These three potential ‘naked swimmers’ threaten stocks and financial markets – CNET

After a hat trick for all three major indices last week, optimism and apprehension are in the air as a new trading period begins.

But some, like the editor-in-chief and founder of La Lettre de Kobeissi, Adam Kobeissi, which peaked in June, remains cautious. “Until we have proof that inflation has peaked and the Fed moderates its hawkish rhetoric, we believe equity rallies will be sold,” he told clients.

Echoing that sentiment, Matt Maley, chief market strategist at Miller Tabak + Co., sees a “huge rebound in economic growth” needed for stocks to recover significantly from current levels, let alone a reaching a new all-time high.

Maley also provides our call of the daywhere he warns of a potentially difficult September/October period, with chances that a second stage of a bear market could develop, exposing “naked swimmers”.

It borrows from a famous quote from Warren Buffett of Berkshire Hathaway in 1992 when Hurricane Andrew exposed under-booked insurers. “It’s only when the tide goes out that you find out who swam naked,” said the legendary investor.

When it comes to these “swimmers,” Maley thinks investors should be wary of the cryptocurrency market, following recent news that bitcoin pooling service Poolin had suspended withdrawals. The strategist recalls the crypto summer rout that coincided with a halt to withdrawal from crypto lender Celsius, eventually forced to declare bankruptcy.

“That, in turn, caused some serious selling in the stock market,” as some leveraged investors had to sell large-cap tech stocks to raise cash to meet their crypto margin calls, said Maley. So if bitcoin BTCUSD,
+3.02%
is starting to fall below June lows, which could spell trouble for other risky assets as well, he warned.

Another potential ‘swimmer’ issue he worries about is a big jump in corporate debt over the past 2.5 years – US companies currently hold nearly $11 trillion in outstanding debt securities. Total US corporate debt is more than $22.5 trillion, nearly double what it was in 2007-08, the strategist said.

The Fed’s monthly quantitative tightening program is expected to double this month, meaning the central bank won’t buy Treasuries, which could drive prices down. And because corporate debt is deducted from Treasury debt, yields on both could continue to rise and a potential blowout in credit markets could occur, Maley said.

Wild card stock market: What investors need to know as the Fed shrinks its balance sheet at a faster pace

Finally, he says they have been concerned by some news reports indicating that European energy markets could come to a halt unless governments extend liquidity to cover some $1.5 trillion of margin calls.

“What if a serious counterparty risk problem were to develop…and people stop trading with one or more entities? It could also create problems in the physical delivery market…As we learned during the GFC, whenever the issue of “counterparty risk” arises, it is always bad for risky assets” , did he declare. (Regulators, including the Bank of England, are already taking steps to prevent these problems.)

According to Maley, while neither of these issues will materialize soon, “if the cracks in these markets start to widen, it would send a major wake-up call to investors in many different risk asset markets.”

The steps

ES00 Equity Futures,
+0.34%

YM00,
+0.12%

NQ00,
+0.32%
point to a fourth day of gains on Wall Street, with oil prices CL.1,
+0.68%

BRN00,
+0.88%
upwards, the dollar DXY,
-0.87%
fall and gold GC00,
+0.75%
is higher. BitcoinBTCUSD,
+3.02%
stands at just over $22,000.

The buzz

Bristol-Myers Squibb BMY,
+1.12%
the stock increases after the FDA approved its drug Sotyktu for psoriasis.

Twitter TWTR,
+0.81%
says Tesla’s latest deal termination letter from potential TSLA suitor,
+3.60%
Elon Musk, is also “invalid”.

European energy prices hit their lowest level in a month on hopes that Russian President Vladimir Putin’s energy war is running out of steam. Meanwhile, after Ukraine forced the recent takeover of the eastern territory, Russian television pundits have begun to question the war.

Data highlights for the week include the August CPI, followed by retail sales and the University of Michigan consumer sentiment survey.

Activist investor Dan Loeb has hinted that he won’t be pushing Disney DIS anymore,
+2.54%
create its ESPN sports network.

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Table

Investors who responded to Deutsche Bank’s September survey are pretty clear about where they think the S&P 500 is heading next:

German Bank


Stock tickers

Here are the most searched tickers on CNET as of 6 a.m. ET:

Teleprinter

Security Name

EMG,
+11.96%

GameStop

TSLA,
+3.60%

You’re here

CMA,
+12.50%

AMC Entertainment

BBBY,
+8.37%

Bed bath and beyond

MONKEY,
+8.22%

AMC Entertainment Preferred Stock

NIO,
+8.37%

NIO

AAPL,
+1.88%

Apple

stroke,
+31.09%

American virtual cloud technologies

AMZN,
+2.66%

Amazon

Mulana,
-7.57%

Mullen Automotive

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These three potential ‘naked swimmers’ threaten stocks and financial markets – CNET


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