The Next Stock Market Crash Will Be Blamed On Donald Trump But It Will Be The Federal Reserve’s Fault Instead

A stock market crash is coming, and the Democrats and the mainstream media are going to blame Donald Trump for it even though it won’t be his fault. The truth is that we were headed for a major financial crisis no matter who won the election. The Dow Jones Industrial Average is up a staggering 230 percent since the lows of 2009, and no stock market rally in our history has ever reached the 10 year mark without at least a 20 percent downturn. At this point stocks are about as overvalued as they have ever been, and every other time we have seen a bubble of this magnitude a historic stock market crash has always followed. Those that are hoping that this time will somehow be different are simply being delusional.
Since November 7th, the Dow is up by about 3,000 points. That is an extremely impressive rally, and President Trump has been taking a great deal of credit for it.
But perhaps he should not have been so eager to take credit, because what goes up must come down. The following is an excerpt from a recent Vanity Fair article…

This post was published at The Economic Collapse Blog on May 28th, 2017.

Millennials Choose To Spend Money On Travel, Dining, And Fitness Than Save For Retirement: Survey

Millennials save more of their income than older generations. Don’t believe it? Look at a recent survey by Merrill Edge, which found millennials say they save 36% more than their general population counterparts report as over a third stash away more than 20% of their salary per year.
As for what they’re saving for, that’s another story. Whereas baby boomers save for retirement, millennials want financial freedom and save for a desired lifestyle rather than exiting the workforce. Millennials would rather spend money on travel, dining, and fitness than save for their financial future. They are also more focused on certain milestones like landing their dream job or traveling the world, and are less worried about getting married or having kids. Bottom line, millennials are saving, just for shorter-term goals as compared to their parents.

This post was published at Zero Hedge on May 28, 2017.

JPMorgan: “Large Parts Of Society Are Not Seeing Any Growth In Income And Job Opportunities At All”

Last week, BofA’s HY credit strategist Michael Contopoulos, laid out a list of the four things that keep him up at night, which included:
1. Zombie Companies And Massive, Rising Student Debt Loads
2. Sliding Used Car Prices, Rising Delinquencies And Subprime Defaults
3. Declining Loan Growth, Lack of commodity rebound and tighter balance sheet
4. Lack of Investment, No Small Business Creation And No Earnings growth
Having let the genie out of the bottle, just 24 hours later it was JPM’s turn to unveil its own answer to this same question, and in his weekly Froday note, JPM’s Jan Loeys said that when it comes to what “keeps the bank up at night” in the context of the bank’s economic outlook “regime change is the main risk.”

This post was published at Zero Hedge on May 28, 2017.

Citi: “We Have Only Seen This Market Anomaly Twice Before: In 1999 And 2006”

With one bank after another – including Goldman, JPM and BofA – quietly urging investors in recent weeks to head for the exits in a time when the Fed is not only hiking rates but warning about “vulnerabilities from elevated asset positions“, over the weekend the latest bank to join the bearish chorus was Citi, and specifically Jeremy Hale’s cross-asset team, which in a moment of surprising honesty writes that “eight years into the cycle – and one where QE has been the asset market driver – virtually every market appears rich“, including stocks, bonds and credit.
According to Hale, this pervasive lack of value “presents the biggest challenge in setting medium term asset allocation tilts” and reminds his readers that as a result he has adopted a fairly defensive approach to the reflation trade, by going overweight cash.
More important still is his observation that at this juncture, even Citi’s own internal projections have become contradictory, and notes that “views and the input forecasts from our asset class specialist colleagues have started to diverge somewhat. Note how EA credit spreads are seen to widen whilst EA equity returns are still strongly positive in our forecast horizon.” This is important because as the Citi analyst writes, “with our credit colleagues worried about ECB taper at rich valuations and equity strategists focused on earnings, such a divergence may well happen, but historically is somewhat of an anomaly.”

This post was published at Zero Hedge on May 28, 2017.

Economic Consequences of More Europe

A resurgence in the euro after recent elections in Europe could leave it top dog in global currency markets. Understanding what that means for the U. S dollar will be pivotal for investors that operate in greenbacks.
Bloomberg’s recent headline ‘This Could be the Euro’s Best Year in a Decade’ shows signs that all eyes are watching Europe.
Currently, the Euro has smashed to a six-month high with aggressive talk coming from the central banking crowd on the European continent.
German Finance Minister Wolfgang Schaeuble, arguably one of the most influential voices in Europe, said that he views the need to further increase in integration in Europe. The German minister went so far as to hint at creating a ‘parliament’ for the euro currency bloc.
In international currency exchanges things are beginning to change. The world’s major reserve currency, the U. S dollar, has seen investors begin to wake up to the reality of a lackluster expectations from the White House.
Impact of the U. S Dollar on Europe
The U. S dollar is now back to levels prior to the November election.
Does that mean a the euro currency surge caused it? No.

This post was published at Wall Street Examiner on May 26, 2017.

After 47 Years, Stephen Lewis Calls It Quits In A Scathing Critique Of Modern Markets

For decades, portfolio managers around the WORLD would receive the periodic “Economics & Policy” newsletter, full of original insights on everything from the markets, to the economy, to geopolitics, as penned by Stephen Lewis, chief economist at ADM (if best known for his tenure at Monument Securities which was eventually absorbed by ADM). Sadly, on Friday Lewis sent out his “Valediction” – the last ever Economic Insights report. Instead of commenting on it, we present his full thoughts in their original form as this particular career epilogue, a scathing critique of capital markets, modern economists, central bankers, and everything else that is broken in today’s society, is a must read for all market participants, as well as economists, politicians and central bankers.
Economics & Policy
Valediction
By Stephen Lewis of ADM Investor Services International
After more than forty-seven years spent observing and commenting on economies and financial markets, I shall be retiring this week to eke out my remaining days, as is fitting, in contemplation of the eternal verities.
When I set out in the markets, on 5 January 1970, the yields on sterling bonds, including those issued by the UK government (gilt-edged), were expressed in pounds, shillings and pence. One of the first tasks to which I was put, when I joined the stockbroking firm of Phillips & Drew, was to convert these yields into the decimal form with which our computer, fully occupying the building on the opposite side of the street, could cope. Back then, the London clearing banks were required to hold in cash an amount equivalent to at least 8% of their deposits and 28% in liquid assets (cash, money at call and Treasury and commercial bills). There was not much risk of a bank liquidity crisis in those days. International asset diversification for UK-based investors was impeded by capital controls, with returns subject to variations in the premium on scarce investment currency as much as in the underlying prices of the assets held. For all the restrictions, though, octogenarians commonly travelled into their offices in the City each working day primarily for the fun of it. It was a different world, unimaginable to those too young to have known it. When told that we worked at our desks in candlelight during the power cuts of the three-day week in 1973-74, they naturally find it hard to comprehend what it was that we could possibly have been doing, so dependent have we lately become on electricity.

This post was published at Zero Hedge on May 28, 2017.

Will the Crazy Global Debt Bubble Ever End?

There are multiple sources of friction in the Perpetual Motion Money Machine.
We’ve been playing two games to mask insolvency: one is to pay the costs of rampant debt today by borrowing even more from future earnings, and the second is to create wealth out of thin air via asset bubbles.
The two games are connected: asset bubbles require leverage and credit. Prices for homes, stocks, bonds, bat guano futures, etc. can only be pushed to the stratosphere if buyers have access to credit and can borrow to buy more of the bubbling assets.
If credit dries up, asset bubbles pop: no expansion of debt, no asset bubble.
The problem with these games is the debt-asset bubbles don’t actually expand the collateral (real-world productive value) supporting all the debt.
Collateral can be a physical asset like a house, but it can also be the ability to earn money to service debt.
Credit card debt, student loan debt, corporate debt, sovereign debt–all these loans are backed not by physical assets but by the ability to service the debt: earnings or tax revenues.
If a company earns $1 million annually, what’s its stock worth? Whether the market values the company at $1 million or $1 billion, the company’s earnings remain the same.

This post was published at Charles Hugh Smith on MAY 28, 2017.

Rand Spikes To 2-Month Highs As South Africa’s Zuma Survives Attempted Ouster

The South African Rand is spiking to 2-month highs in early AsiaPac trading after President Jacob Zuma reportedly survives a bid by members of ruling African Nation Congress’s national executive committee to oust him, according to two members of panel who declined to be named because they aren’t authorized to speak on the matter. Bloomberg reports that the Zuma ouster wasn’t put to vote and the ANC isto hold press conference on Monday.
The Rand spiked to its strongest in two months on the news…
Which is odd because the Rand also spiked last week on news of the plans for Zuma’s ouster… It appears ZAR is now like the US equity market – bad news is good news, and good news is great news.

This post was published at Zero Hedge on May 28, 2017.

GOLD’S DAYS OF GLORY BEGINNING AS DOLLAR’S ARE ENDING

Since the 2011 tops, precious metals investors have had their patience severely tested. Six years later, silver is down 66% from the $50 peak and gold 35% off the $1,920 peak. We mustn’t forget off course that these metals started this century at $280 and $5 respectively. But that is no consolation for the investors who got in near the highs. The best time to buy an asset is when it is unloved and undervalued like gold and silver were in the early 2000s. What few investors realise is that the current levels of gold and silver, when real inflation is taken into account, are very similar to where the metals were in 2000-2. Thus gold at $1,265 and silver at $17 is an absolute bargain and unlikely to remain at these levels for long.
Why are asset markets booming and gold static?
As the precious metals have corrected for six years, many markets have boomed. Money printing and credit creation can do wonders to asset markets. Since 2009, stocks in the US for example have trebled and many other asset classes such as property have appreciated substantially. Global debt since 2006 is up by 75% or $100 trillion and short term and long term rates in the Western world re down from 5-6% to anywhere from negative to around 2%. This has fuelled stocks and property but so far had limited effect on gold and silver.
It was the sub-prime mortgage market that started the 2006-9 crisis. Since then, there are property bubbles in many parts of the world. Canada, Australia, UK, Scandinavia, Hong Kong and China all have property markets which are likely to crash in the next few years together with the US one which is still a bubble.

This post was published at GoldSwitzerland on May 26, 2017.

Powerful Geomagnetic Storms Hit Earth – Will Stocks Fall Next Week?

Overnight and continuing into this morning a large space weather event has signaled a G-3 ‘Strong’ geomagnetic storm. On April 22, 2017, I wrote an article titled: Yesterday’s Broad Power Outage Likely Caused By Geomagnetic Storm outlining how the grid failures in San Fransisco, New York, and Los Angeles were likely due to a strong geomagnetic storm. As we know, geomagnetic storms can influence the functioning and reliability of spaceborne and ground-based systems and services or endanger property or human health.
The Planetary K-Index is used to measure geomagnetic storms at Boulder, Fredericksburg, Est. Planetary, and College. The graphs below indicate a strong geomagnetic storm is currently underway and in some locations literally off the chart.

This post was published at Zero Hedge on May 28, 2017.

Simple (economic) Math

The essence of capitalism is not strictly capital. In the modern sense, the word capital has taken on other meanings, often where money is given as a substitute for it. When speaking about things like ‘hot money’, for instance, you wouldn’t normally correct someone referencing it in terms of ‘capital flows.’ Someone that ‘commits capital’ to a project is missing some words, for in the proper sense they are ‘committing funds to capital.’
Just as the focus has been removed from actual capital, and thus a distortion of capitalism, one of the effects has been to devalue the other component that actually makes it all work. Rising living standards were never the fruit of capital alone, as the real strength was in the combination of it with labor. Over the last few decades, the real capital flow has been with eurodollar finance to the offshoring of productive capacity.
By simple mathematics, businesses are no longer willing to afford labor. Before getting to that math, however, we need to be mindful that the ‘experts’ are almost uniformly suggesting the opposite is true. Instead, we hear constantly of a labor shortage, often serious, whether due to Baby Boomers retiring, lazy Americans addicted to heroin, or the politics of immigration. The problem with all of these is wages, meaning that if there was a shortage, wages would be rising and rising rapidly.
The New York Times on Sunday published yet another of this type of account (they are becoming more frequent), blatantly headlining the piece, Lack of Workers, Not Work, Weighs on the Nation’s Economy. Focusing on anecdotes from Utah, you get all the familiar but unbacked tropes about the travails of employers who have things to do but can’t do them because they can’t find anyone.

This post was published at Wall Street Examiner on May 26, 2017.

Nassim Taleb Crushes The ‘Merchants Of Virtue’

I will always remember my encounter with the writer and cultural icon Susan Sontag, largely because it was on the same day that I met the great Benoit Mandelbrot. I took place in 2001, two months after the terrorist event, in a radio station in New York. Sontag who was being interviewed, was pricked by the idea of a fellow who ‘studies randomness’ and came to engage me. When she discovered that I was a trader, she blurted out that she was ‘against the market system’ and turned her back to me as I was in mid-sentence, just to humiliate me (note here that courtesy is an application of the Silver rule), while her female assistant gave me the look, as if I had been convicted of child killing. I sort of justified her behavior in order to forget the incident, imagining that she lived in some rural commune, grew her own vegetables, wrote on pencil and paper, engaged in barter transactions, that type of stuff.
No, she did not grow her own vegetables, it turned out. Two years later, I accidentally found her obituary (I waited a decade and a half before writing about the incident to avoid speaking ill of the departed). People in publishing were complaining about her rapacity; she had to squeeze her publisher, Farrar Strauss and Giroud of what would be several million dollars today for a book advance. She shared, with a girlfriend, a mansion in New York City, one that was later sold for $28 million dollars. Sontag probably felt that insulting people with money inducted her into some unimpeachable sainthood, exempting her from having skin in the game.
It is immoral to be in opposition of the market system and not live (like the Unabomber) in a hut isolated from it
But there is worse:
It is even more, much more immoral to claim virtue without fully living with its direct consequences

This post was published at Zero Hedge on May 28, 2017.

Trump-Russia Inquiry Looks at Potential for Wall Street Bank Money Laundering

The majority of American citizens have never heard of the U. S. Treasury agency known as FinCEN – short for Financial Crimes Enforcement Network. But for those who work for Wall Street brokerage firms or the mega Wall Street banks like JPMorgan Chase, Citigroup or German banking giant Deutsche Bank, just the mere mention of FinCEN can quickly produce beads of sweat dripping onto those expensive Canali suits. That’s because FinCEN is the Federal agency where suspicious financial activity that might turn out to be money laundering gets reported. All three banks, and numerous others, have had their share of scandalous run ins with money laundering.
In recent weeks, the U. S. Senate Banking Committee, Senate Intelligence Committee and the House of Representatives Financial Services Committee have all shown an interest in what FinCEN might have in its database that would shed sunshine on involvement of the Trump business empire or Trump campaign and Russian money inflows.
Senator Sherrod Brown, the Ranking Member of the Senate Banking Committee, sent a letter on March 2 to U. S. Treasury Secretary Steven Mnuchin, asking for documents and explaining his rationale as follows:
‘… Russia has been subjected to a number of international and US sanctions, as have many prominent Russian leaders and business people. Investors from Russia have, in the past, played a significant role in the Trump organization. example, President Trump’s son Donald Trump Jr. stated at a conference in 2008 that President Trump’s businesses involved substantial Russian investments. He reportedly said: ‘And in terms of high-end product influx into the US, Russians make up a pretty disproportionate cross-section of a lot of our assets; say in Dubai, and certainly with our project in SoHo and anywhere in New York. We see a lot of money pouring in from Russia.’

This post was published at Wall Street On Parade on May 26, 2017.

Dollar General Accounts For 80% Of All New Store Openings In The US

One week ago, when looking at the latest Fitch forecast of retailers most likely to file for bankruptcy next, we listed the hundreds of store closures already announced in 2017 between various bankrupt and still solvent retail chains.
***
Declining consumer demand for traditional retail venues and deteriorating financial results aside, we showed the simple reason for the persistent pressure on traditional “brick and mortar” stores to restructure with the following chart which showed that North America has a glut of retail outlets, as well as far too many shopping malls, something which is becoming apparent as sales per capita decline. On a per capita basis, the US has roughly 24 square feet of retail space per capita, more than twice the space of Australia and 5 times that of the UK.

This post was published at Zero Hedge on May 27, 2017.

The Federal Reserve Is Destroying America

Perhaps I should start with a disclaimer of sorts. Yes, I realize that the people working at the Federal Reserve, as well as the other central banks around the world, are just people. Like the rest of us, they have egos, fears, worries, hopes, and dreams. I’m sure pretty much all of them go home each night believing they are basically good and caring individuals, doing important work.
But they’re destroying America. They might have good intentions, but they are working with bad models. Ones that lead to truly horrible outcomes.
One of the chief failings of central banks is that they are slaves to an impossible idea; the notion that humans are free to pursue perpetual exponential economic growth on a finite planet. To be more specific: central banks are actually in the business of promoting perpetual exponential growth of debt.
But since growth in credit drives growth in consumption, the two are concepts are so intimately linked as to be indistinguishable from each other. They both rest upon an impossibility. Central banks are in the business of sustaining the unsustainable which is, of course, an impossible job.

This post was published at PeakProsperity on Friday, May 26, 2017.

Carson Block Says “Laws Of Economics” Dictate China Will Face “Day Of Reckoning”

Muddy Waters Research founder Carson Block believes that China’s overleveraged economy will eventually face a ‘day of reckoning.’ He just can’t say when.
During an interview with Bloomberg’s Erik Schatzker, Block, who made his name betting against shady Chinese companies trading in the US, explains how the Chinese government’s massive stimulus has led to a potentially destabilizing explosion of corporate-debt growth in the world’s second-largest economy – and why the Communist Party won’t be able to contain the fallout once its twin bubbles -asset and credit – finally burst.
‘I’ve felt for many years that it’s a giant asset and credit bubble. Under the old orthodoxy, that couldn’t be sustained for long, but if you look around the world, the ECB and the Fed are helping to sustain frothy asset values. Japan hasn’t made sense for a while.’
‘Ultimately there will be a day of reckoning, I know that. I just can’t say if it’ll be two months, two years or 20 years.’

This post was published at Zero Hedge on May 27, 2017.

Fed Fail? Traders Cut Rate-Hike Bets By The Most In History Last Week

The last two weeks have seen speculators cover over $710 billion worth of Fed rate-hike bets – the biggest move in Eurodollar futures history as Trump concerns and Fed Minutes reignite lost faith in the ebullient future that sparked the creation of a record $3 trillion bet that The Fed will be right this time.
Macro data has done nothing but collapse since The Fed hiked rates in March…

This post was published at Zero Hedge on May 27, 2017.