Small Caps Are Now More Expensive Than At The Peak Of The Tech Bubble

Everyone knows that tech stocks are – or at least until investors realized that tax reform is a fiasco for the tech sector, were – the darlings of the market, resulting in the biggest concentration of hedge fund holders with a record number of HFs holding the 5 FAANG stocks; at the same time far fewer are aware that while the tech space trades at less than 50% of its peak “dot com” valuations, it is the small and mid caps that have been the best performing, not to mention most overvalued sectors in recent years.
First, looking at midcaps, an analysis by BofA’s Dan Suziki reveals that despite the small-cap rally in late-November – as Trump tax reform gained momentum – it was the mid-caps that posted the best retums and the most multiple expansion for the month. All size segments saw their valuations expand across all five of the valuation metrics the bank tracks, marking the third consecutive month that the forward P/E rose across small, mid and large. Which is ironic considering the recurring, and wrong, calls that record stock prices are the result of earnings growth and not PE expansion.
Looking at valuation, BofA notes that both small and mid-caps both trade at the 99th percentile of their historical valuation range since 1979 vs. the 89th percentile for large caps.

This post was published at Zero Hedge on Dec 5, 2017.

“Astonishing And Disturbing” Email Exposes Mueller Deputy As Anti-Trumper

The rumblings that Special Counsel Mueller’s Russia investigation is perilously compromised by political bias are about to grow a whole lot louder.
Just a couple of days after it was revealed that FBI veteran, Peter Strzok, was removed from Mueller’s team due to the discovery of anti-Trump text messages exchanged with a colleague (whom he happened to be having an extra-marital affair with), and hours after the WSJ editorial board called for Mueller to step down for being “too conflicted”, Judicial Watch has released emails obtained via FOIA that reveal another agent and a Mueller deputy, Andrew Weissmann, praising former Acting Attorney General Sally Yates’ efforts to defy a direct order from President Trump on the enforcement of his travel ban executive order.
“I am so proud. And in awe. Thank you so much. All my deepest respects.”

This post was published at Zero Hedge on Dec 5, 2017.

Dalio Confirms GOP Tax Plan “Good For Business”, Bad For Democratic States

Confirming what many have suggested, the billionaire founder of the world’s largest hedge fund, warns in his latest letter to watch out for the effects of tax reform on migration, the fiscal conditions of affected states and cities, and an increased polarity in America.
While we have talked a lot about the effects of growing wealth and opportunity disparities in America, we haven’t talked enough about the tax migration that is taking place because of growing differences in state and local tax rates. This tax migration issue is especially important to focus on now because of the expected elimination (under the new tax legislation) of the deductibility of state and local taxes (SALT) against federal income taxes.
The dynamic that I’m referring to is the inevitable and self-reinforcing process in which those high SALT locations that a) have big disparities in income and fiscal shortfalls and b) can neither cut their financial supports to the ‘have-nots’ (because their conditions are already unacceptably low) nor raise taxes on the ‘haves’ (because they will move due to tax rates) suffer from tax migration.
Of course, those low SALT locations with the opposite circumstances benefit from this migration.

This post was published at Zero Hedge on Dec 5, 2017.

CME Unveils “Weirdest Chart Ever”

We freely admit: Figure 1 is probably the strangest chart that you will ever see, at least in finance.
You may be wondering: did they throw blue spaghetti noodle on paper for inspiration and then write an economics article about it? Or, have they spent too much time with disciples of psychologist Timothy Leary, a proponent of experimenting with psychedelic drugs?
Figure 1: Weirdest Chart Ever

This post was published at Zero Hedge on Dec 5, 2017.

Stagflation Looms As PMI Shows Surging Costs And Sinking Growth

Following Manufacturing’s drop, the US Services sector PMI disappointed in November, falling to its lowest since June (as business confidence tumbled to its weakest since February). Average selling prices soared as growth slumped setting the scene for a stagflationary future. ISM Services confirmed this weakness, tumbling to 3-month lows.
Of course, between Markit and ISM, there has been at least something to hang some hope on but in November they appeared to line up with PMI Manufacturing and Services (5mo low) sinking (upper pane) and ISM Manufacturing (4mo low) and Services (3mo low) also tumbled…
Under the covers, ISM shows busines activity, new orders, and employment weaker…

This post was published at Zero Hedge on Dec 5, 2017.

Asian Metals Market Update: December-5-2017

The market sharking event could be when President Donald Trump’s eldest son and a former business associate of the president testifies to the U. S. House of Representatives Intelligence Committee. A lot of events are there for the rest of the week. One needs to trade very carefully.
There are concerns that the Chinese infrastructure sector will see a big slowdown next year. This news will prevent industrial metals from a big rise.

This post was published at GoldSeek on 5 December 2017.

US Trade Deficit Surges Near Five Year High Despite Sliding Dollar

The US trade balance surprisingly blew out in October, increasing from $44.9 billion to $48.7 billion, as unexpectedly exports decreased and imports increased despite the ongoing dollar weakness, missing estimates of $47.5 billion. October’s number was tied for the widest deficit going back to early 2012…

… and marks a stark divergence with the recent dollar weakness which would suggest an improvement in US trade data.
Broken down by components, the goods deficit increased $3.8 billion in October to $69.1 billion. The services surplus decreased less than $0.1 billion in October to $20.3 billion.

This post was published at Zero Hedge on Dec 5, 2017.

China: Systemic Risk Surges As HNA’s High Coupon Borrowing Binge Accelerates

In early November 2017, we returned to one of our favourite subjects, systemic risk in China related to its big four highly-indebted conglomerates, HNA, Anbang, Evergrande and Dalian Wanda. In particular, we asked whether the extortionately high coupon of 9% on an HNA dollar bond issue, with less than one year to maturity, marked the beginning of China’s Minsky moment? As we noted at the time, HNA has $28 billion of short-term debt maturing before the end of June 2018, much of it accumulated during an acquisition binge over the last two years, which has seen it become a major shareholder in companies such as Deutsche Bank AG and Hilton Worldwide Holdings.
Speaking to Bloomberg at the time, Warut Promboon, managing partner at credit research firm, Bondcritic, noted…
‘Nine percent is really high for one year. Basically, it tells you that the worry is real.”
In a sign that HNA is under pressure, both from the Chinese government and its creditors, CEO Adam Tan announced last week that the company was reversing its previous strategy. From Reuters.
HNA Group CEO Adam Tan said the acquisitive company is making adjustments to conform with national policies, and has sold some investments and real estate projects to improve its liquidity, domestic media reported on Tuesday.

This post was published at Zero Hedge on Dec 4, 2017.

Three Years Ago QE, Last Year It Was China, Now It’s Taxes

China’s National Bureau of Statistics reported last week that the official manufacturing PMI for that country rose from 51.6 in October to 51.8 in November. Since ‘analysts’ were expecting 51.4 (Reuters poll of Economists) it was taken as a positive sign. The same was largely true for the official non-manufacturing PMI, rising like its counterpart here from 54.3 the month prior to 54.8 last month.
None of these results, however, are meaningfully different from each other. Rather than indicate any improvement, they actually suggest quite the opposite. According to the PMI’s, China’s economy isn’t falling off but it isn’t accelerating, either. The latter is what really matters, and here in the sentiment data marks the best case for the Chinese.
On the manufacturing side, the headline index is supported almost entirely by the reported experience of China’s biggest firms (many state-owned of one variety or another). The PMI for this size category has been consistently above the overall index, though importantly remaining almost at the same level going back to the latter half of last year.

This post was published at Wall Street Examiner on December 4, 2017.

Serially Charged Deutsche Bank Gets a Subpoena from Mueller

If Deutsche Bank is trying to remove itself from scandalous headlines, it’s not doing a very good job at it.
The German language newspaper, Handelsblatt, reported yesterday that Special Counsel Robert Mueller has subpoenaed bank records from Deutsche Bank relating to President Trump and his family members. Handelsblatt writes that ‘The former real-estate baron has done billions of dollars’ worth of business with Deutsche Bank over the past two decades, and First Lady Melania, daughter Ivanka and son-in-law Jared Kushner are also clients.’ The central focus of the Mueller probe is the Trump campaign’s involvement with Russia.
On May 23 of this year, Congresswoman Maxine Walters and other House Democrats sent John Cryan, CEO of Deutsche Bank, a letter regarding its ties to the Trump family and Russia. The letter began:
‘We write seeking information relating to two internal reviews reportedly conducted by Deutsche Bank (‘Bank’): one regarding its 2011 Russian mirror trading scandal and the other regarding its review of the personal accounts of President Donald Trump and his family members held at the Bank. What is troubling is that the Bank to our knowledge has thus far refused to disclose or publicly comment on the results of either of its internal reviews. As a result, there is no transparency regarding who participated in, or benefited from, the Russian mirror trading scheme that allowed $10 billion to flow out of Russia. Likewise, Congress remains in the dark on whether loans Deutsche Bank made to President Trump were guaranteed by the Russian Government, or were in any way connected to Russia. It is critical that you provide this Committee with the information necessary to assess the scope, findings and conclusions of your internal reviews.
‘Deutsche Bank’s failure to put adequate anti-money laundering controls in place to prevent a group of traders from improperly and secretly transferring more than $10 billion out of Russia is concerning. According to press reports, this scheme was carried out by traders in Russia who converted rubles into dollars through security trades that lacked any legitimate economic rationale. The settlement agreements reached between the Bank and the New York Department of Financial Services as well as the U. K. Financial Conduct Authority raise questions about the particular Russian individuals involved in the scheme, where their money went, and who may have benefited from the vast sums transferred out of Russia. Moreover, around the same time, Deutsche Bank was involved in an elaborate scheme known as ‘The Russian Laundromat,’ ‘The Global Laundromat,’ or ‘The Moldovan Scheme,’ in which $20 billion in funds of criminal origin from Russia were processed through dozens of financial institutions.’

This post was published at Wall Street On Parade on December 5, 2017.

A second passport is much cheaper than ever before

While I was off at an annual charity event over the last several days, a few members of my team were dispatched through the Caribbean to meet with government officials at various island nations about their passport programs.
These programs are known as economic citizenship programs, and they allow a person to obtain official citizenship, along with a passport, by donating money or making a financial investment in the country.
One of my senior analysts wrote me from St. Kitts today.
If you haven’t been, it’s an island in the West Indies nestled between the Caribbean and Atlantic Ocean. He’s there looking to secure special terms for Sovereign Man readers.
St. Kitts has the most established citizenship program in the Caribbean.

This post was published at Sovereign Man on December 5, 2017.

How Tax Cuts Will Trigger Recession

According to the more cynical pundits, government programs usually achieve the opposite of their intended goal. And sometimes they do.
For example, Richard Nixon’s ‘War on Drugs’ is still in progress, but the drugs are definitely winning.
***
Some government programs, however, are more effective. Firefighters are doing a pretty good job extinguishing fires. The US Coast Guard saves lives every day. Public school teachers educate students who would rather be elsewhere.
And then there’s our increasingly dysfunctional Congress. Where to begin?
I’ve written recently how Congress’s new tax plan misses a chance to boost economic growth. Now I think it may be even worse. Instead of merely failing to stimulate growth, the tax changes could actually launch a recession. I’ll tell you why in a moment.

This post was published at Mauldin Economics on DECEMBER 5, 2017.

The “Bombshell” Reason Tech Stocks Just Suffered The Biggest Rout Since Brexit, In Two Charts

“Last week, after making new highs, the NASDAQ ‘reversed’ to the downside. It bounced from there, but yesterday’s action was horrific, for having opened sharply, violently, surprisingly higher, by the day’s end the NASDAQ was sharply, violently, surprisingly weaker and it was so even as the Dow finished higher on the day, albeit materially below its peak. This morning, as we write, the Dow futures are higher but the NASDAQ is weaker… again!” – Dennis Gartman
As we discussed in our overnight wrap, FANG stocks have tumbled 5.6% in last 5 sessions…
***
… while overnight the MSCI World Tech index just suffered its biggest four-day drop since Brexit, as contagion from the tech-rout spread across the globe.

This post was published at Zero Hedge on Dec 5, 2017.

Dismissed FBI Agent Is One Who Changed Hillary Email Scandal Language From “Grossly Negligent” To “Extremely Careless”

Over the weekend we noted that Special Counsel Robert Mueller’s top FBI investigator into ‘Russian meddling’, agent Peter Strzok, was removed from the probe due to the discovery of anti-Trump text messages exchanged with a colleague (a colleague whom he also happened to be having an extra-marital affair with).
Not surprisingly, the discovery prompted a visceral response from Trump via Twitter:
Tainted (no, very dishonest?) FBI ‘agent’s role in Clinton probe under review.’ Led Clinton Email probe. @foxandfriends Clinton money going to wife of another FBI agent in charge.
— Donald J. Trump (@realDonaldTrump) December 3, 2017

This post was published at Zero Hedge on Dec 5, 2017.

BREXIT in Jeopardy?

The top story in Britain is the collapse of BREXIT negotiations thanks to the stupidity of Northern Ireland. If Northern Ireland wants to remain inside the EU, we already have Scotland saying they would want the same deal and the Mayor of London adds his two-pence to the issue think he will save the City of London financial system. Of course, none one of these people understands the first thing about economics no less they are surrendering power to Brussels. The Brits have always come in dead last in everything inside the EU. BREXIT was the only thing that would save Britain of it too will be dragged under by the failure of the Euro.
Armstrong Economics

This post was published at Armstrong Economics on Dec 5, 2017.

Tax Euphoria Fades As Tech Rout Spreads

One look at S&P futures this morning reveals an unchanged market, however it is again the violent sector rotation that is taking place behind the scenes that is the real story, with defensive sectors real estate, retail, food, utilities outperforming while investors continue to bail and book profits on tech stocks after sharp gains since the start of the year. Monday’s Nasdaq rout also spread to European and Asian markets which fall on last minute changes to the tax plan, most notably the retaining of AMT which could prevent companies from making use of intellectual property tax breaks, effectively raising their tax rates. As a reminder, on Monday the Nasdaq fell 1.2% following broad based hedge fund liquidation from the most crowded sector, after tax experts said Senate Republicans unwittingly passed a bill that would mean higher-than-intended taxes for technology firms and other corporations; in sympathy Europe’s Stoxx tech sector index SX8P hit the lowest since late September, down 8% since mid-November
European stocks dipped, trimming the previous session’s sharp gains amid a renewed selloff in tech stocks globally and as weaker industrial metal prices weighed on mining shares which slumped ‘due to a marked slowdown in China’s metal consumption growth, with market participants foreseeing weaker public infrastructure spending growth extending into 2018,’ SP Angel analysts including John Meyer, Simon Beardsmore and Sergey Raevskiy write in note.
The Stoxx 600 is down 0.2%, remaining in a range between its 50-DMA and 200-DMA started in mid-November. The Stoxx tech sector SX8P index falls 0.6%, mirroring a drop in the Nasdaq Monday. As noted above, Europe’s tec sector is down about 8% since a peak in early November, amid a sharp sector rotation out of momentum stocks and into potential winners of the U. S. tax reform. UK’s FTSE 100 outperforms peers amid the weaker pound which had briefly tripped through 1.34 as Brexit talks had been unravelled over disagreements from the DUP in regards to a hard border between Ireland and Northern Ireland. UK grocery retailers are among the top movers in the FTSE 100 after a positive note from Goldman Sachs. Elsewhere, to the downside, health care and material names lag.

This post was published at Zero Hedge on Dec 5, 2017.

Mueller Goes After Trump’s Bank Accounts, Subpoenas Deutsche Bank

Special Counsel Robert Mueller has subpoenaed Deutsche Bank, demanding that it disclose details of transactions and documents on accounts help by President Trump and members of his family as the “Russian collusion” probe now turns its attention to Trump’s bank accounts. According to Handelsblatt, which first reported the news, the bank received the subpoena several weeks ago. Trump has had a banking relationship with Deutsche Bank dating back nearly two decades and the German lender’s $300 million loan accounts for nearly half of his outstanding debt (based on a July 2016 analysis by Bloomberg). Trump’s debt to Deutsche includes $170m relating to a Washington hotel.
The media is taking the Deutsche Bank news as a sign that Mueller’s investigation into alleged Russian interference in the 2016 alleged campaign is ‘deepening’. However, it was clear that a subpoena was coming more than four months ago (see below) and, besides Michael Flynn, Mueller’s investigation has included interviews with three other former Trump aides recently, former Chief of Staff Reince Priebus, former spokesman Sean Spicer and National Security Council chief of staff Keith Kellogg, according to people familiar with the investigation.
As Bloomberg adds, “the news comes as Mueller’s investigation appears to be entering a new phase, with Trump’s former national security adviser, Michael Flynn, pleading guilty Friday to lying to FBI agents, becoming the fourth associate of the president ensnared by Mueller’s probe. More significantly, he also is providing details to Mueller about the Trump campaign’s approach to Flynn’s controversial meeting with a Russian envoy during the presidential transition.”

This post was published at Zero Hedge on Dec 5, 2017.

Robot Monster! Transportation Stocks, Bitcoin Zoom, Tech Stocks Stutter and Hindenburg Omen Keeps Flashing

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
Another day in the land of Central Bank bubbles.
According to Bloomberg, transportation stocks have rallied more than 8 percent in a week, realigning them with industrials at new highs in a coupling that is one of the market’s oldest bullish technical indicators. According to the century-old Dow Theory, simultaneous records in the groups trigger a buy signal for U. S. stocks. Optimism that changes in U. S. tax policy will benefit the industry reignited the Dow Jones Transportation Average on Monday, pushing it back to an all-time high along with the industrials gauge.

This post was published at Wall Street Examiner by Anthony B Sanders ‘ December 5, 2017.