Thu
SEP 27 18 SIT EC y POL
ND denounce Global-neoliberal debacle y propone State-Social
+ Capit-compet in Econ
ZERO HEDGE ECONOMICS
Neoliberal globalization is over. Financiers know it, they
documented with graphics
US Economic situation today
US Equity Futures drifted lower
after the cash close yesterday then levitated as Europe opened and into the US
cash open when a panic bid hit Nasdaq (but nothing else)...Nasdaq futures
managed to hold gains post-Powell but S&P and Dow rolled back over..
…
Cash indices on the week shows
Nasdaq touching unchanged before being bid, rest of the US majors all red on
the week...
…
Interestingly - with Small Caps so
ugly this month - "Most Shorted" stocks tumbled after Powell
yesterday and held those losses today...
See Chart:
The yield curve continued its
flattening, back near cycle flats...
The Dollar Index surged back up to
2-week highs, extending post-Powell plunge bounce...
See Chart:
Dollar gains weighed on commodities
broadly today with Copper and PMs ugly, WTI held up...
See Chart:
Finally,
we note that the gap between hope and reality is now at a 11-month high...
See Chart:
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"This bull market seems unstoppable..."
This bull market
seems unstoppable.
Regardless of short-term events,
investors have quickly looked beyond those risks to in a bid to push stock
prices higher. For example, in February
of this year the markets dove roughly 10% as “trade wars” became
a “thing.” Over the next two months, the markets
vacillated coming to grips with what “Trump’s war with China” would
actually mean. Last week, the Administration announced a further $200 billion
in tariffs against China, China cancels talks with the U.S., and China imposes
similar tariffs against the U.S. – and the market
barely budges..
See Chart:
However, in my opinion, the two biggest threats
to the bull market may very well be the two issues which are the most visible
currently – TARIFFS AND INTEREST RATES.
TARIFFS
One of the biggest drivers of the “bullish thesis” is
the explosion in earnings due to the tax cuts passed in December of 2017.
However, the issue is that tax cuts only provide a very short-term benefit and,
since we compare earnings on a year-over-year basis, growth will drop back
towards the growth rate of the economy next year.
For now, the issue has been overlooked due to the surge in
earnings from the changes to the tax code as well as the massive surge in
repatriated dollars from overseas due to that lower tax rate. As shown by
the Federal
Reserve:
“Balance of payments data show that U.S. firms repatriated just over
$300 billion in 2018:Q1, roughly 30 percent of the estimated stock of offshore
cash holdings. For reference, the 2004 tax holiday, which provided a temporary
one-year reduction in the repatriation tax rate, resulted in $312 billion
repatriated in 2005, of an estimated $750 billion held abroad.”
See Chart:
[[ There are 5 more chart on
this issue: open the source below ]]
INTEREST
RATES MATTER
Rising interest rates, like tariffs,
are a “tax” on corporations and consumers as borrowing costs
rise. When combined with a stronger dollar, which negatively impacts
exporters (exports make up roughly 40% of total corporate profits), the
catalysts are in place for a problem to emerge.
The chart below compares total non-financial corporate debt
to GDP to the 2-year annual rate of change for the 10-year Treasury. As you can
see sharply increasing rates have typically preceded either market or economic
events. Of course, it is during those events which loan default rates rise, and
leverage is reduced, generally not in the most “market-friendly” way.
See Chart:
[[ There are 3 more charts on this
issue ]]
STOCK
MARKET IMPLICATIONS
As long as the backdrop is healthy, in this case
strong earnings and economic growth, the markets can fend off attacks from
higher rates and geopolitical issues. However, as tariffs attack corporate profitability, and weakens economic
growth, it makes the system much more susceptible to the virus of higher
rates. This will most likely expose itself as credit-related event
which will be blamed for a bigger correction in the market. However, “Patient
Zero” will be the Federal Reserve.
Even one of the most bullish individuals on Wall
Street, Wharton finance professor Jeremy Siegel, is now turning cautious:
“This market has had a great run, and I wouldn’t be surprised to see
another correction. We have some major challenges. The
trade war is not yet resolved.
We’re going to see how hawkish [the Fed] is with the labor market as
tight as it is. I still believe
that they’re going to be on track for four increases this year. The question is
how will they feel about another raise in December. And,
I think between the trade situation and the interest rate situation, and
then, of course, the midterms in November, there are a lot of challenges facing
Wall Street.” – Trading
Nation.
While Siegel only expects a sell-off like the one we saw in
February of this year, the real risk is of one much
deeper in nature. As noted just recently in “Ingredients
Of An Event.”
“The risk to investors is NOT just a market decline of 40-50%. The
real crisis comes when there is a ‘run on
pensions.’
This is a $4-5 Trillion problem with
no resolve to “fix” the problem before it occurs. This
leaves a large number of pensioners already eligible for their pension at risk and the next decline will likely spur the “fear” benefits will be lost entirely. The combined run
on the system, which is grossly underfunded at a time
when asset prices are dropping, will cause a
debacle. With consumers are once again heavily leveraged with
sub-prime auto loans, mortgages, and student debt, they
too will be forced to liquidate assets to meet payment demands.
All the ingredients for a more severe market correction are
currently present. Between Trump’s “trade war” and the Fed
insistence on hiking rates, it certainly seems as
if they are “hell-bent” on lighting the fuse.
…
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SOURCE: https://www.zerohedge.com/news/2018-09-27/two-biggest-threats-bull-market
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[[ Manipulation of loans: the
business of ignoring reality ]]
"Regulators
should sound the alarm. They should make it clear to the public and the
Congress there are things they are concerned about and they don’t have the
tools to fix it.’" - Janet
Yellen
Escalating the risk of the unbridled loan explosion, none
other than Janet Yellen - who is directly responsible
for the current loan bubble - recently
told Bloombergthat "regulators
should sound the alarm. They should make it clear to the public and the
Congress there are things they are concerned about and they don’t have the tools to fix it." Thanks Janet.
See Chart:
Loan Bonanza
As we noted
recently, the risks of such loans defaulting are obvious, including loss of
jobs and risk to companies on both the borrowing and the lending side.
Tobias Adrian, a former senior vice president at the New
York Fed who’s now the IMF’s financial markets chief, told Bloomberg: "...supporting growth is important, but future downside
risks also need to be considered." He also stated that regulators had
"limited tools to rein in nonbank credit".
But you'd never know this by listening to the Federal
Reserve. According to Fed chairman Jerome Powell,
during his press conference Wednesday, the Fed doesn’t see any risks right now.
Powell said that "overall
vulnerabilities" were "moderate". He also stated that
banks today "take much less risk than they used to". We'll
pause for the obligatory golf clap.
Of course, the harder that regulators squeeze to try to
prevent these types of loans, the quicker that the
market slips past them evolves. Trying to tighten loan standards has instead resulted in the market
shifting to less regulated lenders, including companies like KKR
& Co., Jefferies and Nomura. Hedge funds are next.
See Chart:
Richard Taft, the OCC’s deputy comptroller for credit risk,
stated this month: "There isn’t anything going on
in the market right now that would cause us to increase our supervision of that
because we are always looking at that type of portfolio."
Increased demand also means that
yields won’t rise much even though loan quality has gotten worse.
Investors may not be compensated for the risk that they’re taking, as we
pointed out recently
We quoted Guy LeBas, chief fixed-income strategist
at Janney Montgomery Scott LLC, who stated: "It’s not a good time to be buying bank
loans".
He also noted something troubling which we have discussed on
numerous prior occasions: the collapse in
lender protections which are worse than usual as there's a smaller pool of
creditors to absorb losses, and as covenant
protection has never been weaker.
See Chart:
….
SOURCE: https://www.zerohedge.com/news/2018-09-27/janet-yellen-says-its-time-alarm-loan-bubble-runs-amok
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After two
ugly auction to start the week, with both the 2Y and 5Y sales tailing badly,
today's 7Y was even worse>
Yet despite the auction's poor performance, the bond market
appears to have looked past through and there was no negative reaction in the
secondary market as yet another chunk of US debt was
easily digested by the market.
See Chart:
…
SOURCE: https://www.zerohedge.com/news/2018-09-27/ugly-7-year-auction-draws-huge-tail-bid-cover-slides
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"As the Fed does not
and cannot know the correct level of interest rates, its policy is a
'trial and error' process...it is only appropriate
to consider the Fed’s monetary policy as a 'blind flight' when it
comes to setting market interest rates."
US interest rates keep creeping upwards, largely because the
US Federal Reserve (Fed) is expected to ramp up borrowings costs further in the
coming quarters. The Federal Funds Rate is now in a bandwidth of 1.75 to 2.0
per cent, and the yield on 10-year Treasuries has recently climbed slightly
above the 3 per cent level. Higher,
let alone further rising, borrowing costs can be expected to have far-reaching
consequences for the economy and financial markets in particular.
Let us therefore begin with highlighting five effects that
result from the Fed lowering market interest rates – by slashing its Federal
Funds Rate and/or by bidding up bond prices and thus suppressing capital market
yields across the board. For this should help us better understand what the
Fed’s current tightening of monetary policy might hold in store.
..
[[ I will copy here only the
subtitles & main thesis. Go to
source below to real full art ]]
..
Effects
of interest rate manipulation
1.) The artificially
suppressed interest rate induces an unsustainable boom
2.) The forced depression of the interest rate makes firms more
likely to engage in long-term investments, which become more profitable as
interest rate declines.
3.) The artificial
decline in interest rates inflates stock and housing prices:
See Chart:
4.) The fall in interest rates contributes to an increase
in all prices of goods and services.
5.) Investors' risk
appetite tends to increase as interest rates go down.
The
“natural rate of interest ”
The (unobservable) natural interest rate is part of the
market interest rate, and it is the interest rate at which savings are brought
in line with investments so that the economy is doing just fine. If the central
bank pushes the market interest rate below the natural
interest rate, the economy is driven into a boom; and if the market interest
rate is raised above the natural interest rate, the economy is
thrown into bust.
So if we
want to form a view about what the Fed's interest rate hiking means for the
economy and financial markets, we have to develop an opinion about the level of
the natural interest rate: In
case the natural interest rate has gone up in recent years, higher Fed interest
rates would cause less trouble for the economy and financial markets compared
with the case in which the natural interest rate has remained at a very low
level.
A trial
and error process
The problem is,
however, that we do not, and cannot, know the level of the natural interest
rate.
What is
more, there is no fixed, or immutable, relation between figures such as, for
example, growth of gross domestic product and the interest rate. In fact, a given level of the natural interest
rate can be, depending on the circumstances, compatible with a high or a low
level of savings and investment. Having said that, it is only appropriate to consider the Fed’s monetary
policy as a “blind flight” when it comes to setting market interest rates.
In other words: The current boom that has been
going on for quite a while has not yet faced retribution.
Mind
the “cluster of errors”
Experience tells us that business activity may move along
smoothly for quite a while, while malinvestment, which brings production out of
sync with market demand, is piling up. Then, all of a sudden, the economy is
thrown into disarray: In not just one business sector, but in virtually all of
them "clusters of business errors" surface. This is one of the main
characteristic features of the real-life boom and bust cycle.
Central
bank action causes, for instance, chronic inflation – which benefits a few at
the expense of many –; sets into motion boom and bust cycles; and increases the
economies' debt burden. The truth is
that keeping the market interest rate artificially low – below the natural
interest rate, that is – has become essential to keep the current boom going
and prevent the debt pyramid from crashing down.
Sound economic theory conveys a sobering message: There is little reason to think
that the Fed, in its “blind flight”, will succeed in upholding the boom
indefinitely. Stock and housing
markets may continue to go up in price for quite a while – who knows how long. But
this does by no means refute the insight that the Fed
creates, via its interest rate policy, booms which turn into busts at some
point.
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"...we end up with more accident prone
population ‘likely to die sooner’. That's not a recipe
for a longer life expectancy. But it's also not a problem that can be solved
by simply throwing a few more tax dollars at a government health-care
system."
[[ Why lower life expectancy at birth than other
wealthy countries? Notice that lower
life expectancy is close related to pollution and pulmonary deceases and to drivers
obesity plus..]] The common response is to
assume that the United States must have lower life expectancy rates because it lacks so-called "socialized medicine."
The fact is that “ government spending on health services is higher in
the US than in nearly every other country, and is anything but a
"free-market" health care system” . Another fact is that the
role of the private sector is relatively larger in the US. However, [ this argument ] often serves as a point of
fixation for those who favor even greater government intervention in the US
health-care markets than already exists.
Some might respond
to these findings that life expectancy might improve more if only there were more health care services delivered at
lower prices. This purely hypothetical notion can't be disproven, of
course, but we also know from experience that frequent
usage of health care services is not the key ingredient in better health
outcomes when related to obesity issues.
For
example, we've long known that many immigrant groups have lower obesity rates and higher
life expectancy than the native-born population in spite of having less access
to health care services.
…
SOURCE: https://www.zerohedge.com/news/2018-09-26/so-many-cars-why-american-life-expectancy-falls-short
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Gold: the best in saving
Said
another way, gold is a great insurance policy for all the “I don’t knows.”
History of gold saving is “one of the things that makes gold such an excellent hedge against
political uncertainty, macroeconomic challenges, financial crises, inflation,
etc. Said another way, gold is a great insurance policy for all the
“I don’t knows.”
Continue reading this art at:
SOURCE: https://www.zerohedge.com/news/2018-09-27/look-how-well-gold-has-retained-its-value-1000-years-ago
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US
DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete; it’s full of frauds
& corruption. Urge cambio
“It’s very much something
to worry about..."
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"I simply don’t trust
the fundamentals of the global economy right now. The system is built on quicksand..."
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Want to understand the full scope of
neofeudalism in America? Follow the money and the power and privilege it
buys...
Who's in
the New Aristocracy? Start with this chart:
the top .1%, and everyone they can buy, for example politicos.
See Chart:
The New
Aristocrats feel entitled to remain untouchable, regardless of the enormity of
their crimes. People are starting to
wake up to neofeudal realities of life in America, but the sexual privileges of
this class are only the tip of the iceberg. Want to
understand the full scope of neofeudalism in America? Follow the money and the power and privilege
it buys.
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"But even though this is the case, voters in those cities just keep choosing Democrats election after
election anyway..."
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"To be candid, I think they are scared...Better to be thought powerless
and impotent than to adjust technically and remove all doubt."
[ this text seems be distorted if Sun Tzu P.7 of “The Art of war” is quoted]
Original
source: Authored by
Jeffrey Snider via Alhambra Investment
Partners,
Snider said:
In other words, if the Fed can’t control
federal funds, who can it?
Nobody
See Chart:
Snider concludes:
“Chicken hawks.
Better to be thought powerless and impotent than ( Sun Tzu statement
incomplete: See audiobooks) to adjust technically and remove all doubt.
Central banks aren’t central, and you have to wonder if central bankers are
finally starting to suspect this truth.
…
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US-WW ISSUES (Geo Econ, Geo Pol
& global Wars)
Global depression is on…China, RU, Iran search for State
socialis+K-, D rest in limbo
[[ I thought Big Bankers
& Corp will scape to the Moon if the Econ collapse or WW3 happens ]]
JP Morgan
just launched the largest ever real-world blockchain application, developed to
facilitate corporate cross-border payments. In that surprising development lies
several lessons for public equity investors of financial services companies.
[[ Are
they gona pay for damages cause by Neoliberal or the genocide if WW3 comes ]]
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new weapon
would be used in tandem with cruise missiles to thwart
the take
over of the highly contested islands in the East China Sea.
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SPUTNIK and RT SHOWS
GEO-POL n GEO-ECO
..Focus on neoliberal expansion via wars & danger of WW3
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‘Biggest
Double Standard’: Bill Clinton Rape Accuser Slams Democrats for Kavanaugh
Treatment (VIDEO) Juanita
Broaddrick, a woman who accused former US President Bill Clinton of raping her,
attacked Congressional Democrats Thursday
for their treatment against Supreme Court nominee Brett Kavanaugh, calling it
“the biggest double standard I’ve ever seen.” Yes, it is “the
biggest double standard I’ve ever seen”
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RT SHOWS
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In
Question Trump
Attacks Socialism, Like other neophytes believes Marx created Socialism
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Keiser
Report Trust-busting
Silicon Valley (E1285) Max
and Stacy discuss the progressive case for breaking up monopolies, including
those controlled by Silicon Valley Dems voting tycoons.
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NOTICIAS IN SPANISH
Lat Am search f alternatives to neo-fascist regimes &
terrorist imperial chaos
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INFORMATION CLEARING HOUSE
Deep on the US political crisis: neofascism & internal
conflicts that favor WW3
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Is Trump Letting Al-Qaeda Sympathizers
Survive in Syria? By Scott
Ritter Continue
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Trump parroting Netanyahu At The U.N., By
Philip Weiss Continue
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Ahwaz Attacks: Is Saudi Arabia Taking the War
Inside Iran? By Shireen
Hunter Continue
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Will ‘God’ Save Kavanaugh? By Ray McGovern Continue
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In the Heart of a Dying Empire By Tom Engelhardt Continue
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GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that leads to more
business-wars from US-NATO allies
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PRESS TV
Resume of Global News described by Iranian observers..
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