THE CANARY IN THE COAL MINE IS DEAD

To One Bank, This Is The Flashing Red Warning That A Crash Is Dead Ahead | Zero Hedge
https://www.zerohedge.com/news/2018-11-16/one-bank-flashing-red-warning-crash-dead-ahead

Not everyone agrees, and the die-hard bulls are still hoping that there is no correlation between the now shrinking consolidated global central bank balance sheet, and these increasingly more frequent events. "We have seen a number of idiosyncratic stories going on such as GE, GS, PG&E which are not necessarily a signal of a market correction,” said NN Investment Partners money manager Dorian Garay. “U.S. credit and macro fundamentals are solid as reiterated by recent macro indicators and earnings.”

Perhaps Garay, like all the other millennials in the market who have never lived through a real bear, forgot that the market - when stripped of its central bank training wheels - is a discounting mechanism, and it's not about current earnings but the future cash flow streams. Although in a world dominated by central banks, one can see why people would forget this modest distinction.

Some have had no choice but to remember.

The canarys dead.

Interesting

To justify the controversial claim that a crash is coming - an prediction which will only assure guarantee even more sleepless nights for already worn out millennial "traders" who are still learning how to spell "sell" - BofA CIO Michael Hartnett shows the near record 295bps spread between Libor-Euribor which was last seen on two occasions: the first time in October 99, just before the bursting of the dot com bubble, and the second time in 2006 - just before the US housing bubble burst and ushered in the global financial crisis. It is this spread that is the "tell" that a flash crash is imminent.



So what will catalyze said flash crash? To BofA, triggers could be "violent US dollar move and/or shock macro data forcing abrupt GDP & EPS downgrades." Or, to quote Leuthold Weeden's CIO, Jim Paulsen, "When this thing finally finds a bottom, panic will be everywhere."

We agree.

The Rever rennndddd concurs with this prophecy.