Tavi Costa Current Views

Libor vs. Shibor spread spiking again and now at its highest level since the GFC! You think the Fed is turning dovish? The PBOC has taken it to a whole new level. At the current policy rate differential, USDCNY should be well above 7 already.

Tavi Costa Current Views

Only three other times in history precious metals surged while oil plunged! All of them happened during severe bear markets and recessions. Buckle up, folks.

Tavi Costa Current Views

Massive alligator mouth divergence between US twin deficits and stocks. The government budget and current account imbalance is now close to 8% of GDP! Eventually this is going to matter and should be negative for stocks.

Tavi Costa Current Views

This is now the widest drop in Consumer Confidence Present Situation vs. Expectations since the Tech Bust. Every other cyclical decline in the past 50 years led to a recession. Full credit to John Hussman for sharing another insightful analysis.

Tavi Costa Current Views

36% of the US yield curve is now inverted across 30-year to overnight rates! It is just as high as it was at the start of the tech and housing busts. This is not another 2016 soft landing scenario. Watch what the credit market is telling us.

Tavi Costa Current Views

3 and 5-year yields just dipped below Fed funds rate for the first time since the global financial crisis and the tech bust. In 2000, that coincided with the market top. 2006 was at the beginning of the housing bust. The gold-to-S&P 500 ratio ripped up both times.

Tavi Costa Current Views

Another key indicator signaling recession ahead: The correlation between utilities and treasuries has just turned negative again. It’s a battle of safe-havens that sounds an alarm when credit and equity markets diverge. Are we dipping into the bloody pool again?

Tavi Costa Current Views

Australia now offering 10-yr sovereign bonds at a lower yield than Fed funds overnight rate. Just happens to be the case that last two times these rates got inverted we were at the very end of an Asian economic cycle and right at the peak of the US tech bubble.

Tavi Costa Current Views

S&P 500 vs. utilities correlation rising after reaching its most negative level since the start of the tech bust & GFC! It’s how bear markets manifest: First, the S&P 500 gets wobbly but utilities rise. Then, S&P 500 crashes and utilities relent. Look for utes selloff next.

Tavi Costa Current Views

Critical macro moves happening again today: Gold up; Chinese yuan down. $XAUCNH up. Further confirmation that the record positive correlation between gold & yuan is unsustainable. When emerging market credit bubbles burst, gold prices rise in local terms.

Tavi Costa Current Views

It’s hard to believe the cost of capital remains so cheap for such an unprofitable industry. Every time WTI approached $50 in the last oil bear market, energy junk bonds yielded close to 8%. At similar oil prices today, these yields still have much further to rise.

Tavi Costa Current Views

Gold to oil ratio continues to break out with authority. Watch for this ratio. As I said in Nov. 20, previous breakouts coincided with equity market declines. It sends a contradictory signal to this recent melt-up in the S&P 500.

Tavi Costa Uncategorized

See Crescat’s monthly update letter, link below. Crescat Tops the Chart in October

Tavi Costa Current Views

Flashing signal of recession ahead: Today’s global yield curve inversion looks just as concerning as the ones that preceded the last two market crashes! We now have 11 economies with 30-year yields lower than the fed funds rate. South Korea just joined the pack last month.

Tavi Costa Current Views

The 3-Month Libor vs. Euribor spread is at its highest level since 1999! Is the ECB about to start tightening or the Fed about to stop? Either way, unless “this time is different”, such policy changes from similar extremes is what preceded the last two recessions.

Tavi Costa Current Views

Today’s move in oil is a real sign of weakness. It’s like Oct. 2008 when markets completely ignored OPEC’s 1.5mbd supply cut and prices continued to collapse. Remember: in 2016, the 1.2mbd production cut sent oil prices up over 15% for the next 2 days. Not this time.