SEP 9 17 SIT EC y POL
ND denuncia debacle d Globaliz neoliberal y
propone State-Social + Capit-compet in Econ
ZERO HEDGE ECONOMICS
Neoliberal
globalization is over. Financiers know it, they documented with graphics
"Clients keep asking about
an impending equity downturn. Reasons cited include the
8 year bull market and economic expansion, high valuation, low volatility, Fed
tightening, and politics."
THE 7 REASONS WHY GOLDMAN'S
CLIENTS ARE SO FEARFUL:
1. History. Many investors argue the bull market is “long
in the tooth” and will soon come to an end. It has
been 14 months since the S&P 500 index experienced a 5% sell-off and 19
months since the market had a correction of 10%. The last bear
market defined as a fall in the index greater than 20% ended in 2009. The current bull market has lasted for 8.5 years and the
S&P 500 has climbed by 260% compared with a 124% rise in earnings and a 64%
P/E multiple expansion to 18x forward EPS.
2. Volatility (or lack
thereof). Realized 3-month vol is nearly the lowest in
50 years. Implied vol as measured by the VIX stands at 12, a 6th percentile
event since 1990. In his recent book, Tectonic Shifts in Financial Markets, the
legendary Salomon Brothers economist Henry Kaufman (with the superb sobriquet
“Dr. Doom”) references the lesson of Sherlock Holmes in “The curious incident
of the dog in the night-time” that what doesn’t happen matters as much as what
does. Low volatility across asset classes may be
masking risks that are not evident today but will be obvious in retrospect.
3. Valuation. Equity valuations are stretched on almost
every metric. The typical stock trades at the 98th
percentile and the overall index at the 87th percentile relative to the past 40
years. Only on a Free Cash Flow (FCF) yield basis is the market
valued at an average level (4.4%). But as we
detailed in a recent report, the collapse in capex spending explains the FCF
yield. On a cash flow from operations basis the market trades at the
87th percentile. Other asset classes are also highly
valued vs. history: nominal Treasury yields (92nd), real yields (75th), and HY
(75th) and IG (69th) spreads.
- 4. Economics. The current US economic expansion just celebrated its 8th birthday making it one of the longest stretches without a recession. Only the 10-year expansion during 1991-2000 and the 9-year expansion from 1961 to 1969 had longer durations. The median length of the 16 expansions since 1921 has been 42 months. Along with the question about an equity correction, another frequent inquiry is “when will the next recession occur?” Our economists assign an 18% probability of a recession within 12 months.
- 5. Fed policy. The FOMC has lifted the funds rate by 100 bp since it started tightening in December 2015. During prior hiking cycles, equity P/E multiples typically fell but multiples have actually expanded during the past two years. Futures imply one hike by year-end 2018 vs. our economists’ estimate of five. The uncertain pace of further tightening is a cause of much investor anxiety.
- 6. Interest rates. Two months ago, Treasury yields equaled 2.4%, ten-year implied inflation was 1.7%, and the S&P 500 stood at 2410. Our year-end forecasts of a 2.75% bond yield and a 2400 level in the S&P 500 looked rational. However, weaker-than-expected inflation data sparked a 35 bp drop in bond yields to 2.05% and a 2% stock market rally to 2465 (+10% YTD). Looking ahead, we maintain our year-end 2017 target (-3%).
- 7. Politics. President Trump’s fluid positions on domestic policy disputes in Washington, D.C. and geopolitical gamesmanship with Pyongyang and Beijing make political forecasting a precarious activity. One fund manager cited the “Law of Conservation of Volatility” under which there is a finite amount of uncertainty in the world. All the risk is now concentrated inside the Beltway and volatility outside of politics is close to zero. Of course, this could change at a moment’s notice.
As Kostin further
adds, "investors cite the points above to justify their forecast of a
looming correction. According to their narrative, high valuation leaves little
room for error. A Fed tightening despite low
inflation will spark concerns about the sustainability of economic expansion
and lead to a jump in vol that may be compounded by a political event that in
turn will spark a wave of selling. As factors reverse performance, quant funds
will liquidate positions putting additional downward pressure on share prices
and driving indices lower."
So what is Goldman's
response to these 7 very valid concerns? In a nutshell, "don't worry and
just BTD" or as Kostin puts it, "because
investor euphoria is non-existent, an imminent start of a long decline seems unlikely."
Skepticism abounds
with normal 3% mutual fund cash positions. However,
a sturdy consumer accounts for 69% of US GDP and buybacks remain persistent. Firms
with high growth investment ratios have durable prospects even in the event of
a market hurricane.
Sturdy consumer? Strong Buybacks?
Has Kostin seen either of
these two charts proving that neither of these
statement is true, first the worst
retail sales in nearly 4 years...
... or at least SocGen's chart
showing the biggest drop in buybacks since
the financial crisis?
.
Maybe Goldman clients should add an 8th concern: a grossly incompetent advisor.
In any event, for
those who enjoy having their hand held and buying stocks which trade at the
98th percentile in valuations, hoping for even higher prices, this is how Kostin "rationalizes" his grossly wrong
assessment:
Although the
preceding sequence of events could happen, we view
it as a low probability event in the near-term for two key reasons:
First, investors are not
complacent.
Second, US economic growth
persists led by consumers that account for 69% of GDP.
In short: yes, the market should crash, but because investors are not complacent (just don't look at the VIX), and because
the economy is so strong (just don't look at the 10Y), everything will be
fine. Surely this optimistic bias would lead
Goldman to at least expect some upside from here in the S&P? Well, no:
- "We expect the S&P 500 will end 2017 at 2400 (-2.6)%."
Making sense.
Dear David: a) you are not even trying any more, and b) in your next
weekly letter, can you please just let us know how
much more Goldman's prop desk has left to sell before it pulls the rug out of
the market. Thanks.
….
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"There’s no meat left on that bone.
There isn’t even a bone left. There’s only a debt-ridden mirage of a bone. If you’re looking to
define the country in bumper-sticker terms, that’s it. A debt-ridden mirage. Which can only wait until
it’s relieved of its suffering. Irma may well do
that..."
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The U.S.
housing market has now surpassed its pre-recession peak by 4.3%. This is great news for the economy,
although there’s still an ongoing debate about the
possibility of another housing crash.
Whatever you believe about real estate, there’s no doubt that prices depend on where you live. HowMuch.net
created a new visualization to demonstrate what this looks like...
How much Home (SQFT) CAN YOU BUY FOR $200,400 IN EVERY STATE?
So, naturally, how big of a
house can you afford with a mortgage of $200,400? Our visualization
answers this question on a sliding color-coded scale. We broke each state
into a grid with 25 boxes, representing 2,500 square feet—that’s a large home
with at least 3 bedrooms and 3 bathrooms. Green boxes indicate affordability
and orange and red boxes mean it’s expensive. We then graphed how much house
you can purchase with exactly $200,400.
….
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"...following President Trump’s decision to rescind Obama’s DACA program,
an economic conventional wisdom has been quickly
established... that the impact on the nation’s growth, employment, and
productivity would be disastrous... Sadly - but not surprisingly - an
examination of the data reveals this conclusion to be quintessential
fakeonomics..."
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"When we drop even the pretense of a theoretic limit to our profligacy,
our lenders may decide its time to impose a lending
ceiling of their own. That is a ceiling we have no power to
raise, and it could force our leaders to finally make some
very unpopular choices."
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POLITICS
La seudo democ y sist duopolico es obsoleto por fraudulento y
corrupto. Urge cambiarlo
“It’s as if everyone agrees that it’s too
divisive and we can’t get along, but also that everyone
else is wrong..."
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"The United States shows the world such a
ridiculous face that the world laughs at us... Are Americans capable of comprehending
this? Only a
few have escaped The Matrix."
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While not the first celebrity to
accuse Trump of being Hitler-lite, Colbert was the first to give a Nazi salute on national television...
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WORLD ISSUES and M-East
Global depression is
on…China, RU, Iran search for State socialis+K- compet. D rest in limbo
"We have received a large number of questions from customers
following the publication of a news article by
Caixin alleging that Chinese regulators would stop bitcoin trading. Our response is as
follows..."
- BTCChina operates in strict accordance with Chinese regulations. If the Caixin report is accurate, we will continue acting in strict accordance with regulators, and continue protecting the safety of customers' funds.
- The Caixin report says that regulators have not said bitcoin itself is illegal, and have not decided to prohibit private, one-on-one bitcoin transactions. If the report is accurate, BTCChina will stop all BTC/CNY trading, and change its business model to become an information service provider for private, one-on-one digital asset trading.
Many people regard digital assets, of which bitcoin is the embodiment, as the necessary result of recent advances in
internet technology and the largest scale practical application of blockchain
technology. In addition, bitcoin's blockchain
may have a far-reaching positive impact on the economy, becoming a foundational
layer upon which other revolutionary software projects are based. We believe digital assets will have a far-reaching
impact on the global economy.
BTCChina thanks you
for your support, and will continue working to provide the best service for
all customers.
BTCChina
Saturday, September 9th, 2017
….
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GLOBAL RESEARCH
Global Econ-Pol
crisis leads to more business-wars:
profiteers US-NATO under screen
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INFORMATION CLEARING HOUSE
Deep on the US
political crisis, their internal conflicts n chances of WW3
An Isolated Tyrannical Regime – Not
Pyongyang, It’s Washington By
Finian Cunningham
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Why Trump Won’t Start a War With North Korea By Mike Whitney
No one knows how to exploit a crisis better than Washington.
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“There are causes of wars dying for, but none worth killing
for” : This makes perfect sense
“Las guerras tienen causas, pero
ninguna vale la pena el asesinar a tantos por ellas”.
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Laughing on the Way to Armageddon By Paul Craig Roberts
Oliver Stone: Israel had far more
involvement in the US election that Russia. Then:
Why is it OK for Israel to influence US elections but not for
Russia to do so? Is our ally?
Ally or assassin? Israel
stole Plutonium from US & created a bomb sold to kill many Americans
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Let’s face it, the
entire western monetary system is basically a fraud.
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VEN Is About to Ditch the Dollar in Major
Blow to US: Here’s Why It Matters By D Shahtahmasebi
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Profit Maximization is Easy: Invest in
Violence By Robert J.
Burrowes Just the US main
business
Nelson Mandela: Make your choices reflect your
hopes..Not your fears
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DACA Dies, Sort Of By Fred Reed
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SPUTNIK and RT SHOWS
The nasty business of
US-NATO-Global-wars uncovered .. pro RU view
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RT SHOWS
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Keiser Report
Episode
1121 Bye, bye Petrodolar?
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NOTICIAS IN SPANISH
Latino America fight
to break with collapsing Empire: leftist
view on alternatives
Estados Unidos, obstinadas sanciones económicas Hedelberto
López
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"Hay una suerte de Plan Cóndor
disfrazado que tratan de ocultar" El papa ayudo el 1ro y que hoy?
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"Un nuevo 11S": Estado
Islámico da su explicación del huracán Irma " nuevo 11 de Sep para USA".
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Keiser
Report Petrodólar: descanse en paz
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PRESS TV
Global situation
described by Iranian observers.. Titles distorted n incomplete sentences
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