Something strange happened in the markets last month that signals trouble ahead…
When stocks fell from their September highs, you would have expected investors to run for cover in the world’s safe-haven asset – US Treasurys.
But that’s not what happened.
While stocks were plunging, Treasurys also fell. Yields on 30-year Treasurys increased to 3.4% from 3.22% (and yields have already more than doubled from their 2016 lows).
It’s a sign that the market is worried about the US government’s ability to pay its exploding debts and that inflation is creeping back into the market. That makes me a bit nervous because we haven’t seen inflation in a decade.
We’ve seen an increase in oil prices, food prices, rent and many other things that eat into people’s savings. Unemployment is low and US wages increased 3.1% in September (the highest in nine years). And core inflation is already running above the Fed’s target of 2%.
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November 9, 2018
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
November 7, 2018
Why Oil Prices Will Fall In 2019 And Beyond
The decision by the U.S. to grant waivers to eight countries, allowing them to continue to import oil from Iran, has helped ease the tension in the oil market. No longer are oil traders talking about $100 oil.
Iran’s oil exports stood at 1.7 million barrels per day in October and won’t fall to zero anytime soon. But that may not be the end of the story. “While consistent with our expectations, the granting of waivers does not imply that Iran exports will stabilize near current levels,” Goldman Sachs said in a research note on November 1. As more Iranian supply goes offline, the market will continue to tighten. Iran could lose nearly 600,000 bpd of exports by the end of the year, relative to October levels, the bank predicts.
“As a result, we still expect that the global oil market will be in deficit in 4Q18, leading to a strengthening in Brent time spreads,” Goldman said.
In fact, while everyone focuses on the short-term movements in oil prices, Goldman says it’s important to look at the futures curve.
“In our view, the most interesting takeaway from today’s oil price sell-off is the parallel shift in the crude forward curve. This is consistent with a move down on the oil cost curve as recent supply news (less Iran losses, more US and Saudi production) point to fewer high-cost marginal barrels needed in 2019,” the bank said.
Read the entire article
Iran’s oil exports stood at 1.7 million barrels per day in October and won’t fall to zero anytime soon. But that may not be the end of the story. “While consistent with our expectations, the granting of waivers does not imply that Iran exports will stabilize near current levels,” Goldman Sachs said in a research note on November 1. As more Iranian supply goes offline, the market will continue to tighten. Iran could lose nearly 600,000 bpd of exports by the end of the year, relative to October levels, the bank predicts.
“As a result, we still expect that the global oil market will be in deficit in 4Q18, leading to a strengthening in Brent time spreads,” Goldman said.
In fact, while everyone focuses on the short-term movements in oil prices, Goldman says it’s important to look at the futures curve.
“In our view, the most interesting takeaway from today’s oil price sell-off is the parallel shift in the crude forward curve. This is consistent with a move down on the oil cost curve as recent supply news (less Iran losses, more US and Saudi production) point to fewer high-cost marginal barrels needed in 2019,” the bank said.
Read the entire article
November 6, 2018
The One Election Scenario That Would Be A “Disaster” For The Financial Markets
On Tuesday night all of the speculation about the midterm elections will mercifully be over, and there is one potential outcome that is being called a “disaster” for the financial markets. Over the past couple of years, stock prices have soared to unprecedented levels, and Wall Street has seemed to greatly appreciate the pro-business environment that President Trump has attempted to cultivate. Regulations have been rolled back, corporate taxes have been reduced significantly, and many corporate executives no longer fear that the federal government is out to get them. But after Tuesday, everything could be different.
The most likely outcome appears to be that the Democrats will take control of the House of Representatives and the Republicans will remain in control of the Senate. For what it is worth, Nate Silver is currently projecting that the Democrats have an 88 percent chance of winning the House and only a 19 percent chance of winning the Senate.
But of course he was also projecting a huge landslide victory for Hillary Clinton in 2016.
In any event, a divided Congress would create gridlock in Washington, and according to Wedbush Securities managing director Steve Massocca that would produce “some negative fallout” for the financial markets…
Read the entire article
The most likely outcome appears to be that the Democrats will take control of the House of Representatives and the Republicans will remain in control of the Senate. For what it is worth, Nate Silver is currently projecting that the Democrats have an 88 percent chance of winning the House and only a 19 percent chance of winning the Senate.
But of course he was also projecting a huge landslide victory for Hillary Clinton in 2016.
In any event, a divided Congress would create gridlock in Washington, and according to Wedbush Securities managing director Steve Massocca that would produce “some negative fallout” for the financial markets…
Read the entire article
November 5, 2018
Mortgage Bonds Suffer Worst Month In 2 Years As 'Marginal Buyer' Fed Pulls Out
Mortgage bond investors are about to become reacquainted with 'moral hazard' and its inevitable consequences.
As the Federal Reserve continues to pull out of US Treasury's and mortgage bonds (the Fed entered its "peak" monthly unwind phase in Q4, where it will allow up to $30 billion and $20 billion in MBS to roll off and on Oct. 31 its balance sheet declined by more than $33 billion, the largest one-week drop since the start of QE), holders of housing bonds who had grown accustomed to steady returns in a rigged market endured their biggest shellacking in 2 years, as Bloomberg pointed out in a story published Friday.
And while at least one prominent bond investor pointed out that Bloomberg's warnings about a "bloodbath" in MBS may have been exaggerated...
...the story's central premise that the retreat of the bond market's 'marginal buyer' is creating headaches for complacent bond bulls is certainly valid, as we've said before. It only takes a quick glance at the 10-year-yield vs. the Fed's balance sheet expansion/unwind to spot the dangers that could lie ahead.
Now, as the Fed-generated tidal wave of liquidity slows to a trickle and the central bank looks to unwind some $1.7 trillion in MBS holdings, "savvy" bond bulls are stuck asking themselves: who the hell is going to step in and stop the bleeding once liquidity dries up further and mortgage bonds continue to fall?
The answer isn't immediately clear.
Read the entire article
As the Federal Reserve continues to pull out of US Treasury's and mortgage bonds (the Fed entered its "peak" monthly unwind phase in Q4, where it will allow up to $30 billion and $20 billion in MBS to roll off and on Oct. 31 its balance sheet declined by more than $33 billion, the largest one-week drop since the start of QE), holders of housing bonds who had grown accustomed to steady returns in a rigged market endured their biggest shellacking in 2 years, as Bloomberg pointed out in a story published Friday.
And while at least one prominent bond investor pointed out that Bloomberg's warnings about a "bloodbath" in MBS may have been exaggerated...
...the story's central premise that the retreat of the bond market's 'marginal buyer' is creating headaches for complacent bond bulls is certainly valid, as we've said before. It only takes a quick glance at the 10-year-yield vs. the Fed's balance sheet expansion/unwind to spot the dangers that could lie ahead.
Now, as the Fed-generated tidal wave of liquidity slows to a trickle and the central bank looks to unwind some $1.7 trillion in MBS holdings, "savvy" bond bulls are stuck asking themselves: who the hell is going to step in and stop the bleeding once liquidity dries up further and mortgage bonds continue to fall?
The answer isn't immediately clear.
Read the entire article
November 2, 2018
Trump Asks Cabinet To Draw Up Trade Deal After Conversation With China's Xi: BBG
Is a harmonious conclusion to the six-month-long US-China trade battle finally within reach? Or this just a ploy to push US stocks higher ahead of an election that will decide which party controls Congress for the balance of Trump's term?
That's the question that traders will be asking themselves as they try to suss out the implications of a Bloomberg report claiming that President Trump has asked his cabinet to begin drawing up the terms of a deal following a "long and very good" conversation with Chinese President Xi Jinping on Thursday - the first phone call between the leaders of the world's two largest economies in months. According to Bloomberg, Trump has asked key cabinet secretaries to have their staff draw up a draft deal that he hopes will signal an end to the trade conflict, BBG's anonymous sources said. What remains unclear is whether Trump will drop the list of demands that have reportedly been a sticking point in negotiations since the spring. Among those demands are that China scale back state support for its 'Made in China 2025' initiative, drop policies that support the siphoning of intellectual property from foreign companies and reduce the country's trade surplus with the US.
Predictably, the news ignited a torrid rally in Asian shares, with the Hang Seng Index rising 4.2%, the biggest gain since 2011, while the Shanghai Composite Index climbed 2.7% to cement its first four-day winning streak since February. The Chinese yuan, meanwhile, traded back below 6.9 to the dollar, while US stock futures moved higher, signaling that shares could be on their way to a fourth straight day of gains.
Analysts were split on their interpretation of the news. Some believed that the rash of downbeat forward guidance that helped trigger the 'Shocktober' market rout had finally inspired the president to try and quash the trade beef.
Read the entire article
That's the question that traders will be asking themselves as they try to suss out the implications of a Bloomberg report claiming that President Trump has asked his cabinet to begin drawing up the terms of a deal following a "long and very good" conversation with Chinese President Xi Jinping on Thursday - the first phone call between the leaders of the world's two largest economies in months. According to Bloomberg, Trump has asked key cabinet secretaries to have their staff draw up a draft deal that he hopes will signal an end to the trade conflict, BBG's anonymous sources said. What remains unclear is whether Trump will drop the list of demands that have reportedly been a sticking point in negotiations since the spring. Among those demands are that China scale back state support for its 'Made in China 2025' initiative, drop policies that support the siphoning of intellectual property from foreign companies and reduce the country's trade surplus with the US.
Predictably, the news ignited a torrid rally in Asian shares, with the Hang Seng Index rising 4.2%, the biggest gain since 2011, while the Shanghai Composite Index climbed 2.7% to cement its first four-day winning streak since February. The Chinese yuan, meanwhile, traded back below 6.9 to the dollar, while US stock futures moved higher, signaling that shares could be on their way to a fourth straight day of gains.
Analysts were split on their interpretation of the news. Some believed that the rash of downbeat forward guidance that helped trigger the 'Shocktober' market rout had finally inspired the president to try and quash the trade beef.
Read the entire article
November 1, 2018
The $80 Trillion World Economy In One Chart
The latest estimate from the World Bank puts global GDP at roughly $80 trillion in nominal terms for 2017.
As Visual Capitalist's Jeff Desjardins notes, today’s chart from HowMuch.net uses this data to show all major economies in a visualization called a Voronoi diagram – let’s dive into the stats to learn more.
In nominal terms, the U.S. still has the largest GDP at $19.4 trillion, making up 24.4% of the world economy.
While China’s economy is far behind in nominal terms at $12.2 trillion, you may recall that the Chinese economy has been the world’s largest when adjusted for purchasing power parity (PPP) since 2016.
The next two largest economies are Japan ($4.9 trillion) and Germany ($4.6 trillion) – and when added to the U.S. and China, the top four economies combined account for over 50% of the world economy.
MOVERS AND SHAKERS
Over recent years, the list of top economies hasn’t changed much – and in a similar visualization we posted 18 months ago, the four aforementioned top economies all fell in the exact same order.
However, look outside of these incumbents, and you’ll see that the major forces shaping the future of the global economy are in full swing, especially when it comes to emerging markets.
Here are some of the most important movements:
Read the entire article
As Visual Capitalist's Jeff Desjardins notes, today’s chart from HowMuch.net uses this data to show all major economies in a visualization called a Voronoi diagram – let’s dive into the stats to learn more.
In nominal terms, the U.S. still has the largest GDP at $19.4 trillion, making up 24.4% of the world economy.
While China’s economy is far behind in nominal terms at $12.2 trillion, you may recall that the Chinese economy has been the world’s largest when adjusted for purchasing power parity (PPP) since 2016.
The next two largest economies are Japan ($4.9 trillion) and Germany ($4.6 trillion) – and when added to the U.S. and China, the top four economies combined account for over 50% of the world economy.
MOVERS AND SHAKERS
Over recent years, the list of top economies hasn’t changed much – and in a similar visualization we posted 18 months ago, the four aforementioned top economies all fell in the exact same order.
However, look outside of these incumbents, and you’ll see that the major forces shaping the future of the global economy are in full swing, especially when it comes to emerging markets.
Here are some of the most important movements:
Read the entire article
October 31, 2018
China's Debt Bomb Is Ready To Explode
The great Chinese growth slowdown has been proceeding in stages for the past two years. The reason is simple. Much of China’s “growth” (about 25% of the total) has consisted of wasted infrastructure investment in ghost cities and white elephant transportation infrastructure.
That investment was financed with debt that now cannot be repaid. This was fine for creating short-term jobs and providing business to cement, glass and steel vendors, but it was not a sustainable model since the infrastructure either was not used at all or did not generate sufficient revenue.
China’s future success depends on high-value-added technology and increased consumption. But shifting to intellectual property and the consumer means slowing down on infrastructure, which will slow the economy.
In turn, that means exposing the bad debt for what it is, which risks a financial and liquidity crisis. China started to do this last year but quickly turned tail when the economy slowed. Now the economy has slowed so much that markets are collapsing.
But doesn’t China have over $1 trillion of reserves to prop up its financial system?
Read the entire article
That investment was financed with debt that now cannot be repaid. This was fine for creating short-term jobs and providing business to cement, glass and steel vendors, but it was not a sustainable model since the infrastructure either was not used at all or did not generate sufficient revenue.
China’s future success depends on high-value-added technology and increased consumption. But shifting to intellectual property and the consumer means slowing down on infrastructure, which will slow the economy.
In turn, that means exposing the bad debt for what it is, which risks a financial and liquidity crisis. China started to do this last year but quickly turned tail when the economy slowed. Now the economy has slowed so much that markets are collapsing.
But doesn’t China have over $1 trillion of reserves to prop up its financial system?
Read the entire article
October 30, 2018
China's Economic Slump Accelerated In October, Early Indicators Show
As corporate defaults surge, forcing a desperate PBOC to reverse its deleveraging efforts and threaten more interventions to stave off a more serious retrenchment in growth in the world's second largest economy, it seems like not a day goes by without another warning sign that China's economic precarious situation is even worse than we thought.
The impact this has had on the mainland investors' psyche has been obvious to all. Repeated interventions by China's 'National Team' have done little to arrest the inexorable decline in mainland stocks in October, leaving the Shanghai Composite, the country's main benchmark index, on track for one of its worst months since the financial crisis, and its worst year since 2011. Meanwhile, a flood of FX outflows has pushed the Chinese yuan dangerously close to the 7 yuan-to-the dollar threshold which, if breached, could unleash another wave of chaos across global markets.
And as Chinese policy makers are probably already scrambling to pad the official stats, Bloomberg has released its own proprietary preliminary gauge of Chinese GDP in October which showed that the slowdown unleashed by the US-China trade war worsened in October.
Read the entire article
The impact this has had on the mainland investors' psyche has been obvious to all. Repeated interventions by China's 'National Team' have done little to arrest the inexorable decline in mainland stocks in October, leaving the Shanghai Composite, the country's main benchmark index, on track for one of its worst months since the financial crisis, and its worst year since 2011. Meanwhile, a flood of FX outflows has pushed the Chinese yuan dangerously close to the 7 yuan-to-the dollar threshold which, if breached, could unleash another wave of chaos across global markets.
And as Chinese policy makers are probably already scrambling to pad the official stats, Bloomberg has released its own proprietary preliminary gauge of Chinese GDP in October which showed that the slowdown unleashed by the US-China trade war worsened in October.
Read the entire article
October 29, 2018
In Desperation Move, IBM Buys Red Hat For $34 Billion In Largest Ever Acquisition
In what can only be described as a desperation move, IBM announced that it would acquire Linux distributor Red Hat for a whopping $34 billion, its biggest purchase ever, as the company scrambles to catch up to the competition and boost its flagging cloud sales. Still hurting from its Q3 earnings, which sent its stock tumbling to the lowest level since 2010 after Wall Street was disappointed by yet another quarter of declining revenue...
... IBM will pay $190 for the Raleigh, NC-based Red Hat, a 63% premium to the company's stock price, which closed at $116.68 on Friday, and down 3% on the year.
In the statement, IBM CEO Ginni Rometty said that "the acquisition of Red Hat is a game-changer. It changes everything about the cloud market," but what the acquisition really means is that the company has thrown in the towel on organic growth (or lack thereof) and years of accounting gimmicks and attempts to paint lipstick on a pig with the help of ever lower tax rates and pro forma addbacks, and instead will now "kitchen sink" its endless income statement troubles and non-GAAP adjustments in the form of massive purchase accounting tricks for the next several years.
While Rometty has been pushing hard to transition the 107-year-old company into modern business such as the cloud, AI and security software, the company's recent improvements had been largely from IBM’s legacy mainframe business, rather than its so-called strategic imperatives. Meanwhile, revenues have continued the shrink and after a brief rebound, sales dipped once again this quarter, after an unprecedented period of 22 consecutive declines starting in 2012, when Rometty took over as CEO.
Read the entire article
... IBM will pay $190 for the Raleigh, NC-based Red Hat, a 63% premium to the company's stock price, which closed at $116.68 on Friday, and down 3% on the year.
In the statement, IBM CEO Ginni Rometty said that "the acquisition of Red Hat is a game-changer. It changes everything about the cloud market," but what the acquisition really means is that the company has thrown in the towel on organic growth (or lack thereof) and years of accounting gimmicks and attempts to paint lipstick on a pig with the help of ever lower tax rates and pro forma addbacks, and instead will now "kitchen sink" its endless income statement troubles and non-GAAP adjustments in the form of massive purchase accounting tricks for the next several years.
While Rometty has been pushing hard to transition the 107-year-old company into modern business such as the cloud, AI and security software, the company's recent improvements had been largely from IBM’s legacy mainframe business, rather than its so-called strategic imperatives. Meanwhile, revenues have continued the shrink and after a brief rebound, sales dipped once again this quarter, after an unprecedented period of 22 consecutive declines starting in 2012, when Rometty took over as CEO.
Read the entire article
October 26, 2018
Fed's Mester Says Stocks "Far From" Level That Could Hurt US Economy
Earlier today we noted that a pressing question that has emerged among Wall Street traders following the recent market drop is at what level in the S&P would the "Powell put" be triggered and when could the Fed end its tightening cycle in support of equities (with Goldman recently calculating that the drop in the S&P from its recent September highs is the equivalent of a little over one Fed rate hike).
Well, if Cleveland Fed President Loretta Mester is speaking for the broader FOMC - and the Fed Chair - don't hold your breath.
In a prepared speech delivered on Thursday evening in New York titled "The Economic Outlook, Monetary Policy, and Normal Policymaking Now and in the Future" she said that while she acknowledged that "longer-term interest rates moved up, and over the past couple of weeks, volatility in equity markets has increased", financial markets are "far from a scenario" in which falling equity prices would "dash confidence and lead to a significant pullback in risk-taking and spending" that could hurt the U.S. economy, and added that "the S&P 500 index remains higher than it was a year ago. Similar to the swings in the market we saw earlier this year, the movements of late do not seem to be signaling that investors are becoming overly pessimistic."
"While the market volatility poses a risk to the forecast and bears monitoring, it has not led me to change my modal medium- run outlook" she said, suggesting that the market has a long way to fall before at least this hawk pays attention.
Despite market gyrations, Mester said that she expects "growth to come in a tad above 3 percent this year and to be in the 2-3/4 to 3 percent range next year, well above my 2 percent estimate of the economy’s trend growth rate."
Read the entire article
Well, if Cleveland Fed President Loretta Mester is speaking for the broader FOMC - and the Fed Chair - don't hold your breath.
In a prepared speech delivered on Thursday evening in New York titled "The Economic Outlook, Monetary Policy, and Normal Policymaking Now and in the Future" she said that while she acknowledged that "longer-term interest rates moved up, and over the past couple of weeks, volatility in equity markets has increased", financial markets are "far from a scenario" in which falling equity prices would "dash confidence and lead to a significant pullback in risk-taking and spending" that could hurt the U.S. economy, and added that "the S&P 500 index remains higher than it was a year ago. Similar to the swings in the market we saw earlier this year, the movements of late do not seem to be signaling that investors are becoming overly pessimistic."
"While the market volatility poses a risk to the forecast and bears monitoring, it has not led me to change my modal medium- run outlook" she said, suggesting that the market has a long way to fall before at least this hawk pays attention.
Despite market gyrations, Mester said that she expects "growth to come in a tad above 3 percent this year and to be in the 2-3/4 to 3 percent range next year, well above my 2 percent estimate of the economy’s trend growth rate."
Read the entire article
October 25, 2018
Stock Market Crash! The Dow Has Now Plunged 2,368 Points From The Peak Of The Market Share
The level of panic that we witnessed on Wall Street on Wednesday was breathtaking. After a promising start to the day, the Dow Jones Industrial Average started plunging, and at the close it was down another 608 points. Since peaking at 26,951.81 on October 3rd, the Dow has now fallen 2,368 points, and all of the gains for 2018 have been completely wiped out. But things are even worse when we look at the Nasdaq. The percentage decline for the Nasdaq almost doubled the Dow’s stunning plunge on Wednesday, and it has now officially entered correction territory. To say that it was a “bloodbath” for tech stocks on Wednesday would be a major understatement. Several big name tech stocks were in free fall mode as panic swept through the marketplace like wildfire. As I noted the other day, October 2018 looks a whole lot like October 2008, and many believe that the worst is yet to come.
But in the short-term we should see some sort of bounce once the current wave of panic selling is exhausted. During every major stock market crash in our history there have been days when the stock market has absolutely soared, and this crash will not be any exception.
If we do see a bounce on either Thursday or Friday, please don’t assume that the crash is over. Most key technical levels have already been breached, and even a small piece of bad news can send stocks plunging once again.
On Wednesday there really wasn’t anything too unusual that happened, but stocks cratered anyway. Here is a summary of the carnage…
Read the entire article
But in the short-term we should see some sort of bounce once the current wave of panic selling is exhausted. During every major stock market crash in our history there have been days when the stock market has absolutely soared, and this crash will not be any exception.
If we do see a bounce on either Thursday or Friday, please don’t assume that the crash is over. Most key technical levels have already been breached, and even a small piece of bad news can send stocks plunging once again.
On Wednesday there really wasn’t anything too unusual that happened, but stocks cratered anyway. Here is a summary of the carnage…
Read the entire article
October 24, 2018
Deutsche Bank Shares Tumble After Net Income Plunges 65% On Lowest Revenue In 8 Years
There was some good, but mostly bad news in Deutsche Bank's Q3 earnings report.
The good news is that after years of turmoil, the biggest German bank is showing signs of stabilization under new CEO Christian Sewing after a bitter boardroom battle. The bad news is that the bank missed across all key revenue metrics as Sewing scrambles with a looming problem: how to boost revenue after firing thousands of banks in a multi-year long cost-cutting campaign.
The German bank reported net income of €229 million on Wednesday, above the €160 million expected but 65% below the €649 million reported a year ago. Profit before tax also tumbled by nearly half, dropping from €933 million to €506 million.
Investors were closely watching the bank's costs: the new management team, which was appointed last April, promised to deliver further cost-cutting to revamp the balance sheet. In the third quarter of 2018, the bank said that adjusted costs dropped 1% from a year ago to 5.5 billion euros, with the aim for the full year to bring adjusted costs down to €23 billion and €22 billion in 2019. A core part of the new "restructuring" effort have been mass layoffs as the number of workers is set to come down to 93,000 by the end of 2018, and 90,000 one year later.
But while costs and the bottom line beat were a modest positive surprise, the same could not be said for the bank's revenue which disappointed across the board: total revenue of €6.17BN missed expectations of €6.34BN and guided lower, now predicting a slight decline for full year revenue after earlier guiding for a flat result; trading income in the key FICC division tumbled 15% from a year earlier, while equities trading, a sector where Wall Street banks generally posted gains, also dropped at the same pace as these two key businesses have been hardest-hit by executives departures recently.
Read the entire article
The good news is that after years of turmoil, the biggest German bank is showing signs of stabilization under new CEO Christian Sewing after a bitter boardroom battle. The bad news is that the bank missed across all key revenue metrics as Sewing scrambles with a looming problem: how to boost revenue after firing thousands of banks in a multi-year long cost-cutting campaign.
The German bank reported net income of €229 million on Wednesday, above the €160 million expected but 65% below the €649 million reported a year ago. Profit before tax also tumbled by nearly half, dropping from €933 million to €506 million.
Investors were closely watching the bank's costs: the new management team, which was appointed last April, promised to deliver further cost-cutting to revamp the balance sheet. In the third quarter of 2018, the bank said that adjusted costs dropped 1% from a year ago to 5.5 billion euros, with the aim for the full year to bring adjusted costs down to €23 billion and €22 billion in 2019. A core part of the new "restructuring" effort have been mass layoffs as the number of workers is set to come down to 93,000 by the end of 2018, and 90,000 one year later.
But while costs and the bottom line beat were a modest positive surprise, the same could not be said for the bank's revenue which disappointed across the board: total revenue of €6.17BN missed expectations of €6.34BN and guided lower, now predicting a slight decline for full year revenue after earlier guiding for a flat result; trading income in the key FICC division tumbled 15% from a year earlier, while equities trading, a sector where Wall Street banks generally posted gains, also dropped at the same pace as these two key businesses have been hardest-hit by executives departures recently.
Read the entire article
October 23, 2018
Global Banking Stocks Are Crashing Hard – Just Like They Did In 2008 Share
Global stocks are falling precipitously once again, and banking stocks are leading the way. If this reminds you of 2008, it should, because that is precisely what we witnessed back then. Banking stocks collapsed as fear gripped the marketplace, and ultimately many large global banks had to be bailed out either directly or indirectly by their national governments as they failed one after another. The health of the banking system is absolutely paramount, because the flow of money is our economic lifeblood. When the flow of money tightens up during a credit crunch, the consequences can be rapid and dramatic just like we witnessed in 2008.
So let’s keep a very close eye on banking stocks. Global systemically important bank stocks surged in the aftermath of Trump’s victory in 2016, but now they are absolutely plunging. They are now down a whopping 27 percent from the peak, and that puts them solidly in bear market territory.
U.S. banking stocks are not officially in bear market territory yet, but they are getting close. At this point, they are now down 17 percent from the peak…
Of course European banking stocks are doing much worse. Right now they are down 27 percent from the peak and 23 percent from a year ago. The following comes from Wolf Richter…
Read the entire article
So let’s keep a very close eye on banking stocks. Global systemically important bank stocks surged in the aftermath of Trump’s victory in 2016, but now they are absolutely plunging. They are now down a whopping 27 percent from the peak, and that puts them solidly in bear market territory.
U.S. banking stocks are not officially in bear market territory yet, but they are getting close. At this point, they are now down 17 percent from the peak…
Of course European banking stocks are doing much worse. Right now they are down 27 percent from the peak and 23 percent from a year ago. The following comes from Wolf Richter…
Read the entire article
October 22, 2018
Middle Class Destroyed: 50 Percent Of All American Workers Make Less Than $30,533 A Year
The middle class in America has been declining for decades, and we continue to get even more evidence of the catastrophic damage that has already been done. According to the Social Security Administration, the median yearly wage in the United States is just $30,533 at this point. That means 50 percent of all American workers make at least that much per year, but that also means that 50 percent of all American workers make that much or less per year. When you divide $30,533 by 12, you get a median monthly wage of just over $2,500. But of course nobody can provide a middle class standard of living for a family of four for just $2,500 a month, and we will discuss this further below. So in most households at least two people are working, and in many cases multiple jobs are being taken on by a single individual in a desperate attempt to make ends meet. The American people are working harder than ever, and yet the middle class just continues to erode.
The deeper we dig into the numbers provided by the Social Security Administration, the more depressing they become. Here are just a few examples from their official website…
-34 percent of all American workers made less than $20,000 last year.
-48 percent of all American workers made less than $30,000 last year.
-59 percent of all American workers made less than $40,000 last year.
-68 percent of all American workers made less than $50,000 last year.
Read the entire article
The deeper we dig into the numbers provided by the Social Security Administration, the more depressing they become. Here are just a few examples from their official website…
-34 percent of all American workers made less than $20,000 last year.
-48 percent of all American workers made less than $30,000 last year.
-59 percent of all American workers made less than $40,000 last year.
-68 percent of all American workers made less than $50,000 last year.
Read the entire article
October 19, 2018
European Markets Sink On Italian Fears, China Surges After GDP Miss; S&P Futs Flat
After another turbulent week for markets, which saw violent reversals in US stocks which soared on Tuesday on the back of the biggest short squeeze since the Trump election only to tumble on Thursday on a combination of fears about the hawkish Fed, Chinese margin calls, the Italian standoff with the EU, and concerns about slowing profits, Friday has so far been a relatively quiet session with US equity futures fading the initial move higher and trading close to unchanged.
Markets in Europe were far more downbeat, with the Stoxx 600 falling as much as 0.6% around 6am ET, retreating for a third session in a row...
... with the auto sector down 2.8%, while renewed concerns about Rome's showdown with Brussels over the 2019 budget sent Italy's FTSE MIB to a 19-month low, down 1.6%, and Italian bond yields to new multi year highs as EU nations warned Italy’s populist government its budget won’t fly, with signs of contagion apparent as yields on Spain’s 10-year bonds climb to the highest level since October 2017.
The European auto sector was the biggest loser as the stoxx autos & parts index tumbled after Michelin issued a warning of declining 2H sales in Europe and China,
The latest weekly flow data showed that European equity funds suffered outflows of $4.8b in week ending Oct. 17, the biggest redemption in 27 weeks, and bringing the year-to-date outflows now at $50.4bn.
Read the entire article
Markets in Europe were far more downbeat, with the Stoxx 600 falling as much as 0.6% around 6am ET, retreating for a third session in a row...
... with the auto sector down 2.8%, while renewed concerns about Rome's showdown with Brussels over the 2019 budget sent Italy's FTSE MIB to a 19-month low, down 1.6%, and Italian bond yields to new multi year highs as EU nations warned Italy’s populist government its budget won’t fly, with signs of contagion apparent as yields on Spain’s 10-year bonds climb to the highest level since October 2017.
The European auto sector was the biggest loser as the stoxx autos & parts index tumbled after Michelin issued a warning of declining 2H sales in Europe and China,
The latest weekly flow data showed that European equity funds suffered outflows of $4.8b in week ending Oct. 17, the biggest redemption in 27 weeks, and bringing the year-to-date outflows now at $50.4bn.
Read the entire article
October 18, 2018
China Crashes As Flood Of Margin Calls Sparks "Liquidity Crisis", Panic Selling
The Treasury's latest semiannual FX report may have spared China the designation of currency manipulator (for now... in a new twist, there was a section dedicated exclusively to China in the Executive Summary, a clear signal from the Treasury that China is the disproportionate focus of the report stating that 'it is is clear that China is not resisting depreciation through intervention as it had in the recent past'), but the market was not as forgiving.
In the latest shock to Chinese confidence and stability, overnight Chinese shares extended the world’s worst slump as the yuan touched its weakest level in almost two years, testing the government’s ability to maintain market stability and calm as risks continued to mount for Asia’s largest economy.
Two days after we reported that concerns about pledged shares, in which major investors put up stock as collateral for personal loans - a disastrous practice when stock prices are dropping, emerged as a key pressure point for China's market, overnight Bloomberg reported that "rising fears of widespread margin calls fueled a 3 percent tumble in the Shanghai Composite Index, which sank to a nearly four-year low as more than 13 stocks fell for each that rose."
The concentrated selloff, sent the Shanghai Composite down 2.9%, closing at session lows of 2,486, the lowest level since November 2014, as China's plunge-protecting "National Team" was nowhere to be seen.
Read the entire article
In the latest shock to Chinese confidence and stability, overnight Chinese shares extended the world’s worst slump as the yuan touched its weakest level in almost two years, testing the government’s ability to maintain market stability and calm as risks continued to mount for Asia’s largest economy.
Two days after we reported that concerns about pledged shares, in which major investors put up stock as collateral for personal loans - a disastrous practice when stock prices are dropping, emerged as a key pressure point for China's market, overnight Bloomberg reported that "rising fears of widespread margin calls fueled a 3 percent tumble in the Shanghai Composite Index, which sank to a nearly four-year low as more than 13 stocks fell for each that rose."
The concentrated selloff, sent the Shanghai Composite down 2.9%, closing at session lows of 2,486, the lowest level since November 2014, as China's plunge-protecting "National Team" was nowhere to be seen.
Read the entire article
October 17, 2018
Forced Buy-Ins Spark "Liquidity Crisis" In China's 'Nasdaq'
Marking the worst year since 2008, China's tech-heavy (Nasdaq-equivalent) Shenzhen Composite index is down a shocking 35% year-to-date, and it's starting to become a self-feeding vicious circle...
As Bloomberg reports, the most recent slump in the teach-heavy index comes despite regulators' efforts to rein in risks of share-backed loans following reports over the weekend that insurers are being 'encouraged' to invest in listed companies to reduce liquidity risks connected to such loans.
Share pledges, where company founders and other major investors put up stock as collateral, have emerged as a pressure point in China’s debt-laden economy, especially as the stock market tumbles.
“There’s a liquidity crisis in the stock market, and pledged shares are again starting to sound the alarm,” said Yang Hai, analyst at Kaiyuan Securities Co.
"Stocks in Shenzhen typically bear the brunt of loss of confidence in the stock market because of their higher valuations.”
Read the entire article
As Bloomberg reports, the most recent slump in the teach-heavy index comes despite regulators' efforts to rein in risks of share-backed loans following reports over the weekend that insurers are being 'encouraged' to invest in listed companies to reduce liquidity risks connected to such loans.
Share pledges, where company founders and other major investors put up stock as collateral, have emerged as a pressure point in China’s debt-laden economy, especially as the stock market tumbles.
“There’s a liquidity crisis in the stock market, and pledged shares are again starting to sound the alarm,” said Yang Hai, analyst at Kaiyuan Securities Co.
"Stocks in Shenzhen typically bear the brunt of loss of confidence in the stock market because of their higher valuations.”
Read the entire article
October 16, 2018
Zero-Down Subprime Mortgages Are Back, What Could Possibly Go Wrong?
Ten years after the collapse of Lehman Brothers, banks are once again taking bets on the same type of loans that nearly collapsed the economy amid a flurry of emergency bailouts and unprecedented consolidations.
Bank of America has backed a $10 billion program from Boston-based brokerage Neighborhood Assistance Corporation of America (NACA), to offer zero-down mortgages to low-income borrowers with poor credit scores, according to CNBC. NACA has been conducting four-day events in cities across America to educate subprime borrowers and then lend them money - with a 90% approval rate and interest rates around 4.5%.
"It's total upside," said AJ Barkley, senior vice president of consumer lending at BofA. "We have seen significant wins in this partnership. Just to be clear, when we get those loans with all the heavy lifting here, we're over a 90 percent approval, meaning 90 percent of the people who go through this program that we actually underwrite the loans."
Borrowers can have low credit scores, but have to go through an education session about the program and submit all necessary documents, from income statements to phone bills. Then they go through counseling to understand their monthly budget and ensure they can afford the mortgage payment. The loans are 15- or 30-year fixed with interest rates below market, about 4.5 percent. -CNBC
Read the entire article
Bank of America has backed a $10 billion program from Boston-based brokerage Neighborhood Assistance Corporation of America (NACA), to offer zero-down mortgages to low-income borrowers with poor credit scores, according to CNBC. NACA has been conducting four-day events in cities across America to educate subprime borrowers and then lend them money - with a 90% approval rate and interest rates around 4.5%.
"It's total upside," said AJ Barkley, senior vice president of consumer lending at BofA. "We have seen significant wins in this partnership. Just to be clear, when we get those loans with all the heavy lifting here, we're over a 90 percent approval, meaning 90 percent of the people who go through this program that we actually underwrite the loans."
Borrowers can have low credit scores, but have to go through an education session about the program and submit all necessary documents, from income statements to phone bills. Then they go through counseling to understand their monthly budget and ensure they can afford the mortgage payment. The loans are 15- or 30-year fixed with interest rates below market, about 4.5 percent. -CNBC
Read the entire article
October 15, 2018
The Inevitable De-Industrialization Of Europe
EU ministers agreed to binding cuts in CO2 emissions of 35% by 2030. The German auto industry won't be able to deliver.
The Telegraph reports Berlin court orders German capital to ban most diesel vehicles on 11 major roads to counter pollution.
Hamburg was first in May. Stuttgart, home of Mercedes and Porsche, was second in July.
A diesel ban in Frankfurt came third.
Only older cars that do not meet emission standards are banned, but diesel is now toxic. No one wants to buy diesel.
Merkel Can No Longer Protect Car Makers
Adding to the woes, Merkel has lost control. She is no longer able to protect German industry.
The European Parliament just voted to cut CO2 emissions by 40%. The European ministers voted for a 35% reduction. The latter is binding.
Car sales dropped sharply in September.
Eurointelligence on Autos and German Industry
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The Telegraph reports Berlin court orders German capital to ban most diesel vehicles on 11 major roads to counter pollution.
Hamburg was first in May. Stuttgart, home of Mercedes and Porsche, was second in July.
A diesel ban in Frankfurt came third.
Only older cars that do not meet emission standards are banned, but diesel is now toxic. No one wants to buy diesel.
Merkel Can No Longer Protect Car Makers
Adding to the woes, Merkel has lost control. She is no longer able to protect German industry.
The European Parliament just voted to cut CO2 emissions by 40%. The European ministers voted for a 35% reduction. The latter is binding.
Car sales dropped sharply in September.
Eurointelligence on Autos and German Industry
Read the entire article
October 12, 2018
Whalen: Donald Trump Is Right About The Fed
President Donald Trump has been criticizing the Federal Open Market Committee for raising interest rates. The reaction of the US equity markets is self explanatory. But while the economist love cult in the Big Media may take umbrage at President Trump’s critique of the central bank, in fact Trump is dead right.
First, the Fed’s actions in terms of buying $4 trillion in Treasury debt and mortgage paper has badly crippled the value of the fixed income market as a measure of risk. The Treasury yield curve no longer accurately describes the term structure of interest rates or risk premiums. This means that the Treasury yield curve is useless as an indicator of or guide for policy. Nobody at the Federal Reserve Board understands this issue or cares.
Second, Operation Twist further manipulated and distorted the Treasury market. By selling short-term paper and buying long dated securities, the Fed suppressed long-term interest rates, again making indicators like the 10-year Treasury bond useless as an measure of risk. Without QE 2-3 and Operation Twist, the 10-Year Treasury would be well over 4% by now. Instead it is 3% and change and will probably rally to test 3% between now and year end.
Third is the real issuing bothering President Trump, even if he cannot find the precise words, namely liquidity. We have the illusion of liquidity in the financial markets today. Sell Side firms are prohibited by Dodd-Frank and the Volcker Rule from deploying capital in the cash equity and debt markets. All bank portfolios are now passive. No trading, no market making. There is nobody to catch the falling knife.
The only credit being extended today in the short-term markets is with collateral. There is no longer any unsecured lending between banks and, especially, non-banks. As we noted in The Institutional Risk Analyst earlier this week, there are scores of nonbank lenders in mortgages, autos and consumer unsecured lending that are ready to go belly up. Half of the non-bank mortgage lenders in the US are in default on their bank credit lines. As in 2007, the model builders at the Fed in Washington have no idea nor do they care to hear outside opinions.
Read the entire article
First, the Fed’s actions in terms of buying $4 trillion in Treasury debt and mortgage paper has badly crippled the value of the fixed income market as a measure of risk. The Treasury yield curve no longer accurately describes the term structure of interest rates or risk premiums. This means that the Treasury yield curve is useless as an indicator of or guide for policy. Nobody at the Federal Reserve Board understands this issue or cares.
Second, Operation Twist further manipulated and distorted the Treasury market. By selling short-term paper and buying long dated securities, the Fed suppressed long-term interest rates, again making indicators like the 10-year Treasury bond useless as an measure of risk. Without QE 2-3 and Operation Twist, the 10-Year Treasury would be well over 4% by now. Instead it is 3% and change and will probably rally to test 3% between now and year end.
Third is the real issuing bothering President Trump, even if he cannot find the precise words, namely liquidity. We have the illusion of liquidity in the financial markets today. Sell Side firms are prohibited by Dodd-Frank and the Volcker Rule from deploying capital in the cash equity and debt markets. All bank portfolios are now passive. No trading, no market making. There is nobody to catch the falling knife.
The only credit being extended today in the short-term markets is with collateral. There is no longer any unsecured lending between banks and, especially, non-banks. As we noted in The Institutional Risk Analyst earlier this week, there are scores of nonbank lenders in mortgages, autos and consumer unsecured lending that are ready to go belly up. Half of the non-bank mortgage lenders in the US are in default on their bank credit lines. As in 2007, the model builders at the Fed in Washington have no idea nor do they care to hear outside opinions.
Read the entire article
October 11, 2018
Sears Creditors Push For Bankruptcy Liquidation As Vendors No Longer Paid
Amid recent reports that Sears is set to file for bankruptcy as soon as this weekend ahead of a $134 million debt payment due on Monday, the only question is whether the filing will be a Chapter 11 debt for equity reorganization or a Chapter 7 liquidation. And contrary to the desires of Sears CEO and biggest creditor, Eddie Lampert, who would like to preserve the core business, others are pushing for an outright liquidation.
According to the WSJ, a group of Sears' biggest lenders, including Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., are pushing for the company to liquidate its assets under a chapter 7 bankruptcy filing, as opposed to reorganizing the business under chapter 11, this person said.
The consensus reportedly emerged after Sears met with its lenders Wednesday night to discuss emergency financing for the embattled retailer. The meeting ended without an agreement that would keep Sears operating as a going concern, the WSJ reports.
At Wednesday’s meeting, Sears proposed a restructuring plan to shrink its store base dramatically, at which point it expected to be profitable, the person said. But the banks argued the safest way for them to recoup their money is to sell all of the remaining stores and liquidate the inventory, the person said.
Read the entire article
According to the WSJ, a group of Sears' biggest lenders, including Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., are pushing for the company to liquidate its assets under a chapter 7 bankruptcy filing, as opposed to reorganizing the business under chapter 11, this person said.
The consensus reportedly emerged after Sears met with its lenders Wednesday night to discuss emergency financing for the embattled retailer. The meeting ended without an agreement that would keep Sears operating as a going concern, the WSJ reports.
At Wednesday’s meeting, Sears proposed a restructuring plan to shrink its store base dramatically, at which point it expected to be profitable, the person said. But the banks argued the safest way for them to recoup their money is to sell all of the remaining stores and liquidate the inventory, the person said.
Read the entire article
October 10, 2018
Sears Preparing To File Bankruptcy As Soon As This Week
The neverending saga of the world's longest melting ice cube, that of Sears Holdings which has flirted with bankruptcy for years only to get bailed out in the 11th hour by its biggest investor and CEO Eddie Lampert each and every time, is finally coming to its logical end.
With its stock crashing to a new all time low, and with a $134 million in debt due on Monday on a bond issue that is currently yielding over 1,000% in the 3 or so business days left to maturity...
... the iconic if cash-strapped Sears Holdings, whose predecessor was the de facto originator of "online" retail with its innovative mail order catalogues, and which has been losing money for years, has hired M-III Partners to prepare a bankruptcy filing that could come as soon as this week, the WSJ reported citing people familiar with the situation, as the cash-strapped company that once dominated American retailing faces a debt payment deadline.
The WSJ reports that employees at M-III Partners, a boutique advisory firm, have spent the past few weeks working on the potential filing, with M-III staff seen at the retailer’s headquarters in Hoffman Estates, Illinois. That said, a Chapter 11 may still be avoided as Sears "continues to discuss other options and could still avert an in-court restructuring."
Read the entire article
With its stock crashing to a new all time low, and with a $134 million in debt due on Monday on a bond issue that is currently yielding over 1,000% in the 3 or so business days left to maturity...
... the iconic if cash-strapped Sears Holdings, whose predecessor was the de facto originator of "online" retail with its innovative mail order catalogues, and which has been losing money for years, has hired M-III Partners to prepare a bankruptcy filing that could come as soon as this week, the WSJ reported citing people familiar with the situation, as the cash-strapped company that once dominated American retailing faces a debt payment deadline.
The WSJ reports that employees at M-III Partners, a boutique advisory firm, have spent the past few weeks working on the potential filing, with M-III staff seen at the retailer’s headquarters in Hoffman Estates, Illinois. That said, a Chapter 11 may still be avoided as Sears "continues to discuss other options and could still avert an in-court restructuring."
Read the entire article
October 9, 2018
IMF Slashes US Growth Outlook, Blames Rates & Trade; Sees Venezuelan Inflation 10-Million-Percent
Confirming Director Lagarde's warning that "clouds on the horizon have materialized," The International Monetary Fund is downgrading its outlook for the world economy, citing rising interest rates and growing tensions over trade.
The IMF said Monday that the global economy will grow 3.7 percent this year, the same as in 2017 but down from the 3.9 percent it was forecasting for 2018 in July.
It slashed its outlook for the 19 countries that use the euro currency and for Central and Eastern Europe, Latin America, the Middle East and Sub-Saharan Africa.
Furthermore, The IMF expects the U.S. economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast.
But it predicts that U.S. growth will slow to 2.5 percent next year as the effect of recent tax cuts wears off and as President Donald Trump's trade war with China takes a toll.
As The IMF blog details, there are clouds on the horizon. Growth has proven to be less balanced than hoped. Not only have some downside risks that the last WEO identified been realized, the likelihood of further negative shocks to our growth forecast has risen. In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term. These concerns raise the urgency for policymakers to act.
Read the entire article
The IMF said Monday that the global economy will grow 3.7 percent this year, the same as in 2017 but down from the 3.9 percent it was forecasting for 2018 in July.
It slashed its outlook for the 19 countries that use the euro currency and for Central and Eastern Europe, Latin America, the Middle East and Sub-Saharan Africa.
Furthermore, The IMF expects the U.S. economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast.
But it predicts that U.S. growth will slow to 2.5 percent next year as the effect of recent tax cuts wears off and as President Donald Trump's trade war with China takes a toll.
As The IMF blog details, there are clouds on the horizon. Growth has proven to be less balanced than hoped. Not only have some downside risks that the last WEO identified been realized, the likelihood of further negative shocks to our growth forecast has risen. In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term. These concerns raise the urgency for policymakers to act.
Read the entire article
October 8, 2018
Italian Stocks, Bonds Collapse After EU Rejects Rome's Budget Plans
Italian stocks tumbled with the FTSE MIB dropping 2.3% - the worst performer among major European markets on Monday - and hitting its lowest level since April 2017, while the country's bonds plunged to the lowest level since February 2014 amid what now appears to be an inevitable showdown between Italy and the EU, after the European Commission said Italy’s budget plans are in breach of common rules.
Over the weekend, the European Commission told Italy it is concerned about its budget deficit plans for the next three years since they breach what the EU asked the country to do in July, but a defiant Rome insisted on Saturday it would “not retreat” from its spending plans.
In a letter to Italy’s Economy Minister Giovanni Tria, the Commission said that with a planned headline deficit of 2.4 percent of GDP in 2019, Italy’s structural deficit, which excludes one-offs and business cycle effects, would rise by 0.8 percent of GDP. Under EU rules Italy, which has a public debt to GDP ratio of 133 percent and the highest debt servicing costs in Europe, should cut the structural deficit every year until balance.
“Italy’s revised budgetary targets appear prima facie to point to a significant deviation from the fiscal path” commonly agreed by European Union governments, EU Commissioners Valdis Dombrovskis and Pierre Moscovici wrote in a letter to Italian Finance Minister Giovanni Tria. “This is therefore a source of serious concern,” the commission’s finance chiefs said in their letter Friday responding to a note sent by Tria the day before.
“We call on the Italian authorities to ensure that the Draft Budgetary Plan will be in compliance with the common fiscal rules,” the letter added at the same time as the council of EU ministers asked Italy in July to reduce that structural deficit by 0.6% of GDP next year, which means the deficit would be 1.4 points off track, Reuters reported.
Read the entire article
Over the weekend, the European Commission told Italy it is concerned about its budget deficit plans for the next three years since they breach what the EU asked the country to do in July, but a defiant Rome insisted on Saturday it would “not retreat” from its spending plans.
In a letter to Italy’s Economy Minister Giovanni Tria, the Commission said that with a planned headline deficit of 2.4 percent of GDP in 2019, Italy’s structural deficit, which excludes one-offs and business cycle effects, would rise by 0.8 percent of GDP. Under EU rules Italy, which has a public debt to GDP ratio of 133 percent and the highest debt servicing costs in Europe, should cut the structural deficit every year until balance.
“Italy’s revised budgetary targets appear prima facie to point to a significant deviation from the fiscal path” commonly agreed by European Union governments, EU Commissioners Valdis Dombrovskis and Pierre Moscovici wrote in a letter to Italian Finance Minister Giovanni Tria. “This is therefore a source of serious concern,” the commission’s finance chiefs said in their letter Friday responding to a note sent by Tria the day before.
“We call on the Italian authorities to ensure that the Draft Budgetary Plan will be in compliance with the common fiscal rules,” the letter added at the same time as the council of EU ministers asked Italy in July to reduce that structural deficit by 0.6% of GDP next year, which means the deficit would be 1.4 points off track, Reuters reported.
Read the entire article
October 5, 2018
Inverted Global Yield Curve Creates “The Perfect Cocktail For A Liquidity Crunch” As The IMF Warns Of “A Second Great Depression”
Why would the IMF use the phrase “a second Great Depression” in a report that they know the entire world will read? To be more precise, the IMF stated that “large challenges loom for the global economy to prevent a second Great Depression”. Are they saying that if we do not change our ways that we are going to be heading into a horrific economic depression? Because if that is what they are trying to communicate, they would be exactly correct. At this moment, global debt levels are higher than they have ever been before in all of human history, and in their report the IMF specifically identified “global debt levels” as one of the key problems that could lead to “another financial meltdown”…
The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reforms needed to protect the system from reckless behaviour, the International Monetary Fund has warned.
With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said.
And the IMF report also seemed to indicate that global central banks were responsible for the situation in which we now find ourselves.
Read the entire article
The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reforms needed to protect the system from reckless behaviour, the International Monetary Fund has warned.
With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said.
And the IMF report also seemed to indicate that global central banks were responsible for the situation in which we now find ourselves.
Read the entire article
October 4, 2018
Chinese Imports Of US Crude Have "Totally Stopped" As Tariff Threats Persist
It has been roughly two months since China threatened to impose a 25% tariff on US energy imports (it eventually went back on those threats), and less than two weeks since the latest round of tariffs has been implemented. But even as China has shied away from its threats to punish the US energy industry, Reuters data are showing that imports of US oil to China have ground to a halt.
Confirming the data, Xie Chunlin, the president of China Merchants Energy Shipping Co, said on Wednesday that crude oil shipments to China have "totally stopped" as the trade war has taken its toll, reversing growth in what had been a rapidly expanding market for US shale producers.
"We are one of the major carriers for crude oil from the U.S. to China. Before (the trade war) we had a nice business, but now it’s totally stopped," Chunlin said on the sidelines of the Global Maritime Forum’s Annual Summit in Hong Kong.
"It’s unfortunately happened, the trade war between the U.S. and China. Surely for the shipping business, it’s not good," the CMES president said.
He also said the trade dispute was forcing China to seek soybeans from suppliers other than the United States, adding that China now bought most its soybeans from South America.
Read the entire article
Confirming the data, Xie Chunlin, the president of China Merchants Energy Shipping Co, said on Wednesday that crude oil shipments to China have "totally stopped" as the trade war has taken its toll, reversing growth in what had been a rapidly expanding market for US shale producers.
"We are one of the major carriers for crude oil from the U.S. to China. Before (the trade war) we had a nice business, but now it’s totally stopped," Chunlin said on the sidelines of the Global Maritime Forum’s Annual Summit in Hong Kong.
"It’s unfortunately happened, the trade war between the U.S. and China. Surely for the shipping business, it’s not good," the CMES president said.
He also said the trade dispute was forcing China to seek soybeans from suppliers other than the United States, adding that China now bought most its soybeans from South America.
Read the entire article
October 3, 2018
The Retail Apocalypse Picks Up Speed As Sears, JCPenney, Brookstone And Mattress Firm Spiral Toward Bankruptcy
Over 20 major retailers have filed for bankruptcy since the beginning of last year, and in 2018 we may break the all-time record for annual store closings that was established just last year. We are in the midst of the worst retail apocalypse in American history, and it appears to be picking up speed as retail giants such as Sears, JCPenney, Brookstone and Mattress Firm spiral toward bankruptcy. We live at a time when the middle class is being systematically destroyed, and so the truth is that U.S. consumers simply do not have as much discretionary income as they once did. Many large retailers believed that things would eventually turn around, and they have been fighting very hard to survive, but now time has run out for quite a few of them.
Mattress Firm
Everyone knew that Mattress Firm was in deep trouble, but it still surprised many of us when it was announced that they are officially planning to file for bankruptcy. The following comes from Reuters…
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Mattress Firm
Everyone knew that Mattress Firm was in deep trouble, but it still surprised many of us when it was announced that they are officially planning to file for bankruptcy. The following comes from Reuters…
Read the entire article
October 2, 2018
"They Are Worried About Panic": China Blocks Bad Economic News As Economy Slumps
China's Shadow-banking system is collapsing (and with its China's economic-fuel - the credit impulse), it's equity market has become a slow-motion train-wreck, its economic data has been serially disappointing for two years, and its bond market is starting to show signs of serious systemic risk as corporate defaults in 2018 hit a record high.
But, if you were to read the Chinese press, none of that would be evident, as The New York Times reports a government directive sent to journalists in China on Friday named six economic topics to be "managed," as the long hand of China's 'Ministry of Truth' have now reached the business media in an effort to censor negative news about the economy.
The New York Times lists the topics that are to be "managed" as:
Read the entire article
But, if you were to read the Chinese press, none of that would be evident, as The New York Times reports a government directive sent to journalists in China on Friday named six economic topics to be "managed," as the long hand of China's 'Ministry of Truth' have now reached the business media in an effort to censor negative news about the economy.
The New York Times lists the topics that are to be "managed" as:
- Worse-than-expected data that could show the economy is slowing.
- Local government debt risks.
- The impact of the trade war with the United States.
- Signs of declining consumer confidence
- The risks of stagflation, or rising prices coupled with slowing economic growth
- “Hot-button issues to show the difficulties of people’s lives.”
Read the entire article
October 1, 2018
Goodbye Nafta, Hello USMCA, Trump's "Wonderful New Trade Deal"
Out with the old, in with the new...
Just hours before the end-of-month deadline, US trade rep Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland announced last night that Canada and the US had successfully agreed on a sweeping revision of the Nafta trade accord (an agreement that had been reached with Mexico's outgoing PRI government weeks ago), maneuvering the final leg of the new trilateral deal, which will henceforth be known as the US-Mexico-Canada Agreement, or USMCA, into place. The US heralded the deal by proclaiming that it would mean "freer markets, fairer trade and robust economic growth." After both President Trump and Canadian Prime Minister reportedly approved the agreement, markets rejoiced, sparking rallies in the loonie, Mexican peso and US stock futures.
The preliminary terms reflected a resolution of the dairy-market problem, which had proved to be an intractable point of contention, with Canada offering access to roughly 3.5% of domestic dairy market to the US and will agree to a vehicle export quota of 2.6 million vehicles that could be exported to the US tariff free or near tariff free. Meanwhile, as reported previously, the Chapter 19 dispute resolution process - something that Canada demanded be preserved in the final accord - will remain unchanged.
Given that, in the Trump era, nothing is done until it's done, Trump lauded the agreement on Twitter Monday morning, saying it would correct "deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world."
Read the entire article
Just hours before the end-of-month deadline, US trade rep Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland announced last night that Canada and the US had successfully agreed on a sweeping revision of the Nafta trade accord (an agreement that had been reached with Mexico's outgoing PRI government weeks ago), maneuvering the final leg of the new trilateral deal, which will henceforth be known as the US-Mexico-Canada Agreement, or USMCA, into place. The US heralded the deal by proclaiming that it would mean "freer markets, fairer trade and robust economic growth." After both President Trump and Canadian Prime Minister reportedly approved the agreement, markets rejoiced, sparking rallies in the loonie, Mexican peso and US stock futures.
The preliminary terms reflected a resolution of the dairy-market problem, which had proved to be an intractable point of contention, with Canada offering access to roughly 3.5% of domestic dairy market to the US and will agree to a vehicle export quota of 2.6 million vehicles that could be exported to the US tariff free or near tariff free. Meanwhile, as reported previously, the Chapter 19 dispute resolution process - something that Canada demanded be preserved in the final accord - will remain unchanged.
Given that, in the Trump era, nothing is done until it's done, Trump lauded the agreement on Twitter Monday morning, saying it would correct "deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world."
Read the entire article
September 28, 2018
British Gov't Report Suggests US Is Currently Winning Trade War With China
China has already declared its intent to retaliate against US President Donald Trump’s new tariffs on $200 billion in Chinese imports, a move set to raise prices on consumer goods for both countries.
Several analysts have demonstrated how Trump’s tariffs will blowback on the US economy. Moody’s Investment Service previously warned that the tariffs would reduce US GDP by 0.25 percent in 2019, to about 2.3 percent. The American economy could take an even bigger hit if Trump proceeds with tariffs on $200 bn worth of Chinese products, Moody’s warned.
But whatever the impact on the American economy, an assessment by the British government’s Foreign Office (FCO) confirms that China’s stock market has indeed taken a direct hit from Trump’s tariffs, that so far is much worse than anything the US has experienced.
The newsletter report, China Financial Policy Focus, published in July by the Foreign Office’s China Economics Network based out of the British Embassy in Beijing, says that:
“Rising trade tensions between the US and China have only added further fuel to the fire, causing the stock market to fall more than 20% against its peak in January and leading the currency to depreciate substantially against the dollar.”
The biggest impact is visible in the Shanghai Composite Index, which has “declined more than 20% since its January 2018 peak. By 28 June the index was below 2800 points.”
Read the entire article
Several analysts have demonstrated how Trump’s tariffs will blowback on the US economy. Moody’s Investment Service previously warned that the tariffs would reduce US GDP by 0.25 percent in 2019, to about 2.3 percent. The American economy could take an even bigger hit if Trump proceeds with tariffs on $200 bn worth of Chinese products, Moody’s warned.
But whatever the impact on the American economy, an assessment by the British government’s Foreign Office (FCO) confirms that China’s stock market has indeed taken a direct hit from Trump’s tariffs, that so far is much worse than anything the US has experienced.
The newsletter report, China Financial Policy Focus, published in July by the Foreign Office’s China Economics Network based out of the British Embassy in Beijing, says that:
“Rising trade tensions between the US and China have only added further fuel to the fire, causing the stock market to fall more than 20% against its peak in January and leading the currency to depreciate substantially against the dollar.”
The biggest impact is visible in the Shanghai Composite Index, which has “declined more than 20% since its January 2018 peak. By 28 June the index was below 2800 points.”
Read the entire article
September 27, 2018
Why Are So Many People Talking About The Potential For A Stock Market Crash In October?
It is that time of the year again. Every year, people start talking about a possible stock market crash in October, because everyone remembers the historic crashes that took place in October 1987 and October 2008. Could we witness a similar stock market crash in October 2018?
Without a doubt, the market is primed for another crash. Stock valuations have been in crazytown territory for a very long time, and financial chaos has already begun to erupt in emerging markets all over the globe. When the stock market does collapse, it won’t exactly be a surprise. And a lot of people out there are pointing to October for historical reasons. I did not know this, but it turns out that the month with the most market volatility since the Dow was first established has been the month of October…
The difference is quite significant, as judged by a measure of volatility known as the standard deviation: For all Octobers since 1896, when the Dow Jones Industrial Average was created, the standard deviation of the Dow’s daily changes has been 1.44%. That compares to 1.05% for all months other than October.
Like me, you are probably tempted to think that the reason why October’s number is so high is because of what happened in 1987 and 2008.
But even if you pull out those two months, October is still the most volatile…
You might think that this difference is caused by a few outliers, such as the 1987 crash (which, of course, occurred in October) or 2008 (the Dow suffered several thousand-point plunges that month as it reacted to the snowballing financial crisis). But you would be wrong: The standard deviation of daily Dow changes is much higher in October than other months even if we eliminate 1987 and 2008 from the sample.
Read the entire article
Without a doubt, the market is primed for another crash. Stock valuations have been in crazytown territory for a very long time, and financial chaos has already begun to erupt in emerging markets all over the globe. When the stock market does collapse, it won’t exactly be a surprise. And a lot of people out there are pointing to October for historical reasons. I did not know this, but it turns out that the month with the most market volatility since the Dow was first established has been the month of October…
The difference is quite significant, as judged by a measure of volatility known as the standard deviation: For all Octobers since 1896, when the Dow Jones Industrial Average was created, the standard deviation of the Dow’s daily changes has been 1.44%. That compares to 1.05% for all months other than October.
Like me, you are probably tempted to think that the reason why October’s number is so high is because of what happened in 1987 and 2008.
But even if you pull out those two months, October is still the most volatile…
You might think that this difference is caused by a few outliers, such as the 1987 crash (which, of course, occurred in October) or 2008 (the Dow suffered several thousand-point plunges that month as it reacted to the snowballing financial crisis). But you would be wrong: The standard deviation of daily Dow changes is much higher in October than other months even if we eliminate 1987 and 2008 from the sample.
Read the entire article
September 26, 2018
Insider Selling Soars: Fastest Pace Of September Sales In Past Decade
One month ago, we reported that insider selling reached $450 million daily in August, the highest level this year; on a monthly basis, insiders sold more than $10 billion of their stock, the most of any month this year and near the most on record.
"As corporate buying is at least taking a breather, corporate insiders are ramping up share selling as the major U.S. stock market averages are at or near record highs," TrimTabs wrote in a note.
One month later, TrimTabs is out with a follow up monthly report which finds even more of the same: according to the investment research company, the "best-informed market participants" are selling their own stocks at the fastest pace in September in the past decade, even as stock buyback announcements have hit record levels.
Corporate insiders have sold an average of $400 million daily in September through Friday, September 21, TrimTabs founds, adding that this month’s volume of $5.7 billion is already the highest in any September in the past decade.
Of course this comes at a time of record corporate stock buybacks, resulting in a perverse loops in which insiders dumping near record amount of stock to their own, far less informed, shareholders.
“While insiders are selling hard with their own money, they’ve committed record amounts of shareholders’ money to prop up stock prices this year,” said David Santschi, Director of Liquidity Research at TrimTabs Investment Research.
Read the entire article
"As corporate buying is at least taking a breather, corporate insiders are ramping up share selling as the major U.S. stock market averages are at or near record highs," TrimTabs wrote in a note.
One month later, TrimTabs is out with a follow up monthly report which finds even more of the same: according to the investment research company, the "best-informed market participants" are selling their own stocks at the fastest pace in September in the past decade, even as stock buyback announcements have hit record levels.
Corporate insiders have sold an average of $400 million daily in September through Friday, September 21, TrimTabs founds, adding that this month’s volume of $5.7 billion is already the highest in any September in the past decade.
Of course this comes at a time of record corporate stock buybacks, resulting in a perverse loops in which insiders dumping near record amount of stock to their own, far less informed, shareholders.
“While insiders are selling hard with their own money, they’ve committed record amounts of shareholders’ money to prop up stock prices this year,” said David Santschi, Director of Liquidity Research at TrimTabs Investment Research.
Read the entire article
September 25, 2018
How Long Before China's Exports Are Hammered By Trade War
Two weeks ago we asked "when will the US finally feel the pain from trade wars" and answered: as soon as the $200BN in "phase II" tariffs are implemented, which happened just after midnight on Monday at which point is is only a matter of time before rising prices catch up with ordinary Americans. Today, we reverse the query and ask a similar question for China, which unlike the US has already suffered substantially in its capital markets (and the slumping currency), if not so much where it really matters - at least according to Trump - its exports, the reason behind the US trade deficit.
In other words: When will the trade war affect China's exports?
Echoing the above observations, Deutsche Bank, which once again deconstructs the answer, notes that while the US-China trade war has caused "visible damage" to China's stocks, it seems to have had no impact on China's exports so far. But now that the US has announced a tariff on US$ 200bn of China's exports, when will the actual pain to exporters, corporates, and consumers start to be felt?
Well, according to DB's Zhang Zhiwei, the damage of the trade war has already shown up in disaggregate data. Specifically, after the US imposed a 25% tariff on $34bn of Chinese exports on July 6, US Customs data show that the imports of this group of goods dropped by 10% yoy in July. However, disaggregate data on this level is only available with a lag of about two months, which is why DB expects imports in August for this group of goods to drop further.
The flipside, of course, is that aggregate US imports from China were strong in July, because of interesting "front running" behavior as traders rushed to lock in deliveries, and prices, ahead of the next tariff round. The US government announced on June 15 that a 25% tariff would be imposed on another group of Chinese goods worth US $16bn, which came into effect on August 23. This caused a surge of imports for this group in July, up to 40% yoy, which in turn helped to offset the slump of imports for the US$ 34bn of goods already facing tariffs in July. Meanwhile, the headline trade data, which is the total US imports from China, remained strong at 8% yoy in July.
Read the entire article
In other words: When will the trade war affect China's exports?
Echoing the above observations, Deutsche Bank, which once again deconstructs the answer, notes that while the US-China trade war has caused "visible damage" to China's stocks, it seems to have had no impact on China's exports so far. But now that the US has announced a tariff on US$ 200bn of China's exports, when will the actual pain to exporters, corporates, and consumers start to be felt?
Well, according to DB's Zhang Zhiwei, the damage of the trade war has already shown up in disaggregate data. Specifically, after the US imposed a 25% tariff on $34bn of Chinese exports on July 6, US Customs data show that the imports of this group of goods dropped by 10% yoy in July. However, disaggregate data on this level is only available with a lag of about two months, which is why DB expects imports in August for this group of goods to drop further.
The flipside, of course, is that aggregate US imports from China were strong in July, because of interesting "front running" behavior as traders rushed to lock in deliveries, and prices, ahead of the next tariff round. The US government announced on June 15 that a 25% tariff would be imposed on another group of Chinese goods worth US $16bn, which came into effect on August 23. This caused a surge of imports for this group in July, up to 40% yoy, which in turn helped to offset the slump of imports for the US$ 34bn of goods already facing tariffs in July. Meanwhile, the headline trade data, which is the total US imports from China, remained strong at 8% yoy in July.
Read the entire article
September 24, 2018
China Vows Not To Negotiate Under Threat, As Trump Teases "Major Broadside" Against Beijing
Investors had managed to cling on to optimism that the 'trade skirmish' between the US and China would reach a swift conclusion - and that the US would ultimately be better off, as China would be forced to curtail practices like its IP theft from US companies.
But as downbeat markets observed on Monday morning, hope of a harmonious resolution died when Beijing cancelled plans to send two delegations to Washington. The delegates would have engaged in the fifth round of talks since the trade conflict - war, whatever you want to call it - began earlier this year.
Meanwhile, the US formally imposed 10% tariffs on roughly $200 billion in Chinese goods just after midnight on Monday morning, pushing China to impose tariffs on roughly $60 billion of goods. Even before the tariffs took effect, US stock futures and the yuan tumbled after the start of trading Sunday night, leading European and Asian stocks lower (to be sure, these moves took place with holidays in China, Japan and South Korea, which led to much thinner trading volumes).
Those losses were exacerbated when Beijing-run Xinhua news wire published a white paper where Chinese officials revealed that they would not engage in any further negotiations while the US continues to threaten further tariffs, per Bloomberg.
"The door for trade talks is always open but negotiations must be held in an environment of mutual respect," according to a white paper carried by the state-run Xinhua News Agency. Negotiations "cannot be carried out under the threat of tariffs."
Read the entire article
But as downbeat markets observed on Monday morning, hope of a harmonious resolution died when Beijing cancelled plans to send two delegations to Washington. The delegates would have engaged in the fifth round of talks since the trade conflict - war, whatever you want to call it - began earlier this year.
Meanwhile, the US formally imposed 10% tariffs on roughly $200 billion in Chinese goods just after midnight on Monday morning, pushing China to impose tariffs on roughly $60 billion of goods. Even before the tariffs took effect, US stock futures and the yuan tumbled after the start of trading Sunday night, leading European and Asian stocks lower (to be sure, these moves took place with holidays in China, Japan and South Korea, which led to much thinner trading volumes).
Those losses were exacerbated when Beijing-run Xinhua news wire published a white paper where Chinese officials revealed that they would not engage in any further negotiations while the US continues to threaten further tariffs, per Bloomberg.
"The door for trade talks is always open but negotiations must be held in an environment of mutual respect," according to a white paper carried by the state-run Xinhua News Agency. Negotiations "cannot be carried out under the threat of tariffs."
Read the entire article
September 14, 2018
"The World Is Sleepwalking Into A Financial Crisis": Former UK PM Gordon Brown
"We are in danger of sleepwalking into a future crisis," Brown told The Guardian in a recent interview at his estate in Scotland. "There is going to have to be a severe awakening to the escalation of risks, but we are in a leaderless world."
The former prime minister, who lost the 2010 election following Britain’s deepest recession on a post-war basis, said that countercyclical measures by governments and central banks have become widely exhausted. He warned the ability for global central banks to drop interest rates is not as readily possible today as it was a decade ago, while finance ministries would also have difficulty injecting fiscal stimulus, and here is the surprise: there is no guarantee that China would bail out the world, again.
"The cooperation that was seen in 2008 would not be possible in a post-2018 crisis both in terms of central banks and governments working together. We would have a blame-sharing exercise rather than solving the problem."
Brown had its doubts that China would be as cooperative for the second time to provide a global stimulus, primarily due to the Trump administration's trade war launched squarely at Beijing. "Trump’s protectionism is the biggest barrier to building international cooperation," he said.
Read the entire article
The former prime minister, who lost the 2010 election following Britain’s deepest recession on a post-war basis, said that countercyclical measures by governments and central banks have become widely exhausted. He warned the ability for global central banks to drop interest rates is not as readily possible today as it was a decade ago, while finance ministries would also have difficulty injecting fiscal stimulus, and here is the surprise: there is no guarantee that China would bail out the world, again.
"The cooperation that was seen in 2008 would not be possible in a post-2018 crisis both in terms of central banks and governments working together. We would have a blame-sharing exercise rather than solving the problem."
Brown had its doubts that China would be as cooperative for the second time to provide a global stimulus, primarily due to the Trump administration's trade war launched squarely at Beijing. "Trump’s protectionism is the biggest barrier to building international cooperation," he said.
Read the entire article
September 13, 2018
Global Stocks Rise Ahead Of Central Bank Barrage, Inflation Data
Global trade was front and center again, after the Trump administration proposed another round of trade talks with Beijing before slapping China with $200BN in tariffs in the absence of key concessions from Beijing, while traders were on edge ahead of a slew of central bank announcements and critical CPI data in the US.
One day after Apple's latest iPhone unveiling disappointed shareholders who sold AAPL stock and pressured tech stocks, world markets calmed and MSCI’s All World index was set for a fourth straight day of gains with S&P futures slightly higher after Asian shares jumped ending a 10 day losing streak, the longest in 16 years, on renewed hopes of fresh trade negotiations between the US and China.
Shanghai, Tokyo, Jakarta stocks all gained around 1% following Wednesday's sharp drop in the dollar, while Hong Kong’s Hang Seng finished up 1.8%, while China’s yuan also edged higher in the currency markets even if the Shanghai Composite barely budged amid ongoing skepticism inside Ground Zero, China, that talk this time will be different.
Initially, Europe also moved higher, led by automakers with gains between 0.2% and 0.6% for German, French, Italian and Spanish shares offsetting a weaker FTSE in London which was hit by weaker oil and tobacco stocks. However, Europe's Stoxx 600 index erased gains of as much as 0.3% as the Turkish lira plunged after country’s President Recep Tayyip Erdogan attacked the central bank for continuously missing inflation targets and saying the CBRT "should cut this high interest rate", just hours before rate decision.
Read the entire article
One day after Apple's latest iPhone unveiling disappointed shareholders who sold AAPL stock and pressured tech stocks, world markets calmed and MSCI’s All World index was set for a fourth straight day of gains with S&P futures slightly higher after Asian shares jumped ending a 10 day losing streak, the longest in 16 years, on renewed hopes of fresh trade negotiations between the US and China.
Shanghai, Tokyo, Jakarta stocks all gained around 1% following Wednesday's sharp drop in the dollar, while Hong Kong’s Hang Seng finished up 1.8%, while China’s yuan also edged higher in the currency markets even if the Shanghai Composite barely budged amid ongoing skepticism inside Ground Zero, China, that talk this time will be different.
Initially, Europe also moved higher, led by automakers with gains between 0.2% and 0.6% for German, French, Italian and Spanish shares offsetting a weaker FTSE in London which was hit by weaker oil and tobacco stocks. However, Europe's Stoxx 600 index erased gains of as much as 0.3% as the Turkish lira plunged after country’s President Recep Tayyip Erdogan attacked the central bank for continuously missing inflation targets and saying the CBRT "should cut this high interest rate", just hours before rate decision.
Read the entire article
September 12, 2018
Whole Foods Workers Revolt Against Amazon – Aim To Unionize After Awful Working Conditions
Jeff Bezos, Amazon’s founder, earns $268,000,000 every day, while regular Amazon and Whole Foods Market employees make an average of $15 per hour. Reports have uncovered the horrible working conditions inside Amazon’s massive warehouses — as some employees had to pee in bottles because they lived in fear of being disciplined over ‘idle time’. Now a group of workers at Whole Foods is trying to form a union, seeking better compensation after the Amazon buyout left the company with deteriorating working conditions, workers claim.
In a memo sent to nearly every Whole Foods employee on Thursday, the union’s organizers said Amazon is accelerating layoffs and consolidating stores put employees’ livelihoods at risk, and that more consolidation was expected. This is the second time Whole Foods workers have tried to organize, but it is the first time under the new ownership of Amazon, said the Fast Company.
The union demanded a $15-an-hour minimum wage, better retirement benefits, paid maternity leave and lower health insurance costs, among other benefits — as the current situation shows all is not well in the popular grocery store as Amazon is their new corporate overlord.
“Over the past year, layoffs and the consolidations of store-level positions at Whole Foods Market have upset the livelihood of team members, stirred, anxiety, and lowered morale within stores,” the memo declared. It then claims that Whole Foods CEO John Mackey sold the store to Amazon “with an agreement to trim hundreds of millions of dollars of labor from our stores.” The letter continues, “There will continue to be layoffs in 2019 and beyond as Amazon aims to aggressively trim our labor force before it expands with new technology and labor models.”
Read the entire article
In a memo sent to nearly every Whole Foods employee on Thursday, the union’s organizers said Amazon is accelerating layoffs and consolidating stores put employees’ livelihoods at risk, and that more consolidation was expected. This is the second time Whole Foods workers have tried to organize, but it is the first time under the new ownership of Amazon, said the Fast Company.
The union demanded a $15-an-hour minimum wage, better retirement benefits, paid maternity leave and lower health insurance costs, among other benefits — as the current situation shows all is not well in the popular grocery store as Amazon is their new corporate overlord.
“Over the past year, layoffs and the consolidations of store-level positions at Whole Foods Market have upset the livelihood of team members, stirred, anxiety, and lowered morale within stores,” the memo declared. It then claims that Whole Foods CEO John Mackey sold the store to Amazon “with an agreement to trim hundreds of millions of dollars of labor from our stores.” The letter continues, “There will continue to be layoffs in 2019 and beyond as Amazon aims to aggressively trim our labor force before it expands with new technology and labor models.”
Read the entire article
September 11, 2018
Why The U.S. Is Suddenly Buying A Lot More Saudi Oil
For a few months now, OPEC has been boosting production to ease concerns about high oil prices amid expected supply losses from Venezuela and Iran.
The cartel’s largest producer and exporter, Saudi Arabia, has been specifically targeting an increase in crude oil exports to the most transparent market, the United States, which reports crude oil imports and inventory levels every week.
On the one hand, the Saudis are looking to regain their foothold in the American market after having cut shipments to the United States to a 30-year-low at the end of last year, when OPEC’s efforts to erase the global oil glut were in full swing.
On the other hand, the Saudis are responding to the demands of their staunch ally U.S. President Donald Trump, who has repeatedly slammed OPEC for the high gasoline prices, urging the cartel in early July to “REDUCE PRICING NOW!”
Read the entire article
The cartel’s largest producer and exporter, Saudi Arabia, has been specifically targeting an increase in crude oil exports to the most transparent market, the United States, which reports crude oil imports and inventory levels every week.
On the one hand, the Saudis are looking to regain their foothold in the American market after having cut shipments to the United States to a 30-year-low at the end of last year, when OPEC’s efforts to erase the global oil glut were in full swing.
On the other hand, the Saudis are responding to the demands of their staunch ally U.S. President Donald Trump, who has repeatedly slammed OPEC for the high gasoline prices, urging the cartel in early July to “REDUCE PRICING NOW!”
Read the entire article
September 10, 2018
The New Normal In Europe: Increasing Population, Decreasing GDP
Leading European politicians and economists argue that the influx of immigrants is an economic necessity.
Naturalization of foreigners implemented for the purpose of executing a re-population program (resembling the Sinicization of Tibet) has become a national policy in most European countries. Replacing the dying European population with workers from Africa and the Middle East is supposed not only to save national economies and support the pension systems but also to boost economic growth.
Basic economic indicators, however, show that the opposite is true.
A year ago The Economist wrote that migration is beneficial to the global economy.
The Gefira team has shown that economic immigrants are more frequently beneficiaries of social benefits, and are less professionally active than non-native Europeans.
Our analysis is also validated by the scientists from the University of Basel. The result is that indigenous Europeans have to provide for immigrants.
Read the entire article
Naturalization of foreigners implemented for the purpose of executing a re-population program (resembling the Sinicization of Tibet) has become a national policy in most European countries. Replacing the dying European population with workers from Africa and the Middle East is supposed not only to save national economies and support the pension systems but also to boost economic growth.
Basic economic indicators, however, show that the opposite is true.
A year ago The Economist wrote that migration is beneficial to the global economy.
The Gefira team has shown that economic immigrants are more frequently beneficiaries of social benefits, and are less professionally active than non-native Europeans.
Our analysis is also validated by the scientists from the University of Basel. The result is that indigenous Europeans have to provide for immigrants.
Read the entire article
September 7, 2018
The 11th Hour: 8 Examples Of Mainstream Media Sources Warning Us Of Imminent Economic Disaste
Are we on the verge of another great financial crisis, a devastating recession and a horrific implosion of the global debt bubble? On my website I have been relentlessly warning my readers about the inevitable consequences of our very foolish actions, but now the mainstream media is beginning to sound just like The Economic Collapse Blog. The coming crisis is so close now that a lot of them are starting to see it, and of course economic disaster is already a reality for much of the rest of the planet. For years, the mainstream media told us that things would get better, and in a lot of ways we did see some improvement. But now the tone of the mainstream media has become quite ominous, and that is definitely not a positive sign. The following are 8 examples of mainstream media sources warning us of imminent economic disaster…
#1 Forbes: “Disaster Is Inevitable When America’s Stock Market Bubble Bursts”…
#2 CNBC: “Tech stock sell-off could be just beginning if trade war with China worsens”…
#3 Bloomberg: “Emerging-market rout is longest since 2008 as confidence cracks”…
#4 CNN: “Emerging Markets Look Sick. Will They Infect Wall Street?”…
#5 The Motley Fool: “6 signs the next recession might be closer than we realize”…
#6 Forbes: “U.S. Household Wealth Is Experiencing An Unsustainable Bubble”…
#7 Savannah Now: “Global debt soars, along with fears of crisis ahead”…
#8 CNBC: “The emerging market crisis is back. And this time it’s serious”…
Read the entire article
#1 Forbes: “Disaster Is Inevitable When America’s Stock Market Bubble Bursts”…
#2 CNBC: “Tech stock sell-off could be just beginning if trade war with China worsens”…
#3 Bloomberg: “Emerging-market rout is longest since 2008 as confidence cracks”…
#4 CNN: “Emerging Markets Look Sick. Will They Infect Wall Street?”…
#5 The Motley Fool: “6 signs the next recession might be closer than we realize”…
#6 Forbes: “U.S. Household Wealth Is Experiencing An Unsustainable Bubble”…
#7 Savannah Now: “Global debt soars, along with fears of crisis ahead”…
#8 CNBC: “The emerging market crisis is back. And this time it’s serious”…
Read the entire article
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