• Category Archives Economy
  • What Ford’s New Guy Said about the Future of Self-Driving Cars

    You get to own and steer a car for a while longer, if you insist. Ford Motor Co.’s new CEO, Jim Hackett, is approaching the end of his self-imposed 100-day review of the company’s operations. And self-driving cars is the big thing.
    He took over after Mark Fields was sacked on around May 21 for a lack of strategy, a public tiff with the Trump administration, declining US sales and market share, production cuts, layoffs, and most unforgivably, the share price.
    The stock sagged nearly 40% from the day Fields had taken over three years earlier until he got fired. Since then, shares have edged down further, closing at $10.64 on Thursday, the lowest since November 2012.

    This post was published at Wolf Street on Aug 17, 2017.


  • A Tale of Two ‘Deflationary’ Booms – The Gilded Age vs. Today

    The forces of globalization during the past two decades have been stronger than at any time since the era of ‘the Great Deflation’ which started in the aftermaths of the US Civil War and the Franco-Prussian War, and continued through the 1880s. During teh earlier period, the US economy enjoyed record growth in prosperity. But, during the present era of globalization, the US and most advanced economies have grown fitfully and overall slowly. An obvious question is whether that divergence in outcomes is due to the very different monetary environments (The US and most of Europe were on gold in the first era with prices falling, while monetary experimentation under a global 2% inflation standard prevailed in the second).
    RELATED: “A Modern Concept of Asset Price Inflation in Boom and Depression” by Brendan Brown
    In searching for the answer there are two channels to follow, both involving counterfactual analysis. The first is to study the early episode (the early 1870s to the end of the1880s) and determining whether it would have been less glorious if the monetary environment had been the same as in the present episode (the mid-1990s to now). The other channel is an investigation of the present episode so as to determine whether a sound money regime – as in the earlier episode – would have produced a much better outcome. In conducting the latter search, the analyst should be alert to hints of the world which might have been in the actual world and indeed there are positive findings here.

    This post was published at Ludwig von Mises Institute on August 18, 2017.


  • Negative European 2Yr Sovereign Rates Hit 19 Countries As ECB Expands Balance Sheet

    Despite all the hoopla about Europe’s improving economic condition, the European Central Bank (ECB) is once again increasing their assets purchases (balance sheet) despite their already 0% main refinancing rate.

    This post was published at Wall Street Examiner on August 17, 2017.


  • Shorting Stocks Will Outperform The Market

    On December 1st, with a short-sell report I wrote on L Brands (LB) and published by Seeking Alpha that I used to launch the Short Seller’s Journal, I explained why L Brands was a great short idea at $96. Here was my rationale:
    L Brands (NYSE:LB) is a specialty retailer that operates the Victoria Secret and Bath & Body Works chains. It also operates La Senza, a Canada-based intimate apparel retail concept, and Henri Bendel, a highend accessory products brand. The stock has run from under $7 in March 2009 to its current (November 27) price of $96.68. In that time period, it has outperformed the S&P 500 by over 350%. But, in the context of rapidly slowing revenue growth, declining operating margins, increasing financial leverage and a likely pullback in consumer spending, LB’s stock is extremely overvalued relative to its underlying fundamentals and relative to its peers. In my view, LB represents a compelling opportunity to short the highly overvalued stock of a company operating in a business sector facing significant economic headwinds.
    Here’s how the LB short performed from 12/1/15 to present, after reporting an pre-arranged ‘beat’ of Wall St’s earnings estimates (the big game that has developed over the years is for management to ‘wink wink’ walk Wall Street’s robotic analysts’ quarterly estimates down to a level below the actual numbers the company plans to report) but was forced to warn about the rest of the year:

    This post was published at Investment Research Dynamics on August 17, 2017.


  • The Single Biggest Bullish Catalyst For Oil

    One of the key objectives for OPEC is to bring down inventories, a goal that has been elusive this year. But if the oil futures curve is anything to go by, the oil market is showing signs of tightening.
    Brent futures have recently begun to exhibit a state of backwardation, which is when near-term oil futures trade at a premium to contracts dated further off into the future. This is the first time in years that backwardation has occurred, and most analysts are taking it as a sign that the oil market finally could be getting closer to rebalancing. In the past, backwardations have accompanied a rebound in the oil market after a bust, while a contango (the opposite of backwardation) tends to occur when the market crashes because of a supply glut.
    There are several reasons why backwardation is bullish, which has been discussed in previous articles. A declining futures curve makes it uneconomical to store oil, so backwardation could accelerate the drawdown in inventories. It also complicates the hedging strategies of shale producers, which could hold back expansion plans. It also is a symptom of tightening near-term supplies, although, to be sure, the flip side of that argument is that it could merely be a reflection of expectations that the supply glut will reemerge at some point in the future.

    This post was published at Zero Hedge on Aug 17, 2017.


  • Global Equity Markets Mixed In Wake Of Dovish FOMC Minutes

    (Kitco News) – World stock markets were mixed in overnight trading Thursday. U. S. stock indexes are pointed toward weaker openings when the New York day session begins. Still, equities bulls are having the better week. There has been a perceived de-escalation in the U. S. and North Korea stand-off regarding its nuclear missiles, which has boosted trader and investor risk appetites. However, this matter will likely be on the front burner of the marketplace soon.

    This post was published at Wall Street Examiner on August 17, 2017.


  • Study Finds Higher Min. Wages Bring Crushing Job Losses For Female And Minority Workers

    Anyone who has a basic understanding of elementary-level arithmetic and some common sense can easily explain why raising the minimum wage is bad for employment levels. In a nutshell, higher labor costs simply improve the payback profile of capital investments in technology thus accelerating job losses.
    We recently shared the following example regarding California’s minimum wage hike from $10 per hour to $15. At $10 per hour and a 10-year payback, employers may be reluctant to invest in new technology. But, at $15 per hour and a 6-years payback, that investment become a no-brainer.

    This post was published at Zero Hedge on Aug 16, 2017.


  • Which College Offers The “Best Bang” For Your Tuition Buck?

    Is making the investment in a college education still worth it? How much debt can you expect to have after you graduate, and how much money will you make in your career?
    As HowMuch.net details, Nitrocollege.com crunched the numbers from the top twenty public and top twenty private schools in the country and created a visualization to find out. The data was extracted from the U. S. Department of Education and U. S. News & World Report.
    We ranked each school according to the median salary someone can expect to earn ten years after enrolling. We then looked at the median student debt graduates typically carry. Focusing on median debt and median earnings makes a lot of sense – half of all students fall above these numbers, and half fall below. We then color-coded each school in a floating bar chart, making the private schools blue and the public schools yellow.
    Several things immediately jump out of this visualization.
    First off, private schools dominate the top half of the list while public schools by and large fall to the bottom. Graduates from private universities simply earn more money, which suggests that attending a private school pays off in the long run.

    This post was published at Zero Hedge on Aug 16, 2017.


  • Where in the world do Americans spend their money? Taking a look at where incomes go each month.

    I remember the first budget I put together. It left me feeling depressed and feeling as if I had been punched in the gut. The practice was done largely out of necessity but there was something that jumped out at me. Housing consumes a good portion of net income. For most Americans this is the reality. When we look at spending habits we realize that half of this country is living paycheck to paycheck. A budget is a basic necessity even if you do it just once to understand where your money is flowing. Yet most people spend money as quickly as it comes in like sand flowing through your fingers. I wanted to look at the latest spending breakdown of Americans to see where most of our money is going.
    Where do Americans spend their money?
    There are three major categories where Americans are spending their money: housing, food, and cars. These three items consume the bulk of net income. And keep in mind that with housing, more Americans are renting since housing values are once again high relative to incomes. This makes it tough to build equity and most Americans have their net worth tied up in housing. Food and cars also take up a healthy portion of your paycheck.

    This post was published at MyBudget360 on August 16, 2017.


  • Really Sweating Inflation

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    The markets actually turned before the Fed minutes were released, but once in the public (assuming they weren’t leaked again) the anti-‘reflation’ direction was amplified. Bonds have rallied as have eurodollar futures (near Friday’s recent high), JPY dropped (so you know gold was up, too), and even stocks shifted.
    As usual, it is being characterized as a ‘dovish’ statement which is entirely the wrong way to think about it. That’s true of all of them over the past few years, but this one maybe even more than any other.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ August 16, 2017.


  • S&P Futures, Euro, Stocks Fall After Fed’s Low Inflation Warning

    S&P futures, European stocks and bond yields all fell in early trade alongside oil and the euro after the latest Fed minutes expressed concern over weak U. S. inflation, while Asian equities rose overnight ahead of WalMart earnings and the latest ECB minutes. Gold rose as high as $1,290 before fading most gains as the USDJPY rebounded. Fund futures are now pricing in about a 40% chance the Fed will raise rates by December, compared to 50% before the Fed’s minutes.
    Last week’s market turmoil and resultant near record jump in volatility in the wake of heightened tensions between the U. S. and North Korea has continued to ease, bringing down gauges of equity and bond volatility and repairing most of the damage done to stock markets, in fact as Bank of America showed, the retracement in the VIX on Monday was among the fastest on record.

    This post was published at Zero Hedge on Aug 17, 2017.


  • Did the Fed Just Warn The Debt Bubble Is Beginning to Burst?

    While everyone is focusing on political issues, the NY Fed published a stunning report on the state of the US consumer.
    According to the NY Fed, the average US household has hit a new record for debt, surpassing the old record set at the peak of the 2007 bubble.

    Put simply, the average US household today is more in debt that it was in late 2007: the former peak of a massive debt bubble.
    Of course, revealing that we’re in a massive debt bubble is only half the story. The more critical issue for those looking to invest based on this is when the debt bubble bursts.
    Bad news… it’s starting already.

    This post was published at GoldSeek on 16 August 2017.


  • Stocks, Dollar & Yields Sink After Fed Warns Of “Elevated Vulnerabilities” From High Asset Prices

    The initial reactions wre modest but directionally ‘correct’ given the dovish bias to the Fed Minutes – stocks are up, bonds are up (lower in yield), and the dollar is down. But then traders read the warnings that due to excessively easy financial conditions, “a tighter monetary policy than otherwise was warranted“, something Goldman has been warning about for months, and stocks sank.
    To be sure, there were 3 very dovish quotes:
    1. “Many participants, however, saw some likelihood that inflation might remain below 2 percent for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside.” 2. “Participants agreed that a fall in longer-term inflation expectations would be undesirable, but they differed in their assessments of whether inflation expectations were well anchored.”
    3. “Most Fed officials saw wage-price framework still valid”
    Bonds and the dollar were following that bias…

    This post was published at Zero Hedge on Aug 16, 2017.


  • AUGUST 16/TRUMP’S MANUFACTURING ADVISORY PANEL DISBANDS AFTER MANY PARTICIPANTS LEFT EARLIER: SENDS GOLD AND SILVER SKYROCKETING/GOLD UP $3.55 TO 1277.55 AND SILVER UP TO $16.95 FOR A GAIN OF 25 …

    GOLD: $1277.55 UP $3.85
    Silver: $16.95 UP 25 cent(s)
    Closing access prices:
    Gold $1282.95
    silver: $17.11
    SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)
    SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
    SHANGHAI FIRST GOLD FIX: $1278.74 DOLLARS PER OZ
    NY PRICE OF GOLD AT EXACT SAME TIME: $1273.70
    PREMIUM FIRST FIX: $5.04
    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    SECOND SHANGHAI GOLD FIX: $1274.86
    NY GOLD PRICE AT THE EXACT SAME TIME: $1272.60
    Premium of Shanghai 2nd fix/NY:$2.26
    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    LONDON FIRST GOLD FIX: 5:30 am est $1270.15
    NY PRICING AT THE EXACT SAME TIME: $1270.00
    LONDON SECOND GOLD FIX 10 AM: $1272.25
    NY PRICING AT THE EXACT SAME TIME. $1273.25
    For comex gold:
    AUGUST/
    NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH: 32 NOTICE(S) FOR 3200 OZ.
    TOTAL NOTICES SO FAR: 4579 FOR 457900 OZ (14.24 TONNES)
    For silver:
    AUGUST
    15 NOTICES FILED TODAY FOR
    75,000 OZ/
    Total number of notices filed so far this month: 915 for 4,575,000 oz

    This post was published at Harvey Organ Blog on August 16, 2017.


  • Retail Sales, Dudley, Wages

    Some quick thoughts for the day.
    First, New York Federal Reserve President William Dudley gave an extended interview to the Associate Press. Definitely worth the time to read. Some highlights:
    1.) Dudley never put a Trump bump in his forecast, so his forecast is essentially unchanged:
    I think we’re still on the same trajectory we’ve been on for several years. Above trend growth, gradually tightening labor market, inflation – somewhat below our objective – but we do expect as the labor market continues to tighten, to see firmer wage gains and that will ultimately filter into inflation moving up towards our 2% objective.
    2.) He expects inflation numbers to improve. He wants us to ignore the year-over-year numbers (of course, recent month-over-month numbers are not great):
    Well, the reason why inflation won’t get up to 2% very quickly on a year-over-year basis is because we’ve had these very low inflation readings over the last 4 or 5 months. So it’s going to take time for those to sort of drop out of the year-over-year calculation.

    This post was published at FinancialSense on 08/16/2017.


  • The Two Things To Look For In Today’s FOMC Minutes

    There are two, also known as non-GAAP four, things to look forward to in today’s FOMC Minutes: inflation, and balance sheet, balance sheet, balance sheet.
    At 2pm, the FOMC will release the minutes of the July 25-26 meeting when, as expected, the Fed left its rate unchanged and gave few surprises in its characterization of the outlook. It did surprise many, however, by noting that it expects to begin implementing balance sheet normalization “relatively soon”, language which most had not expected to be introduced until September; this, as UBS notes, is the condition the FOMC set for unwinding its balance sheet, so we now see the Fed announcing its balance sheet normalization policy in September. While there will be no earthshattering revelations, look to the Minutes to shed additional light on the Committee’s debate on this timing and views on the outlook for inflation, which will determine future rate hikes.
    Going back to the July 26 statement, the FOMC’s characterization of inflation was uninformative, merely reflecting the softness in the last several prints. In the minutes, some hope to find if the language reflects strongly held views that the softness is transitory, or if there were participants that wanted to raise more alarm about the inflationary outlook, but were outnumbered. Chair Yellen has been explicit that the outlook for inflation will determine the timing of future rate hikes.
    Leading up to the meeting, Fed officials were explicit that they believe that inflation weakness is transitory but that they need to see evidence that inflation is rising before hiking again. Further complicating matters, the July CPI print – the fifth miss in a row – did not provide sufficient evidence. As a result, the breadth of inflation views within the Committee should inform the sellside’s calls on the next hike.

    This post was published at Zero Hedge on Aug 16, 2017.


  • Trump Disbands Advisory Councils As CEOs Flee; Pence Ends LatAm Trip Early

    Rather than putting pressure on the businesspeople of the Manufacturing Council & Strategy & Policy Forum, I am ending both. Thank you all!
    — Donald J. Trump (@realDonaldTrump) August 16, 2017

    Update 2: Following its decision to disband, which took place even as two more CEOs from the mfg council – the chiefs of J&J and United Tech – were announcing their resignations. Trump’s now defunct Strategy Council has just issued the following statement:
    “As our members have expressed individually over the past several days, intolerance, racism and violence have absolutely no place in this country and are an affront to core American values. The President’s Strategic and Policy Forum was conceived as a bi-partisan group of business leaders called to serve our country by providing independent feedback and perspectives directly to the President on accelerating economic growth and job creation in the United States. We believe the debate over Forum participation has become a distraction from our well-intentioned and sincere desire to aid vital policy discussions on how to improve the lives of everyday Americans. As such, the President and we are disbanding the Forum. Job creation and supporting an inclusive pro-growth agenda remain vitally important to the progress of our country. As Americans, we are all united in our desire to see our country succeed.”
    Meanwhile, as noted earlier, VP Pence will end his visit to South America early and fly home on Thursday, after the latest Trump scandal which led to the dissolution of two of his key economic advisory councils following the riots in Charlottesville, Va.
    As AP reported previously, Pence will cut short his trip to South America, where he joined Chile President Michelle Bachelet for a joint press conference Wednesday on the political unrest in Venezuela. The vice president defended Trump just days ago as Trump drew bipartisan criticism for his remarks following the violent events in Charlottesville, and may return in order to directly address critics and steady the administration after the dissolution of the American Manufacturing Council and Strategy and Policy Forum.

    This post was published at Zero Hedge on Aug 16, 2017.


  • Cash-Strapped Qatar Unexpectedly Cuts Credit Suisse Stake

    Is the ongoing Qatar blockade starting to seriously squeeze the finances of the tiny, but rich (or maybe not so rich any more) Gulf nation?
    Overnight, Credit Suisse’s largest shareholder, Qatar, announced it has lowered its direct shareholding in the largest Swiss bank to 4.94% through the nation’s sovereign wealth fund – the Qatar Investment Authority – marking a rare sale of the Swiss bank’s stock. The QIA previously owned 5.01% in voting rights and is reporting a sale of shares for the first time since 2008. Qatar’s overall holding – including convertible bonds – declined to 15.91% from 17.98% after a rise in the number of outstanding Credit Suisse shares because of its capital increase.
    In June, Credit Suisse, which is halfway through a three-year strategy revamp, raised about CHF4.1 billion after tapping shareholders for a second time since CEI Tidjane Thiam took over in mid-2015, Bloomberg reported. The fresh funding would boost its common equity Tier 1 capital to 13.4% of risk-weighted assets, up from 11.7% in the first quarter.

    This post was published at Zero Hedge on Aug 16, 2017.