Market Morning: Bond Bubble Reaches New Heights, Turkey Jails Mayors, Iran US Tanker Face Off,

Market Morning

Spanish, Portuguese Bonds Near 0% Yield

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Inverted yield curves, record amounts of debt yielding negative rates, and countries only a few years ago on the verge of bankruptcy yielding next to nothing. These are the signs of the beginning of a possible manic bubble phase of a nearly 40 year bond bull market now in totally irrational uncharted territory. People are now paying for the privilege of holding about $16 trillion in the debts of others. Bloomberg is calling this a “new era” for bonds where yields are perpetually low and inflation doesn’t seem to budge. How long this will last could be the investment question of the century, or at least the last 40 years. Bloomberg does admit, however, that a bond bubble might be in the making. Spain and Portugal are the two countries with sub-par leveraged national balance sheets that only 7 years ago were yielding near 7% in what was a near continent-wide sovereign debt default. Now Spain’s 10Y bond for example is yielding 0.08%, with the absolute debt about 50% higher than it was back then. Make sense? When nothing does, everything does.

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Turkey Takes Page From Roosevelt Playbook, Imprison Kurds

Turkey’s government is taking a page from the Franklin Delano Roosevelt Playbook on domestic policy during World War II. The Erdogan Administration has arrested 3 Kurdish mayors and 400 others in a prelude to a military offensive against Kurdish positions in Syria. This parallels FDR’s imprisonment of Japanese nationals in the United States in internment camps in a prelude to an American attack on Japan. The excuse was alleged ties to a group that the Turkish government labels a terrorist group, the PKK. The group is also branded as terrorist in the European Union and the United States. The three mayors who were removed had constituents totaling about 3.7 million people. The US had supported the PKK groups in its fight against ISIS, even though it is labeled a terrorist organization, demonstrating consistency in foreign policy as ever. Meanwhile, Turkey’s stock market (NASDAQ:TUR) is still at less than half the level it was at in 2014.

Iran Renames Tanker, Threatens US With Heavy Consequences

An Iranian oil tanker in British custody in Gibraltar is now on its way to Greece to deliver its goods. Iran has warned the United States that any attempt to seize the tanker before it is able to sell its oil will have “heavy consequences”. Iran did not disclose the exact nature of the heaviness involved. The tanker was previously called the Grace 1, and then renamed the Adrian Darya 1, en route to Kalamata in Greece. The vessel has been interred for 6 weeks by British authorities. A federal court in the US has issued a warrant for the seizure of the tanker, which could be why the tanker changed its name, to get out of the technical warrant, but it is doubtful that the move will work. Gibraltar has since refused to comply with that request because it is bound by EU law. Soon however, Gibraltar could be out of the EU of Boris Johnson has his way and leaves without a deal. At which point who knows if Gibraltar will comply with future demands by the US judicial system to seize Iranian ships. Meanwhile, it’s another game of chicken between the two, with the next round bound to start any day now. Oil prices (NYSEARCA:USO) are up 1.25% this morning on the standoff news.

Hong Kong Continues Protesting, China Keeps Piling Weapons, Troops on Border

After 1.7 million people (by organizers’ estimates) participated in a relatively peaceful protest this past weekend in the wind and rain Hong Kong’s democracy movement looks to keep bringing out the crowds. Some protesters still defaced public buildings and shined laser pointers in the eyes of police. “We have started our rallies very peacefully but after two and a half months it seems that the Hong Kong government has not responded to our five demands so one thing leads to another and it may cause escalation,” a protester named Wang was quoted as saying by Reuters. Chinese forces continue to accumulate in the mainland on the border with Hong Kong for a potential invasion, though following through on it could significantly anger Europe and the United States, worsening any trade disputes still ongoing. Still, Hong Kong’s Hang Seng index is up over 2% today. (NYSEARCA:EWH)

Democrats Ask FCC To Halt Sprint T-Mobile Deal

Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) are on the verge of completing their long-awaited merger, but Democrats are asking for another delay, including presidential hopefuls Amy Klobuchar, Elizabeth Warren, Cory Booker, and Kristen GIllibrand. They apparently think the public should decide for some reason. “We have major antitrust concerns regarding the impact of the proposed T-Mobile/Sprint merger on consumers, competition, and the public interest,” the senators wrote in the letter. “We remain concerned about the lack of transparency in the FCC’s merger review process and the lack of certainty on whether this merger will protect competition and consumers.”

Brexit Apocalypse Paper Leaked

According to official British government documents leaked to the Sunday Times ,the United Kingdom will face food shortages and medicine shortages if British Prime Minister Boris Johnson continues on with a no-deal Brexit. Jammed ports, trade disruptions, and likely chaos were described in the event of a break with the European Union, though that would of course affect both sides of the trade equation. Who can handle this better? Public perception appears to be that the EU can handle it, but the UK can’t. We shall see if this is true in a matter of weeks or months, if Brexit actually happens on October 31.

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