JUN 19 ND SIT EC y POL
ND denounce Global-neoliberal
debacle y propone State-Social + Capit-compet in Eco
WHO Director-General Tedros
acknowledged people worldwide wereweary
of lockdown measures...
….
ZERO HEDGE ECONOMICS
Neoliberal globalization is
over. Financiers know it, they documented with graphics
Generating goods, services and jobs is for chumps. Get over it. The real money is made
bellying up to the Fed's free money for financiers spigot...
SEE CHART:
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Well that was a week of
worrisome headlines (from World War 3 to global COVID reawakenings),
awe-inspiring US macro-economic beats (which lose all context in relation to
the collapse) as earnings outlooks remain just "off the lows", and a
stock market that refuses to go down despite bonds, the dollar, and commodities
all signaling anything but strong growth ahead...
Given
the mean-reverting nature of the US macro surprise index (3 standard deviations
above the mean), this could be as good as it gets...
SEE Chart:
US
Macro Surprise Index
Leaving
the gap between macro and micro at its greatest ever...
See Chart:
All
hell broke loose this morning as the June S&P futures contract expired...
See Chart:
The market started lower the
moment the June contract expired, but there were a
number of triggering headlines for the legs lower...
- 1055ET *FLORIDA COVID CASES +4.4% VS. PREVIOUS 7-DAY AVG. 3.2%
- 1125ET *ARIZONA REPORTS A RECORD 3,246 NEW VIRUS CASES: ABC-15
- 1215ET *APPLE TO CLOSE SOME U.S. STORES AGAIN DUE TO COVID-19 SPIKES
- 1302ET *Fed's Quarles Says Market Reaction to Covid-19 Is Not Over
- 1345ET *CRUISE LINES SUSPEND TRIPS OUT OF US PORTS TIL SEPT. 15: CNBC
- 1405ET *CALIFORNIA RECORDS LARGEST SINGLE-DAY INCREASE OF COVID CASES
See Chart:
On the week, all the US majors
were higher with Nasdaq leading and The Dow lagging.
On the
day only Nasdaq managed to close green...
See Chart:
With the late-day panic..
Nasdaq
is up 6 days in a row and up 17 of the last 20 days..
See Chart:
Banks
started the weak with a panic-bid off opening weakness but that faded as the
week proigressed and yields slid...
See Chart:
Treasury
yields fell today to end the week unch...
See Chart:
The
B-dollar Index ended the week higher (up
6 of the last 7 days and 2nd up-week in a row)
See Chart:
And
finally, don't forget, The Fed's balance sheet shrank the most since 2009 this
week...
See Chart:
Either
TSY yields are dramatically too low or Dr.Copper is way over his recovery skis
relative to gold...
See Chart:
Is
volatility about to be resurrected?
….
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The Fed has spent just $173bn out of
its potential $495bn in firepower (and it can always add more).
Is it time to go short?
With the Fed's balance sheet posting
its biggest weekly drop in 11 years, and hitting a plateau of sorts (at least
until the next major QE push)...
SEE CHART
Hartnett also warns that Fed rhetoric has been bigger than
wallet thus far, which means Powell can easily crush shorts. Here's why - the Fed's facilities are operating at just a
fraction of potential, and as Table 1 below shows, the Fed has spent just $173bn out of its potential $495bn in firepower
(and it can always add more).
SEE TABLE
It's not just the Fed: there is also the 2020 fiscal bazooka
which has a way to go.
As Hartnett adds, the fiscal stimulus is taking 3 forms in
2020… spending, credit
guarantees, loans & equity. BIS data
shows US & Australia lead
spending (>10% GDP), Europe is using aggressive credit
guarantees (e.g. Italy 32% GDP), while Japan/Korea are stimulating via
government loans/equity injections.
SEE CHART:
And while Hartnett echoes what we said last month, that it is
"notable how Emerging Markets lagging in terms of fiscal ability to
address pandemic/recession", recall that last night we reported that China
has now vowed to inject global credit amounting
to 30% of GDP in the economy this year.
So does that mean don't short under
any conditions? Not exactly. As Hartnett summarizes, the tactical risk remains to the upside:
positioning,
policy, credit markets all still point to potential for or above 30Y TSY above 2%, IG CDX 60, SPX 3250, while
credit markets are still too strong (see LQD, PFF, CWB)...
SEE CHARTS:
... to short stocks, even if
like stocks, junk has only retraced partially versus quality bonds (see
relative performance of CCC HY bonds vs 30-year Treasury - Chart 9); summer risk remains to upside driven by central bank
repression of credit spreads (positive for "growth"…see
world's best performing market, Chinese Nasdaq (ChiNext), threatening to breakout to new highs - Chart 10), or via big
RoW macro surprise to upside via fiscal stimulus (see soaring Baltic Freight
Index); barbell of credit/tech and EU/US small cap value & banks.
SEE CHART
But the structural risk is to the downside: Fall
2020 risks will be 1. Fear of double-dip recession & default risk, 2.
Debasement of US dollar & disorderly bond markets, 3. Politics threatening
2021 EPS;
His parting advice for a tipping point back into shorts: watch the
yield curve: a failure of the curve to steepen
>80bps in June/July would signal "peak policy stimulus" and
reinvigorate shorts.
….
SOURCE: https://www.zerohedge.com/markets/bofa-there-just-one-bull-market-short-and-fed-wont-let-you
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Over the last several decades, the Federal Reserve and the US
government havealmost exclusively directed their policies toward “stimulating”
spending. Artificially low interest rates incentivize borrowing
and discourage savings.
Saving is integral to a sound economy. But the government
and central bank policies today undermine savings – and thus the overall
economy. Instead of a robust economic system, we end up with a series of
bubbles. We get the illusion of wealth without the actual wealth.
====
...a flock of black swans still on approach vector has
investment implications. Put simply, how can anyone be buying growth
stocks and ignoring gold in this world?
Why bring up these past examples of multi-part crises? Because the
universe seems to like them. And we seem to be entering another one.
Though it’s been largely forgotten in all the recent turmoil, the US financial system was already in crisis last year, as
the repo market – where banks lend money to each other –
locked up, forcing the Fed to reinstitute quantitative easing. The following
chart screams “emergency!”.
SEE CHART:
Federal Reserve Balance Sheet
Then came the pandemic, which sent the global
economy into freefall. The Atlanta Fed’s GDPNow reading
currently shows the US contracting at an annual rate of over 45%.
See Chart:
Too much of a bad thing
So here we are.
- The Fed can’t print new small businesses once the existing ones die.
- The police can’t stop riots without shooting the rioters.
- Corporate profits are cratering with no obvious path to recovery.
- Stock markets are up, but only because financial asset prices are the sole part of the current mess that monetary policy can influence.
Most Americans are no doubt praying that this is it for a while.
But the universe, don’t forget, has a nasty sense of humor. So it
might have a few more surprises up its sleeve.
Consider:
Indian
and Chinese troops are pouring into a disputed border region and
there is more than rumors Of Wars: China, India: North
Korea, South Korea, Israel And Turkey All Move Toward War. An
on top the US is now entering its hurricane/ wildfire season which raises the prospect of mass-evacuations
during new pand.
Put simply, how can anyone be buying
growth stocks and ignoring gold in this world?
….
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Despite
the bounce in retail sales,
there
will still be no “V-shaped” recovery...
As long as individuals have a paycheck; they will spend it. Give them a
tax refund; they will spend it. Issue them a credit card; they will max it out.
Give them a government stimulus check; they will spend it as well. Don’t believe me, then why is consumer debt at record levels?
SEE CHART:
Debt-Driven Consumption
If consumers were even partially responsible, financial guru’s like
Dave Ramsey wouldn’t have a job selling products to get people out of debt.
However, consumers spending themselves further into debt is what keeps
stock markets going higher and the economy going. Note,
that I said “going,” and not “growing,” Take
a look at the chart below:
SEE CHARTS
The Mirage Of Economic Growth
The ‘gap’ between the ‘standard of living’ and real disposable incomes
is shown below. Beginning in 1990, incomes alone were no longer able to meet
the standard of living so consumers turned to debt to fill the ‘gap.’ However, following the ‘financial crisis,’ even the
combined levels of income and debt no longer fill the gap. Currently,
consumers cannot fill the record $2654 annual deficit to maintain their
lifestyle without more debt.”
SEE CHART:
Debt Driven consumption Retards Economic Growth
The gap between the standard of living and incomes is another
reflection of the wealth inequality which is pervasive in the economy.
Less Then Meets The Eye
While there was a massive jump in retail sales in May, a look below the
headlines revealed a different picture. As noted by Mish
Shedlock:
“Despite the surge, sales numbers are back to levels seen in late 2015
and early 2016. On a year-over-year basis, sales are 6.1% below May
2019. Total sales
for the March 2020 through May 2020 period are down -10.5% from the
same period a year ago.
The stimulus checks are gone and more checks may be problematic to get
through a deeply divided Congress. The additional $600 in unemployment benefits
runs out next month, and there is only talk of a bill to extend them at reduced
levels.
Unemployment is still a problem.
See later on.
What the headlines miss is the growth in the
population. The chart below shows retails sales divided by the current
16-and-over population. (If you are alive, you consume.)
SEE CHART:
Annual % chg in Retail Sales per capita
“Before the “Financial Crisis,” the economy had a linear growth
trend of real GDP of 3.2%. Following the 2008
recession, the growth rate dropped to the exponential growth trend of roughly
2.2%. Instead of reducing the debt problems, unproductive debt, and leverage
increased.”
SEE CHART:
Real GDP vs Lineal & Exponential Trends
EMPLOYMENT PROBLEM
There are two reasons for this, which are continually overlooked or
worse simply ignored, by the mainstream media and economists. The first is that
despite the “longest run of employment growth in U.S. history,” those
who are finding jobs continues to grow at a substantially slower pace than the
growth rate of the population. The
economic shutdown exposed this weakness.
“Since the beginning of the last economic expansion, the working-age
population has grown by 25.3 million while employment has fallen by 1.14
million through May. As the BLS confirms above, there are over 26 million who
are “missing” due to how employment is calculated.”
SEE CHART:
“What is crucially important to the economy is full-time employment,
which creates enough income to expand economic growth. The
number of full-time employees to the working-age population is at 44.81%, which
is not high enough to support economic growth.”
SEE CHART
Full Time Employees Relative to Working age Population
Consumers Are All Tapped Out
Secondly, while stimulus checks and extra-benefits may provide a
temporary boost to incomes, that income boost is only temporary. The reality is that 80% of Americans continue to live
paycheck-to-paycheck and have little saved in the bank. With years of
wage stagnation, the cost of living now exceeds what
incomes and debt increases can sustain.
SEE CHART:
Debt Driven Consumption Retards Economic Growth
It is also why despite the annual hopes of “stronger economic
growth,” the 3-year average of economic growth continues to
deteriorate. With consumers forced to consume more
on credit, such will lead to a slower economic recovery as the ability to tap
additional credit becomes problematic.
SEE CHART:
CONSUMERS using Credit to Consume
The impact on the economy from record levels of unemployment will have
a wide range of impacts forestalling an economic recovery. The first, is a deep suppression of wage growth, which is
derived from both recessionary drags and job losses.
SEE CHART:
OMPENSATION Wage & Salary Disbursements
Tightening Up
As stated, with reduced incomes, it is harder to make ends meet harder
to obtain additional credit. Given consumers are
dependent upon credit to “fill the gap,” and with banks
tightening lending standards, access to credit will become more difficult.
SEE CHART:
Lending standards Getting Much
Tighter
Conclusion
As I
discussed last week, the current detachment of the stock market from the
economy is likely an illusion that will not last long.
“The economic destruction playing out in real-time will eventually
weigh on markets. There is a negative feedback loop between employment and
consumption. As unemployment rises, consumption falls due to a lack of income.
Since businesses operate based on demand for goods and services, the
correlation between PCE, fixed investment, and employment is high.”
SEE CHART:
Businesses Operate Against Actual Demand
As noted, even with the reopening of the economy, businesses will not
immediately return to full operational activity, until consumption returns to
normalized levels. Without a ready vaccine, if there is
a second wave of the virus, consumer confidence would likely reverse. Such
would put further pressure on sales and, ultimately, corporate profits.
SEE CHART:
Link Between Corporate Profits &GDP
As I concluded in a note last year:
“It is hard for consumers to remain ‘confident’ and continue spending
when they have lost their source of income.“
While the markets have indeed managed a strong “rally” from
the March lows, there are reasons to be cautious.
We are just entering into what will likely be a more protracted,
deeper, and more damaging recession than what we saw in 2008.
Despite the bounce in retail sales, there will still be no “V-shaped” recovery.
Invest accordingly.
….
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US DOMESTIC POLITICS
Seudo democ duopolico in US is
obsolete; it’s full of frauds & corruption. Urge cambio
Inventing “majorities”, typical from nazis
Famous bases long named after
Confederate generals
undergoing Pentagon review...
====
Parson recommended to adapt to
your context 1st, otherwise
you are an idiot
Not since Nixon went
to China have relations been so bad...
The
reasons are many...
….
Nixon was one of the
most horrible dictators in America. While in China the dictator MAO was replaced
or cleaned by Lin Piao. Since then China mixed socialism with capitalism, as
Lenin did it with the NEP (New Economic Policy) in Rusia. In America the best
President we had was FDR and he mixed capitalism with socialism. Then only
idiots (non sense of history) believe
that capitalism with socialism cannot be mixed. This is what happen with idiots like
Buchanan. Does BB knows that the communist manifesto of MARX was defeated by
the 2nd International and that instead the word “communism” was
adopted the word “socialism” (that in fact reflected a more objective
reality since socialism existed in
Europe 3 centuries before the Manifesto).
Then use “ socialism” instead communism , if your narrow mind has
trouble digesting ‘words’.
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AMERICAN LIFE MATTERS!!
By Hugo Adan
6/19/20.
This is my answer to one person who has no sense of
history:
In short,
the 2020 recession will usher in a new “Progressive Era” of the early 1900s,
or, more accurately, another
“Regressive Era.”
….
….
The progress of history doesn’t happen in direct line (from A to B to
C-D.. etc) , it goes in spiral and in
ascending way (from worse to best). When
history is repetitive is bad sign, it mean that critical contradiction inside
our system was not solved.
The old duopoly political system
we have is repetitive (Dems & Reps-reproduce the same militaristic stupidity
of the past: state invest in weapons & wars, not in best health nor
education for all.
That type of history has arrived
to its end since ‘our assumed enemies’ has similar power & similar end too:
not winners, but MAD plus total destruction of the world with new pandemics,
ZERO economic progress.
All this is symptom that a new REV is coming in America & the world
too, since it is the end of neo-
liberalism what is at stake. Neo-liberalism in fact doesn’t exist anymore. That we have
instead is different types of monopolies,
all controlled by huge
billionaires. This is the history that is arriving to its end.
The contradictions of upper classes with middle and lower classes (the
labor) will be resolved when the
oppressed make a UNITED FRONT to defend their interest, then we will talk of a real
REVOLUTION in process.
Radical change is ubiquitous, nothing can stopped (much less fraudulent
elections: buying votes mascaraed with invented pools). Most people in America
has decided ABSTENTION instead of going
to the ballot box.
History progress doesn’t move in close circles, its spiral move may
have little set backs , but never total
regression to the pass, only brief step back to soon make two steps forward.
SO, after the coming REVOLUTION there will not be total ‘regresive era’ to
the past. History in America proved so and is going to do it again after a
socialist revolution coming.
The new revolution will not look
like others in our past not in the world. This one will be heroic creation of
our new nation. We won’t die bending our knee to the
ruling class, nor will die in the bed of pandemics, said young people.
The
coming revolution is going to be a new creation of our Nation, different to
previous types of Revolution in the world. Young people in America has already
decided their destiny. That why
we said : AMERICAN LIFE MATTERS!
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As city politicians continue to push their
bailout and statehood agenda, it’s important to note that most would
take a substantial pay cut if
they actually mirrored the salary scale from the states...
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"I don’t really understand
why he decided to take that risk."
====
"The news media on the left has
completely ignored all of these Biden speeches that clearly show some kind ofcognitive decline."
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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
Ruso-phobia behind?
Sen.
Menendez: “This drawdown weakens America and Europe. And Vladimir Putin understands and appreciates that
better than anyone.”
====
SPUTNIK and RT SHOWS
GEO-POL
n GEO-ECO ..Focus on neoliberal
expansion via wars & danger of WW3
-Live Updates: Statues Attacked and Dismantled
as Protests Continue in US After George Floyd's Death
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THE REST FOR TOMORROW
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