Cheat Or Chump? – You Are Not An Investor

Authored by Raul Ilargi Meijer via The Automatic Earth blog,
You are not an investor. One can only be an investor in functioning markets. There have been no functioning markets since at least 2008, and probably much longer. That’s when central banks started purchasing financial assets, for real, which means that is also the point when price discovery died. And without price discovery no market can function.
You are therefore not an investor. Perhaps you are a cheat, perhaps you are a chump, but you are not an investor. If we continue to use terms like ‘investor’ and ‘markets’ for what we see today, we would need to invent new terms for what these words once meant. Because they surely are not the same thing. Even as there are plenty people who would like you to believe they are, because it serves their purposes.
Central banks have become bubble machines, and that is the only function they have left. You could perhaps get away with saying that the dot-com bubble, maybe even the US housing bubble, were not created by central banks, but you can’t do that for the everything bubble of today.
The central banks blow their bubbles in order to allow banks and other financial institutions to first of all not crumble, and second of all even make sizeable profits. They have two instruments to blow their bubbles with, which are used in tandem.

This post was published at Zero Hedge on Apr 22, 2017.

China’s Credit Excess Is Unlike Anything The World Has Ever Seen

By Andrew Brown, a partner for macro and strategy at ShoreVest Capital Partners
From a global macroeconomic perspective, we encourage readers to consider that the world is experiencing an extended, rolling process of deflating its credit excesses. It is now simply China’s turn.
For context, Japan started deflating their credit bubble in the early 1990s, and has now experienced more than 20 years of deflation and very little growth since. The US began its process in 2008, and after eight years has only recently been showing signs of sustainable recovery. The euro zone entered this process in 2011 and is still struggling six years onward. We believe China is now entering the early stages of this process.
Having said that, we believe that Chinese authorities have a viable plan for deflating their credit excess in an orderly fashion. Please stay posted as we will review this multi-pronged, market-based approach in our next column.
For now, let’s turn our attention to the size of the credit excess that China created and why we estimate it to be the largest in the world.

This post was published at Zero Hedge on Apr 22, 2017.

GloBull Warming Hokum On ‘Earth Day’

Let’s cut the crap, shall we?
This is scientific fact. It is a record of history showing temperatures and CO2 levels. You will note that there is no correlation between temperature and CO2 level. In fact, there appears to be an inverse correlation in many (but not all) instances.
I remind you that the basic truth of science when it comes to correlation and causation is as follows:
1. Correlation can never prove causation. It can only suggest that it might be true.

2. The inverse of correlation, however, strongly indicates that causation is absent if it occurs just once.
Well, it has been inverted when we’re talking about CO2 and temperature — and far more often than once.
In the Precambrian era CO2 concentrations fell quite a bit while temperatures rose. In the Silurian period, same. In the Carboniferous period, again. At the end of the Jurasic period, again temperatures went up while CO2 levels fell. Finally, at the exit of the Jurasic period CO2 went up while temperature slowly fell; we believe that happened due to a large asteroid impact (which would make sense as to the step function) but the continued fall in temperatures does not correlate with a further rise in CO2 — until the exit of the Paleocene epoch.

This post was published at Market-Ticker on 2017-04-22.

Visualizing The Collapse Of The Middle Class In 20 Major U.S. Cities

When future historians look back at the beginning of the 21st century, they’ll note that we grappled with many big issues. They’ll write about the battle between nationalism and globalism, soaring global debt, a dysfunctional healthcare system, societal concerns around automation and AI, and pushback on immigration. They will also note the growing number of populist leaders in Western democracies, ranging from Marine Le Pen to Donald Trump.
However, as Visual Cpitalist’s Jeff Desjardins notes, these historians will not view these ideas and events in isolation. Instead, they will link them all, at least partially, to an overarching trend that is intimately connected to today’s biggest problems: the ‘hollowing out’ of the middle class.
VISUALIZING THE COLLAPSE OF THE MIDDLE CLASS
The fact is many people have less money in their pockets – and understandably, this has motivated people to take action against the status quo.
And while the collapse of the middle class and income inequality are issues that receive a fair share of discussion, we thought that this particular animation from Metrocosm helped to put things in perspective.

This post was published at Zero Hedge on Apr 22, 2017.

Central Banks Give “All Clear” To BTFD If French Election Upsets Market

Having already ‘dropped’ over one trillion dollars in 2017 to keep reality at bay, it appears the world’s central bankers are not about to let a French election mishap spoil the illusion.
Just as central bankers gathered at The BIS’ Basel Tower just says before the Brexit vote, so judging by the statements today, the monetary manipulators stand ready to rescue markets once again should the first round of the French election ‘surprise’ the ‘free’ markets.
Brexit’s BTFD took a few days…

This post was published at Zero Hedge on Apr 22, 2017.

Can the Electric Grid Handle Self-Driving Electric Trucks?

Big Beer, dogged by sagging brands, tries to control the market.
One of my many favorite craft brews used to be Lagunitas IPA, brewed in Petaluma, about 40 miles north of San Francisco. I used to be a regular buyer for home use – though when I’m out, I try beers I don’t know. In 2015, Heineken International, one of the world’s largest multinational brewing conglomerates with 180 or so brands, from Tiger to Tecate, bought a 50% stake, following in the footsteps of other multinational brewing conglomerates: they’re all on an acquisition binge of American craft brewers.
Why? Because craft beer sales have been soaring, even as sales of the big brands, despite costly marketing and Super Bowl ads, have been sagging. The market is tilting toward craft brews, and the conglomerates figured this out too.
Conglomerates are cost-cutters. They buy a brewer and try to make it work by cutting costs. One way they cut costs is by using cheaper commodity ingredients that their other breweries buy, which pushes down costs. This is American corporate theology.
A crucial ingredient in beer is hops. Craft brewers use carefully selected specialty hops. Some of the best hops in the world are produced in the US, often on a relatively small scale. But these products are more expensive than the commodity versions traded globally.

This post was published at Wolf Street by Wolf Richter ‘ Apr 22, 2017.

Yale Psychiatrists Just Warned There Is Something Seriously Wrong With Trump

Via TheAntiMedia.org,
‘I’ve worked with murderers and rapists. I can recognize dangerousness from a mile away. You don’t have to be an expert on dangerousness or spend fifty years studying it like I have in order to know how dangerous this man is.’ Those words came from the mouth of James Gilligan, psychiatrist and professor at New York University. The man he is speaking of is the president of the United States.
Gilligan’s comments were one of many from a group of psychiatrists who gathered at Yale’s School of Medicine on Thursday. The message presented was that Donald Trump is mentally unfit to be in the White House.
Dr. John Gartner, practicing psychiatrist and founding member of Duty to Warn, a group of several dozen mental health professionals who feel it’s their obligation to inform the public about the president’s mental state, says the warning signs have been there from the beginning.
‘Worse than just being a liar or a narcissist, in addition he is paranoid, delusional and grandiose thinking, and he proved that to the country the first day he was president,’ Dr. Gartner said.

This post was published at Zero Hedge on Apr 22, 2017.

Despite Mounting Losses, Mystery Trader “50 Cent” Doubles Down With Massive VIX Spike Bet

Three weeks ago we introduced the real “50 Cent” – the mystery trader whose pattern of huge, near-daily trades on the VIX is turning heads in the options market.
Not him..
As we detailed previously, Pravit Chintawongvanich, head of risk strategy at Macro Risk Advisors, the huge options buyer known as “50 Cent” shows no signs of slowing down.
“I would categorize them as someone who doesn’t flinch at losing money,” commented Chintawongvanich who flagged the activity in a series of research notes. The money-losing trades in question have been purchases of call options on the CBOE volatility index. These represent bets that market volatility is set to rise, and to a lesser extent, that stocks are set to fall.
Sussing out the actions of an institutional trader based on public information about options trades can be difficult, if not impossible. But this trader made it easier by leaving a clue out in the open. “They have a very particular pattern of buying options,” Chintawongvanich explained Wednesday on CNBC’s “Trading Nation.”

This post was published at Zero Hedge on Apr 22, 2017.

Where There’s Smoke…

Central banks around the world have colluded, if not conspired, to elevate and prop up financial asset prices. Here we’ll present the data and evidence that they’ve not only done so, but gone too far.
When wee discuss elevated financial asset prices we really are talking about everything.
we’re talking not just about the sky-high prices of stocks and bonds, but also of the trillions of dollars’ worth of derivatives that are linked to them, as well as real estate in dozens of countries and locations. All are intricately linked together. For instance, stocks are elevated, in part, because bond yields are so low. Sam for real estate.
Here are three questions most alert investors are asking:
Question #1: When will financial assets ever ‘correct’ and fall in price? Question #2: How much does overt propping by the central banks have to do with today’s elevated prices? Question #3: How much does covert propping by central banks play a role in these inflated markets? These are important questions to consider because if central banks have been too involved and gotten themselves mixed up in trying to ‘wag the dog’ by using elevated financial asset prices as a means to drive economic expansion — then the risk is a big implosion in financial asset prices if their efforts fail.

This post was published at PeakProsperity on Friday, April 21, 2017,.

IMF Drops Pledge To “Resist All Forms Of Protectionism”

One month after a startling reversion by the G-20 finance ministers and central bankers, who during their latest meeting in Baden-Baden dropped a decade-long tradition of rejecting protectionism and endorsing free trade, pressured by Trump’s delegate Steven Mnuchin, the IMF has done the same, and according to a communique from the IMF’s steering committee released on Saturday in Washington echoed the G-20 reversal, and said that officials ‘are working to strengthen the contribution of trade to our economies” while omitting a call from its last statement in October to ‘resist all forms of protectionism.”
The International Monetary and Financial Committee – which is the IMF’s top advisory panel, composed of 24 ministers and central bankers from nations including the U. S., China, Germany, Japan and France – released the statement during the spring meetings of the IMF and World Bank. Since joint statements at gatherings such as the G-20 and the IMF require assent from members, the change in the U. S. position on trade from the Obama administration is forcng modifications in language that was previously uncontroversial.
While the trade language was drastically changed, some positions remained the same: the IMFC statement reiterated pledges from October to ‘refrain from competitive devaluations’ of currencies and to avoid targeting ‘our exchange rates for competitive purposes.’
There were other changes: in addition to the trade stance, the latest communique omits language from October that welcomed ‘the entry into force of the Paris Agreement on climate change.’ Trump is contemplating whether to make good on his campaign promise to withdraw from the deal, as Bloomberg notes.

The shift in the trade “plege” was due to the Trump administration’s persistent threats to raise tariffs if US trading partners don’t agree to renegotiate trade agreements and create fairer conditions for U. S. goods; in the past week Trump fired the first shot in what may be upcoming trade wars when he signed an executive order looking into curbing steel imports under the guise of “national security” concerns.

This post was published at Zero Hedge on Apr 22, 2017.

What’s Wrong with the American Craft-Beer Boom?

Big Beer, dogged by sagging brands, tries to control the market.
One of my many favorite craft brews used to be Lagunitas IPA, brewed in Petaluma, about 40 miles north of San Francisco. I used to be a regular buyer for home use – though when I’m out, I try beers I don’t know. In 2015, Heineken International, one of the world’s largest multinational brewing conglomerates with 180 or so brands, from Tiger to Tecate, bought a 50% stake, following in the footsteps of other multinational brewing conglomerates: they’re all on an acquisition binge of American craft brewers.
Why? Because craft beer sales have been soaring, even as sales of the big brands, despite costly marketing and Super Bowl ads, have been sagging. The market is tilting toward craft brews, and the conglomerates figured this out too.
Conglomerates are cost-cutters. They buy a brewer and try to make it work by cutting costs. One way they cut costs is by using cheaper commodity ingredients that their other breweries buy, which pushes down costs. This is American corporate theology.

This post was published at Wolf Street by Wolf Richter ‘ Apr 22, 2017.

Your Complete Guide To Sunday’s French Presidential Elections First Round

Ahead of Sunday’s first round of the French election, we have previously provided several perspectives on the political and economic outcomes, including a permutation matrix of all six possible outcomes in terms of “high” vs “low market risk” (from BofA), why the market may be too complacent about a Le Pen – Melenchon result (candidate approval variance is within the polling error), and that European stocks have completely failed to price in any adverse outcome (as DB observed yesterday).
So with markets now closed, and all bets off, if only for the next two days until the results emerge, here is a complete guide to the first round of the first elections, compiled based on research reports by Deutsche Bank and Citigroup.
Guide to the French elections first round, from Deutsche Bank and Citi

Summary:
The first round of the French Presidential elections will be held on Sunday 23rd April. Most polling stations will close at 7pm local time but some will remain open until 8pm local time. The first exit polls should be published at 8pm but may have to be taken cautiously. By midnight local time we could expect to have a clear picture of who would make it to the second round. Since publication of our initial comprehensive piece on the French elections, the polls for the four major candidates have narrowed considerably and Mlenchon has replaced Hamon on the left wing. The narrowing of the polls and the historical error in actual voting relative to polls makes any of the six outcomes involving the four major candidates possible.

This post was published at Zero Hedge on Apr 22, 2017.

TIPping Points?

This is a syndicated repost courtesy of Alhambra Investment Partners. To view original, click here. Reposted with permission.
The Federal Reserve’s complete change last year wasn’t something that happened all at once. There were several hints that a lot was going on behind the scenes that may never become public, including five years (now four) down the road when the full policy transcripts are released to the public. There was more interest in R* and secular stagnation, for one, as well as changing thoughts on inflation expectations.
The latter has been an important topic for policymakers all along, but more so going back to early 2012. After all, by last March the PCE Deflator hadn’t registered 2% in compliance with the Fed’s mandate for four years at that point despite massive additional balance sheet expansion ($1.7 trillion through QE3 and QE4). Through it all, maintaining that it wasn’t but a ‘transitory’ concern, Janet Yellen in particular remained steadfast that long run inflation expectations (anchor) had not changed.

This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ April 21, 2017.

Week in Review: April 22, 2017

Tax day came and went this week, ironically moved to the 17th due to Washington DC celebrating “emancipation day.” Washington’s addiction to spending keeps tax rates high, while the labyrinthine enriches lobbyists while causing headaches for Americans across the country. As Ludwig von Mises write in Human Action, “The metamorphosis of taxes into weapons of destruction is the mark of present-day public finance.”
The cost of taxation isn’t limited to what government takes out of taxpayer wallets.

This post was published at Ludwig von Mises Institute on April 22, 2017.

Liquidity Supernova and the Big Ugly Flaw

This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
April 21 – Reuters (Vikram Subhedar): ‘The $1 trillion of financial assets that central banks in Europe and Japan have bought so far this year is the best explanation for the gains seen in global stocks and bonds despite lingering political risks, Bank of America Merrill Lynch said on Friday. If the current pace of central bank buying, dubbed the ‘liquidity supernova’ by BAML, continues through the year, 2017 would record their largest financial asset purchases in a decade…’
From the report authored by BofA Merrill’s chief investment strategist Michael Hartnett: ‘The $1 trillion flow that conquers all… One flow that matters… $1 trillion of financial assets that central banks (European Central Banks & Bank of Japan) have bought year-to-date (= $3.6tn annualized = largest CB buying in past 10 years); ongoing Liquidity Supernova best explanation why global stocks & bonds both annualizing double-digit gains YTD despite Trump, Le Pen, China, macro.’
A strong case can be made that Q1 2017 experienced the most egregious monetary stimulus yet. No financial or economic crisis – and none for years now. Consumer inflation trends have turned upward on a global basis. Stock prices worldwide have surged higher, with U. S. and other indices running to record highs. At the same time, global bond yields remained just off historic lows. Home prices in many key global markets have spiked upward. Meanwhile, central bank balance sheets expanded at a $3.6 TN annualized pace (from BofA) over the past four months.

This post was published at Wall Street Examiner by Doug Noland ‘ April 22, 2017.

Is China Trying To (Slowly) Burst Another Stock Market Bubble?

The pressure point in Asian stock markets this week has been the decline in Chinese equities (the biggest weekly drop in 4 months).

Despite a stellar performance of the economy the outlook for the Shanghai Composite Index isn’t promising as the government is taking advantage of better growth to spur deleveraging.
For a market relying more on liquidity than fundamentals, China’s worsening monetary conditions index suggests tough times ahead…

This post was published at Zero Hedge on Apr 21, 2017.

Deutsche Bank: “It Was Good While It Lasted”

It all started in February, when we first reported that something unexpected had happened: for reasons that were at the time unknown, the global credit impulse had unexpectedly tumbled, turning negative, a move which we predicted would result in a steep slide in the “soft” economic data, end the “reflation” optimism and unleash a wave of dovishness from the Fed.

Then, two months later when the reflation trade was officially over, in early April the culprit for this sudden collapse in global growth momentum was identified: China, which together with the price of oil, had been the only catalyst for the global reflation trade since the “Shanghai Accord” in February 2016, and had seen its credit impulse crash at the fastest pace since the financial crisis, dropping to a level not seen since 2010.

This post was published at Zero Hedge on Apr 22, 2017.