• Category Archives Market Commentary
  • THE BIGGEST WEALTH TRANSFER IN HISTORY

    What will happen between now and 2025? Nobody knows of course but I will later in this article have a little peek into the next 4-8 years.
    The concentration of wealth in the world has now reached dangerous proportions. The three richest people in the world have a greater wealth than the bottom 50%. The top 1% have a wealth of $33 trillion whilst the bottom 1% have a debt $196 billion.
    The interesting point is not just that the rich are getting richer and the poor poorer. More interesting is to understand: How did we get there? and what will be the consequences?
    PANAMA & PARADISE PAPERS – SENSATIONALISM
    As the socialist dominated media dig into the Panama Papers and now recently the Paradise Papers to attack the rich and tell governments to tackle the unacceptable face of capitalism, nobody understands the real reasons for this enormous concentration of wealth. Sadly no journalist does any serious analysis of any issue, whether it is fake economic figures or the state of the world economy.
    Instead, all news is accepted as the truth while in fact a lot of news is fake or propaganda. The media is revelling in all the disclosures of offshore trusts and companies. The British Queen is being accused of having ‘hidden’ funds. The fact that offshore entities have been used legally for centuries for privacy, wealth preservation and creditor protection purposes is never mentioned. The media sell more much news by being sensational rather than factual.

    This post was published at GoldSwitzerland on November 17, 2017.


  • The Great Retirement Con

    The Origins Of The Retirement Plan
    Back during the Revolutionary War, the Continental Congress promised a monthly lifetime income to soldiers who fought and survived the conflict. This guaranteed income stream, called a “pension”, was again offered to soldiers in the Civil War and every American war since.
    Since then, similar pension promises funded from public coffers expanded to cover retirees from other branches of government. States and cities followed suit — extending pensions to all sorts of municipal workers ranging from policemen to politicians, teachers to trash collectors.
    A pension is what’s referred to as a defined benefit plan. The payout promised a worker upon retirement is guaranteed up front according to a formula, typically dependent on salary size and years of employment.
    Understandably, workers appreciated the security and dependability offered by pensions. So, as a means to attract skilled talent, the private sector started offering them, too.
    The first corporate pension was offered by the American Express Company in 1875. By the 1960s, half of all employees in the private sector were covered by a pension plan.
    Off-loading Of Retirement Risk By Corporations
    Once pensions had become commonplace, they were much less effective as an incentive to lure top talent. They started to feel like burdensome cost centers to companies.
    As America’s corporations grew and their veteran employees started hitting retirement age, the amount of funding required to meet current and future pension funding obligations became huge. And it kept growing. Remember, the Baby Boomer generation, the largest ever by far in US history, was just entering the workforce by the 1960s.

    This post was published at PeakProsperity on Friday, November 17, 2017,.


  • Market Talk- November 17, 2017

    The tax reform bill passing the US House yesterday certainly added to sentiment, after great earnings releases for markets but Asia need more help for cash today. Having opened strong all core markets then drifted and even saw the Nikkei trade negative. For the week it closes down 1.3% which has broken a two month rally. The Hang Seng performed well all day closing up around +0.6% but only off-set the decline in the Shanghai (-0.5%). India traded well following Thursday’s credit upgrade eventually adding an additional +0.7% onto yesterdays gain. All eyes are still on the DXY as we approach the weekend as just below we have the 50 Day Moving Average at 93.50. Oil has bounced following comments from potential output cuts led by OPEC.

    This post was published at Armstrong Economics on Nov 17, 2017.


  • This Michigan Bank Just Brought Back The Zero-Down Mortgage; They’ll Even Cover Your Closing Costs

    A small savings bank in Michigan, Flagstar Bank, has come up with a genius, innovative new mortgage product that they believe is going to be great for their investors and low-income housing buyers: the “zero-down mortgage.” What’s better, Flagstar is even offering to pay the closing costs of their low-income future mortgage debtors. Here’s more from HousingWire:
    Under the program, Flagstar will gift the required 3% down payment to the borrower, plus up to $3,500 to be used for closing costs.
    According to the bank, there is no obligation for borrowers who qualify to repay the down payment gift.
    The program is available to only certain low- to moderate-income borrowers and borrowers in low- to moderate-income areas throughout Michigan.
    Borrowers would not have to repay the down payment or closing costs. But a 1099 form to report the income would be issued to the Internal Revenue Service by the bank. So the gifts could be taxable, depending on the borrower’s financial picture.
    Flagstar said borrowers who might qualify for its new program typically would have an annual income in the range of $35,000 to $62,000. The sales price of the home — which must be in qualifying areas — would tend to be in the range of $80,000 to $175,000.

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


  • U.S. Treasury Becomes a Laughing Stock

    U. S. Treasury Secretary Steven Mnuchin appears to have inaugurated a perpetual bring your wife to work day. It’s become so farcical that it frequently feels like the United States Treasury Department has morphed into a low-budget, badly scripted reality TV show where the female star is so out-of-touch that she must continually scurry about in her haute couture erasing the haughty things she has written about the little people on multiple continents. We’ll get to that shortly, but first some background:
    It all started back on January 19 when actress and then fiance Louise Linton sat by her man during his Senate Finance Committee confirmation hearing to become U. S. Treasury Secretary. At the hearing, Democratic Senator Ron Wyden of Oregon had this to say about his repugnance to see Mnuchin fill the post as U. S. Treasury Secretary:
    ‘Mr. Mnuchin’s career began in trading the financial products that brought on the housing crash and the Great Recession. After nearly two decades at Goldman Sachs, he left in 2002 and joined a hedge fund. In 2004, he spun off a hedge fund of his own, Dune Capital. It was only a few lackluster years before Dune began to wind down its investments in 2008.
    ‘In early 2009, Mr. Mnuchin led a group of investors that purchased a bank called IndyMac, renaming it OneWest. OneWest was truly unique. While Mr. Mnuchin was CEO, the bank proved it could put more vulnerable people on the street faster than just about anybody else around.

    This post was published at Wall Street On Parade By Pam Martens and Russ Marte.


  • E-Commerce Meets Brick-and-Mortar Meltdown

    But some big sectors are still resisting.
    There is one sector in retail that is seriously booming: E-commerce sales in the third quarter jumped 15.5% from a year ago, to $115 billion seasonally adjusted, a new record, according to the Commerce Department this morning. This includes online sales by brick-and-mortar retailers. Over the same period, total retail sales increased 4.3%. And retail sales without e-commerce – an approximation for brick-and-mortar sales – ticked up only 3.1%, barely staying ahead of 2% inflation and 0.8% population growth.
    The chart below shows the e-commerce sales boom on a quarterly basis (seasonally adjusted). Note the beating during the Great Recession. Not even e-commerce is recession proof. It was sharp. People just stopped clicking on the ‘buy’ button. But it was short. By Q3 2009, e-commerce was setting records again:

    But how much of a danger is e-commerce to brick-and-mortar retail? Many observers keep pointing out that e-commerce accounts for only a tiny part of total retail sales. And that’s true. While growing rapidly, the numbers are still relatively small. In the third quarter, the e-commerce share of total retail was still just 9.1%, but that’s up from 8.2% a year ago.

    This post was published at Wolf Street by Wolf Richter ‘ Nov 17, 2017.


  • Here’s Where E-commerce Crushes Brick-and-Mortar

    But some big sectors are still resisting.
    There is one sector in retail that is seriously booming: E-commerce sales in the third quarter jumped 15.5% from a year ago, to $115 billion seasonally adjusted, a new record, according to the Commerce Department this morning. This includes online sales by brick-and-mortar retailers. Over the same period, total retail sales increased 4.3%. And retail sales without e-commerce – an approximation for brick-and-mortar sales – ticked up only 3.1%, barely staying ahead of 2% inflation and 0.8% population growth.
    The chart below shows the e-commerce sales boom on a quarterly basis (seasonally adjusted). Note the beating during the Great Recession. Not even e-commerce is recession proof. It was sharp. People just stopped clicking on the ‘buy’ button. But it was short. By Q3 2009, e-commerce was setting records again:

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


  • Huge Crude Stakes

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    There is a titanic struggle going on right now in the oil market. On the one side of the futures market are the usual pace setters, the money managers. Last week, the latest COT data available, they went the most net long since March. If it continues, it will close in on the most positive futures position since the record long they established back in February.
    Normally that would be insanely bullish for oil prices. But just as in February/March another part of the futures market has intervened on the other side. Back then it was the oil producers who rising inventory forced into a larger and larger offsetting net short (hedge).
    This time, however, it is the swap dealers who are short for reasons that aren’t really clear. The weekly COT report for the last week in October showed a record net short for dealers, just beating their most extreme position from the middle of 2013 at -424k contracts. In the first week and November, they blew away that record at -470k.

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


  • Mueller Subpoena Spooks Dollar, Sends European Stocks, US Futures Lower

    Yesterday’s torrid, broad-based rally looked set to continue overnight until early in the Japanese session, when the USD tumbled and dragged down with it the USDJPY, Nikkei, and US futures following a WSJ report that Robert Mueller had issued a subpoena to more than a dozen top Trump administration officials in mid October.
    And as traders sit at their desks on Friday, U. S. index futures point to a lower open as European stocks fall, struggling to follow Asian equities higher as the euro strengthened at the end of a tumultuous week. Chinese stocks dropped while Indian shares and the rupee gain on Moody’s upgrade. The MSCI world equity index was up 0.1% on the day, but was heading for a 0.1% fall on the week. The dollar declined against most major peers, while Treasury yields dropped and oil rose.
    Europe’s Stoxx 600 Index fluctuated before turning lower as much as 0.3% in brisk volumes, dropping towards the 200-DMA, although about 1% above Wednesday’s intraday low; weakness was observed in retail, mining, utilities sectors. In the past two weeks, the basic resources sector index is down 6%, oil & gas down 5.8%, autos down 4.9%, retail down 3.4%; while real estate is the only sector in green, up 0.1%. The Stoxx 600 is on track to record a weekly loss of 1.3%, adding to last week’s sell-off amid sharp rebound in euro, global equity pullback. The Euro climbed for the first time in three days after ECB President Mario Draghi said he was optimistic for wage growth in the region, although stressed the need for patience, speaking in Frankfurt. European bonds were mixed. The pound pared some of its earlier gains after comments from Brexit Secretary David Davis signaling a continued stand-off in negotiations with the European Union.
    In Asia, the Nikkei 225 took its time to catch up to the WSJ report that US Special Counsel Mueller has issued a Subpoena for Russia-related documents from Trump campaign officials, although reports pointing to North Korea conducting ‘aggressive’ work on the construction of a ballistic missile submarine helped the selloff. The Japanese blue-chip index rose as much as 1.8% in early dealing, but the broad-based dollar retreat led to the index unwinding the bulk of its gains; the index finished the session up 0.2% as the yen jumped to the strongest in four-weeks. Australia’s ASX 200 added 0.2% with IT, healthcare and telecoms leading the way, as utilities lagged. Mainland Chinese stocks fell, with the Shanghai Comp down circa 0.5% as the PBoC’s reversel in liquidity injections (overnight net drain of 10bn yuan) did little to boost risk appetite, as Kweichou Moutai (viewed as a bellwether among Chinese blue chips) fell sharply. This left the index facing its biggest weekly loss in 3 months, while the Hang Seng rallied with IT leading the way higher. Indian stocks and the currency advanced after Moody’s Investors Service raised the nation’s credit rating.

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


  • Bill Blain: “Stock Markets Don’t Matter; The Great Crash Of 2018 Will Start In The Bond Market”

    Blain’s Morning Porridge, Submitted by Bill Blain of Mint Partners
    The Great Crash of 2018? Look to the bond markets to trigger Mayhem!
    I had the impression the markets had pretty much battened down for rest of 2017 – keen to protect this year’s gains. Wrong again. It seems there is another up-step. After the People’s Bank of China dropped $47 bln of money into its financial system (where bond yields have risen dramatically amid growing signs of wobble), the game’s afoot once more. The result is global stocks bound upwards. Again. It suggest Central Banks have little to worry about in 2018 – if markets get fraxious, just bung a load of money at them.
    Personally, I’m not convinced how the tau of monetary market distortion is a good thing? Markets have become like Pavlov’s dog: ring the easy money bell, and markets salivate to the upside.
    Of course, stock markets don’t matter.
    The truth is in bond markets. And that’s where I’m looking for the dam to break. The great crash of 2018 is going to start in the deeper, darker depths of the Credit Market.
    I’ve already expressed my doubts about the long-term stability of certain sectors – like how covenants have been compromised in high-yield even as spreads have compressed to record tights over Treasuries, about busted European regions trying to pass themselves off as Sovereign States (no I don’t mean the Catalans, I mean Italy!), and how the bond market became increasingly less discerning on risk in its insatiable hunt for yield. Chuck all of these in a mixing bowl and the result is a massive Kerrang as the gears of finance explode!

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


  • How Corporate Zombies Are Threatening The Eurozone Economy

    The recovery in Eurozone growth has become part of the synchronised global growth narrative that most investors are relying on to deliver further gains in equities as we head into 2018. However, the ‘Zombification’ of a chunk of the Eurozone’s corporate sector is not only a major unaddressed structural problem, but it’s getting worse, especially in…you guessed it… Italy and Spain. According to the WSJ.
    The Bank for International Settlements, the Basel-based central bank for central banks, defines a zombie as any firm which is at least 10 years old, publicly traded and has interest expenses that exceed the company’s earnings before interest and taxes. Other organizations use different criteria. About 10% of the companies in six eurozone countries, including France, Germany, Italy and Spain are zombies, according to the central bank’s latest data. The percentage is up sharply from 5.5% in 2007. In Italy and Spain, the percentage of zombie companies has tripled since 2007, the Organization for Economic Cooperation and Development estimated in January. Italy’s zombies employed about 10% of all workers and gobbled up nearly 20% of all the capital invested in 2013, the latest year for which figures are available. The WSJ explains how the ECB’s negative interest rate policy and corporate bond buying are keeping a chunk of the corporate sector, especially in southern Europe on life support. In some cases, even the life support of low rates and debt restructuring is not preventing further deterioration in their metrics. These are the true ‘Zombie’ companies who will probably never come back from being ‘undead’, i.e. technically dead but still animate. Belatedly, there is some realisation of the risks.

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


  • Rob From The Middle Class Economics

    Much of our financial world functions as a ‘Rob from the Middle Class’ economy. The system robs from the middle class and poor via ‘money printing’ and inflation of the currency supply!
    The rich get richer and the poor get poorer.
    Little benefit comes from complaining about the process or fighting it. Understand the process, work around it, and use it constructively. Explaining Our Rob from the Middle Class Economy:
    Governments, individuals, pension funds and corporations are increasingly financialized and dependent upon debt, central bank interventions and currency devaluations. Wages are less relevant in a financialized economy because wages rise slowly while debt, currency in circulation, and paper financial assets increase rapidly.

    This post was published at Deviant Investor on November 17, 2017.


  • Reality On So-Called ‘Tax Cuts’

    Let’s cut the crap, shall we?
    Tax cuts have never resulted in any sort of material improvement in the living standard of the ordinary America — which I define as everyone other than the top 1% of earners.
    It has simply never happened.
    The last time the tax code was “reorganized” you got more buy-backs and stock options issued to executives.
    The same thing happened with all the other tax cut packages since.
    Further, when we had the so-called “Reagan Tax Reform” Tipper promised to cut spending in order to make them deficit neutral. He did not do so; no reduction in spending was ever delivered.
    This will be no different. In fact, unlike the Reagan-era game nobody is even claiming to intend to reduce spending.
    The chimera of “tax cuts” being “good for business” is nonsense as well. Almost no corporation actually pays the tax rate claimed, especially large firms. They all cheat — Apple has been caught in the “Paradise Papers” and others have as well. The claim of “repatriation” leading to some sort of boom in investment and wages is nonsense as well.

    This post was published at Market-Ticker on 2017-11-17.


  • Is Peter Thiel Trying To Break Up Google? This $300,000 Political Contribution Seems To Imply He Is…

    Peter Thiel, the billionaire venture capitalist who backed President Trump (just before giving his presidency a “50% chance of ending in disaster“) and infamously helped Hulk Hogan bring down Gawker.com, has allegedly set his sights on a new target: Google. According to The Mercury News, suspicions about Thiel’s next pet project were raised after he recently contributed $300,000 to Missouri Attorney General Josh Hawley just before he launched an antitrust lawsuit against the alleged search monopoly.
    So far, high-profile Silicon Valley venture capitalist and PayPal co-founder Peter Thiel isn’t saying publicly why he gave hundreds of thousands of dollars to the campaign of a state attorney general who’s just launched an antitrust probe of Google. But it’s not the first time Thiel has handed cash to an AG who went after Google over monopoly concerns.
    Missouri Attorney General Josh Hawley announced Nov. 13 that his office was investigating Google to see if the Mountain View tech giant had violated the state’s antitrust and consumer-protection laws. The Missouri attorney general said he had issued an investigative subpoena to Google. He’s looking at the firm’s handling of users’ personal data, along with claims that it misappropriated content from rivals and pushed down competitors’ websites in search results.

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


  • Wall Street Discovers the Brick-and-Mortar Meltdown

    Finally time to make some easy money by betting on the collapse of brick-and-mortar retail, years after it began? Here’s a grisly thought: As of today, there’s an ETF for that.
    In its launch announcement today, ProShares explained:
    Over 30 major retailers have declared bankruptcy over the past three years, nearly two-thirds of those in 2017, including Toys ‘R’ Us, RadioShack, and Payless. The pressure is expected to continue with some analysts predicting that online sales growth will outpace bricks and mortar retailers 3 to 1 by 2020.
    Retail is being profoundly disrupted by shoppers moving online, oversaturated markets and changing consumer behaviors.
    The brick-and-mortar retail pain splits two ways: Retailers that have failed to build a vibrant online sales channel and are dependent on their physical stores; and the landlords that lease stores to them.
    This EFT focuses on the first, the retailers. The ticker is evocatively named EMTY. As an inverse ETF, it’s supposed to rise in price when the Solactive-ProShares Bricks and Mortar Retail Store Index, which is composed of 56 ‘traditional’ brick-and-mortar retail stocks, declines.

    This post was published at Wolf Street by Wolf Richter ‘ Nov 16, 2017.


  • Pay Down Your Mortgage

    The latest issue of Street Freak came out on Tuesday. Street Freak is a bit of an aggressive stock-picking newsletter, where we come up with a new idea every month. I try to keep the ideas a secret – if you want them, you have to subscribe! But I’m going to let you in on this month’s idea for free. Are you ready? Here it is:
    Pay down your mortgage.
    Yes, that’s a bit unorthodox for a financial newsletter. But people spend too much time thinking about the next get-rich-quick idea and not enough time thinking about their overall financial well-being. I’m willing to bet that in addition to having a successful portfolio, many investors reading this also have a lot of debt.
    Going into what might be a downturn, I’m uncomfortable having a lot of financial leverage. If you think the market is going to go down, then you should stop thinking about buying inverse VIX ETNs and start thinking about how to deleverage in a smart fashion.
    Better Risk-Reward Paying down your mortgage is part of that. It is part of an overall exercise in balance sheet repair, which includes –
    Building a cash position Paying off debt: Margin debt Credit card debt Car loans Mortgage debt

    This post was published at Mauldin Economics on NOVEMBER 16, 2017.


  • Options Traders Furiously BFTD!

    Via Dana Lyons’ Tumblr,
    Despite the down day yesterday, one indicator from the equity options market recorded a massive spike in bullishness.
    We like to track metrics from the various stock options exchanges as a measure of stock market sentiment. Generally, when too many calls are being bought versus puts, it is a warning of overheated bullishness, and when put volume becomes extreme relative to calls, it can be a sign of excessive fear. One particular indicator we used to track closely was the International Securities Exchange’s Call/Put Ratio on equity options (ISEE). For years, the ISEE was particularly helpful in signaling bullish or bearish extremes. We’re not sure what changed, however, in recent years the indicator has been of little to no value in that regard (in our assessment). We do still continue to monitor it, though, just in case it gives readings that raise our antennae. Yesterday’s reading did.
    In the past, ISEE readings above 200, i.e., 2 calls bought per every put, have arguably been considered excessively bullish. There have not been nearly as many of these readings in recent years, so yesterday’s number was alarming to say the least. At a reading of 334, it was the highest ISEE recorded in 5 and a half years – and just the 10th ever above 300 since its 2006 inception.

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


  • Solid Sales Growth and Margins at New Highs Drive 3Q17 Results

    Summary: For the third quarter (3Q17), S&P earnings rose 12% yoy, sales grew 6% and profit margins expanded to new all-time highs.
    These strong results are not due to the rebound in oil prices. Sales for the sectors with the highest weighting in the S&P have grown an average of 7% in the past year and 19% in the past 3 years. Moreover, margins outside of energy have expanded to a new high of 10.8%.
    Bearish pundits continue to repeat several misconceptions: that “operating earnings” are deviating more than usual from GAAP measurements; that share reductions (buybacks) are behind most EPS growth; and that equity gains are unreasonably out of proportion to earnings growth. None of these are correct. Continued growth in employment, wages, and consumption tell us that corporate financial results should be improving, as they have in fact done.
    Where critics have a valid point is valuation: even excluding energy, the S&P is now more highly valued than anytime outside of the late 1990s technology bubble. With economic growth of 4-5% (nominal) and margins already at new highs, it will take excessive bullishness among investors to propel S&P price appreciation at a significantly faster rate. At this point, lower valuations are a notable risk to equity returns.
    92% of the companies in the S&P 500 have released their 3Q17 financial reports. The headline numbers are good. Overall sales are 6% higher than a year ago, the second best growth rate in nearly 6 years. Earnings (GAAP-basis) are 12% higher than a year ago. Profit margins are at a new high of 10.2%, exceeding the prior peak from 2014.

    This post was published at FinancialSense on 11/16/2017.