Why Suddenly Two Mega Utility Takeovers?

Do the buyers know something that we don’t?
Two major electricity industry takeovers were announced within a few days of each other. Energy Capital Partners, a private equity firm, announced its planned acquisition of Calpine, the nation’s largest generator of electricity using natural gas as a fuel. The acquisition valued Calpine at $17.3 billion ($5.6 billion for the common stock plus assumption of $11.7 billion of debt).
Days later, Sempra, a California-based utility, outbid Warren Buffet’s Berkshire Hathaway to buy Oncor, a Texas utility spin off from a disastrous private equity acquisition of TXU (the old Dallas-based Texas Utilities). Sempra’s bid values Oncor at $18.8 billion ($9.8 billion for equity and $9 billion to take responsibility for ex-isting debt).
In the case of Oncor, both final bidders had clear motives. Berkshire Hathaway has cash to invest and Mr. Buffett and Co. have targeted U. S. electric utilities for investment As a relatively large financial player, his investments have to be of a size to make a positive impact. In this case that means making relatively large acquisitions. Small ones barely register at Berkshire Hathaway.

This post was published at Wolf Street by Bill Tilles and Len Hyman ‘ Aug 26, 2017.

The Complete Debt Ceiling Decision Tree: “An Alarmingly High Probability Of A Very Bad Outcome”

For all the breathless newsflow over the past 7 days, the single most consequential event of last week was the sudden jump in debt ceiling/government shutdown odds following Donald Trump’s confrontational Phoenix speech, which laid out a problematic dilemma: Trump’s Mexican wall, or a government shutdown. While various financial pundits rushed to discount the odds of a worst case scenario, the market – in Treasury bills, if not so much equities – was spooked, sending the “pre-post default bill” spread to the widest on record…

… as October 5/12 Bill yields continued to blow out after various politicians were quoted with doomsday predictions, some suggesting the odds of a shutdown are as high as 75%.

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

All Things Bullish

Dow Theory Still Bullish
Elliott Wave Hangs On, Too
Your Own Personal Trading System
All About the Profits
Mr. Persistent
Trump Bump
Colorado, Chicago, Lisbon, Denver, and Lugano
‘Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.’
– Sir John Templeton
Dogs bark, birds sing, stock markets (and stocks themselves) fluctuate. Bonds, commodities, currencies, and all else that moves in the economic world will fluctuate. Only the economic market, however, transforms into a new beast when it changes direction to become a bull or a bear. Oddly, though, it’s not easy to objectively define either one: Observers see whichever they prefer to see.
Academic research has consistently pointed out that perma-bulls and perma-bears make far less profit than those who are cautiously optimistic. It’s key to remember that a wide world of economic opportunities lurks out there – you’re not forced to choose just your home-country stocks. Indeed, a home-country bias can be problematic.

This post was published at Mauldin Economics on AUGUST 26, 2017.

Sebastian Gorka Resigns From White House Post

A week after the White House pushed out former chief strategist Steve Bannon, the Trump administration has lost another controversial staffer. The departee this week is Sebastian Gorka, a deputy assistant to the president and former Breitbart employee who was closely allied with the White House’s rapidly shrinking anti-globalist faction. News of Gorka’s resignation was first reported by the Federalist, and later confirmed by Axios and a host of other news outlets.
As with Bannon’s ouster last week, the storyline of who said what when has gotten muddled: Gorka claimed he resigned, while the White House insinuated that he was pushed out.
News of Gorka’s ouster broke shortly after Trump announced that he would be pardoning sheriff Joe Arpaio, a decision that was widely expected after Trump hinted that he ‘wouldn’t do it tonight’ at a rally in Phoenix earlier this week. It also comes as Hurricane Harvey, which has been upgraded to a category four hurricane, is threatening to lay waste to the southwest.

This post was published at Zero Hedge on Aug 25, 2017.

Why The Shale Oil “Miracle” Is Becoming A “Debacle”

Energy is everything.
This is an amazingly important concept. Yet it’s almost universally overlooked.
Sometimes it’s hard to appreciate the magical role energy plays in our daily lives because most of what we experience is a derivative of it. The connection is hidden from direct view. Because of this, most people utterly fail to detect or appreciate the priceless and irreplaceable role of high net-energy fuel sources (such as oil and gas) to our modern lifestyle.
With high net-energy, society enjoys increasing complexity and technological advances. It’s what enables us to pursue massive goals like desalinating billions of gallons of seawater, or going to Mars. But without high net-energy fuel sources, our capabilities quickly regress to those of decades — or even centuries — past.
Which is why understanding where we truly are in the ‘net-energy story’ is so incredibly important. Is the US on the cusp of being “energy independent” from here on out? Is the “shale miracle” ushering in a glorious new ‘boom’ era that will vault America to unprecedented prosperity?
No. The central point of this report is that the US is deluding itself when it comes to energy abundance (generally) and oil (specifically).
Yet that’s not what we hear from the cheerleaders in the industry or in our media. From them, we hear a silver-tongued narrative of coming riches — a narrative that contains some truth, some myth, and a lot of fantasy.
It’s those last two parts — the myths and fantasies — that are going to seriously hurt many investors, as well cause a lot of extremely poor policy and investment decisions.

This post was published at PeakProsperity on Friday, August 25, 2017,.

China Has the Gold, The West Has Paper

Guest Post from David Smith, Originally Published on Money Metals Exchange
Money Metals readers may remember my November 2014 report in which I discussed how gold flowed into China in ‘tributary fashion’ like small streams flowing into a giant one. In this case, the gold has been streaming into China’s increasingly massive thousands-of-tons gold hoard.
In January, 2015, I penned an essay titled ‘China’s Global Gold Supply ‘Game of Stones’ outlining China’s long-range goal to dominate the world’s physical gold market.
Well, events have moved massively forward since then. I want to update you as to just how much things have changed – and how close we may be to experiencing a ‘defining moment’ in the gold market.
I’m talking about a game-changing event that could, with little warning, propel the price of gold upward by hundreds – even thousands – of dollars per ounce in the space of a few weeks… conceivably overnight! (And since silver’s price movements are highly correlated with that of gold, we could expect an upside explosion in silver as well.)

This post was published at Deviant Investor on August 26, 2017.

Live Coverage: One Dead, Over 264,000 Without Power As Harvey Drenches Texas, Brings “Widespread Devastation”

Live CBS Coverage:

Update 2: At least one death from hurricane Harvey was confirmed by local Texas officials. At a press conference Saturday, Rockport, Texas, officials said they knew of one death, but declined to give details. The officials said damage to the town was extensive, but about 40% of the city’s around 20,000 residents had decided to stay and ride out the storm.
* * *
Update: Shortly before 2pm ET, Harvey weakened to a tropical storm with sustained winds of 70 mph after lashing Texas coast as a Category 4 hurricane Friday according to the National Hurricane Center in Miami. The storm is forecast to linger over Texas for days bringing devastating flooding, including to Houston, with as much as 40 inches of rain falling. As of 12:30pm CDT 264,000 Texas customers are without power.

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

These Are The States Where $1 Million Lasts The Longest

If you had a million dollars, would you retire?
For most Americans, the answer to that question would be no. Which is especially problematic for millennials, who, having been permanently scarred by the financial crisis, are investing at lower rates than members of Generation X or the Baby Boomers, making it more difficult for them to build wealth. Furthermore, the generation that now comprises the largest share of working Americans is having trouble saving money, thanks in no small part to their $1.3 trillion in student debt.
Their present financial predicaments suggest that millennials probably won’t retire in the large numbers that members of their parents’ generation will, primarily out of necessity. Even for some baby boomers, perennially low interest rates since the crisis – and possibly from here on out – have made things more difficult for conservative savers who may now need to redo their longstanding retirement plans to make do with less.
For workers in this situation, choosing a location where they can stretch their money the furthest in retirement is paramount. Enter a new study by GoBankingRates that measures how long $1 million will last in different locations around the country.
‘A new report from GOBankingRates measures how long a million dollars would last for retirees 65 and older, state by state. It did that by multiplying the Bureau of Labor Statistics’ mean annual expenditures for that age group by a cost-of-living measure for each state, provided by the Missouri Economic Research and Information Center. The tally separated out annual spending on health care, housing, groceries, transportation, and utilities.’

This post was published at Zero Hedge on Aug 25, 2017.

Special Counsel Looking to Blackmail Manafort Against Trump to Force Him to Resign

The special counsel Robert S. Mueller III, who is leading the Russia inquiry against Trump, executed a search warrant at the Northern Virginia home of President Trump’s former campaign manager, Paul J. Manafort, for tax documents and foreign banking records, according to a person familiar with the matter. Normally, Mueller would simply ask Mr. Manafort’s lawyers for the documents as was done with Hillary. The issue of a search warrant is very aggressive and the probable cause is they believe he will destroy his tax records and will not hand them over.
Mueller is deliberately treating Manafort as a criminal and this is all set to bring criminal charges against him for a collateral tax issue that will have nothing to really do with Trump.

This post was published at Armstrong Economics on Aug 26, 2017.

Japan Sees Surge In Gold Smuggling As Yakuza & Wealthy Chinese Team Up

In a story that was seemingly tailor-made for the tabloids, Japanese news agency Nikkei is reporting that, in an unusual but tantalizing example of financial symbiosis, wealthy Chinese investors are teaming up with Yakuza gangsters to smuggle gold into Japan. The payoff for each side is simple: Chinese investors, who are increasingly fearful that a depreciating yuan will create turbulence in local stock and bond markets, can circumvent China’s stringent capital controls and move their money out of the country. And by cheating the Japanese government out of a consumption tax, the Yakuza stand to make a healthy profit.
‘The argument goes that the rich, having lost confidence in the Chinese yuan and with investment in other assets becoming difficult, are turning to gold smuggling to move their wealth out of the country. They supposedly hire mules to carry the gold from China, as well as places like South Korea and Taiwan, into Japan, where the consumption tax increase has made it easy for them to pay off the carriers and bribe staff at Asian airports.’
While Nikkei admits that its story is mostly based on hearsay, data show that a spike in demand for gold on the mainland has coincided with an increase in busts for gold smuggling by Japanese customs officials

This post was published at Zero Hedge on Aug 25, 2017.

Getting Harder Not Easier To Find Macro Improvement in Housing

The most recent housing data continues to suggest weakness. The National Association of Realtors (NAR) reports that sales of existing homes were down slightly last month from June. It continues a lower trend dating back to March. Overall, the level of resales is largely flat going back to the summer of 2015.
At a 5.44 million seasonally-adjusted annual rate for July 2017, that is actually slightly less than the 5.45 million (SAAR) estimated for the same month two years earlier. The housing market is not crashing, nor does it appear to be in danger of doing so. But it is also not expanding, either, the latter condition relevant to broader macro analysis beyond real estate.
The primary reason seems to be widespread consumer caution. American homeowners do not appear willing to put up their homes for sale despite rising prices. It is practically the antithesis of the housing mania period from just over a decade ago. That may be in part due to a paradigm shift in expectations and behavior (a lot of people learned something from the bust).

This post was published at Wall Street Examiner on August 24, 2017.

Mugabe Says Zimbabwe “Will Not Prosecute Killers Of White Farmers”

93-year-old Zimbabwe President Robert Mugabe made it clear in an address this week that people who murdered white farmers during a government-sanctioned purge in the 2000s will never be prosecuted.
In 2000, Zimbabwe implemented a controversial land reform program that saw squatters invade and seize hundreds of white-owned farms around the country. As Newsweek details, the violent seizures resulted in the murder of several white farmers, with many more displaced, and close associates of Mugabe given large chunks of land.
And now, speaking at a rally in Harare, Mugabe confirmed this massacre will go unpunished, according to Zimbabwean news site NewsDay.

This post was published at Zero Hedge on Aug 25, 2017.

Jackson Hole’d – Dollar Dumps To 2-Year Lows After 2 Million Ounce Gold Flush

The dollar today…
Summarizing the week’s moves: Dollar dump sparks buying binge in bonds, bullion, and stocks (but sinks FANG Stocks)
And this was what happened in FX markets…
Early stock gains – once again thanks to Gary Cohn confirming he is not resigning – topped out as Yellen’s speech was released. Once Europe closed, stocks went bid as usual, with some noise around Draghi’s speech, but the close was ugly…
Nasdaq ended red…

This post was published at Zero Hedge on Aug 25, 2017.

U.S. Late Cycle Means Time to Look Abroad

Given the events of the last few weeks (North Korea, Charlottesville, etc.) as well as seasonality, the U. S. equity markets have moved into a correction phase. Over the last few months, the market has experienced several shallow 2%+ corrections and has snapped back within a few days with a new high. This action is very reminiscent of the bull market from 1994 to March of 2000, with the exception of the 1998 Russian Ruble, Asian, and LTCM liquidity crises, which, collectively, produced a sharp 20% drop in one month. The U. S. Fed dropped rates quickly and the market recovered. From that correction low to the end of the bull market in March of 2000, the Dow doubled and the U. S. GDP peaked at 7%. The Fed continued to push rates up and eventually pricked the dot-com bubble.
I believe the S&P 500 is most vulnerable to a drawdown as it is supported mainly by six tech stocks: Facebook, Apple, Amazon, Microsoft, Netflix, and Google.
Although I do not believe the bull market is over, a few items have come to light from my research that are concerning:

This post was published at FinancialSense on 08/25/2017.

Weekend Reading: Storm Warning

No, I am not talking about ‘Hurricane Harvey’ which will likely be the first hurricane to strike the Texas coast since 2008, but rather the potential for another ‘debt ceiling’ debacle brewing in Washington.
Just recently, Goldman Sachs raised its odds for a government shutdown from 33% to 50% which was further supported by recent statements from President Trump that he would be willing to risk a Government ‘shutdown’ to get his border wall funded. However, as Axios.com noted yesterday:
‘A top Republican source put the chance as high as 75%: ‘The peculiar part is that almost everyone I talk to on the Hill agrees that it is more likely than not.’
This may all come down to Trump’s mood. As Swan puts it: ‘Trump is spoiling for a fight and the [conservative House] Freedom Caucus haven’t had a fight for a while. That’s a dangerous dynamic.’’
While a Government shutdown is often used as a mechanism to force legislative action by threatening default on the national debt. Let me just assure, the Government WILL NOT default on its mandatory spending requirements which includes the social welfare system and interest payments on the debt. Given those items comprise 75% of the budget, the remaining 25% of discretionary categories could see cuts such as the temporary furloughs of some 900,000 government workers considered to be ‘non-essential.’

This post was published at Zero Hedge on Aug 25, 2017.

Trying to Force Trump to Resign

Quite honestly, the all out war on Trump from the very beginning has been constant. There is not a single thing he has done that is not turned into a scandal. His harsh talk against North Korea seemed to work and forced Kim to back off. Nevertheless, they said Trump was the antagonist and one leading Democrat said that Kim was more responsible than Trump. I have worked with governments for more than 30 years around the globe. Never have I seen such a head of state so attacked for absolutely everything.

This post was published at Armstrong Economics on Aug 26, 2017.