Republic Risk: Alarm Bells on American Balance Sheets

A little-followed financial metric outside of academia is signaling a four-alarm fire brewing on balance sheets across the country. Is anyone listening? Plus breakout and breakdown stocks.

Equity Index Strength Is GREEN on the S&P 500 and GREEN on the Russell 2000

Each morning, we assess the full flows of the market by measuring statistical metrics on a very specific number of stocks to determine broader sentiment and the momentum trend. When these readings turn red, we focus on cash, build trades around positive sectors, or take inverse positions against indices. When it is positive, we focus on short-squeeze stocks, companies with improving fundamentals, and trading/investing around the actions of corporate insiders.

Is good news bad news once again? We’ll find out that as we parse through the November jobs report. Oil is getting a bit of a bid this morning as OPEC+ pushes for more volutunary cuts. The 10-year bond jumped this morning to 4.22% after the jobs report. The Two-Year is back at 4.67%, as markets expect some economic trouble in 2024. Looking ahead, we will pay close attention to the U.S. Treasury market as the government needs to refinance nearly one-third of all outstanding debt in the next year. 

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Morning Notes:

• The Japanese yen once again surged against the dollar, driven by expectations of a potential shift in the BOJ's ultra-loose monetary policy, signaling an end to Japan's long-standing ultra-low interest rates.

• The Biden administration aims to use "march-in rights" to potentially seize patents for expensive medications developed with taxpayer funds to lower drug prices and promote competition.

• Consumer credit in October rose by $5.2 billion, a slowdown from September, with a notable decrease in credit growth rates amid tighter lending standards and higher interest rates.

• Alphabet's (GOOG) stock rose 5.3% following the debut of its advanced AI model Gemini, which outperforms OpenAI's latest model and signals a significant boost in the company's AI capabilities and market value.

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Dear Fellow Expat:

Is a credit problem looming across the financial markets?

Yes.