S&P 500 Index Movements

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America's bull market may end soon, but it's not time to hit the panic button yet.
There's a 50% chance that U.S. stocks will dive into a bear market this year, according to a CNNMoney survey of top investment strategists. But most believe the fall would be short-lived.

Global stocks have already tumbled into bear territory -- a drop of 20% or more from the bull-market peak. The U.S. has come close -- investors have heard the bear growling -- but it hasn't hit that point yet.
"There is certainly a decent likelihood that the S&P 500 falls into bear market territory, but it may only be there temporarily," says Kristina Hooper, U.S. investment strategist at Allianz Global Investors.
Experts aren't alarmed, because they believe a big rebound is coming. The U.S. economy is too strong for stocks not to recover from here, they argue, especially if oil prices finally stop sliding.
They predict the S&P 500 will end the year with a gain of 2.5%, according to CNNMoney's latest survey. That would be a surge of over 11% from stocks are now.
Related: Can U.S. stocks still return 5% in 2016?
A recession is unlikely, says Hooper. Deep bear markets typically occur when a country falls into recession. Right now, the fundamentals of the U.S. economy are solid.
Like many strategists, Hooper points to many healthy signs such as extremely low unemployment, cheap gas, decent retail sales and a slight increase in wages.
The U.S. economy is powered by consumer spending. If Americans continue to get jobs and higher pay, that should keep buying strong and the economy chugging along, even if China, Japan and other parts of the world struggle.
"In the absence of a recession, which we do not have and are not likely to for the next year or so, bear markets tend to be short and sharp," says Brad McMillian, chief strategist at Commonwealth Financial.
Related: 20% chance of a U.S. recession this year
So is now the time to buy stocks? Expert views vary.
"Now is the time to be a selective buyer," says Joseph Quinlan, chief market strategist for U.S. Trust. He likes big companies that pay dividends. "For an investor with a three to five-year time horizon, this is a good time to increase equity exposure."
The story for much of 2015 was that stocks got expensive. The bull market, which started in March 2009, was getting tired. But the great sell-off in January has eased a lot of those fears.
The S&P 500 now trades at about 15.5 times forward earnings. That's "not at all overvalued," notes Art Hogan, chief market strategist at Wunderlich Securities. To put it another way, stocks are back at valuations not seen since early 2014.
Still, Hogan wouldn't advise going all in. This is the type of market to "average in" any bets on stocks, meaning put a bit of money in at a time.
Related: Janet Yellen: Negative rates are possible in U.S.
In addition to big, high quality companies, stocks related to homebuilding are also worth a look.
"The nascent U.S. housing recovery, combined with a strongly positioned U.S. consumer, makes homebuilders, building products and materials stocks and retailers that cater to the housing market attractive in today's environment," says Michael Arone, chief investment strategist at State Street Global Advisors.
But others, like Hooper at Allianz Global Investors, advise sitting tight.
"Although valuations have come down, they are not necessarily attractive enough to begin buying in at this point," says Hooper.
Fund managers -- people who invest for a living -- have the most cash in their funds since November 2001, according to the February Fund Manager survey by Bank of America Merrill Lynch.
It's another sign of waiting on the sidelines to see how the coming weeks -- and maybe months -- shake out.
CNNMoney's Matt Egan contributed to this article

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Cashin: I won’t believe in the stock rally until the S&P hits 1,950
Tom DiChristopher   | @tdichristopher
4 Hours Ago
CNBC.com
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The current stock market rally is encouraging because it's broad-based, but it has yet to prove itself, Art Cashin said Wednesday.

Stocks were rallying for a third day Wednesday. The Dow Jones industrial average jumped more than 200 points, and the S&P 500 rose above 1,920, a critical early support level, according to Cashin.

However, equities have a bit further to go before they make a believer out of the director of floor operations at the New York Stock Exchange for UBS.

"It will prove itself if it gets above 1,950. For now we've taken a healthy leap forward. As I say, it's broad, so you've got to appreciate that, but I won't declare 'in' until we talk about 1,950," he told CNBC's "Squawk on the Street."

Traders work on the floor of the New York Stock Exchange.
Stocks post biggest 3-day gain since Aug. as oil rises
The fact that cyclical stocks — including consumer discretionary, industrials and financials — managed to grind higher after getting beaten up suggests short covering is at least partly behind the rally, he said.

Shares also got a boost from surging crude futures, which extended gains after Iran's oil minister said the country supports a plan floated this week by fellow producers Saudi Arabia, Russia, Venezuela and Qatar to freeze output at January levels.

While U.S. crude rose above the critical $30-per-barrel mark, it is important that the commodity proves it can hold those gains, Cashin said. Few people believe talks between OPEC members and non-OPEC producers to stem oil price losses will ultimately be fruitful, he said.

Barry Bannister, chief equity strategist at Stifel Nicolaus, said Wednesday on "Squawk on the Street" that a freeze would not be particularly helpful because it caps production near maximum output. Further, he said he worries about supply from the "Shiite axis" of Iran and Iraq.

Both Iran and Iraq have ramped up production and are politically aligned against top oil exporter Saudi Arabia, the predominant Sunni Muslim power in the region.

A general view shows a unit of South Pars Gas field in Asalouyeh Seaport, north of Persian Gulf, Iran.
Iran voices support for efforts to stabilize oil
The S&P 500 can likely rise above the mid-1,900 level, but gains will be capped because the Federal Reserve must eventually raise interest rates, Bannister said.

He chalked up the rally to the perception that the Fed will not hike interest rates at least until the second half of the year, and the sense that China has achieved some stability in its currency, easing fears that it will export deflation to the rest of the world.

The market is likely to progress up in the medium term as calm sets in, Samantha Azzarello, global market strategist at JPMorgan Funds, said Wednesday.

"I'm not going to say the market is irrational, but at the same time, the amount of sell-off we've seen, we just don't think it's justified," she told "Squawk on the Street."

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This indicator suggests this week’s stock-market rally won’t last

By Joseph Adinolfi
Published: Feb 17, 2016 2:18 p.m. ET

     35 
The yen’s resilience vs. the dollar shows investors remain apprehensive
Shutterstock/Tolga Bayraktar
The dollar is stuck below a crucial support level against the yen.
U.S. stocks are on the verge of logging their first three-day rally since December.

But one widely watched market-based indicator suggests this rebound won’t morph into the sustained recovery that many are hoping for.

The dollar has languished below ¥115 this week, even as Japanese officials warned of more monetary and fiscal stimulus, and weak data showed economic growth in the world’s third-largest economy has remained sluggish — all of which would typically cause a currency to weaken.


The Japanese yen is a popular safe haven, so its continued strength suggests that investors remain apprehensive about the prospects for global equities.

But given the strong historical correlation between U.S. stocks and the dollar-yen exchange rate — which can be observed in this chart — it’s likely that one of the two markets will capitulate, analysts said.


“Would you expect the dollar-yen to go where equity sentiment is going, or equity sentiment to go where the dollar-yen is going?” said Win Thin, chief emerging market currency strategist at Brown Brothers Harriman. “I would expect the dollar-yen to catch up with equity sentiment.”

But not everyone has such a sanguine view of the U.S. market.

Kevin Kelly, a managing partner at Recon Capital, believes there’s more weakness ahead for both U.S. equities and the dollar.

“As a global growth story, the U.S. isn’t going to significantly outperform,” Kelly said.

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BofA: Market sees 50-50 chance of recession
Fred Imbert   | @foimbert
12 Hours Ago
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Traders work on the floor of the New York Stock Exchange.
Getty Images
Traders work on the floor of the New York Stock Exchange.
Bank of America Merrill Lynch sees a 25 percent chance of a recession, but says the market is pricing in a 50 percent chance of a recession in the next 12 months.

"In our view, not only is fear trumping fundamentals, but the fundamentals for the equity market are worse than for the overall economy," the firm said in a note.

It also lowered the number of rate hikes it expects from the Federal Reserve, saying "'gradual' now means two rather than three or four hikes this year, we believe."

‹
Byron Wien
Market hasn't reached ultimate low: Byron Wien
Neel Kashkari
Fed's Kashkari: We're in a 'pickle' over rates
›
BofAML also lowered its expectations for the U.S. dollar, now forecasting the euro/dollar value to reach parity by the end the year, down from 95 cents, and the dollar/yen pair to end at 110 yen, from 120. It also lowered its year-end target on U.S. 10-year note yields to 2 percent from 2.65 percent.
The U.S. stock market has fallen sharply this year as growing recession fears and plummeting oil prices have weighed on investors.

The Dow Jones industrial average and the S&P 500 index are both down about 6 percent for the year, while the Nasdaq composite has fallen over 10 percent. On Wednesday, the Dow and the S&P were aiming for their first three-day winning streak of the year.

BofAML also said there is a 40 percent chance the Fed may have to either stop raising rates or cut rates before the end of 2016. "Unfortunately, the Fed is only likely to capitulate if there are either significant signs of further financial stress or clear signs that growth is dropping below potential," it said

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Poof! S&P 500 says goodbye to correction
 Adam Shell, USA TODAY 8:29 a.m. EST February 18, 2016

At its low point just a few days ago, the Dow was down nearly eighteen hundred points or 10 percent for the year. But the surge is now in it’s third straight day, giving Wall Street the much needed relief it was looking for.

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Poof!

Out of nowhere, a three-day rally on Wall Street has brought the S&P 500 index back from the brink of collapse, trimming its losses from its record high to less than 10% and pulling it out of correction territory.

What a difference three trading sessions make. Last Thursday at its intraday low, the Standard & Poor’s 500  was down more than 15% from its May 2015 peak and looked like it was on an eventual collision course with a bear market, or a drop of 20% or more. But a sudden, swift and sizable three-day surge has trimmed the large-company index’s loss from its high to a more manageable 9.6%, which allows it to exit from its painful early-year correction -- at least for now.


USA TODAY
Winner! S&P 500 exits correction, Dow gains 257

U.S. stocks got off to their worst start ever to a year, dragged down by all sorts of fears -- some real, some imagined -- centered around the big three: plunging oil prices, angst related to the Federal Reserve’s interest rate hike plans and rising risk of a U.S. recession sparked by a slowdown in China, the world’s second-biggest economy.

But amid all the doom and gloom, a market said to be grossly oversold and a spike in pessimism reminiscent of the fear that engulfed Wall Street during the 2008 financial crisis, a rally was born. Wall Street is now debating whether the bottom is in or whether the rally is just a short-term pop in an ongoing down market.

What gave what looked like a dead market new life?

Here are some theories:

* Rationality returned.  Investors were exiting stocks en masse in a fit of panic with a herd mentality that led to a selling stampede. Fear trumped fundamentals (or actual business conditions on the ground). Some positive headlines on the U.S. economy and the oil patch, where talk of a production freeze has emerged, helped stem worse-case scenarios.

“Calmer heads have prevailed,” Brian Belski, chief investment strategist at BMO Capital Markets told USA TODAY. “The positive economic news this week helps defeat the fear mongers and naysayers that have positioned their portfolios for a U.S. recession. Investors should remain leery of excess negative banter in the marketplace, especially after the markets have gone down” so much.

* Recession fears faded. Investors were pricing in increased odds of recession, but good news Wednesday on inflation at the wholesale level and industrial production, sent a clear message that the economy was still in growth mode.

The better economic news “deflated the fear of U.S. recession quite a bit,”  says Bill Stone, chief investment strategist at PNC Asset Management.

* Oil roared back. When Saudi Arabia and Russia went public with a plan to freeze oil production levels this week, it was viewed as a first step toward price stability and a sign that key oil-producing nations were finally willing to act to address the supply glut.

That got Wall Street thinking a long elusive oil bottom was nearing. U.S. produced crude rallied 5.6% Wednesday and climbed back above $30 per barrel, well above its 13-year low of $26.05 hit last Thursday.

“We may be close to a bottom for oil prices,” says Alan Skrainka, chief investment officer at Cornerstone Wealth Management.

Adds Nick Sargen, senior investment advisor, at Fort Washington Investment Advisors: “My view is that the worries about oil and the economy haven’t disappeared. But I’m a believer that Saudi Arabia and Russia are feeling the pain of depressed prices and it is in their interest to try to set a floor for oil. Even if the price doesn’t rise significantly, it would arrest market fears that oil could fall to $20 per barrel or lower.”

The bottom line: Concerns of a 2008 redux have eased -- for now. “At the moment it seems like vindication for those like us that viewed this as more like the stealth bear market of 2011 than the financial crisis of 2008,” says PNC’s Stone

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Ray Dalio: Expect lower returns, higher risk
Jacob Pramuk   | @jacobpramuk
19 Hours Ago
CNBC.com
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Global trends and central bank policy have fueled an environment in which investors should expect "lower than normal returns with greater than normal risk," hedge fund titan Ray Dalio wrote in an investor letter released Thursday.

The Bridgewater Associates founder contended that central banks would "increasingly ease" through negative interest rates and bond-buying. But those methods would have limited effectiveness amid already easy policy, he argued.

"As a result, central banks will increasingly be 'pushing on a string,'" Dalio wrote, adding that "QE will be less and less effective because there is less 'gas in the tank.'"

Ray Dalio
David A. Grogan | CNBC
Ray Dalio
The U.S. Federal Reserve, which hiked from near-zero interest rates in December for the first time in more than nine years, could only boost the economy "a bit" with more easing, Dalio said.

The Bank of Japan and European Central Bank would hold even less sway, as they have already moved to negative interest rates, he argued.

Dalio's sentiments echoed comments he made to CNBC in January, when he contended that the Fed was more likely to ease policy than raise interest rates again. Amid global growth uncertainty and rocky U.S. stock trading this year, the Fed has indicated it plans to stick to its rate-hiking course.

Still, the minutes from the Fed policymaking committee's January meeting showed that officials worried that difficult global financial conditions could spread to the U.S. economy. Policymakers also considered changing their rate hike path and said they would monitor global economic developments like the battered oil market.

Ray Dalio
Bridgewater's Dalio: Fed's next move toward QE
Dalio said central banks' "currency movements must be larger" because they cannot cut rates in some parts of the globe. That creates so-called "currency wars" and increases risk for investors.

"Asset prices have fallen largely as a result of this, together with the deflationary pressures brought about by most economies being in the later stages of their long term debt cycles," he wrote.

Dalio has earned a reputation for market calls. Bridgewater has more than $150 billion under management, and its flagship fund was up 4.7 percent in 2015, versus a 0.7 percent loss for the S&P 500.

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感謝紅三兵！理柏：美股基金投資人逢高選擇減碼
回應(0) 人氣(245) 收藏(0) 2016/02/19 13:52
MoneyDJ新聞 2016-02-19 13:52:16 記者 賴宏昌 報導
最新數據顯示，標準普爾500指數2月12-17日的紅三兵K線型態(見圖)並不是投資人逢低布局的傑作！
Thomson Reuters報導，理柏(Lipper)研究分析師Pat Keon指出，投資人持續減碼股票投資部位。根據理柏公布的統計數據，截至2016年2月17日為止當週美國註冊的股票型基金(包括ETF)淨失血56.65億美元、連續第7週呈現淨流出，美股基金就佔了36.45億美元。歐洲股票型基金當週淨失血12億美元、創2014年10月最大賣超紀錄。日本股票型基金淨流出7.95億美元、連續第3週呈現賣超。
美國公債基金連續第10週淨吸金、當週進帳16億美元。貴金屬商品基金淨流入6.09億美元、連續第6週呈現買超。投資等級債券基金淨失血11億美元、13週以來第12度呈現賣超。能源產業基金淨吸金7.85億美元、連續第2週進帳。

投資公司協會(Investment Company Institute，ICI)發布的統計數據顯示，以美國掛牌企業為投資標的的股票型基金已連續11個月呈現淨失血。
霸榮(Barrons.com)曾報導，Wells Capital Management分析師Jim Paulsen指出，自1955年以來美國股市評價水準在升息初期都是呈現下滑、直到聯準會(FED)升息循環告一段落之後才會止跌。當然，本益比下滑並不代表股價就會重挫、只要企業盈餘成長能夠跟得上來就沒事。
CNBC 18日報導，史上操作績效最棒(贏過索羅斯)、全球最大避險基金集團Bridgewater Associates創辦人Ray Dalio在寫給客戶的信中提到，受全球趨勢以及央行政策影響，未來的投資報酬率將低於正常水準、風險也將高於往常。
日本央行(BOJ)1月29日意外宣布將超額存款準備金率自0.1%降至-0.1%。日經225指數僅上漲兩天、隨後8個交易日當中有7天收低，2月12日收盤(14,952.61點)位置創2014年10月21日以來新低；週線大跌11.1%、創2008年10月24日當週以來最大跌幅。
芝加哥聯準銀行公布，截至2016年2月12日當週「國家金融狀況指數(National Financial Conditions Index；NFCI)」報-0.50、創2012年9月14日當週以來新高，顯示美國金融緊縮狀況達到逾3年來最高水準。NFCI包含28項貨幣市場指標、27項來自股市以及債市的指標以及45項銀行系統指標。FED是在12月16日做出近10年來首見的升息決定；NFCI在2015年12月11日當週報-0.61。
美國密西根大學消費者信心調查團隊2月12日公布，未來5年通膨預期自1月的2.7%降至2.4%、創1970年代末期開始統計以來新低紀錄。
＊編者按：本文僅供參考之用，並不構成要約、招攬或邀請、誘使、任何不論種類或形式之申述或訂立任何建議及推薦，讀者務請運用個人獨立思考能力，自行作出投資決定，如因相關建議招致損失，概與《精實財經媒體》、編者及作者無涉


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Opinion: This one-two-three punch could drop stocks 30% in 2016

By Mark D. Cook
Published: Feb 19, 2016 5:08 a.m. ET

     13 
Energy, currencies, banks spell trouble for investors
Getty Images
A 30% slide for U.S. stocks in 2016 could be more likely than ever. Here’s why.

There are two diametrically opposing forces within the stock-market prediction world — those who believe in market fundamentals and those who follow market technicals, of which I am the latter.

My brother is a market fundamentalist. I am a market technician. And about this market we see eye-to-eye: Stocks have nowhere to go but down.

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My brother the market fundamentalist sees global stock prices tied to the energy industry woes, which are global and infectious to many ancillary businesses and governments; Second, the economies throughout the world are experiencing violent currency swings, making international trade uncertain. Third, the banks of the world are realizing that loans which seemed iron-clad are in fact not, making the banking sector vulnerable.

“Stocks are going down!” my brother screamed over the phone to me.

I told him that I agree. The energy sector has experienced a devastating decline. Second, the U.S. dollar DXY, +0.00%  is at levels versus world currencies that are literally upside down from the last decade — thus commodity resources of the U.S. are suffering price-wise. Third, bank stocks are in a bear market.

Rarely do market fundamentalists and market technicians agree, particularly in the opinion that U.S. stocks could lose 30%.

The current situation has more clarity for a market technician such as myself. Market technicians are number-crunchers. They arrive at conclusions utilizing formulas and proprietary methods.

Market conditions are alarmingly similar to 1987, 2000, and 2008.
Personally, my proprietary indicator, the CCT, is an overbought/oversold indicator I have used for 30 years. It ties together many large components of the internals of the market to measure bullish or bearish price moves. The CCT formula is the NYSE tick quotation correlated to price movements of indices.

The CCT measures investor sentiment. It recognizes complacency as well as panic. Nowadays the CCT shows a market alarmingly similar to 1987, 2000, and 2008.

The market’s engine is stalling. Each of these bear-market years resulted in declines in excess of 35%. The severity of the decline is indeed a concern, but more importantly is the time it takes from the highs to the lows.

For example, a market low in 2016 would be less injurious than if the low is registered in 2017, because the longer the market experiences anxiety, the more pain there is to relieve. This fact was demonstrated in 1987 when the 35% decline was short-lived and rebuilt quicker. The decline starting in 2000 lasted into 2003 with intermittent attempts to stabilize being showered with selling panics. The demise in prices and time was longer than 1987, making bearish sentiment increase and stalling rallies. Sentiment is a slow-moving, large vessel that cannot be turned quickly.

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Weekend Reading: The Bull Is Back?
Tyler Durden's pictureSubmitted by Tyler Durden on 02/19/2016 16:35 -0500

Bear Market Ben Graham Central Banks China Deutsche Bank Doug Kass Dow Jones Industrial Average Evans-Pritchard Federal Reserve Global Economy Japan John Hussman Kyle Bass Kyle Bass Larry Summers McClellan Oscillator Moving Averages Quantitative Easing Recession Tyler Durden Volatility


 
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Submitted by Lance Roberts via RealInvestmentAdvice.com,

That didn’t take much. After a three-day rally, the media is back into “bullish” mode suggesting the bottom is likely in and by the end of this year, it’s all going to be just fine.



Unfortunately, history suggests that after such a long unabated expansion risks are substantially higher than it has been previously. Furthermore, as I have repeated often in these missives, in an economy that is driven primarily based on consumption, and such consumption is already weak, it doesn’t take much to “flip the switch.”

Believe it or not, this was a point make by former bull Joseph LaVorgna, Chief Economist for Deutsche Bank, now turned…da..da..dum…“bear.”  (Lord help us, hell hath frozen over.)



This week’s reading list in a continuation of thoughts on the current state of the financial markets, economy and the Fed. Is the recent correction now over setting the stage for the bull to begin its next charge? Or, is the recent rally just a trap drawing unwitting investors into the next sell off? No one knows for sure, but what you decide next could have potentially serious ramifications.

1) Bearish Sentiment A Cocktail For Rallies by Doug Kass via Real Clear Markets

“As I noted both four weeks ago and again late last week, numerous precedents and positive technical divergences have led to our current sharp rally, including the fact that:
 
Despite the S&P 500 and Dow Jones Industrial Average recently hitting fresh lows, only about 50% as many New York Stock Exchange-listed companies hit new 52-week lows this month as did so in January.
 
The percentage of stocks trading above their 50- and 200-day moving averages was higher at the recent low than it was at the market’s January low.
 
The McClellan Oscillator and Summation Index recently held at higher oversold levels.
 
Conversely, the market’s recent leaders have gone on the defensive and become laggards. But as I’ve previously pointed out, leadership changes often accompany a weak overall market — so we have to stay alert.”
But Also Read: The Curious Case Of Surging Transports by Mark Hulbert via MarketWatch

But Read: Bert Dohmen Is Uber-Bearish by Financial Sense

2)  Odds Of A Recession At 33% By Next Year by Larry Summers via The Washington Post

“I would put the odds of a U.S. recession at about 1/3 over the next year and at over ½ over the next 2 years.   There is a substantial chance that widening credit spreads, a strengthening dollar as Europe and Japan plunge more deeply into the world of negative rates, and lower inflation expectations will be tightening financial conditions even as recession looms.  And while there is certainly scope for quantitative easing, for forward guidance and possibly for negative rates, it is very unlikely that the Federal Reserve can take steps that are nearly the functional equivalent of 400 basis point cut in Fed funds that is normally necessary to respond to an incipient recession.”
But Also Read: The 4-Horseman Of The Economy Are Here by Constantin Gurdgiev via True Economics

3) Kyle Bass: A Ticking Bomb In China by Julia La Roche via Business Insider

“China’s banking system has grown from under $3 trillion to over $34.5 trillion in assets over the last 10 years alone. No credit system in history has ever attempted this rate of growth. There is no precedent.
 
What does this mean for Chinese banks? There is a bad answer and a worse answer. The bad answer is that Chinese bank capital – the equity buffer – is significantly overstated. A TBR requires much less capital to be set aside (only 2.5c as opposed to 11c for an on-balance sheet loan) at the time of origination (anyone thinking Fannie and Freddie?). Adjusting reported bank capital ratios for this effect changes reasonable 8-9% Core Tier 1 capital ratios (CT1) to undercapitalized 5-6% levels.
 
Now, the worse news. TBRs are one of the biggest ticking time bombs in the Chinese banking system because they have been used to hide loan losses.“
China-Bank-Loans-021816

Also Read: The China Delusion by Rob Johnson via Project Syndicate

4) Central Banks & The Ongoing Dispute

Negative Rates Are A Failure by Ambrose Evans-Pritchard via The Telegraph
Yes, NIRP Was A Bad Idea by Izabella Kaminska via FT AlphaVille
NIRP Doomed To Failure by Frank Hollenbeck via The Mises Institute
Central Banks Face Credibility Test by John Plender via FT.com
Japan Near Ending Of Stimulus by Jeffrey Snider via Alhambra Partners
Central Banks Face New World by Caroline Baum via E21
Central Banks Are Clueless by Alanna Petroff via CNN Money
Negative Rates, Deficits & Defaults by Reuven Brenner via Asia Times
 

5) It’s August 2008 All Over Again by Ken Goldberg via The Street

“The stock market’s path for the next month or two is likely to take its toll on both bulls and bears. This is because of how the market tends to “frack” its way through major peaks and troughs, as some indices peak earlier than others, while others tend to trough earlier than others. If you know which index is leading the others, the solution is simple. Once the leader shows its hand, take the appropriate action in the followers and wait for them to catch up, as the profits should be close behind, right? Maybe. Unless humans are involved. We tend to use coping mechanisms that limit our ability to see what the markets are showing us. That historically results in situations where the herd becomes bullish at major tops and bearish at major bottoms.”

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Has The Market Crash Only Just Begun?
Tyler Durden's pictureSubmitted by Tyler Durden on 02/19/2016 21:10 -0500

Black Swan Cognitive Dissonance keynesianism Mark Spitznagel Market Crash Reality


 
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Having successfully called the market's retreat in the fall of 2015, Universa's Mark Spitznagel is not taking a victory lap as he warns Bloomberg TV that "the crash has only just begun."

Investors are facing the most binary "let's make a deal" market in history in Spitznagel's view: choose Door #1 to bet on Keynesianism, central planners, and monetary interventionism; or Door #2 to bet on free markets and natural price discovery.

"There is massive cognitive dissonance here," Spitznagel explains as history teaches us that door #2 is the right choice... but it's not possible to do that today as investors have been coerced to choose door #1, but when door #1 is slammed open "we will see that dreaded black swan monster."

That is what is going on right now:

"Investors want to go with The Fed when it's working - like David Zervos... the problem is, when do you know that it is not working?"
"At some point this stops working..."
 
"the market is going through a resolution process, transitioning from the cognitive dissonance of Door #1 to the harsh reality of Door #2... if everyone were to change doors at the same time, that is a market crash... it can't be done in a non-messy way.

[king]

To see where the US economy is headed, look at 1986
Matt Phillips February 19, 2016
 
Amazing: The US avoided recession in 1986. (AP Photo)
Nobody seems to know where the US economy is going.
In recent weeks, stock, bond and commodities markets have signaled rising risks of recession, and industrial numbers looked feeble, even as updates on the health of the all-important US consumer sector remain sturdy.
The divergent data highlight key questions facing the US:
Can the US shrug off the slowdown of China and other economic powerhouses?

Is the sharp decline in the US energy and industrial sectors big enough to pull the rest of the economy down with it?
Are consumers able to pick up the slack to keep the economy growing?
Well, the US has been in a similar position before, just about 30 years ago.

Back in 1986, oil prices were in the midst of an epic collapse, after Saudi Arabia essentially set off a price war aimed at preserving and boosting the Kingdom’s share of the global oil market.
That’s not too far off from the plunge we’ve seen in oil prices over the last couple years. Prices for benchmark crude have tumbled in the neighborhood of 70% since the end of 2013.
Moreover, the Asian exporting behemoth of the time, Japan, had started to slow. (Japan’s growth in 1986 turned out to be the slowest in a dozen years.)

The historical echo of 1986 offers an opportunity for those of us eager to understand where the US economy goes from here.
Here’s what happened back then. And some thoughts about what we can expect this time.
Oil made an impact

Like today, the sharp decline in oil prices most obviously hammered the energy sector. Investment in the oil and gas sector dried up fast.

What happened?

Jobs quickly vaporized, with employment in oil and gas extraction shrinking by roughly 150,000 jobs in 1986 alone.

Of course there was some spillover. Energy-centric cities such as Houston suffered big housing busts as people left town, and declining prices prompted homeowners to walk-away from homes worth far less than their mortgage.
A front page article from the Wall Street Journal in early 1987 spotlighted Houston’s “suburban slums.” Meanwhile, the oil patch as a whole went through a rather severe regional recession.
Slower growth, but no recession

But while the oil bust hammered some regions, the US as a whole never slipped into a recession.

Real GDP growth slowed to 3.5% in 1986, down from much faster clips in 1984 (7.3%) and 1985 (4.2%).

The consumer

 

Consumer spending did most of the heavy lifting during the mid-1980s as American behavior went through a major transformation.
Since the Great Depression, Americans had been massive savers. But that essentially changed in the 1980s. Americans stopped saving, and opted for spending, en masse.

That spending was fueled by consumer debt, which soared as Reagan-era deregulation opened up access to new forms of borrowing such as credit cards. As a result, household debt loads shot sharply higher during the mid-1980s.
The government

American consumers weren’t the only players in the US economy that underwent a transformation.
Under President Ronald Reagan, the US federal government began running large deficits in order to pay for booming defense spending as well the tax cuts of 1981.

The tax overhaul of 1986 curtailed some of these deficits by raising revenue, but that didn’t take effect until 1987. Meanwhile, the deficit in 1986 was roughly 5% of GDP, amounting to a sizable fiscal fillip for the economy.
No US deficit was bigger until 2009, when the government intervened to offset the Great Recession.
The dollar


In 1986, the US dollar had slid sharply against other major global currencies, as booming US fiscal and trade deficits under Reagan made global investors—already concerned about a return of the inflationary trends of the 1970s—leery of holding the greenback.
It’s true that the weak dollar didn’t ignite an export boom. But, all else equal, it helped the industrial economy weather the slowdown.
The Fed


Meanwhile, the Federal Reserve, increasingly worried about slow growth and less concerned about a recurrence of inflation, had taken to cutting short-term interest rates, offering the economy a bit of a tailwind.
That was then, this is now

It’s heartening to see that the US went through a similar traumatic oil bust in the mid-1980s and continued to power forward.
But that doesn’t mean continued economic growth will automatically be the case this time around.
Some things are very different. For example, the federal government isn’t providing as much of a boost to the economy. (The US federal deficit last year was only 2.5% of GDP, compared to 5% in 1986.)
And while the Fed was easing back in the mid-1980s, Janet Yellen’s Federal Reserve has seemed intent on lifting interest rates, keeping the dollar at some of the highest levels in recent memory.
That could change, though. A decidedly dovish turn in the tone from the Fed in recent days—along with some decent economic data—has buoyed the stock market, weakened the dollar, and reversed some of the rush to the safety of US government bonds.
It’s a very small sample size, but a shift in those directions is certainly possible. The experience of 1986 shows that the US can endure a bust in its oil and gas sector, regional recessions and a global slowdown. But it also shows that policy makers have to work the levers pretty hard to make sure the expansion continues.

http://qz.com/617675
VIRTUAL HIRING
Virtual reality could be a solution to sexism in tech
Katharine ZaleskiFebruary 19, 2016

Interviewing job candidates with virtual reality headsets could remove gender bias.(AP Photo/Markus Schreiber)
A new study of software developers has confirmed what women already know too well: Gender bias has big consequences in the workplace.
The study, which has not yet been peer-reviewed, looked at acceptance rates for code written by women and men on the massive code repository Github. Developers accepted 71.8% of code written by women when they didn’t know their gender. But when gender was made public, acceptance rates for women dipped to just over 62%.
These results are infuriating—but they’re not surprising. Another recent experiment gave scientists at Yale University the exact same resumes, topped by masculine and feminine names. Scientists extended more job offers, and higher salaries, to the job applicants they thought were men.
Personally, I’ve encountered many founders and executives who warn that they “can’t lower the bar” in order to add more diversity to their tech teams. A woman working at Uber said this to me last month on a phone call; the vice president of engineering at Twitter was famously quoted as saying the same thing. Clearly, many managers continue to assume that people who aren’t white and male must be less talented.

Luckily, the tech world may be on its way to developing a solution. Virtual reality could make the way we hire more gender-blind.
 
Virtual reality could make the way we hire more gender-blind.
 
The thought first occurred to me when I tried on a virtual reality headset at a venture capital conference in San Francisco last year. The software instantly transported me to a moonscape. There I inhabited my new avatar—a male truck driver who was tasked with moving cargo across a field of craters. As I played the game, I thought about how my fellow participants were watching me in a completely different body. Their perceptions of my abilities might have been different if they’d met me in person; virtual reality prompted them to value me purely for my brain.
That experience got me thinking: If women could use virtual reality to mask their genders during job interviews, would we see more equality in hiring?
Here’s how a gender-blind interview process might work. As a hiring manager, I’d get a list of candidates who’d already been vetted for their skills through code reviews. These candidates would only be identifiable to me by their avatar names.

 
Job candidates could choose to project any avatar they chose.
 
I’d invite the candidates, in the form of avatars, to sit with me for an interview where we would view each other in the same virtual space through our headsets. A candidate could choose to project any avatar they chose. Some women might opt for women avatars; others might choose to appear as men or in other forms altogether. Some men might want to look like aliens. It wouldn’t matter. The important thing would be that I could see the job candidates as they chose to be viewed. That’s better than me projecting my own views on them.
A human resources representative would know the candidates’ real names, so they could conduct background checks if they moved to the final round. But I wouldn’t know the genders of the candidates until I decided I wanted to hire them. I also wouldn’t know their races.
There’s solid precedent for this approach. For decades, orchestras in the US hired many more men than women. Then, in the 1970s and 1980s, the top five symphonies in the US began putting up screens behind which candidates would perform during auditions. Data collected from actual auditions showed that the screens increased the probability that a woman would move out of the preliminary rounds by 50%.
I’m trying out a scaled-down version of blind hiring processes as co-founder and president of PowerToFly, a company that matches businesses with women who work remotely. Many of the women who interview through us never meet their future bosses in person before they get hired. The men—and it’s mainly men who review their applications—rely on the women’s code reviews and read about their past experiences. While they know whether they’re hiring women, they can’t size them up during interviews to see if they’re wearing a wedding ring or how much makeup they’ve applied.
I’ve seen firsthand how this approach can help more women land jobs. One vice president of engineering at Hearst asked us recently if we could find him some men, as his team is now composed almost entirely of women. This VP likes to interview job candidates via text messages. He says it’s the fastest way for him to find out if they have the skills to do the job. But texting is a fairly one-dimensional way to get to know someone.
Virtual reality could be an even more palatable option for gender-blind hiring. It’s time the tech world used its own tools to solve its inherent biases—and stop denying itself talented workers.

[king]

BET AGAINST DOLLAR AT OWN PERIL, MANAGERS OF US$365B SAY
admin | February 20, 2016
NEW YORK, Feb 20 — The dollar’s weak start to 2016 is showing signs of a turnaround as doubts about the economic outlook fade, according to US Bank Wealth Management and Pioneer Investments.

Traders who almost completely rule out a Federal Reserve interest-rate increase this year are confronted with data showing the US economy is growing at a faster pace than its major peers. A forecasting tool created by the Fed Bank of Atlanta indicates US growth in the first quarter of 2.6 per cent at an annual rate, exceeding 1.6 per cent average for Group of Eight countries, according to Bloomberg surveys.

“Moving to the extreme of zero hikes this year is not based on rational thought,” said Jennifer Vail, head of fixed-income research in Portland, Oregon at US Bank Wealth Management, which oversees US$125 billion. “The Fed’s dual mandate of employment and inflation are both crying for normalisation. It’s going to support our case for modest dollar appreciation throughout the year” against the euro and currencies of commodity exporters.

The dollar’s selloff paused this week, as oil prices rose and eased concern that a global demand slump may spill into the US The Bloomberg Dollar Spot index, which tracks the greenback versus 10 peers, was little changed this week and is down 1.1 per cent this year. The index rose 20 per cent during the past two years.

The greenback is down 2.4 per cent versus the euro and 6.3 per cent against the yen in 2016 as investors scaled back wagers of dollar strength based on Fed rate increase while other major central banks increase monetary stimulus.

Futures traders price in a 44 per cent probability that the Fed raises rates this year, based on the assumption that the effective fed funds rate will trade at the middle of the new FOMC target range after the next increase. The likelihood is up from 30 per cent a week earlier.

Monetary policy

“Divergence in monetary policies still matters,” said Paresh Upadhyaya, director of currency strategy in Boston at Pioneer Investments, which oversees more than US$240 billion. He said he is “more heartened” to buy the dollar against the euro and the yen.

Data due next week may provide more clues on whether the world’s biggest economy is weathering the global storm. Economists forecast a rebound in manufacturing activities and durable goods orders in January.

A report Friday showed consumer prices excluding food and fuel rose by the most in more than four years in January, adding to evidence that inflation may be moving toward the Fed’s 2 per cent target.

“The risk right now is so skewed to one extreme that the reward favours the pendulum swinging the other way,” Upadhyaya said. — Bloomberg
Source: The Malay Mai

[king]

星洲网首頁 > 財經 > 國際
美1月CPI增1.4%‧通膨回溫
2016-02-20 17:58     

 
（美國‧華盛頓20日訊）美國勞工部公佈，1月消費者物價指數（CPI）雖維持在去年12月水平，但與去年同期相比增加1.4%，是2014年10月以來最大年增幅。排除食品及能源價格後的核心CPI更較去年同期增加2.2%，創2012年6月以來最大年增幅，透露國內通膨率回溫跡象。
此一最新指標也使市場對聯儲局今年內升息的預期升高。根據聯邦基金利率期貨顯示，年底時升息的幾率達到43%，3月也有8%的升息幾率，雖然仍低，但已較指標公佈前增加一倍。
與去年12月相比，1月核心CPI月增0.3%，也創下2011年8月以來最大月增幅。華爾街日報先前調查分析師預期，1月CPI月減0.1%，核心CPI月增0.2%，但實際結果雙雙高於預期。
報告顯示，儘管油價下跌持續壓低美國能源及食品價格，但過去1年來房價不斷攀升，推動1月住宅價格上漲，其他包括醫療、服飾、新車及餐飲價格也普遍上漲。
自從2014年夏天國際油價開始下跌以來，美國CPI增幅便微乎其微，再加上美元上漲壓低進口商品價格，同樣阻礙國內通膨回溫。
報告顯示，1月能源價格雖較去年12月減少2.8%，但與去年同期相比僅減少6.5%，是2014年11月以來最小跌幅。
由於通膨率是聯儲局評判升息步調的重大參考指標，因此從去年12月聯儲局首度升息以來，市場便密切關注國內通膨發展。（星洲日報／財經）


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星洲网首頁 > 財經 > 國際
美股全周狂飆418點‧今年單周最佳
2016-02-20 17:42     

 
（美國‧紐約20日訊）美股週五早盤隨著油價同步下挫，道瓊斯工商指數盤中一度跌逾百點，所幸尾盤科技及金融股的拉抬下，跌幅明顯收歛，終場3大指數漲跌互見，道指收低21.44點或0.13%至16391.99點；納斯達克指數收高16.89點或0.38%至4504.43點；標普500指數收低0.05點至1917.78點。
油價連續第二天走跌，再度喚醒市場對石油供應過剩的擔心，不過顯然市場擺脫油價下跌壓力，分析師表示，道指數本周上漲逾2.6%或418點，創下今年來單周最佳漲幅。
截至週五收盤，WTI3月原油期貨收跌1.13美元，跌幅3.67%，報每桶29.64美元。布蘭特4月原油期貨收跌1.27美元，跌幅3.70%，報每桶33.01美元。
歐股收黑獲利了結
另一方面，歐洲股市也收黑，在經過一週來強勁漲勢後，投資者獲利了結，由銀行、石油和汽車股領跌。
另外，投資者正在觀望等待英國脫歐協議的結果出爐。倫敦富時100指數下跌0.36%，收在5950.23點；法蘭克福DAX30指數下跌0.80%，收在9388.05點。巴黎CAC40指數下跌0.39%，收在4223.04點。（星洲日報／財經）


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This Crash Will Be Bigger Than 2008 - Here's Why
Tyler Durden's pictureSubmitted by Tyler Durden on 02/20/2016 16:35 -0500

Bear Market Bond Central Banks China Federal Reserve Japan Quantitative Easing Recession Saudi Arabia Subprime Mortgages


 
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Via FinancialSense.com,

Bert Dohmen, founder of Dohmen Capital Research, is uber-bearish and believes that it is time for investors to panic (before everyone else does) given a potential collapse of the stock market greater than what we saw in 2008.

Here's what he had to say on Thursday's podcast:

"Over a year ago we said that we are now in a transition year from a bull market to a bear market and from a growing economy to a recession—and this could be a very deep recession...
 
...now we see that we are finally there and more and more people are starting to realize it. But I raise the question here, 'Is it too late to panic?' Because...the advice given by so many analysts is 'Don't panic, don't sell, don't panic.' And I say, 'Yes, panic!' And it's not too late to panic. Panicking at the right time can save you a lot of money...
 
I predict in this bear market you will see the majority of stocks—majority meaning over 50% of the stocks—selling at $5 or less. Okay, just put that into your portfolio and see if you should be selling some stocks...
 
We hear other analysts say, 'Oh, this is nothing like 2008' and I agree with that, but I say that because I think it's going to be much worse. 2008 was really a crisis triggered by the subprime mortgage market and the confetti that the Wall Street firms distributed around the world. They took those subprime mortgages, put them into pools, they sold participations in these pools, in these CDOs...they got a triple-AAA rating on all this garbage and sold it around the world and then they started defaulting. That caused ripples throughout the financial system and a global financial crisis, okay; but it was basically a mortgage crisis—that's how it started.
 
Now, look at what we have currently. We have every major economic zone in the world in financial trouble. You have Japan with a debt-to-GDP ratio of 280%. You have China at 300% debt-to-GDP. China has over $34 trillion of debt and the banking system is flooded with bad loans. The best estimate—and this was two years ago I wrote a book called The Coming China Crisis—and I said the best estimate is that they have $11 trillion of bad loans in the banking system. $11 trillion is the annual GDP of China—this is huge!
 
You have Europe, you have Latin America in trouble, you have Russia in big trouble, you have Saudi Arabia even thinking about doing an IPO on their big oil company in order to make up for the shortfall of oil revenues. You have every major economic zone in the world in big, big trouble including the US and that is why I say this crisis has the potential of becoming much, much worse than the last one."
Given your outlook, how long do you think this will take to unfold?

"Well, from 1929 to the bottom in 1933 it took four years—probably a little bit less—so that's probably the duration but, you know, you can't forecast those things because the central banks learned something the last time around. They learned how to bail things out, they learned how to change the laws and...they've changed a lot of laws in the meantime. For example, if a bank goes under it's no longer the government that goes to bail it out—they just confiscate the depositors money. If you have a savings account at a bank that goes out of business, they will take part of your savings account to bail the bank out because they now have an interpretation that bank deposits—money that you put in a bank—you actually become an unsecured creditor...
 
That is the current intrepretation in the West—in Europe and in the United States. It's called a 'bail-in'. So this time around there are a lot of gimmicks that they can use. They've exhausted quantitative easing—it just doesn't work...and now the whole world is going to negative interest rates. In Europe already they have over 30% of the government bonds at zero interest rates or below so if you buy a government bond you are paying for the privelege of owning that bond, of lending the government money. The Federal Reserve just put out a note saying that banks should prepare for negative interest rates...
 
The world has never seen this and there is no one that knows the eventual consequences of this... This is desperation! The central banks have run out of ammunition and tools...all they have now is just talk

[king]

FINANCE
One smart stock-market analyst thinks this is where we’re headed… (gulp)
HENRY BLODGET FINANCE    FEB. 20, 2016, 11:18 PM
image: https://static-ssl.businessinsider.com/image/56c880106e97c621048b881d-897-750/screen%20shot%202016-02-20%20at%209.25.25%20am.png

1929 stock chart
John Hussman, Hussman Funds
The calm before the storm in 1929…

John Hussman, Hussman Funds
The calm before the storm in 1929…

John Hussman, Hussman Funds
The calm before the storm in 1929…

No one knows what the stock market is going to do, but if you want to get an informed sense of what it might do, it helps to understand what it has done.

And in the perpetual debate about where we’re headed next, one mistake that is often made is confining one’s observation of market history to recent trends instead of the many generations of market data that are now available.

One analyst who does the latter is John Hussman of the Hussman Funds.

Hussman’s reputation has been clobbered of late because he missed the market turn in 2009 and then acted on his more recent concern about an impending crash several years too early.

As the market has struggled over the past 18 months, however, Hussman’s concerns have been partially vindicated.

And those hoping that the recent 15% drop from the peak was just a little bobble in a great new bull market won’t like to hear where Hussman thinks we’re headed next.

Specifically…

Here’s where we are:

image: https://static-ssl.businessinsider.com/image/56c880106e97c621048b881d-897-750/screen%20shot%202016-02-20%20at%209.25.25%20am.png

1929 stock chart
John Hussman, Hussman Funds
The calm before the storm in 1929…

John Hussman, Hussman Funds
The calm before the storm in 1929…

And here’s where Hussman thinks we’re headed next:

image: https://static-ssl.businessinsider.com/image/56c880106e97c621048b881d-897-750/screen%20shot%202016-02-20%20at%209.25.25%20am.png

1929 stock chart
John Hussman, Hussman Funds
The calm before the storm in 1929…

John Hussman, Hussman Funds
The calm before the storm in 1929…

That latter chart is a chart of the 1929 crash, one of the most famous in history.

Hussman thinks it also loosely illustrates our likely future.

Hussman’s key observation about that chart — and the charts of many other market crashes in history, the most recent two of which he has correctly forecasted in advance (2000 and 2007) — is that market crashes generally follow the same pattern.

First, in a market in which stocks are highly overvalued (as they are today) and in which investors are increasingly risk-averse (as they are today — see the spreads on interest rates between safe and risky bonds), crashes are much more likely than they are in any other market environment.

Second, crashes do not just happen suddenly — for years everything’s great and then one day the market just falls out of the sky. Rather, crashes develop over many months. And the “crash” itself — the period of massive, near-vertical market losses — generally starts AFTER THE MARKET IS ALREADY DOWN ABOUT 15%.

That’s the insight to note in the chart above.

And because one observation is rarely persuasive, here’s another Hussman chart, this one showing the crash in 1987. Same pattern. Down about 10%-20% fom the top, some failed recoveries, and then, blam.

image: https://static-ssl.businessinsider.com/image/56c880826e97c660008b884a-891-751/screen%20shot%202016-02-20%20at%209.25.45%20am.png

1987 crash
John Hussman, Hussman Funds
And, for good measure, here are charts of the crashes in 2000 and 2007. Same pattern. A general peaking and “rolling over” for many months, followed by a 10%-20% drop, followed by some stabilization and recovery, followed by a mega-crash.

2000:

image: https://static-ssl.businessinsider.com/image/56c880da6e97c622048b880a-729-270/screen%20shot%202016-02-20%20at%209.32.23%20am.png

2000 market crash
Google Finance
2007:


image: https://static-ssl.businessinsider.com/image/56c881082e52651a008b87af-728-290/screen%20shot%202016-02-20%20at%209.33.14%20am.png

2007 crash
Google Finance

Is that what will happen this time?

No one knows.

But anyone who’s feeling comfortable after a strong week in the markets should at least understand that 1) the macro environment most conducive to crashes is still in place (overvaluation + increasing risk aversion) and 2) the way the market is behaving now is exactly the same way it behaved before the biggest crashes in history.

So, neither Hussman, nor I, nor you should be surprised if the market keeps on dropping and doesn’t bottom until it’s down 50% or more from the peak.

As Hussman noted last week in his usual depressing note, a 50% crash would not even be the worst-case scenario. It would just be a normal correction from valuations we reached in 2015. The “worst-case scenario” would take us down 75%


Read more at http://www.businessinsider.my/risk-of-a-stock-market-crash-2016-2/#sK62qFARWeYGoztq.99

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Options market sees 50% chance of massive S&P plunge
Alex Rosenberg   | @CNBCAlex
1 Hour Ago
CNBC.com
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Stocks may have rebounded from their recent lows, but the option market still implies a big chance that stocks plummet anew before the year is out.

After falling as low as 1,810 two weeks ago, the S&P 500 Index bounced significantly in the prior week, closing Friday trading at 1,918. But even as stocks somewhat regained their footing, the market's fear certainly has not dissipated.

According to options market data from multiple providers, the December quarterly options expiring at the end of the year imply a 50 percent chance that the S&P 500 will touch 1,600 at some point in 2016. That would be a drop of nearly 17 percent from current levels and a full-year decline of 22 percent.

Read MoreWhy this could be a pivotal week for markets

And it's not just that big moves are generally expected in this more-volatile market. The converse upside level — the highest point which traders think the S&P has at least a 50 percent chance of a touching in 2016 — is 2,110, or just 10 percent above Friday's close.

The dramatic amount of downside traders appear to be bracing for "tells you that this is sustainable fear, even going out six to twelve months," Brian Stutland of Equity Armor Investments said last week. "People clearly think that the downside could be real, and they want protection."

'Fairly significant declines from here'

‹
Trader on the floor of the New York Stock Exchange.
Trader who called for $26 oil now predicts this

The million-dollar bet on emerging markets
›
To be sure, the option market also tends to imply more downside than traders actually expect. Most investors are long stocks, and many of the biggest investors — whose trades move the options market—have a lot to lose if stocks drop considerably. This is why options (and particularly index options) are more commonly used to hedge downside risk than to speculate on upside.

Further, history tells us that massive and speedy downside is more common than similar upside moves. That is another reason downside puts are often more expensive (and thus appear to price in higher probabilities) than congruent upside calls.

But the market tends to be more balanced than it is now. Bullish traders will typically take advantage of outsized fear by selling put options, a strategy allows them to take in options premium if stocks don't fall, and to get long the market at cheaper levels if it does.

This time around, few are doing that, Stutland said—allowing the bears to take over.

Whatever the exact cause, the market-implied chanced of catastrophic downside have certainly risen.

"The implied distribution [of potential market moves for the year] has gotten much wider, and much more negatively skewed," longtime options trader Mike Khouw told CNBC. "Downside tends to be overstated in general, but it's still fair to say that the options market is pricing in the probability for fairly significant declines from here."

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字級設定： 小 中 大 特
NYSE融資觸頂、羅素轉空，標普五百恐將下探1400點
回應(0) 人氣(293) 收藏(0) 2016/02/22 08:00
MoneyDJ新聞 2016-02-22 08:00:35 記者 賴宏昌 報導
MarketWatch 19日報導，2009年初以來即一路看多美國股市的InvesTech Research總裁Jim Stack在過去一年來開始轉趨保守、最新一期投資建議更直接表示華爾街已步入空頭。他表示，從總經的角度來看，多數指標顯示未來9個月美國經濟不會步入衰退。不過，除了1966、1987年以外，美國股市轉空在其餘時間皆準確發出經濟衰退的預警。Stack的研究顯示，空頭市場通常會吃掉前一波多頭走勢過半的漲幅，在過去85年當中只有1950年代是例外。
據此推算，Stack預期標準普爾500指數將自去年5月的歷史收盤新高紀錄(2,130.82點)下跌34.1%至1,400點左右。如果美國經濟可以避開衰退，美股空頭跌幅將可控制在25%左右。截至2015年12月底為止紐約證交所(NYSE)股票融資餘額報4,612.00億美元、創2015年9月底以來新低，較2015年4月底的5,071.53億美元(歷史最高紀錄)下滑9%。Stack的研究顯示，融資餘額觸頂的時間點大約與股市作頭時點相當接近。此外，羅素200指數、道瓊運輸平均指數步入空頭也是值得關注的警訊，因為在過去35年當中這項指標只有3次沒能讓整體股市跟著陷入熊市。
今日美國報19日報導，S&P Dow Jones Indices研究顯示，今年迄今標準普爾500大企業調升股利的幅度平均為10.4%。作為對照，2010年以來升幅最高出現在2011年、調漲26.5%，最低出現在2015年、漲幅為13.01%。

羅素兩千19日上漲0.53%、收1,010.01點，較2015年6月23日的1,295.8點(歷史最高收盤位置)下跌22%。
瑞士財經媒體《財經和經濟(Finanz und Wirtschaft)》1月22日報導，Zulauf資產管理公司總裁Felix Zulauf在受訪時指出，二次世界大戰以來美國股市空頭走勢平均下跌23%、預估標準普爾500指數本波空頭走勢將下跌至1,200-1,400點(註：若以1,200點來計算、相當於較歷史最高收盤紀錄下跌44%)。Zulauf曾多次獲邀參加霸榮(Barrons.com)圓桌會議。
Thomson Reuters 19日報導，美銀美林(BAML)引述基金動向追蹤機構EPFR Global公布的數據顯示，截至2月17日當週美股基金淨流出60億美元。根據理柏(Lipper)公布的統計數據，截至2016年2月17日為止當週美國註冊的股票型基金(包括ETF)淨失血56.65億美元、連續第7週呈現淨流出，美股基金就佔了36.45億美元。
芝加哥聯準銀行公布，截至2016年2月12日當週「國家金融狀況指數(National Financial Conditions Index；NFCI)」報-0.50、創2012年9月14日當週以來新高，顯示美國金融緊縮狀況達到逾3年來最高水準。NFCI包含28項貨幣市場指標、27項來自股市以及債市的指標以及45項銀行系統指標。
＊編者按：本文僅供參考之用，並不構成要約、招攬或邀請、誘使、任何不論種類或形式之申述或訂立任何建議及推薦，讀者務請運用個人獨立思考能力，自行作出投資決定，如因相關建議招致損失，概與《精實財經媒體》、編者及作者無涉。


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Opinion: Welcome to economic stagnation and stock market dysfunction

By L.A. Little
Published: Feb 21, 2016 3:35 p.m. ET

     22 
We should entertain the idea of repeated 25%-30% bear markets followed by cyclical bull markets
In 1968, a nation that was reeling from huge societal upheavals was fertile ground for a populist political wave.

There was the Vietnam War that was raging at the time and would continue for another four years. There was the Great Society push by President Johnson, increasing social welfare while simultaneously attempting to eliminate a racial divide that had remained entrenched for the better part of a century. The stock market responded to all the debt and stimulus with gains of more than 80% for the better part of the decade (1962-69). The accumulation of huge debts, however, eventually came home to roost and the boom of the 1960s led to a decade of market stagnation in the ’70s.


In 2016, with Bernie Sanders and Donald Trump running for president, we are seeing another populist tidal wave — like the one ridden by Eugene McCarthy that changed the tenor of the 1968 Democratic race — engulfing the country. After more than 14 years at war and a financial crisis that crippled the nation, once more we have debts piled to the sky. Our solution has been to create more debt in the hopes of growing our way out of the problem. We have even taken a walk on the wild side with the invention and practice of quantitative easing and negative interest rates in Europe and now Japan.


Just as was the case back then, the stock market's huge run higher is beginning to fade into memory, although this time around we have seen a threefold increase in stock-market valuations rather than a mere doubling. A decade from now, will we look back and see eight or 10 years of stagnation in equity prices? Will we witness a huge range trade that carves out multiple 20% to 40% losses over years with return trips back to those same highs in the intervening years? Might that be the fate that awaits equity investors in the decade to come?

Everyone either remembers or is aware of what happened in the decade- long rally that ensued after President Reagan came to office in 1981, but few remember the agony of the 11 years that preceded that. For a refresher, here are some charts showing what those 11 years looked like.

1969-73


1973-77


1977-80


A lot happened in those 11 years from an escalation of the war to the cessation of it; the resignation of a president; the oil embargo and stagflation; and, eventually, the Iran hostage crisis. Essentially the economy muddled along. Sound familiar?

Today we have an even larger debt backdrop than we had almost half a century ago. Unlike then, though, we have almost exactly the opposite scenario creating what appears to be an almost parallel set of consequences. Rather than inflation creating stagnation, we have deflation dragging the economy to stagnation.

Back then, a 37% and 49% decline in equity prices wasn’t called a crash but instead a bear market. Maybe things are just more dramatic now. Writing in May 2015, I spoke of a potential 20%-50% stock-market decline. It was mostly laughed at, yet the Russell 2000 has already achieved the lower end of that level. In fact, many stocks have already had 20% or 25% corrections over the past year. If you go down the list, you will find plenty with a 50% correction already in place.

Don't expect a crash — expect a continued bleed. Don't expect a dramatic but a moribund pounding over time. We should truly entertain the idea of repeated 25% or 30% bear markets followed by cyclical bull markets. At this juncture, that sure looks like it could be the market’s future path. Don't be surprised to see multiple cyclical bull and bear markets over the next decade resulting from a stagnated world economy — an economy that likely isn't going to change any time soon, given overburdened debt and the demographics of the major equity markets in Europe, the U.S. and Japan

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Down but not out, U.S. economy still a beacon of growth

By Jeffry Bartash
Published: Feb 21, 2016 12:03 p.m. ET

     28 
Slower growth in 2016 keeps Fed on edge, but economy still stable
Getty Images
The economy isn’t flying high, but the U.S. is doing much better than most other countries.
The United States is still a sheltered harbor in a world of economic tossing and turning, but fresh worries about the way forward are likely to keep the guardians of U.S. growth — aka the Fed — on edge.

A handful of bigwigs at the Federal Reserve will weigh in this week on the economy and the prospect of higher interest rates in 2016. Key members of the central bank were worried enough about a big drop in U.S. stock markets in January to put off another rate hike for a while.

Stocks rallied last week and that could ease some of the concerns. Fed officials still want to see more evidence the U.S. economy is recovering from a fourth-quarter dip when growth sagged below 1%.


Don’t expect a bevy of reports this week to show the economy has found its sea legs.

Sales of new and previously owned homes are forecast to dip in January. Consumer confidence has plateaued after recently touching post-recession highs. Businesses probably increased investment, but the longer-term trend is weak. Even consumer spending, which likely rose in January, did so in part because households spent more on heating as temperatures turned frigid.

For all the recent difficulties, though, the U.S. is growing and creating plenty of new jobs unlike many other countries around the world. Japan might be in recession again. Europe isn’t doing much better. Even China is grappling with the slowest growth in years.

Fed takes foot off pedal
The hesitancy of the Fed was illustrated last week in a speech by St. Louis Fed President James Bullard, an ardent supporter last year of raising interest rates who’s suddenly gone cold on the idea.

Senior economist Michael Gapen of Barclays said Bullard’s turnabout “reflected a starkly dovish tone.”

Other Fed VIPs this week, especially Vice Chairman Stanley Fischer, may take a more measured tone in an effort to soothe investors and financial markets.

It will take more than just reassuring words, however, and the first wave of economic reports for January and February have been decidedly mixed. That’s unlikely to change this week.

Home sales, for example, likely slowed in January after finishing 2015 on a strong note. Cold weather and a big snowstorm in the eastern U.S. probably played a part.

Yet a steady increase in permits to build new homes suggest a pause won’t last long. Mortgage rates are still very low and the economy continues to generate an average of more than 200,000 new jobs a month, giving more families the financial means to buy despite rising prices.

More worrisome is weak business investment. Companies cut back toward the end of 2015, and with profits flat, many executives talked of tighter budgets after releasing fourth-quarter results in January and early February.

“This has been the weakest business expansion in history,” said Michael Gregory, deputy chief economist at BMO Capital Markets.

A rebound in auto sales in January, along with higher bookings for jumbo jets, will likely boost orders for durable goods. But underlying investment is pitiful. Orders for so-called core capital goods fell 7.5% in 2015 to mark the first drop in three years.

The 2016 presidential election probably won’t make executives any bolder, some economists say. Leading candidates for both parties are promoting policies that many businesses consider harmful.

Read: Mainstream Democratic economists join effort to discredit Bernie Sanders

Perhaps the best news in January is that consumers spent a lot more. Economists polled by MarketWatch predict a 0.4% increase in consumer spending last month.

The catch? Some of the increased stemmed from higher utility bills, not exactly a sign consumers were feeling more confident. Confidence has leveled off after hitting an eight-year high last year

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Sovereign Wealth Funds May Sell Half Trillion In Stocks This Year
Tyler Durden's pictureSubmitted by Tyler Durden on 02/22/2016 07:26 -0500

Abu Dhabi Crude fixed Norway Real estate Recession Saudi Arabia


 
inShare
 
 
Last month, we noted that according to JP Morgan, persistently low oil prices are set to create a $75 billion headwind for global equities in 2016.

At issue are sovereign wealth funds, many of which are funded with proceeds from oil sales. For years, producers were next exporters of capital. That is, they funneled their crude revenue into a variety of assets including USTs and other core paper as well as equities and real estate.

All of that changed late in 2014 when Saudi Arabia moved to bankrupt the US shale sector by deliberately suppressing prices. Crude’s collapse meant revenues no longer exceeded expenses and suddenly, producing countries found themselves running deficits. That in turn left two options: tap the debt markets or tap the rainy day, SWF piggy banks.

We’ve seen this dynamic play out in Saudi Arabia where SAMA reserves have been steadily sliding as Riyadh struggles to fund a deficit that amounted to 16% of GDP in 2016 and is set to come in at 13% this year. And then there’s Norway, whose SWF is the largest in the world at $830 billion. Lower for longer crude has hit the country’s economy hard, but competitive devaluations from the likes of the ECB and the Riksbank have prevented the krone from weakening enough to absorb the blow. In order to help shield the economy from excessive damage, the country is resorting to fiscal stimulus which officials are paying for by tapping the oil fund.



To let JPMorgan tell it, all of the above will lead to a $75 billion outflow from global stocks this year. “Assuming selling in accordance to the average allocation of FX Reserve Managers and SWF across asset classes, we estimate that the sales of bonds by oil producing countries will increase from -$45bn in 2015 to -$110bn in 2016 and that the sales of public equities will increase from -$10bn in 2015 to -$75bn in 2016,” the bank wrote, in a note out last month. “There is little offset to this -$75bn of equity sales from accumulation of SWF assets by oil consuming countries, as we expect these countries to spend most of this year’s oil income windfall.” 

That figure, JPM went on to note, “isn’t huge,” but considering the bank thinks retail investor flows may actually flatline in 2016, SWF selling could have a significant impact.

Well according to the Sovereign Wealth Fund Institute, JPM’s numbers are off. By a lot.

If oil prices stay between $30 and $40 SWFI says outflows from equities could total $404.3 billion in 2016 and likely hit $213.4 billion last year.

That's fairly substantial. And even those numbers might well be optimistic. On Sunday, the National Bank of Abu Dhabi PJSC said oil prices might well "spike down towards $20." “For at least the next few years there do appear to be solid fundamental reasons why oil prices are likely to remain in a trading range, a report reads. That "range" tops out at $45 but is $25 on the low end and if prices remain below $30, it's entirely reasonable to suspect that nearly a half trillion in SWF money could flee global equities by the end of the year.

To what extent that's offset by buying by the likes of the SNB and the BoJ is an open question, but do note that SWFs have more than $7 trillion in total. If even a quarter of that comes out of global markets (and we're talking about fixed income here as well)it would amount to a meaningful reduction in global liquidity just as the world careens into recession on the back of China's rapidly decelerating growth machine

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+26

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1945.50

+27.72

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Geneva Swiss Bank Just Called The Top On The "Bear Market Rally", Cashes Out
Tyler Durden's pictureSubmitted by Tyler Durden on 02/22/2016 14:26 -0500

Bear Market Carry Trade Central Banks China



 
inShare
5
 
Moments ago, after having called the bear market bounce for what it was just on February 11, and positioned accordingly to take advantage of the expected 6-8% rebound...



... Swiss private bank Geneva Swiss Bank just called the end of the bear market rally, and has gone back to a market neutral stance.

Here is its reasoning:

Dear All,
 
Please note that after this nice rebound in equities, we are moving tactically cautious.
 
Actions taken today: we moved to market neutral (long equities / short index futures) on our new Swiss Tactical Equity Certificate and have bought downside protection on the S&P500 in our portfolios.
 
We believe that :
This was just a bear market rally driven essentially by hedge funds covering their shorts…
Many risks including China/CNY, Oil supply, US economy, German economy/social situation, BREXIT, earnings growth, high valuations,  still remain in mind.
Investors are losing confidence in Central Banks hazardous monetary policies and buying gold as the ultimate hedge… You might want to read this article on gold I wrote for Citywire last July >>> link
And by the way…
Negative: Major equity indices have technical opening-gaps to be closed (15.02.2016) >>> 1860 for the S&P500 and 2756 for the Eurostoxx50
Positive: something interesting might come out of next G20 meeting in Shanghai. Finance ministers and central bank governors are due to meet on Feb. 26 and 27 to discuss issues including China's excess capacity, oil prices and global growth….
It appears that to GSBank's CIO, Loïc Schmid, the negatives to outweight the positives at this moment.

Furthermore as we noted earlier, while stocks have soared relentless into today's latest short squeeze, not only bonds...



... but the all important USDJPY carry trade...



... have both completely ignored today's move in equities

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Two more signs a recession could be coming
Jeff Cox   | @JeffCoxCNBCcom
4 Hours Ago
CNBC.com
84
SHARES
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COMMENTSJoin the Discussion

Stocks have gotten a lift lately in part from hopes that fears over a recession are overdone. That optimism could be a little premature.

In addition to several other trouble spots, two key indicators are flashing warning signs: income tax withholdings and corporate profits.

The withholdings data show taxes taken out of worker paychecks and are considered by some economists to be a strong indicator of overall economic growth. Released daily by the Treasury Department, the count is a simple nonadjusted measure of how much wages are growing.

Read More'Bad Goldilocks' could be the market's worst enemy
The latest numbers showed a 0.2 percent annualized decline over the past four weeks, compared to growth rates of 2 percent in December and 3 percent in January, according to market research firm TrimTabs.

The data show "the U.S. economy is already stalling out," TrimTabs CEO David Santschi said. He pointed out that the slowdown in withholdings comes as "credit markets are flashing clear warning signs about future growth, growth in building permits and housing starts has pulled back, and manufacturing activity continues to contract."

A trader works on the floor of the New York Stock Exchange during the afternoon of August 20, 2015 in New York City.
Getty Images
A trader works on the floor of the New York Stock Exchange during the afternoon of August 20, 2015 in New York City.
A continuation in the trend would be a recession flag, Trim Tabs pointed out in a release, though Santschi noted that the month-to-month numbers are volatile.

On top of the other economic problems, corporate profits continue to wane, providing a headwind both for the economy and stock market. Estimates through the year show that the earnings recession is far from over and could last at least two more quarters.

Read More Challenges loom for producers to stabilize the oil market
With 87 percent of the S&P 500 reporting, total blended fourth-quarter earnings have shown a decline of 3.6 percent, according to FactSet. Assuming the trend holds up, it will mark the first time profits have fallen for three straight quarters since 2009.

But the road ahead doesn't get any easier.

FactSet is now projecting that earnings will decline 6.9 percent in the first quarter, a stunning move lower over time considering that in September the expectation was for 4.8 percent growth. S&P Capital IQ had been estimating the quarter to post a 15.1 percent gain in initial projections made in April 2015.

FactSet is not expecting profits to turn positive until at least the third quarter.

There are two primary culprits for the earnings weakness: Energy, which fell 74 percent in the fourth quarter and is expected to slide 93 percent in the first quarter, and the strong U.S. dollar. Companies with more than 50 percent of sales outside the U.S. fell 11.2 percent in the fourth quarter, while those with a majority of sales at the domestic level actually grew 2.7 percent.

Read MoreSlow progress bridging America's economic divide
In the most recent rally, which has brought the S&P 500 back to even for February, investors are hanging their hopes on a rebound in energy prices that will raise economic hopes and lift the market.

However, more sobering economic news could be only a few days away.

On Friday, the government will release the first revision to the fourth quarter's gross domestic product growth. Joe LaVorgna, Deutsche Bank's chief U.S. economist and a Wall Streeter who has been warning of recession risk, said the new number is likely to show the economy grew just 0.1 percent in the quarter, down from the original 0.7 percent and perilously close to contraction.

To be sure, a recession is not the consensus call on Wall Street, with projections in recent days showing increased optimism. Bob Doll, chief equity strategist at Nuveen Asset Management, said financial markers are pricing in a 50 percent chance of recession, while he sees a likelihood that GDP will rise 2.5 percent in 2016, though not without stumbles.

"Fears over the prospects of a recession are rising. We do not believe a recession is likely, but we acknowledge that it will take time for financial markets to stabilize and better data to emerge," Doll said in a recent commentary. "Unfortunately, this means confusion and turmoil could be the order of the day for several more weeks or even months."

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Is it possible the correction is over?

By Avi Gilburt
Published: Feb 22, 2016 12:22 p.m. ET

     34 
Shutterstock
As we noted last week, the market can certainly have bottomed, especially when you consider the pattern in the Russell 2000 IWM, -0.49% But we have a test coming over the next week or two which can very well provide us with one more lower low before we consider the correction completed.

I want to start this week with one chart that is making it very hard for me to bearish in the bigger picture, and that is the IWM chart. While it is still possible we can see a lower low, the pattern and technicals are suggestive of the type of bottoming that we experienced in 2011. Moreover, we have an a-b-c pattern into that bottoming region, with what can be argued as a completed 5 wave move down in the c-wave. Of course, I can substantiate another trip down toward that lower trendline and the bottom of the box one more time, but, in the bigger picture, this is a textbook larger-degree bottoming pattern.

In moving onto the SPX chart, as long as we remain below 1975SPX, I can substantiate one more lower low. Right now, we have the potential for a textbook wave 4 flat pattern forming, which is the pattern we have been carefully tracking for the last few weeks. Currently, we have likely completed wave iv in the (c) wave of that 4th wave. And as long as Friday's low holds as support, I am looking up toward the 1947SPX level to complete the (c) wave. This can then set us up for a 5th wave to a lower low into the 1700s, as seen on the 60-minute chart.


However, there are two patterns for which the bears have to watch out, which can place them back into hibernation. The first pattern also assumes we see a drop from the 1950SPX region after we top this week. However, if that drop is corrective, and then we take out the top of this rally off the recent lows, that will have me into the green count on the 60-minute chart, which can take us all the way back to the prior all-time market highs.

The second pattern is if we are able to simply just run right through the 1975SPX region in the upcoming week. The first pattern is one which has much greater potential than the latter, but I will be focusing on the potential for one more lower low as the primary for now. The bulls will have to prove the bottom is in before I can change perspectives in this region.

While we have dropped toward the targets we set up for this correction, I have consistently noted that I do not believe this is the financial apocalypse or the repeat of 2008 that many seem to believe. Rather, I believe this is a larger degree 4th wave correction, with my primary count being a 4th wave within primary wave 3.

But until we start developing impulsive structures off a low, I cannot be certain that the correction has completed. But once we do see such evidence, I still believe that the market has a date with levels well over 2300SPX before I can seriously consider that we have a multi-year top in place. As I have said before, the pattern off the 2009 lows simply does not look complete to me at this point in time.

Lastly, as I have been mentioning several times, I see the potential for 2016 being the year that major commodities, many emerging markets, and the U.S. equity market all bottom, and we begin a global melt up. So, stay tuned, as 2016-2018 will likely be a very interesting time

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-21

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1921.27


-24.23

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The fundamental and technical case for S&P to hit 2,000
Stephanie Yang
11 Hours Ago
CNBC.com
22
SHARES
24
COMMENTSJoin the Discussion

With stocks around the world rising Monday, some traders say short-term gains for the S&P 500 should continue thanks to changing sentiment among investors.

Erin Gibbs, equity chief investment officer of S&P Investment Advisory, said positive economic data could assist a minor recovery for the S&P 500. Among the good news, Gibbs noted that retail sales increased in January, with upward revisions for December. She also cited numbers from core CPI, jobless claims and industrial production that pointed to strength in the overall economy.

"We're seeing sentiment change, things are looking a little better," Gibbs said Monday on CNBC's "Power Lunch." "We could see valuations expand a little."

Gibbs said the data could drive up the forward price-to-earnings ratio on the S&P 500, which currently trades at 16.5 times forward earnings. Tentatively, Gibbs sees the ratio increasing to 17 times forward earnings, or around 2,000.


On Monday, the S&P 500 gained nearly 1.5 percent to 1,945.

Read MoreThe S&P is closing in on a critical level
Ari Wald, head of technical analysis at Oppenheimer, also is targeting a move to 2,000 for the S&P. Driving the short-term move, Wald credits deeply pessimistic sentiment among investors and greater volume into advancing shares than declining shares.

"Underneath the data, the volume trends have been very encouraging," he said Monday in a "Trading Nation" interview.

Specifically, Wald favors reputable, blue chip names to bounce higher than the rest. However, he also warns of another dip in equity prices, once the S&P reaches the 1,965 to 2,000 range.

"[We] still have to deal with this broken trend," Wald said Monday. "We think it's too soon to give the 'all clear.'"

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"Debt Is The Cause, Not The Cure"
Tyler Durden's pictureSubmitted by Tyler Durden on 02/23/2016 16:25 -0500

Central Banks Deficit Spending Great Depression Keynesian economics Personal Consumption Reality Recession TARP Twitter Twitter Unemployment


 
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Submitted by Lance Roberts via RealInvestmentAdvice.com,

Recently, my article on weak economic underpinnings led to an interesting exchange, via Twitter, with Steve Chapman regarding debt and the impact on economic growth.

 


 

This question has been a point of contentious debate over the last several years as debt levels in the U.S. have soared higher.

According to Keynesian theory, some microeconomic-level actions, if taken collectively by a large proportion of individuals and firms, can lead to inefficient aggregate macroeconomic outcomes, where the economy operates below its potential output and growth rate (i.e. a recession).

Keynes contended that “a general glut would occur when aggregate demand for goods was insufficient, leading to an economic downturn resulting in losses of potential output due to unnecessarily high unemployment, which results from the defensive (or reactive) decisions of the producers.”  In other words, when there is a lack of demand from consumers due to high unemployment, the contraction in demand would force producers to take defensive actions to reduce output.

In such a situation, Keynesian economics states that government policies could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

Keynes’ was correct in his theory. In order for government deficit spending to be effective, the “payback” from investments being made through debt must yield a higher rate of return than the debt used to fund it.

The problem is that government spending has shifted away from productive investments that create jobs (infrastructure and development) to primarily social welfare and debt service which has a negative rate of return.  According to the Center On Budget & Policy Priorities nearly 75% of every tax dollar goes to non-productive spending.

policybasics-wheretaxdollarsgo-f1

Here is the real kicker, though. In 2014, the Federal Government spent $3.5 Trillion which was equivalent to 20% of the nation’s entire GDP. Of that total spending, $3.15 Trillion was financed by Federal revenues and $485 billion was financed through debt. In other words, it took almost all of the revenue received by the Government just to cover social welfare and service interest on the debt. In the financial markets, when you borrow from others to pay obligations you can’t afford it is known as a “Ponzi-scheme.”

Debt Is The Cause, Not The Cure

Debt, if used for productive investments, can be a solution to stimulating economic growth in the short-term. However, in the U.S., debt has been squandered on increase in social welfare programs and debt service which has an effective negative return on investment. Therefore, the larger the balance of debt becomes, the more economically destructive it is by diverting an ever growing amount of dollars away from productive investments to service payments.

The relevance of debt growth versus economic growth is all too evident as shown below. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the growth in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare.

Debt-GDP-Presdient-022216

It now requires $3.71 of debt to create $1 of economic growth.

Debt-GDP-Growth-022216

In fact, the economic deficit has never been greater. For the 30-year period from 1952 to 1982, the economic surplus fostered a rising economic growth rate which averaged roughly 8% during that period. Today, with the economy growing at an average rate of just 2%, the economic deficit has never been greater.

Debt-Economic-Deficit-022216

But it isn’t just Federal debt that is the problem. It is all debt.

When it comes to households, which are responsible for roughly 2/3rds of economic growth through personal consumption expenditures, debt was used to sustain a standard of living well beyond what income and wage growth could support. This worked out as long as the ability to leverage indebtedness was an option. The problem is that eventually, the debt reaches a level where the level of debt service erodes the ability to consume at levels great enough to foster stronger economic growth.

In reality, the economic growth of the U.S. has been declining rapidly over the past 35 years supported only by a massive push into deficit spending by households.

Debt-Total-GDP-022216

What was the difference between pre-1980 and post-1980?

From 1950-1980, the economy grew at an annualized rate of 7.70%. This was accomplished with a total credit market debt to GDP ratio of less 150%. The CRITICAL factor to note is that economic growth was trending higher during this span going from roughly 5% to a peak of nearly 15%. There were a couple of reasons for this. First, lower levels of debt allowed for personal savings to remain robust which fueled productive investment in the economy. Secondly, the economy was focused primarily on production and manufacturing which has a high multiplier effect on the economy.  This feat of growth also occurred in the face of steadily rising interest rates which peaked with economic expansion in 1980.

The obvious problem is the ongoing decline in economic growth over the past 35 years has kept the average American struggling to maintain their standard of living. As wage growth stagnates or declines, consumers are forced to turn to credit to fill the gap in maintaining their current standard of living. However, as more leverage is taken on, the more dollars are diverted from consumption to debt service thereby weighing on stronger rates of economic growth.

Austrians Might Have It Right

The massive indulgence in debt, what the Austrians refer to as a “credit induced boom”, has now reached its inevitable conclusion.  The unsustainable credit-sourced boom, which leads to artificially stimulated borrowing, seeks out diminishing investment opportunities. Ultimately these diminished investment opportunities lead to widespread mal-investments. Not surprisingly, we clearly saw it play out “real-time” in everything from sub-prime mortgages to derivative instruments which was only for the purpose of milking the system of every potential penny regardless of the apparent underlying risk.

Debt-Austrian-Theory-022216

When credit creation can no longer be sustained the markets must begin to clear the excesses before the cycle can begin again. It is only then, and must be allowed to happen, can resources be reallocated back towards more efficient uses. This is why all the efforts of Keynesian policies to stimulate growth in the economy have ultimately failed. Those fiscal and monetary policies, from TARP and QE to tax cuts, only delay the clearing process. Ultimately, that delay only potentially worsens the inevitable clearing process.

That clearing process is going to be very substantial. The economy is currently requiring roughly $4 of debt to create $1 of economic growth. A reversion to a structurally manageable level of debt would involve a nearly $30 Trillion reduction of total credit market debt from current levels.

Debt-Structurally-Maintainable-Level-022216

The economic drag from such a reduction would be a devastating process which is why Central Banks worldwide are terrified of such a reversion. In fact, the last time such a reversion occurred the period was known as the “Great Depression.”

Debt-GDP-Annual-022216

This is one of the primary reasons why economic growth will continue to run at lower levels going into the future. We will witness an economy plagued by more frequent recessionary spats, lower equity market returns and a stagflationary environment as wages remain suppressed while costs of living rise.

Correlation or causation? You decide

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Tom DeMark Warns If The S&P Closes Below This Level, It Could "Wreak Havoc To The Downside"
Tyler Durden's pictureSubmitted by Tyler Durden on 02/23/2016 15:02 -0500



 
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The S&P 500 is three trading days from reaching "trend exhaustion," according to infamous technical analyst Tom DeMark. "The foundation of the ongoing rally is suspect," warns DeMark, noting that if the market closes below these key levels in the next three days, DeMark warns "the decline is going to be sharp."



 

As Bloomberg reports, a top in the S&P 500 would also be confirmed should the S&P 500 finish below 1,926.82 on Tuesday, or close less than 1,917 on Wednesday or Thursday, DeMark said.

If any of those S&P 500 triggers occur, the benchmark index will decline at least 8.2 percent from Monday’s close to 1,786, a level last seen in February 2014, according to DeMark. Should the market top correspond with what he referred to as “bad news,” the S&P 500 could see deeper selling down to 1,736, an 11 percent decline. DeMark sees the ongoing market rally as temporary relief as investors exit short positions.
 
“We’ve seen some pretty vicious short-covering come in, which has caused the market to move up,” said DeMark. “When that happens, it really plays havoc with the market once the downside move begins.”
 
“The foundation of the ongoing rally is suspect,” DeMark, based in Scottsdale, Arizona, said in a phone interview. “The temporary buying produces a price vacuum beneath the market and accelerates the subsequent decline. The decline is going to be sharp.”
*  *  *

A handful of chart-based calls by DeMark have looked prescient in recent weeks, including a prediction on Feb. 11 that oil would rally and a Jan. 20 forecast for a temporary bottom in the S&P 500. And traders pay close attention to the levels he suggests

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THE FED
ECONOMY  WORLD ECONOMY  US ECONOMY  THE FED  CENTRAL BANKS  JOBS  GDP OUTLOOK
Fed's Fischer: Too early to assess hit to US economy from market volatility
Patti Domm   | @pattidomm
26 Mins Ago
CNBC.com
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Stanley Fischer
Brendan McDermid | Reuters
Stanley Fischer
Federal Reserve Vice Chairman Stanley Fischer said the central bank simply did not know what course of action it would take at its next meeting, due three weeks from now, and that it was too early to assess the impact of recent market volatility.

Speaking to the energy industry at the annual IHS CERAWeek conference, Fischer stressed that the Fed was data dependent and pointed to recent testimony from Chair Janet Yellen, who said the central bank would be careful not to jump to premature conclusions about the impact of global financial developments on the U.S. economy.
He said that similar periods of volatility had left "little imprint" on the broader economy.

"If the recent financial market developments lead to a sustained tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States," Fischer said.

"But we have seen similar periods of volatility in recent years ... that have left little visible imprint on the economy, and it is still early to judge the ramifications."

Global stock markets have been on a wild ride since the Fed tightened rates in December for the first time in nine years, which led many commentators to scale back their expectations on further hikes in 2016.


Fischer noted that the core consumer price index had reached the 2 percent threshold, although the Fed's preferred inflation measure - personal consumption expenditures (PCE) - had not. The Fed targets 2 percent inflation.
Fischer said spending indicators picked up in January, pointing to an uptick in economic growth this quarter.

The economist added that he thought it would be appropriate if the U.S. economy recorded more than full employment for a period of time. The unemployment rate is currently 4.9 percent and going lower than that would usually spark worries about inflation, but there has been a recent decline in U.S. inflation expectations, in part due to the low oil price.

"A modest overshoot," of full employment would ensure people who want to rejoin the labor force or work more hours get a chance to do so, Fischer said, and could also help ensure the Fed reaches its 2 percent inflation goal.

- Reuters contributed to this report

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1 in 4 Americans on verge of financial ruin

By Catey Hill
Published: Feb 23, 2016 5:31 a.m. ET

     874 
Shutterstock.com / VGstockstudio
The rich keep getting richer. The rest of us aren’t so lucky.

According to a survey released Tuesday by Bankrate.com of more than 1,000 adults, nearly one in four Americans have credit card debt that exceeds their emergency fund or savings. And that’s partially because many people, in addition to their debt, don’t have a dime in their emergency fund at all: another Bankrate survey released earlier this year found that 29% of Americans have no emergency savings at all.

These numbers mean that many Americans are “teetering on the edge of financial disaster,” says Greg McBride, Bankrate.com’s chief financial analyst — thanks to the fact that they might be hard-pressed to pay for an emergency should one arise. “Not only do most of them not have enough savings, they’ve all used up some portion of their available credit — they are running out of options.”


That’s particularly problematic considering that emergencies happen more often than you might think. A 2014 survey by American Express found that half of all Americans had experienced an unforeseen expense in the past year — some of which could be considered an emergency. Indeed, 44% of those who had an unforeseen expense(s) had one for health care and 46% for car trouble — two items that for many Americans are must-pay items, as you need a car to get to work and your health expenses are usually not optional.


Some groups — for example, the 30 to 49 age group — are in worse off than others when it comes to credit card debt and savings. This group is in particularly rough shape, likely it faces child-related and mortgage expenses.

Age   % who say credit card debt is greater than emergency savings
18-29   20%
30-49   26%
50-64   25%
65+   14%
For consumers, the ideal situation is to have no credit card debt and at least six months of savings in an emergency fund (more if you have dependents), experts say. But the reality is that most of us don’t have even close to that (just 52% of Americans have more emergency savings than credit card debt, the Bankrate survey revealed).

The good news: If you have no emergency savings, or more debt than savings, experts say you can remedy that situation. Some recommend paying off your credit card debt first (focus on paying as much as you can on the highest-interest-rate debt and the minimums on all others) and then building up savings, but others say you should try to do both at once. “When you have high interest credit card debt, I recommend saving just enough to cover short-term emergencies (your washer or dryer breaks, your car needs new brakes) — that might be one or two thousand dollars,” says Doug Bellfy, a financial advisor at Synergy Financial Planning in Glastonbury, Conn. “Then attack the credit cards and only then go back and complete building your emergency fund.”

Wan McCormick, a financial planner with Reliable Alliance Financial in Fairfax, Va., agrees with the split strategy: “Based purely on the numbers, one might recommend to focus on the high-interest rate credit debt since it costs more money out of pocket…however, oftentimes, unexpected events happen, and without an emergency fund, consumers with high-interest rate debts usually resort back to loans and most frequently, the credit card, since it is the easiest form of accessing money,” he says. To do both at once, McBride recommends setting up a direct deposit with part going into savings and part toward your credit card.

This story was originally published in February 2015

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Markets in 'state of disbelief’ over Trump
David Reid   | @cnbcdavy
1 Hour Ago
CNBC.com
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COMMENTSJoin the Discussion
Donald Trump at a campaign rally on December 16, 2015 in Mesa, Arizona.
Ralph Freso | Getty Images
Donald Trump at a campaign rally on December 16, 2015 in Mesa, Arizona.
Following success in the Nevada state primaries, Republican presidential candidate Donald Trump looks set to extend his lead in the race for the Republican party nomination.

According to NBC polls, Trump leads in four of six states going into Super Tuesday next week.

Mike Thompson, Managing Director and Chairman at Standard & Poor's Investment Advisory Services, said he didn't think investors knew how to respond to Trump's run.

"I think markets are in a kind of a state of disbelief. I don't think they've ever seen anything like this.

"The extreme between the two parties is really striking," he told CNBC Wednesday.

Thompson said the election process itself was like something that nobody has ever dealt with.

"It's like somebody broke all the rules.

"Its unfamiliar territory and it's hard to take a historical precedent and apply it in this situation," he said.


U.S. Tax reform

Tax reform has so far been largely absent as a debate topic in the U.S. election race.

U.S. corporations pay 40 percent tax on domestic operations, one of the highest rates in the world according to KPMG.

Thompson claimed levies on U.S. companies were a poor way of collecting revenue and raised less than 20 percent of U.S. government taxes.

"Some people are making the argument that you can create more jobs and income tax from personal income tax receipts by just getting rid of the corporate tax rate" he told CNBC.

"At the same time you vault the U.S. to the premier place, in the biggest unified consumption engine, to be a business owner.

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Home
"It's All A Short Squeeze" - Goldman Expects A 20% Drop Before Markets Can Rally
Tyler Durden's pictureSubmitted by Tyler Durden on 02/24/2016 07:42 -0500

Bond Central Banks China Core CPI CPI Crude Monetary Policy OPEC Price Action Primary Market Recession recovery Volatility Yuan


 
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Three weeks into January things were looking rather grim.

Plunging crude, jitters about the ongoing (and increasingly unpredictable) yuan devaluation, and spillovers to global risk assets stemming from an ill-fated attempt by Chinese regulators to implement a stock market circuit breaker got US equities off to one of their worst Januarys in history.

Compounding the problem, it seemed that the market had all of the sudden woken up to two very important (and very interconnected) facts: 1) central banks are desperate, and 2) sluggish global growth and trade look to have become structural and endemic rather than cyclical and transitory.

All of this weighed heavily on risk appetite and the bears stood by and watched as a kind of slow motion panic spread through markets. Since then, things have stabilized. Sort of. Oil is still a huge question mark and barring a Saudi production cut (which oil minister al-Naimi made clear on Tuesday isn’t going to happen) will likely continue to fuel the global disinflationary impulse. Meanwhile, markets are asking more questions about negative rates and central banker omnipotence every day.

For those wondering whether we’ll be riding the short squeeze euphoria wave higher, Goldman’s answer is definitively “no.” In a note out this morning, the bank says short covering and positioning have fueled the bounce and that a sustained rebound is exceptionally unlikely until either valuations get significantly more attractive or inflation expectations stabilize.



*  *  *

From Goldman

Over the past couple of weeks, it would appear that many of the worries that beset the markets through January have faded. But we think it is risky to read too much into price action currently. Volatility remains very high and much of the moves may reflect positioning rather than a genuine change of view about fundamentals. Remember that at the heart of the correction there has been a growing concern about growth and, with it, the risks of deflation.

The rally in the equity market has occurred despite further declines in inflation expectations (and bond yields). In Europe 5 year-5 year forward inflation swaps (which Mr. Draghi has emphasized in the past) have recently hit an all-time low.



Even in the US the market is pricing core CPI inflation to turn negative in 1-years’ time, an outcome that did not occur even in 2008-2009; the 5-year/5-year inflation breakeven rate is only at 1.45% - well below the Fed’s target. Ironically the stabilization in oil prices and EM assets that has been at the core of recent short covering and recovery in risk appetite was probably explained initially more by the fear of weaker data than confidence in a genuine economic recovery. Concerns about a broadening out of the manufacturing downturn in January to the broader economy, together with falling inflation expectations and tightening financial conditions, pushed out the expected timing of interest rate rises. This, in turn, has capped the rise in the US dollar thereby alleviating some pressure on commodity prices and EM currencies.

Another critical ingredient of the rebound in risk assets has been the strengthening of the CNY since February and the narrowing gaps between CNY and CNH. Some would also point to a more stable price for oil which likely led to some short covering and resulted in mining and oil moving to the top of the best performing sector list year to date. However, this may be premature. Hopes of an OPEC deal explained some of the stability in oil prices, but our commodity team expects oil prices to remain volatile and oscillate between $20/bbl and $40/bbl in the near term.

But there has been a roughly 8% rally since the trough – does this mark the start of a sustained recovery in the index?

On the valuation front the picture is complicated. Anything that compares equites to bonds makes equities look very cheap. But on the other hand absolute valuations are not yet cheap – prices have fallen but so have earnings expectations.



As a result, most valuation measures have increased in recent years, leaving equities vulnerable to perceived increases in risks. It is for this reason that we think a continued meaningful rise in markets is not likely unless either valuations have fallen further first, or the macro data shows more meaningful signs of improvement and the fears about deflation shift towards fears of missing the leverage to inflation.



For equities to move meaningfully higher from here, we think valuations would need to be cheaper first (around 11x or 12x forward earnings compared with 14x currently). Without this, the market is likely to remain volatile, but tread water until there is a clear shift in inflation expectations.

*  *  *

In other words, Goldman thinks stocks need to fall some 20% from here before the buyers come out in earnest.

Goldman’s conclusion: there will be no sustained rally until at least one of the following three things occurs: 1) Valuations become cheap; 2) The broad macro data stabilizes enough to shift up inflation expectations and/or; 3) Policy action becomes more supportive.

Put simply, number 2 isn't going to happen. At least not for the foreseeable future. Oil prices would need to rise dramatically, the global deflationary supply glut would need to moderate on the back of a sustained uptick in aggregate demand, and China would need to stop exporting deflation.

As for number 3, monetary policy can't get any more supportive. Literally. Rates are so low that the cash ban calls are rolling in and for a variety of reasons, policy makers across the globe have been reluctant to embark on massive fiscal stimulus programs.

Finally, as for number 1, either earnings would need to rise or else stocks need to fall. Considering the fact that the world looks very likely to careen into recession just as primary market appettite for the bond deals that are fueling bottom line-inflating buybacks dissipates, we know which alternative seems more likely to us.

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The Selling Is Back: S&P Futures Tumble Below 1,900; Sterling Crashes, Gold Soars
Tyler Durden's pictureSubmitted by Tyler Durden on 02/24/2016 07:40 -0500

Australia BOE Bond Case-Shiller China Consumer Confidence Consumer Sentiment Copper Crude Crude Oil Dallas Fed Equity Markets European Union France Glencore Global Economy headlines HFT Hong Kong Institutional Investors Iran Japan Jim Reid Kyle Bass Kyle Bass Market Sentiment Markit Monetary Policy New Home Sales Nikkei Nomination Price Action Primary Market Richmond Fed Risk Management Saudi Arabia Saxo Bank Standard Chartered Volatility Yen Yuan


 
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While the prevailing dour (or perhaps sour) overnight mood was a continuation of the weak oil theme which started yesterday after Iran said the production freeze proposed by Saudi and Russia as "ridiculous", and Saudi oil minister Al-Naimi said that Saudi won't cut supply and that high-cost producers need to either "lower costs, borrow cash or liquidate” (ideally the latter), risk sentiment was further dented when BOJ Governor Kuroda says he won’t target FX rates or stocks, which is clearly nonsense, and further spooked Japanese asset prices (Nikkei -0.85), while sending JGB yields to fresh record lows as follows: 10-year at -0.055%, 20-year at 0.600%, 30-year at 0.915% and 40-year at 1.035%.

As Bloomberg adds, with the introduction of negative-rate policy, investors particularly banks are investing excess cash in govt bonds yielding more than zero, says Hideo Suzuki, chief manager, forex and financial products trading at Mitsubishi UFJ Trust & Banking, in an interview; says there’s a sense among investors that unless they buy positive-yielding debt now, they won’t be able to purchase them. Well there are always positive yielding US Treasurys, though maybe not for much longer.

Going back to oil, it seems that finally the headline chasing algos have run out of steam: "the Saudi comments stating the obvious that the output deal was really not a deal” is weighing on prices, says Global Risk Management oil risk manager Michael Poulsen, with API also pulling prices lower. It’s "maybe an overreaction to things that were clear days ago, so might be some bargain hunters cashing in their chips."

"Once again we are seeing lower oil prices halting the emerging confidence in global markets," added Ole Hansen, head of commodity strategy at Saxo Bank A/S. "Lower oil prices continue to raise concerns about EM growth, a credit event among weak oil producers and selling from sovereign wealth funds."

So with the marketwide short squeeze now officially over, global selling of stocks has resumed, dragging down everything from banks to commodity producers as well as emerging markets, while in the US S&P futures have tumbled back down to, or rather just below, the psychological support level of 1900 (and below DeMark's breach level) driven by another day of tumbling USDJPY, but also by the latest surge higher in gold - something which according to Goldman which has by now been stopped out of its gold "short" means systemic risk is once again rising.



 

Indeed, the bullish euphoria that had gripped markets as recently as Monday is all gone: "It will take some time before market sentiment does turn,” Kerry Craig, global market strategist at JPMorgan Asset Management, told Bloomberg TV in Melbourne. “It’s still very pessimistic. Most investors are very risk averse. You need catalysts or triggers such as an oil price stabilization, clarity about what the Fed is actually going to do and what we see happening with the Chinese currency and economic data."

How much changes in just 48 hours based on nothing but HFT algo stop hunting price action and a co

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How much changes in just 48 hours based on nothing but HFT algo stop hunting price action and a confirmation of what everyone already knew: that there will be no oil production cuts.

While the rest of the risk moves have seen the now all too familiar correlations (Treasuries in Europe and US surging as stocks tumble), another notable plunge has taken place in cable which continues to sell on Brexit fears and overnight dropped below 1.3900. Effectively Boris Johnson has had a more favorable impact on the British currency than a few hundred billion in BOE QE - the local stock market should be cheering on Brexit.



 

Oh, we almost forgot the key event of the night: Trump's juggernaut in Nevada virtually assures him the GOP presidential nomination barring some calamity. The market is desperately trying to explain to itself if this is bullish or bearish for risk.

In summary: European shares dropped the most in two weeks and U.S. stock-index futures also sank. Crude fell through $31 a barrel in New York, after sliding last session, when Iran’s oil minister derided a plan forged by Saudi Arabia and Russia to lock production at January levels. The Russian ruble retreated with Malaysia’s ringgit and the pound weakened below $1.40 for the first time since 2009 on concern the U.K. may exit the European Union. The cost of insuring investment-grade corporate debt rose for the first time in three days, while Treasuries and the yen advanced.

Where markets stand now:

S&P 500 futures down 0.8% to 1900
Stoxx 600 down 2.2% to 320
FTSE 100 down 1.6% to 5867
DAX down 2.5% to 9182
German 10Yr yield down 4bps to 0.14%
Italian 10Yr yield down less than 1bp to 1.53%
MSCI Asia Pacific down 0.9% to 119
Nikkei 225 down 0.8% to 15916
Hang Seng down 1.1% to 19192
Shanghai Composite up 0.9% to 2929
US 10-yr yield down 3bps to 1.69%
Dollar Index up 0.22% to 97.7
WTI Crude futures down 3.1% to $30.89
Brent Futures down 2.2% to $32.55
Gold spot up 0.6% to $1,233
Silver spot down less than 0.1% to $15.29
Global Top News

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Global Top News

Hong Kong Forecasts Slowing Economic Growth as Tourism Slumps: Economy may expand by 1% to 2% in 2016, slower than 2.4% gain last year
This Is Why Kyle Bass Is Wrong on China Collapse, Says CICC: China International Capital questions parallels between Japan in 1990, China now
Goldman’s Ex-Southeast Asia Chairman Leissner Leaves Firm: Tim Leissner helped build the investment bank’s Malaysia business
Asia Hedge Funds Top Rankings as Jiang Pounces in Panicky Market: Performance by Segantii, Sylebra, Greenwoods, Tybourne shows industry matured in Asia
Steven Cohen’s Point72 Said to Add Ai Yoshino as Trader in Asia: Yoshino most recently worked for Mitsubishi UFJ Securities as equity sales trader
Wanda to Announce ‘Major Deal’ This Week, Chairman Wang Says: Chinese conglomerate has been on an acquisition spree this year
Fortescue CFO Sees $1 Billion Firepower to Further Reduce Debt: Cutting debt remains company’s strategic focus, CFO Stephen Pearce says
Chinese Coal Miners Said to Lobby Government for Price Floor: A request to Premier Li Keqiang was made in January in Shanxi
Looking at regional markets, Asian equities traded lower following the negative close on Wall St. driven by the decline in oil prices after the Saudi Oil Minister dismissed a production cut, while the latest API figures showed a significant build of 7.1mIn bbls. ASX 200 (-2.16%) and Nikkei 225 (-0.85%) were pressured from the open with the latter back below 16000, while sentiment in Australia was further dampened by several poor earnings results from the likes of Fortescue, BHP and Wesfarmers. Chinese markets also conformed to the negative tone, with casino losses leading the declines in Hong Kong, while the Shanghai Comp (+0.88%) saw relatively subdued price action amid a lack of any significant catalyst and the PBoC remaining relatively neutral on the CNY reference rate. 10yr JGBs traded higher (10yr yield reached record low of -0.04%) amid weakness in riskier assets while the BoJ also entered the market for JPY 1.26tr1 of government debt.

Asian Top News

Hong Kong Forecasts Slowing Economic Growth as Tourism Slumps: Economy may expand by 1% to 2% in 2016, slower than 2.4% gain last year
This Is Why Kyle Bass Is Wrong on China Collapse, Says CICC: China International Capital questions parallels between Japan in 1990, China now
Goldman’s Ex-Southeast Asia Chairman Leissner Leaves Firm: Tim Leissner helped build the investment bank’s Malaysia business
Asia Hedge Funds Top Rankings as Jiang Pounces in Panicky Market: Performance by Segantii, Sylebra, Greenwoods, Tybourne shows industry matured in Asia
Steven Cohen’s Point72 Said to Add Ai Yoshino as Trader in Asia: Yoshino most recently worked for Mitsubishi UFJ Securities as equity sales trader
Wanda to Announce ‘Major Deal’ This Week, Chairman Wang Says: Chinese conglomerate has been on an acquisition spree this year
Fortescue CFO Sees $1 Billion Firepower to Further Reduce Debt: Cutting debt remains company’s strategic focus, CFO Stephen Pearce says
Chinese Coal Miners Said to Lobby Government for Price Floor: A request to Premier Li Keqiang was made in January in Shanxi
In Europe, equities can be seen suffering once again this morning, with Euro Stoxx drifting lower throughout the morning (-1.9%), taking the impetus from a lacklustre Asian session and with the usual suspects of energy, materials and financial sectors weighing on the indices. Given the aforementioned underperformance, high profile material names BHP Billiton (-7.2%), Glencore (-5.8%) and Anglo American (-6.1%) are all among the worst performers in Europe, while Standard Chartered (-5.2%) have also seen a continuation of weakness after yesterday's earnings.

European Top News

Draghi Has Two Weeks to Map ECB Plan That Won’t Let You Down: When ECB policy makers meet from March 9-10, they’ll consider whether negative interest rates and EU60b a month of debt purchases is enough to revive consumer prices
Bayer Names Werner Baumann to Succeed Marijn Dekkers as CEO: Named chief strategy and portfolio officer Werner Baumann to succeed CEO Marijn Dekkers after April shareholders meeting
Airbus Profit Gains 1.6% on A350 Ramp-Up, Break-Even on A380: 2015 Ebit before one-offs EU4.1b, est. EU4.38b; figures held back by higher development spending; cranks up production after order rush for new jets; says 2016 earnings set to be stable
Peugeot Promises New Profit Plan With Restructuring Complete: To resume paying a dividend, 1st since 2011, from this year’s earnings, 5% oper. margin was more than double 2018 target
Delta Lloyd Shares Surge After Rights Offer Cut to $715m: Bowed to investor pressure and cut the size of a rights offer to EU650m; said in Nov. aimed to raise as much as EU1b
Man Group Declines After Profits Fall on Performance Fees Drop: FY adj. pretax fell to $400m vs $481m y/y, est. $455m
How Low Could Pound Go in a ‘Brexit’? Economists See 1985 Levels: 29 of 34 economists see drop to $1.35 or below on leave vote; GBP already at seven-year low as EU campaign heats up
In FX, it has been a busy morning and certainly so if you are GBP trader with a brief respite in Cable through 1.4000 quickly followed up by heavy selling, talking the pair down below 1.3900, the lowest level since the 2009 crisis. The focus is already on the 2009 lows just under 1.3500. EUR/GBP has been pushed higher, and we are nearing the .7900 level here despite moderate losses in EUR/USD, which has traded below the previous session lows — to just under 1.0975. More bids seen to 1.0950. USD/JPY is lower, but cross/JPY likely to be seeing more of the flow — the spot rate holding off the Tuesday base as yet. GBP/JPY is through 156.00, EUR/JPY 123.00. The oil related currencies are all softer along with WTI and Brent, but no panic moves like we saw earlier in the year. Even, so USD/CAD is back through 1.3800.

Lower crude prices dragged on the currencies of oil exporters Russia and Malaysia. The ruble dropped 2.5 percent and the ringgit fell 0.6 percent.  The Bloomberg Dollar Spot Index added 0.2 percent. Japan’s yen climbed versus all of its major counterparts, strengthening 0.3 percent to 111.81 per dollar.

China’s yuan fell for a fourth day as the People’s Bank of China set its reference rate at the lowest level in almost three weeks. Figures from the nation’s foreign-exchange regulator released Tuesday afternoon showed banks net sold overseas currencies to their clients for a seventh straight month in January. The yuan weakened 0.13 percent to 6.5359 against dollar, according to China Foreign Exchange Trade System prices. The central bank cut the reference rate by 0.04 percent to 6.5302 following a 0.17 percent reduction on Tuesday.

In commodities, it remains all about oil, as WTI futures slid as much as 3.3 percent in New York, below $31 once again this time on the April contract. Saudi Arabia’s proposal to cap output at January levels puts “unrealistic demands” on Iran, Oil Minister Bijan Namdar Zanganeh said Tuesday, according to the ministry’s news agency Shana. Ali Al-Naimi, his counterpart from Saudi Arabia, said at a conference in Houston that high-cost producers should bear the burden of reducing the current surplus and reaffirmed the kingdom’s commitment to last week’s accord.

Crude is down 17 percent this year on speculation a global glut will persist amid the outlook for increased shipments from Iran and brimming U.S. supplies, which are at the highest level in more than eight decades. The nation’s stockpiles expanded by 7.1 million barrels last week, the industry-funded American Petroleum Institute was said to report Tuesday.

Copper led losses in industrial metals on concerns that rising stockpiles in China signal continued weak demand in the world’s biggest consumer. Inventories in warehouses tracked by the Shanghai Futures Exchange have more than doubled to a record since the end of August, bourse data show. Copper for delivery in three months slid 1 percent in London.

On the US calendar there will be some focus on the flash services (expected to nudge up 0.3pts to 53.5) and composite PMI’s for February, while January new home sales data is also due out. The latest Fedspeakers due up will be Lacker who is set to talk on monetary policy and growth, as well as Kaplan later this evening who is due to talk on current economic conditions and monetary policy.

Bulletin Headline Summary from Bloomberg and RanSquawk

European equities take the impetus from the weak Asia lead with the usual suspects (Financial, Material and Energy) leading the region lower.
GBP yet again underperforms amid the continuous concerns surrounding a potential Brexit with GBP/USD printing fresh 7-yr lows.
Looking ahead highlights include US services PMI, DoE crude inventories reports as well as comments from Fed's Lacker, Bullard, Kaplan and BoE's Cunliffe
Treasuries higher overnight as global equity markets and commodities, ex-precious metals, resume selloff; U.S. auctions continue today with $34b 5Y notes, WI yield 1.17%, compares with 1.496% awarded in January.
A British exit from the European Union would be so devastating for the pound that 29 out of 34 economists in a Bloomberg survey see it sinking to $1.35 or below within a week of a vote to leave -- levels last seen in 1985.
China scrapped limits on the amount of funds that foreign institutional investors can put into its interbank bond market, the latest step to lure capital from abroad as outflows weigh on the yuan
China International Capital Corp’s economists published a rebuttal of hedge-fund manager Bass’s assessment where he stated that China’s banking system may see losses of more than four times those suffered by U.S. lenders during the 2008 credit crisis
U.S. Treasury Secretary Jacob J. Lew downplayed expectations for an emergency response to global market turbulence when Group of 20 finance chiefs and central bankers meet this week in China
JPMorgan’s investment bank said revenue from sales and trading has tumbled about 20% this year, providing an early gauge of the pain inflicted on Wall Street’s biggest firms by the global market rout battering investors
Donald Trump’s dominating victory in the Nevada caucuses pushes him further out ahead of his nearest competitors for the Republican presidential nomination, giving his unorthodox candidacy a major boost heading into Super Tuesday contests next week
$11.15b IG corporates priced yesterday (YTD volume $255.4b) and $250m HY priced (YTD volume $11.375b)
Sovereign 10Y bond yields mostly steady; European, Asian markets drop; U.S. equity- index futures lower. Crude oil and copper fall, gold rises
US Event Calendar

7:00am: MBA Mortgage Applications, Feb. 19 (prior 8.2%)
8:00am: Fed’s Lacker speaks in Baltimore
9:45am: Markit US Services PMI, Feb. P, est. 53.5 (prior 53.2); Markit US Composite PMI, Feb. P (prior 53.2)
10:00am: New Home Sales, Jan., est. 520k (prior 544k)
1:00pm: U.S. to sell $34b 5Y notes; New Home Sales m/m, Jan., est. -4.4% (prior 10.8%)
1:15pm: Fed’s Kaplan speaks in Dallas
7:00pm: Fed’s Bullard speaks in New York
 

DB's Jim Reid concludes the overnight wrap

Markets have been soft over the last 24 hours not helped by China's weaker Yuan fix yesterday and a 4.5% drop in oil. While the fix was little changed this morning (set 0.04% weaker) a further tumble for Oil overnight (now approaching $31/bbl) has kept risk assets firmly on the back foot in Asia this morning. The Nikkei (-1.36%), Hang Seng (-1.60%), ASX (-2.26%) and Shanghai Comp (-0.62%) in particular are all in the red, while credit indices are also a tad weaker. Not helping sentiment is the latest MNI consumer sentiment reading out of China, with the February reading declining 3.6pts to 111.3 and to a four-month low.

The latest twist in the Oil saga yesterday came about as headlines out of both Saudi Arabia and Iran hit the wires. The former’s Oil Minister, Ali al-Naimi, did initially say that freezing output at current levels is the beginning of a process and that high inventory levels will probably decline in due time if we can get all the major producers to agree to not add additional barrels. It was a follow up to this comment which appeared to spook the market however, with al-Naimi warning that ‘this is not the same as cutting production’ and that ‘that’s not going to happen’, while also suggesting that ‘there is less trust then normal’ between nations. Chatter from Iran’s Oil Minister Zanganeh didn’t help, saying that the Saudi-Russia freeze plan is ‘ridiculous’ and that the proposal puts ‘unrealistic demands’ on Iran. ConocoPhillips CEO seemingly summed up the confidence at a corporate level, saying that Oil companies ‘have to prepare for the worst case’ and that you ‘can’t count on a Saudi freeze working’.

Combined with the already dampened sentiment after the CNY fix, it was a broadly weaker day across equity markets yesterday. In Europe we saw the Stoxx 600 close -1.22%, DAX -1.64% and FTSE MIB -1.95%. A softish German IFO survey did little to help with the expectations component in particular down 3.5pts to 98.8 and the lowest since late 2012.

Across the pond the S&P 500 (-1.25%) finished near enough at its lows for the day with a rough session for financials following some bleak but perhaps unsurprising comments about difficult trading conditions so far this year from JP Morgan not helping. Credit markets appeared to largely ignore the intraday volatility in Oil with Main finishing half a basis point tighter and sub-fins also outperforming (5bps tighter). US credit did weaken slightly into the close with CDX IG finishing 2bps wider although a second consecutive high volume session in the primary market kept sentiment relatively upbeat.

Elsewhere, Treasury yields tracked the move lower with Oil with the closing level of 1.723% for the 10y (-3bps) masking what was a pretty big high-to-low swing after yields had crept up over 1.812% prior to the latest headlines. Gold (+1.51%) and the Yen (+0.73%) were the beneficiaries from the broader risk selloff, while Sterling was another sharp leg lower against both the Dollar (-0.90% to $1.402) and Euro (-0.82% to €1.273) and has in fact dipped below $1.40 during the Asia session this morning. Moves have also come following comments from the BoE’s Carney yesterday who said that the BoE has ‘considerable room’ should additional stimulus be required.

Away from the focus on Oil markets yesterday, the US data was something of a sideshow although the fall in consumer confidence did turn a few heads. The February print declined a fairly sharp 5.6pts to 92.2 (vs. 97.2 expected) which was the lowest since July last year with the expectations component down 6.4pts and to the lowest since February 2014. Elsewhere the Richmond Fed manufacturing index reading unexpectedly declined 6pts this month to -4 after the consensus had been for no change. Existing home sales were up in January by +0.4% mom (vs. -2.5% expected) while the S&P/Case-Shiller home price index was a smidgen behind market at +0.80% mom for December (vs. +0.85% expected).

Yesterday’s Fedspeak offered some interesting contrasting comments. Kansas City Fed President George argued that a potential March move ‘absolutely should be on the table’ and that ‘at this point I would not say that the data have suggested there has been a fundamental shift in the outlook’. Dallas Fed President Kaplan was a lot more dovish in his comments to the FT saying that ‘in order to reach our inflation objective we may need to be more patient than we previously might have thought’ and that ‘if that means we take an extended period of time where we stop and don’t move, that may also be necessary’. Speaking overnight meanwhile, Fed Vice-Chair Fischer probably sat somewhere in the middle of his colleague’s comments, saying that ‘if the recent financial market developments lead to a sustained tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the US’. At the same time however, Fischer also opined that ‘we have seen similar periods of volatility in recent years…that have left little visible imprint on the economy, and it is still early to judge the ramifications’.

Running over today’s calendar, this morning in Europe the only data of note is out of France where we’ll receive the latest consumer confidence print and the UK where CBI reported sales data is due. In the US this afternoon there will be some focus on the flash services (expected to nudge up 0.3pts to 53.5) and composite PMI’s for February, while January new home sales data is also due out. The latest Fedspeakers due up will be Lacker (at 1pm GMT) who is set to talk on monetary policy and growth, as well as Kaplan later this evening (at 6.15pm GMT) who is due to talk on current economic conditions and monetary policy. Away from this the EC’s Tusk and Juncker are due to speak in EU Parliament this afternoon on the outcome of the EU summit with Brexit expected to be a hot topic. The BoE’s Cunliffe is also due to speak tonight.

Average:
5

[king]

+11

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1929.8

+8.53

[king]

Stocks won't bottom until managers underweight equities: Cavanaugh
Tom DiChristopher   | @tdichristopher
4 Hours Ago
CNBC.com
19
SHARES
27
COMMENTSJoin the Discussion

The market won't bottom until professional fund managers begin underweighting stocks, Voya Investment Management's Karyn Cavanaugh said Wednesday.

But there's a problem. Investors are not yet taking a dim enough view of equities because, despite fundamental weakness in corporate earnings, stocks still look cheap compared with bonds in the current low-rate environment, she said.

The S&P 500 had surged 6 percent since Feb. 11, when JPMorgan Chase CEO Jamie Dimon announced he had purchased 500,000 shares of his bank's stock. But the rally since the so-called Dimon Bottom was foiled this week as stocks fell back into correction territory.

Equities fell in tandem with oil futures, which reversed gains on Tuesday after Saudi oil minister Ali al-Naimi dashed investors' hopes that major producers would eventually cut output to stabilize prices.

To be sure, managers are raising more cash, Cavanaugh said, but capitulation selling has only just begun.

"We're talking about episodic volatility. We think this is going to continue, and until we get that full-fledged capitulation, there is a little bit more risk, we think, to the downside," she told CNBC's "Squawk Box."

A gas flame is seen in the desert near the Khurais oilfield operated state oil giant Saudi Aramco, about 160 km (99 miles) from Riyadh.
Schork: Why oil won't hit the $40s this year
Voya Investment Management remains overweight equities and favors large-cap stocks and high-quality companies, Cavanaugh said.

Mary Ann Bartels, a chief investment officer at Bank of America Merrill Lynch, said she is not ready to underweight stocks, either.

"The market is behaving just like it should behave. Oil, China, the central banks — whether they'll act, whether they won't act — those are all uncertainties," she told "Squawk Box."

Those uncertainties would be on the back burner if it weren't for poor earnings, she added. Without earnings growth, the market has no catalyst to move higher, she said.

Further, volatility is actually below the 25-year average, Bartels pointed out, but investors have gotten so used to the Federal Reserve backstopping markets through monetary policy that moderate volatility is roiling stocks.

The Fed had kept rates near zero since December 2008 until finally hiking them by 25 basis points in December, offering little yield to investors and sending them piling into stock markets.

Krishna Memani, chief investment officers at Oppenheimer Funds, said that stocks would not hit a true low until the Fed shows it will not just pause its plans to raise interest rates, but put aside its monetary tightening altogether.

"Clearly oil is an issue, but I think these are symptoms, rather than the cause. The cause has been the 18-month Fed talk of tightening in an environment of deflation and deleveraging on a global basis," he told CNBC's "Squawk on the Street" on Wednesday.

[king]

US still in a bull market: RBC Wealth Management
Leslie Shaffer   | @LeslieShaffer1
9 Mins Ago
CNBC.com
2
SHARES
COMMENTSStart the Discussion

U.S. shares are still in a bull market, despite the volatility currently grabbing global attention, Alan Robinson, global portfolio manager at RBC Wealth Management, told CNBC.

"We are we think in the middle of a bull market expansion for stocks. Bull markets don't die of old age, they die of speculative excess and I'd argue that we are far away from that level at the moment," Robinson told CNBC's Squawk Box.

The wealth manager cited the S&P 500 index's close above 1,920 on Wednesday as a particularly positive sign because it put the benchmark U.S. index at a price-to-earnings (P/E) multiple of about 16 times the next 12 months' earnings, which are forecast to be about $120. The S&P ended Wednesday up 8.53 points, or 0.44 percent, at 1929.80 after a sharp intraday reversal from 1 percent-plus losses.

"It gives us some confidence that we can get a fairly significant expansion [of valuations] by year-end, either by an increase in the P/E multiple as confidence comes back into the market with this bottoming in the oil price," Robinson said.

Janet Yellen
Banks to take hit from fading hopes of rate hike
In U.S. trade on Wednesday, WTI recovered from a sharp overnight decline to settle up 28 cents, or 0.88 percent, at $32.15 a barrel.

The recovery was fueled by U.S. Department of Energy's weekly crude inventory data, which showed U.S. oil barrels rose by 3.5 million, about half what the American Petroleum Institute reported late Tuesday, suggesting a respite from continued oversupply.

U.S. crude oil futures had declined Tuesday after Saudi Oil Minister Ali al-Naimi said production cuts would not happen, although producers planned to meet in March to negotiate an output freeze.

But RBC Wealth, which has around 777 billion Canadian dollars ($566.53 billion) under management, cautions that there won't be a huge rally in stocks.

"I don't think we'll get a 50 percent breakout, let me be clear about that," Robinson said. "But I think [a rise to] an 18 P/E is not unreasonable."

The investor is particularly bullish on the outlook for one beaten down sector: U.S. banks.

An oil worker adjusts a flow valve at an oilfield operated by Embamunaigas, a unit of KazMunaiGas Exploration Production, near Atyrau, Kazakhstan.
Oil not going away as headache for big banks
The S&P 500 Financial Sector index is down 12.5 percent so far this year, as shares in the sector sold off on fading expectations for further Federal Reserve interest rate hikes and worries grow about banks' exposure to the hard-hit oil and gas sector.

But Robinson expects that lower rates for longer could benefit U.S. banks by increasing their net interest margins, which is the difference between banks' interest income from loans and the interest they have to pay for funds, such as deposits.

"This will lead to a little bit more inflation further down the line," he said. "We think lower rates for longer, plus the increased threat of higher inflation because of that, will steepen the yield curve and improve net interest margins.

[bursamy]

On Friday there will be G20 meeting - a gathering of finance ministers and central bank governors in Shanghai. After that, ECB will meet on March 10, BOJ on March 14-15 and FED on March 15-16. More stimulus is expected from ECB and BOJ and FED will likely be on hold and all of these should be positive for equity market.

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[bursamy]

Even after a brutal start to 2016, stocks may still be more expensive than they seem. Even worse, investors may be paying for earnings and growth that aren’t anywhere near what they think. The result could be that share prices have even further to fall before they entice true value investors.

The difference shows up starkly when looking at price/earnings ratios. On a pro forma basis, the S&P trades at less than 17 times 2015 earnings. But that shoots up to over 21 times under GAAP.

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