ND
SEP 1 19
SIT EC y POL
ND denounce Global-neoliberal debacle y propone State-Social
+ Capit-compet in Eco
Maximum
sustained winds of 220 mph
….
ZERO HEDGE ECONOMICS
Neoliberal globalization is over. Financiers know it, they
documented with graphics
Authored
by Michael Wilson, chief US equity strategist at Morgan Stanley
The bullish
narrative today is that while the US industrial/manufacturing part of the economy
is weak, the US consumer remains strong, so the US economy can avoid a further
slowdown or recession.
The estimate for
3Q19 was +10% a year ago. Most importantly, 4Q19 and 2020 estimates still look
way too high and far above the normal “overestimate” that bulls argue is always
the case. In particular, the positive operating
leverage baked into current consensus estimates seems fantastical to me.
See Chart:
Small and mid-cap companies saw negative earnings growths in
1H19
An even broader measure of US corporate profits, the
National Income and Products Account (NIPA), shows the same trends as the
S&P small and mid-caps. This matters because the bullish narrative today is
that while the US industrial/manufacturing part of the economy is weak, the US
consumer remains strong, so the US economy can avoid a further slowdown or
recession. Though that may be true for now, this profit trend is unequivocally bad, and getting
worse. Such a broad profits recession, if it doesn’t get better
soon, is exactly what could lead to layoffs. Obviously, such an outcome would
negatively affect the US consumer and is really all that separates the US
economy from a recessionary outcome. On that score, we’re already seeing companies take action on labor by
reducing the number of hours worked and hiring at a much slower pace than last
year.
While it’s not yet clear whether layoffs are coming, the
risk is elevated, and it’s unlikely that the third quarter earnings season will
bring much comfort, given the newly enacted tariffs that kick in this week. Therefore, I
continue to expect further downside in US equity markets this quarter and
believe that the S&P 500 will trade to 2700.
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There has
been a record $160 billion in inflows to bond funds over the past 3 months,
which reveal deep global recession fear & global capitulation into
"Japanification" theme; such
big bond inflows often precede big policy changes.
See Chart:
Big global Bond fund inflows
often precedes big policy changes
... even if it does pose the
question: just who is buying stocks here?
See Chart:
The gap between equity flows & market levels remains wide
despite recent correct
See more interesting charts at
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...it’s akin to the government admitting it has
no intention to ever pay back the debt. 100 years, for all
intents and purposes, is akin to a permanent bond. Government
is asking to take the principle and never pay it back, only interest.
With
central banks globally once again suppressing the borrowing cost of sovereign
entities to near zero rates, with yields in
some countries even going negative, there is
significant talk of issuing a 100-year bond to take advantage of these rates. Part of the argument is to lock in low
rates now to hedge against future increase; though if the past decade is
any consideration, central banks globally will fight until they collapse to
keep sovereign borrowing near zero permanently because they legitimately
have no choice in the matter. Even if governments do lock in these rates
now, it won’t matter considering interest
rate manipulations have placed banks on shaky ground. But if we assume this is a good
idea on a purely financial basis (it’s not, I’ll get into that later), the
concept of these ultra-long bonds are highly unethical.
One of the key reasons behind the
relatively short maturity rates of United States debt instruments is to maintain the illusion that the federal
government is a responsible debt payer. While debt may be
formally paid, it’s done by borrowing additional funds to cover the maturity of
the bond. This is demonstrated by examining
the federal cash flow statements, which show that $9 trillion was
spent paying debt, or over twice the formal federal outlays. Two-thirds of all
cash that transitions through the US Treasury today is related to debt
maintenance.
However,
with the issuance of the 100-year bond or even a perpetual bond, such
as this incredible bond that was issued 371 years ago and is still
being paid by the Netherlands to this day, is that it’s akin to the government
admitting it has no intention to ever pay back the debt. 100 years, for all intents and purposes, is akin
to a permanent bond. Government is asking to take the principle and never pay
it back, only interest.
It’s
Financially Foolish
A major concept in organizational finance, be it a
for-profit or non-profit, is maturity
matching. The term of any debt should match, or be shorter than, the
productive life of the asset it is used to buy. Organizations generally want to
avoid paying debt on obsolete assets as this is a dead-weight loss. Setting
aside for a moment that the vast majority of debt activity by modern
governments is to give it away as a hand-out, the 100-year bond blows up this
concept.
With the
typical four-year bond issued by the government, the initial issuance fits
perfectly with the concept of maturity matching.
Taxation without
Representation
The major issue here is that the 100-year bond throws out
the entire notion that no prior governing body can bind a future governing body
to any activity. The 100-year bond is a solemn promise
that people a century from now are obligated to cover the expenses of today’s
borrowings. Obligating hundreds of millions of unborn people to pay for
our expenses today is the very meaning of taxation without representation. The only option handed to the future generation is to either
pay for today’s excesses or default on that debt and undermine their own
priorities in the process.
While the four-year
bond has some questionable elements since the life of these bonds do extend
beyond the life of both the current and subsequent Congress, the ethical impact is limited to whoever turned 18 during the
following Congressional session. That
Congress can then decide at the time to either pay it or roll-over to what are
still, effectively, the same people it represents. Congress
today doesn’t even have this overlap as no one of voting age now will likely be
alive when the debt is due.
The concept of public debt is already on shaky ethical
grounds, but those ethics are generally limited by the short-term nature of
those debts. They do give the option to those who issued the debt to eventually
pay it off. However, the 100-year debt is highly questionable as they’re
designed to safely insulate the beneficiaries from the costs.
In the immortal words of John Maynard Keynes, “In the long run, we’re all dead.” And what better way to
leverage that long run than by issuing a century bond? We’ll be dead when it
comes due, SO WHO CARES?
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SO WHO CARES?.. about BONDS WRECK PENSION PLANS.. YOU will know it
SOON
“It is financial vandalism and the government and central banks need to wake up
to this.”
….
YES it is financial vandalism or pillage. People WILL REVOLT… no doubts about
Unnaturally Low and negative yield
bond yields are wrecking pension plans.
See Chart:
Bloomberg Barclays Global Agg
Sovereign Bond Yields
Negative-yielding debt has spread to
more than 30% of the world’s investment-grade bonds -- the most ever.
See Chart:
Pension World
Reeling
Most US pension plans assume returns
of six to seven percent. They have shied away from government bonds
because yields have been too low.
“The true madness is pension funds being
forced to invest in assets which will be guaranteed to lose, such as in the
case of long dated inflation-linked gilts at real yields of -3%,” said Mark Dowding, chief investment officer
at BlueBay Asset Management, which has pension-fund mandates.
“It is financial
vandalism and the government and central banks need to wake up to this.”
Vandalism or Fraud?
Five Choice Terms
- Fraud
- Theft
- Counterfeiting
- Robbery
- Vandalism ( as pillage & intentional plundering)
I discussed this
setup in detail in Negative
Yield Curves to Infinity and a Reader Question Regarding Fraud
Please read the
above link if you don't understand why negative yields constitute fraud, theft,
or counterfeiting, and why negative yields can never
occur in the absence of manipulation.
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RELATED:
"This, on its face, is blatant price fixing..."
====
Changes in the prices of sushi offers one example where prices are rising much faster than is reflected
in the 'official' data...
Prices are
rising much
faster than the CPI would have you believe.
====
The official story:
well documented. El Coronel
Trump tiene quien le escriba
...this isn’t 1995.
From a short-term
market perspective, the risk is to the downside next week:
- Historically, September is one of the weakest months of the year, particularly when it follows a weak August.
- The market remains range bound and failed at both the 50-dma and downtrend line on Friday
- The oversold condition has now reversed. (Top panel)
- Volatility is continuing to remain elevated.
- Important downside support moves up to 2875
- The bulls regain control of the narrative on a breakout above 2945.
See Chart:
$SPX S&P 500 Large Cup Index
BREAKING
DOWN THE BULL/BEAR ARGUMENT
Here few of
the “myths” which prevail
in the markets currently.
1) Sentiment Is
Hardly Bearish
Currently, individuals could not be more confident about the
markets or the economy. As shown in the chart below both investor confidence
about the economy, and expected returns from stocks
over the next 12-months, are near record highs, not lows.
See Chart:
Consumer Composite Indices
2) Record Outflows?
In total, long-term fund flows collected $224
billion in the first half of the year, slightly ahead of 2018’s $219 billion.”
See Chart:
Furthermore,
it is hard to suggest there are record outflows when the market is extremely
overbought. As Ned Davis noted:
“Stock market bulls have been
arguing for months that muted stock market valuations and consistent
equity-fund outflows are proof-positive that stock-market investors are not feeling the sort of euphoria that
typically exists before the start of an economic recession or bear
market. But a longer-term view of equity valuations and allocations
indicates ‘excessive optimism.'”
See Charts:
https://www.zerohedge.com/s3/files/inline-images/NedDavis-Stocks-Overbought-083019.jpg?itok=d9ShsWy5
Davis, in
a note, said that the value of the S&P is much higher today than the
index’s average growth would predict. In fact, it’s higher relative to the
average than it has been 80% of the time.
3) The Myth Of Cash
On The Sidelines. To wit:
“Underpinning gains in both stocks and
bonds is $5 trillion of capital that is
sitting on the sidelines and serving as a reservoir for buying on weakness. This
excess cash acts as a backstop for financial assets, both bonds and equities,
because any correction is quickly reversed by investors deploying their excess
cash to buy the dip,”
However, the reality
is if they haven’t done it by now after 3-consecutive
rounds of Q.E. in the U.S., a 300% advance in the markets, and ongoing global
Q.E., exactly what will that catalyst be?
Clifford Asness previously touched on this issue as well.
“There are no sidelines. Those saying this seem to envision a seller of stocks
moving her money to cash and awaiting a chance to return. But they always
ignore that this seller sold to somebody, who presumably moved a
precisely equal amount of cash off the sidelines.”
Every
transaction in the market requires both a buyer and a seller with the only
differentiating factor being at what PRICE the transaction occurs. Since this is required for there to be
equilibrium in the markets, there can be no “sidelines.”
Furthermore, despite
this very salient point, a look at the stock-to-cash ratios also suggest there
is very little available buying power for investors current.
See
Charts:
The
reality is that investors remain more invested in riskier assets than
has historically been the case. And, as Ned Davis noted:
“Cash is low, meaning households are fairly fully
invested.”
See Charts:
4) Not A Bull In
Sight
“Our full year GDP is on pace for 2.6%, which
is stronger than the average annual GDP of this entire 10½ year expansion.
Unemployment is near record lows. Consumer confidence is near record highs. And
corporate earnings continue to impress.
None of that says recession.
But let me just play along for a moment and
pretend that the inverted yield curve actually meant something this time around
– the fact of the matter is that the economy often
expands after an inversion, and the stock market goes up on average of
double-digits afterwards.
If anything, the inverted yield curve is one
of the best buy signals of all time.”– Kevin Matras, Zacks Research
Or, this:
“Despite recent recession fears and yield
curve inversions, the bull market should live on until early 2021, analyst Tom
McClellan said Thursday on CNBC’s ‘Closing
Bell. ‘ Everyone needs to just keep their pants on for now and realize that
the yield curve gives a really long early warning about trouble. It doesn’t say
that trouble is upon us now. It takes several
months to over a year before we get the final price high after a yield curve
inversion. If you get an instance like 1995, there was a very
momentary yield curve inversion and then it backed off and the bull market kept
on going. So that is possible.” – CNBC
You can’t get much more
bullish than that.
However, as I wrote
previously in “The Yield Curve Is Sending A Message:”
“While everybody is ‘freaking out’ over the
‘inversion,’ it is when the yield-curve
‘un-inverts’ that is the most important.
The chart below, shows that when the Fed is
aggressively cutting rates, the yield curve un-inverts as the short-end of the
curve falls faster than the long-end. (This is because
money is leaving ‘risk’ to seek the absolute ‘safety’ of money markets, i.e.
‘market crash.’)”
See Chart:
Lastly, this isn’t
1995.
The Fed is
cutting rates with the “yield curve” inverted.
I wouldn’t dismiss that too quickly.
Kevin Matras is
correct. The stock market DOES indeed go up double
digits following a yield curve inversion. The only issue is that it is the
first step in recovering from the bear market that preceded it.
[ Interesting .. I will re-read it to make my
comments ]
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US
DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete; it’s full of frauds
& corruption. Urge cambio
"If I
had hair, I’d be pulling it out. I’m really concerned about the financial
performance of the business, knowing that if we continue to eat this cost, how
much it hurts."
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US-WORLD ISSUES (Geo Econ, Geo Pol & global Wars)
Global depression is on…China, RU, Iran search for State
socialis+K-, D rest in limbo
Hezbollah
claims successful attack on an Israeli military vehicle which "killed and wounded those inside"...
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The People’s Bank of
China (PBoC), the
country’s central bank, has announced that
it is planning to launch a central
bank digital currency (CBDC), inspired in
part by Facebook’s Libra project...
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SPUTNIK and RT SHOWS
GEO-POL n GEO-ECO
..Focus on neoliberal expansion via wars & danger of WW3
-London Mulls Sending Drones to Persian Gulf
Amid Escalation of Tensions With Iran - Reports The whole middle East will be burned
& then London & Jerusalem bunkers +
- 'Catastrophic'
Hurricane Dorian Pounds Bahamas, Prompts South Carolina, Georgia Coastal
Evacuation
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NOTICIAS IN SPANISH
Lat Am search f alternatives to neo-fascist regimes &
terrorist imperial chaos
RT EN ESPAÑOL
- PRIMERAS IMÁGENES: El huracán Dorian destruye casas, autos y árboles en su potente paso por las Bahamas
- Trump sobre Dorian: "Las Bahamas, golpeadas como nunca antes"
- MINUTO A MINUTO: El huracán Dorian azota a Bahamas
- VIDEO: Irán presenta su nuevo dron de alta precisión que puede atacar blancos lejos de sus fronteras
- "Las Ábaco van a ser borradas": Expertos prevén "devastación y un impacto catastrófico" del huracán Dorian en las Bahamas
- El Gobierno argentino anuncia controles a la compra de dólares desde el 2 de septiembre
- 'Jesús Santrich' reaparece en un nuevo video de las FARC y llama a crear una nueva constituyente en Colombia
- Keiser Report "Insurrección mundial": la nueva era del oro y el bitcóin y la rebelión contra el dinero fíat y los bancos
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PRESS TV
Resume of Global News described by Iranian observers..
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