The “helicopter balloon” drove stocks higher in July and nothing else seemed to matter.  We use that term to refer to efforts by the global elite to float the idea (trial balloon) of the Bank of Japan directly funding government spending (“helicopter money”).  The BOJ backed away from the helicopters at its meeting late last week and is taking a wait and see approach for now. 

We will see how markets deal with the BOJ’s current reticence and prudence in coming weeks.  It also expressed some angst about existing QE policies.  That cannot be pleasing to the central bank-loving crowd.    Could it be that some of the deciders are growing worried that they have done nothing for eight years but distort markets and capitalism with nothing to show for it?  We can only hope so!

It is not hard to see why the QE faithful are growing weary.  Last week we found out that U.S. Q2 GDP came in at a scant 1.2% and Q1 was revised down to just 0.8%.  Now the BEA says it may have to report unseasonably adjusted data because it can’t figure out what is going on with the numbers.  We can only chuckle.  Elsewhere, corporate earnings reports and future guidance have been disappointing.  Of particular importance, Ford Motor sounded concerned about future car sales and subprime auto lenders are running into credit issues. 

The views expressed on this blog are the opinions of the authors. This information is not intended as investment advice or to recommend the purchase or sale of securities. More information on Strategic Balance, LLC may be obtained by contacting investor relation.

Equities broadly sold off on Brexit news and then rallied on central bank easing chatter, but the collapses in global bank stocks and sovereign yields are sending a powerful message that levitating equity indices are reflecting a world vastly different than reality.  A number of real estate funds in the U.K. have had to halt redemptions as one initial consequence of the vote was to pour cold water on the ebullient London commercial property markets. These events have also made other trouble spots become more obvious.  For instance, Italian banks have been “swimming” in bad loans for years, but in this new more cautionary environment, investors are not willing to look the other way.  As a result, discussions about bailing out the banks there have come to the fore.

Economic growth in the U.S. and abroad only seems to look good when the central planners are given a chance to seasonally adjust the data.  Closer to where the “rubber meets the road,” (pardon the pun) auto sales have rolled over meaningfully and that had been one of the only sources of strength, though it had been driven by reckless subprime lending practices.

We recently heard again from one of our favorite economic barometers, Fastenal.  The large industrial supplier with a presence in so much of the real economy stated:

“While our customers value the capabilities we bring to the table, in the last eight quarters this group of customers has seen a contraction in its production and therefore its need for fasteners. During this time frame, our fastener product line has seen its daily growth decrease from about 10% growth in the last six months of 2014 to about 6% contraction in the fourth quarter of 2015 and about 2% contraction in the first half of 2016. Our market share gains continue to be strong, but the contraction in purchases from our existing customers, plus some price deflation, has eliminated our growth and led to contraction.”

Considering these comments in the context of rail traffic, which was down 8% in the first half of 2016 and it really is hard to comprehend where some of the official data and surveys are coming from.  They just do not make sense.  This matters when evaluating individual stocks because hanging one’s hat on rosy government data at cyclical inflection points has been a surefire way to lose considerable money. 

For all the talk of supposed consumer strength, we have mentioned repeatedly how management teams at the retailers just do not see it that way.  At the same time, Moody’s Investors Service just took down its estimates for 2016 retail spending and mentioned broad weakness in several subsectors.  Additionally, we have recently come to find that restaurants saw quite a soft month in June.  According to Knapp-Track, guest counts were down near 5%.  That’s a lot!  We reiterate that much of the growth showing up in consumer-related data is tied to mandatory healthcare spending related to Obamacare, which is likely choking off spending elsewhere.

Factory orders have now fallen for 19 consecutive months in the U.S and industrial production has fallen year-over-year for 10 months.  Those are recessionary numbers.  Inventories remain stubbornly high.  The celebrated bounce in the June employment data from the establishment report still left us with a slowing jobs growth rate for this year and runs counter to both the household survey, income tax receipts, and the Fed’s own Labor Market Conditions Index which paint a much darker picture. 

That yields are hitting record lows on major growth concerns while equities in the U.S. are at record highs, suggesting things are great, is quite unusual to say the least.  To us, it appears that we have entered a new stage of the crisis that began in 2008.  Having been caught off guard by events in the U.K., the deciders will redouble efforts to maintain the status quo.  You can count on that.

As for the broader equity market, we expect that sooner or later the historic discrepancy between economic growth and valuations will narrow much like the aftermaths of the 2000 and 2007 bubbles.  Equity markets were the last to realize trouble ahead in those periods as well. We remain patient and expect that we can continue to profit from our less exposed posture of recent months. We find that cash is not trash at all in the current environment because its optionality is much undervalued with so many securities so expensive and policy mistakes quite likely as the deciders grow desperate. After all, the historic record is not very good at all for central bankers who tried to prevent the inevitable or for investors who bet that they could. 

The views expressed on this blog are the opinions of the authors. This information is not intended as investment advice or to recommend the purchase or sale of securities. More information on Strategic Balance, LLC may be obtained by contacting investor relation.

The vote in the U.K. to leave the EU was the big news last month.  It was just a symptom of the moribund global growth disease caused by official policy failures, but it will be used as an excuse for much that ails the world going forward. It also served as a wakeup call to the ruling elites that their narratives and Ponzi schemes have created a rebellious mood in the real world if not the financial one.  A sizable portion of the populace simply wants to “throw the bums out.”

In recent weeks, sensing an insurrection, the central banks have gone into overdrive to protect all that they and their friends hold sacred by expanding their balance sheets to keep order in markets.  Japan is now considering direct central bank funding of fiscal spending or as is more commonly known, distributing “helicopter money.”  The scheme is not too much different from the radical and massive QE going on there already.  It simply allows the central bank to buy bonds directly from the government without entering the secondary market.  Make no mistake.  It is clearly a step further into emergency policy measures that most of us hoped would never be employed.

Bernanke, while no longer holding any official role at the Fed, has espoused the helicopter money concept for years.  It speaks volumes about the sad state of affairs that he recently felt compelled to make this push now in plain sight by traveling to Japan and speaking with the powers-that-be there about it.  Theoretically, this money would be directed at consumers or the real economy in some way through perhaps infrastructure project funding, which has become the deciders’ favorite cover for spending more of the voters’ money. 

Some within Japan have questioned whether this scheme is legally permissible, so maybe it will never come to pass.  However, we would bet that sooner or later leadership there will have to pull the trigger because in spite of enormous QE and negative-rate policy, the nation simply cannot escape its poor demographics and massive leverage without trashing the yen, which has stubbornly rallied in recent months.  Of course, China will not just sit idly buy, so we expect it to devalue its currency in response.  Therein lies the problem.  Debasing currencies does not work when every central bank is doing it.  No relative advantage can be gained. 

The head of the Federal Reserve Bank of Cleveland also mentioned helicopter money as a possibility down the road in an interview in Australia recently, so clearly the central bankers are preparing the populace for this abomination.  She subsequently tried to walk back the comments because of some outrage over the concept, but it is quite obvious where the central planners want to take us next whether we like it or not.

Even before the weak May employment report came out early this month to throw “cold water” on the strong growth narrative, evidence had continued to mount that quasi-recessionary conditions remained stubbornly in place.  That report, with its downward revisions to data from prior periods, made clear that job growth over the last three months was closer to 100k than the over 200k pace that had been just about the only support out there for the case that the economy was fine.  On that front, Barron’s mentioned that:

“While the markets were viewing the employment numbers with relative equanimity, David Rosenberg, chief strategist and economist at Gluskin Sheff, points out that May’s 38,000 drop in goods-producing payrolls was the steepest since February 2010. This critically sensitive sector contracted for the fourth consecutive month, by some 77,000 positions, or 1.2%. ‘This is precisely the sort of rundown we saw in November 1969, May 1974, October 1989, November 2000, and May 2007’—each presaging a recession by an average of five months, he commented.”

Precisely the sort indeed.     

It still seems that many investment luminaries like Soros, Gross, and Icahn, as well as numerous major sell-side shops like Goldman Sachs are taking turns trying to outdo each other in discussing how the central planners have failed us or caused various risky market distortions.  We can put our “tin foil hats” back in our desk drawers, for now, we guess.   From a contrarian’s perspective, we suspect these persistent public displays of bearishness may lend some support to equities for a while longer because they are so widespread and coincide with a virtual buyer’s strike from traditional investors who seem fed up with the Fed and its effect on markets.  This does not change our views, which remain dependent on valuations. Besides, various measures of sentiment like volatility suggest complacency.      

The ECB’s foray into corporate bond buying to combat a still struggling European economy has added impetus to the collapse in global yields, but underlying slow global growth remains the major driving force for these moves in rates.  At the same time, negative-rate policies in Europe and Japan are proving highly disruptive to banking and insurance companies and elected officials in those places are starting to worry more vocally that the central bankers have gone way too far.  Isn’t it quite telling that a policy designed to increase lending is crushing the very profitability of financial intermediaries who are clamoring for less monetary intervention?  We continue to think it is just a matter of time before the political tide turns more harshly against central bank meddling of all types.

At the same time, this month’s vote on the U.K.’s continued membership in the EU, in which the “leave” side appears to have the lead for now, is just the latest example of how the elites are losing their grip on a frustrated populace.  We remain cautiously positioned. The vote in the U.K. later in the month could move markets in either direction for a while, depending on the outcome, but that one event is not a driver of our positioning at all.  The current flatness of the treasury curve and the strength in bond prices conveys very little doubt that future growth prospects are not exciting and that the forecasted jump in corporate profits for later in 2016 seems misguided to say the least.

The views expressed on this blog are the opinions of the authors. This information is not intended as investment advice or to recommend the purchase or sale of securities. More information on Strategic Balance, LLC may be obtained by contacting investor relation.

Analysts that follow individual stocks still seem to want to wear “rose-colored glasses,” though generally revenues and earnings look softer than they have in many years.  As usual, they mostly expect a big second half of the year increase in earnings.  However, it is getting harder for them to ignore the obvious.  All one needs to do is listen to the managements of many major retailers like Kohl’s, Target, and Macy’s in recent days as they report another dismal quarter of earnings to realize that things are not nearly as swell as equity indices imply. We have not heard such downbeat assessments and forward guidance outside of a recession and numerous retail stocks are at multi-year lows in response.  Unless you sell food, RV’s, or hammers, the consumer is conspicuously absent from your establishment.

We had half-joked last month about the need to triple seasonally adjust the weak data to keep the planners happy, and, in spite of so many major retailers discussing the nothing short of terrible conditions, the government’s April retail sales figure was reported as quite robust.  How did that occur?  The seasonal adjustment factor for the April data was three times that of recent years.  Yep, a triple seasonal adjustment as the economists at Macromavens pointed out.  Was that simply because of Easter falling into March this year?  Apparently not.  March was heavily seasonally adjusted as well.  You just can’t make this stuff up!  We expect the data rigging to continue in a major way and worry that it will lead to even less clarity for the notoriously poor economists at the Fed.

Department store woes are not just the result of Amazon taking more market share from the “brick-and -mortar” retailers. That has been going on forever.  Restaurants and hotels are also seeing soft numbers and the “smart” phone market is losing its luster if you look at Apple’s sales and industry data.  Auto inventories are high and reflect the fact that while monthly sales data reported by the manufacturers remains good, they simply reflect shipments to the dealers, not ultimate consumers.

If we sound like a broken record in discussing how reality is much worse than market expectations, apparently there is a good reason.  The Citigroup Surprise Index, which tracks differences between economic forecasts and where actual data is reported, has been in negative territory for over a year and by a lot.  Such significant over-estimation of growth has not happened often, if ever.  In addition, industrial production remains recessionary.  Inventories across many sectors of the economy remain quite high relative to sales and rail traffic remains very weak.  You are not going to hear about train carload volumes and intermodal shipments falling a combined 8% for the first 19 weeks of 2016 on the nightly news, but that data says more about what is going on out there than a lot of the seasonally adjusted bunk.  We point this stuff out every month because it helps explain why we have a hard time buying equities with any cyclicality when they often trade near 20 times peak earnings when, given the underlying environment, they should be trading closer to 10 times trough EPS.  We do not see that 50-75% price gap as making any sense at all.

We think current markets especially favor high levels of patience and discipline.  Though credit spreads have narrowed in recent weeks, corporate bankruptcies are on a substantial rise and credit measures are deteriorating.   We continue to expect the credit cycle to play out in a manner that makes current high yield corporate bond prices and equity multiples appear foolish.  Meaningful treasury curve flatness, with long bonds quite firm, should give pause to those chasing equities higher. 

The views expressed on this blog are the opinions of the authors. This information is not intended as investment advice or to recommend the purchase or sale of securities. More information on Strategic Balance, LLC may be obtained by contacting investor relation.

The “choir” on Wall Street is grumbling and moaning while the “pastors” at the Fed preach about tightening soon because growth is so good.  Very few still buy the sermon and eyes are rolling.  Much of the market euphoria caused by the astounding $1 trillion in new Chinese lending earlier in the year is quickly fading, as one might expect, because the reality of still soft global growth cannot be escaped. Now numerous Wall Street pundits and strategists are not singing the pre-approved hymns as the year progresses and many big, well-known investors are publicly bearish, arousing our contrarian nature to some degree.  It seems a bit odd when paid optimists at the major brokerages admit the Fed may not be quite as heroic as once seemed and equity markets appear vulnerable.    Even Goldman Sachs recently discussed how equities have rarely been more expensive than they are now.  Blasphemy!

We guess it is getting easy for everyone to see that once the central planners pushed rates towards zero and now openly manipulate markets in a despotic fashion with timely chatter, expected returns of many assets approached levels where one is simply paying a high price for the “pleasure” of taking risk with very little upside and a lot of downside.  Equity markets seem designed to keep politicians in office at these mandated prices and the deciders certainly don’t care about our efforts to find investable securities or the potential for future losses for those who blindly adhere to the “there is no alternative” dogma. That seems to have caused a bit of a buyers’ strike from traditional investors.    

The executive summary of many research pieces is that in spite of central banks trying like mad to spur growth, it is not working and equities look risky because earnings are sinking and valuations are rich.  They also often point to events like the U.K. potentially voting to abandon the EU in coming months or the U.S. Presidential election this fall as potential catalysts for higher volatility later in the year.  At the same time, news stories about how negative rates in Japan and Europe are causing confusion and angst, but not increased business activity, are making the rounds and that continues to take a lot of the “steam” out of that strange central banker perversion that was supposed to be the next great thing for the bulls.

We suspect that the soft business conditions on Wall Street may have forced a change in thinking in some places in recent months.  Trading revenues are weak and IPO’s are few and far between.  JP Morgan recently noted that:

“During this cycle (2Q07 profit cycle peak to present), revenues expanded at 2.5% with total cumulative growth of 24% (vs. the prior cycle at 7.8% and 66%, respectively).  While sales growth was robust in the initial years of this recovery, the steadily declining trend has been less encouraging. More recently, top-line contracted during each of the last four quarters and is expected to decline further in 1Q16 (-1.8% y/y) and 2Q16 (-1.1%). The prior recovery in comparison was more robust and consistent without any intra-cycle contraction.”

We could not agree more and would add a couple of points.  First, with this in mind, based on historic price-to-revenue data, investors are paying twice the normal valuation for about one-third of the revenue growth.  Secondly, this state of affairs has transpired in the face of trillions of dollars of fiscal and monetary efforts to stimulate growth, including about $60 trillion in new global debt since the last recession.  The Keynesians are beside themselves trying to rationalize how this debt binge failure could be possible by suggesting that even more fiscal irresponsibility is in order.

The views expressed on this blog are the opinions of the authors. This information is not intended as investment advice or to recommend the purchase or sale of securities. More information on Strategic Balance, LLC may be obtained by contacting investor relation.

It is not difficult to see why new efforts are deemed necessary by “the deciders” who believe they have some basic right to control everything all the time.  The Atlanta Fed GDP estimate is at 0.3% for the first quarter even after the economists began to double seasonally adjust the data because they just could not believe economic growth could possibly be so low given all of the monetary and fiscal “stimulus” that has been unleashed.  Is triple seasonally adjusting next guys?  Last year the pundits were strangely blaming the cold weather in winter for weak growth, yet this year it has been quite mild.  Now the New York Fed wants to begin releasing its own GDP estimate, apparently unhappy that the Atlanta version is not “growthy” enough.  It is an election year!    

No matter how you slice it, consumer spending is terrible even if you just look at the government’s own retail sales figures which showed a flat core number for March.  We just do not see how anyone can point to the consumer as a key driver of the economy now unless one is fooled into believing that the ungodly and mandatory sums being spent on the Obamacare tax are really a sign of strength.  As for auto sales, used care prices and inventories are now looking troublesome as even that sub-prime lending induced surge is rolling over.

Overall industrial production printed at down 0.6% for March and the manufacturing component fell 0.3%.   Manufacturing capacity utilization of 75.1% is running over 3% below its long-term average. It’s no wonder factories aren’t hiring!  Rail traffic is down about 7% year to date, yet inventories still remain quite high relative to sales. 

The bottom line is that current activity is virtually indistinguishable from a recession and the electorate in the U.S. is seeing through the charade of pleasantly manipulated equity prices based on the “throw the bums out” mentality on display in the polls.  In fact, one long-time restaurant analyst blamed the decline in industry sales on the unfolding Presidential campaign drama curbing the desire to eat out, but that looks a bit like a “chicken and egg” argument to us.

The views expressed on this blog are the opinions of the authors. This information is not intended as investment advice or to recommend the purchase or sale of securities. More information on Strategic Balance, LLC may be obtained by contacting investor relation.

Last week’s meeting of major oil producers in Doha was a farcical attempt to foster belief that the glut of crude could be magically brought back into balance by agreeing to maintain current high production levels without cuts and with no real assurance that production levels would be enforced anyway. In the end, the meeting was a total failure with nothing accomplished.  Nonetheless, crude had rallied off the February lows in recent weeks as various pundits held Doha out as an important turning point even as tankers full of crude lined up around the planet due to the glut and U.S. inventories remained enormous.  This chicanery had caused equities to rally because the computers trade crude and the S&P 500 in an inane lockstep.  

The purported gist of the recent secret central planner dealings is that they are attempting to manage the global currency war in a manner that keeps events from cascading out of control.  While we do not really know if that is the case, there are some obvious issues.  First, to boost its economy and to keep deflation at bay, China desperately needs the once soaring U.S. dollar to cheapen because its currency is linked to the greenback.  Secondly, Japan wants the dollar to rise versus the yen to foster export growth if only to show some positive effect of its gargantuan monetary policy bets.  Further confounding matters for all central bankers is the fact that the BOJ’s QE and negative rate schemes are looking like a miserable failure.  The yen has rallied meaningfully and Japanese stocks have been less than enthusiastic as the economy remains moribund.  

In the U.S., dismal earnings reports from Goldman Sachs and some of the big banks in recent days highlight that Wall Street is feeling serious pain and credit quality is a big issue.  We would also suggest that these weak reports make it clear that monetary policy efforts have been exhausted because if the financial sector is struggling mightily in the current environment of extreme central bank largesse, then it must mean those same policies have outlived their usefulness.  The transfer mechanism of money to the real economy is sputtering.

Nonetheless, the PhD’s keep trying and negative rates are supposed to be their next great idea.  However, the “fly in the ointment” is the reality that this has been greeted less than enthusiastically by markets if you look at financial stock behavior and listen to various titans of banking and investment.  Of course, common sense would suggest that bank deposits will flee rapidly if the deciders push this negative rate idea too far and that cannot be good.  More recently, the central bankers are publicly mentioning printing money that is to be given directly to consumers.  While some in the ECB sees this quackery as just a natural progression, the Germans want none of it for now anyway.  Even former Fed chairman Bernanke revisited the topic of “helicopter money” recently.  Yet somehow, we are all supposed to believe that everything is back to normal and the Fed could normalize policy. 

The views expressed on this blog are the opinions of the authors. This information is not intended as investment advice or to recommend the purchase or sale of securities. More information on Strategic Balance, LLC may be obtained by contacting investor relation.

It remains a heavily propagandized market with low transaction volumes and computer trading programs in charge 24/7.  We cannot imagine why anyone would embrace a large exposure to unhedged equities with valuations that harken back to the prior bubble peaks of the last one hundred years.  Going back sixty years, the current price-to-sales ratio of the S&P 500 has only been exceeded at the 2000 tech bubble peak and not by much.  Cash flow multiples are also at extremes.

Those willing to bear high equity risk may, in fact, make money, but it is not based on any valuation math upon which we would risk our capital.  As for the “don’t fight the central bankers” concept, that rings hollow when one realizes that some of the biggest drawdowns in market history, including 2009’s, have occurred when monetary policy is loose or loosening simply because investors decided to head for the exits as cash suddenly looked better than equities when risk aversion set in.       

Regardless, the notion that in February, behind the scenes, the central bankers of the globe coordinated an emergency response to disappointing growth and volatile markets is a consistent theme in recent weeks.  With that in mind, investors have become further convinced (if that were possible) that the central bankers are completely held hostage by markets and that has provided the impetus for the sharp relief rally of the past two months.  The idea that the Fed is going to raise rates substantially has fallen by the wayside for now.

That change in mindset on monetary policy supports our case because it meant that markets finally had come to grips with the idea that if equities were going to remain extremely richly priced, they could only do so in the context of interest rates remaining low for longer.  In addition, it seems that recent events also made clear the concept that fiat currency debasement in various forms remains in overdrive, making gold and silver more attractive.  We have believed for months that interest-rate risk and currency risk were cheap to equity risk.

Though equities have rallied strongly, the growing sense that earnings and fundamentals are deteriorating brings the term Pyrrhic victory to mind.  Based on what we have seen, many traditional investors remain skeptical sellers of stocks. In contrast, short sellers have been forced to cover positions because of relentless corporate buyback pressure and heavily manipulated stock futures trading. Companies continue to issue billions in debt to fund a roughly $500 billion annual stock buybacks habit, which help keep management stock options profitable and EPS better than it otherwise would be.  It is the only game in town and a key element of the charade which keeps people with pitchforks away from the Fed’s Eccles building.  However, in an odd juxtaposition, treasury bonds remain generally well bid near the recent lows in yields because holders just can’t bring themselves to part with positions given the slow global growth of recent months.   

Central bankers and other deciders are now feverishly attempting to maintain control of the system and the dialogue with more outlandish schemes and theories.  For instance, it has become clear that the Chinese orchestrated an irrational lending binge to start the year in an effort to maintain the appearance of real economic growth.  We are hearing close to $1 trillion was poured into the economy in the first quarter and that is a new record for their recklessness.  It seems that problem assets are coming to the surface with more frequency in China in recent months and that cannot be good when loan growth has been so enormous. 

The views expressed on this blog are the opinions of the authors. This information is not intended as investment advice or to recommend the purchase or sale of securities. More information on Strategic Balance, LLC may be obtained by contacting investor relation.

Earnings troubles and economic weakness continue to spill over into credit markets.  Like equities, corporate bonds have rallied off of the lows of a few weeks ago but default rates are moving higher and credit rating downgrades far outnumber upgrades.  Given the pace of credit deterioration, it would be quite unusual for the corporate bond and leveraged loans markets to not cheapen further in coming quarters.  Importantly, the flatness of the treasury curve with the long bond having remained generally firm should cause one to have second thoughts about taking on credit risk in any major way.  

Because QE did not lead to sustainable economic growth and loan demand is stalling, the central bankers outside the U.S. are pulling out all the stops to try to get markets excited about the negative-rate concept, which turns free market capitalism on its head.  It is stunning how this is being sold as no big deal and just a logical next step.  Europe and Japan have led the way into this strange world where borrowers are paid to borrow.  Japan just issued government debt that yields less than zero and about 40% of the sovereign debt in Europe trades with yields below that threshold.  The ECB just moved further into this no-man’s land of negative rates in last week’s meeting and markets appear to be acting as unenthusiastically as they did when Japan opened the door in the zero floor in January.

In many places around the globe the populace is just plain sick and tired of the monetary regime and endless fiction peddling that passes for leadership and news reporting.  As a result, the central bankers feel an intense need for a new fix to maintain any semblance of credibility, but they are running out of manipulative tactics. Their battle cry has become “QE was such a success that now we are now compelled to try something even weirder to create growth.” We know, it sounds illogical…and it surely is, but they look at the political polls too and see the groundswell of “pitchforks at the door” insurgency that is not just a U.S. phenomenon.  In the U.K., talk of exiting the EU fold is front and center as disgust with the rest of Europe builds.  In Japan, Prime Minister Abe is on the hot seat because after all of the endless rhetoric and QE, growth in Japan remains nonexistent. 

We are also hearing trial balloons about the powers that be taking large denomination bills out of circulation supposedly in a crime-fighting effort.  Obviously that idea must be a result of bankers fearing that depositors will simply pull their cash out of accounts if they are going to be losing money every day that their money is held at a financial institution in a negative rate environment.  No wonder precious metals have been rallying strongly this year. 

Negative rate policy is not being greeted with the desired euphoria by investors because it adds to a sense of unease, as well it should.  Bank stocks, particularly in Europe, have been quite soft for months due to profound worries about loan defaults and now investors must twist their brains into thinking that somehow negative rates will be a good thing for lenders.  We are not the only ones who are not buying it based on comments we hear from bank managements.