JUN
13 ND SIT EC y POL
ND denounce Global-neoliberal debacle y propone State-Social
+ Capit-compet in Eco
The US,
Russia and Latin America are the global leaders as more southern and western
states report a jump in new cases...
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ZERO HEDGE ECONOMICS
Neoliberal globalization is over. Financiers know it, they
documented with graphics
...the recent bull market
produced average annual returns more than 3x that of normal.
Let’s start with decomposing earnings per
share into its piece parts.
·
From the 2009 low in stocks through the recent
high earnings per share rose about 265% in total (12.5% annualized, from about
$43/share to about $157/share).
·
Contributing to this rise was rising sales, which
increased about 33% in total, or 2.6% annualized.
·
The tax cuts enacted in 2017 also added
significantly to aggregate earnings, boosting EPS by 19.3%.
·
Share buybacks were on a tear over the last five
years, adding 1.3% to EPS in each of those years through the reduction in the
denominator. But share issuance was rampant at the beginning of the cycle. In
total, share buybacks added 4.5% to aggregate EPS over the last bull market.
·
The final leg in EPS growth is what we will
call ‘other margin expansion’. The aggregate profit margin for the S&P 500
expanded from 7.7% in 2009 to 11.8% in 2020. Some of this margin expansion was
due to tax cuts, but most of it was due to lower interest rates (10-year rates
fell from about 3.3% to 0.3% more recently), and wages falling relative to
aggregate output (wages as a percent of GDP fell from 45%, to an all-time low
of 42% in 2011, and have recently risen back to 43.5%).
SEE CHART:
As previously stated, the S&P 500 rose by
488% over the previous cycle. Roughly 265% of this was due to higher earnings,
and the rest was due to multiple expansion. The P/E
ratio rose from about 10 in early 2009 to about 22 at the beginning of 2020,
which is a 220% rise. So, 60% of the appreciation in the S&P 500 came from
earnings growth and the other 40% came from multiple expansion.
SEE CHART
In the next
chart we put all this together into a breakdown the S&P 500’s total
appreciation into the granular piece parts.
SEE CHART:
With that behind us, we need to analyze each component of share price
appreciation from the last cycle to in order to judge whether it is likely to
be repeated this next cycle.
Sales growth in the US. Are aggregate sales likely to rise by
2.6% annualized going forward? Sales growth closely tracks population growth.
From 2009-2019 the US population grew by 3% per year on average. From now until 2024, the IMF estimates that the US population
will only grow 2.25% per year on average. A 0.75% lower rate of population
growth in the years to come vs the previous decade would seem to imply a lower
aggregate level of sales growth for the S&P 500 this cycle compared to last
cycle.
SEE CHART:
Tax cuts: Dems vs. Reps. It would stretch the imagination to
assume another round of massive corporate tax cuts in the years ahead, even if
the Republican party were to sweep in November. Alternatively, if the Democrats
sweep, the corporate tax rate is likely to rise to 28% (it’s a campaign promise
by Joe Biden). Currently, Biden is the odds on favorite
to take the White House and the Democrats are the favorites to retake the
Senate. Therefore, tax cuts certainly cannot be counted on for EPS growth this
time around and may in fact reduce aggregate EPS.
SEE CHART:
2020 Presidential winning party
2020
Democratic Control of Congress
SEE CHART:
Share buybacks. In the age of bailouts the term “share
buyback” has taken on a negative connotation. Even if there is not legislation
regulating buybacks in the coming years, we are hard pressed to assume a higher
level of buybacks during this cycle compared to last. For this reason, the
buyback factor may be neutral this cycle compared to last.
Other margin expansion.
With the 2-year Treasury rate at 19bps, the 10-year at 70bps, and BAA
spreads only a bit above average at 292bps, we are hard pressed to see another
significant interest rate reduction being a catalyst for margin expansion this
cycle. At the same time, wages as a share of GDP are
still only slightly above the post-war low. A Blue wave in November would
certainly usher in policies to help swing the pendulum back in favor of labor
at the expense of capital. Therefore, margin expansion due to lower wages as a
percent of output would seem an unlikely source of margin expansion.
SEE CHART:
Wages as a
% of GDP
Finally, multiple expansion.
At the beginning of the last market cycle the S&P 500 was sporting
a forward PE of 10x. Back in March, the PE only reached a nadir of 17x and is
already back to 25x. Could the forward multiple double from the March low and
reach 34x? Anything is possible (see negative oil
prices). But even with Fed asset purchases (which empirically are accretive to
multiples), we would be hard pressed to count on multiples topping those from
the 1999-2000 period by a wide margin.
SEE CHART:
In sum, the last market
cycle was a unique one in terms of the aggregate stock price appreciation as
well as its sources. Some of
those sources were clearly one offs (tax cuts), while others may have simply
reached their logical limits (interest rates, wages as a share of output). In
the end, we find lots of reasons to expect lower EPS growth and less multiple
expansion during this market cycle than last. At the very least, this means we have to
re-calibrate our return assumptions moving forward and not expect a repeat of
the 2009-2020 cycle. At worst, it could mean
that achieving even average equity returns over the coming years could be a
challenge.
....
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As
experienced on Thursday, “reversions happen fast.”
The market achieved the retracement to the
200-dma support on Thursday during the most intense sell-off since March. Importantly, it was a good reminder of just how brutal
markets can be when there is a complete lack of liquidity.
The issue remains that the markets have
priced in a “V-shaped” recovery, which is well ahead of what
the economic data suggests.
A Note About The Fed
There were two catalysts that ignited the
sell-off on Thursday. The first, as stated above, were headlines of a surge in
COVID-19 cases. (As discussed in this week’s #MacroView
below)
READ THE NOTE:
The second, and probably more important
reason, was what the Fed didn’t say following this week’s Fed
meeting. While the markets were hopeful for
announcements for more stimulus to support the markets, the Fed simply
reiterated their current stance.
SEE CHART:
As
noted previously, while the Fed is doing a massive amount of QE, the
“hole” they are trying to fill is substantially larger. In what I call the “PacMan” chart below, the “economic
deficit” will consume more than the Fed has currently
committed. (Economic deficit is the estimated loss due to ongoing
unemployment, reduced growth, and impact of debt and deficits.)
SEE CHART:
The Worst Economic Forecasters Ever
The Federal Reserve must qualify as the worst
economic forecasters ever. Despite annual promises of stronger economic growth,
such has yet to be the case. Ever.
SEE TABLE & CHART:
Lance Roberts said: Recessions are a #necessity for
stronger #economic #growth and expanded #prosperity. By
opting to avoid short-term pain by not letting #capitalsim function
in killing off the #weak
and #reducing #debt we have trapped ourselves into long-term low growth and
inequality.
SEE CHARTS:
Markets
are in hysteria.
See Chart:
And
then she said:
Return to “normal” tied to reopening and
Covidenial.
SEE CHART:
Daniel
Lacalle Said:
Markets vs real economy. Insane monetary
policies promote dangerous strategies:
1) Buy the junk: Buy the worst assets hoping
for a bounce.
2) Ignore risk. Buy high risk for lower
returns.
3) Finance recklessness: Buying debt of
insolvent issuers at low yields
SEE CHART:
….
SOURCE: https://www.zerohedge.com/markets/market-corrects-covid-19-cases-surge-bear-case-still-valid
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BIG Corp don’t
accept the competition of small Comp. US Econ survive thanks to Sm-C
"That’s
why we’re seeing a giant rush of small retail investors and everybody else into
the market"
Two weeks
ago, shortly after we first observed that the primary source of capital used by
the Robinhood army of day trading retail investors has been government
stimulus, unemployment and benefit checks...
SEE TABLE
Those who
receive stimulus vs. those who did not (yet received)
... we reported that something
unprecedented has happened: a basket of Goldman "retail
favorite" stocks had outperformed not only the broader S&P500, but
also Goldman's basket of most popular hedge fund stocks.
SEE CHART:
Indeed, as Goldman highlighted at
the end of May, as a result of free government money, zero cost online trades
and millions of bored "unemployed from home"Gen-Zers, there
has been nearly a tripling in retail user activity this year, with the number
of distinct user-positions in S&P 500 stocks rising from 4 million at
the start of 2020 to 5 million at the market peak in February, 7 million at the
S&P 500 trough in March, and 12 million as of the end of May (since then
this number has exploded even higher).
This sharp
increase in retail trading amid still muted hedge fund bullishness in a very
illiquid market, helped a basket of popular retail stocks (which for those who
have access can track it using Goldman's Marquee platform under the GSXURFAV
ticker) outperform the S&P 500 by 13 percentage points YTD.
SEE CHARTS:
https://www.zerohedge.com/s3/files/inline-images/goldman%20on%20retail%20trading_1.jpg?itok=sGgw6Nyw
Or maybe unprecedented is too
strong a word: after the last time retail outperformed hedge funds was in late
February - just two days after the S&P hit an all time high - when we
posted the exact
same observation, and concluded by saying that "while it is certainly a novelty to see retail investors
outperform hedge funds, we doubt this divergence will last long."
It did not,
and the market crashed just days later.
However, what has happened since is
truly unprecedented because if retail had merely smacked "smart
money" returns at the end of February, it has positively crucified both
the smart money - and all the money in the face of the
S&P500 as of right now, when the basket of most popular retail stocks is up
20% YTD compared to the S&P which after Thursday's rout ended down 5% for
the year..
SEE CHART:
... and the Hedge Fund VIP basket
which is roughly unchanged YTD. Even on a hedged basis (retail
favorites/S&P500 vs hedge fund VIPs/largest short pair trades), the retail
army is up almost 30% despite last week's rout, massively outperforming
virtually everyone else, and as the Goldman chart below
shows, since the start of 2019, retail
is outperforming hedge funds roughly 3 to 1.
SEE CHART:
To be sure, retail outperformance
was somewhat hobbled after last Thursday's rout but not nearly enough to catch
down to the broad market, which experienced its sharpest decline since
bottoming on March 23, which shockingly took place one day after arguably the
most dovish Fed statement ever, one in which the central bank announced its
intention to keep the funds rate at 0-25 bp through 2022, while formalizing
open-ended QE. (that said, the S&P is still 36% above its March low largely
thanks to the trillions in Fed stimulus).
This disconnect between retail and
hedge fund performance has not gone unnoticed by Goldman's clients - who pay
Goldman handsomely to outperform - or be told how to outperform - the market.
The surge in retail trading activity has
amplified the market rotation toward cyclicals and value stocks.
Stocks with these qualities which were quickly embraced by
value-seeking retail investors, and now make up a large portion of our retail
basket.
SEE CHARTS:
However, the volatile rotations in recent weeks underscore just how
difficult timing that opportunity can be. We believe most investors should
include some value exposure in their portfolios, although the degree will
depend on time horizon and risk tolerance, among other factors. In the medium-term,
the challenge is determining which laggards are value opportunities and which
leaders will experience fundamental growth that justifies current elevated
valuations.
SEE CHART:
"The Fed doesn’t believe, and
shouldn’t believe, that it can forecast the stock market, and therefore
recognize a bubble in real time,” said Princeton University economist Alan
Blinder, a former Fed vice chairman, in a Bloomberg Television interview.
"They’re pretty easy to
recognize after the fact, after they burst. But, in real time, in a predictive
way, pretty much impossible."
Really?
Impossible? How about one look at the chart of bankrupt Hertz...
SEE CHART:
... whose market cap almost hit $1
billion last week and prompted the company to do the unthinkable: try to sell
stock to the hordes of Robinhood daytraders, whose tiny trades are being
frontrun all day long by HFT algos which are accentuating the momentum and
allowing a handful of small investors to have an outsized impact on the market
(below is Robinhood's latest
606 Report: 65.5% of all orders are sold to Citadel).
SEE TABLE:
Meanwhile,
retail investors - confident they can never lose - and certainly their returns to
date justify it, are betting more and more aggressively on the market, in the
form of the ever more levered upside bets such as tiny, short duration calls.
According to SentimentTrader,
one-contract transactions have surged to 13% from roughly 9%. The smallest of
traders bought more than 14 million speculative call options in the week ended
June 5, an all time high.
SEE CHART:
"We have Instagram influencers
and now we have Reddit influencers,” QVR’s Benn Eifert told Bloomberg. "They post a trade idea in an option, in a single name, and
within an hour you see hundreds of thousands of call options placed, which is
totally insane."
Insane?
Yes, but it's working, and who can blame them: the Fed chairman himself
said he will do nothing to pop the bubble (which he can't see) with tens of
millions of Americans out of work. That means that, all else equal, when it
comes to market insanity you ain't seen nothing yet. Jim Bianco, president and
founder of Bianco Research LLC, agrees, and says that it all comes down to the
Fed's only mandate: never again allow a drop in stocks.
"That’s why we’re seeing a giant rush of
small retail investors and everybody else into the market,” Bianco told Bloomberg Television
Wednesday. “When you go into the
market, you go to the riskiest end of the market, so you buy bankrupt
companies, you buy beaten down airlines, you buy cruise ships, you buy
retailers because they will benefit the most from a support system where
everything is targeted, and the markets will always go up."
And as they do, and as "retail
investors" retire at the old age of 11, Goldman's
clients will get angrier by the day until one day, who knows, we may just see
riots in the streets with chants of "millionaires' lives matter." [ Nice Irony ]
….
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US
DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete; it’s full of frauds
& corruption. Urge cambio
Leandra
Cohen is stepping aside at Man Repeller,
the fashion
blog she created...
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The media in the last four years has devolved into a succession of moral manias... It’s been learned in
these episodes we may freely
misreport reality, so long as the political goal is righteous...
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The killing of black people CONTINUE.. So far, more than 1Mll move to US streets
The incident
happened late Friday in a Wendy's parking lot...
….
Two
lessons learned: 1-the virus ‘racism’ among the police is more lethal
than CV19 . 2- We
can’t cure the evil by using the very means that brought it about.
Mr POTUS: If you don’t
mobilize at least 10% or more 100
thousand in your meetings pro-re-election you better quit & save the shame.
It is more than one million people mobilized so far against your policies. Even
if you bit Biden you won’t be
able to get legitimacy &
governability. You will have to use FASCIM to stay in power and
our Nation will move to armed REVOLUTION. Fascism has not space in America. You will be
defeated and the FED split. Is that you want?
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People’s Police about to be enlarged to serve the community
& punish the criminals
"Every
department, every officer you talk to is looking to leave."
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Health System has to be re-organized. It has to serve the
public, no private business
"Flor said he’s hyper-aware that somebody is paying his million-dollar bill — taxpayers, other
insurance customers and so on."
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Dangerous are policeman who kill blacks because they are infected
with racist’ virus
"It isn’t difficult to see against what – or whom –
this media movement turns nex"
====
Wikipedia, Facebook, Twitter, and mainstream media are falling all over themselves with censorship
and spin jobs to get the narrative back under control as mass protests continue to
sweep across America...
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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
WE were defeated by armed resistance in Iraq.. but we don’t
talk d language ‘defeat’
In line
with Trump withdraw policy, US
hands over more bases even as rhetoric targeting Iran-backed
militias continues...
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Damascus
ramps up efforts at busting past US lines with Russia's help, in an area
where Russian & American
troops are increasingly squaring off...
====
N-KOREA vs
S-KOREA: 'EXPECT
SOMETHING BIG': KIM JONG-UN'S POWERFUL SISTER THREATENS MILITARY ACTION AGAINST
SOUTH
Pyongyang cut the military deescalation hotline
last week, outraged over Seoul giving free reign to defectors.
====
SPUTNIK and RT SHOWS
GEO-POL n GEO-ECO
..Focus on neoliberal expansion via wars & danger of WW3
- Colombian
Businessman Sanctioned by US Over Work With Venezuelan Food Program Arrested in
Cape Verde
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NOTICIAS IN SPANISH
Lat Am search f alternatives to neo-fascist regimes &
terrorist imperial chaos
VIENTO SUR
In
memoriam Chato Galante (1948-2020) Radicalmente humano
Rob
Wallace: Agroindustria pone en riesgo de
muerte a millones
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RT EN ESPAÑOL
Policía que mató a G Floyd: elegible para pensión de
1 millón (aún si es declarado culpable) https://actualidad.rt.com/actualidad/356515-policia-matar-george-floyd-pension-millon-dolares Increible : solo en el US se premia al policía
criminal
Piñera destituye ministro de Salud tras las críticas
sobre el manejo de la pandemia https://actualidad.rt.com/actualidad/356537-pinera-destituye-ministro-salud-criticas-pandemia Si este ministro fuera del US se le daría más
de 1 Millon, pero es Chileno
"No somos la Policía del mundo": Trump
anuncia fin de "las guerras interminables" del US. https://actualidad.rt.com/actualidad/356554-trump-fin-guerras-interminables-eeuu Aun si anuncia traer tropas y desmantelamiento nuclear muy pocos le creerán
Trump revela nuevos detalles del "requete-súper
misil" desarrollado por US. https://actualidad.rt.com/actualidad/356552-trump-revela-nuevas-detalles-misil-hipersonico Es la manera como piensa terminar con las
guerras. Fraude pre-electoral?
"Es claro el divorcio entre economía real y el extraño
casino que opera con dinero de la Res-FED" https://actualidad.rt.com/programas/keiser_report/356520-liquidez-sin-precedentes Pero los padrinos del matrim-anti-natura -el WS- sigue
lucrando con eso
Mineápolis
aprueba reemplazo d Policía por sistema de segurid pública comunitario https://actualidad.rt.com/actualidad/356455-mineapolis-reemplazar-policia-sistema-comunidad Ya hay policía comunal en 2 estados y viene el
tercero: Atlanta.
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INFORMATION CLEARING HOUSE
Deep on the US political crisis: neofascism & internal
conflicts that favor WW3
- The New Cold War with China. How Will It
Affect You? By Michael T.
Klare
- How Saudis, Qataris and Emiratis bought
Washington By Morgan and
Jessica
- It looks like Trump and Adelson cutting a
deal on annexation By Philip and James
- Syria in Seattle: Commune Defies the U.S.
Regime By Pepe Escobar
- Removing a U.S. President Without an Election By Paul Ryder
- U.S. Press Is Destroying Itself By Matt Taibbi
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GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that leads to more
business-wars from US-NATO allies
-ICC
Probe of US War Crimes in Afghanistan. Trump Lashes Back. ICC is “Threat” to
America. By Stephen Lendman
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