• Category Archives Economy
  • Get Ready To Party Like It’s 2008

    Apparently Treasury Secretary, ex-Goldman Sachs banker Steven Mnuchin, has threatened Congress with stock crash if Congress didn’t pass a tax reform Bill. His reason is that the stock market surge since the election was based on the hopes of a big tax cut. This reminded me of 2008, when then-Treasury Secretary, former Goldman Sachs CEO, Henry Paulson, and Fed Chairman, Ben Bernanke, paraded in front of Congress and threatened a complete systemic collapse if Congress didn’t authorize an $800 billion bailout of the biggest banks.
    The U. S. financial system is experiencing an asset ‘bubble’ that is unprecedented in history. This is a bubble that has been fueled by an unprecedented amount of Central Bank money printing and credit creation. As you are well aware, the Fed printed more than $4 trillion dollars of currency that was used to buy Treasury bonds and mortgage securities. But it has also enabled an unprecedented amount of credit creation. This credit availability has further fueled the rampant inflation in asset prices – specifically stocks, bonds and housing, the price of which now exceeds the levels seen in 2008 right before the great financial crisis.
    However, you might not be aware that western Central Banks outside of the U. S. continue printing money that is being used to buy stocks and risky bonds. The Bank of Japan now owns more than 75% of that nation’s stock ETFs. The Swiss National Bank holds over $80 billion worth of U. S. stocks, $17 billion of which were purchased in 2017. The European Central Bank, in addition to buying member country sovereign-issued debt is now buying corporate bonds, some of which are non-investment grade.

    This post was published at Investment Research Dynamics on October 19, 2017.


  • These Are The Wall Street Jobs Most Threatened By Robots

    Cashiers at fast food restaurants aren’t the only workers who should fear being imminently replaced by kiosks and artificial intelligence. Advances in machine-learning software could soon render many high-paying Wall Street jobs obsolete – jobs that will no doubt quickly disappear as electronic trading in equities and foreign exchange markets squeezes trading revenue, forcing banks to seek cost savings elsewhere.
    As Bloomberg points out, ‘the fraternity of bond jockeys, derivatives mavens and stock pickers who’ve long personified the industry are giving way to algorithms, and soon, artificial intelligence.’
    Indeed, firms are already rolling out machine-learning software to recommend trades and hedging strategies. And while many of these tools will undoubtedly help the employees who remain vastly improve productivity (if history is any guide), one day soon, the machines may not need much help.
    But as anyone in the industry has probably noticed, banks have stepped up recruiting of tech talent since the financial crisis. Of the jobs Goldman Sachs’s securities business posted online in recent months, most were for tech talent.
    Billionaire trader Steven Cohen is reportedly experimenting with automating his top money managers. Venture capitalist Marc Andreessen has said 100,000 financial workers aren’t needed to keep money flowing.

    This post was published at Zero Hedge on Oct 18, 2017.


  • Something Wicked This Way Comes: McDonalds – A Bear In A Bull Costume

    As Halloween nears, kids are choosing costumes to transform themselves into witches, baseball players and anything else they can imagine. In the spirit of Halloween, we thought it might be an appropriate time to describe the most popular costume on Wall Street, one which many companies have been donning and fooling investors with terrific success.
    Having gained over 65% in the last two years, the stock of McDonald’s Corporation (MCD) recently caught our attention. Given the sharp price increase for what is thought of as a low growth company, we assumed their new line of healthier menu items, mobile app ordering, and restaurant modernization must be having a positive effect on sales. Upon a deeper analysis of MCD’s financial data, we were quite stunned to learn that has not been the case. Utility-like in its economic growth, MCD is relying on stock buybacks and the popularity of passive investment styles to provide temporary costume as a high-flying growth company.
    Stock Buybacks
    We have written six articles on stock buybacks to date. While each discussed different themes including valuations, executive motivations, and corporate governance, they all arrived at the same conclusion; buybacks may boost the stock price in the short run but in the majority of cases they harm shareholder value in the long run. Data on MCD provides support for our conclusion.
    Since 2012, MCD’s revenue has declined by nearly 12% while its earnings per share (EPS) rose 17%. This discrepancy might lead one to conclude that MCD’s management has greatly improved operating efficiency and introduced massive cost-cutting measures. Not so. Similar to revenue, GAAP net income has declined almost 8% over the same period, which rules out the possibilities mentioned above.

    This post was published at Zero Hedge on Oct 18, 2017.


  • Stocks and Precious Metals Charts – Stock Option Expiration on Friday – Anything Goes

    “Wall Street did not accidentally run a barge aground and leave a small oil slick on the Hudson River. Wall Street did not accidentally release tainted lettuce that sickened a few dozen people.
    What Wall Street did was intentional and criminal: it financially engineered a toxic subprime house of cards which it knew from its own internal reviews was going to collapse; it then molded the toxic product into inscrutable bundles; it sold the bundles to unsuspecting investors around the globe while making side bets that it would all come crashing down.
    Then, after causing the greatest financial collapse in the United States since the Great Depression, Wall Street’s unrepentant scoundrels paid themselves billions of dollars in bonuses with taxpayer bailout funds.”
    Pam and Russ Martens, Wall Street On Parade
    There will be a stock options expiration for October on this Friday.
    The touts are talking up stocks this week. I’ll take that as a good sign to take profits out of equities if you have them. We are nearing what is likely to be at least a short term top.
    The bullish argument is that the Fed will keep supplying easy money to Wall Street, and they and their minions will keep piling into stocks because they have no other choice. That is sounding a bit tired at this point.

    This post was published at Jesses Crossroads Cafe on 18 OCTOBER 2017.


  • Big Blue Blasts Dow To (Another) New Record High As Chinese Yield Curve Inverts

    Don’t fight The Fed or The Machines…
    The Dow is now the 2nd most overbought in 22 years… 3rd most overbought in 62 years
    Kicking off The National Congress last night, Xi’s words did not manage to inspire the bond market as China’s yield curve inverted once again…

    This post was published at Zero Hedge on Oct 18, 2017.


  • American Express CEO Ken Chenault Is Retiring

    Despite credit card giant American Express reporting another round of solid quarterly earnings, with revenue of $8.40bn beating expectations of $8.19bn, and generating EPS of $1.50, also above the $1.48 expected, and boosting its profit guidance for good measure, now projecting full year EPS of $5.80 to $5.90, up from $5.60 to $5.80 (above the consensus estimate of $5.75), AXP stock initially spiked, then immediately slumped back to unchanged, following news that the company’s CEO since 2001, Ken Chenault, is retiring effective February 1, 2018.
    The unexpected departure prompted Warren Buffett, the company’s largest shareholder, to share the following parting words ‘Ken’s been the gold standard for corporate leadership and the benchmark that I measure others against. He led the company through 9/11, the financial crisis and the challenges of the last couple of years. American Express always came out stronger. Ken never went for easy, short-term answers, never let day-to-day challenges distract him from what was right for the moderate to long term. No one does a better job when it really counts and he’s always done it with the highest degree of integrity.’
    Chenault will be replaced by Stephen Squeri, who has been Vice Chairman since 2015 and prior to that was Group President of the Company’s Global Corporate Services Group.
    Full press release below:
    American Express Announces Stephen J. Squeri to Succeed Kenneth I. Chenault as Chairman and Chief Executive Officer
    American Express Company (AXP) said today that its Board of Directors has appointed Stephen J. Squeri Chief Executive Officer and elected him Chairman of the Board, each effective February 1, 2018. Mr. Squeri, 58, will succeed Kenneth I. Chenault, 66, who will retire after a distinguished 37-year career with the Company.

    This post was published at Zero Hedge on Oct 18, 2017.


  • Paulsen: Tax Cut May Lead to Overheating, Help to End Bull Market

    Jim Paulsen, Chief Investment Strategist for the Leuthold Group, discusses his outlook on the US stock market and the economy with FS Insider. He is still bullish, citing 3 basic pillars holding up this bull market, but also explains why a tax cut at this point in the cycle will likely do more harm than good in the short-term, even though tax reform is important long-term for US competitiveness.
    No Need to Panic on Rate Hikes
    Though the Fed has been raising rates, real rates are still negative. Historically, the three-steps-and-a-stumble rule says that once the Fed tightens three times, that signals the end of the recovery and the beginning of the bear market, Paulsen stated.
    However, with unprecedented levels of stimulus and debt, ‘monetary policy [is] so far out of bounds from anything it used to be,’ Paulsen said, and getting back to normal may take quite some time.
    The Fed has already raised interest rates four times since 2015, and yet the Fed funds rate is still about a half of a percent or more below consumer price inflation. As a result, rate increases haven’t had much impact as the economy and stock markets continue to accelerate.

    This post was published at FinancialSense on 10/18/2017.


  • The S&P 500 Is Now Overvalued On 18 Of 20 Metrics

    With the market now stuck in the “Icarus Rally” melt-up predicted earlier in the year by BofA Michael Hartnett, in which EFTs, algos and desperate carbon-based hedge fund managers are all chasing performance, i.e. beta, in the last weeks of the year, at least until the inevitable “Humpty Dumpty great fall“, some have been naive enough to ask just how overvalued are stocks as of this moment.
    Yesterday we showed one answer, when according to Goldman Sachs, the average stock is in the 88th percentile of all historical valuations and 98% from if one uses median stocks to eliminate huge outliers such as Apple; the number would be even higher if one excluded cash flow-based valuation metrics, which are artificially boosted due to the collapse in capex and investment spending.

    This post was published at Zero Hedge on Oct 18, 2017.


  • Beige Book Signals Inflation & Healthcare Concerns Amid Modest Growth

    Despite major disruptions from Hurricanes Harvey and Irma, all 12 Federal Reserve Districts indicated that economic activity increased in September through early October. Several Districts noted increased manufacturing input costs, citing storm impacts (with 58 mentions of the word Hurricane) and labor constraints (employers were having difficulty finding qualified workers), but The Fed notes healthcare service prodviders were less upbeat.
    Full Fed Summary:
    Overall Economic Activity
    Reports from all 12 Federal Reserve Districts indicated that economic activity increased in September through early October, with the pace of growth split between modest and moderate. The Richmond, Atlanta, and Dallas Districts reported major disruptions from Hurricanes Harvey and Irma in some areas and sectors, including transportation, energy, and agriculture. Manufacturing activity and nonfinancial services expanded modestly to moderately in most Districts. Retail spending rose slowly, while vehicle sales and tourism increased in most Districts. Residential construction continued to increase, and growth in commercial construction was up slightly on balance. Low home inventory levels continued to constrain residential sales in many areas, while nonresidential real estate activity increased slightly overall. Loan demand was generally stable to modestly higher. Growth in the energy sector eased slightly. Agricultural conditions were mixed; while some regions were reporting better-than-expected harvests, low commodity prices continued to weigh down farm incomes.
    Employment and Wages
    Employment growth was modest on balance, with most Districts reporting flat to moderate increases. Labor markets were widely described as tight. Many Districts noted that employers were having difficulty finding qualified workers, particularly in construction, transportation, skilled manufacturing, and some health care and service positions. These shortages were also restraining business growth. Firms in several Districts reported that scarcity of labor, particularly related to construction, would be exacerbated by hurricane recovery efforts. Despite widespread labor tightness, the majority of Districts reported only modest to moderate wage pressures. However, some Districts reported stronger wage pressures in certain sectors, including transportation and construction. Growing use of sign-on bonuses, overtime, and other nonwage efforts to attract and retain workers were also reported.

    This post was published at Zero Hedge on Oct 18, 2017.


  • Mnuchin Deploys Stock Market Bubble as Political Weapon

    But the National Debt has disappeared from the agenda. The S&P 500 has soared 20% since the presidential election, the Dow Jones Industrial Average 26%, and the Nasdaq 28%, in about 11 months. Understandably, everyone is taking credit for the surge in stock prices, including President Trump, who according to CNBC, has tweeted ‘more than 20 times since the election’ about the stock market, ‘extolling the market’s gains,’ including this gem on Monday: ‘Stock Market has increased by 5.2 Trillion dollars since the election on November 8th, a 25% increase.’
    The folks in Congress are heavily invested in the skyrocketing stock market, and unless they pass the tax cut, their gains could be eviscerated – that’s the warning that Treasury Secretary Steven Mnuchin has thrown their way in an interview with Politico.
    Sure, everyone wants a tax cut – the lucky ones that get them. Especially since we no longer have to worry about how to pay for it. The reason we don’t have to worry about it anymore is because the US national debt has miraculously disappeared from the agenda.

    This post was published at Wolf Street on Oct 18, 2017.


  • $1 Trillion In Liquidity Is Leaving: “This Will Be The Market’s First Crash-Test In 10 Years”

    In his latest presentation, Francesco Filia of Fasanara Capital discusses how years of monumental liquidity injections by major Central Banks ($15 trillion since 2009) successfully avoided a circuit break after the Global Financial Crisis, but failed to deliver on the core promise of economic growth through the ‘wealth effect’, which instead became an ‘inequality effect’, exacerbating populism and representing a constant threat to the status quo.
    Fasanara discusses how elusive, over-fitting economic narratives are used ex-post to legitimize the “fake markets” – as defined previously by the hedge fund – induced by artificial flows. Meanwhile, as an unintended consequence, such money flows produced a dangerous market structure, dominated by both passive-aggressive investment vehicles and a high-beta long-only momentum community ($8 trn and rising rapidly), oftentimes under the commercial disguise of brands such as behavioral Alternative Risk Premia, factor investing, risk parity funds, low vol / short vol vehicles, trend-chasing algos, machine learning.
    However as Filia, and many others before him, writes, only when the tide goes out, will we discover who has been swimming naked, and how big of a momentum/crowding trap was built up in the process. The undoing of loose monetary policies (NIRP, ZIRP), and the transitioning from ‘Peak Quantitative Easing’ to Quantitative Tightening, will create a liquidity withdrawal of over $1 trillion in 2018 alone. The reaction of the passive community will determine the speed of the adjustment in the pricing for both safe and risk assets.

    This post was published at Zero Hedge on Oct 18, 2017.


  • Ron Paul on the Stock Market: Delusions and the Madness of Crowds (Video)

    Stock markets continue to surge higher on a seemingly endless upward trajectory. On Tuesday, the Dow Jones crossed the 23,000 mark for a time and closed just below that threshold at 22,997.
    It almost seems like this can go on forever, but Ron Paul said it would eventually come to an end during an interview on CNBC Futures Now last week. He said it reminds him of ‘delusions and the madness of crowds.’
    Of course, as Paul pointed out, even though we don’t know exactly when it will eventually crash, the market can’t go up forever. And Paul offered a sobering warning.
    ‘My position is the longer it lasts, the bigger the bust.’
    So what’s really behind the meteoric rise in stocks? Paul echoed what Peter Schiff and other contrarians have said – it’s a big bubble pumped up by central bank intervention.

    This post was published at Schiffgold on OCTOBER 18, 2017.


  • Dow Futures Over 23,000: Dollar, Global Stocks Jump As China Congress Begins

    World stocks stayed near peaks and currencies moved in tight ranges on Wednesday as China’s 19th Communist Party Congress opened while focus in Europe turned to speeches from top euro zone central bankers before next week’s key policy meeting, as well as Catalonia’s ultimatum due on Thursday. S&P futures are solidly in the green as usual, with Dow futures jumping above 23,000, driven higher by IBM as investors looked for new reasons to extend gains after hitting new all-time highs Tuesday. The dollar continues to strengthen, buoyed by speculation that the next Federal Reserve chair will be more hawkish, as volatility in major currencies fell to a three-month low, while Treasury yields rose.

    Among the factors contributing to today’s burst of risk on buying is the continued bid in USD, which has forced markets into hybrid risk-on mode according to Bloomberg. EUR/USD and GBP/USD push through yesterday’s session lows, which consequently supports domestic equity markets via exporters and multinationals. Rally in USD/JPY pressures USTs, dragging down core fixed-income markets; UST/bund spread wider by 1.6bps. U. S. equity futures also supported, Dow futures test 23,000; crude futures hold small gains after bullish API data.

    This post was published at Zero Hedge on Oct 18, 2017.


  • The Power Players Behind Silencing Wall Street Reformers

    America has now been through various iterations of ‘it’s time to stop bashing Wall Street’ by writers who seem to easily get air time or plenty of print space to make their case. An OpEd in the New York Times today is the latest in this endless series. We’ll get to that column shortly, but first some necessary background.
    Wall Street did not accidentally run a barge aground and leave a small oil slick on the Hudson River. Wall Street did not accidentally release tainted lettuce that sickened a few dozen people. What Wall Street did was intentional and criminal: it financially engineered a toxic subprime house of cards which it knew from its own internal reviews was going to collapse; it then molded the toxic product into inscrutable bundles; it sold the bundles to unsuspecting investors around the globe while making side bets that it would all come crashing down. Then, after causing the greatest financial collapse in the United States since the Great Depression, Wall Street’s unrepentant scoundrels paid themselves billions of dollars in bonuses with taxpayer bailout funds.
    One of the largest wrongdoers of this era, Citigroup, received the largest taxpayer bailout in history (over $2.5 trillion in loans, cash infusions and asset guarantees) and while this was occurring, one of its executives, Michael Froman, was staffing up the administration of the next President of the United States, Barack Obama, including an accepted recommendation for the head of the Justice Department.
    The 2007-2009 financial crash was more than the product of greed. There was both knowing and criminal wrongdoing, but none of those responsible have gone to jail. None of the regulatory gaps that allowed this to happen have been rectified. The biggest Wall Street banks have grown even bigger and remain too-big-to-fail; Wall Street is still paying the rating agencies for their Triple-A ratings; highly speculative Wall Street firms are still allowed to hold trillions of dollars in taxpayer-backstopped insured deposits in the commercial banks that they are allowed to own under a Byzantine bank-holding company structure with thousands of far-flung subsidiaries around the globe; and a handful of Wall Street banks continue to house trillions of dollars of derivatives inside their insured depository banks – something the public was assured would end under the Dodd-Frank financial reform legislation.

    This post was published at Wall Street On Parade on October 18, 2017.


  • Own this currency [no, it’s not a cryptocurrency]

    With the nearly daily moves to record highs among the hundreds of cryptocurrencies that currently exist, talking about ‘regular’ currencies seems about as out-of-fashion as that hideous shoulder pad trend from the 1980s.
    [Millennial readers: see here if you’re confused.]
    But there are actually a few currencies out there worth talking about right now.
    And top among them, especially for anyone holding US dollars, is the Hong Kong dollar.
    The Hong Kong dollar is different because it is ‘pegged’ to the US dollar at a pre-determined rate.

    This post was published at Sovereign Man on October 18, 2017.


  • The State Of Illinois Is “Past The Point Of No Return”

    Summary
    Unless used for capital improvements, any new Illinois State borrowing, regardless of security structure, will amount to nothing more than kicking the can further down the road. Markets remain open to uncreditworthy government borrows longer than they should. In a low interest rate environment, investors will stretch credit standards. Benchmark bond ratings are at variance with the rating agencies. ***
    Everyone knows Illinois’ financial condition is poor. Conventional thinking seems to be that a bond default, should that happen, would be many years in the future. Pardon me, but wasn’t that the thinking right up to Puerto Rico’s, ‘We can’t pay’ announcement?
    To answer the question of just how badly off is Illinois, I assembled a list of key creditworthiness indicators and applied them to New York, a highly rated state, and Illinois.

    This post was published at Zero Hedge on Oct 18, 2017.


  • 17/10/17: Intel Opens the Era of Unemployed Insurance Brokers…

    If you have a job structuring and selling, marketing and monitoring/managing car insurance contracts, you should stop reading this now… because, Intel has developed the first set of algorithmic standards for self-driving vehicles that aim to ensure that any accident involving a self-driving vehicle cannot be blamed on the software that operates that vehicle.
    How? Read some scant details here: What does this mean? If successful, regulating algorithmic standards, most likely more advanced than the one developed by Intel, will mean that self-driving vehicles collision will be by system definition blamed only on human drivers, bicyclists and pedestrians. Which will, de facto, perfectly standardise all insurance contracts covering vehicles other than those operated by people. The result will be rapid collapse in demand for car insurance as we know it.

    This post was published at True Economics on Wednesday, October 18, 2017.


  • History Says Global Debt Levels Will Lead to Another Crisis

    It may feel like we’ll escape a debt crisis since, well, the world hasn’t ended in spite of runaway debt levels. Some of us hard money people feel like we’re taking crazy pills; how the heck can debt be so out of control, so completely unpayable, and yet the financial system keeps chugging along as if nothing’s wrong?
    Well, history has a message for us: the current calm won’t last forever, because there is a direct link between government debt levels and the number of financial crises that occur. And since global debt levels are high – the second highest level in the past 150 years – it’s not exactly a stretch to conclude that another financial crisis is coming.
    Analysts at Deutsche Bank recently released an extensive study that demonstrates the link between debt and crisis. One chart in particular screamed for attention.
    They measured G-7 government debt levels, as a percent of GDP, and charted that figure against the number of crisis those countries have experienced. Here are the primary events they classified as a crisis or shock:
    15% fall in stocks 10% decline in the country’s currency exchange rate 10% fall in bonds

    This post was published at GoldSeek on Wednesday, 18 October 2017.


  • Inflation Warning: US Import Prices Rise 2.7% YoY In September (US Export Prices Rise 2.9% YoY)

    This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
    If you are looking for inflation that is seemingly missing, try the US import and export prices. US import prices by end use rose 2.7% YoY in September and US export prices by end use rose 2.9% YoY.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ October 17, 2017.