Stock Market 2018: The Tao vs. Central Banks

The central banks claim omnipotent financial powers, and their comeuppance is overdue.
I will be the first to admit that invoking the woo-woo of the Tao as the reason to expect a reversal of the stock market in 2018 smacks of Bearish desperation. With everything coming up roses in much of the global economy, there is precious little foundation for calling a tumultuous end to the global Bull Market other than variations of nothing lasts forever.
Invoking the Tao specifically calls for extremes to return or reverse to the opposite polarity: this is expressed in the line from Lao Tzu, The way of the Tao is reversal or Reversal is the movement of Tao.
In other words, extremes of bullishness lead to extremes of bearishness, just as the extremes of bearishness in March 2009 (S&P 500 at 667) led to the current extremes of bullishness (S&P 500 2,600).

This post was published at Charles Hugh Smith on SUNDAY, DECEMBER 03, 2017.

Trump’s Tax Cut – FDR Would Be Envious

Authored by Tom Luongo,
The first rule of politics is feather your own nest. President Trump’s tax cut proposal always had this in mind.
Congress has passed a bill which tinkers at the edges but leaves most of Trump’s core proposal intact. It’s obvious to me that Trump has the political acumen of another brilliant U. S. politician, the loathsome Franklin Delano Roosevelt.
Yeah, I’m not a fan of FDR. But I do respect his political skill in the same way I respect the way sharks hunt their prey.
FDR repackaged Herbert Hoover’s Works Progress Administration as ‘The New Deal’ which set him on a course of near perpetual re-election thanks to the wealth redistribution it engendered.
Am I saying the New Deal was nothing more than a vote-buying scheme? Yeah, pretty much. FDR knew that politicizing the Supreme Court and pushing the New Deal, even if he did it for the right reasons, would reshape the Federal election landscape for generations.
Trump’s tax plan will have similar effects. And it’s why there was such staunch opposition to it in Congress.
Democratic leadership understand that the triple-whammy of eliminating the State and Local Tax exemption, lowering corporate tax rate to 20% and incentivizing the on-shoring of corporate profits held overseas will gut their support at the electoral college level.

This post was published at Zero Hedge on Dec 3, 2017.

Market Goes ‘Full Bitcoin’

Authored by Lance Roberts via RealInvestmentAdvice.com,
Market Review
What the ‘heck’ was that?
This past week seemed to be the story of Christmas coming early. Earlier this week the markets surged higher on hopes that ‘Ole’ St. Tax Cuts’ would soon be here. But that dream seemed to be short-lived on Friday, at least at the open, as General Mike Flynn seems to embody the ‘Grinch’ trying to steal Christmas.
But at the end of it all, not much actually changed. Well, except for the fact that volatility not only made an appearance as stock prices swung wildly in both directions, but also in Treasury rates. As expectations of tax reform grew, rates spiked higher but then sank just as quickly as fears of turmoil in the Administration sent money into the safety of bonds.

This post was published at Zero Hedge on Dec 3, 2017.

Paul Tudor Jones: “This Market, Which Is Reminiscent Of The 1999 Bubble, Is On The Verge Of A Significant Change”

Just hours after Neil Chriss announced that his $2.2 billion Hutchin Hill hedge fund is shuttering due to underperformance and admitted that “we fought hard, but did not deliver the performance that you expected from us”, another legendary hedge fund announced it was undergoing a significant restructuring as a result of relentless investor withdrawals: citing a November 30 letter, Bloomberg reported that Paul Tudor Jones’ Tudor Investment Corp, which lost 1.6% YTD, was closing its Discretionary Macro fund “and letting investors shift assets to the main BVI fund as of Jan. 1” with the letter clarifying that “Jones will also principally manage Tudor’s flagship BVI fund, which will be the firm’s only multi-trader fund next year.”
The restructuring took place as clients pulled half a billion dollars from Tudor in the third quarter, leaving the firm’s assets at $7 billion, roughly half the level it managed in June 2015, Bloomberg News reported previously. As part of the sweeping overhaul, Andrew Bound and Aadarsh Malde, formerly co-CIOs of the Tudor Discretionary Macro Fund, would depart. In a move reminiscent of George Soros’ recent return to more active management, Jones, who ran the BVI fund with a team of managers, would now have a smaller team and will assume a more dominant role in the fund.

This post was published at Zero Hedge on Dec 3, 2017.

The Venture Capital Bubble Is Imploding! (The Beginning Of The Great Bubble Deflation?)

Following The Great Recession and The Fed’s extraordinary response, there was a lot of money available that we seeking risky assets, such as equities, housing and apartments.
Venture capital, the darling of business schools (that rarely look at the data, but focus on the snake oil-aspect of VC), has been in decline since 2014 after a meteoric rise after 2007.

This post was published at Wall Street Examiner by Anthony B Sanders – December 1, 2017.

3/12/17: Russian and BRICS debt dynamics since 2012

Back in 2014, Russia entered a period of recessionary economic dynamics, coupled with the diminishing access to foreign debt markets. Ever since, I occasionally wrote about the positive impact of the economy’s deleveraging from debt. Here is the latest evidence from the BIS on the subject, positing Russia in comparative to the rest of the BRICS economies:

This post was published at True Economics on Sunday, December 3, 2017.

Some Classic Short-Sale Candidates Get Even Better

Six months ago, recreational vehicle sales were booming and the companies making those expensive, gas-guzzling rolling houses were riding high. See The Perfect Crash Indicator Is Flashing Red.
And now? Same story, even bigger numbers – but with a decidedly more skeptical treatment in the media:
Hipsters Go Glamping, and RV Makers Soar
(Wall Street Journal) – For anyone who has gotten stuck on a mountain road behind a massive recreational vehicle, get used to it, there are a lot more on the highway. Recreational vehicles, ranging from bus-sized motor homes to retro trailers, have been a boom-and-bust industry since they first became popular in the early 1970s. Now a wave of retiring baby boomers and a surprisingly young new fan base have sent U. S. unit sales above their housing boom peak. Shares of the two leading manufacturers of RVs, Thor Industries and smaller Winnebago Industries each hit records last week.
The fundamentals – fuel prices, interest rates, disposable income and demographics – all look solid. That has the Recreation Vehicle Industry Association projecting a further jump this year and next. Despite that, delighted investors might want to unhitch themselves from these stocks. When things go badly for the economy, they go very badly for RV makers.

This post was published at DollarCollapse on DECEMBER 3, 2017.

Technical Scoop – Weekend Update Dec 3

Weekly Update
‘You can lead a horse to water, but you can’t make it drink’
– old saying
We may warn investors about the risks in the markets, but we can’t make them take action to do something about it. We recall back in late 1999/early 2000 receiving calls from people wanting to open up a brokerage account so that they could buy some tech or dot.com stock. We politely told them that to open an account would require we meet with the prospect, learn their investment goals, fill out papers, and await approval from the compliance department. The process could take more than a few days. By that time, the stock they were targeting could be up a further 10%, 20%, or even more.
Things were moving that fast. From lows in October 1998, the tech-heavy NASDAQ index soared almost 260% to its high in March 2000. The price earnings ratio (P/E) of the NASDAQ soared to an unheard-of (and never heard of again) 175 while some individual companies had P/Es over 400. The fact that the companies did not make any money was not an issue as the focus was on their long-term potential and growth. Warnings that the market was in an unsustainable bubble and that a potential crash could follow were largely ignored. Those communicating the warnings were dismissed as doomsayers, charlatans, or worse. Some received death threats. Two years, later by October 2002, the NASDAQ had fallen 78%. The bubble had burst.
Fast forward five years later. The Dow Jones Industrials (DJI) had soared to new all-time highs gaining 98% from October 2002 to October 2007. The NASDAQ had gained 158% in the same period but was still down 45% from the March 2000 high. But the real focus was on the hot housing market where prices had more than doubled since 2000 and where some regions saw even more spectacular growth. The growth had been spurred by the loosening of credit encouraged by government action, particularly through what was known as the Community Reinvestment Act and government agencies such as Fannie Mae and Freddie Mac.

This post was published at GoldSeek on 3 December 2017.

FX Weekly Preview: Tax Cuts, Rising Debt, Fed Hikes And More “Fake” News; USD Vol Rising

After a week when little other than politics has been ‘running’ the currency and rates markets, we expect more of the same but with the (now) backdrop of tier one data in the US to look to towards the latter end of this week. US payrolls is something which will be put on the back-burner as traders and investors alike size up the reaction to the Senate vote on the tax (cut) bill, which will be exacerbated by the retraction of the ABC story on Michael Flynn. The initial release on Friday reported the former national security adviser was ready to testify that Donald Trump had directed him to contact the Russians whilst a running candidate, but this was corrected to president elect which is standard procedure in foreign policy. The reporter, Brian Ross has since been dismissed by ABC, much to the satisfaction of the president, who continues to fight the good fight against fake news.
There will in all likelihood, be many more twists and turns, and no doubt more news – fake or otherwise – but next week will likely see US equities testing higher again, followed by the carry trade, but to a lesser degree. USD/JPY took a sharp downturn from near 113.00 levels, before dip buyers contained the sell off to the mid 111.00’s, and ending the week above 112.00 is likely to see a return to the highs before the market then starts to evaluate the effective gains of the tax cut bill, which has yet to meet agreement between House and Senate. The president expects to sign off this legislation by year end.
Back to the economy, where we will need to see continued improvement in order to underpin the 3 Fed hikes anticipated next year, and US factory orders on Monday kick off the week, followed by the ISM non manufacturing indices on Tuesday. Then it’s all eyes on the Nov payrolls report on Friday, where the consensus is for a 200k rise in the headline number, but hourly earnings seen tailing off from the 0.5% seen in Oct. We continue to see 2.50% capping 10yr yields, and as a such, the upper end of the USD/JPY range looks even less likely to exceed 115.00. Japanese GDP for Q3 due out on Thursday, but at 1.5% expected, is hardly going to light the fire under the JPY. Growth is picking up pace however, and provides food for thought further down the line when considering longer term (JPY) undervaluation.

This post was published at Zero Hedge on Dec 3, 2017.

Maduro Unveils “The Petro”: Venezuela’s Official Cryptocurrency To “Overcome Financial Blockade”

You sure he didn't say 'KLEPTO-currency'? — Wild Goose (@TrueSinews) December 3, 2017

Three months ago, in a not entirely surprising move meant to circumvent US economic sanctions on Venezuela, president Nicolas Maduro announced that his nation would stop accepting dollars as payment for oil imports, followed just days later by the announcement that in a dramatic shift away from the Petrodollar and toward Beijing, Venezuela would begin publishing its oil basket price in Chinese yuan. The strategic shift away from the USD did not work quite as expect, because a little over two months later, both Venezuela and its state-owned energy company, PDVSA were declared in default on their debt obligations by ISDA, which triggered the respective CDS contracts as the country’s long-expected insolvency became fact.
Fast forward to today when seemingly impressed by the global crypto craze, Maduro on Sunday announced the creation of the “Petro“, Venezuela’s official cryptocurrency “to advance in the matter of monetary sovereignty, to make financial transactions and to overcome the financial blockade”.
“Venezuela announces the creation of its cryptocurrency, the Petro; this will allow us to move towards new forms of international financing for the economic and social development of the country,” Maduro said during his weekly television program, broadcast on the state channel VTV.

This post was published at Zero Hedge on Dec 3, 2017.

Goodbye, Net Neutrality. Hello, Liberty.

The New York Times has published a screed with this title: The Internet Is Dying. Repealing Net Neutrality Hastens That Death.
Let me remind you of the basic rule of titling breathless articles: begin with the phrase “the death of” or “the end of.” When you read such a phrase, you can be sure that whatever it is, it is not dying. Whatever it has been in the past, it is likely to be in the future. It is not facing the end.
Here is the logic of the screed.
The internet is dying. Sure, technically, the internet still works. Pull up Facebook on your phone and you will still see your second cousin’s baby pictures. But that isn’t really the internet. It’s not the open, anyone-can-build-it network of the 1990s and early 2000s, the product of technologies created over decades through government funding and academic research, the network that helped undo Microsoft’s stranglehold on the tech business and gave us upstarts like Amazon, Google, Facebook and Netflix.
Nope, that freewheeling internet has been dying a slow death – and a vote next month by the Federal Communications Commission to undo net neutrality would be the final pillow in its face.
Net neutrality is intended to prevent companies that provide internet service from offering preferential treatment to certain content over their lines. The rules prevent, for instance, AT&T from charging a fee to companies that want to stream high-definition videos to people.
The phrase “preferential treatment” is easy to define: high bid wins. It is the organizational principle of the auction.
The mainstream media are Keynesian to the core. The fundamental principle of the free market is this: high monetary bid wins. It is the principle of the auction. Liberals hate most auctions. Yes, they like auctions of incredibly overpriced and incomparably ugly art. They don’t get upset when somebody pays $150 million to buy a piece of tripe painted by Picasso. That’s their kind of stupidity. They like it. But they don’t want the common people to have access to open markets. Open markets are only for the elite, in the view of America’s Left.

This post was published at Gary North on November 30, 2017.

Blow.Off.Top.

No period is worse for bears than when it’s the best time to sell stocks. It’s the polar opposite of when conditions are worst for bulls, right when it’s the best time to buy as it was in January-March 2009. The exhaustion factor is enormous. It’s called capitulation as moves get stretched to the extreme even though the set-up is valid.
November’s close marked the 13th consecutive month straight up for global markets. Nothing but up with fewer and ever smaller dips in between. Deutsche Bank’s Reid illustrated the point: ‘We’ve never had such a run with data going back over 90yrs’. I’d say that qualifies as the worst of time for bears.
Yet we could be sitting on a generational opportunity to sell equities as it could be argued that conditions will never be better for bulls as the game of offering carrots of free money is coming to an end. Indeed it could be argued that the prospect of tax cuts is the final carrot the free money scheme has to offer. The carrot top. No more carrots.

This post was published at Zero Hedge on Dec 3, 2017.

Iceland’s New Government Has Cunning Plan Of Tapping Banks To Boost Growth, Improve Infrastructure

We like Iceland, we’ve never been there, but that doesn’t matter. Besides the outstanding natural beauty, Iceland, unlike the US, UK and practically everywhere else, holds bankers accountable. Last time we checked, 29 had been jailed. As we discussed, it also holds its leaders accountable (partially – see below) when they are complicit in exonerating convicted child rapists. Such an event brought down Iceland’s government in September.
Last week, it emerged that Prime Minister Bjarni Benediktsson knew of attempts by his father, Benedikt Sveinsson, to have the Ministry of Justice grant ‘restored honor’ to a convicted child rapist. Benediktsson kept this secret as the rapist, a friend of his father’s was essentially exonerated.
Restored honor is the controversial process by which convicted criminals can have their crimes expunged and return to society with all rights and privileges restored. It requires that the convicted person serve between two to five years of their sentence on their best behavior and that they have multiple letters of recommendation. Sveinsson provided one such letter.

This post was published at Zero Hedge on Dec 2, 2017.

The Boom Continues

The US economic boom is still in progress, where a boom is defined as a period during which monetary inflation and the suppression of interest rates create the false impression of a growing/healthy economy*. We know that it is still in progress because the gap between 10-year and 2-year Treasury yields – our favourite proxy for the US yield curve – continues to shrink and is now the narrowest it has been in 10 years.
***
Reiterating an explanation we’ve provided numerous times in the past, an important characteristic of a boom is an increasing desire to borrow short to lend/invest long. This puts upward pressure on short-term interest rates relative to long-term interest rates, which is why economic booms are associated with flattening yield curves. The following chart shows the accelerating upward trend in the US 2-year yield that was the driving force behind the recent sharp reduction in the 10yr-2yr yield spread.

This post was published at GoldSeek on Sunday, 3 December 2017.

ABC NEWS SUSPENDS BRIAN ROSS AFTER ON-AIR FAKE NEWS REPORT ABOUT MICHAEL FLYNN THAT CAUSED STOCK MARKET PANIC

In a stunning admission of guilt, ABC news announced Saturday that it was suspending investigative reporter Brian Ross for four weeks after he aired a fake news report about embattled former national security adviser Michael Flynn that caused a sharp sell-off in the stock market and was spread like wildfire by liberal journalists throughout the media who were desperate to believe the disinformation.
‘We deeply regret and apologize for the serious error we made yesterday. The reporting conveyed by Brian Ross during the special report had not been fully vetted through our editorial standards process,’ ABC claimed in a statement released to the media.
‘As a result of our continued reporting over the next several hours ultimately we determined the information was wrong and we corrected the mistake on air and online.’

This post was published at The Daily Sheeple on DECEMBER 2, 2017.

More on Interest Rates and Time Preference

In a recent column for Mises Wire, Doug French raised very important issue of negative interest rates. Quoting Fleckenstein Capital He wrote,
Yesterday a Parisian BBB-rated company (i.e., quasi junk) issued $500 million in three-year notes yielding negative 0.026%. We have been peppered with so many absurdities, nothing seems absurd anymore…
French continues with his own observations:
[The French utility company] Veolia Environnement S. A. floated 500 million of debt, rated just 2 notches above junk, with a three year maturity priced to yield negative 0.026%. As Grant’s Almost Daily writes, ‘Even better: Investor demand for the Veolia issue was such that the offering was oversubscribed by more than 4:1. Said another way, three out of four investors who wished to lose money on a yield-to-maturity basis were left disappointed.’
Clearly, this supposedly contradicts the view of important thinkers such as Mises and Rothbard that individuals always assign a greater importance to present goods versus future goods (i.e.. that interest rates must be always positive). This is also known as a positive time preference.
Before attempting to reconcile the apparent contradiction of the facts of reality and the positive time preference theory of interest let us have a look at the essence of this theory.

This post was published at Ludwig von Mises Institute on 12/02/2017.

“Deadliest Year Ever” – Baltimore Eclipses 2016 Homicide Total

As of 11:20am ET. Thursday morning, the wave of violent crime continued in Baltimore with the death of a 21-year old man by gunfire.
The significance of this latest death in Baltimore’s urban war zone, is that total homicides in 2017 have now topped 2016 levels at 319, and there is still one month to go.
Homicides in Baltimore have averaged 29 per month, which could indicate Baltimore is now on track for the deadliest year ever to be recorded. The all-time per-capita record was set back in 2015, with 344 homicides, said Fox News.

This post was published at Zero Hedge on Dec 2, 2017.

Short Sellers Are Aggravating China’s Bond Rout – Regulators AWOL (For Now)

After the Party Congress finished in October and China’s centrally planned markets were released (somewhat) from the vice-like grip which had prevailed during the proceedings, we noted the comment from Huachuang Securities that China’s bond holders may be about to get hit by ‘daggers falling from the sky’, referring to deleveraging. They were right, to some extent, as first the government bonds, then corporate bonds sold off during November. This was driven by the authorities tightening credit conditions and redemptions in Wealth Management Products, which led to some unravelling in the latter Ponzi scheme. However, as Bloomberg explains, another factor has been at work, a rise in short-selling, which might not please the central planners.
While the nation’s debt market has no official measure of short sales, analysts say a surge in bond lending has been partially fueled by rising bearish bets. A record 1.82 trillion yuan ($274 billion) of notes has been lent out this year, 18 percent more than the total for all of last year, according to clearinghouse ChinaBond. Short sellers profit from falling bond values by selling borrowed notes and buying them back after prices fall. “This creates a vicious feedback loop — when institutions think bonds will fall, they borrow and sell, causing a plunge in the securities, which then drags futures down, and thus there’s more shorting,” said Wang Wenhuan, an analyst at Huachuang Securities Co. in Shanghai. “As investors are still quite cautious, there will likely be more bond borrowing in the near term as yields climb.”

This post was published at Zero Hedge on Dec 2, 2017.