Did powerlines cause the Los Angeles wildfires?
Edison International stock, $EIX, the parent company of Southern CA Edison, is currently crashing. It's now down -30% since the fires began, erasing $10 BILLION of market cap. Could this be the next big bankruptcy? Source: The Kobeissi Letter
Are Insurance stocks set to collapse?
LA wildfires have officially spread over 40,000 acres with INSURANCE LOSSES crossing $20 billion. Since the market closed on Friday, ESTIMATED DAMAGES have TRIPLED to $150 billion. Insurance, power company, and other corporate bankruptcies could emerge from this. As seen with the PG&E bankruptcy in 2019 after the Camp Fire disaster, these events can create economic ripple effects. E.g many bonds will be downgraded to "Junk" rating in the near future. Could LA wildfires cause an economic ripple effect? Source: The Kobeissi Letter
Europeans own much less stocks than those in the US
Source: GD, Mike Zaccardi, CFA, CMT, MBA
BREAKING: The difference between the S&P 500’s earnings yield and BBB-rated corporate bond yield has dropped to -1.9%, the lowest in 15 years.
Excluding a brief period in 2009, this is the lowest level in 23 years. The gap has fallen by 4 percentage points over the last 5 years as US interest rates have risen sharply. In other words, less risky investment-grade corporate bonds now pay a higher yield than S&P 500 companies' profits relative to their stock prices. This metric suggests the market may be overvalued. Can this gap continue to widen? Source: Bloomberg, The Kobeissi Letter
Breadth matters. And what we currently see on us equities does not look healthy.
Here is a visual of the % of stocks outperforming the S&P500: ALL TIME LOWS. In other words, concentration risk measured in this way beats 2000 lows. Source: Samantha LaDuc on X, GS
Year 1 of the presidential election cycle is not that great, but still decent. 1928-2024 $SPX
Source: Mike Zaccardi, CFA, CMT, MBA
Mag 7 EPS vs SPX last 20 years
Source: GS, Mike Zaccardi, CFA, CMT, MBA
It’s Shorts Weather
A basket of 50 heavily-shorted stocks tracked by Goldman Sachs with market caps of at least $1 billion apiece is down 3.2% on the day as of 1:30 p.m. ET, undoing what had been a very strong start to the year. source : gs, bloomberg
