Market Morning: Treasuries Trashed, Oil in Red Zone, Netflix Buys A Studio

All Eyes on Treasuries

Thanks to Columbus Day’s ambiguous and confusing status as a semi-holiday for some markets but not for others, Wall Street was open yesterday but bond markets were closed in the US. That gave a day reprieve to the ongoing Treasury plunge. But the debt pits are opening up again today and traders are waiting with baited breath to see what the yield gods and goddesses have in store. As of the wee hours of the morning, the yield on the 10Y is up again, hitting highs of 3.26%. Spooked by the fall in bond prices amid impossibly heavy debt loads all over the world, stocks continue their fall this morning as S&P 500 futures (NYSEARCA:SPY) are down two thirds of a percent, while the Nasdaq is down three quarters in premarket trading. International stock markets aren’t doing any better.

Oil Hasn’t Seemed to Notice Though

One asset class that hasn’t taken much notice of the jitters in both the bond and stock markets globally has been oil (NYSEARCA:USO), up another 0.6% today at $74.75 a barrel for West Texas Intermediate. The International Energy Agency has sounded the alarm, saying that oil is in the “red zone” and that exporters should blast open the taps because demand is still very strong. “We should all see the risky situation, the oil markets are entering the red zone,” IEA Executive Director Fatih Birol said Tuesday. “We should try to comfort the markets all together because it may be bad news for the consumers, importers today, but I believe it may well be bad news for the producers tomorrow.” Full sanctions against Iran’s oil exports haven’t even been implemented yet. The energy sector (NYSEARCA:XLE) has escaped from the recent market turmoil relatively unscathed so far.

 

Netflix is Going to Albuquerque to Make Movies

In the spirit of “Breaking Bad” and “Better Call Saul,” Netflix (NASDAQ:NFLX) is buying a movie studio in Albuquerque, aptly named ABQ Studios. Netflix is already filming three new shows there, including “Chambers,” “Messiah,” and “Daybreak”. Albuquerque’s mayor is quite excited about this, and he probably has New Mexico’s low taxes to thank, compared to California. Netflix spends about $8 billion a year on original content for its streaming services, and estimates that the purchase in Albuquerque will lead to 1,000 jobs for the city.

Turkish Delusions On Inflation Worsen

Turkey’s Finance Minister Berat Albeyrak could have passed for a stand-up comic this morning, but unfortunately he wasn’t joking. According to Albeyrak, in order to fight inflation, he has secured broad-based agreement for a 10% cut in all prices from the private sector in Turkey. By this, he probably means forced price controls, if not now then soon, because there is no way to get the private sector to voluntarily price goods and services at 10% below market rates. This, of course, should do nothing but cause shortages of goods and services across the board as prices are kept 10% below clearing levels. Albeyrak continued, “The fight against inflation and for price stability is not a fight that can be conducted by the state and institutions alone.” Au contraire. The state is the sole cause of inflation, for it has exclusive control of the money supply that it inflates, hence the word. Therefore, it has sole responsibility for stopping it, by simply ceasing to inflate. This would mean, among other things, shrinking the government, which government are generally loathe to do, so they blame the private sector instead.

What to do: If this is true, the situation in Turkey is about to get markedly worse. Consider shorting Turkey. (NASDAQ:TUR)

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