Schwab's Sonders: Here's the bull case for stock markets:
But not Charles Schwab chief investment strategist Liz Ann Sonders. She just made maybe the boldest call of all: belief in a continued bull market run and confidence that a recession isn't happening anytime soon."
'via Blog this'
Thursday, January 28, 2016
Tuesday, January 26, 2016
Apple beats on earnings, misses revenue and iPhone units; Q2 sales guidance below consensus
Apple beats on earnings, misses revenue and iPhone units; Q2 sales guidance below consensus:
"Cook said that the second quarter will be the iPhone's toughest comparison, but then "the year will get better as we move forward.""
'via Blog this'
"Cook said that the second quarter will be the iPhone's toughest comparison, but then "the year will get better as we move forward.""
'via Blog this'
Mohamed El-Erian warns about a day of reckoning
Mohamed El-Erian warns about a day of reckoning: ""Either we validate the financial asset prices and growth faster, or alternatively we will slip into a global recession with financial disorder," El-Erian told CNBC's "Squawk Box." He put a timetable of about three years on the outcome.
"The path we're on right now — and that we've been on for a while— is ending," the former Pimco co-CEO said, advocating central banks step back and allow economies to determine their own futures."
'via Blog this'
"The path we're on right now — and that we've been on for a while— is ending," the former Pimco co-CEO said, advocating central banks step back and allow economies to determine their own futures."
'via Blog this'
Wall Street sees next rate hike in May now: Survey - CNBC 2016 Market Prediction
Wall Street sees next rate hike in May now: Survey: "Despite the recent sell-off, Wall Street expects stocks to rebound in 2016 and into 2017. The S&P 500 is seen rising to 2,035 this year and 2,158 next year from the current S&P level of 1,877. But the outlook for the 10-Year Treasury yield hit a new low with a forecast of just 2.51 percent by the end of 2016, down from the prior forecast of 2.67 percent. The 10-year yield closed Monday at 2.01 percent.
And 2016 began with the most downbeat outlook on growth in three years. Gross domestic product is seen growing just 2.17 percent this year. In each of the last two years, January forecasts in the survey for the year averaged closer to 3 percent.
The inflation outlook has also been revised lower, with an average year-end CPI forecast of just 1.5 percent, and oil prices seen lowering inflation by 40 basis points. The probability of a U.S.recession stands at 24.1 percent, among the higher readings from the survey. Previous readings that were higher, however, did not result in recessions."
'via Blog this'
And 2016 began with the most downbeat outlook on growth in three years. Gross domestic product is seen growing just 2.17 percent this year. In each of the last two years, January forecasts in the survey for the year averaged closer to 3 percent.
The inflation outlook has also been revised lower, with an average year-end CPI forecast of just 1.5 percent, and oil prices seen lowering inflation by 40 basis points. The probability of a U.S.recession stands at 24.1 percent, among the higher readings from the survey. Previous readings that were higher, however, did not result in recessions."
'via Blog this'
Monday, January 25, 2016
May 2015 U.S. Foreclosure Market Report | Newsroom and Media Center
May 2015 U.S. Foreclosure Market Report | Newsroom and Media Center: "38 states post annual increase in REOs
Following the national trend, 38 states and the District of Columbia posted year-over-year increases in REOs, including New Jersey (up 197 percent), New York (up 116 percent), Ohio (up 114 percent), Georgia (up 108 percent), Pennsylvania (up 106 percent), Florida (up 63 percent), Michigan (up 63 percent), Maryland (up 62 percent), and California (up 31 percent).
“Even though national foreclosures increased a tad and REOs in California jumped we saw an expected settling in the Los Angeles metro numbers,” said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. “As we settle back into more stable markets we will see some areas up and some down in foreclosure starts but overall we are settling back towards pre-boom distress percentages as a part of the overall market. There’s still more inventory to clean up but all indicators are these are the final and in some cases the toughest distressed properties to move through the system. A drop in distressed inventory adds even more upward pressure on pricing as inventory still lags behind good buyer interest across the region.”
“As available housing inventory begins to increase, we are noticing slight increases in foreclosure activity across Ohio — particularly, in Columbus for homes priced under $200,000, which appears to be driven by Home Equity Lines of Credit maturity loans, as well as an aging population of homeowners not understanding opportunities available to them from increased area prices,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “As income has not kept up with growing medical costs and credit expenses, many of these same homeowners are now in negative cash flow and equity situations. These homeowners should reach out to a neighborhood real estate or mortgage professional immediately to find out what options are available to them.”"
'via Blog this'
Following the national trend, 38 states and the District of Columbia posted year-over-year increases in REOs, including New Jersey (up 197 percent), New York (up 116 percent), Ohio (up 114 percent), Georgia (up 108 percent), Pennsylvania (up 106 percent), Florida (up 63 percent), Michigan (up 63 percent), Maryland (up 62 percent), and California (up 31 percent).
“Even though national foreclosures increased a tad and REOs in California jumped we saw an expected settling in the Los Angeles metro numbers,” said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. “As we settle back into more stable markets we will see some areas up and some down in foreclosure starts but overall we are settling back towards pre-boom distress percentages as a part of the overall market. There’s still more inventory to clean up but all indicators are these are the final and in some cases the toughest distressed properties to move through the system. A drop in distressed inventory adds even more upward pressure on pricing as inventory still lags behind good buyer interest across the region.”
“As available housing inventory begins to increase, we are noticing slight increases in foreclosure activity across Ohio — particularly, in Columbus for homes priced under $200,000, which appears to be driven by Home Equity Lines of Credit maturity loans, as well as an aging population of homeowners not understanding opportunities available to them from increased area prices,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “As income has not kept up with growing medical costs and credit expenses, many of these same homeowners are now in negative cash flow and equity situations. These homeowners should reach out to a neighborhood real estate or mortgage professional immediately to find out what options are available to them.”"
'via Blog this'
U.S. Homeownership at 25 Year Low, Non-Occupant Owners at Record High - WORLD PROPERTY JOURNAL Global News Center
U.S. Homeownership at 25 Year Low, Non-Occupant Owners at Record High - WORLD PROPERTY JOURNAL Global News Center: "According to RealtyTrac's Q1 2015 Cash, Investor & Distressed Sales Report, owner-occupant buyers accounted for 63.2 percent of all residential single family home and condo sales in the first quarter of 2015, down from 65.8 percent in the previous quarter and 68.6 percent a year ago to the lowest quarterly level going back to the first quarter of 2011, the earliest quarter with data available.
In addition, the homeownership rate in the first quarter of 2015 fell to 63.7 percent, the lowest since 1990, according to the U.S. Census. "
'via Blog this'
In addition, the homeownership rate in the first quarter of 2015 fell to 63.7 percent, the lowest since 1990, according to the U.S. Census. "
'via Blog this'
Managing Risk in High LTV Loans
Managing Risk in High LTV Loans:
"Again quoting Wriston, "All life is the management of risk, not its elimination," Freddie Mac's economists concluded that low down payments, by themselves, do not carry unreasonable credit risk compared to other well-accepted mortgage products. Thus one key to reducing risk is to avoid layering on other components of risk."
'via Blog this'
"Again quoting Wriston, "All life is the management of risk, not its elimination," Freddie Mac's economists concluded that low down payments, by themselves, do not carry unreasonable credit risk compared to other well-accepted mortgage products. Thus one key to reducing risk is to avoid layering on other components of risk."
Managing Risk in High LTV Loans
Sep 2 2015, 10:24AM
In addition to its usual recap of economic and housing indicators and future projections this week's edition of Freddie Mac's Insights and Outlook sought to put any potential risk of its the new 97 percent mortgages in context. The mortgages, a program Freddie Mac calls Home Possible Advantage, were rolled out last spring and a similar program was introduced by Fannie Mae the previous autumn.
The new mortgages have safeguards to limit the credit risks associated with the low down payments including solid FICO scores and require private mortgage insurance. A key element of the program is the elimination of layered risks; a combination of multiple risky features has been found to magnify the total risk of a loan. It was layered risk that presented a significant vulnerability to loss in loans originated prior to the Great Recession.
Building on a quote from banker Walter Wriston, "Judgment comes from experience-and experience comes from bad judgment" the article says it was some of the market's bad judgments during the housing bubble that led to the losses experienced thereafter. Those events in turn give markets the experiences that forge better judgment behind the design of programs like those now offered by Freddie and Fannie.
Before Freddie Mac launched the program it had to assess the magnitude of the risk of low down payments. To do this they looked at loans funded by the company between the beginning of 2000 and June 2013 and calculated the actual losses realized between January 2003 and the end of the period, a span the includes both peak loan losses and a more typical pattern of loss. They measured the absolute risk by the average percentage loss on groups of loans but loss are dominated by the time period i.e. absolute risk would be higher in periods ofunusually high loss. Therefore Freddie Mac looked at relative risk, the ratio of the absolute risk of two comparable groups. For example, 3/1 hybrid ARMS had an absolute risk 35 percent higher than that of 30-year fixed-rate mortgages (FRM), or an absolute risk ratio of 1.35.
The report says that, not surprisingly, low down payment mortgages were found to be relatively riskier than loans with down payments between 20 and 29 percent but what was surprising how small the difference was. Loans with a 95 percent or higher loan-to-value (LTV) ratio were found to be only 31 percent riskier than loans with an 80 percent LTV - in other words about as risky as a 3/1 ARM. Further, the relative risk of other types of loans was much higher. Hybrid 7/1 ARMs were 155 percent riskier than 30-year FRM and 5/1 ARMS carried five times the risk.
So clearly one way to control the risk of low-down payment loans is to make that option available only for fixed rate loans, avoiding the payment shocks that can lead to financial problems - and not layering on additional risk. When only FRM were analyzed Freddie Mac found 95+ LTV loans were 68 percent riskier than 80 LTV loans. This estimate is a bit higher than the 31 percent relative risk for all loan types but still much lower than the relative risk of medium-term hybrid ARMs. And at exactly 97 LTV, the maximum allowed by Home Possible Advantage, low down payment loans were only 17 percent riskier than 80 LTV loans.
Again quoting Wriston, "All life is the management of risk, not its elimination," Freddie Mac's economists concluded that low down payments, by themselves, do not carry unreasonable credit risk compared to other well-accepted mortgage products. Thus one key to reducing risk is to avoid layering on other components of risk.
The new mortgages have safeguards to limit the credit risks associated with the low down payments including solid FICO scores and require private mortgage insurance. A key element of the program is the elimination of layered risks; a combination of multiple risky features has been found to magnify the total risk of a loan. It was layered risk that presented a significant vulnerability to loss in loans originated prior to the Great Recession.
Building on a quote from banker Walter Wriston, "Judgment comes from experience-and experience comes from bad judgment" the article says it was some of the market's bad judgments during the housing bubble that led to the losses experienced thereafter. Those events in turn give markets the experiences that forge better judgment behind the design of programs like those now offered by Freddie and Fannie.
Before Freddie Mac launched the program it had to assess the magnitude of the risk of low down payments. To do this they looked at loans funded by the company between the beginning of 2000 and June 2013 and calculated the actual losses realized between January 2003 and the end of the period, a span the includes both peak loan losses and a more typical pattern of loss. They measured the absolute risk by the average percentage loss on groups of loans but loss are dominated by the time period i.e. absolute risk would be higher in periods ofunusually high loss. Therefore Freddie Mac looked at relative risk, the ratio of the absolute risk of two comparable groups. For example, 3/1 hybrid ARMS had an absolute risk 35 percent higher than that of 30-year fixed-rate mortgages (FRM), or an absolute risk ratio of 1.35.
The report says that, not surprisingly, low down payment mortgages were found to be relatively riskier than loans with down payments between 20 and 29 percent but what was surprising how small the difference was. Loans with a 95 percent or higher loan-to-value (LTV) ratio were found to be only 31 percent riskier than loans with an 80 percent LTV - in other words about as risky as a 3/1 ARM. Further, the relative risk of other types of loans was much higher. Hybrid 7/1 ARMs were 155 percent riskier than 30-year FRM and 5/1 ARMS carried five times the risk.
So clearly one way to control the risk of low-down payment loans is to make that option available only for fixed rate loans, avoiding the payment shocks that can lead to financial problems - and not layering on additional risk. When only FRM were analyzed Freddie Mac found 95+ LTV loans were 68 percent riskier than 80 LTV loans. This estimate is a bit higher than the 31 percent relative risk for all loan types but still much lower than the relative risk of medium-term hybrid ARMs. And at exactly 97 LTV, the maximum allowed by Home Possible Advantage, low down payment loans were only 17 percent riskier than 80 LTV loans.
Again quoting Wriston, "All life is the management of risk, not its elimination," Freddie Mac's economists concluded that low down payments, by themselves, do not carry unreasonable credit risk compared to other well-accepted mortgage products. Thus one key to reducing risk is to avoid layering on other components of risk.
'via Blog this'
Fannie Mae Is At It Again: Loan-To-Value Ratio Now Higher Than During Housing Bubble | Zero Hedge
Fannie Mae Is At It Again: Loan-To-Value Ratio Now Higher Than During Housing Bubble | Zero Hedge: "Fannie Mae Is At It Again: Loan-To-Value Ratio Now Higher Than During Housing Bubble"
'via Blog this'
At last. Residential mortgage (1-4 unit) lending is almost back to zero percent growth!
It has been a tough time for mortgage lenders since the passing of Dodd-Frank and the creation of the Consumer Financial Protection Bureau (CFPB). The Urban Institute has this chart showing that the absence of risky loans in the economy is the answer.
Now, hold on one second! I am unclear as to how Laurie Goodman and company define “risky,” but low down payment loans are more risky than 20% down payment loans empirically. I don’t know if the Urban Institute counts 3-5% down payment loans as risky in their chart.
Why mention loan down payment lending? Because Fannie Mae and Freddie Mac are the primary purchaser of single-family mortgages since the housing bubble burst. The FHA is an insurer, not a loan purchaser.
Here is some empirical evidence from Fannie Mae mortgage-backed securities (MBS). Here is the average loan-to-value (LTV) ratio for Fannie Mae 4% coupon MBS:
At least for 4% coupon Fannie MBS, the average LTV is higher now than during the housing bubble! So much for the story that Fannie and Freddie are “too tight” with mortgage credit.
Now, in terms of credit (FICO) score, Fannie 4% coupon MBS is higher today than during the housing bubble. But it continues to decline.
But how low should Fannie and Freddie expand (drop) their FICO box?
It is like a raccoon riding on the back of an alligator.
The raccoon hopes that the economy doesn’t tank and home prices fall (again).
'via Blog this'
High Risk Investment That Brought Down The U.S. Economy Returns, With A New Name | ThinkProgress
High Risk Investment That Brought Down The U.S. Economy Returns, With A New Name | ThinkProgress: "Goodbye, “collateralized debt obligations.” Hello, “bespoke tranche opportunities.” Banks including Goldman Sachs are marketing that newfangled product, according to Bloomberg, and total sales of “bespoke tranche opportunities” leaped from under $5 billion in 2013 to $20 billion last year."
'via Blog this'
'via Blog this'
The Bubble Is Complete: 'Smart Money' Buys Into Bespoke Tranche "Opportunity" (Again) | Zero Hedge - March 2015
The Bubble Is Complete: 'Smart Money' Buys Into Bespoke Tranche "Opportunity" (Again) | Zero Hedge: "Goldman is marketing what the bank calls a “bespoke tranche opportunity”, which is in many ways financial engineering taken to its logical extreme, as it allows the customer (or, as banks will call him/her, the “investor”) to actually participate in the creation of Frankenstein by choosing the credits that are included in the tranche on which protection is being bought/sold. Why would anyone want to do this? Well, there are a few reasons, but it basically comes down to whether you, the investor, think you either have a particularly good read on the outlook for a specific set of credits, or believe that a customized basket of credits offers a better risk/reward profile than standardized IG/HY indices, or both. As Citi notes, if you can find a mix of credits you’re comfortable with, you can juice the yield well above what you’d be getting on a pure IG portfolio and still be happy with the level of risk. If you’re in the equity tranches and you’re good at selecting credits that hold up, you can take advantage of structural leverage.
So, in a nutshell, this is the synthetic CDO equivalent of a Build-A-Bear Workshop. "
'via Blog this'
So, in a nutshell, this is the synthetic CDO equivalent of a Build-A-Bear Workshop. "
'via Blog this'
Friday, January 22, 2016
Tom DeMark: "Today Is An Interim Low" Followed By A 5-8% Rebound, Then Another Selloff; China To Fall Further | Zero Hedge
Tom DeMark: "Today Is An Interim Low" Followed By A 5-8% Rebound, Then Another Selloff; China To Fall Further | Zero Hedge: "Earlier today, just as global stocks entered a bear market, DeMark spoke with Bloomberg TV, and may have been one of the catalysts for today's violent surge off the lows just as the Dow Jones was crashing by over 550 points, when he said that "today may have been an interim low" highlighting that the intensity of the decline is comparable to the plunge in November 2008 and August 2011, both of which were followed by reflex rallies of 5-8%, roughly the same as what he expects now:
We think it could be a pretty good rally off that low; We're going to have a two-step affair: a low today, maybe tomorrow and then we rally and people take a deep breath. After we see that rally, maybe anywhere from a week and a half to three weeks, we decline again and I think that's coincident with the Shanghai Composite and the Hang Seng Index declining."
'via Blog this'
We think it could be a pretty good rally off that low; We're going to have a two-step affair: a low today, maybe tomorrow and then we rally and people take a deep breath. After we see that rally, maybe anywhere from a week and a half to three weeks, we decline again and I think that's coincident with the Shanghai Composite and the Hang Seng Index declining."
'via Blog this'
"Is The Bottom In?" - BofA Answers The Question Everyone Is Asking | Zero Hedge
"Is The Bottom In?" - BofA Answers The Question Everyone Is Asking | Zero Hedge: "On Wednesday, as the Dow Jones plunged by over 550 points and the S&P dropped by 15% from its all time highs seen last summer, many speculated - most notably Tom DeMark - that the relentless selloff had finally hit an "interim low", and was due for a rebound as much as 8%. Events since then have so far validated this forecast.
However the one question on everyone's lips, is whether aside from a "interim low", was Wednesday's flush the market's lows for the foreseeable future, and certainly for the first quarter.
Bank of America responds.
According to its strategist Michael Hartnett, while the January lows may indeed be in for the following reasons...
Breadth Rule in "buy" territory (95% of mkts <200 & 50dma); FMS cash jumped to 5.4% in Jan (3rd highest since 2009); uber-crowded trades of long peripheral Euro-area debt, long Euro-area banks, long NKY, long FANG (FB, AMZN, NFLX, GOOG) spanked; capitulation in “Illiquid” yield plays (EMB, HY, MLPs); massive outperformance (6.8% YTD) of “long duration, short risk” CTA’s (Chart 2).
....the Q1 lows are not in"
'via Blog this'
However the one question on everyone's lips, is whether aside from a "interim low", was Wednesday's flush the market's lows for the foreseeable future, and certainly for the first quarter.
Bank of America responds.
According to its strategist Michael Hartnett, while the January lows may indeed be in for the following reasons...
Breadth Rule in "buy" territory (95% of mkts <200 & 50dma); FMS cash jumped to 5.4% in Jan (3rd highest since 2009); uber-crowded trades of long peripheral Euro-area debt, long Euro-area banks, long NKY, long FANG (FB, AMZN, NFLX, GOOG) spanked; capitulation in “Illiquid” yield plays (EMB, HY, MLPs); massive outperformance (6.8% YTD) of “long duration, short risk” CTA’s (Chart 2).
....the Q1 lows are not in"
'via Blog this'
Governor Knew About Flint Water Poisoning for Nearly A Year, Tried To Shift Blame | Zero Hedge
Governor Knew About Flint Water Poisoning for Nearly A Year, Tried To Shift Blame | Zero Hedge: "Redacted emails released Wednesday by Michigan Gov. Rick Snyder show that his administration was informed of problems with Flint’s water almost a year ago, many months before the embattled governor or his staff begrudgingly admitted to bearing any responsibility for poisoning a city — or for fixing the problem.
A background memo sent to the governor on February 1, 2015, “dismissed the pleas of Flint’s then-mayor Dayne Walling for state assistance, saying that the mayor had ‘seized on public panic … to ask the state for loan forgiveness and more money for infrastructure improvement’,” the Guardian reports from Detroit.
According to FOX2 Detroit, the email says the governor and Walling “had a telephone conversation and the mayor has pledged to work together on solutions.” Furthermore, it adds that Flint Representative Sheldon Neeley had “sent the governor a letter, saying that his constituents are on the verge of civil unrest” due to the water issue."
'via Blog this'
A background memo sent to the governor on February 1, 2015, “dismissed the pleas of Flint’s then-mayor Dayne Walling for state assistance, saying that the mayor had ‘seized on public panic … to ask the state for loan forgiveness and more money for infrastructure improvement’,” the Guardian reports from Detroit.
According to FOX2 Detroit, the email says the governor and Walling “had a telephone conversation and the mayor has pledged to work together on solutions.” Furthermore, it adds that Flint Representative Sheldon Neeley had “sent the governor a letter, saying that his constituents are on the verge of civil unrest” due to the water issue."
'via Blog this'
How To Trade This Market: What The Charts Say | Zero Hedge
How To Trade This Market: What The Charts Say | Zero Hedge: "The S&P 500 has been short-term oversold for most of January with little response to this oversold condition, which, BofAML's Stephen Suttmeier warns, is typically bear market behavior. However, US (and global) equities may be finally responding to tactical oversolds with what we believe is a sell strength relief rally..."
'via Blog this'
The S&P 500 has been short-term oversold for most of January with little response to this oversold condition, which, BofAML's Stephen Suttmeier warns, is typically bear market behavior. However, US (and global) equities may be finally responding to tactical oversolds with what we believe is a sell strength relief rally...
Where’s resistance?
In terms of the S&P 500, look for resistance in the 1867-1900 area, which the S&P 500 could exceed today, followed by 1950 and then the chart congestion zone between 1990-2025. Note that if the S&P 500 cannot regain 1900, it would be a textbook top breakdown and retest, but this is the real world where “trend followers” do battle with “mean reverters” and we cannot rule out a throw back into the topping pattern and into the 1950 to 2025 area.
Where’s support?
For those looking short term, yesterday’s low of 1848 is important support for building on an oversold bounce. The undercut of the October 2014 low of 1820 on Wednesday’s move to 1812, establishes 1820-1812 as support. However, many US equity indices already have tops in place (Russell 2000, S&P Midcap 400, and Value Line Arithmetic) and many technical indicators rolled over in advance of price. As such, we see risk for additional new lows.Below 1812 the next level for the S&P 500 is the rising 200-week MA near 1782 with the 38.2% retracement of the 2011-2015 rally at 1730. With a potential year-long distribution top, we are not ruling out 1600-1575 or a retest of the 2013 secular breakout point.
VXV/VIX oversold
The VXV/VIX is oversold, but since July 2015 these signals have led to lower highs in the S&P 500.
We see a similar set up for 2016. The S&P 500 failed to respond to the January 11 buy signal on the VXV/VIX – instead the S&P 500 dropped over 100 points into Wednesday’s intra-day low. It generated another on January 19.
Williams %R coming out of tactical oversold
Similar to the VXV/VIX, oversolds for the Williams %R, a price momentum indicator, have led to rallies to lower S&P 500 highs since mid 2015.
The Williams %R has been pinned at oversold since early January and quick spikes into overbought indicated sellable rallies in December. This is downtrend, correction, and/or bear market behavior.
The drop was too orderly anc complacent to be "the" bottom...
On Wednesday, the S&P 500 probed below the August 2015 and October 2014 lows at 1867 and 1820 on the move down to 1812. This intra-day drop of 3.67% did not trigger an intra-day NYSE ARMS panic reading of 2.0 or more and we have not gotten any closing ARMS above 2.0. This suggests that the decline was orderly and not capitulation. This is unlike the late September and late August lows of 1872-1867, which coincided with panic readings for daily closing ARMS of 2.0 or more.
So here we are, tactically oversold and bouncing... for now.
'via Blog this'
Thursday, January 21, 2016
January 2016 - ECB poised to pull QE trigger on deflation - Business Insider - LTRO failing 4 years later
ECB poised to pull QE trigger on deflation - Business Insider: "Frankfurt (AFP) - The stage is set this week for the European Central Bank to unleash its biggest weapon yet in the battle against deflation in the eurozone, analysts said.
Financial markets and ECB watchers are betting that central bank chief Mario Draghi will unveil a programme of sovereign bond purchases known as quantitative easing (QE) at the first policy meeting of this year on Thursday."
'via Blog this'
Financial markets and ECB watchers are betting that central bank chief Mario Draghi will unveil a programme of sovereign bond purchases known as quantitative easing (QE) at the first policy meeting of this year on Thursday."
'via Blog this'
ECB 2011 LTRO Announcement -This Footnote To The ECB's LTRO Announcement Will Make You Squirm - Business Insider
This Footnote To The ECB's LTRO Announcement Will Make You Squirm - Business Insider: "It was just a little footnote to the LTRO announcement. Just a little statement that 40 billion of the collateral received by the ECB was newly issued, newly guaranteed Italian debt. The more I think about it, the more uncomfortable I get.
The ECB claims they have 40 billion of Italian government bonds on their books from the LTRO. The banks say they pledged 40 billion of Italian government debt. The Italian government doesn’t acknowledge it as debt. Maybe it will show up in a footnote somewhere, but that is about it.
So while approving some new austerity measures that are unlikely to work, the government added 40 billion of contingent liabilities. The rating agencies can’t be happy about that. Investors shouldn’t be happy with that. Rather than being a new source of funds for Italian debt (the most optimistic view of LTRO) it created new debt! It is adding to Italy’s debt problem.
And I can’t even figure out why they did this. Didn’t banks have other eligible collateral? Have they already pledged anything decent they own to the ECB or private lenders to get funds? Given the size of the balance sheets that is unbelievable but yet there is no explanation of why they didn’t have more ‘normal’ assets to pledge."
'via Blog this'
The ECB claims they have 40 billion of Italian government bonds on their books from the LTRO. The banks say they pledged 40 billion of Italian government debt. The Italian government doesn’t acknowledge it as debt. Maybe it will show up in a footnote somewhere, but that is about it.
So while approving some new austerity measures that are unlikely to work, the government added 40 billion of contingent liabilities. The rating agencies can’t be happy about that. Investors shouldn’t be happy with that. Rather than being a new source of funds for Italian debt (the most optimistic view of LTRO) it created new debt! It is adding to Italy’s debt problem.
And I can’t even figure out why they did this. Didn’t banks have other eligible collateral? Have they already pledged anything decent they own to the ECB or private lenders to get funds? Given the size of the balance sheets that is unbelievable but yet there is no explanation of why they didn’t have more ‘normal’ assets to pledge."
'via Blog this'
Goldman Has Four Reasons the Pullback in Stocks Doesn't Signal Recession - Bloomberg Business- Goldman Prediction
Goldman Has Four Reasons the Pullback in Stocks Doesn't Signal Recession - Bloomberg Business: "The S&P 500 is having one of its worst starts to the year ever, and while a number of big name investors say there's plenty more room to fall, economists at Goldman Sachs Group Inc. are arguing that the equities rout doesn't necessarily signal a coming recession in the U.S.. "
'via Blog this'
'via Blog this'
Wednesday, January 20, 2016
"My Career Basically Ended Today": What Is Really Happening In China | Zero Hedge
"My Career Basically Ended Today": What Is Really Happening In China | Zero Hedge: "Two months ago, long before the WSJ and the NYT wrote virtually carbon-copy pieces, we laid out a list of China risk factors which everyone by now is familiar with. These were as follows:
a slowing economy crippled by soaring debt, now over 300% of GDP
an economy which is overly reliant on fixed investment
an artificially high exchange rate which is adversely impacting exports and impairing trade, in a "beggar thy neighbor" world everyone is rapidly devaluing their own currency
the feedback loop of plunging commodity prices and highly levered domestic corporation which can not pay their annual interest expense payments at current prices of industrial commodities, leading to surging business failures and defaults
a burst housing bubble which recently popped (although slowly growing again)
a burst stock market bubble which recently popped (although slowly growing again)
Non-performing loans, as high as 20%, and metastsizing across the Chinese banking sector
The market has been struggling to price many of these into any existing investment theses. "
'via Blog this'
a slowing economy crippled by soaring debt, now over 300% of GDP
an economy which is overly reliant on fixed investment
an artificially high exchange rate which is adversely impacting exports and impairing trade, in a "beggar thy neighbor" world everyone is rapidly devaluing their own currency
the feedback loop of plunging commodity prices and highly levered domestic corporation which can not pay their annual interest expense payments at current prices of industrial commodities, leading to surging business failures and defaults
a burst housing bubble which recently popped (although slowly growing again)
a burst stock market bubble which recently popped (although slowly growing again)
Non-performing loans, as high as 20%, and metastsizing across the Chinese banking sector
The market has been struggling to price many of these into any existing investment theses. "
To corroborate this, in November we showed a tally of labor strikes through the 11th month amounted to a record high 2,005. We have updated this to show that in just the last two months of the year, labor strikes in China have exploded, sending the total to a whopping 2,703.
This chart alone, more than any bullshit goalseeked "data" released by the Chinese politburo, reveals all one needs to know not only about the Chinese economy and its collapsing labor situation, but also the social mood because for Chinese workers to dare to protest their employment conditions knowing full well they risk the full retaliation of the state which always frowns upon public displays of dissatisfaction, things in China must truly be on the verge of total collapse.
A useful anecdote to illustrate what is truly happening on the ground, comes courtesy of the NYT which tells the story of how having lost his factory job, one Chinese migrant worker returns home.
Liu Lang, a Chinese migrant worker, left his rural hometown in Sichuan Province two decades ago to work in the factories of the southern province of Guangdong, China’s manufacturing powerhouse. Now, he is moving back.“I worked my way up from a basic worker to a department head. And my career basically ended today,” Mr. Liu said on the train leaving Guangdong.Factories in Guangdong have been hit hard by the slowing economy, and many of them have closed, including the shoe factory where Mr. Liu worked.In 2015, China’s economy expanded 6.9 percent, just below the government’s target of 7 percent, according to official numbers released Tuesday. While the pace would be the envy of many developed countries, it marks China’s slowest economic growth since 1990, the year after the government’s crackdown on protesters in Tiananmen Square.“My wife and I were both working at that factory,” Mr. Liu said. “We lost more than 20,000 renminbi for the last three months,” he added, referring to about $3,000 in unpaid back wages.
'via Blog this'
Dumpster-Diving Massive-Short-Squeeze Rescues Stocks From 2014 Ebola Lows | Zero Hedge
Dumpster-Diving Massive-Short-Squeeze Rescues Stocks From 2014 Ebola Lows | Zero Hedge: "Dumpster-Diving Massive-Short-Squeeze Rescues Stocks From 2014 Ebola Low"
'via Blog this'
Then a huge Short-Squeeze ramped us higher in the afternoon...
'via Blog this'
Investing legend Jack Bogle: 'Stay the course' - Prediction
Investing legend Jack Bogle: 'Stay the course': "Investors thinking of selling amid the current market turmoil should resist the urge, Vanguard Group founder Jack Bogle said Wednesday.
"Just stay the course. Don't do something, just stand there. This is speculation that we're seeing out there, and you can't respond to it," the investing legend told CNBC's "Power Lunch."
Bogle made his remarks in the midst of yet another sell-off in global equities."
'via Blog this'
"Just stay the course. Don't do something, just stand there. This is speculation that we're seeing out there, and you can't respond to it," the investing legend told CNBC's "Power Lunch."
Bogle made his remarks in the midst of yet another sell-off in global equities."
'via Blog this'
Bridgewater's Dalio: Fed's next move toward QE, not tightening - Prediction - Accurate
Bridgewater's Dalio: Fed's next move toward QE, not tightening: "Amid the global market turmoil, the Federal Reserve is more likely to ease than tighten interest rates again, Ray Dalio, founder of the world's largest hedge fund, said Wednesday.
"I think a move to a quantitative easing would bolster psychology," he told CNBC's "Squawk Box" at the World Economic Forum in Davos, Switzerland.
The Fed hiked rates in December, the first such move in more than nine years.
At the time, central bankers telegraphed four more possible rate increases in 2016. But with the horrible start for the markets in the new year, many investors are questioning the wisdom of such an aggressive path higher.
"This will be a negative for the economy, this market movement. The Fed should remain flexible. It shouldn't be so wedded to a path," Dalio said. "We're going to have a lower level of growth in six months from now ... about 1.5 percent.""
'via Blog this'
"I think a move to a quantitative easing would bolster psychology," he told CNBC's "Squawk Box" at the World Economic Forum in Davos, Switzerland.
The Fed hiked rates in December, the first such move in more than nine years.
At the time, central bankers telegraphed four more possible rate increases in 2016. But with the horrible start for the markets in the new year, many investors are questioning the wisdom of such an aggressive path higher.
"This will be a negative for the economy, this market movement. The Fed should remain flexible. It shouldn't be so wedded to a path," Dalio said. "We're going to have a lower level of growth in six months from now ... about 1.5 percent.""
'via Blog this'
JPMorgan CEO Dimon: Market sell-off could just be an adjustment - Prediction
JPMorgan CEO Dimon: Market sell-off could just be an adjustment: "The recent equity sell-off could indicate a market-wide adjustment to new global conditions, JPMorgan Chase Chairman and CEO Jamie Dimon said Wednesday.
"When the market is this bad, it's reasonable to say it might be telling you something, but it's also reasonable to say 'maybe it's not,'" Dimon told CNBC's "Squawk on the Street" at the World Economic Forum in Davos.
"My own view is that you've had four or five things very different that are taking place," Dimon said. "China scared people with this bungling of the yuan — their currency — and their stock market, and their lower growth changed flows around the world. Commodity prices are down substantially now."
‹
Nasdaq posts most intraday lows since depths of 2008 crisis"
'via Blog this'
"When the market is this bad, it's reasonable to say it might be telling you something, but it's also reasonable to say 'maybe it's not,'" Dimon told CNBC's "Squawk on the Street" at the World Economic Forum in Davos.
"My own view is that you've had four or five things very different that are taking place," Dimon said. "China scared people with this bungling of the yuan — their currency — and their stock market, and their lower growth changed flows around the world. Commodity prices are down substantially now."
‹
Nasdaq posts most intraday lows since depths of 2008 crisis"
'via Blog this'
Investor sentiment sends the wrong message - CNBC Prediction
Investor sentiment sends the wrong message: "So if you buy during a period of low sentiment, you can't expect with reasonable certainty to gain beyond the typical return for the market over a given time period.
The only statistical significance was if you bought stocks a month before investors' sentiment was this low and sold the day the survey came out. In that case, you'd be down a median of 4.5 percent. That means the only thing investor sentiment is actually showing is that the market has been performing poorly and you shouldn't take it as a sign to sell."
'via Blog this'
The only statistical significance was if you bought stocks a month before investors' sentiment was this low and sold the day the survey came out. In that case, you'd be down a median of 4.5 percent. That means the only thing investor sentiment is actually showing is that the market has been performing poorly and you shouldn't take it as a sign to sell."
'via Blog this'
Fact-checking claims about Donald Trump's four bankruptcies | PolitiFact
Fact-checking claims about Donald Trump's four bankruptcies | PolitiFact: ""However, the source of the financial problems varies from case to case," he said. "Sometimes it is the result of circumstances beyond the control of the business. Sometime it caused by poor judgment. More frequently, it is a combination.""
'via Blog this'
'via Blog this'
How many times has Trump filed bankruptcy - Google Search
How many times has Trump filed bankruptcy - Google Search:
"First things first: Donald Trump has filed for corporate bankruptcy four times, in 1991, 1992, 2004 and 2009. All of these bankruptcies were connected to over-leveraged casino and hotel properties in Atlantic City, all of which are now operated under the banner of Trump Entertainment Resorts."
In short he washed everyone he owed money to 4 TIMES - and continues to own the very assets he screwed everyone on.
And we have him running for President. WOW! America!
'via Blog this'
"First things first: Donald Trump has filed for corporate bankruptcy four times, in 1991, 1992, 2004 and 2009. All of these bankruptcies were connected to over-leveraged casino and hotel properties in Atlantic City, all of which are now operated under the banner of Trump Entertainment Resorts."
In short he washed everyone he owed money to 4 TIMES - and continues to own the very assets he screwed everyone on.
And we have him running for President. WOW! America!
'via Blog this'
Trump: Apple should build 'their damn things' in US - Says the man who filed BK 4 times!
Trump: Apple should build 'their damn things' in US: ""Free trade is good. But we have to do it [force them back to the US]. Or we won't have a country left," said Trump.
Trump's campaign for the Republican nomination has been full of controversial ideas, with comments on Mexican immigrants, mosques, Muslims and refugees, among others."
With idiots like Trump we don't need outside elements to destabilize the masses who take everything at surface value.
This man has filed Bankruptcy and washed his creditors 4 times! His entire repertoire is hate speak, hyperbole and conjecture.
And to think he has a large of the voting population is a testament to what the combination of corruption and the breakdown in education has done.
The first along with easy access to information has served to inform and the second now allows people like Trump to interpret it in a fast and loose manner to suit his purpose.
He should be checkmated and soon.
'via Blog this'
Trump's campaign for the Republican nomination has been full of controversial ideas, with comments on Mexican immigrants, mosques, Muslims and refugees, among others."
With idiots like Trump we don't need outside elements to destabilize the masses who take everything at surface value.
This man has filed Bankruptcy and washed his creditors 4 times! His entire repertoire is hate speak, hyperbole and conjecture.
And to think he has a large of the voting population is a testament to what the combination of corruption and the breakdown in education has done.
The first along with easy access to information has served to inform and the second now allows people like Trump to interpret it in a fast and loose manner to suit his purpose.
He should be checkmated and soon.
'via Blog this'
Tuesday, January 19, 2016
Proving Wall Street Strategists Are "Full Of Bull" | Zero Hedge
Proving Wall Street Strategists Are "Full Of Bull" | Zero Hedge: "In now what’s an annual rite for Wall Street, their market “strategists” come out to the major media outlets and celebrate what they deem to be a prophetic view of the market’s future. Year after year though, what we see is a generally tight, and optimistic view of the next year’s market level. Of course the market doesn’t always go up by 9% or so every year (in the past two decades it has been roughly half of this!), which begs the question where is the value in these strategists' forecasts? Given that many on Wall Street have been dishing out their views to the media for nearly two decades (and includes multiple business cycles), we can now scrutinize more closely their forecasts and examine the quality of these firms individually (as opposed to only as a group for a single year). What we see in this article is that in some random circumstances, a predicting firm may be just ok, but many of the times the firms’ prediction results over the past 18 years are generally slightly worse than if had you flipped a coin about your own fixed guess as to where markets are headed, over that entire time.
We laboriously put together 186 public forecasts, culled from 19 years of media coverage of their “annual market call” story. And the data, the lengthiest ever for this purpose, is now available for your own public consumption here -https://sites.google.com/site/statisticalideas/home/wall-st-forecasters .
What you’ll see below is that these optimistic predictions haven’t changed immediately after the dot-com bubble burst of 2000. Though after the 2008 financial crisis strategist predictions have generally been brought down slightly, and run even more closely versus each other versus before the 2008 crisis. Of course there isn’t much risk for the forecaster in making such lousy calls. For example, of the 29 forecasting firms included in the study here, 13 provided forecasts in at least one of these disastrous market years: 2001, 2002, 2008. And not one of these 13 firms ever envisioned a down market year in any of these 3 years. If not bailed out through TARP, the other banks employing them did blow up however, and even then sometimes the analyst continued singing optimistic market praises at the new acquiring bank. If Wall Street prophets were able to provide an explicit confidence interval about each of their forecasts, with the risk of being fired if the market falls outside of their own forecast interval, would this whole game come to an abrupt end? Now let’s dig into these publicly tabulated strategist calls, from mostly the Barron’s reports.
It’s helpful to first simply draw out the raw data used for this analysis. We do so in the diagram below, and use continuous returns for all of our calculations for greater analytical potential. We see below that in December 2014, the 10 strategists surveyed predicted that the S&P would rise (and on average by 7%) through December 2015 (and there is standard deviation of 4% among these 10 strategists). We show this with “X” data about 0.07. The market of course, instead fell 1% during 2015, which we show with the blackened-in “O” data at -0.01. So in this example, all of the market forecasts were more optimistically biased than actual reality. "
'via Blog this'
We laboriously put together 186 public forecasts, culled from 19 years of media coverage of their “annual market call” story. And the data, the lengthiest ever for this purpose, is now available for your own public consumption here -https://sites.google.com/site/statisticalideas/home/wall-st-forecasters .
What you’ll see below is that these optimistic predictions haven’t changed immediately after the dot-com bubble burst of 2000. Though after the 2008 financial crisis strategist predictions have generally been brought down slightly, and run even more closely versus each other versus before the 2008 crisis. Of course there isn’t much risk for the forecaster in making such lousy calls. For example, of the 29 forecasting firms included in the study here, 13 provided forecasts in at least one of these disastrous market years: 2001, 2002, 2008. And not one of these 13 firms ever envisioned a down market year in any of these 3 years. If not bailed out through TARP, the other banks employing them did blow up however, and even then sometimes the analyst continued singing optimistic market praises at the new acquiring bank. If Wall Street prophets were able to provide an explicit confidence interval about each of their forecasts, with the risk of being fired if the market falls outside of their own forecast interval, would this whole game come to an abrupt end? Now let’s dig into these publicly tabulated strategist calls, from mostly the Barron’s reports.
It’s helpful to first simply draw out the raw data used for this analysis. We do so in the diagram below, and use continuous returns for all of our calculations for greater analytical potential. We see below that in December 2014, the 10 strategists surveyed predicted that the S&P would rise (and on average by 7%) through December 2015 (and there is standard deviation of 4% among these 10 strategists). We show this with “X” data about 0.07. The market of course, instead fell 1% during 2015, which we show with the blackened-in “O” data at -0.01. So in this example, all of the market forecasts were more optimistically biased than actual reality. "
'via Blog this'
Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit | Irish Examiner
Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit | Irish Examiner: "Oxfam, in the business of battling poverty worldwide for more than 70 years, says inequality is reaching new extremes despite massive growth in the global economy. But it is benefitting almost uniquely the rich, and even their club is getting smaller.
Part of the reason, the British-based charity shows, is that “tax is for little people”, with the wealthiest having $7.6tn (€6.98tn) salted away in tax havens — more than the combined gross domestic product of Britain and Germany.
Oxfam includes Ireland as one of 10 regimes that allow wealthy individuals and massive multinational corporations to avoid paying out the same percentage of their income in taxes as ordinary citizens.
IMF data referenced in the report also shows that corporate investment in these tax havens increased by almost four times between 2000 and 2014. This may come as something of a shock given the recent changes to the country’s tax rules, but Oxfam points out that, despite this, and the OECD devising new structures, not enough is changing and countries, including Ireland, have ensured new rules have been watered down.
The average yearly income of the poorest 10% has increased by less than $3 in the past 25 years. Close to half the overall growth in income went to the top 10%, while the bottom 10% got a miserable 0.6%.
“Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate,” the report says. “Once there, an ever more elaborate system of tax havens and an industry of wealth managers ensure that it stays there, far from the reach of ordinary citizens and their governments.”
But the money being sucked up by the top 1% is not just coming from the poor, but also from ordinary workers as they receive less of what they help create, while more of it goes to the owners of capital and the men at the top. The CEOs in top US companies have had a pay rise of more than 54% in the past five years, while ordinary wages have barely moved — despite big increases in labour productivity.
This creates a spiral of inequalities, with women in particular falling behind even further, with poorer health care, education, political representation, and work compared to men. Even among the richest, women get less of the pie, with 445 of the richest 500 being men while, at the other end of the scale, women make up the majority of low-paid workers.
And as the rich get richer, they also get more powerful, persuading or dictating to governments the policies they want.
“Economic and policy changes over the past 30 years — including deregulation, privatisation, financial secrecy and globalisation, especially of finance — have supercharged the age-old ability of the rich and powerful to use their position to further concentrate their wealth,” the report states.
Our politicians have bought into the myth that low taxes for rich people and companies are needed to spur economic growth that will trickle down to all. With some countries acting as tax havens, it puts pressure on others to lower taxes on businesses and the rich in what Oxfam describes as a “relentless race to the bottom”.
It feeds into a cycle of doom, as fewer taxes mean fewer services, with higher indirect tax such as Vat hitting the poorest most. And tax avoidance is rapidly getting worse, says Oxfam.
They analysed 200 companies and found that nine out of 10 have a presence in at least one tax haven, while, in 2014, corporate investment in these tax havens was almost four times more than it was in 2001.
The financial sector has grown most rapidly in recent years and now produces one in every five billionaires. The difference between what they pay themselves and the actual value their industry adds to the country is greater than in any other sector. Added to this is the fact that the majority of offshore wealth is managed by just 50 big banks.
Oxfam quotes a recent study by the OECD that is pertinent for Ireland, which shows countries with oversized financial sectors suffer greater economic instability and higher inequality.
The report fingers another sector that is big in Ireland — pharmaceutical companies — and especially their use of monopoly and intellectual property to drive up prices. They lobby to keep their monopoly and, rather than putting the needs of the ill first, they orchestrate their business to create profit at almost any cost to others.
Oxfam found that pharmaceutical companies spent more than $228m lobbying in Washington in 2014 — which several examples show is money well spent, having convinced the US to pressure India, and the EU and the US pressured Thailand to step back from allowing generics to be produced at a fraction of the cost they were paying Big Pharma. Limits on governments’ ability to act for cheaper medicines is also being enshrined in free trade agreements."
'via Blog this'
Part of the reason, the British-based charity shows, is that “tax is for little people”, with the wealthiest having $7.6tn (€6.98tn) salted away in tax havens — more than the combined gross domestic product of Britain and Germany.
Oxfam includes Ireland as one of 10 regimes that allow wealthy individuals and massive multinational corporations to avoid paying out the same percentage of their income in taxes as ordinary citizens.
IMF data referenced in the report also shows that corporate investment in these tax havens increased by almost four times between 2000 and 2014. This may come as something of a shock given the recent changes to the country’s tax rules, but Oxfam points out that, despite this, and the OECD devising new structures, not enough is changing and countries, including Ireland, have ensured new rules have been watered down.
The average yearly income of the poorest 10% has increased by less than $3 in the past 25 years. Close to half the overall growth in income went to the top 10%, while the bottom 10% got a miserable 0.6%.
“Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate,” the report says. “Once there, an ever more elaborate system of tax havens and an industry of wealth managers ensure that it stays there, far from the reach of ordinary citizens and their governments.”
But the money being sucked up by the top 1% is not just coming from the poor, but also from ordinary workers as they receive less of what they help create, while more of it goes to the owners of capital and the men at the top. The CEOs in top US companies have had a pay rise of more than 54% in the past five years, while ordinary wages have barely moved — despite big increases in labour productivity.
This creates a spiral of inequalities, with women in particular falling behind even further, with poorer health care, education, political representation, and work compared to men. Even among the richest, women get less of the pie, with 445 of the richest 500 being men while, at the other end of the scale, women make up the majority of low-paid workers.
And as the rich get richer, they also get more powerful, persuading or dictating to governments the policies they want.
“Economic and policy changes over the past 30 years — including deregulation, privatisation, financial secrecy and globalisation, especially of finance — have supercharged the age-old ability of the rich and powerful to use their position to further concentrate their wealth,” the report states.
Our politicians have bought into the myth that low taxes for rich people and companies are needed to spur economic growth that will trickle down to all. With some countries acting as tax havens, it puts pressure on others to lower taxes on businesses and the rich in what Oxfam describes as a “relentless race to the bottom”.
It feeds into a cycle of doom, as fewer taxes mean fewer services, with higher indirect tax such as Vat hitting the poorest most. And tax avoidance is rapidly getting worse, says Oxfam.
They analysed 200 companies and found that nine out of 10 have a presence in at least one tax haven, while, in 2014, corporate investment in these tax havens was almost four times more than it was in 2001.
The financial sector has grown most rapidly in recent years and now produces one in every five billionaires. The difference between what they pay themselves and the actual value their industry adds to the country is greater than in any other sector. Added to this is the fact that the majority of offshore wealth is managed by just 50 big banks.
Oxfam quotes a recent study by the OECD that is pertinent for Ireland, which shows countries with oversized financial sectors suffer greater economic instability and higher inequality.
The report fingers another sector that is big in Ireland — pharmaceutical companies — and especially their use of monopoly and intellectual property to drive up prices. They lobby to keep their monopoly and, rather than putting the needs of the ill first, they orchestrate their business to create profit at almost any cost to others.
Oxfam found that pharmaceutical companies spent more than $228m lobbying in Washington in 2014 — which several examples show is money well spent, having convinced the US to pressure India, and the EU and the US pressured Thailand to step back from allowing generics to be produced at a fraction of the cost they were paying Big Pharma. Limits on governments’ ability to act for cheaper medicines is also being enshrined in free trade agreements."
'via Blog this'
China's economic growth now at lowest level in 25 years | Irish Examiner
China's economic growth now at lowest level in 25 years | Irish Examiner: "China's economic growth edged down to 6.8% in the final quarter of 2015 as trade and consumer spending weakened, dragging full-year growth to its lowest in 25 years.
Growth has fallen steadily over the past five years as the ruling Communist Party tries to steer away from a worn-out model based on investment and trade toward self-sustaining growth driven by domestic consumption and services.
But the unexpectedly sharp decline over the past two years prompted fears of a politically dangerous spike in job losses."
'via Blog this'
Growth has fallen steadily over the past five years as the ruling Communist Party tries to steer away from a worn-out model based on investment and trade toward self-sustaining growth driven by domestic consumption and services.
But the unexpectedly sharp decline over the past two years prompted fears of a politically dangerous spike in job losses."
'via Blog this'
RPT-COLUMN-China GDP shows action needed on industry zombies, currency: Russell | Reuters
RPT-COLUMN-China GDP shows action needed on industry zombies, currency: Russell | Reuters:
"So what are the GDP and other numbers not telling us?
The main thing is exactly what steps Beijing will take and when they will be taken in order to ensure that growth doesn't fall too far this year.
The market will be looking to further monetary and fiscal easing as the headline act in official efforts to prop up growth and ease the transformation process.
But given that China's slowing growth is largely a result of debt-driven overcapacity in many sectors, it's likely that monetary and fiscal policy won't be enough.
What would seem key to China's prospects of a second half recovery is decisive action on structural reforms, and dealing with excess capacity in key heavy industries is the main area to target.
Industries that need action to purge surplus capacity include steel, aluminium, coal, cement and shipbuilding, all of which happen to be key consumers of major imported commodities.
At the UBS Greater China Conference in Shanghai last week, the bank's chief China economist Wang Tao said she believed the government would have success this year in tackling overcapacity.
However, when the conferences delegates were asked to vote on whether they shared this optimism, the overwhelming response was that Beijing would make little to no significant progress on restructuring, merging or closing state-owned enterprises (SOE).
NEED TO KILL ZOMBIES
Many of these companies are referred to as zombies, insofar as they continue producing even though they are loss-making and saddled with enough debt that it would be impossible for them to trade themselves to sustainable profitability, even if the prices of the commodities or products they produce increased.
The other key issue raised at the conference was whether the authorities will be able to manage the yuan exchange rate, or whether they will struggle to prevent a weakening of more than 10 percent against the U.S. dollar in 2016.
Both the issue of reform of industries with excess capacity and the path of the yuan will be key for China's commodity imports.
A significantly weaker yuan will discourage commodity imports and may lead to the reduction of stockpiles, particularly for those commodities with existing elevated inventory levels, such as copper and iron ore.
The impact of restructuring the SOE sector will be harder to quantify, as in theory it will lead to lower output and therefore a reduced requirement for natural resource inputs.
But it's more complex than that.
Rationalising domestic mining may result in lower output of iron ore and coal, thus opening the door for increased imports of cheaper supplies, especially from top exporter Australia.
Shutting excess steel capacity may not lower actual output much, rather it will lower the cost curve for China's production, which in turn may make exports more competitive.
The same argument could be made for aluminium and copper smelting, which also stand to benefit from lower overall production costs, rather than lower actual supply.
However, the start of a recovery in commodity prices is likely linked to the removal of excess capacity, particularly in China.
This may come initially at the cost of lower imports of key natural resources, which in turn should drive rationalisation of output outside China.
But overall, it will key to watch what Beijing actually does to reform zombie SOEs, and if reforms are forthcoming, working out how long they will take to make a difference."
'via Blog this'
"So what are the GDP and other numbers not telling us?
The main thing is exactly what steps Beijing will take and when they will be taken in order to ensure that growth doesn't fall too far this year.
The market will be looking to further monetary and fiscal easing as the headline act in official efforts to prop up growth and ease the transformation process.
But given that China's slowing growth is largely a result of debt-driven overcapacity in many sectors, it's likely that monetary and fiscal policy won't be enough.
What would seem key to China's prospects of a second half recovery is decisive action on structural reforms, and dealing with excess capacity in key heavy industries is the main area to target.
Industries that need action to purge surplus capacity include steel, aluminium, coal, cement and shipbuilding, all of which happen to be key consumers of major imported commodities.
At the UBS Greater China Conference in Shanghai last week, the bank's chief China economist Wang Tao said she believed the government would have success this year in tackling overcapacity.
However, when the conferences delegates were asked to vote on whether they shared this optimism, the overwhelming response was that Beijing would make little to no significant progress on restructuring, merging or closing state-owned enterprises (SOE).
NEED TO KILL ZOMBIES
Many of these companies are referred to as zombies, insofar as they continue producing even though they are loss-making and saddled with enough debt that it would be impossible for them to trade themselves to sustainable profitability, even if the prices of the commodities or products they produce increased.
The other key issue raised at the conference was whether the authorities will be able to manage the yuan exchange rate, or whether they will struggle to prevent a weakening of more than 10 percent against the U.S. dollar in 2016.
Both the issue of reform of industries with excess capacity and the path of the yuan will be key for China's commodity imports.
A significantly weaker yuan will discourage commodity imports and may lead to the reduction of stockpiles, particularly for those commodities with existing elevated inventory levels, such as copper and iron ore.
The impact of restructuring the SOE sector will be harder to quantify, as in theory it will lead to lower output and therefore a reduced requirement for natural resource inputs.
But it's more complex than that.
Rationalising domestic mining may result in lower output of iron ore and coal, thus opening the door for increased imports of cheaper supplies, especially from top exporter Australia.
Shutting excess steel capacity may not lower actual output much, rather it will lower the cost curve for China's production, which in turn may make exports more competitive.
The same argument could be made for aluminium and copper smelting, which also stand to benefit from lower overall production costs, rather than lower actual supply.
However, the start of a recovery in commodity prices is likely linked to the removal of excess capacity, particularly in China.
This may come initially at the cost of lower imports of key natural resources, which in turn should drive rationalisation of output outside China.
But overall, it will key to watch what Beijing actually does to reform zombie SOEs, and if reforms are forthcoming, working out how long they will take to make a difference."
'via Blog this'
IMF cuts global growth forecast as China, falling oil prices weigh | Reuters - IMF Predicition
IMF cuts global growth forecast as China, falling oil prices weigh | Reuters: "The Fund forecast that the world economy would grow at 3.4 percent in 2016 and 3.6 percent in 2017, both years down 0.2 percentage point from the previous estimates made last October. It said policymakers should consider ways to bolster short-term demand.
The updated World Economic Outlook forecasts came as global financial markets have been roiled by worries over China's slowdown -- confirmed by official Chinese data on Tuesday -- and plummeting oil prices.
The IMF maintained its previous China growth forecasts of 6.3 percent in 2016 and 6.0 percent in 2017, which represent sharp slowdowns from 2015.
China reported that growth for 2015 hit 6.9 percent after a year in which the world's second biggest economy endured huge capital outflows, a slide in the currency and a summer stock market crash."
'via Blog this'
The updated World Economic Outlook forecasts came as global financial markets have been roiled by worries over China's slowdown -- confirmed by official Chinese data on Tuesday -- and plummeting oil prices.
The IMF maintained its previous China growth forecasts of 6.3 percent in 2016 and 6.0 percent in 2017, which represent sharp slowdowns from 2015.
China reported that growth for 2015 hit 6.9 percent after a year in which the world's second biggest economy endured huge capital outflows, a slide in the currency and a summer stock market crash."
'via Blog this'
Saturday, January 16, 2016
Wal-Mart to Shut Hundreds of Stores - Bloomberg Business
Wal-Mart to Shut Hundreds of Stores - Bloomberg Business: "Wal-Mart Stores Inc. plans to shutter 269 stores, the most in at least two decades, as it abandons its experimental small-format Express outlets and looks to streamline the chain.
A Wal-Mart Express Photographer: Jason E. Miczek/Bloomberg
The move by the largest private employer in the U.S. will affect about 10,000 jobs domestically at 154 locations, according to a statement Friday. Overseas, the effort will eliminate 6,000 jobs and includes the closing of 60 money-losing stores in Brazil, a country where Wal-Mart has struggled."
'via Blog this'
A Wal-Mart Express Photographer: Jason E. Miczek/Bloomberg
The move by the largest private employer in the U.S. will affect about 10,000 jobs domestically at 154 locations, according to a statement Friday. Overseas, the effort will eliminate 6,000 jobs and includes the closing of 60 money-losing stores in Brazil, a country where Wal-Mart has struggled."
'via Blog this'
Fed's historic rate hike slammed by markets, weak data | Reuters
Fed's historic rate hike slammed by markets, weak data | Reuters: "A lull in global market turmoil allowed the U.S. Federal Reserve to raise interest rates with a clear conscience in December, but policymakers across the spectrum now acknowledge the economic landscape may have shifted beneath their feet since the move.
It is too early to declare the first rate hike in nearly a decade a mistake, they say, or to fear the U.S. central bank will be forced, like the European Central Bank and others, to retreat before the current tightening cycle is complete.
"
'via Blog this'
It is too early to declare the first rate hike in nearly a decade a mistake, they say, or to fear the U.S. central bank will be forced, like the European Central Bank and others, to retreat before the current tightening cycle is complete.
"
'via Blog this'
Friday, January 15, 2016
This Is What Janet Yellen Thinks Is The "Worst-Case Scenario" For The U.S. | Zero Hedge
This Is What Janet Yellen Thinks Is The "Worst-Case Scenario" For The U.S. | Zero Hedge:
"And here is where it gets even scarier, because if Ms. Yellen loses control of the stock market, then a "Japan-style deflation" will seem like a walk in the park compared to what is coming in the US..."
'via Blog this'
"And here is where it gets even scarier, because if Ms. Yellen loses control of the stock market, then a "Japan-style deflation" will seem like a walk in the park compared to what is coming in the US..."
'via Blog this'
Atlanta Fed Waits Until The Close To Reveal 0.6% Q4 GDP Estimate | Zero Hedge
Atlanta Fed Waits Until The Close To Reveal 0.6% Q4 GDP Estimate | Zero Hedge:
"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 0.6 percent on January 15, down from 0.8 percent on January 8. The forecast for fourth quarter real consumer spending growth fell from 2.0 percent to 1.7 percent after this morning's retail sales report from the U.S. Census Bureau and the industrial production release from the Federal Reserve.
As a reminder 0.6% is how much the US economy "grew" by in the revised Q1 2015 quarter when the "harsh weather" was blamed for unleashing hell on US GDP. Whose fault will it be this time?
Worse, it means that Yellen raised rates in a quarter in which the US economy may well end up contracting in nominal terms.
Finally, perhaps the fact that the Atlanta Fed waited as long as it did, is confirmation that bad news for the economy is now bad news for stocks, at least until the Fed does fold and either cut or launch more QE."
'via Blog this'
"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 0.6 percent on January 15, down from 0.8 percent on January 8. The forecast for fourth quarter real consumer spending growth fell from 2.0 percent to 1.7 percent after this morning's retail sales report from the U.S. Census Bureau and the industrial production release from the Federal Reserve.
As a reminder 0.6% is how much the US economy "grew" by in the revised Q1 2015 quarter when the "harsh weather" was blamed for unleashing hell on US GDP. Whose fault will it be this time?
Worse, it means that Yellen raised rates in a quarter in which the US economy may well end up contracting in nominal terms.
Finally, perhaps the fact that the Atlanta Fed waited as long as it did, is confirmation that bad news for the economy is now bad news for stocks, at least until the Fed does fold and either cut or launch more QE."
'via Blog this'
Here It Comes: New York Fed President Says "If Economy Weakens Further, Would Consider Negative Rates" | Zero Hedge
Here It Comes: New York Fed President Says "If Economy Weakens Further, Would Consider Negative Rates" | Zero Hedge: "Remember when the Fed's dots - less than a month ago - suggested there would be 4 rate hikes in 2016? Ah, the memories. Well, you can not only forget that (now that the market is estimating the next rate hike will come in October if ever), but it appears that the Fed will follow Kocherlakota's advice after all and not only cut rates (the possibility of a January rate cut now is 10%), but will pass go, and collect negative rates:
DUDLEY: IF ECONOMY WEAKENED, WOULD CONSIDER NEGATIVE RATES
After today's atrocious, recessionary data, one can be certain that the Fed is furiously considering negative rates.
While the comment came from the Dudley Q&A, his full speech can be found here.
And just to add confusion, here is a spurious Bloomberg headline which will hardly aid matters:
YELLEN SAID IN 2010 JAPAN-STYLE DEFLATION `WORST-CASE SCENARIO'
So both NIRP and more QE, just as anyone who is not a tenured economist or drama major predicted."
'via Blog this'
DUDLEY: IF ECONOMY WEAKENED, WOULD CONSIDER NEGATIVE RATES
After today's atrocious, recessionary data, one can be certain that the Fed is furiously considering negative rates.
While the comment came from the Dudley Q&A, his full speech can be found here.
And just to add confusion, here is a spurious Bloomberg headline which will hardly aid matters:
YELLEN SAID IN 2010 JAPAN-STYLE DEFLATION `WORST-CASE SCENARIO'
So both NIRP and more QE, just as anyone who is not a tenured economist or drama major predicted."
'via Blog this'
Wednesday, January 13, 2016
"You Lie" - Fact-Checking Obama's SOTU Job "Gains" Claims | Zero Hedge
"You Lie" - Fact-Checking Obama's SOTU Job "Gains" Claims | Zero Hedge:
Jobs & the Deficit
As he has done in the past, Obama embellished the statistical record of his presidency by selective omissions.
Jobs — He crowed about “more than 14 million new jobs,” when the net gain in total employment since he first took office is actually just under 9.3 million. What he didn’t spell out is that he was omitting the more than 4 million jobs lost during the first 13 months of his presidency, and ignoring losses of state and local government jobs as well.
Though he did not make it clear, he was actually referring to the change only in private sector jobs, and only since the job losses hit bottom in February 2010. And as of December that gain indeed stood at 14.1 million.
Unemployment rate — The president also referred to “an unemployment rate cut in half.” Actually, the jobless rate when he took office was 7.8 percent, and it has dropped to 5 percent as of December. It’s only “cut in half” if measured from the worst point of his presidency, which was the 10 percent rate recorded in October 2009.
Manufacturing — Obama also cherry-picked when he spoke of manufacturing jobs. The president said, “That’s just part of a manufacturing surge that’s created nearly 900,000 new jobs in the past six years.” The gain was 878,000 to be exact, measured from the low point in his presidency.
But of course, he has been president for seven years, not just six. And over his entire time in office, the U.S. has lost 230,000 manufacturing jobs, dropping from 12,561,000 jobs in January 2009 to 12,331,000 in December 2015, according to the Bureau of Labor Statistics.
Deficit — He also boasted that “we’ve done all this while cutting our deficits by almost three-quarters.” That’s close to true if measured from the $1.4 trillion deficit run up in fiscal 2009. The final figure for FY 2015 — which ended Sept. 30 — was $438.9 billion.
So that’s still 31 percent of the 2009 figure, which is closer to a two-thirds reduction than a three-quarters reduction.
More important, it ignores Obama’s own contribution to that record 2009 deficit. As we’ve shown before, Obama’s early initiatives increased FY 2009 spending — and thus the deficit — by as much as $203 billion. So his claim to have reduced the deficit by three-quarters is akin to a merchant who raises his price one day and declares “75 percent off” the next.
'via Blog this'
Jobs & the Deficit
As he has done in the past, Obama embellished the statistical record of his presidency by selective omissions.
Jobs — He crowed about “more than 14 million new jobs,” when the net gain in total employment since he first took office is actually just under 9.3 million. What he didn’t spell out is that he was omitting the more than 4 million jobs lost during the first 13 months of his presidency, and ignoring losses of state and local government jobs as well.
Though he did not make it clear, he was actually referring to the change only in private sector jobs, and only since the job losses hit bottom in February 2010. And as of December that gain indeed stood at 14.1 million.
Unemployment rate — The president also referred to “an unemployment rate cut in half.” Actually, the jobless rate when he took office was 7.8 percent, and it has dropped to 5 percent as of December. It’s only “cut in half” if measured from the worst point of his presidency, which was the 10 percent rate recorded in October 2009.
Manufacturing — Obama also cherry-picked when he spoke of manufacturing jobs. The president said, “That’s just part of a manufacturing surge that’s created nearly 900,000 new jobs in the past six years.” The gain was 878,000 to be exact, measured from the low point in his presidency.
But of course, he has been president for seven years, not just six. And over his entire time in office, the U.S. has lost 230,000 manufacturing jobs, dropping from 12,561,000 jobs in January 2009 to 12,331,000 in December 2015, according to the Bureau of Labor Statistics.
Deficit — He also boasted that “we’ve done all this while cutting our deficits by almost three-quarters.” That’s close to true if measured from the $1.4 trillion deficit run up in fiscal 2009. The final figure for FY 2015 — which ended Sept. 30 — was $438.9 billion.
So that’s still 31 percent of the 2009 figure, which is closer to a two-thirds reduction than a three-quarters reduction.
More important, it ignores Obama’s own contribution to that record 2009 deficit. As we’ve shown before, Obama’s early initiatives increased FY 2009 spending — and thus the deficit — by as much as $203 billion. So his claim to have reduced the deficit by three-quarters is akin to a merchant who raises his price one day and declares “75 percent off” the next.
'via Blog this'
Cramer Does It Again: Camera-On-A-Stick Crashes 30% After Slashing Guidance, Cuts 7% Of Jobs | Cramer prediction
Cramer Does It Again: Camera-On-A-Stick Crashes 30% After Slashing Guidance, Cuts 7% Of Jobs | Zero Hedge:
"Who could have seen this coming? Week after the CEO ordered his mega-yacht and 6 months after Jim Cramer said "it was going higher," GoPro has just slashed Q4 revenue guidance by 15% (from $510.9mm to $435mm) and has addtionally decided to layoff 7% of the workforce. For now, GPRO is halted... but Ambarella is not (and is collapsing 6% after hours) leaving them down 65-80% since Cramer said "buy buy buy.""
'via Blog this'
"Who could have seen this coming? Week after the CEO ordered his mega-yacht and 6 months after Jim Cramer said "it was going higher," GoPro has just slashed Q4 revenue guidance by 15% (from $510.9mm to $435mm) and has addtionally decided to layoff 7% of the workforce. For now, GPRO is halted... but Ambarella is not (and is collapsing 6% after hours) leaving them down 65-80% since Cramer said "buy buy buy.""
'via Blog this'
JPM's "Gandalf" Quant Is Back With A Startling Warning | Zero Hedge
JPM's "Gandalf" Quant Is Back With A Startling Warning | Zero Hedge: "His short answer:
"The fact that market volatility is on the rise and the Fed is raising interest rates further increases the probability of a Bear Market. The current option-implied probability of a bear market (i.e. ~20% decline this year) is about 25%. While there is no way to predict a bear market, below we look at various scenarios, and estimate that the probability of a bear market may be nearly twice as large."
So according to the man whose every market forecast has been so far impeccable, the probability of a bear market: or a 20% or more drop in the S&P500 - is roughly 50%.
Not good.
And what will make the permabulls even angrier is his proposed allocation to avoid the bear market:
In case an equity bear market materializes this year, investors should benefit from increasing allocation to cash or gold. Cash has zero correlation to all risky assets, while Gold has recently exhibited strong negative correlation to risky assets (e.g. -40% to equities)."
'via Blog this'
"The fact that market volatility is on the rise and the Fed is raising interest rates further increases the probability of a Bear Market. The current option-implied probability of a bear market (i.e. ~20% decline this year) is about 25%. While there is no way to predict a bear market, below we look at various scenarios, and estimate that the probability of a bear market may be nearly twice as large."
So according to the man whose every market forecast has been so far impeccable, the probability of a bear market: or a 20% or more drop in the S&P500 - is roughly 50%.
Not good.
And what will make the permabulls even angrier is his proposed allocation to avoid the bear market:
In case an equity bear market materializes this year, investors should benefit from increasing allocation to cash or gold. Cash has zero correlation to all risky assets, while Gold has recently exhibited strong negative correlation to risky assets (e.g. -40% to equities)."
'via Blog this'
General Motors raises 2016 guidance, dividend - GM Earnings prediction
General Motors raises 2016 guidance, dividend: "
"Our overall financial outlook for 2016 is based on a strong product launch cadence, growth in adjacent businesses, modest industry growth and aggressive efforts to drive efficiencies," said Mary Barra, chairman and CEO of General Motors.
In 2016, GM expects to earn between $5.25 and $5.75 a share. Its guidance for 2016 had previously called for between $5 and $5.50 a share. Meanwhile, the automaker increased its stock buyback program by $4 billion, bringing it to a total of $9 billion.
Finally, General Motors has raised its quarterly dividend by 6 percent, to $0.38 per share, beginning in the first quarter of this year."
'via Blog this'
"Our overall financial outlook for 2016 is based on a strong product launch cadence, growth in adjacent businesses, modest industry growth and aggressive efforts to drive efficiencies," said Mary Barra, chairman and CEO of General Motors.
In 2016, GM expects to earn between $5.25 and $5.75 a share. Its guidance for 2016 had previously called for between $5 and $5.50 a share. Meanwhile, the automaker increased its stock buyback program by $4 billion, bringing it to a total of $9 billion.
Finally, General Motors has raised its quarterly dividend by 6 percent, to $0.38 per share, beginning in the first quarter of this year."
'via Blog this'
Obama: 'We may surprise cynics again' - Prediction
Obama: 'We may surprise cynics again': "
"Anyone claiming that America's economy is in decline is peddling fiction," the president said. "What is true — and the reason that a lot of Americans feel anxious — is that the economy has been changing in profound ways, changes that started long before the Great Recession hit and haven't let up."
He invoked his own remedies for that insecurity: higher minimum wages, improved education for the next generation of workers, stronger pensions, tougher regulation of corporations and a reformed tax system. And he strongly disputed candidates like Donald Trump who point toward illegal immigrants as the source of America's economic woes.
"Food-stamp recipients didn't cause the financial crisis; recklessness on Wall Street did," Obama said. "Immigrants aren't the principal reason wages haven't gone up enough; those decisions are made in the boardrooms that too often put quarterly earnings over long-term returns. It's sure not the average family watching tonight that avoids paying taxes through offshore accounts.""
'via Blog this'
"Anyone claiming that America's economy is in decline is peddling fiction," the president said. "What is true — and the reason that a lot of Americans feel anxious — is that the economy has been changing in profound ways, changes that started long before the Great Recession hit and haven't let up."
He invoked his own remedies for that insecurity: higher minimum wages, improved education for the next generation of workers, stronger pensions, tougher regulation of corporations and a reformed tax system. And he strongly disputed candidates like Donald Trump who point toward illegal immigrants as the source of America's economic woes.
"Food-stamp recipients didn't cause the financial crisis; recklessness on Wall Street did," Obama said. "Immigrants aren't the principal reason wages haven't gone up enough; those decisions are made in the boardrooms that too often put quarterly earnings over long-term returns. It's sure not the average family watching tonight that avoids paying taxes through offshore accounts.""
'via Blog this'
Monday, January 11, 2016
According To SocGen The Problem Is Not "China", It's This | Zero Hedge
According To SocGen The Problem Is Not "China", It's This | Zero Hedge: "Earlier today, when Bank of America said that "panic is building" in the market and asked, rhetorically, "how bad could it get", it listed what it thought are the five core pillars in the bailed out bank's wall of worry:
We were very surprised that one thing missing, perhaps the most important thing, was fundamentals. And, as SocGen's Andrew Lapthorne conveniently points out, as he has been pounding the table on this issue for years, it is fundamentals - stretched to ridiculous levels - that are finally being appreciated by the market, and the result is the dramatic repricing we have seen.
As Lapthorne says, whilst the focus has been on China, where the CSI 300 fell 10% last week and at time of writing is off another 5%, "China and its accompanying devaluation is just another domino to fall, in what has been a long process of investor realisation that all is not well in the global economy. For us the real problem remains the lack of growth, a problem QE sought to disguise, but did not solve through higher asset prices."
So having deferred growth for years and years, hoping central bankers would magically conjure it out of thin air eventually, suddenly the market is realizing it the most important component to justify valuations isn't coming, "and now after four long years without any profits growth, the risk is that MSCI World mean-reverts to its original 2011 PE multiple, which would imply a further 50% decline from here. Even decline back to average would imply a 15% drop."
"
'via Blog this'
- slowing US and global economic growth (US 4Q GDP tracking 1%)
- collapsing commodity prices (oil prices averaged -42% y/y in 4Q)
- renewed fears about China (Shanghai Composite -38% since last June)
- heightened geopolitical tensions (Middle East, North Korea, etc.)
- the first transition to Fed policy tightening (in a decade).
We were very surprised that one thing missing, perhaps the most important thing, was fundamentals. And, as SocGen's Andrew Lapthorne conveniently points out, as he has been pounding the table on this issue for years, it is fundamentals - stretched to ridiculous levels - that are finally being appreciated by the market, and the result is the dramatic repricing we have seen.
As Lapthorne says, whilst the focus has been on China, where the CSI 300 fell 10% last week and at time of writing is off another 5%, "China and its accompanying devaluation is just another domino to fall, in what has been a long process of investor realisation that all is not well in the global economy. For us the real problem remains the lack of growth, a problem QE sought to disguise, but did not solve through higher asset prices."
So having deferred growth for years and years, hoping central bankers would magically conjure it out of thin air eventually, suddenly the market is realizing it the most important component to justify valuations isn't coming, "and now after four long years without any profits growth, the risk is that MSCI World mean-reverts to its original 2011 PE multiple, which would imply a further 50% decline from here. Even decline back to average would imply a 15% drop."
"
'via Blog this'
Friday, January 8, 2016
U.S. payrolls surge in December in boost to economic outlook | Reuters(More Bullshit)
U.S. payrolls surge in December in boost to economic outlook | Reuters: "U.S. payrolls surged in December and the job count for the prior two months was revised sharply higher, showing the economy on solid ground despite a troubling international backdrop."
This is the sort of headline that aggravates the general populace and still they continue to make it up and broadcast it.
'via Blog this'
This is the sort of headline that aggravates the general populace and still they continue to make it up and broadcast it.
'via Blog this'
Friday, January 1, 2016
2015 Greatest Hits: Presenting The Most Popular Posts Of The Past Year | Zero Hedge
2015 Greatest Hits: Presenting The Most Popular Posts Of The Past Year | Zero Hedge: "One year ago, when looking at the 20 most popular stories of 2014, we were troubled by a recurring thread: "despite the just concluded 6th consecutive year of a rising S&P 500 - the longest such stretch since 1999 of what otherwise would be deemed optimism - despite what should be a steadily improving economy and improving social and economic conditions, what readers founds most fascinating, and troubling, was the increasing preponderance of social disobedience, of covert, proxy or outright wars, and of civil unrest: all phenomena that accompany a world sliding deeper into distress, not as most central banks and their puppet media would have us believe, a global recovery.""
'via Blog this'
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