Goldman: These Are The Three Biggest Risks Facing Stocks In 2018

When it comes to the most influential investment bank in the world, Goldman Sachs, its 2018 outlook is borderline euphoric despite the bank’s own explicit admission that valuations have never been higher. In a tortured, goalseeked analysis which we discussed last week, the bank’s chief equity strategist David Kostin said that he expects a year of ‘rational exuberance’ catalyzed by the Trump tax cuts becoming law (some time in early 2018), leading to an upward revised year-end S&P price target of 2,850 (from 2,500 previously) and rising to 3,100 by 2020 (Kostin’s ‘irrationally exuberant’ parallel universe sees the S&P rising above 5,000 as the equity bubble repeats the events of the late 1990s – more here).
Naturally, the chief strategist concedes that all bets are off should Trump fail to pass tax reform (or even a far less comprehensive corporate tax cut program), and the S&P is likely to tumble to 2,400 from its current all time high level above 2,600 (Kostin did not have a S&P forecast for outer years which does not implement Trump tax cut, suggesting that Goldman’s clients will be extremely disappointed, and angry, should Goldman’s 80% odds of GOP tax reform passing prove just a “little” off ).
What is more interesting, is that even in discussions of the future that do not include Goldman’s assumptions of legislative reform, or its explicit S&P forecasts, the bank is especially sanguine, and does not anticipate a bear market as a result of 2017 being a ‘goldilocks year’ in which the world enjoyed coordinated, synchronized global growth courtesy of over $2 trillion in central bank liquidity injections but without the matching increase in inflation, which coupled with a perverse collapse in global volatility…

This post was published at Zero Hedge on Nov 26, 2017.

There Have Been 698 Earthquakes In California Within The Past 30 Days

Why is the west coast shaking so violently? According to the latest data from Earthquake Track, there have been 698 earthquakes in California within the past 30 days. By the time that you read this article, that number will undoubtedly have changed. In recent days I have felt such an urgency to write about the seismic activity on the west coast, and I am quite concerned that so few people seem to be paying attention to what is happening.
As I have covered previously, scientists tell us that when seismic activity begins to escalate the probability of having a major earthquake jumps significantly. Over the past month there have been more mainstream news articles about earthquake swarms in California than I have seen in years, and the magnitude 4.6 earthquake that rattled Monterey County earlier this month made headlines all over the world.
And it isn’t just the U. S. section of the ‘Ring of Fire’ that seems to be awakening. I have written about Mt. Popocatepetl down in Mexico several times recently, and on Friday it erupted three more times…
Spectacular eruptions have been seen Southeast of Mexico City as Mexico’s Popocatepetl volcano spewed smoke and ash high into the air.
The volcano had three eruptions Friday, one of which reached two and a half miles into the sky.

This post was published at The Economic Collapse Blog on November 26th, 2017.

‘Stocks and Economy are Totally Out Of Sync’

Wolf Richter with Jim Goddard on ‘This Week in Money’:
Are the current stock market highs related to the economy? Who gets crushed by the onslaught of online retail? How are Canadian mortgages riskier for homeowners and lenders than standard US mortgages? Are new vehicles overpriced? What are you bullish or bearish on for 2018…


This post was published at Wolf Street by Wolf Richter ‘ Nov 26, 2017.

Obamacare’s Revenge: The IRS Will Not Process Your Tax Return Unless You Tell Them Whether You Have Health Insurance Or Not

Yes, this is a true story. I was completely shocked when I learned about this too, and this just underscores the importance of repealing the individual mandate immediately. Shortly after taking office, President Trump issued an executive order which was intended to move the IRS away from enforcing Obamacare’s individual mandate, but now the IRS has found a way around that executive order. According to the official AARP website, the IRS has announced that it will not process any tax returns from individuals that are not willing to disclose whether they currently have health insurance or not…
The Internal Revenue Service won’t process individual tax returns in 2018 unless taxpayers indicate whether they have health insurance coverage or an exemption.
The move, announced last month, reverses course from this year, when the IRS said it would not require filers to indicate on 1040 tax forms whether they had health insurance. Filers were still required to have medical insurance or pay a penalty, but the IRS accepted and processed returns even if taxpayers didn’t indicate coverage status.
So what this means is that you will not get your refund until you tell the IRS if you have health insurance.
And if you don’t have health insurance and you don’t qualify for an exemption, you could be hit with a very painful financial penalty.

This post was published at The Economic Collapse Blog on November 26th, 2017.

OPEC, Russia Said To Announce Oil Pact Extension On Nov 30

Authored by Tsvetana Paraskova via OilPrice.com,
Saudi Arabia and Russia have agreed that OPEC and non-OPEC allies should announce an extension of the cuts at the highly-anticipated meeting in Vienna on November 30, Bloomberg reported on Friday, quoting people involved in the talks.
Recent OPEC/non-OPEC oil pact chatter had it that Saudi Arabia was pushing for an announcement of the cuts extension next week in Vienna, while Russia was more hesitant about telling the market on November 30 how the participants in the deal would act. Russia appeared to be stalling and playing for an announcement to be issued closer to the current expiration deadline of the deal, March 2018.
According to Bloomberg’s sources, now Russia and Saudi Arabia have agreed on the need to announce some sort of a deal next week, but Russia has insisted on additional phrasing in the extension deal that would link the size of the cuts to the state of the oil market.

This post was published at Zero Hedge on Nov 26, 2017.

DiMartino Booth Warns Pressure On US Households Is Intensifying

Behind the rosy economic headlines, consumer stresses have continued to build and are likely to worsen…
Is the U. S. economy enjoying a honeymoon, or is this merely a hiatus? Although this isn’t a subject of discussion among most economists, there will be both good and bad associated with three hurricanes and the California wildfires.
In early summer, the economic data began to surprise to the upside and the momentum has gained traction. The Citigroup Economic Surprise Index recently hit its highest level of the current cycle.
But there are signs that beneath the veneer of healthy headlines, household stresses have continued to build and are likely to worsen as losses related to the storms begin to seep into future months’ data.

This post was published at Zero Hedge on Nov 26, 2017.

The Dumbest Dumb Money Finally Gets Suckered In

Corporate share repurchases have turned out to be a great mechanism for converting Federal Reserve easing into higher consumer spending. Just allow public companies to borrow really cheaply and one of the things they do with the resulting found money is repurchase their stock. This pushes up equity prices, making investors feel richer and more willing to splurge on the kinds of frivolous stuff (new cars, big houses, extravagant vacations) that produce rising GDP numbers.
For politicians and their bureaucrats this is a win-win. But for the rest of us it’s not, since the debts corporations take on to buy their own stock at market peaks tend to hobble them going forward, leading eventually to bigger share price declines than would otherwise be the case.
The ultimate loser? The only people traditionally willing to buy in after corporations are finished overpaying for their stock: Retail investors, of course.
Let’s see how it’s playing out this time.
First, corporations spent several years elevating stock prices with share repurchases. Note the near perfect correlation between the two lines:

This post was published at DollarCollapse on NOVEMBER 26, 2017.

26/11/17: FAANGS+ Brewing up another markets storm

One of the key signals of a systemic mispricing of financial assets is concentration risk. I wrote about this in a number of posts on the blog, so no need repeating the obvious. Here is the latest fragment of evidence suggesting that we – the global financial markets and their investors – are at or near the top of froth when it comes to ‘irrational exuberance’: So what should investors do? Some lessons from the GFC that can help are summarized here: And some additional warning signs of the bubble are summarized here: Quote: “…our new Delirious Dozen consists of the FAANGs (Facebook, Apple, Amazon, Netflix and Google) plus seven additional high flyers (Tesla, NVIDIA, Salesforce, Alibaba, UnitedHealth, Home Depot and Broadcom).”

This post was published at True Economics on Sunday, November 26, 2017.

Citi’s Shocking Admission: “There Is A Growing Fear Among Central Bankers They’ve Lost Control”

Earlier we showed a variation on a VIX chart from Citi’s Hans Lorenzen which, if it doesn’t impress, or scare you, then nothing probably will.
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However, leaving readers unimpressed – and unscared – will not satisfy Lorenzen, which is why the credit strategist who works together with the godfather of rational doom, Matt King, and has been warning for weeks that now is the time to sell credit, unloads in one of the more effusive missives of dripping negativity to hit during this holiday week when one after another equity sellside analyst has been desperate to outgun each other with their ridiculous 2018 year end S&P forecasts.

This post was published at Zero Hedge on Nov 25, 2017.

“When To Worry?”: How Long After The Curve Inverts Does The Recession Begin

The recent (bear) flattening of the US yield curve to levels not seen since before the GFC, a move which has only accelerated in recent weeks as the stock market hit all time highs, has prompted some to question the strength of the US economic cycle, and others to ask outright how long before the curve inverts, signaling an imminent recession. Here, as Citi’s Jeremy Hale notes, just as “Dr. Copper” can sometimes be viewed as a stock market precursor, so “Professor Curve” (particularly when inverted or aggressively flattening) can be viewed as a signal of that policy is too restrictive relative to economic fundamentals (especially when using term premium suggests the curve should already be inverted). That said, during an expansion it’s generally normal for the curve to flatten, as the economy expands and the output gap closes, as shown in the chart below. This can be attributed to expectation of a higher Fed funds rate, but also a lower term premium, or more ominously, an inability to pass through inflation to the broader economy, leading to tighter financial conditions which ultimately manifest in an economic contraction.
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Putting the recent 2s10s flattening in context (blue line on chart above), assuming this cycle started at the December 2013 steepness of 264bps, the curve has flattened for the past 60 months. On average, historic flattening cycles last for 2-2.5 years and flatten ~270bps from peak to trough. As Citi notes, we have flattened three quarters on the way there, or roughly 204bps so far in this cycle, therefore in comparison to previous episodes; perhaps this flattening dynamic is growing grey hairs… but it’s certainly not finished yet.

This post was published at Zero Hedge on Nov 26, 2017.

Largest employer in each U.S. state: In 22 states Walmart is the largest employer.

With the holiday season comes the usual mindless shopping and stampedes of people looking for that blowout sale. If you have any doubt about how far we have slid into a low wage nation just look at the largest employer data for each state. Walmart is the largest employer in 22 states. Instead of the majority creating things we now have the majority consuming things in mass. This is also one part of the complicated calculus that has hollowed out our middle class and has exported our savings out of this country and across the world to other places where manufacturing is occurring. Now this data might be known by some but watching the mainstream press you realize that people are really out of touch with how most Americans are living. People are living paycheck to paycheck and the standard of living is slowly being chipped away. Welcome to Walmart Nation.
Walmart dominating employment
It might be worth looking back at 1955 to see who the biggest employers were then:
GM
Chrysler
U. S. Steel
Standard Oil of New Jersey
Amoco
Goodyear
Firestone

This post was published at MyBudget360 on November 26, 2017.

Why Capital Controls Usually Fail, China Versus Bitcoin Edition

One of the recurring themes of financial history is government over-reach leading citizens to mistrust the local currency and move money overseas, prompting the government to try to trap that wealth within its borders. This nearly always fails because rich people are clever and borders are really hard to seal.
The latest chapter in this story involves China – which has engineered an epic debt binge in the past decade, and bitcoin – which has emerged as a highly efficient way to move capital across national borders. The following chart shows that between 2009 and 2016 China’s debt soared to levels comparable as a percentage of GDP to that of the US leading up to the Great Recession:

This post was published at DollarCollapse on NOVEMBER 26, 2017.