Is the oldest trick in the Trump market manipulation book finally coming to an end?
12 hours after futures spiked by 10 points to a a new record high, after algos reacted as if stung to the following China headline:
CHINA, U.S. HELD CALL TODAY; AGREED TO CONTINUE PHASE-1 TALKS
... and which said that China’s Vice Premier Liu He, Robert Lighthizer and Steven Mnuchin held a phone call in which they "reached consensus on properly resolving relevant issues" and agreed to stay in contact on the remaining points for a “phase one” trade deal during a phone, yet which if one thinks about it said absolutely nothing new - the US and China agreed to continue talks to reach a deal which Trump already announced back on October 11? - futures have faded the entire move higher and as in danger of rolling over as it suddenly appears that algos are no longer responding to the daily injections of artificial "trade deal optimism."
China's Global Times tweeted later that topics in the call may have included tariff removal, agricultural purchase and a possible face-to-face meeting citing experts close to trade talks. Furthermore, Global Times later reiterated that China and the US have basically reached broad consensus on a phase one trade deal including the removal of tariffs, although some differences remain over how much tariffs should be rolled back citing experts close to the talks. Yet if that is the case why did the two sides agree to continue the talks, and is this just a charade to keep stocks high, Trump happy, and China free to intervene in HK without angering the US president?
"We take any positive pronouncements on a trade deal with healthy skepticism given how long this has dragged out," Rabobank strategists wrote in a note Tuesday. "It would seem that any major progress on the trade deal front will be hindered by the ongoing unrest in Hong Kong." Perhaps this skepticism is starting to rub off on the algos too?
The following "flow" chart shows the most notable moments and comments in the past year of the US-China trade war, whose end continues to remain "just around the corner":
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Showing posts with label Wall Street. Show all posts
Showing posts with label Wall Street. Show all posts
October 8, 2019
"Paper Money Systems Have Always Wound-Up With Collapse And Chaos", Buffett Senior
Warren himself acquired a record-setting 128 million ounces of silver back in the late 1990s… which he later sold at a profit in the early 2000s.
But to listen to him talk about precious metals these days, he’s always negative.
Buffett often quips that if you took the world’s entire supply of gold and melted it together, it would form a cube of about 68 feet (~21 meters) per side and be worth around $9 trillion.
Reclusive Millionaire Urges Retirees: “Get Out Of Cash”
PhD Millionaire who called Dotcom crash, housing bust, and market's surge since '09 is now predicting a 'cash panic' in 2019. Here's how to prepare.
With that same $9 trillion, you could buy every share of Apple, Disney, Google, Microsoft, JP Morgan, Exxon Mobil, all the farmland in the United States, all the developable land in Manhattan, and still have more than a trillion dollars left over.
This is Buffett’s central argument: gold doesn’t produce anything. So it’s much better to invest in a productive asset like a business, farmland, etc.
Sure, I’d rather own a profitable, productive asset than a pile of metal.
But Buffett is completely wrong to compare gold to productive assets… they’re apples and oranges.
Gold isn’t an ‘investment’. It’s an insurance policy against paper currencies will lose value over time. So a MUCH better comparison for gold is CASH.
Read the entire article
But to listen to him talk about precious metals these days, he’s always negative.
Buffett often quips that if you took the world’s entire supply of gold and melted it together, it would form a cube of about 68 feet (~21 meters) per side and be worth around $9 trillion.
Reclusive Millionaire Urges Retirees: “Get Out Of Cash”
PhD Millionaire who called Dotcom crash, housing bust, and market's surge since '09 is now predicting a 'cash panic' in 2019. Here's how to prepare.
With that same $9 trillion, you could buy every share of Apple, Disney, Google, Microsoft, JP Morgan, Exxon Mobil, all the farmland in the United States, all the developable land in Manhattan, and still have more than a trillion dollars left over.
This is Buffett’s central argument: gold doesn’t produce anything. So it’s much better to invest in a productive asset like a business, farmland, etc.
Sure, I’d rather own a profitable, productive asset than a pile of metal.
But Buffett is completely wrong to compare gold to productive assets… they’re apples and oranges.
Gold isn’t an ‘investment’. It’s an insurance policy against paper currencies will lose value over time. So a MUCH better comparison for gold is CASH.
Read the entire article
November 8, 2018
Wall Street Seems To Believe That Endless Gridlock And Political Turmoil Will Be Good For America
It is difficult not to admire the relentless optimism on Wall Street. A divided Congress is going to guarantee two years of gridlock and political turmoil in Washington, but many in the financial community are choosing to interpret the election results as a positive sign. They remember the “gridlock” during the Obama years, and they are hopeful that the next couple of years will be at least somewhat similar. The Dow Jones Industrial Average shot up 545 points on Wednesday, and that was the largest post-midterm rally that we have seen in 36 years. Stock prices normally go up the day after midterm elections, but Wednesday’s rally was definitely unusual…
Wednesday’s post-midterms rally was larger than the average gain that follows the contests. Goldman Sachs noted the S&P 500 has averaged a gain of 0.7 percent from the day before the elections to the day after midterms. Wednesday marked the biggest post-midterms gain for both the Dow and S&P 500 since the day after the 1982 contests, when the indexes surged 4.3 percent and 3.9 percent, respectively.
To a certain extent, it is likely that investors were greatly relieved that the worst case scenario did not play out. As I noted on Monday, a blue wave that would have resulted in Democrats taking control of both houses of Congress would have meant big trouble for Wall Street, and many are very thankful that we were able to avoid that outcome…
Investors also avoided the most-feared Wall Street outcome, a so-called “blue wave,” or Democratic sweep of both chambers of Congress. That could have put the president’s economic policies under assault and boosted the odds of a Democratic House pushing for Trump’s impeachment.
Read the entire article
Wednesday’s post-midterms rally was larger than the average gain that follows the contests. Goldman Sachs noted the S&P 500 has averaged a gain of 0.7 percent from the day before the elections to the day after midterms. Wednesday marked the biggest post-midterms gain for both the Dow and S&P 500 since the day after the 1982 contests, when the indexes surged 4.3 percent and 3.9 percent, respectively.
To a certain extent, it is likely that investors were greatly relieved that the worst case scenario did not play out. As I noted on Monday, a blue wave that would have resulted in Democrats taking control of both houses of Congress would have meant big trouble for Wall Street, and many are very thankful that we were able to avoid that outcome…
Investors also avoided the most-feared Wall Street outcome, a so-called “blue wave,” or Democratic sweep of both chambers of Congress. That could have put the president’s economic policies under assault and boosted the odds of a Democratic House pushing for Trump’s impeachment.
Read the entire article
August 22, 2018
Bank Of England Chief Economist Warns Of Disruptive AI Threat In "Fourth Industrial Revolution"
Meanwhile, the UK government's chair of the newly formed Artificial Intelligence Council, Tabitha Goldstaub, echoed Haldane's sentiment, warning of a "huge risk" of people being left without jobs that computers and robots have taken. She says that the challenge will be ensuring that people are prepared for the cultural and economic shifts - and that hte focus would be on creating "the new jobs of the future" in order to replace those at risk of robotic-replacement.
Mr. Haldane told the BBC: "Each of those [industrial revolutions] had a wrenching and lengthy impact on the jobs market, on the lives and livelihoods of large swathes of society," adding "Jobs were effectively taken by machines of various types, there was a hollowing out of the jobs market, and that left a lot of people for a lengthy period out of work and struggling to make a living.
"That heightened social tensions, it heightened financial tensions, it led to a rise in inequality. This is the dark side of technological revolutions and that dark-side has always been there."
"That hollowing out is going to be potentially on a much greater scale in the future, when we have machines both thinking and doing - replacing both the cognitive and the technical skills of humans."
That's a lot of words, but solutions are elusive
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Mr. Haldane told the BBC: "Each of those [industrial revolutions] had a wrenching and lengthy impact on the jobs market, on the lives and livelihoods of large swathes of society," adding "Jobs were effectively taken by machines of various types, there was a hollowing out of the jobs market, and that left a lot of people for a lengthy period out of work and struggling to make a living.
"That heightened social tensions, it heightened financial tensions, it led to a rise in inequality. This is the dark side of technological revolutions and that dark-side has always been there."
"That hollowing out is going to be potentially on a much greater scale in the future, when we have machines both thinking and doing - replacing both the cognitive and the technical skills of humans."
That's a lot of words, but solutions are elusive
Read the entire article
August 8, 2018
Market Stunned After Musk Discloses Intention To LBO Tesla, Lawsuits Threatened
Update 10: After all that, nobody has any idea what just happened, and a word being increasingly thrown around is lawsuit. As Yahoo's Rick Newman writes, if the LBO deal described by Musk with "funding secured" is true, it’s a boon for shareholders. But if it’s not true, Tesla is in trouble, and shareholders may feel the pain.
“If funding is secured, then it’s a factual statement,” says John C. Coffee, director of the Center on Corporate Governance at Columbia Law School. “But if he can’t prove that, he’s in some danger of a big lawsuit because short sellers will be devastated by this.”
On Aug. 7, Musk tweeted: “Am considering taking Tesla private at $420. Funding secured.” Those nine words sent the stock soaring from $342 to around $370, an 8% jump. Then the Nasdaq exchange temporarily halted trading in the shares, pending clarification of material news by the company.
About three hours after his momentous tweet, Musk posted a message to employees explaining his rationale for going private. He cited “wild swings” in the stock price and frequent attacks by short sellers as “a major distraction for everyone working at Tesla.” He cited Space X, the rocket-launching company where Musk is also CEO, as an example of a privately owned company better able to focus on a complex long-term mission. “A final decision has not yet been made,” he said.
Read the entire article
“If funding is secured, then it’s a factual statement,” says John C. Coffee, director of the Center on Corporate Governance at Columbia Law School. “But if he can’t prove that, he’s in some danger of a big lawsuit because short sellers will be devastated by this.”
On Aug. 7, Musk tweeted: “Am considering taking Tesla private at $420. Funding secured.” Those nine words sent the stock soaring from $342 to around $370, an 8% jump. Then the Nasdaq exchange temporarily halted trading in the shares, pending clarification of material news by the company.
About three hours after his momentous tweet, Musk posted a message to employees explaining his rationale for going private. He cited “wild swings” in the stock price and frequent attacks by short sellers as “a major distraction for everyone working at Tesla.” He cited Space X, the rocket-launching company where Musk is also CEO, as an example of a privately owned company better able to focus on a complex long-term mission. “A final decision has not yet been made,” he said.
Read the entire article
February 27, 2018
"Tanks On Their Lawn": Comcast Challenges Fox With $31 Billion Bid For Sky
US cable-and-content behemoth Comcast issued a brazen challenge to News Corp. mogul Rupert Murdoch by offering a 22 billion pound ($31 billion) cash bid to buy Sky, challenging Murdoch's Twenty-First Century Fox - which is trying to buy the 61% of the company that it doesn't already own - and Walt Disney, which recently purchased nearly all of the entertainment assets once owned by the Murdoch-controlled 21st Century Fox.
Comcast's bid comes out to GBP12.5 per share in cash for the UK broadcaster, a 16% premium to the GBP10.75 per share that Fox recently agreed to.
Sky shares soared nearly 20% on the news.
As Reuters points out, Sky services 23 million homes across Europe and is known for its technological innovation. Murdoch has been trying to gain 100% control of the company, but has been stymied by British regulators, who have raised concerns about his stewardship stemming from the News of the World phone-hacking scandal and his already vast influence over UK media. Murdoch already owns several of the UK's most widely circulated print publications, as well as his 39% stake in Sky, According to Reuters.
Read the entire article
Comcast's bid comes out to GBP12.5 per share in cash for the UK broadcaster, a 16% premium to the GBP10.75 per share that Fox recently agreed to.
Sky shares soared nearly 20% on the news.
As Reuters points out, Sky services 23 million homes across Europe and is known for its technological innovation. Murdoch has been trying to gain 100% control of the company, but has been stymied by British regulators, who have raised concerns about his stewardship stemming from the News of the World phone-hacking scandal and his already vast influence over UK media. Murdoch already owns several of the UK's most widely circulated print publications, as well as his 39% stake in Sky, According to Reuters.
Read the entire article
December 21, 2017
Why Wall Street Is Furious At The Trump Tax Plan
Back in October 2016, the "millionaire, billionaire, private jet owners" of America's elitist, liberal mega-cities (A.K.A. New York and San Francisco) celebrated the tax hikes that a Hillary Clinton presidency would have undoubtedly jammed down their throats proclaiming them to be a 'patriotic duty'. Unfortunately, now that Trump has given them exactly what they apparently wanted...an amazing opportunity to 'spread their wealth around"...they're suddenly feeling a lot less patriotic.
Of course, as we've noted numerous times, while most people across the country and across the income spectrum will benefit from the Republican tax reform package, the folks who stand to lose are those living in high-tax states with expensive real estate as their SALT, mortgage interest and property tax deductions will suddenly be capped. And, as Bloomberg points out today, that has a lot of Wall Street Traders in New York drowning their sorrows in expensive vodka and considering a move to Florida.
One trader, sipping a Bloody Mary on a morning flight to somewhere more tropical, said he’s going to stop registering as a Republican. En route, he sent more than a dozen text messages ripping the tax bill.
A pair of hedge fund managers said the tax bill is too tilted toward corporations, rather than individuals who should get more relief.
“My clients are hard-working young professionals on Wall Street. I don’t have a lot of good news for them,” said Douglas Boneparth, a financial adviser in lower Manhattan who counsels people throughout the industry. Most are coming to terms with it. “I don’t think anyone is going to be surprised by the economic reality.”
Read the entire article
Of course, as we've noted numerous times, while most people across the country and across the income spectrum will benefit from the Republican tax reform package, the folks who stand to lose are those living in high-tax states with expensive real estate as their SALT, mortgage interest and property tax deductions will suddenly be capped. And, as Bloomberg points out today, that has a lot of Wall Street Traders in New York drowning their sorrows in expensive vodka and considering a move to Florida.
One trader, sipping a Bloody Mary on a morning flight to somewhere more tropical, said he’s going to stop registering as a Republican. En route, he sent more than a dozen text messages ripping the tax bill.
A pair of hedge fund managers said the tax bill is too tilted toward corporations, rather than individuals who should get more relief.
“My clients are hard-working young professionals on Wall Street. I don’t have a lot of good news for them,” said Douglas Boneparth, a financial adviser in lower Manhattan who counsels people throughout the industry. Most are coming to terms with it. “I don’t think anyone is going to be surprised by the economic reality.”
Read the entire article
December 1, 2017
Bitcoin Soars After CFTC Approves Futures Trading: First Trade To Take Place Dec.18
Bitcoin is back over $10,000 after the the CFTC confirmed what had been previously reported, namely that it would allow bitcoin futures to trade on two exchanges, the CME and CBOE Futures Exchange, also granting the Cantor Exchange permission to trade a contract for bitcoin binary options.
The CFTC announced that through a process known as "self-certification," CME and Cboe stated that their contracts comply with U.S. law and CFTC regulations. The US commodity regulator also said that the it held “rigorous discussions” with the exchanges that resulted in improvements to the contracts’ designs and settlement.
As to when the first bitcoin futures will cross the tape, the CME said it has self-certified the initial listing of its bitcoin futures to launch Monday, December 18, 2017.
“Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past,” said CFTC Chairman J. Christopher Giancarlo. “As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets. In working with the Commission, CME, CFE and Cantor have set an appropriate standard for oversight over these bitcoin contracts given the CFTC’s limited statutory ability to oversee the cash market for bitcoin.”
In response to the news, Bitcoin has surged back over $10,000...
Read the entire article
The CFTC announced that through a process known as "self-certification," CME and Cboe stated that their contracts comply with U.S. law and CFTC regulations. The US commodity regulator also said that the it held “rigorous discussions” with the exchanges that resulted in improvements to the contracts’ designs and settlement.
As to when the first bitcoin futures will cross the tape, the CME said it has self-certified the initial listing of its bitcoin futures to launch Monday, December 18, 2017.
“Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past,” said CFTC Chairman J. Christopher Giancarlo. “As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets. In working with the Commission, CME, CFE and Cantor have set an appropriate standard for oversight over these bitcoin contracts given the CFTC’s limited statutory ability to oversee the cash market for bitcoin.”
In response to the news, Bitcoin has surged back over $10,000...
Read the entire article
November 30, 2017
The Dow Peaked At 14,000 Before The Last Stock Market Crash, And Now Dow 24,000 Is Here
The absurdity that we are witnessing in the financial markets is absolutely breathtaking. Just recently, a good friend reminded me that the Dow peaked at just above 14,000 before the last stock market crash, and stock prices were definitely over-inflated at that time. Subsequently, the Dow crashed below 7,000 before rebounding, and now thanks to this week’s rally we on the threshold of Dow 24,000. When you look at a chart of the Dow Jones Industrial Average, you would be tempted to think that we must be in the greatest economic boom in American history, but the truth is that our economy has only grown by an average of just 1.33 percent over the last 10 years. Every crazy stock market bubble throughout our history has always ended badly, and this one will be no exception.
And even though the Dow showed a nice gain on Wednesday, the Nasdaq got absolutely hammered. In fact, almost every major tech stock was down big. The following comes from CNN…
Meanwhile, big tech stocks — which have propelled the market higher all year — were tanking. The Nasdaq fell more than 1%, led by big drops in Google (GOOGL, Tech30) owner Alphabet, Amazon (AMZN, Tech30), Apple (AAPL, Tech30), Facebook (FB, Tech30) and Netflix (NFLX, Tech30).
Momentum darlings Nvidia (NVDA, Tech30) and PayPal (PYPL, Tech30) and red hot gaming stocks Electronic Arts (EA, Tech30) and Activision Blizzard (ATVI, Tech30) plunged too. They have been some of the market’s top stocks throughout most of 2017.
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And even though the Dow showed a nice gain on Wednesday, the Nasdaq got absolutely hammered. In fact, almost every major tech stock was down big. The following comes from CNN…
Meanwhile, big tech stocks — which have propelled the market higher all year — were tanking. The Nasdaq fell more than 1%, led by big drops in Google (GOOGL, Tech30) owner Alphabet, Amazon (AMZN, Tech30), Apple (AAPL, Tech30), Facebook (FB, Tech30) and Netflix (NFLX, Tech30).
Momentum darlings Nvidia (NVDA, Tech30) and PayPal (PYPL, Tech30) and red hot gaming stocks Electronic Arts (EA, Tech30) and Activision Blizzard (ATVI, Tech30) plunged too. They have been some of the market’s top stocks throughout most of 2017.
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November 13, 2017
This Is What A Pre-Crash Market Looks Like
The only other times in our history when stock prices have been this high relative to earnings, a horrifying stock market crash has always followed. Will things be different for us this time? We shall see, but without a doubt this is what a pre-crash market looks like. This current bubble has been based on irrational euphoria that has been fueled by relentless central bank intervention, but now global central banks are removing the artificial life support in unison. Meanwhile, the real economy continues to stumble along very unevenly. This is the longest that the U.S. has ever gone without a year in which the economy grew by at least 3 percent, and many believe that the next recession is very close. Stock prices cannot stay completely disconnected from economic reality forever, and once the bubble bursts the pain is going to be unlike anything that we have ever seen before.
If you think that these ridiculously absurd stock prices are sustainable, there is something that I would like for you to consider. The only times in our history when the cyclically-adjusted return on stocks has been lower, a nightmarish stock market crash happened soon thereafter…
The Nobel-Laureate, Robert Shiller, developed the cyclically-adjusted price/earnings ratio, the so-called CAPE, to assess whether stocks are likely to be over- or under-valued. It is possible to invert this measure to obtain a cyclically-adjusted earnings yield which allows one to measure prospective real returns. If one does this, the answer for the US is that the cyclically-adjusted return is now down to 3.4 percent. The only times it has been still lower were in 1929 and between 1997 and 2001, the two biggest stock market bubbles since 1880. We know now what happened then. Is it going to be different this time?
Since the market bottomed out in early 2009, the S&P 500 has been on a historic run. If this rally had been based on a booming economy that would be one thing, but the truth is that the U.S. economy has not seen 3 percent yearly growth since the middle of the Bush administration. Instead, this insane bubble has been almost entirely fueled by central bank manipulation, and now that manipulation is being dramatically scaled back.
Read the entire article
If you think that these ridiculously absurd stock prices are sustainable, there is something that I would like for you to consider. The only times in our history when the cyclically-adjusted return on stocks has been lower, a nightmarish stock market crash happened soon thereafter…
The Nobel-Laureate, Robert Shiller, developed the cyclically-adjusted price/earnings ratio, the so-called CAPE, to assess whether stocks are likely to be over- or under-valued. It is possible to invert this measure to obtain a cyclically-adjusted earnings yield which allows one to measure prospective real returns. If one does this, the answer for the US is that the cyclically-adjusted return is now down to 3.4 percent. The only times it has been still lower were in 1929 and between 1997 and 2001, the two biggest stock market bubbles since 1880. We know now what happened then. Is it going to be different this time?
Since the market bottomed out in early 2009, the S&P 500 has been on a historic run. If this rally had been based on a booming economy that would be one thing, but the truth is that the U.S. economy has not seen 3 percent yearly growth since the middle of the Bush administration. Instead, this insane bubble has been almost entirely fueled by central bank manipulation, and now that manipulation is being dramatically scaled back.
Read the entire article
November 3, 2017
Visualizing How Billionaire Investors Hedge Against Geopolitical Black Swans
Sometimes this risk flies under the radar and isn’t as pronounced as it probably should be. However, as Visual Capitalists's Jeff Desjardins notes, in other cases, the topic of risk can catapult to the forefront of discussion. There can be specific events or signals unfolding that give investors the jitters – and during these times, investors will make adjustments to their portfolios to avoid getting caught off guard.
HOW BILLIONAIRES ARE HEDGING
In the following infographic from Sprott Physical Bullion Trusts, we explain the particular geopolitical risks that have the world’s most elite investors concerned today – and what moves they are making to protect themselves from black swans.
The world isn’t predictable at the best of times – but after unanticipated occurrences such as Brexit and the election of Trump in 2016, the geopolitical tea leaves are getting even more difficult to read.
The world is approaching a major inflection point and the intense amount of global angst we’re experiencing now stems from deep, structural forces that have been building over decades. – Reva Goujon, VP Global Analysis of Stratfor
According to Reva Goujon, VP Global Analysis of Stratfor, we are experiencing the perfect storm of “-isms”: nationalism, nativism, protectionism, and isolationism.
Read the entire article
HOW BILLIONAIRES ARE HEDGING
In the following infographic from Sprott Physical Bullion Trusts, we explain the particular geopolitical risks that have the world’s most elite investors concerned today – and what moves they are making to protect themselves from black swans.
The world isn’t predictable at the best of times – but after unanticipated occurrences such as Brexit and the election of Trump in 2016, the geopolitical tea leaves are getting even more difficult to read.
The world is approaching a major inflection point and the intense amount of global angst we’re experiencing now stems from deep, structural forces that have been building over decades. – Reva Goujon, VP Global Analysis of Stratfor
According to Reva Goujon, VP Global Analysis of Stratfor, we are experiencing the perfect storm of “-isms”: nationalism, nativism, protectionism, and isolationism.
Read the entire article
August 23, 2017
Jackson Hole Preview: Market Reactions, And Why UBS Says "Don't Skip Lunch"
Historically the annual Jackson Hole symposium has been a major market-moving event as it has traditionally been the venue where central banks make critical announcements such as Bernanke's preview and hints of QE2 and QE3 in 2012, as well as Draghi's suggestion of the ECB's QE in 2014. As shown in the chart below, market reactions following these events have been material.
This year, however, while there was a sharp build-up in expectations after several media trial balloons suggested that Draghi would unveil the ECB's taper, the fact that the market sent the EUR just shy of 1.20 in frontrunning of this announcement, prompted the ECB head to abort the entire affair, "leaking" that no material announcement would be made this week in Wyoming after all. Which is why, in previewing potential market moves, Barclays says that "the risk for the EUR around the event is biased to the downside, and that EUR bulls might be disappointed by a lack of meaningful hints on ECB monetary policy normalisation."
ING is quick to take the fun out of this week's annual meeting: "this year's major speakers, Fed Chair Janet Yellen and the ECB President Mario Draghi, are likely to keep their cards close to their chest. Both speeches are likely to be fairly "high level" and lack any major hints about future policy."
As Deutsche Bank's Jim Reid echoes, "there might be a few less nerves about the next few days in markets than many felt a few weeks ago. Back then, Thursday's commencement of the annual Jackson Hole Symposium seemed to be a natural place for Mr Draghi to signal that exit from QE was soon to be accelerated. However a combination of still soft global inflation data and the Euro's recent ascent has made it unlikely that the event will be a watershed moment. Expect him to be upbeat on the economy but the hawkish/dovishness indicator might be swayed one way or the other on how much attention the Euro gets in his remarks."
Read the entire article
This year, however, while there was a sharp build-up in expectations after several media trial balloons suggested that Draghi would unveil the ECB's taper, the fact that the market sent the EUR just shy of 1.20 in frontrunning of this announcement, prompted the ECB head to abort the entire affair, "leaking" that no material announcement would be made this week in Wyoming after all. Which is why, in previewing potential market moves, Barclays says that "the risk for the EUR around the event is biased to the downside, and that EUR bulls might be disappointed by a lack of meaningful hints on ECB monetary policy normalisation."
ING is quick to take the fun out of this week's annual meeting: "this year's major speakers, Fed Chair Janet Yellen and the ECB President Mario Draghi, are likely to keep their cards close to their chest. Both speeches are likely to be fairly "high level" and lack any major hints about future policy."
As Deutsche Bank's Jim Reid echoes, "there might be a few less nerves about the next few days in markets than many felt a few weeks ago. Back then, Thursday's commencement of the annual Jackson Hole Symposium seemed to be a natural place for Mr Draghi to signal that exit from QE was soon to be accelerated. However a combination of still soft global inflation data and the Euro's recent ascent has made it unlikely that the event will be a watershed moment. Expect him to be upbeat on the economy but the hawkish/dovishness indicator might be swayed one way or the other on how much attention the Euro gets in his remarks."
Read the entire article
August 8, 2017
Fannie, Freddie Would Need $100BN Bailout In New Financial Crisis
While the latest Fed stress test found that all US commercial banks have enough capital to survive even an "adverse" stress scenario, a severe recession in which the VIX hypothetically soars to 70, the two US mortgage giants would not be quite so lucky: according to the results from the annual stress test of Fannie Mae and Freddie Mac released today by their regulator, the Federal Housing Finance Agency, the "GSEs" which were nationalized a decade ago in the early days of the crisis, would need as much as $100 billion in bailout funding in the form of a potential incremental Treasury draw, in the event of a new economic crisis.
Under the "severely adverse" scenario, i.e., a "severe global recession" U.S. real GDP begins to decline immediately and reaches a trough in the second quarter of 2018 after a decline of 6.50% from the pre-recession peak. The rate of unemployment increases from 4.7% to a peak of 10.0% in the third quarter of 2018. CPI declines to about 1.25% by the second quarter of 2017 (so not that much further from here) and then rises to approximately 1.75% by the middle of 2018. Outright deflation is not even considered.
In addition, equity prices fall by approximately 50% from the start of the planning horizon through the end of 2017, and equity volatility soars, approaching levels last seen in 2008. Home prices decline by approximately 25% , and commercial real estate prices fall by 35% through the first quarter of 2019. The Severely Adverse scenario also includes a global market shock component that impacts the Enterprises’ retained portfolios. The global market shock involves large and immediate changes in asset prices, interest rates, and spreads caused by general market dislocation, uncertainty in the global economy, and significant market illiquidity. Option-adjusted spreads on mortgage-backed securities widen significantly in this scenario.
Most interesting is the following provision in the "severly adverse" scenario: the global market shock also includes a counterparty default component that assumes the failure of each Enterprise’s largest counterparty. Which, of course, is ironic because the Fed's own stress test of commercial banks did not anticipate any bank failing. The global market shock is treated as an instantaneous loss and reduction of capital in the first quarter of the planning horizon, and the scenario assumes no recovery of these losses by the Enterprises in future quarters.
Read the entire article
Under the "severely adverse" scenario, i.e., a "severe global recession" U.S. real GDP begins to decline immediately and reaches a trough in the second quarter of 2018 after a decline of 6.50% from the pre-recession peak. The rate of unemployment increases from 4.7% to a peak of 10.0% in the third quarter of 2018. CPI declines to about 1.25% by the second quarter of 2017 (so not that much further from here) and then rises to approximately 1.75% by the middle of 2018. Outright deflation is not even considered.
In addition, equity prices fall by approximately 50% from the start of the planning horizon through the end of 2017, and equity volatility soars, approaching levels last seen in 2008. Home prices decline by approximately 25% , and commercial real estate prices fall by 35% through the first quarter of 2019. The Severely Adverse scenario also includes a global market shock component that impacts the Enterprises’ retained portfolios. The global market shock involves large and immediate changes in asset prices, interest rates, and spreads caused by general market dislocation, uncertainty in the global economy, and significant market illiquidity. Option-adjusted spreads on mortgage-backed securities widen significantly in this scenario.
Most interesting is the following provision in the "severly adverse" scenario: the global market shock also includes a counterparty default component that assumes the failure of each Enterprise’s largest counterparty. Which, of course, is ironic because the Fed's own stress test of commercial banks did not anticipate any bank failing. The global market shock is treated as an instantaneous loss and reduction of capital in the first quarter of the planning horizon, and the scenario assumes no recovery of these losses by the Enterprises in future quarters.
Read the entire article
August 3, 2017
Remember This Milestone: The Dow Jones Industrial Average Hits 22,000 For The First Time In U.S. History
The Dow hit the 22,000 mark for the first time ever on Wednesday, and investors all over the world greatly celebrated. And without a doubt this is an exceedingly important moment, because I think that this is a milestone that we will be remembering for a very long time. So far this year the Dow is up over 11 percent, and it has now tripled in value since hitting a low in March 2009. It has been quite a ride, and if you would have told me a couple of years ago that the Dow would be hitting 22,000 in August 2017 I probably would have laughed at you. The central bankers have been able to keep this ridiculous stock market bubble going for longer than most experts dreamed possible, and for that they should be congratulated. But of course the long-term outlook for our financial markets has not changed one bit.
Every other stock market bubble of this magnitude in our history has ended with a crash, and this current bubble is going to suffer the same fate.
But many in the mainstream media are still encouraging people to jump into the market at this late hour. For example, the following comes from a USA Today article that was published on Wednesday…
“It’s still not too late to get in,” says Jeff Kleintop, chief global investment strategist at Charles Schwab, based in San Francisco. “The gains are firmly rooted in business fundamentals, not false hopes.”
I honestly don’t know how anyone could say such a thing with a straight face. We have essentially been in a “no growth economy” for the past decade, and signs of a new economic slowdown are all around us.
Read the entire article
Every other stock market bubble of this magnitude in our history has ended with a crash, and this current bubble is going to suffer the same fate.
But many in the mainstream media are still encouraging people to jump into the market at this late hour. For example, the following comes from a USA Today article that was published on Wednesday…
“It’s still not too late to get in,” says Jeff Kleintop, chief global investment strategist at Charles Schwab, based in San Francisco. “The gains are firmly rooted in business fundamentals, not false hopes.”
I honestly don’t know how anyone could say such a thing with a straight face. We have essentially been in a “no growth economy” for the past decade, and signs of a new economic slowdown are all around us.
Read the entire article
July 10, 2017
38 Incredible Facts About The Modern U.S. Dollar
We’ve previously showed you 31 Fascinating Facts About the Dollar’s Early History, which highlighted the history of U.S. currency before the 20th century. This was a very interesting period in which we looked at the money used by the first colonists, the extreme bust of the Continental currency, the era of privately-issued bank notes, and Congress’ emergency issuance of the fiat “greenback” during the Civil War.
However, as The Money Project - an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money - notes, the modern era of the U.S. dollar is just as interesting. We have it starting in 1913, when the Federal Reserve Act was passed by Woodrow Wilson. Not only did it establish a new central bank, but it also gave the Fed the authority to issue the Federal Reserve Note, which is (for now) the dominant form of U.S. currency both domestically and abroad.
Read the entire article
However, as The Money Project - an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money - notes, the modern era of the U.S. dollar is just as interesting. We have it starting in 1913, when the Federal Reserve Act was passed by Woodrow Wilson. Not only did it establish a new central bank, but it also gave the Fed the authority to issue the Federal Reserve Note, which is (for now) the dominant form of U.S. currency both domestically and abroad.
Read the entire article
June 2, 2017
The Bilderberg 2017 Agenda: "The Trump Administration - A Progress Report"
Every year, the world's richest and most powerful business executives, bankers, media heads and politicians sit down in some luxurious and heavily guarded venue, and discuss how to shape the world in a way that maximizes profits for all involved, while perpetuating a status quo that has been highly beneficial for a select few, even if it means the ongoing destruction of the middle class. We are talking, of course, about the annual, and always secretive, Bilderberg meeting.
And just like last year's meeting in Dresden, the primary topic on the agenda of this year's 65th Bilderberg Meeting which starts today and ends on Sunday, is one: Donald Trump.
Ironically, this year "the storm around Donald Trump" as the SCMP puts it, is not half way around the world, but just a few miles west of the White House, in a conference centre in Chantilly, Virginia, where the embattled president will be getting his end-of-term grades from the people whose opinion actually matters: some 130 participating "Bilderbergs".
The secretive three-day summit of the political and economic elite kicks off Thursday in heavily guarded seclusion at the Westfields Marriot, a luxury hotel a short distance from the Oval Office.
Read the entire article
And just like last year's meeting in Dresden, the primary topic on the agenda of this year's 65th Bilderberg Meeting which starts today and ends on Sunday, is one: Donald Trump.
Ironically, this year "the storm around Donald Trump" as the SCMP puts it, is not half way around the world, but just a few miles west of the White House, in a conference centre in Chantilly, Virginia, where the embattled president will be getting his end-of-term grades from the people whose opinion actually matters: some 130 participating "Bilderbergs".
The secretive three-day summit of the political and economic elite kicks off Thursday in heavily guarded seclusion at the Westfields Marriot, a luxury hotel a short distance from the Oval Office.
Read the entire article
May 17, 2017
Manufacturing Resistance – The American Public Is Being Manipulated Into Irrelevance
No honest person could accuse me of being a Trump fan or supporter. I refused to back his candidacy despite my total disdain for Hillary Clinton and pretty much everything she stands for. More importantly, I’ve written a multitude of articles since he was inaugurated severely taking him to task on a wide variety of subjects. I’ve tirelessly discussed how he’s outsourced his economic policy to Goldman Sachs, and condemned his burgeoning neocon foreign policy, evidenced by his disturbing coziness with the autocratic barbarians of Saudi Arabia.
Nevertheless, the most incredible aspect of the past four months is not how much of a fake populist Trump’s proven to be, but how the corporate media’s managed to disgust me even more. I’m happy to become outraged at Trump, because I find many things about Trump outrageous. That said, I find it telling that the stuff about Trump that outrages me, is never the same stuff which outrages the corporate media. Why is that?
The reason is the corporate media doesn’t mind Goldman Sachs running U.S. economic policy. It also doesn’t mind a close alliance with the terrorist state of Saudi Arabia, or our government’s endless string of disastrous neocon wars abroad. In fact, when it comes to the latter, the corporate media is reliably the primary cheerleader for unprovoked militarism.
Following the election of Trump, an axis of evil in U.S. politics has formed consisting of the corporate media, neoliberal Democrats (Hillary cultists) and neocons. This alliance has one primary objective, which revolves around obsessing incessantly on a conspiracy theory that deflects attention away from the crimes of our very own domestic plutocrats, war mongers and rent-seekers (you know, the forces that are actually wrecking the country). Russia is the perfect outside enemy to rally ignorant rubes around in order to prevent any real progressive or centrist populism from ever gaining a foothold in U.S. politics. Unfortunately, thanks to the gullibility of the average American, their plan seems to be succeeding.
Read the entire article
Nevertheless, the most incredible aspect of the past four months is not how much of a fake populist Trump’s proven to be, but how the corporate media’s managed to disgust me even more. I’m happy to become outraged at Trump, because I find many things about Trump outrageous. That said, I find it telling that the stuff about Trump that outrages me, is never the same stuff which outrages the corporate media. Why is that?
The reason is the corporate media doesn’t mind Goldman Sachs running U.S. economic policy. It also doesn’t mind a close alliance with the terrorist state of Saudi Arabia, or our government’s endless string of disastrous neocon wars abroad. In fact, when it comes to the latter, the corporate media is reliably the primary cheerleader for unprovoked militarism.
Following the election of Trump, an axis of evil in U.S. politics has formed consisting of the corporate media, neoliberal Democrats (Hillary cultists) and neocons. This alliance has one primary objective, which revolves around obsessing incessantly on a conspiracy theory that deflects attention away from the crimes of our very own domestic plutocrats, war mongers and rent-seekers (you know, the forces that are actually wrecking the country). Russia is the perfect outside enemy to rally ignorant rubes around in order to prevent any real progressive or centrist populism from ever gaining a foothold in U.S. politics. Unfortunately, thanks to the gullibility of the average American, their plan seems to be succeeding.
Read the entire article
May 15, 2017
"It Fell Off A Cliff": Morgan Stanley's Macro Indicator Just Crashed The Most Since Dec. 2008
Step aside Citi US Economic Surprise Index, which after a "surprising" streak of negative economic data, recently crashed to the lowest level since October 2016...
... and make way for Morgan Stanley's ARIA, a monthly US macro indicator based on data collected through primary research on key US sectors (consumer, autos, housing, employment, and business investment).
The reason why this particular index will likely feature prominently in financial commentary in the coming days and weeks, is that as Morgan Stanley's chief economist Ellen Zentner writes, "ARIA appears to have fallen off a cliff in April, with a 0.72% decline, the largest since December 2008."
As Zentner expains, weakness was led by sharp declines in the investment and housing components, although even as the bank's data on business and residential investment was weaker, the consumer, employment, and autos components posted modest to moderate gains in April.
What was the main driver for the collapse: "Business formations were this month's biggest drag, as they looked to have reversed an earlier post-election surge. If not for that, ARIA would have come in slightly positive in April at +0.13%."
Some more observations from MS:
Read the entire article
... and make way for Morgan Stanley's ARIA, a monthly US macro indicator based on data collected through primary research on key US sectors (consumer, autos, housing, employment, and business investment).
The reason why this particular index will likely feature prominently in financial commentary in the coming days and weeks, is that as Morgan Stanley's chief economist Ellen Zentner writes, "ARIA appears to have fallen off a cliff in April, with a 0.72% decline, the largest since December 2008."
As Zentner expains, weakness was led by sharp declines in the investment and housing components, although even as the bank's data on business and residential investment was weaker, the consumer, employment, and autos components posted modest to moderate gains in April.
What was the main driver for the collapse: "Business formations were this month's biggest drag, as they looked to have reversed an earlier post-election surge. If not for that, ARIA would have come in slightly positive in April at +0.13%."
Some more observations from MS:
Read the entire article
January 17, 2017
Peak Savings: Wall Street Faces 20 Years Of Retirement Withdrawals As Boomers Hit 70 1/2
The United States is a demographic time bomb, plain and simple. Over the next 30 years, the U.S. economy will face an unrelenting demographic transition as ~75 million baby boomers exit the highest wage earning years of their life and start to draw down what little retirement savings they've managed to tuck away while wreaking havoc to the public "safety net" ponzi schemes, like Social Security, that will almost certainly be insolvent in a decade.
Per the U.S. Census Bureau, over the 30 years, the number of people in the U.S. over the age of 65 is expected to double while those 85 and up will triple. Needless to day, the overall population growth of the United States is a fraction of that which means that millennials are about to get crushed by their parents....so it's probably a good thing they already live in mom and dad's basement.
In aggregate, per the Wall Street Journal, Boomers have saved $10 trillion in various tax-deferred saving accounts. While that sounds like an impressive figure, with 75 million Boomers, it equates to an average of $133,000 per person which, needless to say, is insufficient to fund ~20 years of retirement.
But while the Boomers, and by extension taxpayers, are facing a harsh future, Wall Street has made a killing in fees off of managing the ever growing balance of retirement accounts as Baby Boomers have come of age. But that all looks set to change as America's aging population is forced by IRS regulations to take retirement withdrawals once they hit 70 1/2 years of age.
As illustrated by the chart below, over the past 2 decades Americans have consistently contributed more than they've withdrawn from tax deferred accounts, excluding recessionary periods. But that all changed in 2013 and 2014 as the first wave of Boomers hit the magical age of 70.5 with a total of $25 billion of net withdrawals in 2014 alone.
Read the entire article
Per the U.S. Census Bureau, over the 30 years, the number of people in the U.S. over the age of 65 is expected to double while those 85 and up will triple. Needless to day, the overall population growth of the United States is a fraction of that which means that millennials are about to get crushed by their parents....so it's probably a good thing they already live in mom and dad's basement.
In aggregate, per the Wall Street Journal, Boomers have saved $10 trillion in various tax-deferred saving accounts. While that sounds like an impressive figure, with 75 million Boomers, it equates to an average of $133,000 per person which, needless to say, is insufficient to fund ~20 years of retirement.
But while the Boomers, and by extension taxpayers, are facing a harsh future, Wall Street has made a killing in fees off of managing the ever growing balance of retirement accounts as Baby Boomers have come of age. But that all looks set to change as America's aging population is forced by IRS regulations to take retirement withdrawals once they hit 70 1/2 years of age.
As illustrated by the chart below, over the past 2 decades Americans have consistently contributed more than they've withdrawn from tax deferred accounts, excluding recessionary periods. But that all changed in 2013 and 2014 as the first wave of Boomers hit the magical age of 70.5 with a total of $25 billion of net withdrawals in 2014 alone.
Read the entire article
January 2, 2017
How Hedge Funds Closed Out 2016, And Why Hopes For A 2017 Rebound May Disappoint
2016 was a year most hedge funds would be happy to forget. And while the same goes for 2015, 2014, 2013, 2012, 2011, and 2010, in fact virtually every year since the financial crisis in which the vast majority of the two and twenty crowd have failed to generate alpha, in 2016 - a year many said would mark a renaissance for active managers - the "flash hedge fund return" according to a report by BofA's Paul Ciana from Friday was a paltry 3.34%, which as BofA conveniently calculated meant they "underperforming the S&P 500 index by 6.2%" at which point your average underperforming hedge fund manager complains that they shouldn't be benchmarked against the S&P, even as the redemption notices flood in and the AUM gets ever smaller.
Not everyone did poorly: credit related strategies lead HF performance, including Distressed Credit, Convertible Arbitrage and Event Driven strategies. On the other end, predictably, dedicated Short Bias was down 5.10%
In recent weeks there has been a fresh burst of hope that 2017 will be better for the HF community as a result of the recent collapse in cross-asset correlation; it is hoped that the resulting returns dispersion will make it easier for hedge funds to stand out in a world in which due to central bank intervention, correlations had been abnormally high following the financial crisis.
But is that an accurate description of events? To a great extent, the answer is no.
While correlation between diversified HF performance and S&P 500 price return declined from the May 2016 high (Chart 1), the 1-year correlation (83.7%) was slightly above the 3-year correlation (83.0%) as of the end of November. Overall, correlation remained far higher than it has been historically. Which as BofA redundantly explains, means that "when S&P 500 declines, performance of HFs with higher positive correlation is expected to suffer."
Read the entire article
Not everyone did poorly: credit related strategies lead HF performance, including Distressed Credit, Convertible Arbitrage and Event Driven strategies. On the other end, predictably, dedicated Short Bias was down 5.10%
In recent weeks there has been a fresh burst of hope that 2017 will be better for the HF community as a result of the recent collapse in cross-asset correlation; it is hoped that the resulting returns dispersion will make it easier for hedge funds to stand out in a world in which due to central bank intervention, correlations had been abnormally high following the financial crisis.
But is that an accurate description of events? To a great extent, the answer is no.
While correlation between diversified HF performance and S&P 500 price return declined from the May 2016 high (Chart 1), the 1-year correlation (83.7%) was slightly above the 3-year correlation (83.0%) as of the end of November. Overall, correlation remained far higher than it has been historically. Which as BofA redundantly explains, means that "when S&P 500 declines, performance of HFs with higher positive correlation is expected to suffer."
Read the entire article
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