• Category Archives Corporate
  • (Cape) Fear! Shiller CAPE Ratio At 1929 Black Tuesday Levels (Probability Of Further Rate Cuts Low)

    Robert Shiller, the Nobel Laureate in economics from Yale University, has a cyclically-adjusted price-earnings ratio termed the CAPE ratio. And it just rose to the same level as Black Tuesday of 1929, the famous stock market crash.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ June 19, 2017.

  • “Probably Nothing”

    For the first time since September 2001, Robert Shiller’s CAPE Ratio measure of stock market valuation has topped 30x…
    (…and yes, we know, we “don’t get it” and “this time is different” and “the world is a changed place” and so on…)
    Time will tell…

    This post was published at Zero Hedge on Jun 19, 2017.

  • What Happens When the Machines Start Selling?

    The death of fundamental analysis.
    The infamous FAANG stocks – Facebook, Apple, Amazon, Netflix, and Google’s parent Alphabet – along with other ‘tech’ stocks have been getting ‘hammered,’ to use a term that for now exaggerates their ‘plight.’ The FAANG stocks are down between 1.7% and 2.5% at the moment and between 5.5% and 11% since their peak on June 8. Given how far these stocks have soared over the past few years, this selloff is just a barely visible dip.
    But fundamental analysis has long been helpless in explaining the surge in stocks. The shares of Amazon now sport a Price-Earnings ratio of 180, when classic fundamental analyses might lose interest at a PE ratio of 18 for the profit-challenged growth company that has been around for over two decades. For them, the stock price might have to come down 90% before it makes sense.
    Or Netflix, with a PE ratio of 195. Or companies like Tesla. Forget a PE ratio. There are no earnings. The company might never make any money. Its sales are so minuscule in the overall US automotive market that they get lost as a rounding error. It bought Elon Musk’s failing solar-panel company as a way to bail it out. And the battery-cell technology Tesla uses comes from Panasonic. So what should a company like this be worth? Fundamental analysis has been completely irrelevant: Tesla’s current stock price gives it a market capitalization of $61 billion.

    This post was published at Wolf Street by Wolf Richter /Jun 15, 2017.

  • Seth Klarman On ‘Trumptopia’: “Investors Are Being Too Trusting”

    Via RealInvestmentAdvice.com,
    Baupost Group’s Seth Klarman laid out his concerns with the market in a recent client letter…
    ‘Risk, Klarman wrote, is the most important consideration when investing, and investors are being too trusting. When share prices are low, as they were in the fall of 2008 into early 2009, actual risk is usually quite muted while perception of risk is very high. By contrast, when securities prices are high, as they are today, the perception of risk is muted, but the risks to investors are quite elevated.’
    The problem with overvaluation and investor exuberance is they are clear hallmarks of historical bull market peaks. This is particularly the case when there is a central asset, or asset class, that investors are piling headlong into without regard to the consequences. As I addressed recently:
    ‘When it comes to investing, ALL investors, individual and professionals, are subject to making ‘stupid’ decisions. As Idiscussed recently: At each major market peak throughout history, there has always been something that became ‘the’ subject of speculative investment. Rather it was railroads, real estate, emerging markets, technology stocks or tulip bulbs, the end result was always the same as the rush to get into those markets also led to the rush to get out. Today, the rush to buy ‘ETF’s’ has clearly taken that mantle, as I discussed last week, and as shown in the chart below.’

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

  • New Home Prices Are Over 50% Higher In Canada Than The US

    The price of new homes is quickly diverging in Canada and the US.
    Data from the Canadian Housing and Mortgage Corporation (CMHC) show that new homes are selling for substantially more than the same time last year.
    Meanwhile south of the border, data from the US Bureau of Census show that new home prices are on the decline.
    This has lead to an even wider gap between the average price of a new home in Canada and the US.
    Canadian New Construction Is Higher The price of a new home across Canada is up for the second month in a row. The average sale price in April was CA$751,881 (US$559,123). This represents an 11% increase from the same time last year, when measured in Canadian dollars. When compared in US dollars, that increase drops to a much more conservative 2.64%. Even after factoring in the loonie’s decreased buying power in Canada, new home prices still climbed.

    This post was published at Zero Hedge on May 28, 2017.

  • Silver Superman coins prove to be Kryptonite to Royal Canadian Mint’s bottom line

    In 2011, the mint began selling a series of silver collectible coins, with a face value of $20, at a time when the price of silver was soaring. The cost to buy one was also just $20, tax free.
    Superman, Bugs Bunny, the starship Enterprise and other catchy images on the coins attracted hundreds of thousands of coin collectors and investors, and fattened revenues at the Crown corporation. More than 4.2 million such coins have been struck to date.
    But the price of silver has fallen dramatically in the five years since, and Canadians are returning the coins by the truckload, protected from the fall in silver prices by that fixed $20 face value which the mint must pay back on request.
    Stung by the massive returns, the mint abruptly ended its so-called Face Value collectible coin business earlier this year, and has taken a big hit on its balance sheet.
    The 2016 annual report, delayed for months because of revised accounting for the Face Value reversal, says there’s no plan to place an expiry date on redemptions of the coins.

    This post was published at CBC News

  • Buffett Sells A Third Of His IBM Stake: ‘I Don’t Value IBM The Same Way That I Did Six Years Ago”

    When Warren Buffett surprised markets in 2011 after announcing that he had started building up a stake in IBM – a member of the tech sector from which Buffett had traditionally kept a safe distance – we joked that the only reason for his involvement was IBM’s then unprecedented buyback spree. A few short years later, IBM’s buybacks ended with a whimper when its debt level hit record highs (the company’s credit rating was recently downgraded) even as its revenues continued to post a record slide and were back to levels seen at the start of the Millennium, while EPS only beat thanks to ever lower effective tax rates.
    Which is why we were not surprised to learn overnight that Buffett’s Berkshire had dumped a third of its stake in IBM in the first explicit sign of declining confidence by the famed investor.
    Speaking with CNBC, Buffett said he had sold the substantial holding, worth more than $4bn at the current share price, after “revising his view of the company’s competitive prospects.”
    ‘I don’t value IBM the same way that I did six years ago when I started buying’.’.’.’I’ve revalued it somewhat downward,’ he said. ‘IBM is a big strong company, but they’ve got big strong competitors too.’
    “I think if you look back at what they were projecting and how they thought the business would develop I would say what they’ve run into is some pretty tough competitors,’ Mr Buffett added,

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

  • FOMC Preview: Here Are The Possible Surprises In Today’s Statement

    Today’s FOMC announcement at 2:00pm is expected to be mostly a non-event, and the only incremental information will be what is contained in the updated statement, which comes one month ahead of the Fed’s next expected rate hike in June. There will be no press conference and no update to the summary of economic projections. The statement is expected to incorporate modest changes to reflect recent (mixed) data but see the risks around the meeting are low.
    Here is what Wall Street consensus looks like ahead of 2pm:
    The market expect no rate hike at the May meeting; Fed Fund futures are currently pricing in a 65% probability of a June rate hike. There is a risk of a small hawkish surprise if the committee indicates they are “looking through” Q1 weakness in growth and inflation. A less likely dovish surprise could come from the FOMC emphasizing the decline in inflation. It is likely too soon for the committee to update language related to reinvesting balance sheet securities. Subsequent Fed speeches by Yellen, Fischer, Williams and Rosengren on Friday will likely provide additional color Continuing the trend from recent weeks, most Wall Street firms expect the Fed to hike twice more this year despite the recent slowdown in US economic indicators and the near record collapse in the Citi eco surprise index, in June and September and announce balance sheet reduction in December.

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

  • JPM Cuts Q1 GDP Forecast To Just 0.3%

    While we wait to see if the Atlanta Fed will cut its final Q1 GDP estimate ahead of tomorrow’s official print to 0% or negative, here comes JPM which after slashing its Q1 GDP tracker from 0.6% to 0.4% yesterday, having started the quarter – like most others on Wall Street – at 3%, just trimmed its Q1 GDP estimate to the lowest yet, at just 0.3%.
    Here is the full note from JPM’s Daniel Silver
    We now believe that real GDP increased 0.3% saar in 1Q. This incorporates the various source data that were released this morning as well as a correction to our treatment of the annual revision to the retail sales data that was released yesterday. The updated details of our forecast are in the table below.
    In terms of the retail sales data, it appears that this year the BEA will not incorporate the updated figures until the May GDP report, so this Friday’s GDP release will be based on an older vintage of retail sales data. Reverting to the older data, we think Friday’s GDP report will show real consumption at 0.9% saar.

    This post was published at Zero Hedge on Apr 27, 2017.

  • Trump Keeps His Pledge on Tax Reform

    A lot of emails are coming in asking if I have been advising Trump on the taxes since this is similar to the plan I proposed when I testified before Congress. The answer is no. If they took the tax proposals we had worked on with members of Congress back in the Nineties, who knows. They are on file and have been endorsed by many different tax reform advocates.
    I have not spoken with anyone in the White House regarding taxes. I testified why the corporate tax rate must be cut to 15% before the House Ways & Means Committee. The answer is very simple. Corporations will be taxed in their home country unless they pay some tax where they are domiciled overseas. Our headquarters back then was in Hong Kong. Everyone was there because of a 15% corporate tax rate. I testified if the USA lowered the corporate tax rate to 15%, then the USA would become the tax-haven and corporations would move to the States. This is a no brainer and was based on the fact that we did in fact advise multinational corporations – not just theory. I knew what they would do and would have advised them to move accordingly.

    This post was published at Armstrong Economics on Apr 27, 2017.

  • Mnuchin: “Trump To Propose Biggest Tax Cut In History”, But It May Be DOA In Congress

    Speaking at at an event hosted by The Hill this morning, Treasury Secretary Steven Mnuchin made a grand introduction for today’s main event: he said President Trump’s forthcoming tax plan will be the “biggest” tax cut in history, even if he provided few clues as to what will actually be contained in the package, set to be unveiled at 1:30pm today.
    As previewed last night, Mnuchin confirmed that the proposal would cut tax rates for businesses to 15%, with the rate applying to both corporations and owner-operated businesses known as “pass-throughs.” The 15% rate was also part of Trump’s campaign plan. Mnuchin said that Trump thinks that’s “absolutely critical” for driving economic growth. As the Hill adds, Mnuchin also said that the administration wants to simplify the personal tax system and that most Americans should be able to file their taxes on a large postcard, although so far there has been virtually no discussion, or leaks, on whether personal income taxes would be affected
    ‘The average American should have simple taxes,’ Mnuchin said, adding that many people won’t end up paying any taxes under the administration’s plan.
    Mnuchin also said that Trump’s proposal won’t include infrastructure spending. ‘This plan is just tax reform,’ he said.

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

  • Stocks and Precious Metals Charts – Dear Mr. Fantasy – Precious Metals Option Expiration

    Stocks and Precious Metals Charts – Dear Mr. Fantasy – Precious Metals Option Expiration
    Another ‘risk on’ day after the French have seemingly chosen a populist neo-liberal businessman with little policy experience for their front runner.
    And our own US version of this new breed, with considerably more panache, has signaled as intention to cut the US corporate tax rate to 15%.
    If that 15% was like an Alternative Minimum Tax for corporations it might be a good idea, since so many of the big multinational corporations game the system and pay little to nothing in taxes almost every year.
    Somehow, I don’t think it is going to work out that way.
    Rumor has it that the wealthy will also be enjoying a personal tax cut.
    Trickle down tax cuts for the wealthy and their corporations do not produce broader growth and consumption. Spending huge sums on projects designed to benefit a wealthy few, while shifting the burdens of bloated monopolies like healthcare and control frauds like TBTF banking to the middle and working class, in the face of record income inequality, is a policy recipe for disaster.
    The ridiculous proposition is going to meet the unbelievable farce.

    This post was published at Jesses Crossroads Cafe on 25 APRIL 2017.

  • Wells Meeting Turns Into Screaming Match, Shareholder Kicked Out After “Physical Approach” Toward Board Member

    What may be the most controversial annual shareholder meeting in Wells Fargo history, in which the board is seeking re-election after last year’s misselling scandal, devolved into a screaming match on Tuesday morning and was briefly halted following interruptions by angry shareholders as the bank’s chairman and chief executive tried to calm nerves ahead of a vote that could oust the majority of its board.
    According to Reuters, at least one shareholder was ejected and the meeting went into recess after he made what Chairman Stephen Sanger called a “physical approach” toward a board member. Others were escorted out and the meeting was interrupted several times as investors demanded answers related to the bank having created as many as 2.1 million unauthorized accounts in customers’ names without their permission.
    “You’re saying we’re out of order. Wells Fargo has been out of order for years!” the first angry shareholder said, before being ejected. Board Chairman Sanger and Chief Executive Tim Sloan repeatedly asked him to sit down because he was out of order, and then called a recess, only to have other shareholders stand and shout.

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

  • What Trump’s Next 100 Days Will Look Like

    Trump is often described as a “transactional” president who sees the world as one big negotiating table where he can leverage his business experience to exact better terms and conditions for American workers and corporations. Trump will, therefore, try to keep his core agenda focused on what he regards as his sweet spot: US economy and trade. But even though the domestic economy may be the thing closest to the president’s comfort zone, it’s also where he comes up against a wall of institutional barriers. As a result, his much-touted tax overhaul attempting a steep reduction in the corporate tax rate will remain gridlocked in congressional battles over health care and the budget.
    The new US administration will have a bit more room to maneuver on trade issues. It’s simplistic fixation on countries with which the United States has a large deficit will become more nuanced with time. The United States cannot simply force other countries to buy more of its goods in volumes that would make an appreciable difference in the trade deficit. And in some cases, America’s existing factory capacity is neither ready nor able to meet a sizable increase in demand from abroad. Instead, for select industries, Washington will try to boost US purchases of American goods and the enforcement of trade measures to restrict certain imports from abroad.
    The steel sector is a logical place for the White House to focus its attention. After all, it’s an industry that appeals to Trump’s support base in the Rust Belt (though price hikes risk alienating big US steel consumers); the United States has the domestic capacity to meet most of its steel demand (save for specific, often military-related applications); and there are several World Trade Organization (WTO) provisions that the United States can use to tighten restrictions on imports (well before Trump’s election, Washington had placed more than 150 countervailing and anti-dumping duties on steel imports).

    This post was published at FinancialSense on 04/25/2017.

  • Our State-Corporate Plantation Economy

    We’ve been persuaded that the state-cartel Plantation Economy is “capitalist,” but it isn’t. It’s a rentier skimming machine. I have often discussed the manner in which the U. S. economy is a Plantation Economy, meaning it has a built-in financial hierarchy with corporations at the top dominating a vast populace of debt-serfs/ wage slaves with little functional freedom to escape the system’s neofeudal bonds. Since I spent some of my youth in a classic Plantation town (and worked on the plantation as a laborer in summer), the concept of a Plantation Economy is not an abstraction to me, but a living analogy of the way our economy works. Wal-Mart and the Plantation Economy (August 24, 2010) Colonizing the Plantation of the Mind (August 25, 2010) We Need a Social Economy, Not a Hyper-Financialized Plantation Economy (November 12, 2015) Loving Our Servitude in America’s Plantation Economy (February 10, 2017) The Plantation Economy is extremely hierarchical. Corporations and the state are both extremely hierarchical.

    This post was published at Charles Hugh Smith on FRIDAY, APRIL 21, 2017.

  • Toronto House Price Bubble Hit with 15% Foreign Buyers Tax. ‘Property Scalpers’ & ‘Double Ending’ Brokers Targeted

    ‘People need to ask themselves very carefully, ‘Why am I buying this house?”: Stephen Poloz, Bank of Canada.
    The government of the Province of Ontario announced a laundry list of measures to prick the crazy house price bubble in Toronto and surrounding areas. This includes a 15% transfer tax imposed on home sales to non-resident foreign investors, including corporations. It’s aimed at Chinese investors in China that buy homes in Canada to diversify their assets and get them out of harm’s way in their own country.
    For them, homes in Toronto (or anywhere outside China) are an asset class denominated in a foreign currency. But these homes also confer other benefits in the event some untoward mishaps occur in China, as these investors appear to half-expect.
    The Province of British Columbia imposed a similar measure last August to get a grip on the housing bubble in Vancouver that had long ago spiraled out of control. It had the effect of freezing the market, with home sales volume plunging.
    Why now in Toronto? It appears that the attention of Chinese investors has pivoted from Vancouver to Toronto: In March, year-over year, the average price for all types of homes in Toronto soared 33%! It doesn’t take a genius to figure out that this is simply ludicrous.

    This post was published at Wolf Street by Wolf Richter ‘ Apr 20, 2017.

  • Central Banking Warfare Model Readies The Next Step

    The global capacity for debt has reached it’s zenith. So-called developed markets and emerging markets have all reached maximum debt load. Of the all the major countries that impact the global GDP name one that’s not fully levered with debt. I’ll wait here while you look for that needle in a haystack.
    We came into the bail outs. The G7 had levered up. Then we had the emerging markets lever up and they’re finished levering up and now everybody’s levered up.
    There is no place to go. We can go to an equity model and we can optimize bottom-up but that requires a legitimate pricing function. And when you’re trying to run the whole thing with fake intel, fake science, fake news… The harvesting machine needs a new way to dig and digital currency and digital cash is that way. But you need all those countries in the tent and you need the ability to force everybody into a digital system. Source
    The world (tent) must get inline with the idea of global governance and global currency, otherwise, it will not work.
    Cryptocurrencies and all the people who believe this digital illusion is going to somehow save us from the evil banksters are overlooking what I have been saying since bitcoin first came onto the scene – it plays into the hands of the banksters and their desire to move us all to a digital currency. If someone believes for a second that Amazon or any other large multinational corporation that conducts retail business is going to accept bitcoin when they have been instructed not to, they are simply living in a fantasy.
    That’s why the guys from bitcoin drive me nuts. Because they think ‘Oh this is how we’re going to be free’. No, you’re prototyping Mr. Globals digital currency. Source
    If a person thinks the central banks and their digital currency will COMPETE with bitcoin you are not seeing the entire picture. That is not going to happen – EVER. The reason gold was outlawed in the U. S. in the 1930’s was to keep gold from competing with the Federal Reserve Note. Why would anyone believe the Federal Reserve is going to allow a digital form of currency to compete with their wealth transferring mechanism on a large scale?

    This post was published at GoldSeek on 20 April 2017.

  • In Stark Warning, IMF Finds Over 20% Of US Corporations At Risk Of Default Should Rates Rise

    While the market has been generally euphoric over Trump’s proposed fiscal agenda (even if in recent weeks it increasingly looks its implementation will be indefinitely delayed), one adverse side effect which has largely been ignored by the market is the impact of rising interest rates not only on sovereign debt, but on record corporate debt loads. Conveniently, this was one of the more notably topics covered in the latest Global Financial Stability report released by the IMF on Wednesday.
    According to the IMF writes, as corporate leverage has risen, and is now at the highest level since the start either the financial crisis or the dot com bubble, depending on which metric one uses…
    … so too has the proportion of income devoted to debt servicing, notwithstanding low benchmark borrowing costs. And while the absolute level of debt servicing as a proportion of income is low relative to what it was during the global financial crisis, the 4 percentage point rise has brought it to its highest level since 2010, which leaves firms vulnerable to tighter borrowing conditions. The average interest coverage ratio – a measure of the ability for current earnings to cover interest expenses – has fallen sharply over the past two years.

    This post was published at Zero Hedge on Apr 19, 2017.

  • China Q1 gold demand 7.7% Up On 2016 — Lawrie Williams

    While the detailed Shanghai Gold Exchange (SGE) Monthly Report figures on its website still seem stuck on the February figures (released on March 7), trawling elsewhere through the site suggests that the March withdrawals figure actually came through at 192.25 tonnes and totalling up the reported year to date figures show that Q1 withdrawals totalled 555.9 tonnes – some 7.7% up on the 2016 Q1 figure, although still 11% behind that for the record 2015 calendar year.
    While China’s gold demand as expressed by SGE withdrawals may be up on that of a year ago, it is early days yet for 2017 and it should be recalled that Chinese gold demand was probably at its lowest for four years in 2016, and way below that of the record 2015 year. There are, however, also a number of other factors out there – not least a potential for economic conflict – or even, but probably unlikely, military conflict – between China and the USA over a number of flashpoints such as trade equality, North Korea and the South China Sea any of which could affect gold demand positively.
    Whether SGE gold withdrawals should be equated to the real gold flows into China remains a contentious point. As we have pointed out here beforehand the withdrawals data as reported appears to offer a far closer correlation to the sum of Chinese gold imports plus domestic gold production and an estimate of scrap recycling than some of the estimates of demand produced by independent specialist consultancies. In part this divergence of estimates tends to relate to how Chinese demand is calculated, with the consultancies tending to dismiss gold going into the financial and banking sectors. None of the figures take into account anything that may, or may not, be being absorbed by the government for the nation’s gold reserves. Officially these have not increased for the past five months, but doubts are being raised again as to whether China is again hiding gold reserve additions in separate accounts now that the nation has achieved its aim of having the Yuan (Renminbi) incorporated as an integral part of the IMF’s Special Drawing Rights.

    This post was published at Sharps Pixley