It’s More Than Just The Absence of Acceleration, It’s The Synchronization Where There Should Be None

This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
According to the latest ECB figures, as of yesterday total ‘liquidity’ added to the European banking system for that central bank’s ongoing monetary ‘stimulus’ was just shy of 2 trillion. The outstanding balance in the core current account (reserves) held on behalf of the banking system was 1.296 trillion. In the deposit account, banks are holding 686 billion at -40 bps in ‘yield.’
To create all these euro-denominated numbers, the European Central Bank through its constituent National Central Banks (NCB) has purchased 2.21 trillion through its three main active LSAP’s (Large Scale Asset Purchases): the PSPP, or QE, which buys up sovereign bonds and is the reason for running them through the NCB’s (out of original concern exactly who would bear any default risk); the CBPP3, or the third time the ECB has bought covered bonds from banks; and the Corporate Sector Purchase Program which is self-explanatory.
The numbers given above don’t appear to balance because of the way all this stuff is accounted for. The NCB transactions of QE and other material operations actually subtract from the ECB’s asset side because it isn’t doing them, becoming instead -1.21trillion in so far accumulated autonomous factors. On the other side, the liability side of the simple balance sheet, there are outstanding 769 billion in normal liquidity operations (OMO) at the MRO.

This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ November 30, 2017.

The Complete Idiot’s Guide To Being An Idiot

Authored by MN Gordon via,
There are many things that could be said about the GOP tax bill. But one thing is certain. It has been a great show.
Obviously, the time for real solutions to the debt problem that’s ailing the United States came and went many decades ago. Instead of addressing the Country’s mounting insolvency, lawmakers chose the expedient without exception. They kicked the can from yesterday to today.
Presently, there are no good options left to fix the mathematics bearing down on us all. Hence, in the degenerate stage of an overburdened nation-state, style over substance is what counts. Without question, Congress and President Trump played their parts to push the bill with much bravura.
On Tuesday, for example, President Trump, Senate Majority Leader Mitch McConnell, and House Speaker Paul Ryan held a White House meeting with two empty chairs. Apparently, Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi didn’t want to participate in a ‘show meeting.’ Thus, they made a spectacle of themselves and ditched the meeting.
Indeed, their absence was all part of the show. Moreover, the entire episode was show; nothing more. At the time of this writing (Thursday night), the show continues on. The last we heard, the Senate vote had been delayed until Friday. By the time you read this it may be a done deal – or maybe not.
Regardless, the tax bill is all quite meaningless when you have a fiat currency that’s been stretched out like silly putty. No doubt, this has propagated immense financial speculation while outrunning actual economic growth. The effect has manifested in strange and unexpected ways.

This post was published at Zero Hedge on Dec 1, 2017.

Susan Collins Will Vote For Senate Tax Reform Plan

Update: In a statement, Susan Collins declared her intention to vote for the Senate GOP tax plan, saying the GOP leadership’s decisions to preserve state and local tax deductions up to $10,000 and to expand the child tax credit helped win her support.
“I will cast my vote in support of the Senate tax reform bill. As revised, this bill will provide much-needed tax relief and simplification for lower- and middle-income families, while spurring the creation of good jobs and greater economic growth.”
Here's the full @SenatorCollins stmt RE:her support of the Senate GOP tax plan:
— Frank Thorp V (@frankthorp) December 1, 2017

This post was published at Zero Hedge on Dec 1, 2017.

1/12/17: Eonia’s strange vaulting

What concentration risk and liquidity risk can do to you when both combine?

Eonia (Euro OverNight Index Average) is the 1-day interbank interest rate for the Euro zone. In other words, it is the rate at which banks provide loans to each other with a duration of 1 day (so Eonia can be considered as the 1 day Euribor rate). In other words, it is a measure of short-term liquidity. Eonia is an average of actual rates charged, so it is, in theory, a reflection of the market demand for short term liquidity. But Eonia is a tiny market, trading normally daily at around EUR7 billion or less. And in a tiny market, there can be a sudden shift in trading volumes. This is what happened on Wednesday and Thursday. Eonia rose from -0.36 basis points on Tuesday to -0.30 bps on Wednesday to -0.24 bps on Thursday.

This post was published at True Economics on Friday, December 1, 2017.

Democrats’ Last-Ditch Effort To Force Tax Reform Back To Committee Fails By Vote Of 56-44

Update (2:35PM EST): And just like that, another forced procedural vote to push the GOP tax reform bill back to committee fails by a vote of 56-44.
Tune in below as the Senate takes yet another vote on a procedural motion to force the GOP tax reform legislation back to committee. As we noted earlier, this last ditch effort by Democrats comes after Mitch McConnell confirmed that Republicans have the votes required to pass their tax bill after working through the night to make a series of substantial changes. Here’s more from Bloomberg:
Senate agrees to hold another procedural vote from Democrats on the tax bill at 2pm, and Majority Leader Mitch McConnell will speak on the floor after the vote. Vote is the latest effort from Democrats to send the bill back to cmte; all previous attempts to delay the bill have failed

This post was published at Zero Hedge on Dec 1, 2017.

Banks and the Fed’s Duration Trap

This is a syndicated repost courtesy of theinstitutionalriskanalyst. To view original, click here. Reposted with permission.
Atlanta | Is a conundrum worse than a dilemma? One of the more important and least discussed factors affecting the financial markets is how the policies of the Federal Open Market Committee have affected the dynamic between interest rates and asset prices. The Yellen Put, as we discussed in our last post for The Institutional Risk Analyst, has distorted asset prices in many different markets, but it has also changed how markets are behaving even as the FOMC attempts to normalize policy. One of the largest asset classes impacted by ‘quantitative easing’ is the world of housing finance. Both the $10 trillion of residential mortgages and the ‘too be announced’ or TBA market for hedging future interest rate risk rank among the largest asset classes in the world after US Treasury debt. Normally, when interest rates start to rise, investors and lenders hedge their rate exposure to mortgages and mortgage-backed securities (MBS) by selling Treasury paper and fixed rate swaps, thereby pushing bond yields higher.

This post was published at Wall Street Examiner by (Admin) Bill Patalon ‘ November 30, 2017.

Carmageddon for Tesla

This is where Hype Goes to Die.
Today was the monthly moment of truth for automakers in the US. They reported the number of new vehicles that their dealers delivered to their customers and that the automakers delivered directly to large fleet customers. These are unit sales, not dollar sales, and they’re religiously followed by the industry.
Total sales rose 0.9% from a year ago to 1,393,010 new vehicles, according to Autodata, which tracks these sales as they’re reported by the automakers. Sales of cars dropped 8.2%. Sales of trucks – which include SUVs, crossovers, pickups, and vans – rose 6.6%. Strong replacement demand from the hurricane-affected areas in Texas papered over weaknesses elsewhere. As always, there were winners and losers.
And one of the losers was Tesla.
First things first: There is nothing wrong with a tiny automaker trying to design, make, and sell cool but expensive cars that a few thousand Americans might buy every month, and trying to do so on a battleground dominated by giants. Porsche has been doing that for years. Porsche AG is owned by Volkswagen AG, which is itself majority-owned by Porsche Automobil Holding SE. Tesla is out there by itself.

This post was published at Wolf Street by Wolf Richter ‘ Dec 1, 2017.

Wonder Who Was Buying Yesterday’s Market Breakout? Here’s The Answer

Wonder who was buying the euphoria blow-off top stock market breakout yesterday? One clear answer, according to Nicholas Colas of DataTrek Research, is answer is ‘Mom and Pop’. Nick looked at the publicly available trade data on Fidelity’s retail website and found net buy orders across both single stocks (mostly tech) and ETFs. And, no surprise, some bitcoin names as well.
Here’s what else Nick discovered.
Retail investors have lost some of their reputation for being the ‘Dumb money’ over the last few years. After all, anyone ‘Dumb’ enough to own the largest US listed ETF (SPY) or the biggest tech names (AAPL, GOOG, etc) has done very well for over half a decade.
Still, whenever we see a big up day for US stocks, we can’t help but wonder what the retail investor is buying when stocks hit (yet another) all time high. Are they getting cautious and lightening up? And what names do they still like?
Fidelity Investments lets you see their customers’ Top 10 names traded, in real time if you have an account and one day-delayed if you don’t.
Here’s some color on today’s market action, courtesy of that information source:
Fidelity’s retail accounts were net buyers in 9 out of the top 10 names traded by their customers. The only exception: Kroger. Tech names held the top 4 positions in terms of total order volumes. Ranked by total activity, they were: Nvidia, Micron Technology, Apple and Amazon.

This post was published at Zero Hedge on Dec 1, 2017.

Flynn Flush Rescues ‘VIX Elephant’ As ’50 Cent’ Backs Up The Truck

The ‘VIX Elephant’ has awakened. And ’50 Cent’ is back.
That’s the mysterious-sounding ointroduction to a notable market insight from Bloomberg this mornig as they note the turmoil surrounding Mike Flynn headlines – spiking VIX and slamming stocks – provided two big options market ‘whales’ with some relief and room to move…
First, the trader who’s known as the Elephant for making big moves in the VIX — but who’s been surprisingly quiet in recent weeks — returned with a vengeance to start December, buying and selling more than 2 million contracts Friday to continue betting on a modest rise in the Cboe Volatility Index. That’s three times the average daily volume for all VIX options.
The Elephant caught a major break thanks to the sharp retreat in the S&P 500 Index following reports that former national security adviser Michael Flynn would implicate members of President Donald Trump’s transition team in the probe into Russian meddling in the 2016 election. The VIX spiked to as high as 14.58 as equities tumbled.
Pravit Chintawongvanich, head of derivatives strategy at Macro Risk Advisors, said the investor had been poised to lose $20 million to $30 million on the December leg of this trade before Friday, but was able to escape with a loss of less than $2 million in closing up those positions.
‘They got really lucky with the selloff today,’ Chintawongvanich said.
‘They were down a lot on the December position, and this allows them to get out of it without too much of a loss.’

This post was published at Zero Hedge on Dec 1, 2017.

US Manufacturing’s Hurricane-Rebound Is Over: New Orders Sink, Costs Soar

The brief rebound in US manufacturing after the hurricanes appears to have ended as Markit’s PMI dropped from 54.6 to 53.9 as new orders slowed amid soaring inflation. For once ISM Manufacturing also agreed with PMI – dropping to its lowest since July – with employment and export orders sinking.

While new orders slowed, the most notable item in the PMI data was that inflation is surging…

This post was published at Zero Hedge on Dec 1, 2017.

Market Talk- December 1, 2017

Although Asian indices opened well on the back of a strong US session, they unfortunately could not hold the levels. Part of the reasoning was the tax Bill would be delayed and having seen the DOW blast through the psychological 24k level many were concerned this delay could threaten Thursday gains. The Nikkei was up over 1% at the open but the uncertainty depleted over half of that gain. The Yen continues to drift with the high 112’s a comfortable trading range as the US markets reopen. Exporters were again leading the way but the weaker currency was a definite factor! Both the Hang Seng and Shanghai indices opened better but the lack of confidence and weak economic data (Manufacturing PMI) added to the uncertainty.

This post was published at Armstrong Economics on Dec 1, 2017.

The Dirty Shopping Season Secret ‘They’ Don’t Want You to Know About

This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission.
I don’t want to get into one of my ‘commercialization of Christmas’ rants, but my biggest issue with the whole Christmas shopping season is that Americans fall for this blatant scam every single year.
Now, I’m not here to fight the culture wars, but I do have an agenda: to tell you the truth – and point you toward ‘unreasonably’ good profits.
With that said…
They already screwed up Christmas, and now they’ve screwed up my favorite holiday, Thanksgiving, with this destructive Black Friday con.
In fact, if I were ever CEO of a retailer, I’d gather all the executives during our first meeting and ask them, ‘What’s your Black Friday strategy for next Thanksgiving?’
Anyone who had plans would be fired.
Hear me out…
These Numbers Don’t Even Come Close to Adding Up
You see, retail is 70% of the U. S. economy, and 20% of all retail sales are in the fourth quarter. If you work that out, it means that 14% of the entire U. S. GDP is a result of consumers buying holiday gifts, with most of the sales taking place in the three days between Black Friday and Cyber Monday.

This post was published at Wall Street Examiner by Tim Melvin ‘ December 1, 2017.

Tax Plan Deceptions Come Under Scrutiny by Inspector General

On April 20 of this year, U. S. Treasury Secretary Steven Mnuchin spoke about the Trump administration’s tax plan at the Institute of International Finance. (Watch the video here.) Mnuchin described how the plan would pay for itself without adding to the national debt. He stated:
‘The deal will pay for itself. Now, having said that, we fundamentally believe in dynamic scoring. So, as you know, static scoring – you change the tax code, you plug it in, you see what the cost is. So, you are correct, fundamentally you’re lowering taxes under a static score, it’s gonna cost money. Now, having said that, some of the lowering in rates is going to be offset by less deductions, in simpler taxes. So, some of it will be made up on that but the majority of it will be made up on in what we believe is fundamentally growth and dynamic scoring.
‘And, you know, these are huge numbers. I mean you could have as high as $2 trillion difference in revenues over a 10-year period, depending on what you think is going to be the growth function. So the plan will pay for itself with growth.’
The United States Congress has already sentenced the next generation to a lower standard of living by virtue of its current $20.5 trillion in national debt. Just in the past fiscal year, the U. S. ran up a deficit of $666 billion. That follows deficits of $585 billion in 2016, $438 billion in 2015, $485 billion in 2014, $679 billion in 2013 and more than $1 trillion in deficits in each year from 2009 through 2012 despite extraordinary efforts to stimulate the economy following the 2008 Wall Street financial collapse.

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

Germany Ends Tesla Model S Subsidies In Massive Blow To Company’s Government Funded Business Plan

Apparently German government officials have finally woken up to the realization that it’s utterly ridiculous to use tax revenue generated primarily from middle and low-income households to fund subsidy payments to rich people buying $100,000 luxury sports cars. As Business Standard notes this morning, the German Federal Office for Economic Affairs and Export Controls announced that it will no longer subsidize the Tesla Model S as it can not be delivered in a configuration that meets the 60,000 euro price limit.
A German government agency has removed Tesla’s Model S from the list of electric cars eligible for subsidies because it is not available in a version that falls within a 60,000 euro ($71,448) price limit. Tesla customers could not order the Model S without extra features that pushed the price of the car above the limit, a spokesman for the German Federal Office for Economic Affairs and Export Controls (BAFA) said on Friday.
German magazine Auto Bild had reported that BAFA was looking into the issue and could take Tesla off the eligibility list.

This post was published at Zero Hedge on Dec 1, 2017.

“You’re Right, I’m A Threat To Big Banks” – UK Opposition Leader, Jeremy Corbyn, Lashes Out At Morgan Stanley

Earlier this week, Morgan Stanley published a report arguing that UK opposition leader, Jeremy Corbyn becoming Prime Minister, was a bigger threat to UK asset markets than Brexit. MS saw a two thirds chance of a snap UK election in the second half of 2018 when UK can’t secure a satisfactory Brexit deal and the ruling Conservative party fractures. This could lead to a sharp swing in political support towards the far left, Corbyn’s ascension, a 32% crash in the Footsie 100 index, another big fall in Sterling, nationalizations and irreparable damage to free markets…basically heaps of bad stuff. The Guardian quoted from the MS report.
‘From a UK investor perspective, we believe that the domestic political situation is at least as significant as Brexit, given the fragile state of the current government and the perceived risks of an incoming Labour administration that could potentially embark on a radical change in policy direction. ‘Against this backdrop, even if we see good progress in the Brexit negotiations, the scope for UK sensitive assets to rally may be muted, unless we also see an improvement in the government’s position in opinion polls.’
MS equity strategist, Graham Secker, handed out a warning for UK investors, which was reported by Bloomberg.
‘If I am a U. K. equities fund manager, I am more concerned about a potential change in the domestic political government than I am about Brexit,’ Secker said at a briefing Monday. ‘You need to think about tax rates going up, about nationalization, about an economic system which has favored capital over labor for last 10 to 20 years shifting to favor labor over capital.’

This post was published at Zero Hedge on Dec 1, 2017.