DEC 2 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
Ignore the
BBB downgrade "wall of worry":
corporate America is now facing a "maturity tsunami of worry" that is
some 1.6 trillion dollars high.
As the following chart from BNP Paribas shows, a wall of
maturing debt is about to slam head on into S&P 500 companies. Commenting
on the chart, BNP understandable writes that it is "concerned by the
maturity wall of bonds that need to be refinance over the next few years."
And, as Bloomberg's Sebastian Boyd observes, said maturity wall is made even
scarier by adding the amount available in untapped revolvers, which is money
that in theory doesn't need to be paid back and splits the counterparty risk
with the company's bank lenders (see GE).
See Chart:
As Boyd
notes, the market cap of
the Bloomberg Barclays 1-3 Year Credit index reached a record high of $1.4
trillion at the end of September, or roughly three times what it was before the
crisis.
Finally, just as troubling is this chart from SRP which in
addition to IG, also incorporates the amount of junk bond maturities in the
coming decade.
See Chart:
Needless to say, as trillions in
debt mature over the next several years and have
to be rolled over into debt with far higher yields and cash coupons, corporations
will be saddled with tens of billions in additional annual interest expense
costs, money which CEOs and CFOs would have otherwise
used to fund stock buybacks.
As for the other key question - whether this $1.6 trillion "debt maturity tsunami" results in a cascade of
defaults - that will be answered by Fed Chair Powell: unless the Fed takes aggressive action to cut rates
(and keep zombie companies alive), between the "falling angles" and
the rotting "zombie companies" that are about to die for the last
time, the next two years of mass defaults should prove
to be quite exciting for those who still have dry powder to go angel and/or
zombie hunting...
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The average
sell side prediction is for the S&P 500 to rise 11% to 3,056 by the end of
next year. it’s the most optimistic call since the bull market began in 2009.
[ For
this to happen: gluttony & its
parasites.. has to be eliminated. How to? ]
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For now, FX
markets remain the only 'liquid' course of reflection on the Trump-Xi
trade-truce 'deal' and China's
offshore yuan has spiked over 6 handles (back below 6.90/USD) implying
a solid jump at the open for US equity futures...
And extrapolating from last week's moves, offshore yuan
implies an open for S&P futures around 2800...
SEE Chart
Which, as we noted earlier, is exactly in line with one
"base case" which correctly predicted that a Truce - in which
existing tariffs stay in place - is the most likely outcome (with a 70%
chance), while also accurately predicting a 3 month ceasefire, the agreement
will be enough to get the S&P to 2,800...
Read this prediction:
... so look for a burst of buying in the S&P over the
next 24 hours which pushes the stock index higher, but not much higher as trader
concerns will next revert back to the Fed which now that trade tensions have
been temporarily removed, may promptly revert back to its hawkish bias and
resume rising rates well into 2019 which in turn will be the next bearish
event-risk to put a damper on any substantial Christmas rally.
And while spread-betting markets are
signaling around a 250 point gain at the open for the Dow...
See Chart:
It is clear that there is little follow-through since the
initial spike.
We await the Algos open to see just
what can be made of this so-called 'truce'.
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"...I’d expect a
moderate risk-on move to begin... But, since I am already trying to
think about what could derail this move, and when to start cutting back on risk
again, I think the rally won’t be
as big or long lasting as I’d like to see."
As far as I can tell from the press coverage I’ve seen
- China agreed to buy more agricultural and commodity goods (as we’ve been suggesting all along is part of the ‘easy’ deal)
- We agreed not to go ahead with the scheduled tariff increases (which were hurting us as well)
- Both sides have agreed to talk more with what seems like a 90 day target for progress (though a timeline that could easily be extended again)
Is this
'Deal' Good Enough for Markets?
It seems like this should be good enough for markets to
continue with the rally that took S&P 500 and Nasdaq up 4.9% and 5.6%
respectively on the week.
I think the outcome is marginally better than what people
were pricing in and took some of the disaster scenarios off the table.
I would
expect VIX to collapse now that the biggest wildcard is either off the table or
at least postponed.
The biggest driver could be the market’s view, which we share, that Powell is trying to walk back a little
on the dogmatically hawkish side (though part of this
apparent change makes perfect sense for a data dependent Fed that is seeing the
data weaken).
If VIX can
come down and the new issue
calendar can show signs of slowing into year-end, credit should be able to turn
around – but since its weakness on Friday was noteworthy, across
the board, we will be watching that closely.
Bottom
Line
Assuming the reporting we have seen so far is accurate, this
deal, coupled with some oversold technicals and generally favorable
seasonality, I’d expect
a moderate risk-on move to begin.
But, since I am already trying to think about what could
derail this move, and when to start cutting back on risk again, I think the rally won’t be as big or long lasting as I’d like
to see.
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TOWARD A CLEAR VIEW OF US ECON FUTURE
My introduction to:
DID THE
"POWELL PUT" CHANGE ANYTHING?
Hugo Adan Dec 2, 2018
....
....
This Doct is already published in http://nd-hugoadan.blogspot.com/
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"S&P would need to decline by
33% just to reduce valuations to long-term historical median
average..."
[[ To measure long-term declines (by 33%) I don’t
think the index S&P 500 is sufficient. I guess the Keynesian ‘Aggregate
Demand’ has to be added to see the strength vs. weakness of the GDP in 1 year
or 2 (before Presid election time). I
can be added other indicators like Savings vs. Debt and Interest rates in
correlation to Production Rates., as suggested by LV Mises.. The buy/sell from
S&P 500 gives a short-term view: an insufficient picture to see the Fut of
our Economy. Bloomberg do so and show
that the market (with WS indicators) is full of manipulation.. then .. insufficient
and no reliable. ]]
On
Friday, I discussed the market surge on Wednesday following comments from
Fed Chair Jerome Powell:
“All it took was two 10% stock market corrections in a single year and
some heavy ‘browbeating’ from President Trump to reverse Jerome Powell’s
hawkish stance on hiking interest rates.
Importantly, while the market surged higher after the comments on the
suggestion the Fed was close to ‘being done’ hiking rates, it also suggests the
outlook for inflation and economic growth has fallen. With the Fed Funds rate
running at near 2%, if the Fed now believes such is close to a ‘neutral rate,’
it would suggest that expectations of economic growth will slow in the
quarters ahead from nearly 6.0% in Q2 of 2018 to roughly 2.5% in 2019.”
See
Chart:
Fed Funds vs.
Economic Growth
This weekend, Presidents Trump and Xi are going to the table
to discuss trade and tariffs. While I don’t expect much to actually come from
the meeting, I would expect some smiles and handshaking between the two with
some positive overtones on “progress being made.”
However, I agree with Goldman
Sachs assessment on Friday via Zerohedge:
“Goldman writes
that it sees three basic scenarios for what happens after this weekend.
- The first and in Goldman’s view most likely outcome is continuing on the current path of ‘escalation’— tariff rates rise to 25% on all imports currently under tariff, and tariffs are extended to remaining Chinese imports.
- A close second is a ‘pause’, where existing tariffs remain in place but the two sides agree to keep talking with escalation put on hold.
- A ‘deal’, which Goldman thinks is unlikely in the near term, would involve complete rollback of the current tariffs.
The reason why Goldman is surprisingly pessimistic on the outcome is
because there has been a growing sense among US policymakers that China has
benefited disproportionately from the bilateral economic relationship,
effectively supporting a hard-line stance against Beijing.”
While Goldman is leaning more towards an “escalation,” President Trump has
staked his entire Presidential career to the stock market as a measure of his
success and failure.
This is
also particularly the case since the House was lost to the Democrats in the
mid-term. This is an issue
not lost on China’s leadership either. With the President in a much weaker position,
and his second tax cut now “DOA,”there is little likelihood of any major
policy victories over the next two years. Therefore,
the risk to the Trump Administration is continuing to fight a “trade
war” he can’t win anyway at the risk of crippling the economy and
losing the next election.
The chart below
shows the Advance-Decline Percent, TRIN, TICK and McClellan Summation Index all of which have failed to show the improvement needed to
establish a bottom has been put into place.
See Chart:
Daily
View
The rally over the
past few days has virtually exhausted a bulk of the “oversold” condition
which previously existed. While such doesn’t mean the market can’t move higher,
it simply suggests that most of the “fuel” available for a
rally has been utilized. With the markets still on a “sell signal” currently,
and below major points of resistance, remaining a bit cautious until the
underlying technical backdrop improves seems prudent.
See Chart:
S&P 500 DAILY
BUY/SELL INDICATOR
Action: After reducing exposure in portfolios previously, and portfolios much
heavier in cash currently, we will sit with our winners and core positions and
allow the markets time to figure out what it wants to do next.
Weekly
View
On a weekly basis,
the story remains much the same. With a sell signal registered for only the 7th
time in the past two decades, we will just allow the markets to figure out what
they want to do before getting more aggressive. The recent violations of
long-term moving averages suggest a change in market conditions that should not
be dismissed. However, should the market improve,
and ultimately reverse the relative “sell signals,” we will
gladly increase exposure back to target weights.
See Chart:
S&P 500 WEEKLY
BUY/SELL INDICATOR
Action: Hold
higher levels of cash and rebalance risk as necessary on this rally.
Monthly
View
Like the daily and
weekly analysis above, the market has confirmed a “sell signal” on
a monthly basis as well. The good news here is that the long-term moving
average, which is a critical level of bullish trend support, has NOT been
violated as of yet. This suggests the longer-term
bullish trend remains intact and we should not get overly conservative just
yet.
See Chart:
S&P 500 MONTHLY
BUY/SELL INDICATOR
Nonetheless,
the deterioration in the markets is extremely concerning, and while the official “bull
market” is not dead as of yet, there are more
than enough warnings which suggest erring to the side of caution, for now, is
warranted.
Action: Use
the current rally to reduce risk and rebalance portfolios accordingly.
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US
DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete; it’s full of frauds
& corruption. Urge cambio
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
Because of NetanYiha ISR is at
risk to be wipe out off the map.. ISR need a guillotine to solve the problem..
NO need for 1 Robespierre to execute
him.. 1 Yihaa can do it
"Netanyahu and those close to him bluntly intervened, sometimes on a daily basis, with the content being
published on the Walla news website..."
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It’s being billed as a counter to both Arab and Russian power but that’s not really true...
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SPUTNIK and RT SHOWS
GEO-POL n GEO-ECO
..Focus on neoliberal expansion via wars & danger of WW3
RELATED:
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RT SHOWS
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NOTICIAS IN SPANISH
Lat Am search f alternatives to neo-fascist regimes &
terrorist imperial chaos
VIENTO SUR
ENT
a H Gerstenberger Violencia y explotación en el capitalismo
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Franc chalecos
amarillos Lo que está en juego en esta mov popular
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FEM Por nueva Const La deuda de la Constitución con las mujeres
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RT
EN español
Boliv La Nación se llama EVO. Con él florece Bolivia
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De china depende el USD.. si cae el
dollar, cae Trump
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Subiría un general nacionalista tipo Stalin y
anti-USA
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El clero ya está lleno de pedófilos y maricas,
algunos en cárcel
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GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that leads to more
business-wars from US-NATO allies
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Bush
Family Links to Nazi Germany: “A Famous American Family” Made its Fortune from
the Nazis By Prof Michel
Chossudovsky,
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PRESS TV
Resume of Global News described by Iranian observers..
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