One Bank Is Unsure If Any Humans Still Trade Stocks In Japan, Or Have All Moved To Bitcoin

While the wholesale disappearance of retail traders from stock markets is hardly a novel observation, it has taken on a whole new meaning in Japan, where the lack of carbon-based investors has prompted Deutsche Bank to ask if “Japan’s stocks are still traded at all by humans.”
As Deutsche strategist Masao Muraki writes, since the US presidential election, Japanese stocks (in this case the TOPIX index) have been almost entirely defined by just three things: US stocks (S&P 500), the implied volatility (VIX), and USDJPY. This is shown in the model correlation chart below.

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

Asian Metals Market Update: December-21-2017

‘Spend wisely and Invest lavishly should be life mantra for 2018’
American companies announcing large bonuses for its employees after the passage of Tax bill will result in higher consumption in the first quarter of next year. Higher retail consumption in the USA will result in higher employment and higher profitability. Global stock markets will remain firm and result in rosier projections for economic growth in the USA and China.
Negative news surrounding crypto currencies like hacking etc this week is state manipulated. States know that block chain technology is like the Linux of the world (which is free) and not windows (which is very expensive).

This post was published at GoldSeek on 21 December 2017.

Despite Record Levels, the Stock Market Is Actually Shrinking in Size

Like that box of macaroni in your kitchen cupboard, the U. S. stock market has become a lot more expensive but has actually shrunk in terms of quantity.
In 1975, U. S. domestic companies that traded on U. S. exchanges totaled 4,819. Forty years later, the market has shrunk to less than 4,000, despite a tripling in GDP.
If you take a shorter time span of 20 years, which included the dot.com craze of listing companies known to Wall Street insiders as ‘crap’ and ‘dogs,’ the numbers are worse. In September of last year, Jim Clifton, the Chairman and CEO of Gallup, the polling company, reported the following:
‘The number of publicly listed companies trading on U. S. exchanges has been cut almost in half in the past 20 years – from about 7,300 to 3,700. Because firms can’t grow organically – that is, build more business from new and existing customers – they give up and pay high prices to acquire their competitors, thus drastically shrinking the number of U. S. public companies. This seriously contributes to the massive loss of U. S. middle-class jobs.’
As of early 2017, according to Ernst & Young, just 140 of these publicly traded companies represented more than half of the total market value of all stocks traded in the U. S. Another stark example of the dangerous trend of wealth concentration in the U. S.

This post was published at Wall Street On Parade on December 20, 2017.

Margin Debt, Backed by Enron-Dj -Vu Steinhoff Shares, Hits BofA, Citi, HSBC, Goldman, BNP

‘Shadow margin’ is a hot business for brokers. Now they’re licking their wounds. When the bankers of Christo Wiese, the former chairman and largest shareholder of Steinhoff International Holdings – a global retail empire that includes the Mattress Firm and Sleepy’s in the US – went to work on December 6 in the epic nothing-can-go-wrong calm of the rising stock markets, they suddenly discovered that much of their collateral for a 1.6-billion margin loan they’d made to Wiese had just evaporated.
Citigroup, HSBC, Goldman Sachs, and Nomura had extended Wiese this ‘securities-based loan’ in September 2016. His investment vehicles pledged 628 million of his Steinhoff shares as collateral, at the time worth 3.2 billion. He wanted this money so he could participate in a Steinhoff share sale in conjunction with the acquisition of Mattress Firm and Poundland, essentially borrowing against his Steinhoff shares to buy more Steinhoff shares.
This loan forms part of the $21 billion of debt associated with Steinhoff that global banks are exposed to.
But that December 6, the shares of Steinhoff plunged 64% to 1.07 on the Frankfurt stock exchange after the company announced the departure of the CEO and unspecified ‘accounting irregularities requiring further investigation.’

This post was published at Wolf Street on Dec 19, 2017.

CalPERS Goes All-In On Pension Accounting Scam; Boosts Stock Allocation To 50%

Starting July 1, 2018 stock markets around the world are going to get yet another artificial boost courtesy of a decision by the $350 billion California Public Employees’ Retirement System (CalPERS) to allocate another $15 billion in capital to already bubbly equities. Of course, if this decision doesn’t make sense to you that’s because it’s not really meant to make sense.
As Pensions & Investments notes, CalPERS’ decision to hike their equity allocation had absolutely nothing to do with their opinion of relative value between assets classes and nothing to do with traditional valuation metrics that a rational investor might like to see before buying a stake in a business but rather had everything to do with gaming pension accounting rules to make their insolvent fund look a bit better. You see, making the rational decision to lower their exposure to the massive equity bubble could have resulted in CalPERS having to also lower their discount rate for future liabilities…a move which would require more contributions from cities, towns, school districts, etc. and could bring the whole ponzi crashing down.
The new allocation, which goes into effect July 1, 2018, supports CalPERS’ 7% annualized assumed rate of return. The investment committee was considering four options, including one that lowered the rate of return to 6.5% by slashing equity exposure and another that increased it to 7.25% by increasing the exposure to almost 60% of the portfolio.

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

What to Expect From Equities in 2018

Summary: US stocks will likely rise in 2018. By how much is anybody’s guess: the standard deviation of annual returns is too wide to get even close to a correct estimate on a consistent basis. Earnings growth implies 6% price appreciation, but tax cuts could boost that to 13%. Investor psychology could push returns much higher (or lower).
While it’s true that investors are already bullish and valuations are already high, neither of these implies a likelihood of negative returns in 2018. That the stock market rose strongly this year also has no adverse impact on next year’s probable return.
A bear market is always possible but is also unlikely. That said, the S&P typically experiences a drawdown every year of about 10%; even a 14% fall would be within the normal, annual range. It will feel like the end of the bull market when it happens.
The Fed will likely continue to raise rates next year, which normally leads to higher stock prices. While political risks seem high, the stock market usually ignores these. The “Year 2” presidential cycle provides no investment edge.
This article highlights 11 key ideas to explain what to expect in 2018.

This post was published at FinancialSense on 12/19/2017.

Jedi Mind Trick: The Disturbing, Destabilizing Abnormal Is Now Normal

Disturbing, destabilizing abnormalities are now accepted as normal life in America. Forgive me for wondering if the populace of America hasn’t fallen for a Jedi mind trick: *** Disturbing, destabilizing abnormalities are now accepted as normal life in America: 1. Sprawling tent camps of homeless sprout like flowers of poverty in U. S. cities, leaving mountains of trash that speak volumes about systemic failure, destitution and overwhelmed city services. 2. The Federal Reserve’s vaunted “Wealth Effect” that was supposed to be a tide that raised all boats at least a bit has concentrated wealth and power in the top 5%, 1%, and 1/10th of 1%, leaving the bottom 95% with diminished prospects and a thinning stake in The American Project. 3. The stock market’s year-long levitation while the real-world economy decays is a perverse counter-correlation that reflects the widening divide between those enriched by the asset bubbles and those left further behind.

This post was published at Charles Hugh Smith on MONDAY, DECEMBER 18, 2017.

2017 Has Been The Best Year For The Stock Market EVER

We have never seen a better year for stocks in all of U. S. history. Just five days after Donald Trump entered the White House, the Dow Jones Industrial Average hit the 20,000 mark for the first time ever. On Monday, the Dow closed at 24,792.20, and there doesn’t seem to be any end to the rally in sight. Overall, the Dow Jones Industrial Average is up more than 5,000 points so far in 2017, and that absolutely shatters all of the old records. Previously, the most that the Dow had risen in a single year was 3,472 points in 2013.
Yes, I know that it may seem odd for a website that continually chronicles our ongoing ‘economic collapse’ to be talking about a boom in stock market prices. But of course there has not been a corresponding economic boom to match the rise in stock prices. This artificial stock market bubble has been created by unprecedented central bank intervention, and every previous stock market bubble in our history has ended with a horrible crash.
But for the moment, it is certainly appropriate to be in awe of what has transpired in the financial markets in 2017. Never before have we seen the Dow close at a record high 70 times in a single year, and we still have almost two weeks to go.
Stocks have risen every single month in 2017, and that is the very first time that has ever happened as well. No matter how much bad news has come out, stock prices have just kept climbing and climbing and climbing.
Since Donald Trump’s surprise election victory last November, the Dow is up a whopping 34 percent.
34 percent!

This post was published at The Economic Collapse Blog on December 18th, 2017.

The Darkest Hours

This is a syndicated repost courtesy of Kunstler. To view original, click here. Reposted with permission.
The Tax ‘Reform’ bill working its way painfully out the digestive system of congress like a sigmoid fistula, ought be re-named the US Asset-stripping Assistance Act of 2017, because that’s what is about to splatter the faces of the waiting public, most of whom won’t have a personal lobbyist / tax lawyer by their sides holding a protective tarpulin during the climactic colonic burst of legislation.
Sssshhhh…. The media has not groked this, but the economy is actually collapsing, and the nova-like expansion of the stock markets is exactly the sort of action you might expect in a system getting ready to blow. Meanwhile, the more visible rise of the laughable scam known as crypto-currency, is like the plume of smoke coming out of Vesuvius around 79 AD – an amusing curiosity to the citizens of Pompeii below, going about their normal activities, eating pizza, buying slaves, making love – before hellfire rained down on them.
Whatever the corporate tax rate might be, it won’t be enough to rescue the Ponzi scheme that governing has become, with its implacable costs of empire. So the real aim here is to keep up appearances at all costs just a little while longer while the table scraps of a four-hundred-year-long New World banquet get tossed to the hogs of Wall Street and their accomplices. The catch is that even hogs busy fattening up don’t have a clue about their imminent slaughter.

This post was published at Wall Street Examiner by James Howard Kunstler ‘ December 18, 2017.

Janet Yellen: Trump’s Tax Cut Could Play a Negative Role in Next Downturn

The outgoing Chair of the Federal Reserve, Janet Yellen, held her last press conference yesterday following the Federal Open Market Committee’s decision to hike the Feds Fund rate by one-quarter percentage point, bringing its target range to 1-1/4 to 1-1/2 percent.
Given the growing reports from market watchers that the stock market has entered the bubble stage and could pose a serious threat to the health of the economy should the bubble burst, CNBC’s Steve Liesman asked Yellen during the press conference if there are ‘concerns at the Fed about current market valuations.’
Yellen gave a response which may doom her from a respected place in history. She stated:
‘So let me start Steve with the stock market generally. Of course the stock market has gone up a great deal this year and we have in recent months characterized the general level of asset valuations as elevated. What that reflects is simply the assessment that looking at price-earnings ratios and comparable metrics for other assets other than equities we see ratios that are in the high end of historical ranges. And so that’s worth pointing out.
‘But economists are not great at knowing what appropriate valuations are. We don’t have a terrific record. And the fact that those valuations are high doesn’t mean that they’re necessarily overvalued.

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

Bond Markets Really Are Signalling A Slowdown

Authored by Lakshman Achuthan and Anirvan Banerji via Bloomberg.com,
Analysts shouldn’t dismiss the yield curve’s message just because inflation expectations have been declining in recent years. When it comes to the economic outlook, the bond market is smarter than the stock market. That Wall Street adage appears to be on the money from a cyclical vantage point, with key indicators in the fixed-income markets independently corroborating slowdown signals from the Economic Cycle Research Institute’s leading indexes.
The yield curve is widely considered to be among the most prescient indicators. That’s why its flattening this year has been troublesome for an otherwise optimistic consensus to explain away.
This hasn’t stopped optimistic analysts from dismissing the yield curve’s message on the grounds that inflation expectations have been declining in recent years, or that foreign central banks like the European Central Bank and the Bank of Japan continue to artificially suppress their bond yields, pulling down U. S. yields. We’re reminded of Sir John Templeton’s warning that ‘this time it’s different’ are the “four most costly words in the annals of investing” — but that’s effectively what it means to simply ignore the slowdown signals emanating from the fixed-income markets.
Of course, there’s no Holy Grail in the world of forecasting, which is why we look at a wide array of leading indexes that each includes many inputs. From that vantage point, the yield curve flattening actually makes a lot of sense.

This post was published at Zero Hedge on Dec 15, 2017.

15 Market Red Flag: Stocks May Be About To Tank: ‘If There’s One Thing That You Need To Pay Attention To It’s This…’

Stock and bond markets may be teetering on the edge of a widespread crash following a stellar year that has seen all-time highs across just about every major asset class. Earlier today Zero Hedge reported that Bloomberg market commentator Mark Cudmore says markets could be in for a violent downside break in the weeks ahead.
It’s a sentiment also shared by Traders Choice analyst Greg Mannarino, who up until this point has been generally bullish on short-term market movements. On Thursday, however, Mannarino reports that bond buying, which has been used to prop up stocks through massive cash injections in recent weeks and months, failed to keep stocks from falling.
This, says Mannarino, is a major red flag that could signal a reversal going forward:
If there’s one thing that you need to pay attention to it’s this… savage bond buying occurred today in an attempt to re-prop up the stock market and it didn’t work…
They’re trying to play a game here and it’s been working time and time again…
Without fail every single time… except for today… that has worked.

This post was published at shtfplan on December 15th, 2017.

Dear Janet Yellen: Here Is Your Own Watchdog Warning About Financial Stability Risks In “Red And Orange”

In the most interesting exchange during Janet Yellen’s final news conference, CNBC’s seemingly flustered Steve Liesman asked Janet Yelen a question which in other times would have led to his loss of FOMC access privileges: “Every day it seems the stock market goes up triple digits on the Dow Jones: is it now, or will it soon become a worry for the central bank that valuations are this high?”
Yellen’s response was predictable, colorfully so in fact.
Of course, the stock market has gone up a great deal this year. And we have in recent months characterized the general level of asset valuations as elevated. What that reflects is simply the assessment that looking at price-earnings ratios and comparable metrics for other assets other than equities, we see ratios that are in the high end of historical ranges. And so that’s worth pointing out. But economists are not great at knowing what appropriate valuations are, we don’t have the terrific record. And the fact that those valuations are high doesn’t mean that they’re necessarily overvalued.


This post was published at Zero Hedge on Dec 14, 2017.

Fed’s Janet Yellen: Stock Market Bubble Not Seen as Major Risk Factor

The outgoing Chair of the Federal Reserve, Janet Yellen, held her last press conference yesterday following the Federal Open Market Committee’s decision to hike the Feds Fund rate by one-quarter percentage point, bringing its target range to 1-1/4 to 1-1/2 percent.
Given the growing reports from market watchers that the stock market has entered the bubble stage and could pose a serious threat to the health of the economy should the bubble burst, CNBC’s Steve Liesman asked Yellen during the press conference if there are ‘concerns at the Fed about current market valuations.’
Yellen gave a response which may doom her from a respected place in history. She stated:
‘So let me start Steve with the stock market generally. Of course the stock market has gone up a great deal this year and we have in recent months characterized the general level of asset valuations as elevated. What that reflects is simply the assessment that looking at price-earnings ratios and comparable metrics for other assets other than equities we see ratios that are in the high end of historical ranges. And so that’s worth pointing out.
‘But economists are not great at knowing what appropriate valuations are. We don’t have a terrific record. And the fact that those valuations are high doesn’t mean that they’re necessarily overvalued.

This post was published at Wall Street On Parade on December 14, 2017.

Yellen’s Big Goodbye (And What She’s Leaving Behind)

The past three Fed Chairs before Yellen all had their own crisis to deal with.
Volcker had the disaster of the early 1980’s as he struggled to tame inflation with double digit interest rates. That helped contribute to the Latin American debt crisis, and the subsequent global bear markets in stocks.
He handed over the reins to Greenspan in the summer of ’87 and within months, the new Fed Chairman faced the largest stock market crash since the 1920’s. That trial by fire was invaluable for Greenspan, as he faced a second crisis when the DotCom bubble burst at the turn of the century.
His successor, Ben Bernanke also did not escape without a record breaking financial panic when the real estate collapse hit the global economy especially hard in 2007.
But Yellen? Nothing. Nada. She has presided over the least volatile, most steady, market rally of the past century. Was she lucky? Or was this the result of smart policy decisions? I tend to attribute it more to luck, but it’s tough to argue that she made any large mistakes. Sure you might quibble about the rate of interest rate increases. And her critics will argue that economic growth, and more importantly, wage increases have been especially anemic under her watch, but to a large degree, those variables are out of her hands.

This post was published at Zero Hedge on Dec 13, 2017.

The Stock Market and the FOMC

An Astonishing Statistic
As the final FOMC announcement of the year approaches, we want to briefly return to the topic of how the meeting tends to affect the stock market from a statistical perspective. As long time readers may recall, the typical performance of the stock market in the trading days immediately ahead of FOMC announcements was quite remarkable in recent decades. We are referring to the Seaonax event study of the average (or seasonal) performance across a very large number of events, namely the past 160 monetary policy announcements and the 10 trading days surrounding them. It looks as follows:

This post was published at Acting-Man on December 12, 2017.

The “Exit” Problem

Last week, I discussed the issue of ‘bubbles’ in the market. To wit:
‘Market bubbles have NOTHING to do with valuations or fundamentals.’
Hold on…don’t start screaming ‘heretic’ and building gallows just yet. Let me explain.
Stock market bubbles are driven by speculation, greed, and emotional biases – therefore valuations and fundamentals are simply a reflection of those emotions.
In other words, bubbles can exist even at times when valuations and fundamentals might argue otherwise. Let me show you a very basic example of what I mean. The chart below is the long-term valuation of the S&P 500 going back to 1871.’

This post was published at Zero Hedge on Dec 11, 2017.

Why Do You Keep Doing This To Yourself?

As I am known to do, I will peruse articles on the web to find some interesting tidbits. And, I found one in one of Lance Robert’s recent posts.
Within this article, he cited a Doug Kass note, which stated:
‘Despite many who are suggesting this has been a ‘rational rise’ due to strong earnings growth, that is simply not the case as shown below . . . Since 2014, the stock market has risen (capital appreciation only) by 35% while reported earnings growth has risen by a whopping 2%. A 2% growth in earnings over the last 3-years hardly justifies a 33% premium over earnings.
Of course, even reported earnings is somewhat misleading due to the heavy use of share repurchases to artificially inflate reported earnings on a per share basis. However, corporate profits after tax give us a better idea of what profits actually were since that is the amount left over after those taxes were paid.
“Again we see the same picture of a 32% premium over a 3% cumulative growth in corporate profits after tax. There is little justification to be found to support the idea that earnings growth is the main driver behind asset prices currently.
We can also use the data above to construct a valuation measure of price divided by corporate profits after tax. As with all valuation measures we have discussed as of late, and forward return expectations from such levels, the P/CPATAX ratio just hit the second highest level in history.”
So, what is Lance’s conclusion from the Kass note? ‘The reality, of course, is that investors are simply chasing asset prices higher as exuberance overtakes logic.’
And, all of this leaves me scratching my head.

This post was published at GoldSeek on 11 December 2017.

Crypto-Cornucopia Part 4 – “Without It, You’re Talking Mad Max”

Authored by Dr. D via Raul Ilargi Meijer’s The Automatic Earth blog,
Part 1 “Bitcoin Is A Trust Machine” here.
Part 2 “This System Is Garbage, How Do We Fix It?” here.
Part 3 “A System With No Justice, No Order, No Rules, & No Predictability” here.
Well, all parts of the system rely on accurate record-keeping.
Look at voting rights: we had a security company where 20% more people voted than there were shares. Think you could direct corporate, even national power that way? Without records of transfer, how do you know you own it? Morgan transferred a stock to Schwab but forgot to clear it. Doesn’t that mean it’s listed in both Morgan and Schwab? In fact, didn’t you just double-count and double-value that share? Suppose you fail to clear just a few each day. Before long, compounding the double ownership leads to pension funds owning 2% fake shares, then 5%, then 10%, until stock market and the national value itself becomes unreal. And how would you unwind it?
Work backwards to 1999 where the original drop happened? Remove 10% of CALPERs or Chicago’s already devastated pension money? How about the GDP and national assets that 10% represents? Do you tell Sachs they now need to raise $100B more in capital reserves because they didn’t have the assets they thought they have? Think I’m exaggerating? There have been several companies who tired of these games and took themselves back private, buying up every share…only to find their stock trading briskly the next morning. When that can happen without even a comment, you know fraud knows no bounds, a story Financial Sense called ‘The Crime of the Century.’ No one blinked.

This post was published at Zero Hedge on Dec 9, 2017.

Shocking New Stock Market Prediction Shows When We’ll Hit a Top

The current bull market is in its ninth year, but Money Morning Liquidity Specialist Lee Adler’s newest stock market prediction shows that we are now in its final stages. In fact, he sees the S&P 500 hitting its final high sometime in the first quarter of 2018.
As December unfolds, we’ve seen a breakout in stocks, and Adler’s technical analysis bumped up his long-term price target on the S&P 500 to 2,800. That’s based on his work with market cycles and published in his Wall Street Examiner Pro Trader Market Updates each week. Simply put, by rising above 2,630, the market’s character changed for the better, suggesting one more leg higher.
However, December looks like the last chance to ride the current bull markethigher before conditions change and a bear market becomes likely…
Stock Market Prediction: Expect a Market Top in Q1
Pundits considered the U. S. Federal Reserve’s quantitative easing (QE) program as the punch bowl keeping the recovery party going and goosing the economy and the stock market for several years.
However, as Adler has been warning, things will change in 2018…
This Book Could Make You a Millionaire: The secrets in this book have produced 42 chances to double, triple, and even quadruple your money this year alone. Claim your free copy…
And it already has, now that the Fed’s bond purchases are over. Plus, we’ve already seen the first of several planned hikes in short-term interest rates.
So far, it has not made much of a dent.
However, the forces of monetary policy and liquidity will be hostile to the markets in 2018. The Fed’s program, which it calls ‘normalization,’ is designed to reduce the size of its balance sheet.

This post was published at Wall Street Examiner on December 6, 2017.