El-Erian: 3 Things Stock Market Investors Should Watch (And 6 Observations)

With attractive returns such as haven’t been seen for quite a few years, investors in global stock markets have had a very good first half of 2017. Record levels for several widely-followed country indexes occurred in the context of notably muted volatility, adding to the sense of investor comfort and accomplishment. All of this was accompanied by tensions and transitions — some completed and others frustrated, at least for now — that will likely influence how investors feel at the end of the year.
Here are six key things you should know about recent developments, along with some important determinants of prospects for the remainder of the year:
A generalized global stock market rally: According to a Wall Street Journal analysis of the world’s 30 biggest stock markets by value, 26 registered gains in the first half of 2017 (the exceptions were Canada, China, Israel and Russia). At the global level, this delivered the best first-half performance since the immediate bounce back from the depth of the 2008-09 global financial crisis. Almost half of these 30 markets ended June at or near record highs. Market leadership rotated with relatively diversified sector performance: Within the S&P, the largest market in the world, nine of 11 sectors delivered gains to investors. Yet dispersion was notable, both overall and within certain segments — notwithstanding a further shift to passive investing and the proliferation of index-based exchange-traded funds. Tech and health care led, with returns of 17 percent each; telecom lost 13 percent and energy 14 percent. Amazon surged while many traditional brick-and-mortar retailers languished. Despite a late gain that helped markets overall offset a June slump in tech, financials ended the six-month period only slightly above water. Meanwhile, size also mattered. The Dow and S&P gained 8 percent, along with 14 percent for the Nasdaq, while the Russell small cap benchmark lost about 5 percent.

This post was published at Zero Hedge on Jul 3, 2017.

Gold and Silver Up in First Half of 2017

With plenty of geopolitical turmoil around the world, and strong demand from the east, gold and silver both posted healthy gains through the first half of 2017.
While most of the mainstream headlines focus the short-term drop in the price of gold in June, looking at the bigger picture reveals a much more positive trend for precious metals. The price of gold rose 7.9% through the first half of the year. Meanwhile, the price of silver logged a healthy 4% advance.
Safe-haven buying helped drive the surge. Investors are buying gold and silver in a world of uncertainty, and an abundance of caution helped push the price of gold higher. Political uncertainty and geopolitical tensions around the world have people on edge and seeking the safe-haven gold traditionally offers. The war in Syria continues to rage, the relationship between Russia and US remains tense, Qatar is locked in a standoff with its neighbors, numerous terror attacks have rocked Europe over the last several month, and how Brexit will proceed remains up in the air.
One could look at the current political tensions and troubling events on the horizon and think, ‘well, this will soon pass.’ But as we’ve pointed out in recent months, uncertainty seems to be the new norm. Next week, there will be a whole new set of political issues, surprise events, and rising tensions to make us uneasy.

This post was published at Schiffgold on JULY 3, 2017.

Gartman Remains Bearish On Oil

On June 22, Citi called the bottom in oil to the day, when in a not too subtly titled note it said “Here Comes The V-Shaped Rebound In Oil.” Since then, both WTI and Brent had risen for 8 trading days in a row, the longest stretch since February 2012. Meanwhile, surprisingly not too many, Gartman went short and, in his latest note, he explained the he remains bearish. End result: the oil rally just closed higher for 9 consecutive days.
Below is the relevant excerpt from Gartman’s latest note, according to which oil bears may want to keep a low profile at least until Gartman does what he does best, and once again succumbs to price momentum.
CRUDE OIL PRICES ARE RATHER BRISKLY HIGHER and we shall continue to view this as nothing more than a much needed, long over-due technical correction in what is and shall continue to be a long term bear market.

This post was published at Zero Hedge on Jul 3, 2017.

Car Sales Have A Long Way To Fall

The past decade’s historically low interest rates convinced millions of Americans to buy cars they could only afford with hyper-cheap credit. This made auto sales one of the drivers of the recovery, but it also left far too many people with underwater ‘car mortgages’ that will limit their spending on other things and prevent them from buying their next car until sometime in the 2020s.
Like all artificial (that is, credit-driven) booms, this had to end eventually, and it’s looking like now is the time:
U. S. Auto Makers Post Sharp Sales Decline in June
(Wall Street Journal) – Detroit’s car companies reported steep sales declines in June, capping a bumpy first half of the year for the U. S. auto industry and setting a bleak tone for the summer selling season.
The reports, released Monday, come as analysts expect overall auto sales to have fallen more than 2% in June compared with the prior year, according to JD Power. The firm said the industry’s selling pace hit its lowest point since 2014 over the first six months of 2017, and traffic at dealerships – measured by retail sales – fell to a five-year nadir in June.
Edmunds.com, a consumer-research company, said buyers are stretching more than ever to afford cars and trucks that are growing increasingly more expensive due to a barrage of safety gear and connectivity options. The firm estimates the average auto-loan length reached a high of 69.3 months in June, with the average amount of financing reaching $30,945, up $631 from May.

This post was published at DollarCollapse on JULY 3, 2017.

Steve St. Angelo: Prepare For Asset Price Declines Of 50-75%

The following video was published by ChrisMartensondotcom on Jul 3, 2017
Like we here at PeakProsperity.com, Steve is a student of energy. He shares our worldview that net energy per capita has been in steady decline, and a result, future growth will be limited. Also like us, he notes that the “growth” seen over the past several decades hasn’t been due to surplus net energy (which makes being able to do more possible). Instead, it has been fueled by debt — which essentially steals prosperity from the future and consumes it today.

Janet Yellen’s Secret Signal: Time to Look Abroad?

Top central bankers choose their words carefully. They know sending the wrong signals can unleash havoc, and they’ll get blamed for it. More important, as masters in acrobatic flip-flopping and backpedaling, they rarely promise a specific outcome.
So when a Fed official does say anything definitive, I pay attention – because it’s almost never an accident.
Last week, I did a double take when I saw this Reuters headline:
Fed’s Yellen expects no new financial crisis in ‘our lifetimes’
That’s an unusually bold statement for any Fed leader, much less the chair.
It sure would be nice if Yellen were right. We’d all go to our graves (hopefully not too soon) without ever having seen another financial crisis.
Not so fast, though. Let’s see exactly what Yellen meant, and what it means for your investment strategy.
‘We’re Much Safer’
Here is the Reuters lead:
U. S. Federal Reserve Chair Janet Yellen said on Tuesday that she does not believe that there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash.
“Would I say there will never, ever be another financial crisis?” Yellen said at a question-and-answer event in London.
“You know probably that would be going too far, but I do think we’re much safer, and I hope that it will not be in our lifetimes and I don’t believe it will be,” she said.
This was a head-scratcher to me. While it wasn’t a prepared text, Yellen would still never say anything like this by accident.

This post was published at Mauldin Economics on JULY 3, 2017.

Sentiment Naturally Changes With Each Skirmish, As The Financial War Proceeds

I listened to Craig in his pretty unique podcast of this Independence Day weekend, ( TFMR Podcast – Friday, June 30 ) and I totally appreciate his honesty and candour, and value that. Not many business owners have the chutzpah to openly discuss their difficulties with clients. It indicates humanity, honesty, ability to talk about difficulties and what is being done about them, during the process. And trust in their clients, which can only be built up incrementally over time. Weaker individuals wait until afterwards before saying anything that might show less than an invincible public image, if they ever dare say it.
I think that Turd isn’t doing anything “wrong” when a decline of subscribers becomes visible, though I am sure a lot of soul searching goes into it. Seafarers have to sail through storms to get to the other side, that’s all. And business is important. Unfortunately this is simply the bear grinding out the bullish element to incentivise the move of assets weaker individuals over to the “right hands”. After the property is owned by “the right pockets” it will rise in price. It has always been so since capital could be used in a weaponized way, which was of course the end of capitalism there and then … a longer time ago, I believe, than many people think.
And when Turd requests that conversation about crypto currencies be kept to certain places instead of all over the site he strives against the proponents of a competing asset to precious metals, and precious metals interested groups. Think about all this in terms of the effect that defeatist talk during an ongoing war time situation has upon morale, and how that morale has it’s own effect upon the outcome of the war itself for those who were making the defeatist conversations.
So why that interest in digi-FX? Well for one it’s a technological new thing with all the mysterious possibilities that new products seem to offer. And for another thing it appears to be a way out of precious metals for those who can’t take the heat, or the duration, and who want a alternative asset which appears to be a hard asset. Saving face while walking out the door in other words. For some, not all of course. Everybody’s different, but groups form from individuals, right?
Another use of my “this is a financial war ” metaphor. There are many kinds of wars. For instance there might be a pitched battle, a running battle with skirmishes along the trail, and there might be a guerrilla war with skirmishes at unpredictable locations, but in a complex timed sequence where timing reflects dynamics of preparation and transport to the location of the following skirmish. Like acted out civilian atttacks require preparation, as do real ones. We understand the need of hidden parties to prepare and gather resources.
Well, in financial markets, there is no requirement to fight a pitched battle and lose to a bigger opponent. We can always get stopped out of a loss making trade, and then stand aside until it all pauses again. We have no mission, in a trade, other than to benefit from it. This can be contrasted with Turd’s relationship with investors who have not learned this, and who become emotionally despondent when the price goes down. They look to him for guidance, motivation, and by implication, resilience.

This post was published at TF Metals Report on July 3, 2017.

Beware the Predictions of “Experts” Like Janet Yellen

Speaking in London, Federal Reserve chair Janet Yellen Tuesday predicted that the ‘the system is much safer and much sounder’ and explained that the Federal Reserve is prepared to deal with numerous enormous shocks to the economy.
In her conversation with Lord Nicholas Stern, Yellen also went on to list the reasons that, thanks to central bank intervention, there is unlikely to be another financial crisis ‘in our lifetimes.’
For those who have lived through more than one business cycle, however, alarm bells tend to go off every time an economist, central banker or high-ranking government official declares that there’s little to no danger of economic turmoil in the near future.
There is a long history of spectacularly bad predictions being made shortly before economic crises. Famously, shortly before the Crash of 1929 – one of the earlier crises that occurred on the Federal Reserve’s watch – Herbert Hoover proclaimed that ‘We in America today are nearer to the final triumph over poverty than ever before in the history of any land.’ But, we certainly don’t have to go back that far.

This post was published at Ludwig von Mises Institute on July 4, 2017.

Public Schools: One Of The Government’s Biggest Failures? Or Successes?

Baltimore is proving just how ineffective the government is at educating the nation’s children. Almost as if it was their goal, the city has six schools that failed to produce one child proficient in either English or math.
Even though it spends more per pupil than every other large school district in the country save for two, Baltimore City Public Schools is failing to teach students even the very basic concepts that will help them get through life. Proving that the government will always fail, Baltimore’s education costs to the taxpayer are not small; about $16,000 per student, per year. An investigation by Project Baltimore found that five high schools and one middle school in the district should pretty much be shut down at this point because they’re serving no useful purpose whatsoever – except to drain the taxpayer of their money and indoctrinate the youth.

This post was published at The Daily Sheeple on July 3, 2017.

Global Equity Markets Start Third Quarter On Positive Note

(Kitco News) – Most World markets started the second half of 2017 on an upbeat note Monday, boosted in part by positive manufacturing data just released.
The Eurozone June manufacturing purchasing managers’ index (PMI) came in at 57.4 versus 57.0 in May. A reading of 57.3 was expected in June. U. S. stock indexes are also pointed toward higher openings when the New York day session begins.
Gold prices are weaker and hit a six-week low overnight, on slack demand for the safe-haven metal amid the keener ‘risk-on’ trading atmosphere exhibited in the world marketplace recently.

This post was published at Wall Street Examiner on July 3, 2017.

Steve Bannon Reportedly Pushing Trump To Raise Taxes On The Wealthy

The tensions between the Trump administration’s populist win and its more traditionally Republican establishment types have been well-documented in recent months. And now, more than two months after Treasury Secretary Steven Mnuchin and National Economic Council chief Gary Cohn unveiled an outline of the administration’s tax-reform ambitions, another battle between the two wings appears to be brewing.
Trump’s chief strategist Steve Bannon is said to be pushing to raise the top tax rate on individuals, with Axios saying the former Breitbart CEO would like the top rate to have ‘a 4 in front of it’ – currently, the highest income-tax bracket in the US is 39.6% for individuals earning more than $414,000 a year.

This post was published at Zero Hedge on Jul 3, 2017.

Where Is The Line?

There is one, you know.
It was quite interesting in the 1990s going from being a common private person to someone who ran a corporation. You become a public person immediately, and then if you start appearing in the media in any way (and most such people do, eventually) then the rules shift even further.
See, those who are deigned a “public figure” have an entirely different set of rules that apply when others talk about them. As an ordinary private person if someone calls you a “slut” in print that’s probably actionable. You might not be able to get any money in a lawsuit (most likely because the person who did it doesn’t have any) but — it’s actionable.
On the other hand once you cross the rubicon into being a public figure all that changes. Virtually anything is in-bounds, with a very few exceptions. One of the few remaining exceptions is a direct allegation of a specific and serious crime. For instance you can’t call someone a child molester unless they actually are, public figure or no.

This post was published at Market-Ticker on 2017-07-03.

US Manufacturing Schizophrenia Continues – Best ISM Since Aug 2014, Worst PMI Since Dec 2016

US Manufacturing stumbled to its lowest since Dec 2016 according to the latest ‘soft’ survey from Markit, as respondents reported a “disappointing end to the second quarter, with few signs of growth picking up any time soon.” However, if ISM’s seasonal adjustments are listened to, US Manufacturing just surged to its highest since Aug 2014… you decide.
Under the covers of the ISM data, everything is awesome…
Which is an oddly divergent picture from the one painted by Markit respondents… Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
‘Manufacturers reported a disappointing end to the second quarter, with few signs of growth picking up any time soon.
‘The PMI has been sliding lower since the peak seen in January and the June reading points to a stagnation – at best – in the official manufacturing output data.

This post was published at Zero Hedge on Jul 3, 2017.

GM Reports Record “Channel Stuffing”: Dealer Auto Inventory Highest Since June 2007

As we await all US carmakers to report June auto sales, we remind readers that when we discussed last month’s disappointing monthly car sales report, which badly missed expectations showing the fifth consecutive month of declining auto sales – the first time this has happened since July 2009 – with domestic light vehicle auto sales printing at an annualized 12.59, the lowest sales number going back more than three years – we noted what may be the biggest concern for the auto industry: inventory days continued to trend higher as OEMs push product on to dealer lots even though sale-through to end customers has seemingly stalled.
Of note, we highlighted GM, one of the few OEMs to actually disclose dealer inventories in monthly sales releases, which reported that May inventories increased to 101 days (963,448 vehicles) from 100 days at the end of April and just 71 days (681,402 vehicles) in April 2016. Indicatively, analysts say an overall inventory level of 60 to 70 days is healthy. 100 is not. GM management was eager to deflect attention from this troubling statistic, and said that soaring inventories are normal and, somehow, “reflect strong sales”, as per the press release: “As planned, GM’s inventories reflect strong sales, lower car production and strategic, launch-related growth in truck and crossover stocks.”
Or maybe not, because as Automotive News reporter Nick Bunkley pointed out something troubling: with 935,758 unsold GM units collecting dust in dealer lots at the end of June, this was the highest inventory number in 9.5 years, the highest since November 2007, one month before the recession began.
Fast forward to today when GM reported its June results which again disappointed, and were down 4.7%, more than the expected 3.4% decline (although one wouldn’t know it by looking at the stock which was up as much as 3%). GM sales were dragged by most brands: Chevy -6.4%, GMC -3.6%, Buick +16.4%, Cadillac -11.8%. But that’s not what caught our attention: a bigger problem is what GM revealed in its deliveries report which disclosed a whopping 980,454 units in dealer inventory at the end of June, up nearly 17k from the past month, and representing 105 days of supply, up from an already red-flag raising 101 in May. As Buntkley notes, “GM’s inventory has officially hit a 10-year high. 980,454 units in stock (a 105-day supply) as of June 30, the most since June 2007.“
In short: GM “channel stuffing” just hit a new all time high for the restructured company, with the number of GM vehicles parked at dealer lots and patiently waiting for a buyer rising to the highest since the summer before recession officially began, when GM was still pre-bankruptcy GM, with far greater (if ultimately superfluous and in need of restructuring) production.

This post was published at Zero Hedge on Jul 3, 2017.

Silver Is Now Offered At a Discount

Have you ever been in a discussion about gold, when someone blurts out ‘we don’t have enough gold to operate a gold standard!’ We have a standard retort. ‘Oh, that’s interesting. Please tell us how much gold you think would be necessary, and how you calculated it.’
We have never heard a coherent answer to this question. Most people just don’t like gold, and will say whatever words they think will dismiss the monetary question entirely, without actually having to address the issues.
The common answer from the gold community is not much better, ‘We could have a gold standard, if gold was at the right price.’
Here is the typical logic: divide the money supply by the amount of gold. The result tells you the price of gold to fully back the money supply. Let’s first use M1 (we are aware that which measure of money supply to use is debated, but we don’t think it much matters). M1 today is $3.5 trillion, according to the Fred Economic Data published by the St Louis Fed.
Divide this by the amount of gold. Often, this is supposed to be the amount of gold held by the Fed itself, some 8,133 tons or 261.5 million ounces. The answer comes out to $13,400 per ounce.

This post was published at SilverSeek on Monday, July 3rd.

SocGen: “Global Stocks Are Trading At 21.5x P/E: What Equities Need Now Is Higher Revenue Growth”

As we begin the second half of the year, which follows one of the best 6-month periods for global stocks in history, largely courtesy of a record ongoing liquidity injection by central banks (which however, is rapidly slowing down), here is SocGen’s x-asset strateigst, Andrew Lapthorne, laying out where we stand, noting that the MSCI World positive run continues – at 21.5x P/E, the same level where it was in 2004 from where it continued on a 70% run -even as Europe has its worst month since Brexit, and summarizes that what global stocks need to continue their rally is not high bond yields, but higher revenue growth.

This post was published at Zero Hedge on Jul 3, 2017.

7 Fast Facts About the Economic Collapse of Illinois

The state of Illinois is in big trouble. In fact, they’re facing an economic collapse. Some pundits are calling them ‘The Venezuela of the United States.’
They owe $14,711,351,943.90 in overdue bills. This does not count their day-to-day operating expenses – this is money that should have already been paid out, but wasn’t. Nearly 15 BILLION DOLLARS.
Like every person who has ever spent more than they’re making with no regard for budget, things are starting to go downhill in an ever-growing avalanche of disasters.
1) Illinois is about to be the first state ever to have their credit downgraded to ‘junk.’
They’re about to become the first state ever to see their credit downgraded by Standard & Poor to ‘junk status,’ which means they are a terrible credit risk. If they’re even able to borrow money, it will be at much higher interest rates than ever before. This means that anything they spend on infrastructure (or refinancing their existing debt) will cost much more. And guess who will foot the bill for that? The taxpayers.
To put this in perspective, even Michigan, with all of the issues in Detroit, has not been downgraded to junk status. That’s how much worse things are in Illinois.
Illinois has a tab of unpaid bills worth $15 billion, equivalent to 40% of its operating budget. The state’s backlog of financial obligations will skyrocket to $28 billion by June 2019 without a deal, Moody’s predicted, which would rack up even more interest and penalties than what is already owed. Even if a deal is reached, state debt and taxpayer dues will both likely increase. (source)
2) They haven’t had a state budget in 3 years.
Let me compare this to a household again, yet, of course on a far grander scale. To figure out how to pay off crippling debt, you have to have a strict budget in place. You’ll need to slash expenditures where you can, increase income where you can, and do without some of the finer things. Pennies turn into dollars.
The trouble is, Illinois legislators haven’t passed a state budget in 3 years now.

This post was published at The Daily Sheeple on July 3, 2017.

‘Investors Are Being Swindled’: Canadian Accountants Slammed

People ‘mistakenly believe their pension plans, mutual funds, and other investments are safeguarded.’
Canada’s Finance Minister Bill Morneau was one of the country’s top pension fund management professionals before he went into government. But when he recently addressed Concordia University business students, not one asked about the country’s $4 trillion national debt, much of which is pension-related.
That’s not surprising – because, as the Fraser Institute notes, nearly three quarters of those debts are not included in the federal and provincial governments’ financial statements. So, Canadians have no clue how bad the country’s true financial situation is.
This lax reporting is spread throughout the system, including public companies, says one expert.
‘Investors are being systematically swindled out of large amounts of retirement savings,’ says Al Rosen, a forensic accountant and co-author of Easy Prey Investors, a recently-released book that details shortfalls of Canada’s lax reporting standards.
Accounting scandals abound
‘Investors mistakenly believe that their pension plans, mutual funds, and other investments are safeguarded,’ says Rosen. ‘In fact, they are suffering losses that are monumental, compared to individual publicized scams.’
A key challenge, says Rosen, relates to Canada’s use of International Financial Reporting Standards, which ‘assign excessive power and choice to corporate management, providing them the ability to inflate corporate profits.’ Rosen cites a range of accounting scandals including Valeant, Nortel, and Sino-Forest as examples of Canadian laxness.

This post was published at Wolf Street on Jul 3, 2017.

EBay And PayPal Have An ENORMOUS Fraud Enabling Problem

I have recently become aware of an utterly enormous fraud vector problem with both of these related (used to be that PayPal was owned by Ebay) sites.
On every reputable site around the Internet, no matter what it is, when you sign up for an account you have to verify that you own the email address that you give them before they will let you do anything.
That’s true everywhere. It’s true for banks. It’s true for forums like mine, Garmin’s or anyone else’s. It’s true in every instance I’m aware of; you sign up, you get a link in your email, you click the link which is only known to you and then, and only then, can you do anything.
Except with eBAY and PayPal.
I do not know when this changed, but it has. Someone (and I know who it is) used a very old email address that belongs to me and is not used for any of these sorts of things (but has a legitimate purpose) to sign up for an eBAY account and pay for items using PayPal.

This post was published at Market-Ticker on 2017-07-03.

Illinois House Approves Historic 32% Tax Increase, Governor Vows Veto

With Illinois, which on Saturday morning entered its third fiscal year without a budget, facing a catastrophic downgrade, late on Sunday evening the Illinois House approved the most controversial element of a budget package, a tax hike which will increase the income tax rate by 32% from 3.75% to 4.95%, and the corporate income tax rate from 5.25% to 7%, to try and end a historic budget impasse. The bill passed 72-45. The House also approved a $36 billion spending plan minutes later on a 81-34 vote. According to the Sun Times, it cleared an initial hurdle on Friday with 23 Republicans voting ‘yes.’
‘While no one could say this was an easy decision, it was the right decision,’ House Speaker Mike Madigan said after the spending bill vote. ‘There is more work to be done.’ Dems said they would work with Republicans on other resolution of other issues on table.
The proposed tax increase will now head back to the Illinois Senate, which approved a revenue bill on May 23 with all Democratic votes as part of its ‘grand bargain’ package. But Governor Bruce Rauner has said he’ll only support an income tax hike if it’s limited to four years and paired with a four-year property tax freeze. He’s also still seeking changes in workers’ compensation and pensions.

This post was published at Zero Hedge on Jul 3, 2017.