Bank of America: “The Best Reason To Be Bearish Is…There Is No Reason To Be Bearish”

Back in mid-July, Bank of America chief investment strategist Michael Hartnett wrote “The Most Dangerous Moment For Markets Will Come In 3 Or 4 Months” in which he warned that “further upside in risk assets will create problems later in the year” and concluded that “ultimately, we believe the extremely strong performance by equities and bonds in H1 is very unlikely to be repeated in H2” because “monetary policy will have to tighten to raise volatility, reduce Wall St inflation, and reduce inequality. There are two ways to cure inequality: you can make the poor richer, or you can make the rich poorer. The Fed will reduce its balance sheet in the hope of making Wall St poorer.”
Or maybe not, because almost three months later, the same Hartnett today writes that the “best reason to be bearish is…there is no reason to be bearish.” and admits that the “Icarus ‘long risk’ trade extended into autumn (Humpty-Dumpty “great fall” postponed a tad longer) by low inflation, big liquidity ($2.0tn central bank buying), high EPS, and promise of US tax reform”, noting that the “monster rally in credit and equity markets began 18 months ago when best reason to be bullish was there was no reason to be bullish.”
And with the VIX approaching all time lows as the S&P hits another daily high, the BofA strategist reiterates that his “Icarus Rally” price targets for Q4 remains 2630 in the S&P, 6666 on the Nasdaq, and the 10-year Treasury hitting 2.85%, as the rising dollar pushed the EURUSD down to 1.15. So what will prompt Q4 peak in the market? According to the BofA strategist, the catalyst will be a “Q4 “top” driven by tax reform, i.e. “peak Policy, a rise in MOVE index, and a peak RMB.
As Hartnett details further, here are the three catalysts that could end the current period of record complacency. Tax reform = “peak policy” = buy rumor, sell fact…but too early to sell fact; tax reform = quicker Fed balance sheet reduction and less share buybacks if capex accelerates (since 2009 lows S&P equity market cap up $15.3tn, Fed’s balance sheet up $4.5tn, share buybacks up $3.5tn) Big jump in the MOVE index of US Treasury market volatility (i.e. “bond shock”) catalyst for cross-asset vol, but requires inflation to rise

This post was published at Zero Hedge on Sep 29, 2017.

Core Inflation For August Falls To 1.3% YoY, Lowest Since 2015 (Home Prices Growing at 6.25% YoY)

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
Federal Reserve Chair Janet Yellen kept saying that 2% inflation was just around the corner, then recently proclaimed that 2% inflation might not be attained for 2 years.
Core inflation for August fell to 1.3% YoY while MoM core inflation fell 0.1%. Both below expectations.

This post was published at Wall Street Examiner by Anthony B Sanders ‘ September 29, 2017.

The ‘Koyaanisqatsi’ Economy

Authored by Raul Ilargi Meijer via The Automatic Earth blog,
The film Koyaanisqatsi was released in 1982. The title means ‘life out of balance’ in the language of the Hopi, a Native American tribe who live(d) mainly in what is now north-east Arizona. It is directed by Godfrey Reggio with music by Philip Glass and cinematography by Ron Fricke. There are no actors, and no dialogue. Philip Glass’s music underlies a series of film fragments that contrast the beauty of American nature with the noise and pollution mankind has added to it. Wikipedia:
The film consists primarily of slow motion and time-lapse footage of cities and many natural landscapes across the United States. The visual tone poem contains neither dialogue nor a vocalized narration: its tone is set by the juxtaposition of images and music. Reggio explained the lack of dialogue by stating ‘it’s not for lack of love of the language that these films have no words. It’s because, from my point of view, our language is in a state of vast humiliation. It no longer describes the world in which we live.’ Due to its initial success, Reggio and Glass made two sequels to the film, Powaqqatsi (1988), meaning ‘parasitic way of life’ or ‘life in transition’, and Naqoyqatsi (2002) which means ‘life as war’, ‘civilized violence’ and ‘a life of killing each other’. If you haven’t seen them, they come highly recommended.

This post was published at Zero Hedge on Sep 29, 2017.

Fun on Friday: He Put Gold Where???

A few Fridays back, I shared some of the innovative ways people have come up with to smuggle gold. Like I said in that article, gold smuggling is a very lucrative business. People want gold, and they’ll go to great lengths to have it. But smuggling isn’t as easy as you might think, and people have put gold in some places … Well, let’s just say it couldn’t have been a comfortable experience.
OK – I’ll just come out and say it. More than a few smugglers have resorted to sticking gold up their butts.
Now when I hear about these stories, I imagine some poor guy shoving a few gold coins or ingots up there – or maybe even a single bar. That would be uncomfortable enough. But get this. A man from Sri Lanka got caught with 2.2 pounds of gold stashed in his rectum.
Yes. You read that right.
According to the Metro, the 45-year-old was trying to smuggle the gold into India when customs agents at the Colombo airport noticed ‘suspicious movements.’

This post was published at Schiffgold on SEPTEMBER 29, 2017.

Kass: “Sell The FANGs”

Facebook was always anti-Trump. The Networks were always anti-Trump hence, Fake News, @nytimes(apologized) & @WaPo were anti-Trump. Collusion?
— Donald J. Trump (@realDonaldTrump) September 27, 2017

I expect comparisons between the FANG stocks and Dr. Evil of the Austin Powers film series to be an ongoing investment storyline over the next year given these digital gatekeepers’ increased dominance over the U. S. economy. This idea might receive a lot more play in U. S. political and antitrust circles – and produce more legal challenges – than most investors currently presume.
For those unfamiliar with Austin Powers, Mike Myers’ character Dr. Evil is a parody of the James Bond villains. He hatches schemes to take over the world with his sidekick Mini-Me and his cat Mr. Bigglesworth. He’s also assisted by Number 2 (played by Robert Wagner), who fronts for his evil corporation, Virtucon Industries. A natural businessman, Number 2 is often more concerned about the financial aspects of world domination than in world domination itself. That sounds a lot like the FANG stocks – Facebook, Amazon , Netflix and Alphabet/Google.
Now, the FANG shares have been slipping recently despite Wednesday’s strength. However, investor sentiment remains almost universally optimistic as it relates to the intermediate term for these names.
Here are just two examples of that enthusiasm:
Based on expectations of the FANGs’ glorious future and continued popularity, the Intercontinental Exchange this week announced an early November launch of a ‘FANG+’ ETF. This will combine the FANGs with other hot stocks like Alibaba, Nvidia and Tesla. Some, like my pal Tom Lee of Fundstrat Global, remain ecstatic about the FANGs’ future prospects. In an early June CNBC appearance, Tom explained why, despite having an overall bearish market view, he thinks the FANGs can add nearly 50% over 2017’s second half – and then continue to soar in 2018 and beyond.

This post was published at Zero Hedge on Sep 29, 2017.

Asian Metals Market Update: September-29-2017

The good thing about October is that the interest rate factor by the Federal Reserve will not be there. The next FOMC meet is on the 1st of November. The interest rate factor will not haunt gold and silver in October unless chances of a no hike are there in December. Europe and Japan will take center stage in October as Japan goes for snap polls and Germany’s politics take shape. The USA will make it to the headlines if Trump’s tax reforms turns out to be a big dud. In case the US senate does not pass the Trump tax reforms then the US dollar will nosedive in the short term.
The recovery of gold yesterday is a sign that demand is there at lower prices.

This post was published at GoldSeek on 29 September 2017.

Trump Tax Plan To Benefit “Top 1%” Most, Cost $2.4 Trillion, Middle Class To Pay More Taxes

Based on what we already know about the proposed Trump tax reform, which can be summarized as follows:
collapse the seven individual income tax rates to three (12, 25, and 35 percent), increase the standard deduction, eliminate personal exemptions, increase the child tax credit, eliminate most itemized deductions, repeal the individual and corporate alternative minimum taxes, repeal the estate tax, reduce the corporate tax rate from 35 to 20 percent, tax pass-through business income at a top rate of 25 percent, allow businesses to fully expense investment in equipment and machinery for at least five years, adopt a territorial tax system that would exempt the foreign earnings of US corporations from US tax … moments ago the Tax Policy Center released its analysis of what the practical impacts of the Trump tax plan will be on the broader population. Below we present the key findings.
The tax plan will cost $2.4 trillion over the first decade and $3.2 trillion over the second dacade, on a static basis
The proposal would reduce federal revenues by $2.4 trillion over the first ten years and $3.2 in the second decade. This means that absent a matched deduction in spending, US deficit and debt will increase by a similar amount. This is a problem as a Senate GOP budget resolution unveiled on Friday only allows for adding $1.5 trillion to the debt, implying a revenue shortfall of just under $1 trillion.

This post was published at Zero Hedge on Sep 29, 2017.

Gold Uplegs’ Three Stages

Gold bull markets offer outstanding opportunities for traders to grow their wealth. These bulls consist of series of alternating uplegs and corrections. Naturally the best times to buy low within ongoing bulls are right after corrections when major new uplegs are being born. Gold uplegs have three distinct stages that are evident in real-time in key datasets. Understanding how gold uplegs play out leads to superior gains.
Bull markets in gold can be exceedingly profitable for investors and speculators. The last secular gold bull ran between April 2001 to August 2011. During that 10.4-year span, gold powered 638.2% higher! That radically bested the general stock markets’ 1.9% loss per the S&P 500 over that same time frame. Hardened contrarians willing to buy low as gold bottoms after long bears can ride all of gold’s big bull gains.
Unfortunately the great majority of investors lack the experience, discipline, and mental toughness to fight the herd to buy low when all hope seems lost. So they end up buying into gold bulls later after they are already well underway. Understanding the evolution of gold uplegs, what births them and fuels their growth, really helps later investors deploy capital at better prices. Buying relatively low is still essential mid-bull.
Knowing gold uplegs’ three-stage anatomy is very valuable for speculators too. By actively trading the upleg-correction cycles within ongoing bulls, traders can earn ultimate gains much bigger than buy-and-hold investors. Speculators buy relatively low early in major uplegs, then sell relatively high when they mature. This profitable trading cycle can continue as long as the bull persists, creating more effective upside.
Consider gold’s current young bull, which was stealthily born in deep despair in mid-December 2015. As of this week, gold was up 22.1% bull-to-date. But the gains possible actively trading its uplegs are much larger. Gold surged 29.9% higher by early July 2016 in this bull’s first upleg, then plunged 17.3% by mid-December 2016 in its first correction. Since then gold has rallied 19.5% in its second upleg as of early September.

This post was published at ZEAL LLC on September 29, 2017.

Meet The Six Republican Senators Who Could Kill Trump’s Tax-Reform Bill

The nine-page dax document unveiled by the Trump administration this week included may of the proposals we expected to hear: streamlining the tax code for individuals into three (or possibly four) brackets, eliminating state and local deductions, repealing of the estate tax, major reductions on corporate rates and incentives for American companies to repatriate billions of dollars in overseas profits.
And while the details of the bill have yet to be worked out (Treasury Secretary Steven Mnuchin has said they will be negotiated in committee), after a handful of holdout senators killed the Republican effort to repeal and replace Obamacare (resulting in an embarrassing defeat on repealing an unpopular law that President Donald Trump has said “should’ve been a slam dunk”), the administration is likely already trying to figure out where senators stand. And, more importantly, where various senators stand in terms of their reservations.
To help give readers a sense of where the legislation stands, Bloomberg has identified six senators who may (and in many cases will) cause problems for the Trump administration by opposing the bill. The list includes moderates, hard-core conservatives, and several senators who already have – or may soon announce – that they will not be seeking reelection, presumably allowing them more freedom to consider the legislation on its actual merits.
The full list is presented below:

This post was published at Zero Hedge on Sep 29, 2017.

Jim Rogers: 3 Ways to Prepare for the Upcoming Crash

Despite all of the political chaos coming out of Washington and multiple threats of nuclear war from North Korea, the worst is yet to come.
That is, according to legendary investor Jim Rogers.
In fact, Rogers expects the ‘worst crash of our lifetime’ to occur sooner than we think.
‘I would expect it to start this year or the next… and it’s going to be the worst in your lifetime and my lifetime,’ Jim Rogers told MSN back in July.
Here’s how the financial guru suggests traders protect themselves now – before it’s too late…
Avoid Millennials… Seriously
Perhaps Rogers’ most sage advice for investors during a stock market crash is to avoid being around twenty-somethings.
‘I have been around a long time and when things go bad, 26-year-olds don’t have enough experience,’ said Rogers to Kitco on Monday (Sep. 25).

This post was published at Wall Street Examiner on September 29, 2017.

Frontrunning: September 29

Republican Tax Plan Hits First Hurdle (WSJ) A $6.4 Billion Windfall Awaits Big U. S. Banks in Trump’s Tax Cut (BBG) How Does the Trump Tax Plan Affect You? WSJ Answers Your Questions (WSJ) Twitter suspends Russia-linked accounts, but U. S. senator says response inadequate (Reuters) Flight ban on Iraqi Kurds imposed after independence vote (Reuters) Elon Musk’s New Vision: Anywhere on Earth in Under One Hour (BBG) Kurdistan region refuses to hand over border crossings to Iraqi government: Rudaw (Reuters) Independence Vote Tests Catalonia’s Police Force (WSJ) Uber CEO Khosrowshahi to Visit U. K. to Rescue London License (BBG) Chinese Money Is Still Leaking Into the World’s Housing Markets (BBG) Russia accuses CNN International of violating Russian media law (Reuters) Dems on Trump’s Voter Fraud Panel Push Back (BBG) Schumer says senators close to bipartisan deal on health exchanges (Reuters) VW’s dieselgate bill hits $30 billion after another charge (Reuters) VW Takes New $2.9 Billion Hit From Diesel Scandal (WSJ) Iron Ore Becomes Punch Bag as China Concerns Drive 20% Collapse (BBG) U. S. visas to six Muslim nations drop after Supreme Court backs travel ban (Reuters) P&G CEO Blasts Nelson Peltz as Tensions Mount Over Board Vote (BBG) Lyft IPO puts investors in self-driving cars as well as ride services (Reuters) World’s Biggest Oil Company Promised Expats Idyllic Lifestyle – Then Fire Erupted (WSJ) Chaos and hackers stalk bitcoin investors (Reuters)
Overnight Media Digest
– A day after announcing their tax plan, Senate Republicans debated scaling back one of their largest and most controversial proposals to pay for lower tax rates – repeal of the individual deduction for state and local taxes.

This post was published at Zero Hedge on Sep 29, 2017.

Chart of the Day: 2017 Is the Shallowest Year on Record

This chart is making the rounds on Twitter right now. Liz Ann Sonders (@LizAnnSonders), Chief Investment Strategist at Charles Schwab, brought it to our attention. It shows the maximum drawdown in the S&P 500 each year going back to 1914 with our current year the shallowest in history.
h/t to @LizAnnSonders – S&P 500 has experienced "shallowest drawdown in history" this year
— Financial Sense (@FinancialSense_) September 28, 2017

This post was published at FinancialSense on 09/28/2017.

Here Are The Cities Of The World Where “The Rent Is Too Damn High”

In ancient times, like as far back as the 1990s, housing prices grew roughly inline with inflation rates because they were generally set by supply and demand forces determined by a market where buyers mostly just bought houses so they could live in them. Back in those ancient days, a more practical group of world citizens saw their homes as a place to raise a family rather that just another asset class that should be day traded to satisfy their gambling habits.
But, thanks to the efforts of global central banks, the days where home prices roughly reflected the ability of the marginal local buyer to afford those homes, is long gone. As a general rule of thumb, a house was historically considered “affordable” if it was less than 2.5 times a family’s annual gross income…by those metrics, at least according to the UBS Global Real Estate Bubble Index released earlier today, the median buyer can’t afford housing in pretty any of the major cities of the world.
Buying a 60m2 (650 sqft) apartment exceeds the budget of people who earn the average annual income in the highly skilled service sector in most world cities. In Hong Kong, even those who earn twice the city’s average income would struggle to afford an apartment of that size. House prices have also decoupled from local incomes in London, Paris, Singapore, New York and Tokyo, where price-to-income multiples exceed 10. Unaffordable housing is often a sign of strong investment demand from abroad, tight zoning and rental market regulations. If investment demand weakens, the risk of a price correction will increase and the long-term appreciation prospects will shrink.

This post was published at Zero Hedge on Sep 29, 2017.

Don’t Fall for Tax Reform

Please don’t fall for tax reform.
It’s a con, and a shell game. It’s a promise every presidential candidate makes, including Trump. But we ought to be suspicious of grandiose talk about Congress reforming anything. Tax reform proposals always evade and obscure the real issue, which is the total cost– financial, compliance, and human– taxes impose on society. The fundamental questions about war and entitlements and state power go unasked. We never consider whether Congress really needs to spend more than $4 trillion in 2018, or how it managed to double federal spending in only 15 years.
Since those questions are never seriously raised, every proposal necessarily pits various interest groups against each other in a deadly game to make sure the other guy pays. After all, that $4 trillion has to come from somewhere. Hence we read articles about “winners and losers” in the Wall Street Journal, hapless tax serfs in a zero-sum world.

This post was published at Ludwig von Mises Institute on 09/28/2017.