Widening CDS and A Raging Dollar

Over at a financial forum...

Batman asked: "Don't understand why high yield stocks like VZ, PM and T are not up today."

We Natter: HY, leveraged, EM, even sovereign bonds like Russia, Ukraine, China are going nowhere. Look at HYG, JUNK, few want to touch it or worse yet the underlying bonds with a ten foot poll.  Biotech's with single digit PE are getting porked, Icahn is even chiming in. What does that say?

Wanna see bad capital market juju, just look at the credit spreads CDS.  There's alot of money being bet on massive defaults occurring within the next 12 - 36 months and for good reason. Too much debt, declining earnings, inability to service, little to no market liquidity, even the few dealers left are sitting out.  What does that say?

Why are those CDS getting extreme? A side effect of a global recession, what the "dollar" could do. The jobs data will only get worse along with global economic decline.  Today's 1% drop, just more compression in the consolidation. As the global economy gets squeezed in a vice, defaults will rise along with the dollar. Contrarian? NO. This is how it works.  More defaults, less spending, less earnings, less petrodollars, less eurodollars, higher dollar, more defaults. Wash, rinse, spin, repeat. And when that spring pops 100 DXY could be the new low.  

Remember, when everything else goes to hell in a hand basket, what's in your wallet?  i.e. When they dug Saddam's scraggly ass up from his bunker, what did he have in his safe? Gold? Kruggerands? Silver? Marks? Yen? Francs? Euros? Bonds? NO WAY.  5000 fresh pictures of Ben Franklin and nothing else.  What does that say? 

When IT hits the fan, the dollar junkies will make a flight to safety in the very drug causing them to code.... gotta love those addicts, so predictable.

You can find more info about the contractionary economic trajectory and the effects the dollar will have in Contractions in Money Flows and Market Liquidity, and what weapons the Fed still has in A Fed Raise Conundrum.