 0.3% gain, with WTI crude jumping to near $70 a barrel and gold edging higher at $2,643 per ounce. Bitcoin stood little changed at $96,000 and the VIX remained at 13 and change.

- Philip Grant

Western commerce runs headlong into the Great Wall, via the Financial Times:

Apple is facing an uphill battle to release its own artificial intelligence models for iPhones and other products in China, with a top Beijing official warning that foreign companies will confront a “difficult and long process” to win approval unless they partner with local groups. 

Apple chief Tim Cook arrived in China on Monday for his third visit of the year as the company tries to navigate the country’s complex regulatory regime and bring its Apple Intelligence to devices sold in the country. . . 

The U.S. tech group has been working to reinvent itself around AI this year, betting that consumers will upgrade their devices to access new features that will not work on older models of the iPhone. 

Apple’s sales in China have faltered amid a top-down campaign to cut iPhone usage among Chinese state employees and a nationalist backlash over thorny U.S.-China relations.

Behold the latest display of percolating animal spirits, this time among leveraged exchange traded products. Total trading volume among such single-stock ETFs reached $86 billion last week according to Bloomberg, topping the prior $80 billion bogey to mark the largest such figure on record. Those contraptions purchased a net $2.1 billion of U.S. stocks at Thursday’s close according to Nomura, likewise marking a daily peak. More fuel for a bull market fire that didn’t need it. 

“Rampant speculation on par with the 2000 peak” is at hand, JonesTrading chief market strategist Michael O’Rourke opined to Bloomberg. “These levels of momentum and turnover are hard to maintain for an extended period of time.” 

In the meantime, stock market punters enjoy a Saylor’s delight on the back of bitcoin’s near 40%, one-month surge to the doorstep of $100,000. Thus, a pair of leveraged vehicles tracking MicroStrategy gathered a net $420 million last week, as shares in the bitcoin speculation vehicle powered higher by 24% over the five days through Friday. The bull-minded T-Rex 2X Long MSTR Daily Target ETF (ticker: MSTU), which debuted on Sept. 18, now manages $2.6 billion in assets, up nearly fourfold since election day. 

Instructively, that hair-raising ascent is clogging pipes on Wall Street. Bloomberg relayed Friday that several of the fund’s prime brokers have curtailed access to swap lines, spurring Rex Shares custodian Matthew Tuttle to the options market to help fulfill his fund’s mandate. “If [the ETF] was based on Procter & Gamble, I could get as much swap exposure as I wanted,” Tuttle lamented. “But MicroStrategy is a different beast.” 

Indeed, intrepid industry players look to bring the leveraged ETF movement beyond hot money trades to the platonic ideal of long-term, buy-and-hold investing. Thus, South Korea-based Kiwoom Securities is partnering with U.S. firm Tidal Investment to launch an ETF providing 200% of the daily performance of Berkshire Hathaway Class B shares according to an Oct. 24 filing with the Securities and Exchange Commission. 

While Berkshire declined to comment on that development, Warren Buffett laid down some potentially relevant thoughts in the firm’s 2002 annual report, terming derivatives "financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."  The Oracle of Omaha, who began selling equity index put options and credit default swaps in 2004, expanded on those remarks a few years later: “I don’t think they’re evil per se. . . but they do let people engage in massive mischief.”

The monkey shines continue. 

New highs are at hand for the S&P 500 following a near 0.6% rise for the broad average, which now sits higher by 27% in the year-to-date. Treasurys gave back a piece of yesterday’s gains on the long end as 10- and 30-year yields each rose three basis points to 4.3% and 4.48%, respectively, while the two-year remained at 4.21%. WTI crude slipped below $69 a barrel, gold bounced to $2,633 an ounce, bitcoin remained under pressure at $91,600 and the VIX settled just above 14. 

- Philip Grant