The world is now 188 trillion dollars in debt, and that number continues to grow rapidly each year. It is a form of enslavement that is deeply insidious, because most of those living on the planet do not even understand how the system works, and even if they did most of them would have absolutely no hope of ever getting free from it. The borrower is the servant of the lender, and the global financial system is designed to funnel as much wealth to the top 0.1% as possible. Of course throughout human history there has always been slavery, and the primary motivation for having slaves is to extract an economic benefit from those that are enslaved. And even though most of us don’t like to think of ourselves as “slaves” today, the truth is that the global elite are extracting more wealth from all of us than ever before. So much of our labor is going to make them wealthy, and yet most people don’t even realize what is happening.
Let’s start with a very simple example to help illustrate this.
When you go into credit card debt and you only make small payments each month, you can easily end up paying back more than double the amount of money that you originally borrowed.
So where does all that money go?
Well, of course it goes to the financial institution that you got your credit card from, and in turn that financial institution is owned by the global elite.
In essence, you willingly became a debt slave when you chose to go into credit card debt, and the hard work that it took to earn enough money to pay back that debt with interest ended up enriching others.
On a much larger scale, the same thing is happening to entire nations.
Today, the United States government is nearly 23 trillion dollars in debt. In essence, we have been collectively enslaved, and we have been obligated to pay back all of that money with interest. Of course at this point it is literally impossible for us to ever pay back all that debt, and every year we add another trillion dollars or so to the balance. The global elite are now extracting more than 500 billion dollars in interest from this debt on an annual basis, and it is expected that number will greatly escalate in the years ahead.
It is not an accident that the Federal Reserve and the federal income tax were both instituted in 1913. The Federal Reserve system was designed to create an endless debt spiral that would get the federal government in as much debt as possible, and since that time the size of our national debt has gotten more than 7000 times larger. And the federal income tax was needed as the mechanism through which our wealth is transferred to the government to service all of this debt.
It is truly a deeply, deeply insidious system, and the American people should refuse to back any politician that does not favor shutting it down, but at this point this isn’t even a major political issue in our nation.
Read the entire article
DAILY BUSINESS REPORT - Financial Updates, International Markets and Business News
Showing posts with label forecast. Show all posts
Showing posts with label forecast. Show all posts
November 8, 2019
November 4, 2019
China To Establish $10 Trillion Economic Zone In Space
Having already created 12 free trade zones (with 6 more coming soon) in and around major Chinese metro areas...
. Beijing's next project to boost commerce is more ambitious than anything seen on earth before. Literally.
According to the Global Times, China plans to establish an Earth-moon space economic zone by 2050, which is expected to generate $10 trillion worth of services per year. The zone will cover areas of space near Earth, the moon and in between.
Bao Weimin, director of the Science and Technology Commission of the China Aerospace Science and Technology Corporation, revealed the ambitious plan at a seminar last week on the space economy, Chinese media reported Friday. CAST is a state-owned company focused on researching, making and launching carrier rockets, satellites, spacecraft and space stations.
Perhaps because by 2050 all of China will be one giant free trade zone (even though the US Trade war will still not be over), the proposed zone will cover areas of space near Earth, the moon and in between, Weimin said, adding that companies involved in basic industries, application exploration and development will feature at the zone, which will focus on three key fields: interspace transport, space resource detection and space-based infrastructure.
In a report on developing earth and moon space, Bao shared his thoughts on the economic potential in this field and pledged that the country would study its reliability, cost and flight-style transportation system between the Earth and moon, The Science and Technology Daily reported Friday.
He pledged to complete basic research and make a breakthrough on key technologies before 2030 and establish the transportation system by 2040. By 2050, China could successfully establish an earth-moon space economic zone, he said.
Read the entire article
. Beijing's next project to boost commerce is more ambitious than anything seen on earth before. Literally.
According to the Global Times, China plans to establish an Earth-moon space economic zone by 2050, which is expected to generate $10 trillion worth of services per year. The zone will cover areas of space near Earth, the moon and in between.
Bao Weimin, director of the Science and Technology Commission of the China Aerospace Science and Technology Corporation, revealed the ambitious plan at a seminar last week on the space economy, Chinese media reported Friday. CAST is a state-owned company focused on researching, making and launching carrier rockets, satellites, spacecraft and space stations.
Perhaps because by 2050 all of China will be one giant free trade zone (even though the US Trade war will still not be over), the proposed zone will cover areas of space near Earth, the moon and in between, Weimin said, adding that companies involved in basic industries, application exploration and development will feature at the zone, which will focus on three key fields: interspace transport, space resource detection and space-based infrastructure.
In a report on developing earth and moon space, Bao shared his thoughts on the economic potential in this field and pledged that the country would study its reliability, cost and flight-style transportation system between the Earth and moon, The Science and Technology Daily reported Friday.
He pledged to complete basic research and make a breakthrough on key technologies before 2030 and establish the transportation system by 2040. By 2050, China could successfully establish an earth-moon space economic zone, he said.
Read the entire article
October 17, 2019
High-Income Millennials Say They'll "Need To Work Forever" Due To Lack Of Savings
The economy isn't even in a full-blown recession yet, but nearing one, and high-income millennials are already saying they'll need to work "forever" because they don't have enough savings, stated a new study via Spectrem Group, a wealth advisory company, first reported by Bloomberg. It certainly seems that after the financial crash of 2008/09, the economic environment for millennials ages 30 to 34 changed for the worst.
High-income millennials as a whole are maxed out on credit cards, student loans, auto loans, and if they're fortunate enough, have insurmountable mortgage debts. Their debt servicing payments have left many of them without savings, but it depends on which millennials you ask.
The study says 50% of high-income millennials ages 30 to 34 feel that they will work forever because their savings are depleted.
Meanwhile, younger millennials, 29 or less, ones who graduated college after the financial crash, so the economy was already in an upswing, are more optimistic in retiring. Only 25% of them say they will need to work forever because of savings issues.
Read the entire article
High-income millennials as a whole are maxed out on credit cards, student loans, auto loans, and if they're fortunate enough, have insurmountable mortgage debts. Their debt servicing payments have left many of them without savings, but it depends on which millennials you ask.
The study says 50% of high-income millennials ages 30 to 34 feel that they will work forever because their savings are depleted.
Meanwhile, younger millennials, 29 or less, ones who graduated college after the financial crash, so the economy was already in an upswing, are more optimistic in retiring. Only 25% of them say they will need to work forever because of savings issues.
Read the entire article
July 23, 2019
Oil Will "Go Bust" If Recession Hits
Oil prices plunged last week, dragged down by fears of slowing demand, and shrinking geopolitical risk premia.
An unexpected increase in inventories underscored the downside risk to oil prices. The EIA reported a drawdown in crude stocks, but a huge 9.25 million barrel combined increase in gasoline and diesel inventories, which surprised traders. Also, gasoline demand plunged by 0.5 mb/d in the week ending on July 12, although week-to-week changes are typical and make the data a bit noisy.
Crude prices sold off on the news, falling by nearly 3 percent on Thursday.
The data release renewed fears of a slowdown in demand. But cracks in U.S. demand are larger than one week’s worth of data. “The [year-on-year] increase in demand for the year to 11 July was just 29 thousand barrels per day (kb/d), up 0.1%,” Standard Chartered wrote in a note.
“Demand will have to be strong for the rest of the year if consensus forecasts for 2019 growth are to be achieved.”
The investment bank sees U.S. oil demand only rising by 89,000 bpd this year, while the EIA expects a stronger 248,000-bpd increase. Standard Chartered says U.S. oil demand “appears consistent with a slowing economy.”
Read the entire article
An unexpected increase in inventories underscored the downside risk to oil prices. The EIA reported a drawdown in crude stocks, but a huge 9.25 million barrel combined increase in gasoline and diesel inventories, which surprised traders. Also, gasoline demand plunged by 0.5 mb/d in the week ending on July 12, although week-to-week changes are typical and make the data a bit noisy.
Crude prices sold off on the news, falling by nearly 3 percent on Thursday.
The data release renewed fears of a slowdown in demand. But cracks in U.S. demand are larger than one week’s worth of data. “The [year-on-year] increase in demand for the year to 11 July was just 29 thousand barrels per day (kb/d), up 0.1%,” Standard Chartered wrote in a note.
“Demand will have to be strong for the rest of the year if consensus forecasts for 2019 growth are to be achieved.”
The investment bank sees U.S. oil demand only rising by 89,000 bpd this year, while the EIA expects a stronger 248,000-bpd increase. Standard Chartered says U.S. oil demand “appears consistent with a slowing economy.”
Read the entire article
April 3, 2018
Subprime Auto Bubble Bursts As "Buyers Are Suddenly Missing From Showrooms"
It was less than a month ago when we showed a series of "10 charts revealing an auto bubble on the brink", and which laid out several very troubling trends, including i) the average new vehicle loan hit a record high $31,099; ii) the average loan for a used auto climbed to a record high $19,589...
Summarizing the above is simple: cheap credit leads to easy lending conditions, and record prices as everyone floods into the market with lenders hardly discriminating who they give money to.
But, as we said in March, the key data which seems to suggest that the auto bubble may have run its course came from the following charts which showed that traditional banks and finance companies are starting to aggressively slash their share of new auto originations while OEM captives are being forced to pick up the slack in an effort to keep their ponzi schemes going just a little longer.
Commenting on these trends, Melinda Zabritski, Experian's senior director of automotive finance solutions warned that "we're certainly at a point where affordability is a question. When you look at how much income you need to support that payment, it certainly is higher than your average individual income." And nowhere was this more obvious than the auto sector's overreliance on stretched subprime borrowers, who remained the marginal source of auto demand as long as rates remained low.
However, with short term rates rising, with Libor soaring, low rates are increasingly a thing of the past.
"For some buyers, this is going to come as a surprise," said Jessica Caldwell, executive director of Industry Analysis for Edmunds.com. "For buyers with average credit scores, the rates are higher than a couple years ago and that will mean a higher monthly payment."
And, as we said last month, it will mean for a sharp drop in demand, especially among the most stressed consumer groups.
Read the entire article
Summarizing the above is simple: cheap credit leads to easy lending conditions, and record prices as everyone floods into the market with lenders hardly discriminating who they give money to.
But, as we said in March, the key data which seems to suggest that the auto bubble may have run its course came from the following charts which showed that traditional banks and finance companies are starting to aggressively slash their share of new auto originations while OEM captives are being forced to pick up the slack in an effort to keep their ponzi schemes going just a little longer.
Commenting on these trends, Melinda Zabritski, Experian's senior director of automotive finance solutions warned that "we're certainly at a point where affordability is a question. When you look at how much income you need to support that payment, it certainly is higher than your average individual income." And nowhere was this more obvious than the auto sector's overreliance on stretched subprime borrowers, who remained the marginal source of auto demand as long as rates remained low.
However, with short term rates rising, with Libor soaring, low rates are increasingly a thing of the past.
"For some buyers, this is going to come as a surprise," said Jessica Caldwell, executive director of Industry Analysis for Edmunds.com. "For buyers with average credit scores, the rates are higher than a couple years ago and that will mean a higher monthly payment."
And, as we said last month, it will mean for a sharp drop in demand, especially among the most stressed consumer groups.
Read the entire article
March 28, 2018
Tech Shares Tumble Again as Regulatory Risks Rattle Investors
Technology stocks are suffering one of their worst beatings in years, as investors reassess a sector that has been considered the growth engine of the global economy but now faces the prospect of greater regulatory scrutiny.
The tech-heavy Nasdaq Composite Index fell 2.9% Tuesday. That selloff carried over to the broader market, where the S&P 500 index slumped 1.7%. The Dow Jones Industrial Average fell 1.4%, giving back some of Monday’s 2.8% rebound.
U.S. Treasury yields also declined. Analysts said that reflected in part a move by some investors to reduce risk at the end of the quarter by selling stocks and putting that cash into bonds. Bond prices rise when yields fall.
But tech shares were hit the hardest, dragging down the broader market in the final hour of trading. A series of recent developments pointed to more government oversight of the industry.
Facebook Chief Executive Mark Zuckerberg is planning to testify before Congress about the social-media company’s privacy and data-use standards, according to people familiar with the matter. The company’s shares fell 4.9% on Tuesday and are down 15% this month over concerns about its handling of user data, on track for its worst monthly decline since 2012.
Read the entire article
The tech-heavy Nasdaq Composite Index fell 2.9% Tuesday. That selloff carried over to the broader market, where the S&P 500 index slumped 1.7%. The Dow Jones Industrial Average fell 1.4%, giving back some of Monday’s 2.8% rebound.
U.S. Treasury yields also declined. Analysts said that reflected in part a move by some investors to reduce risk at the end of the quarter by selling stocks and putting that cash into bonds. Bond prices rise when yields fall.
But tech shares were hit the hardest, dragging down the broader market in the final hour of trading. A series of recent developments pointed to more government oversight of the industry.
Facebook Chief Executive Mark Zuckerberg is planning to testify before Congress about the social-media company’s privacy and data-use standards, according to people familiar with the matter. The company’s shares fell 4.9% on Tuesday and are down 15% this month over concerns about its handling of user data, on track for its worst monthly decline since 2012.
Read the entire article
March 6, 2018
Oh Canada! The Looming Economic Meltdown
Canada’s Fourth Quarter economic growth was 1.7% following positive signs of growth earlier in the year. This growth, however modest, is attributable to easy credit and the increased consumer spending. At this time, Canadian households are facing one the largest indebtedness when compared to most other countries. For every $1.00 of income, consumers owe $1.68. This is the highest income to debt ratio in the world. For low-income Canadian households, the $1.00 disposable income to $3.33 debt ratio is even worst.
Canada, along with other nations, especially emerging markets are carrying records levels of consumer debts, may be facing a serious crash as further growth becomes unsustainable.
Canada combined deficit rose to $18.1 billion in 2016, from $12.9 billion in the previous year. Higher debts and increased spending are causing serious concerns that the Canadian economy is on an unsustainable economic path.
A considerable portion of Canada’s future economic growth has been predicated on strengthening and improving the country’s infrastructure. However, Prime Minister Trudeau’s policies are destined to strangle potential economic growth by shifting C$7.2 billion allocated to infrastructure improvements to government programs such as gender equality hiring opportunities. According to the Conference Board of Canada’s Craig Alexander.
Canada appears to be stunting its own economic growth as a matter of policy.
Three major infrastructure projects, The Northern Gateway pipeline ($7.9 billion), the Pacific Northwest LNG project ($36 billion), and possibly the Energy East pipeline ($15.7 billion) would have been instrumental in guaranteeing economic growth for decades to come. However, these have been stymied in favor of Trudeau’s economic egalitarian vision. As a result, investors have been abandoning certain projects. The last time Canada’s saw such heavy-handed government interference in its economy was during the presidency of Trudeau’s father, Pierre Trudeau.
Read the entire article
Canada, along with other nations, especially emerging markets are carrying records levels of consumer debts, may be facing a serious crash as further growth becomes unsustainable.
Canada combined deficit rose to $18.1 billion in 2016, from $12.9 billion in the previous year. Higher debts and increased spending are causing serious concerns that the Canadian economy is on an unsustainable economic path.
A considerable portion of Canada’s future economic growth has been predicated on strengthening and improving the country’s infrastructure. However, Prime Minister Trudeau’s policies are destined to strangle potential economic growth by shifting C$7.2 billion allocated to infrastructure improvements to government programs such as gender equality hiring opportunities. According to the Conference Board of Canada’s Craig Alexander.
Canada appears to be stunting its own economic growth as a matter of policy.
Three major infrastructure projects, The Northern Gateway pipeline ($7.9 billion), the Pacific Northwest LNG project ($36 billion), and possibly the Energy East pipeline ($15.7 billion) would have been instrumental in guaranteeing economic growth for decades to come. However, these have been stymied in favor of Trudeau’s economic egalitarian vision. As a result, investors have been abandoning certain projects. The last time Canada’s saw such heavy-handed government interference in its economy was during the presidency of Trudeau’s father, Pierre Trudeau.
Read the entire article
January 8, 2018
2018 Market Outlook - Reality Dawns At The End Of The Artificial Liquidity Rainbow
This 2018 market outlook is building on recent articles I’ve published as they lay the foundation to the technical discussion I’ll be outlining below. Hence I won’t be repeating them here, but I may make occasional reference to them. If you haven’t read them I highly encourage you to have a read for the additional context & background. Specifically: 2017 Market Lessons, Yearly Charts, The Debt Beneath, and Welcome to Gap Land.
In this analysis I’m outlining upside market upside targets I see from a technical perspective as well as select examples of signs I’m watching that would signal a change from the current uninterrupted trend in market prices. Additionally I’ll be looking at some specific price risk zones should the trend change. It is my intent to follow-up on this analysis on a regular basis here in the public section of the site throughout the year.
I’m approaching 2018 with eyes wide open in regards to the market conditions we find ourselves in. From my perspective global markets are engaged in the largest asset bubble in our lifetimes (the artificial liquidity bubble) the eventual unwind of which during the next recession will unfortunately hurt a majority of people. Again.
Consider the context:
8 years after the financial crisis we remain in an environment that is entirely dependent on artificial liquidity, be it via central bank liquidity driven low rates and/or QE or now US fiscal stimulus in the form of tax cuts. And while a reduction in central bank stimulus is anticipated for 2018 the $1.5 trillion US tax cut is the next active artificial boost to hit markets. You can view it perhaps this way: When the US ended QE3 Europe and Japan took over the stimulus baton, and now that Europe is reducing stimulus the US again is taking the lead, this time with fiscal stimulus.
It is a bizarre dance that excels in one aspect in particular: It never ends. Consider: German unemployment is at all time lows, and European PMIs are at their highest in over 7 years:
Read the entire article
In this analysis I’m outlining upside market upside targets I see from a technical perspective as well as select examples of signs I’m watching that would signal a change from the current uninterrupted trend in market prices. Additionally I’ll be looking at some specific price risk zones should the trend change. It is my intent to follow-up on this analysis on a regular basis here in the public section of the site throughout the year.
I’m approaching 2018 with eyes wide open in regards to the market conditions we find ourselves in. From my perspective global markets are engaged in the largest asset bubble in our lifetimes (the artificial liquidity bubble) the eventual unwind of which during the next recession will unfortunately hurt a majority of people. Again.
Consider the context:
8 years after the financial crisis we remain in an environment that is entirely dependent on artificial liquidity, be it via central bank liquidity driven low rates and/or QE or now US fiscal stimulus in the form of tax cuts. And while a reduction in central bank stimulus is anticipated for 2018 the $1.5 trillion US tax cut is the next active artificial boost to hit markets. You can view it perhaps this way: When the US ended QE3 Europe and Japan took over the stimulus baton, and now that Europe is reducing stimulus the US again is taking the lead, this time with fiscal stimulus.
It is a bizarre dance that excels in one aspect in particular: It never ends. Consider: German unemployment is at all time lows, and European PMIs are at their highest in over 7 years:
Read the entire article
January 5, 2018
Tesla's Model 3 deliveries fall short of estimates
Tesla Inc (TSLA) delivered 1,550 of its new Model 3 electric cars in the fourth quarter, missing Wall Street expectations as it tries to overcome production issues that have hampered the roll out of its most affordable sedan.
Shares of the Palo Alto, California-based company fell 1.7 percent to $312 in after-market trading.
The electric-car maker Opens a New Window. on Wednesday pushed back for the second time its target of producing 5,000 Model 3 sedans per week to the end of the second quarter.
Tesla Opens a New Window. had initially predicted to reach the milestone in December, but in November deferred the target to the end of the first quarter.
The latest sedan is critical to Tesla’s long-term success, as it is the most affordable of its cars to date and is the only one capable of transforming the niche automaker to a mass producer amid a sea of rivals entering the nascent electric vehicle market.
Read the entire article
Shares of the Palo Alto, California-based company fell 1.7 percent to $312 in after-market trading.
The electric-car maker Opens a New Window. on Wednesday pushed back for the second time its target of producing 5,000 Model 3 sedans per week to the end of the second quarter.
Tesla Opens a New Window. had initially predicted to reach the milestone in December, but in November deferred the target to the end of the first quarter.
The latest sedan is critical to Tesla’s long-term success, as it is the most affordable of its cars to date and is the only one capable of transforming the niche automaker to a mass producer amid a sea of rivals entering the nascent electric vehicle market.
Read the entire article
January 4, 2018
Petro-Yuan Looms - How China Will Shake Up The Oil Futures Market
The "huge story",as Graticule's Adam Levinson called it, will, it appears, be a "wake up call" for the West that seems to happily be ignoring this potential bombshell that is China's looming launch of domestic oil futures trading.
Additionally, Levison warns Washington that besides serving as a hedging tool for Chinese companies, the contract will aid a broader Chinese government agenda of increasing the use of the yuan in trade settlement... and thus the acceleration of de-dollarization and the rise of the Petro-Yuan.
“I don’t think there’s any doubt we’re going to see use of the renminbi in reserves go up substantially”
China has been planning this for a number of years and given rising tensions, now seems like a good time for China to flex a little.
The Shanghai International Energy Exchange, a unit of Shanghai Futures Exchange, will be known by the acronym INE and will allow Chinese buyers to lock in oil prices and pay in local currency. Also, foreign traders will be allowed to invest -- a first for China’s commodities markets -- because the exchange is registered in Shanghai’s free trade zone. Even Bloomberg admits there are implications for the U.S. dollar’s well-established role as the global currency of the oil market, as Sungwoo Park sums up some of the key questions...
Read the entire article
Additionally, Levison warns Washington that besides serving as a hedging tool for Chinese companies, the contract will aid a broader Chinese government agenda of increasing the use of the yuan in trade settlement... and thus the acceleration of de-dollarization and the rise of the Petro-Yuan.
“I don’t think there’s any doubt we’re going to see use of the renminbi in reserves go up substantially”
China has been planning this for a number of years and given rising tensions, now seems like a good time for China to flex a little.
The Shanghai International Energy Exchange, a unit of Shanghai Futures Exchange, will be known by the acronym INE and will allow Chinese buyers to lock in oil prices and pay in local currency. Also, foreign traders will be allowed to invest -- a first for China’s commodities markets -- because the exchange is registered in Shanghai’s free trade zone. Even Bloomberg admits there are implications for the U.S. dollar’s well-established role as the global currency of the oil market, as Sungwoo Park sums up some of the key questions...
Read the entire article
December 28, 2017
China Beige Book Warns Economic Slowdown Has Begun
When it comes to the global economy, few things matter as much as China, the trajectory of its economy and especially the pace and impulse of its credit creation, which is ironic because virtually all data coming out of China is fabricated and manipulated, and thoroughly untrustworthy, either on purpose or "by accident."
The latest example of the former was highlighted over the weekend, when we discussed that a nationwide Chinese audit found some local governments inflated revenue levels and raised debt illegally, once again making a mockery of China's credibility on the global stage. As Bloomberg reported ten cities, counties or districts in the Yunnan, Hunan and Jilin provinces, as well as the southwestern city of Chongqing, inflated fiscal revenues by 1.55 billion yuan, the National Audit Office said in a statement on its website dated Dec. 8.
An even more blatant example of the former was highlighted in October ahead of China's Communist Party Congress, when the local securities watchdog literally "advised" some loss-making companies to avoid publishing quarterly results ahead of the Congress as authorities sought to ensure stock-market stability during the critical gathering of China's political elite. As a result, at least 17 Shenzhen-listed companies announced delays to their earnings reports from Oct. 20 to Oct. 24, up from three during the same period last year.
However, now that the Party Congress is long over, China's recent economic data offer a "warning for 2018" now that Beijing's leaders are less motivated to prop up fake "growth" for purely optical purposes. That is the opinion of China Beige Book, and its president Leland Miller who said that "Incentives to ensure the economy was growing smartly at the time of the Communist Party Congress do not apply as next year wears on," CBB president Leland Miller and chief economist Derek Scissors said in a report released on Wednesday.
Read the entire article
The latest example of the former was highlighted over the weekend, when we discussed that a nationwide Chinese audit found some local governments inflated revenue levels and raised debt illegally, once again making a mockery of China's credibility on the global stage. As Bloomberg reported ten cities, counties or districts in the Yunnan, Hunan and Jilin provinces, as well as the southwestern city of Chongqing, inflated fiscal revenues by 1.55 billion yuan, the National Audit Office said in a statement on its website dated Dec. 8.
An even more blatant example of the former was highlighted in October ahead of China's Communist Party Congress, when the local securities watchdog literally "advised" some loss-making companies to avoid publishing quarterly results ahead of the Congress as authorities sought to ensure stock-market stability during the critical gathering of China's political elite. As a result, at least 17 Shenzhen-listed companies announced delays to their earnings reports from Oct. 20 to Oct. 24, up from three during the same period last year.
However, now that the Party Congress is long over, China's recent economic data offer a "warning for 2018" now that Beijing's leaders are less motivated to prop up fake "growth" for purely optical purposes. That is the opinion of China Beige Book, and its president Leland Miller who said that "Incentives to ensure the economy was growing smartly at the time of the Communist Party Congress do not apply as next year wears on," CBB president Leland Miller and chief economist Derek Scissors said in a report released on Wednesday.
Read the entire article
October 23, 2017
After 16 Months Without a 5% Market Pullback, Goldman's Clients Want To Know Just One Thing
It's confusing to be a Goldman client these days.
One month after the investment bank reported that its Bear Market Risk indicator had jumped to 67%, a level it hit most recently before the dot com bubble crash and just before the global financial crisis and prompted Goldman to ask "should we be worried now"...
... Goldman's chief equity strategist, David Kostin, nearly admitted capitulation on his bearish year-end S&P price target of 2,400 (which rises to 2,600 by year end 2019, or just 25 points from current levels!), writing last week that "the 2400 target assumes no reform and P/E of 17.3x. 65% probability of passage by 1Q." However, "with tax reform, target could be 2650 (17.9x)." Even so, Kostin still conceded that both the S&P 500 and the median stock trades at high valuations (the latter at the 98%-percentile of historical records), with the exception of free cash flow yields, which he explained is artificially low due to companies' unwillingness to spend on capex.
So on one hand, there is a broad consensus that stocks are massively overvalued, there are also concerns that the market is poised for a bear market, if not worse, and all this takes place 30 years after Black Monday. On the other however, Goldman refuses to cut its tactical outlook on stocks, and despite predicting a 6% drop by year end, cautions that stock may keep rising, if only on expectations of tax reform getting done, which will push stocks even higher, to 2,650 or more.
In this context, it is probably not surprising then that as Goldman's David Kostin writes in his latest Weekly Kickstart report that "In the ninth year of economic expansion, with S&P 500 up 15% YTD, the most common question from clients is, “When will the rally end?”
Here are the details from the latest round of conversations Goldman had with its clients, which it summarizes as "peak growth and drawdown potential."
Read the entire article
One month after the investment bank reported that its Bear Market Risk indicator had jumped to 67%, a level it hit most recently before the dot com bubble crash and just before the global financial crisis and prompted Goldman to ask "should we be worried now"...
... Goldman's chief equity strategist, David Kostin, nearly admitted capitulation on his bearish year-end S&P price target of 2,400 (which rises to 2,600 by year end 2019, or just 25 points from current levels!), writing last week that "the 2400 target assumes no reform and P/E of 17.3x. 65% probability of passage by 1Q." However, "with tax reform, target could be 2650 (17.9x)." Even so, Kostin still conceded that both the S&P 500 and the median stock trades at high valuations (the latter at the 98%-percentile of historical records), with the exception of free cash flow yields, which he explained is artificially low due to companies' unwillingness to spend on capex.
So on one hand, there is a broad consensus that stocks are massively overvalued, there are also concerns that the market is poised for a bear market, if not worse, and all this takes place 30 years after Black Monday. On the other however, Goldman refuses to cut its tactical outlook on stocks, and despite predicting a 6% drop by year end, cautions that stock may keep rising, if only on expectations of tax reform getting done, which will push stocks even higher, to 2,650 or more.
In this context, it is probably not surprising then that as Goldman's David Kostin writes in his latest Weekly Kickstart report that "In the ninth year of economic expansion, with S&P 500 up 15% YTD, the most common question from clients is, “When will the rally end?”
Here are the details from the latest round of conversations Goldman had with its clients, which it summarizes as "peak growth and drawdown potential."
Read the entire article
October 18, 2017
What Goldbugs Have Been Waiting For: Goldman’s New Primer On Gold
The good news is that Goldman believes “precious metals remain a relevant asset class in modern portfolios, despite their lack of yield” and disagrees with Ben Bernanke and the naysayers “They are neither a historic accident or a relic. Indeed, by looking at each of the physical properties of an ideal long-term store of value…we can clearly see why precious metals were initially adopted and why they remain relevant today.”
It was sounding really good – and there was 91 pages to go - although when it came to the drivers of precious metal prices, Goldman did not exactly re-invent the wheel “We see two key drivers of the precious metals markets: Fear and Wealth”
That said, there was a new take on what, in Goldman's eyes constitutes fear as “in our new framework we see a closer link to growth expectations. However, we ?nd that many risk factors are relevant, depending on the sub-component of gold demand: real interest rates, debasement risks, sovereign balance sheet risks, geopolitical risks and other market tail-risks. Stated more simply, we are talking about the drivers of “risk-on”/”risk-off” behavior in markets.”
On the wealth angle, the good news for gold was that “as economies grow, they tend to go through a rapid gold accumulation phase at around per capita GDP of $20,000-$30,000, following a ‘hump-shaped’ relationship between per capita income and gold demand. As more EM economies (including China) are set to grow to these income levels over the next few decades.”
As in-depth students of gold market research, our mood was lifted by some genuinely original research. Goldman found that the ratio between gold purchases and household savings (global we assume) has been broadly stable at around 1.7% for almost 40 years. Who knew that.
Read the entire article
It was sounding really good – and there was 91 pages to go - although when it came to the drivers of precious metal prices, Goldman did not exactly re-invent the wheel “We see two key drivers of the precious metals markets: Fear and Wealth”
That said, there was a new take on what, in Goldman's eyes constitutes fear as “in our new framework we see a closer link to growth expectations. However, we ?nd that many risk factors are relevant, depending on the sub-component of gold demand: real interest rates, debasement risks, sovereign balance sheet risks, geopolitical risks and other market tail-risks. Stated more simply, we are talking about the drivers of “risk-on”/”risk-off” behavior in markets.”
On the wealth angle, the good news for gold was that “as economies grow, they tend to go through a rapid gold accumulation phase at around per capita GDP of $20,000-$30,000, following a ‘hump-shaped’ relationship between per capita income and gold demand. As more EM economies (including China) are set to grow to these income levels over the next few decades.”
As in-depth students of gold market research, our mood was lifted by some genuinely original research. Goldman found that the ratio between gold purchases and household savings (global we assume) has been broadly stable at around 1.7% for almost 40 years. Who knew that.
Read the entire article
October 6, 2017
Will Retailers Switch to a Price Tag System That Screws Customers at Every Opportunity?
Retailers intend to engage in very sneaky price discrimination. But big data is way overhyped and regularly underdelivers. It might be great at pricing airline seats, but airlines have only so many routes and run planes only so many times of day and days of the week. By contrast, the average grocery store has over 40,000 SKUs. They aren’t going to have granular enough data to discriminate finely on a lot of things. They may try to draw crude inferences, like “People who go to Starbucks daily are higher income and can/will pay more” but aside from using certain criteria to pick out less price sensitive customers, how much price gouging they might take is a crude inference. And what about stores you rarely visit, say the once a year at best sports store shopper?
In addition, this type of price discrimination is against the law in many cities which require merchants to post prices and honor them. But the threat of this sort of system is an argument in favor of not using ApplePay and other phone-based payment systems, which could provide even more granular info about your shopping habits, or not using a smart phone, or putting it in a mini Faraday cage when you are going on a serious shopping mission. Plus if this sort of system starts to be implemented, it’s not hard to imagine that software developers would implement apps to block inquiries from purchase snooping systems, or better yet, feed them incorrect data that says you are price sensitive (like a false history of shopping regularly at discounters).
But as Ramsi Woodcock, professor of legal studies at Georgia State University, observes, those outraged by Delta’s reportedly asking $3,200 for a ticket out of Florida as Hurricane Irma approached should be aware that dynamic pricing enabled Delta to charge the same price to last minute customers two weeks before.
We’ve imposed no limits on dynamic pricing, although we’re nibbling around the edges of imposing some constraints on the sale of our personal data. Woodcock believes dynamic pricing could have anti-trust implications. Anti-trust is justified by many as a way to stop or break up monopolies that could artificially raise prices and reduce total consumer welfare. In a detailed article, Woodcock argues that big data enables “price discrimination (that) extracts more value from consumers than uniform pricing, by tailoring price to the maximum level tolerated by each consumer.” And thus warrants anti-trust enforcement.
Read the entire article
In addition, this type of price discrimination is against the law in many cities which require merchants to post prices and honor them. But the threat of this sort of system is an argument in favor of not using ApplePay and other phone-based payment systems, which could provide even more granular info about your shopping habits, or not using a smart phone, or putting it in a mini Faraday cage when you are going on a serious shopping mission. Plus if this sort of system starts to be implemented, it’s not hard to imagine that software developers would implement apps to block inquiries from purchase snooping systems, or better yet, feed them incorrect data that says you are price sensitive (like a false history of shopping regularly at discounters).
But as Ramsi Woodcock, professor of legal studies at Georgia State University, observes, those outraged by Delta’s reportedly asking $3,200 for a ticket out of Florida as Hurricane Irma approached should be aware that dynamic pricing enabled Delta to charge the same price to last minute customers two weeks before.
We’ve imposed no limits on dynamic pricing, although we’re nibbling around the edges of imposing some constraints on the sale of our personal data. Woodcock believes dynamic pricing could have anti-trust implications. Anti-trust is justified by many as a way to stop or break up monopolies that could artificially raise prices and reduce total consumer welfare. In a detailed article, Woodcock argues that big data enables “price discrimination (that) extracts more value from consumers than uniform pricing, by tailoring price to the maximum level tolerated by each consumer.” And thus warrants anti-trust enforcement.
Read the entire article
May 5, 2017
Goldman Explains What The Repeal Of Obamacare Really Means
After months of internal discord, House Republicans finally approved a bill to overhaul Obamacare, which they have been attacking since it was enacted in 2010. While there are various nuances, here are the bill's main provisions courtesy of Reuters:
COVERAGE
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COVERAGE
- The Republican plan would maintain some of Obamacare's most popular provisions. It would allow young adults to stay on their parents' health plan until age 26.
- The bill would let states opt out of Obamacare's mandate that insurers charge the same rates on sick and healthy people. It would also allow states to opt out of Obamacare's requirement that insurers cover 10 essential health benefits, such as maternity care and prescription drug costs.
- The measure would provide states with $100 billion, largely to fund high-risk pools to provide insurance to the sickest patients. The bill also would provide $8 billion over five years to help those with pre-existing conditions pay for insurance.
- It would let insurers mark up premiums by 30 percent for those who have a lapse in insurance coverage of about two months or more. Insurers won a provision they had long sought: The ability to charge older Americans up to five times more than young people. Under Obamacare, they could only charge up to three times more.
Read the entire article
March 10, 2017
"It Can Only Disappoint" - What Wall Street Expects From Friday's Payrolls Report
Following Wednesday's blowout ADP report, which printed some 40K jobs higher than the highest estimate, the only possibility for tomorrow's nonfarm payroll report, the last major economic data point before the Fed's March 15th rate hike announcement, is to disappoint, especially in terms of wages (which in light of the recent downward revision of Q1 GDP by the Atlanta Fed to 1.2% is not out of the question). That possibility, however, is slim to none if one looks at Wall Street's forecasts, where virtually every sellside analyst boosted their NFP estimate in the hours after the ADP number. Still, with the market pricing in a 100% chance of a rate hike, only a very disappointing - think less than 100K - report will derail the Fed from hiking for the second time in three meetings.
Here are some of the more notable forecasts for tomorrow's number::
Westpac 170K
Bank of America 185K
BNP 185K
Barclays 200K
Deutsche Bank 200K
Goldman Sachs 215K
Nomura 235K
Morgan Stanley 250K
Putting it all together, here is what Wall Street expects from the February payrolls report due out at 8:30am ET tomorrow morning:
Change in Nonfarm Payrolls: Exp. 193K (Prey. 227K, Dec. 157K)
Unemployment Rate Exp. 4.70% (Prey. 4.80%, Dec. 4.70%)
Average Hourly Earnings M/M Exp. 0.30% (Prey. 0.10%, Dec. 0.20%)
Consensus calls for an increase of 193K jobs in February, with the unemployment rate falling to 4.7% from 4.8%. Much of the focus could be on average hourly earnings for signs of inflationary pressure. Last month, average hourly earnings disappointed with Y/Y wage growth slowing to 2.5% from 2.9%. This month, average hourly earnings are expected to pick up to 2.7% Y/Y with monthly growth of 0.3%.
Read the entire article
Here are some of the more notable forecasts for tomorrow's number::
Westpac 170K
Bank of America 185K
BNP 185K
Barclays 200K
Deutsche Bank 200K
Goldman Sachs 215K
Nomura 235K
Morgan Stanley 250K
Putting it all together, here is what Wall Street expects from the February payrolls report due out at 8:30am ET tomorrow morning:
Change in Nonfarm Payrolls: Exp. 193K (Prey. 227K, Dec. 157K)
Unemployment Rate Exp. 4.70% (Prey. 4.80%, Dec. 4.70%)
Average Hourly Earnings M/M Exp. 0.30% (Prey. 0.10%, Dec. 0.20%)
Consensus calls for an increase of 193K jobs in February, with the unemployment rate falling to 4.7% from 4.8%. Much of the focus could be on average hourly earnings for signs of inflationary pressure. Last month, average hourly earnings disappointed with Y/Y wage growth slowing to 2.5% from 2.9%. This month, average hourly earnings are expected to pick up to 2.7% Y/Y with monthly growth of 0.3%.
Read the entire article
January 20, 2017
Chinese Investors Exit Bitcoin, Flood Into Gold ETFs
Amid a weakening yuan and a tumbling Bitcoin (amid crackdowns on 'virtual' capital outflows from China), Chinese money is moving to bullion as investors seek an alternative to the 'managed' fiat paper offered by the PBOC. In the week through Monday, China attracted $52 million, the biggest inflow into commodity-linked exchange-traded funds of all countries tracked by Bloomberg.
As China cracks down on various Bitcoin exchanges, sparking an exodus from Bitcoin China platforms, gold has pushed higher...
As Bloomberg reports, Huaan Yifu Gold ETF, China’s largest ETF backed by raw materials, is getting all the attention, attracting almost $72 million last week.
“Chinese capital outflow has certainly elevated the risk to the financial system,” Chad Morganlander, a portfolio manager at Washington Crossing Advisors, which oversees $1.5 billion, said in a telephone interview. “It would be no surprise to me that Chinese gold ETF caught a bid under this elevated or increased concern about reserves, about the currency and about trade relations.”
Huaan Yifu attracted the third-biggest inflow into gold ETFs in the week through Monday, behind Frankfurt-listed Xetra-Gold, which got $172.9 million, and London-listed Source Physical ETF, which lured $73.6 million. ETF holders are bucking the trend in China’s jewelry market that saw the nation’s gold imports from Hong Kong fall in November to the lowest since January.
There are other troubles triggering capital flight and sending money to gold. The International Monetary Fund warned that China’s continued reliance on policy stimulus measures and the slow progress in addressing corporate debt raise the risk of a “sharper slowdown or disruptive adjustment.” The IMF issued the warning even as it raised the nation’s growth forecast for this year by 0.3 percentage points to 6.5 percent.
Read the entire article
As China cracks down on various Bitcoin exchanges, sparking an exodus from Bitcoin China platforms, gold has pushed higher...
As Bloomberg reports, Huaan Yifu Gold ETF, China’s largest ETF backed by raw materials, is getting all the attention, attracting almost $72 million last week.
“Chinese capital outflow has certainly elevated the risk to the financial system,” Chad Morganlander, a portfolio manager at Washington Crossing Advisors, which oversees $1.5 billion, said in a telephone interview. “It would be no surprise to me that Chinese gold ETF caught a bid under this elevated or increased concern about reserves, about the currency and about trade relations.”
Huaan Yifu attracted the third-biggest inflow into gold ETFs in the week through Monday, behind Frankfurt-listed Xetra-Gold, which got $172.9 million, and London-listed Source Physical ETF, which lured $73.6 million. ETF holders are bucking the trend in China’s jewelry market that saw the nation’s gold imports from Hong Kong fall in November to the lowest since January.
There are other troubles triggering capital flight and sending money to gold. The International Monetary Fund warned that China’s continued reliance on policy stimulus measures and the slow progress in addressing corporate debt raise the risk of a “sharper slowdown or disruptive adjustment.” The IMF issued the warning even as it raised the nation’s growth forecast for this year by 0.3 percentage points to 6.5 percent.
Read the entire article
January 16, 2017
Why The Stock Market Has Soared (And We'll All Soon Know What It's Like To Be A Madoff Client)
What is driving the US stock markets to such amazing gains? While some corporations have seen increases in sales and most have innovated to reduce costs, lessen waste, and maximize efficiency, I'll focus on some of the other means that have driven profits higher helping to push US equities into record territory.
1- Declining % of profits going to Uncle Sam.
2- Minimal wage growth and holding the line on new hires.
3- Debt fueled stock buybacks and dividends at the expense of investment in mid and long term activities (R&D, cap-ex, exploration, etc.).
To represent the US market as broadly as possible, we'll use the Wilshire 5000 index, representing all 3600+ publicly traded US corporations (chart below vs. the 10yr Treasury rate).
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August 19, 2016
Another Market Descends Into Chaos: "It’s Madness. The Market Makes Major Moves For No Reason"
While that is indeed the quoted lament of a living, breathing market participant, it does not refer to what takes place in the stock or - increasingly more often - the bond or FX market. Instead, what Blake Alberts, cited by the WSJ, is furious about are the wild swings in the cattle futures market, which as a result of its recent unprecedented moves, has been dubbed “the meat casino” by traders.
In response, the WSJ writes, the world’s largest futures exchange has refused to list new contracts, leaving ranchers with fewer tools to hedge the $10.9 billion market. The reason is one painfully familiar to traders across all other product segments: a lack of collateral, only in the case of physical cattle it is much worse. According to the CME Group trading of physical cattle has become so scant that the futures market can’t get the signals it needs to set prices.
While we have long expected market-moving disconnects between a rapidly shrinking collateral base, and an exponentially growing universe of derivatives referencing this shrinking pool of underlying securities, we did not anticipate this would take place in this relatively quiet market.
According to the WSJ, the decision to delay new contract listings is the culmination of alarms raised by the exchange and industry groups this year that problems in the physical marketplace have affected futures—a highly unusual meltdown in a market that has attracted more speculators.
As the chart below shows, live-cattle futures climbed as high as $1.4155 a pound before free-falling to $1.1580 over seven weeks this spring. That represents a more than $10,000 drop in income for a single contract. Many producers have lost money as prices tumbled to a five-year low of $1.07525 a pound this summer.
Read the entire article
In response, the WSJ writes, the world’s largest futures exchange has refused to list new contracts, leaving ranchers with fewer tools to hedge the $10.9 billion market. The reason is one painfully familiar to traders across all other product segments: a lack of collateral, only in the case of physical cattle it is much worse. According to the CME Group trading of physical cattle has become so scant that the futures market can’t get the signals it needs to set prices.
While we have long expected market-moving disconnects between a rapidly shrinking collateral base, and an exponentially growing universe of derivatives referencing this shrinking pool of underlying securities, we did not anticipate this would take place in this relatively quiet market.
According to the WSJ, the decision to delay new contract listings is the culmination of alarms raised by the exchange and industry groups this year that problems in the physical marketplace have affected futures—a highly unusual meltdown in a market that has attracted more speculators.
As the chart below shows, live-cattle futures climbed as high as $1.4155 a pound before free-falling to $1.1580 over seven weeks this spring. That represents a more than $10,000 drop in income for a single contract. Many producers have lost money as prices tumbled to a five-year low of $1.07525 a pound this summer.
Read the entire article
August 18, 2016
Ford Announces Plans To Self-Destruct Starting In 2021
Ford CEO, Mark Fields, sat down with Bloomberg to discuss plans to introduce a completely autonomous car by 2021. The only real problem we see with that plan is that it pretty much ensures their own demise. That said, they're pretty much doomed anyway so might as well go for it.
The company said it plans to have a fully autonomous vehicle -- no steering wheel, no gas or brake pedals -- available by 2021 for ride-hailing services.
“We see the autonomous car changing the way the world moves once again,” Chief Executive Officer Mark Fields said today at Ford’s research lab in Palo Alto, California. “They address a whole host of safety, social and environmental issues.”
Like Alphabet Inc.’s Google, Ford will skip the interim steps of driver-assisted technology as a way to evolve toward full autonomy. Its plan to deploy self-driving cars in ride-hailing and ride-sharing fleets is similar to what General Motors Co. aims to do with Lyft Inc. Ford’s 2021 scheduled start matches BMW’s ambitious timeframe.
“We believe in our plan that taking the driver out of the loop is really important,” Fields said in an interview with Bloomberg Television. The automaker couldn’t find a sensible way through the “no-man’s land” -- determining exactly when a robotic car should to try to re-engage a human driver in an emergency.
Read the entire article
The company said it plans to have a fully autonomous vehicle -- no steering wheel, no gas or brake pedals -- available by 2021 for ride-hailing services.
“We see the autonomous car changing the way the world moves once again,” Chief Executive Officer Mark Fields said today at Ford’s research lab in Palo Alto, California. “They address a whole host of safety, social and environmental issues.”
Like Alphabet Inc.’s Google, Ford will skip the interim steps of driver-assisted technology as a way to evolve toward full autonomy. Its plan to deploy self-driving cars in ride-hailing and ride-sharing fleets is similar to what General Motors Co. aims to do with Lyft Inc. Ford’s 2021 scheduled start matches BMW’s ambitious timeframe.
“We believe in our plan that taking the driver out of the loop is really important,” Fields said in an interview with Bloomberg Television. The automaker couldn’t find a sensible way through the “no-man’s land” -- determining exactly when a robotic car should to try to re-engage a human driver in an emergency.
Read the entire article
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