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RED FLAG
« on: May 28, 2016, 08:56:14 AM »



Greenspan: Western World Headed for a State of Disaster
By Julia Limitone  Published May 26, 2016 Business Leaders

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Former Federal Reserve Chairman Alan Greenspan has a dire warning about the economy. During an exclusive interview on The FOX Business Network’s Cavuto: Coast to Coast he told Neil Cavuto the U.S. has “a global problem of a shortage in productivity growth” and is headed for a state of disaster.


“What the Fed does at this particular stage is less important than what the markets are doing. And what the markets are beginning to show us is acceleration in money supply for the first time in a very long time… We have a global problem of a shortage in productivity growth and it’s not only the United States but it’s pretty much around the world and it’s being caused by the fact that the populations everywhere in the Western world, for example, are aging and we are not committing enough of our resources to fund that,” he said.

Greenspan said the main thing confronting our country and the global economy is long-term economic growth.

“Our problem is not recession which is a short-term economic problem. I think you have a very profound long-term problem of economic growth at the time when the Western world, there is a very large migration from being a worker into being a of recipient of social benefits as it is called. And this is legally mandated in all of our countries. The size has got nothing to do with the rate of growth in economic activity, but if we stay down at the two percent economic growth in the United States and elsewhere, we’re not going to be able to fund what we are already legally obligated to spend,” he said.

More on this...
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Former Reagan budget director David Stockman on Wednesday told Neil Cavuto the U.S. could be on the verge of a market economic collapse but Greenspan says “we need not go that far.”

“Since 1975, the sum of gross domestic savings and entitlements as a percentage of GDP has been remarkably flat and what that tells us is all the way back to ’65 we have essentially been seeing a one Dollar to one Dollar tradeoff between entitlement growth and gross savings decline. And despite the fact that we are borrowing savings from abroad its’ kept our rate of capital investment as a percent of GDP going down,” he said.

Greenspan who is “not exactly” a fan of Donald Trump or Hillary Clinton also discussed their opposition to trade deals and why they are critical to economic growth.

“People don’t realize, they think that you’re going to shut off, for example, imports from China, that somehow will create jobs in the United States -- it doesn’t.  Instead of getting goods out of China you will get them out of the Philippines or someplace else. But before they come back to the United States, they will try other places around the world where labor costs are perceived to be cheaper. So the issue of foreign trade is something which has helped the country grow all the way back to 1790 and the presumption that of sudden we’re turning off on trade is very narrow-minded in my impression,” he said.

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RED FLAG
« on: May 28, 2016, 08:56:14 AM »

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Re: RED FLAG
« Reply #1 on: May 29, 2016, 07:53:26 AM »



Former Morgan Stanley Chief Asia Economist: "Don't Listen To The Ruling Elite, The World Economy Is In Real Trouble"
Tyler Durden's pictureSubmitted by Tyler Durden on 05/28/2016 14:00 -0400

Bill Gates Central Banks China Davos Federal Reserve Global Economy Gross Domestic Product Hong Kong Hyperinflation Monetary Policy Morgan Stanley Recession Steve Jobs World Trade


 
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Authored by Andy Xie, the former Morgan Stanley chief Asia-Pacific economist, originally posted Op-Ed at The South China Morning Post,

Andy Xie says the world's elite that are attending the G7, G20, Davos and other wasteful meetings are wrong to try to pin the blame for the turmoil on people’s psychology; all signs point to a prolonged period of global stagnation and instability.

Before the current G7 meetings waste of time, The G20 working group meeting in Shanghai didn’t come up with any constructive proposals for reviving the global economy and, instead, complained that the recent market turmoil didn’t reflect the “underlying fundamentals of the global economy”. The oil price has declined by 70 per cent since June 2014, while the Brazilian real has halved, and the Russian rouble is down by 60 per cent. The global economy is on the cusp of another recession, and these important people blamed it all on some sort of psychological problem of the people.

Over the past two decades, the global economy has been blessed with the entry and participation of 800 million hard-working Chinese, plus the information revolution. The pie should have increased enough in size to make most people happier. Yet, the opposite has happened. The world has gone from one crisis to another. People are complaining everywhere. This is due to mismanagement by the very people who attend the G20 meetings, the Davos boondoggle, and so many other global meetings that waste taxpayers’ money and put inept leaders in the limelight.

One major complaint that people have is that the system is rigged – that is, the rising income concentration is not due to free market competition, but a rigged system that favours the politically powerful. This is largely true. The new billionaires over the past two decades have come mostly from finance and property. Few made it the way Steve Jobs or Bill Gates did, creating something that makes people more productive.

The most important factor in the rigged system is monetary policy being used to pump up financial markets in the name of stimulating growth for people’s benefit. This is essentially the trickle-down wealth effect, that is, making some people in the financial food chain rich while the spillover gives people a few crumbs. Yet, instead of crumbs, the wealth effect has pumped up property prices in Manhattan, London and Hong Kong, as well as the price of modern art. Essentially, the wealth effect has stayed within the small circle of the wealthy. And these people show up at Davos to congratulate policymakers on their “successes”.

Wasting resources is an equally important factor in making the global economy weak and prone to crisis. After the 2008 financial crisis, the US government and Federal Reserve spent trillions of dollars to bail out the people who created the crisis. Instead of facing bankruptcy and jail, these people have become richer than ever. Predictably, they have used their resources to rig the system further.

After 2008, when Beijing launched a massive investment push, the global ruling elite all praised China for saving the global economy. China has increased credit by over US$20 trillion to finance the construction of factories and homes. However, investment does not guarantee final demand. The process of building up a factory creates demand. But, when it is completed, it needs to sell its goods to someone. What China did was build even more factories to keep this factory occupied. This Ponzi scheme couldn’t last long. We are just seeing the beginning of its devastating consequences.

China’s overinvestment has pumped up commodity prices, which has led to another Ponzi scheme. As major central banks cut interest rates to zero, credit demand didn’t respond in general, as businesses didn’t see growing demand from people who were suffering income erosion. The commodity boom justified credit demand for the time being. Trillions of dollars were poured into the energy sector, and trillions more into other commodity industries. Businesses in emerging economies that were pumped up by rising commodity prices borrowed US$9 trillion. This mountain of debt is floating on a commodity Ponzi scheme that is floating on China’s investment Ponzi scheme. Its bursting is just the beginning. Its impact on the global financial system could be bigger than the 2008 financial crisis.

In addition to the bursting of the global commodity bubble, China’s overcapacity bubble will kill global capital expenditure for many years to come. Even though Chinese investment isn’t growing like before, investment at half of gross domestic product is still adding overcapacity by over US$1 trillion per year – the problem is getting bigger.

All indications are that China wants to export the overcapacity. And why not? China overinvested to bail out the global economy. It shouldn’t pay the whole price for the mistake.

China’s strategy would lead to de-industrialisation in most of the world, in particular middle-income emerging economies. Weak capital expenditure would lead to weak employment and labour income. The resulting bankruptcies may further weaken the global credit system.

The global economy is facing years of stagnation, deflation and financial crises. The current economic managers will resort to the same tricks of pumping up the financial markets with liquidity, to no avail. In the meantime, political instability will spread around the world. It will take a long time for the right leaders to emerge.

Initially, populists will win. Their policies, unfortunately, will focus on protectionism and rolling back the World Trade Organisation system. That will lead to further economic turmoil in the global economy. Protectionism may suddenly jump-start inflation that will quickly become hyperinflation, which would certainly lead to violent revolutions.

The world is on the cusp of a prolonged period of stagnation and instability. Our ruling elite is blaming it on people seeing things. Their strategy is to change people’s psychology. Unfortunately for them, the world is catching fire and that fire will eventually reach their Davos chalets.

Offline zuolun

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Re: RED FLAG
« Reply #2 on: June 11, 2016, 11:01:17 AM »
The next bear market will be ruthless ~ 10 Jun 2016
http://seekingalpha.com/article/3981292-next-bear-market-will-ruthless

Brexit could herald historic gold rush ~ 10 Jun 2016
http://www.iii.co.uk/articles/325042/brexit-could-herald-historic-gold-rush

US stocks join global sell-off as 'Brexit' fears mount ~ 10 Jun 2016
http://www.channelnewsasia.com/news/business/us-stocks-join-global/2863288.html

Iran snaps up first sugar purchases since lifting of sanctions ~ 10 Jun 2016
http://www.reuters.com/article/iran-sugar-idUSL8N192421

Bad weather in South America threatens crops, prices of sugar, soybeans and coffee fly ~ 9 Jun 2016
http://www.forbes.com/sites/fredoltarsh/2016/06/09/bad-weather-in-south-america-threatens-crops-commodity-prices-like-sugar-soybeans-and-coffee-fly



Soros seeks safe haven in gold, concerned about possible EU collapse ~ 9 Jun 2016
https://www.rt.com/business/345990-soros-gold-stocks-investment/

索罗斯重出江湖 准备大规模沽空 ~ 9 Jun 2016
http://www.orientaldaily.com.my/business/cj200017212



Goldman says there's an elevated risk of a big market selloff ~ 8 Jun 2016
http://www.bloomberg.com/news/articles/2016-06-08/goldman-says-there-s-an-elevated-risk-of-a-big-market-selloff



Commodities: the bear market is over ~ 7 Jun 2016
http://www.iii.co.uk/articles/323200/commodities%3A-bear-market-over

Vietnam coffee output to hit 4-year low and could shrink further ~ 7 Jun 2016
http://www.agrimoney.com/news/vietnam-coffee-output-to-hit-4-year-low---and-could-shrink-further--9627.html

Cotton futures touch 9-month top, as storm lands heavy rains on US ~ 7 Jun 2016
http://www.agrimoney.com/news/cotton-futures-touch-9-month-top-as-storm-lands-heavy-rains-on-us--9623.html

Commodities enter bull market, ending 5-year selloff: Chart ~ 7 Jun 2016
http://www.bloomberg.com/news/articles/2016-06-06/commodities-enter-bull-market-ending-five-year-selloff-chart



Drought, ethanol demand send sugar prices surging ~ 6 Jun 2016
http://www.theglobeandmail.com/globe-investor/investment-ideas/drought-ethanol-demand-send-sugar-prices-surging/article30312162/



On bull-market brink, Citi sees commodity gains as Goldman jeers ~ 4 Jun 2016
http://www.bloomberg.com/news/articles/2016-05-04/on-bull-market-brink-citi-sees-commodity-gains-as-goldman-jeers



Rain worries lift Paris wheat futures to five-month high ~ 3 Jun 2016
http://www.agrimoney.com/news/rain-worries-lift-paris-wheat-futures-to-five-month-high--9615.html

Sugar: World markets and trade ~ May 2016
https://apps.fas.usda.gov/psdonline/circulars/sugar.pdf


Offline zuolun

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Re: RED FLAG
« Reply #3 on: June 11, 2016, 02:22:20 PM »
'Brexit': A vote to take Britain out of the EU on 23 Jun 2016

No economic upsides to a Brexit ~ 10 Jun 2016
https://www.youtube.com/watch?v=QnFwcSmDG1U

If 'Brexit' wins, fear gets into the marketplace: Bill Gross ~ 10 Jun 2016
http://www.cnbc.com/2016/06/10/if-brexit-wins-fear-gets-into-the-marketplace-bill-gross.html

EU referendum: Commonwealth trade groups scotch Brexit claims ~ 10 Jun 2016
http://www.theweek.co.uk/eu-referendum/63710/eu-referendum-paris-rolling-out-red-carpet-for-post-brexit-bankers

'Brexit' will have cascading effect in Europe, US will be safe haven: Trader ~ 10 Jun 2016
http://www.cnbc.com/2016/06/10/brexit-will-have-cascading-effect-in-europe-us-will-be-safe-haven-trader.html

No single market access for UK after Brexit, Wolfgang Schäuble says ~ 10 Jun 2016
http://www.theguardian.com/politics/2016/jun/10/no-single-market-access-for-uk-after-brexit-wolfgang-schauble-says


Offline zuolun

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Re: RED FLAG
« Reply #4 on: June 11, 2016, 05:10:53 PM »
Why is the EU Referendum so divisive in the UK? ~ 30 May 2016
https://www.youtube.com/watch?v=KB6_FI_CJi0

Sterling falls as Brexit campaign enters final fortnight ~ 10 Jun 2016
http://www.reuters.com/article/britain-sterling-idUSL8N1922W9

EUR/GBP exchange rate forecast to trend lower on further Brexit warnings ~ 10 Jun 2016
http://www.exchangerates.org.uk/news/15577/eur-gbp-usd-euro-pound-us-dollar-exchange-rate-news-and-outlook-.html




Offline zuolun

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Re: RED FLAG
« Reply #5 on: June 13, 2016, 07:27:21 AM »
Cox: Slicing global trade with a GE carving knife ~ 9 Jun 2016
http://blogs.reuters.com/breakingviews/2016/06/09/cox-slicing-global-trade-with-a-ge-carving-knife/

Rob Cox discusses why his grandfather’s GE carving knife from 1970 illustrates how free trade benefits people in developed economies beyond the heart-wrenching stories of dislocated workers.

Parkson’s decline a sign of the times for retail stores ~ 11 Jun 2016
http://www.thestar.com.my/business/business-news/2016/06/11/parksons-decline-a-sign-of-the-times-for-retail-stores/

Stiff competiton: File picture showing workers sorting out packages at an express delivery company in Beijing. Like many other traditional retail stores, Parkson has no answer to the rapid rise of e-commerce. Apart from AliBaba, there are many other websites that cater to e-shoppers. – AFP



JD.com launches drone delivery in rural Jiangsu ~ 8 Jun 2016
http://news.xinhuanet.com/english/2016-06/08/c_135423101.htm



JD.com for the first time used its self-developed drones to deliver online purchases made by villagers in Suqian city of East China's Jiangsu province. JD staffer Liu Genxi, pictured, sends the packages to village shoppers after collecting the delivery from a drone.


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Re: RED FLAG
« Reply #6 on: June 16, 2016, 10:21:23 AM »



Time To Let Go Of Your Junk
Jun.15.16 | About: ConocoPhillips (COP) Get Alerts
Eric Parnell, CFA   Eric Parnell, CFAPremium Research »⊕Follow(10,878 followers)
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Summary

Investors have been feasting in the post-crisis period on a banquet of free-flowing liquidity and low-cost debt.

But as the monetary spigots are being gradually shut off, some of the higher-risk areas of capital markets have started to show some worrisome cracks.

Now may be the time to meaningfully dial down exposures to some of the higher-risk areas of the market while the opportunity still presents itself.

Investors have been feasting in the post-crisis period on a banquet of free-flowing liquidity and low-cost debt. But as the monetary spigots are being gradually shut off, some of the higher-risk areas of capital markets have started to show some worrisome cracks. While it certainly has been a jubilant time for risk taking in capital markets during the post-crisis period, now may be the time to meaningfully dial down exposures to some of the higher-risk areas of the market while the opportunity still presents itself.

Risk Assets Under Fire

Riskier areas of capital markets such as more volatile low-quality stocks (NYSEARCA:SPHB) and high-yield "junk" corporate bonds (NYSEARCA:HYG) have performed terrifically well during the post-crisis period. These same segments, of course, were also among the most beaten down during the financial crisis. Once the post-crisis recovery got underway, it was not surprising to see these areas of the market outperform, as low-quality assets traditionally lead the market during the early stages of a recovery. But what has been remarkable during the central bank liquidity fueled rally over the past many years is how long this investment market junk has been able to maintain its leadership.

High-Yield Bonds



Consider high-yield corporate bonds (NYSEARCA:JNK). While they were beaten down badly during the financial crisis, their recovery in the years since has been nothing short of remarkable, as they have soared well beyond to record new highs in recent years. But what has been notable all along the way is the dependence on accommodative monetary policy. For every time a Fed stimulus program ended, high-yield bonds quickly tumbled back lower. And it required a new Fed asset purchase program to get them moving to the upside again. As a result, it is no surprise that the high-yield bond market has struggled ever since the Fed brought to an end its QE3 stimulus program in late 2014. For since that time, it has moved sharply lower. That is, of course, until the recent rally higher since mid-February

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Re: RED FLAG
« Reply #7 on: June 20, 2016, 02:38:16 PM »



Nearly All Assets Are Either Absurdly Overvalued Or Worthwhile Bargains
Jun. 19, 2016 6:34 PM ET| Includes: BRAQ, BRAZ, BRF, CNDA, COPX, DBS, EPU, EWZ, EWZS, FXG, GDX, GDXJ, GLDX, IEF, IEI, IYR, KOL, LIT, NANR, PSAU, REMX, RING, RSXJ, RWR, SGDJ, SGDM, SIL, SILJ, SIVR, SLV, SLVP, SLX, TLT, TPYP, XLP, XLU, XME, ZROZ
Steven Jon Kaplan   Steven Jon Kaplan⊕Follow(560 followers)
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It has been considerably less trendy to discuss the concept of fair value in recent years. Investors have been obsessed about the political situation and how that will impact the financial markets, or what is the latest trendy sector, or what will happen with Brexit, and many considerations which have nothing to do with whether something is overvalued or undervalued. If you analyze thousands of assets, both liquid and otherwise, you will soon discover that these fit into one of two categories. Either they are at or near their highest levels in history, both in absolute and relative terms, or else they had slumped to multi-decade bottoms during the first several weeks of 2016 and have since been moderately rebounding while remaining far below their tops from the past decade. Not surprisingly, most investors remain eager to buy the most overpriced assets, while remaining indifferent to accumulating true bargains.

Most people today are following the dangerous path of stretching for yield.

Many investors think to themselves or say to their financial advisors something like this: "I need income in order to meet my living expenses. I used to get 3% or 4% from my savings accounts, but now they pay less than one percent. So I want to invest in whichever are the safest and most reliable assets which will give me an income of three or four percent each year." If only a few people thought this way, then there wouldn't be a problem. However, since perhaps a billion people suffer from this exact situation and are approaching it in the same way, it has created an extremely dangerous form of herding in which assets like utilities (NYSEARCA:XLU), consumer staples (FXG, XLP), and real estate investment trusts or REITs (IYR, RWR) have become so popular that they are trading on average for about twice their usual historic ratios of prices to profits, prices to dividends, and other classic measures of valuation. Some investors have purchased commercial or residential real estate where rental yields are similarly 3% or 4%, believing they are getting a worthwhile rate of return on their capital because it is considerably more than they would receive in a money market fund. U.S. Treasuries (TLT, IEF, IEI) are also exaggeratedly overvalued as those who don't trust corporations believe the government will always pay on time. The chance of default is essentially zero, but you can still lose a huge percentage of your money from Treasury yields moving higher especially when such an outcome seems impossible to most participants. I will go way out on a limb and forecast that the yield on the 10-year U.S. Treasury bond will exceed 3% in 2017, which almost surely seems absurd to most people because we have become irrationally accustomed to a much lower yield range in recent years.

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Re: RED FLAG
« Reply #8 on: June 21, 2016, 07:19:30 AM »



Soros – A Rudimentary Theory Of Bubbles

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by Tyler Durden - Jun 20, 2016 5:45 PM
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Submitted by Lance Roberts via RealInvestmentAdvice.com,

Over the last few weeks, I have touched on the impact of valuations and forward returns. However, it is not just valuations that are an issue, but also the surge in corporate debt, balance sheet leverage combined with declining profitability which is a result of weak economic growth. All in all, such a combination of factors have historically been associated with “bear markets” in equities.

However, none of these fundamental concerns seem to be a problem currently. Despite one selloff after another leading to increased volatility, the markets are currently hovering near all-time highs as the “chase for yield” continues. Just recently David Rosenberg made an interesting observation in this regard:

“All this reminds me of what Alan Greenspan said about this type of behavior more than a decade ago:
 
Thus, this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent. To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy. But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.
Alan Greenspan, August 25th, 2005.
 
A decline in perceived risk is often self-reinforcing in that it encourages presumptions of prolonged stability and thus a willingness to reach over an ever-more extended time period. But, because people are inherently risk averse, risk premiums cannot decline indefinitely. Whatever the reason ‎ for narrowing credit spreads, and they differ from episode to episode, history caution’s that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets. Such developments apparently reflect not only market dynamics but also the all-too-evident alternating and infectious bouts of human euphoria and distress and the instability they engender.
Alan Greenspan, September 27th, 2005.
 
Well, remember what happened next! The ensuing two years caught up to investors pretty quickly. ‎
 
It goes without saying that we should all heed the message from a zero percent interest rates. We are seeing in some cases negative interest rates right out to the 10-year part of the yield curve or even sub-zero as is the case in Japan and Germany, something we only really saw to this scale in the 1930s.“
David’s comments reminded me of George Soros’ take on bubbles.


“First, financial markets, far from accurately reflecting all the available knowledge, always provide a distorted view of reality. The degree of distortion may vary from time to time. Sometimes it’s quite insignificant, at other times, it is quite pronounced. When there is a significant divergence between market prices and the underlying reality, there is a lack of equilibrium conditions.
 
I have developed a rudimentary theory of bubbles along these lines. Every bubble has two components: an underlying trend that prevails in reality and a misconception relating to that trend. When a positive feedback develops between the trend and the misconception, a boom-bust process is set in motion. The process is liable to be tested by negative feedback along the way, and if it is strong enough to survive these tests, both the trend and the misconception will be reinforced. Eventually, market expectations become so far removed from reality that people are forced to recognize that a misconception is involved. A twilight period ensues during which doubts grow and more and more people lose faith, but the prevailing trend is sustained by inertia. As Chuck Prince, former head of Citigroup, said, ‘As long as the music is playing, you’ve got to get up and dance. We are still dancing.’ Eventually, a tipping point is reached when the trend is reversed; it then becomes self-reinforcing in the opposite direction.
 
Typically bubbles have an asymmetric shape. The boom is long and slow to start. It accelerates gradually until it flattens out again during the twilight period. The bust is short and steep because it involves the forced liquidation of unsound positions.”
The chart below is an example of asymmetric bubbles.


Asymmetric-bubbles

Soros’ view on the pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view.  Prices reflect the psychology of the market which can create a feedback loop between the markets and fundamentals.  As Soros stated:

“Financial markets do not play a purely passive role; they can also affect the so-called fundamentals they are supposed to reflect. These two functions, that financial markets perform, work in opposite directions. In the passive or cognitive function, the fundamentals are supposed to determine market prices. In the active or manipulative function market, prices find ways of influencing the fundamentals. When both functions operate at the same time, they interfere with each other. The supposedly independent variable of one function is the dependent variable of the other, so that neither function has a truly independent variable. As a result, neither market prices nor the underlying reality is fully determined. Both suffer from an element of uncertainty that cannot be quantified.”
The chart below utilizes Dr. Robert Shiller’s stock market data going back to 1900 on an inflation-adjusted basis.  I then took a look at the markets prior to each major market correction and overlaid the asymmetrical bubble shape as discussed by George Soros.


SP500-Asymmetrical-Bubbles-062016

There is currently much debate about the health of financial markets. Have we indeed found the “Goldilocks economy?” Can prices can remain detached from the fundamental underpinnings long enough for an economy/earnings slowdown to catch back up with investor expectations?

The speculative appetite for “yield,” which has been fostered by the Fed’s ongoing interventions and suppressed interest rates, remains a powerful force in the short term. Furthermore, investors have now been successfully “trained” by the markets to “stay invested” for “fear of missing out.”

The increase in speculative risks, combined with excess leverage, leave the markets vulnerable to a sizable correction at some point in the future. The only missing ingredient for such a correction currently is simply a catalyst to put “fear” into an overly complacent marketplace. 

In the long term, it will ultimately be the fundamentals that drive the markets. Currently, the deterioration in the growth rate of earnings, and economic strength, are not supportive of the current levels of asset prices or leverage. The idea of whether, or not, the Federal Reserve, along with virtually every other central bank in the world, are inflating the next asset bubble is of significant importance to investors who can ill afford to, once again, lose a large chunk of their net worth. 


It is all reminiscent of the market peak of 1929 when Dr. Irving Fisher uttered his now famous words: “Stocks have now reached a permanently high plateau.” The clamoring of voices proclaiming the bull market still has plenty of room to run is telling much the same story.  History is replete with market crashes that occurred just as the mainstream belief made heretics out of anyone who dared to contradict the bullish bias.

It is critically important to remain as theoretically sound as possible. The problem for most investors is their portfolios are based on a foundation of false ideologies. The problem is when reality collides with widespread fantasy.

Does an asset bubble currently exist? Ask anyone and they will tell you “NO.” However, maybe it is exactly that tacit denial which might just be an indication of its existence

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Re: RED FLAG
« Reply #9 on: June 22, 2016, 09:01:47 AM »



FED發出紅色警戒:美股本益比超出30年平均值太多
回應(0) 人氣(268) 收藏(0) 2016/06/22 07:11
MoneyDJ新聞 2016-06-22 07:11:41 記者 陳瑞哲 報導
美股真的高處不勝寒?聯準會(FED)周二對股市泡沫化疑慮,發出自葉倫主席上任以來最強烈的警訊。

FED在最新發佈的貨幣政策報告上警告,美股前瞻本益比已超出過去三十年水平太多,但何以致此,FED的長期寬鬆貨幣政策恐難辭其咎,因為利率是評估資產價值的依據,通常利率越低、資產價格越高,而目前FED設定的利率同樣遠低於過去三十年水平。

這不是FED第一次對美股發出警告,2014年7月FED也曾發佈報告警告生技與社群網站股價明顯超漲,雖然短暫引發賣壓,但一年過後,某檔追蹤生技股的ETF還是攀升3%,另一檔追蹤生技股的ETF更是跳漲50%,證明只要寬鬆貨幣政策不退場,資產價格高估問題將持續存在。(路透社)

按照FED計算方法,美股前瞻本益比(P/E)目前來到16.47倍,對照2月10日時的15.43倍高出6.8%,對照30年平均值(14.86倍)則是高出10.8%。

儘管如此,FED似乎已打定主意,即使冒著資產泡沫化風險,也要延長低利率政策。葉倫主席周二接受參議院銀行委員會質詢時表示,由於就業報告等經濟數據好壞參半,加上英國脫歐風險,因此FED有必要採取更謹慎態度。(MarketWatch)


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Re: RED FLAG
« Reply #10 on: June 29, 2016, 06:11:18 PM »



Why Barclays Thinks The V-Shaped Recovery Is Dead: "Massive Redemptions Are Coming"

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by Tyler Durden
Jun 28, 2016 8:12 PM
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While one can speculate about the causes of today's global risk-on rally (as we did earlier today on two occasions), a more important question is whether after the recent historic rout (which as shown yesterday surpassed the volatility of the 2008 great financial crisis for various, mostly FX-linked assets), stock markets will simply brush it off, forget about all that's happened and as has been the case all too often in the past several years, surge in yet another V-shaped recovery.

According to Barclays, the answer is no.

As the firm's equity strategist, Keith Parker, writes today, active investors considerably increased risk exposures in the week leading up to the UK referendum. That trade did not play out as expected, and as a result this is where active money managers (MFs and HFs) find themselves now:

"By our measures, aggregate equity positioning by active managers is again near post-crisis highs as the market braces itself for a potential acceleration in redemptions after the equity collapse. With cash levels at equity MFs fairly low and net cyclical sector positioning near the highs, we believe managers are unprepared for outflows and lengthy risk aversion. Although there is cash on the sidelines, the current environment of heightened uncertainty gives rise to a “buyer’s strike” as investors wait for a sufficient value cushion to open up before deploying precious dry powder. Finally, short interest has considerable room to rise across cash equities, ETFs and futures."
Barclays goes on to add that it sees scope for "positioning to turn much more defensive at active managers and for equity outflows to pick up."

And the biggest wildcard, and the reason why we suggested recently BofA's "smart money" clients have pulled money in 21 of the past 22 weeks, not just existing redemption requests, but the threat of a surge in "massive redemptions" over the next few months. Here is Barclays: "Weak active manager performance YTD increases the risk of even larger redemptions in H2."



 


The bank's conclusion: "The positioning overhang coupled with the ‘prove it mindset’ of investors now, points to further equity downside risk as well as a prolonged market bottoming process like we saw in 2011-12, rather than the v-shaped rebounds that have characterized equity markets of late (like January)."

* * *

Finally, since this is a touchy topic for countless 17-year-old hedge fund managers whose only trading strategy during this "business cycle" has been to BTFD, here is Barclays' summary of the key points:

Composite equity positioning is 2std above average, at the post crisis highs. Funds increased risk exposure considerably in the week leading up to the referendum. US MFs and balanced funds are the most exposed currently, while Europe funds went from underweight to neutral.




 

Rebalance bid for equities at the end of month/quarter is unlikely to be material. Our implied US equity vs. bond allocation proxy is still well above recent lows as US equities are down just 3% in Q2. Additionally, the relative spike in equity vol vs. bond vol does not point to net equity buying by multi-asset funds. The rebalance bid may be more pronounced outside the US where the selloff was more acute.


 


Elevated equity fund betas combined with redemptions fuelled prior selloffs. US equity MF beta is 2.5std above average despite equity MF redemptions running $30-40bn a month. The selloffs in 2011 and 2012 were preceded by elevated MF beta, underperformance, and redemptions – which then helped fuel the corrections.




 


Short interest has considerable room to rise. S&P 500 short interest in single stocks is at 2.15% compared to about 2.4% at the recent highs; this implies nearly $50bn in potential selling pressure. ETF short interest is also at all-time lows and a rise to September levels would also imply about $50bn of selling pressure. Finally, S&P futures positioning is net long, compared to being net short in February.




 

Sector positioning turned much more cyclical heading into the referendum. Net cyclical minus defensive positioning by our measures has risen toward the highs, and is reversing. US equity MFs are the most cyclically positioned while global MFs and long-short equity HFs are closer to neutral

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Re: RED FLAG
« Reply #11 on: July 02, 2016, 01:59:02 AM »
Taiwan mistakenly fires ‘carrier killer’ missile toward China ~ 1 July 2016
http://www.japantimes.co.jp/news/2016/07/01/asia-pacific/taiwan-mistakenly-fires-carrier-killer-missile-toward-china

Taiwan fires ‘aircraft carrier killer’ missile toward China, hitting trawler in fatal accident ~ 1 July 2016
http://www.japantimes.co.jp/news/2016/07/01/asia-pacific/taiwan-fires-aircraft-carrier-killer-missile-toward-china-hitting-trawler-fatal-accident


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Re: RED FLAG
« Reply #12 on: July 05, 2016, 03:03:22 PM »
M’sian developers with exposure to Brexit give assurance ~ 30 Jun 2016
http://www.thestar.com.my/business/business-news/2016/06/30/msian-developers-with-exposure-to-uk-give-assurance/

Nothing to see here
https://www.youtube.com/watch?v=rSjK2Oqrgic

Is there any tax implication for Malaysians due to Brexit?  ~ 29 Jun 2016
http://www.thestar.com.my/business/business-news/2016/06/29/brexit-any-tax-implication-for-malaysian-corporates/


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Re: RED FLAG
« Reply #13 on: July 05, 2016, 03:38:32 PM »



Deutsche Bank to Initiate the Next 'Financial Crisis'!
By: Chris Vermeulen | Mon, Jul 4, 2016 Share
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I am certain that you remember Lehman Brothers and the "chaos" that it created when it 'failed'. If you think that the Worlds' Central Banks are now wiser and consequently will not allow another similar event to occur, think again. We will not only see a repeat of this occurrence, again, but it will be exponentially larger than Lehman's was!
On June 29th, 2016 the IMF stated that "among the [globally systemically important banks], Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBCand Credit Suisse," reports The Wall Street Journal.
However, if you were to believe that statement, why should you be concerned about a German bank and how it will affect you while living in the U.S.? The IMF adds: "In particular, Germany, France, the U.K. and the U.S. have the highest degree of outward spillovers as measured by the average percentage of capital loss of other banking systems due to banking sector shock in the source country," reports Bloomberg. The chart below clearly shows the systemic risks emanating out of a Deutsche Bank (DBK) collapse.
Systemic Risk Among GSIBs
Two years in succession, the American unit of Deutsche Bank has failed the FED's "stress test" which is what determines the ability of the bank to weather out yet another 'financial crisis'.

Leverage of Lehman vs. Deutsche Bank:
In 2007, Lehman had a leverage (the ratio of total assets to shareholder's equity) of 31:1. At the time that Lehman filed for bankruptcy, it had $639 billion in assets and $619 billion in debt. Still, it caused a 'systemic risk' worldwide.
In comparison, DBK has a mind boggling leverage of 40x, according to Berenberg analyst, James Chappell. He stated, "facing an illiquid credit market limiting Deutsche Bank's (DBK) ability to deliver and with core profitability impaired, it is hard to see how DBK can escape this vicious circle without raising more capital. The CEO has eschewed this route for now, in the hope that self-help can break this loop, but with risk being re-priced again it is hard to see DBK succeeding."

Why Can't the ECB save DBK in the similar fashion as how the FED saved the banks, in the US?
The nominal value of derivatives risk that DBK holds on its' books is $72.8 trillion, according to the banks' April 2016 earnings report. What is astounding about this, is that a single bank owns 13% of the total outstanding global derivatives, which was a staggering $550 trillion in 2015.
What is more concerning and alarming is that the market cap of DBK is less than $20 billion.
Nonetheless, the nominal value of derivatives exposure does not mean that DBK will have a default worth trillions of dollars seeing as most of the contracts are covered by counterparties. However, when the domino effect is put into motion, we have witnessed how it engulfs the entire world, into it.
If the domino effect does occur, Germany with its GDP of $4 trillion or the EU with a GDP of $18 trillion will not be in a position to gain control over it.
A nominal figure of the high derivatives risk on DBK, as of December 2014, is shown in the chart below.
German GDP versus Eurozone GDP and Deutsche Bank Total Deratives Position

Negative interest regime is NOT the solution to global economic problems which we are facing today:
The European Central Banks' NIRP policy is making matters worse for DBK, as the banks' profits are getting squeezed thus making it difficult for it to repair its' balance sheet.
The bank is finding it difficult to sell its' assets because of illiquid credit markets. The banks' management will also find it difficult to raise capital as the investment-banking industry is in a "structural decline", according to Berenbergs' James Chappell.

BREXIT is adding to the woes:
DBK receives 19% of its' revenues from the UK. After the "BREXIT" vote, the uncertainty regarding future relations of the U.K. with Europe has increased the risk for all of the banks. President Francois Hollande of France is eyeing the financial industry and is pitching for them to move to Paris from London.
DBK is the biggest European bank in London. Moving operations, which are handled by 8,000 members of the staff, will not be an easy task for DBK and will further weaken their balance sheet.

How is the stock behaving?
The stock is in a downtrend and has broken below the panic lows of 2009.
Deutsche Bank Monthly Chart
The stock is quoting at a price to book ratio of 0.251, which indicates the pessimism of the markets towards the stock. The investors believe that the stock is not worth more than a quarter of its' liquidation value.
A comparative study of the stock, with Lehman, gives a more accurate picture of the future price of DBK, which is zero.
Deutsche Bank versus Lehman Chart
The German Newspaper 'Die Welt' reported that the great George Soros had recently opened a short position of 0.51% of the DBK's outstanding shares. This equates to 7 million shares, worth $7.5 billion, reports Investopedia.

Conclusion:
The easy monetary policy of various Central Banks is the main reason for the banks holding such massive leverage. The "next financial crisis" will cause the Central Banks' actions to be redundant and ineffective, as they will not be in a position to control this impending catastrophe! In such a situation, the world will revert to the only remaining resort left, and that is gold.

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Re: RED FLAG
« Reply #14 on: July 05, 2016, 09:20:23 PM »



A Look Inside Europe's Next Crisis: Why Everyone Is Finally Panicking About Italian Banks

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by Tyler Durden
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Back in May 2013, we wrote an article titled "Europe's EUR 500 Billion Ticking NPL Time Bomb" in which we laid out very simply what the biggest danger facing European banks was: non-performing, or bad, loans.



We further said, that "Europe's non-performing loan problem is such an issue that there is increasing bluster that the ECB may take this garbage on to its balance sheet since policymakers realize that bad debts and non-performing loans (NPLs) reduce the capacity of banks to lend, hindering the monetary policy transmission mechanism. Bad debts consume capital and make banks more risk averse, especially with respect to lending to higher risk borrowers such as SMEs. With Italy (NPLs 13.4%) now following the same dismal trajectory of Spain's bad debts, the situation is rapidly escalating (at an average of around 2.5% increase per year).


The conclusion was likewise simple:

"The bottom line is that at its core, it is all simply a bad-debt problem, and the more the bad debt, the greater the ultimate liability impairments become, including deposits. As we answered at the time - the real question in Europe is: how much impairment capacity is there in the various European nations before deposits have to be haircut? With Periphery non-performing loans totaling EUR 720bn across the whole of the Euro area in 2012 and EUR 500bn of which were with Peripheral banks."
Now, three years later, the bomb appears to be on the verge of going off (or may have already quietly exploded), and nowhere is it more clear than in an exhaustive article written by the WSJ in which it focuses on Italy's insolvent banking system, and blames - what else - the hundreds of billions in NPLs on bank books as the culprit behind Europe's latest upcoming crisis.


To be sure, nothing new here, although it is a good recap of the Catch 22 Italy finds itself in: from the WSJ's "Bad Debt Piled in Italian Banks Looms as Next Crisis"

Britain’s vote to leave the EU has produced dire predictions for the U.K. economy. The damage to the rest of Europe could be more immediate and potentially more serious. Nowhere is the risk concentrated more heavily than in the Italian banking sector. In Italy, 17% of banks’ loans are sour. That is nearly 10 times the level in the U.S., where, even at the worst of the 2008-09 financial crisis, it was only 5%. Among publicly traded banks in the eurozone, Italian lenders account for nearly half of total bad loans.
 
Years of lax lending standards left Italian banks ill-prepared when an economic slump sent bankruptcies soaring a few years ago. At one major bank, Banca Monte dei Paschi di Siena SpA, bad loans were so thick it assigned a team of 700 to deal with them and created a new unit to house them. Several weeks ago, the bank put the bad-credit unit up for sale, hoping a foreign partner would speed the liquidation process.

The headquarters of Banca Monte dei Paschi di Siena
 
The U.K. vote to exit the European Union has compounded the strains on Europe’s banks in general and Italy’s in particular. It imperils the Monte dei Paschi sale, some bankers say, and creates fresh uncertainty at a time when lenders are struggling with ultralow and even negative interest rates and sluggish economic growth.

 
Brexit has many executives concerned that central banks will keep interest rates lower for longer than they might otherwise, in an attempt to counteract the slower growth—in the eurozone as well as Britain. European banks’ stocks slid after the vote, with those in Italy especially hurt. Shares in Monte dei Paschi are down roughly a third since the June 23 referendum. All this threatens to spark a crisis of confidence in Italian banks, analysts say. Although Italy has only one bank classified as globally significant under international banking regulations—UniCredit—some analysts say bank stresses worsened by Brexit could threaten Italy’s stability and, potentially, even that of the EU.
 
“Brexit could lead to a full-blown banking crisis in Italy,” said  Lorenzo Codogno, former director general at the Italian Treasury. “The risk of a eurozone meltdown is clearly there if Brexit concerns are not immediately addressed.”
A quick tangent on why in the aftermath of Brexit, Italian banks have been scrambling to get a special permission from Europe to bail-out (instead of 'In') local banks, as the alternative would likely spark a chaotic bank run.


When the financial crisis of late 2008 hit, Italian banks tended to roll over loans whose borrowers weren’t repaying on time, hoping an economic upswing would take care of the problem, say Italian bank executives.Italian banks’ struggles have led to the first serious test of a model the EU adopted two years ago for handling banking woes. The Italian government has sought EU permission to inject €40 billion into its banks to stabilize the system.
 
To do so would require bending an anti-bailout rule the bloc adopted in 2014 to force troubled banks’ stakeholders—shareholders, bondholders and some of their depositors as well—to pay a financial price before the country’s taxpayers must.
 
Rome argues that bending this rule would be a small price to pay for erecting a firewall against possible bank contagion stemming from Brexit. Italy’s EU partners, led by Germany, reject the idea, leaving Rome exposed to the potential for a banking crisis.
... Especially if the man who was in charge of Italy's banks in 2008, Mario Draghi, were to be somehow identified as the key man responsible for Italy's insolvent financial system. However, so far Merkel has been again a full-blown bailout, knowing the further "bending of Europe's rules" would simply mean more German taxpayer money being flushed down the drain.

And while we wait for the outcome of this soap opera which as of last night has seen harsh words of frustration expressed by Italy's PM Renzi and directed at Draghi, here are some numbers:

When the European Central Bank began supervising the eurozone’s largest banks in 2014, things got harder. The new supervisor applied tougher criteria than the Bank of Italy did for declaring loans impaired, say bankers. In April, it forced one bank to take bigger write-downs to bad loans before receiving its blessing to merge with another bank. The result is that impaired loans at Italian banks now exceed €360 billion—quadruple the 2008 level—and they continue to rise.
 
Banks’ attempts to unload some of the bad loans have largely flopped, with the banks and potential investors far apart on valuations. Banks have written down nonperforming loans to about 44% of their face value, but investors believe the true value is closer to 20% or 25%—implying an additional €40 billion in write-downs.
 
One reason for the low valuations is the enormous difficulty in unwinding a bad loan in Italy. Italy’s sclerotic courts take eight years, on average, to clear insolvency procedures. A quarter of cases take 12 years. Moreover, in many cases, the loan collateral is the family home of the owner of the business, or it is tied up in the business itself.
 
“There is a desperate need to make collateral liquid,” said Andrea Mignanelli, chief executive of Cerved Credit Management Group. “Right now, it gets stuck in auctions and judicial procedures that make cashing the loan very hard.”
The problem is that as of this moment, Rome finds itself in a lose-lose situation:

With investors pummeling its shares this year, UniCredit ousted its chief executive, Federico Ghizzoni. Last week, with its stock falling, it rushed to appoint a new CEO, Jean-Pierre Mustier, its former head of corporate and investment banking. In short order, Mr. Mustier must now present a convincing restructuring plan and raise as much as €9 billion to shore up investor confidence. UniCredit declined to comment. The Italian government pushed for a broad solution that would recapitalize banks and draw a line under the bad-loans crisis, when it appealed to the EU for permission to inject €40 billion into the lenders. The Italian government argues that without such a recapitalization move, Italy’s banking problems could mushroom into a broader crisis.
 
“There is an epidemic, and Italy is the patient that is sickest,” said Pierpaolo Baretta, an undersecretary at the Italian Economy Ministry. If “we don’t stop the epidemic, it will become everybody’s problem…The shock of Brexit has created a sense of urgency.”Italian Prime Minister Matteo Renzi pressed the issue in his meeting last week with German Chancellor Angela Merkel.
 
The European Commission, with strong backing from Berlin, has dismissed the push from the Italians. Some European officials privately expressed annoyance that Rome has been slow to deal with its banking problem and is paying the price in such volatile markets. Now, they say, the Italians are using Brexit to press for permission to bend the rules of a hard-fought banking regime.
 
* * *
 
Rome has criticized the EU’s new banking regime and doesn’t want to use “bail-in” rules that prescribe the order in which stakeholders must bear losses for winding down an ailing bank, in part because of the peculiarities of the Italian banking system. About €187 billion of bank bonds are in the hands of retail investors, whose holdings would be wiped out by a bank resolution under the new rules.
 
Last year, more than 100,000 investors in four small Italian banks that were wound up saw their investments wiped out. Some lost their life savings. The controversy exploded in December after Italian news media reported that a retiree committed suicide after losing €110,000 in savings invested in one of the banks.
 
Such problems carry little truck in Brussels. “Every grandmother has bought bank shares,” said one EU official. “That’s how it’s presented to us…. This work has to be done within the rules, using all the flexibility there is.”
In that case, "every grandmother" in Italy has a big problem then, but not nearly as big as Renzi, because if the bank run (ahead of bail-ins) begins, it will all be over for Europe's most insolvent banking system

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Re: RED FLAG
« Reply #15 on: July 06, 2016, 05:38:59 AM »
國產列車現裂紋 星洲疑秘密退貨 港鐵已向同一供應商大量訂車 ~ 5 Jul 2016
http://hk.apple.nextmedia.com/realtime/finance/20160705/55317610



【國產列車】列車中國製電池曾爆炸!質素太差 癱瘓星洲地鐵 ~ 5 Jul 2016
http://hk.apple.nextmedia.com/realtime/finance/20160705/55317716



Mainland manufacturer for MTR secretly recalls 35 trains from Singapore due to cracks ~ 5 Jul 2016
https://www.hongkongfp.com/2016/07/05/mainland-manufacturer-mtr-secretly-recalls-35-trains-singapore-due-cracks/

US firm scraps plan for China to build LA-Vegas rail line ~ 9 Jun 2016
http://www.dailymail.co.uk/wires/afp/article-3633875/US-firm-scraps-plan-China-build-LA-Vegas-rail-line.html



China’s investment in embattled 1MDB throw Malaysian Prime Minister a lifeline - but carry a hidden price tag ~ 12 Jan 2016
http://www.scmp.com/news/china/diplomacy-defence/article/1900056/chinas-investment-embattled-1mdb-throw-malaysian-prime

Analysts said China was now in pole position to win the construction tender for the rail link, one of the country’s largest pending infrastructure projects, with an estimated cost of RM70 billion.



First of 45 new trains for SMRT arrives ~ 21 May 2015
http://www.straitstimes.com/singapore/transport/first-of-45-new-trains-for-smrt-arrives


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Re: RED FLAG
« Reply #16 on: July 06, 2016, 08:09:02 AM »



The Poisonous Gap Between Paper Wealth And Real Wealth

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by Tyler Durden
Jul 5, 2016 4:25 PM
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Excerpted from John Hussman's Weekly Market Comment,

“Understand that securities are not net economic wealth. They are a claim of one party in the economy - by virtue of past saving - on the future output produced by others. Fundamentally, it's the act of value-added production that ‘injects’ purchasing power into the economy (as well as the objects available to be purchased), because by that action the economy has goods and services that did not exist previously with the same value. True wealth is embodied in the capacity to produce (productive capital, stored resources, infrastructure, knowledge), and net income is created when that capacity is expressed in productive activity that adds value that didn't exist before.
 
“New securities are created in the economy each time some amount of purchasing power is transferred to others, rather than consuming it. Once issued, all of these pieces of paper can vary in price later, so the saving that someone did in a prior period, embodied in the form of some paper security, may be worth more or less consumption in the current period than it was initially. That’s really the main effect QE has - to encourage yield-seeking speculation that drives up the prices of risky securities, but without having any material effect on the real economy or the underlying cash flows that those securities will deliver over time.
 
“If one carefully accounts for what is spent, what is saved, and what form those savings take (securities that transfer the savings to others, or tangible real investment of output that is not consumed), one obtains a set of ‘stock-flow consistent’ accounting identities that must be true at each point in time:
 
1) Total real saving in the economy must equal total real investment in the economy;
 
2) For every investor who calls some security an ‘asset’ there is an issuer that calls that same security a ‘liability’;
 
3) The net acquisition of all securities in the economy is always precisely zero, even though the gross issuance of securities can be many times the amount of underlying saving; and perhaps most importantly,
 
4) When one nets out all the assets and liabilities in the economy, the only thing that is left - the true basis of a society’s net worth - is the stock of real investment that it has accumulated as a result of prior saving, and its unused endowment of resources. Everything else cancels out because every security represents an asset of the holder and a liability of the issuer.”
 
Stock-Flow Accounting and the Coming $10 Trillion Loss in Paper Wealth
John P. Hussman, April 6, 2015
Following the British referendum to exit the European Union, the paper value of global assets briefly fell by about $3 trillion. This decline in the market capitalization immediately garnered headlines, suggesting that some destruction of “value” had occurred. No. The value of a security is embodied in the future stream of cash flows that will actually be delivered into the hands of investors over time. What occurred here was a paper loss. While the recent one was both shallow and temporary, get used to such headlines. In the U.S. alone I fully expect that $10 trillion of paper wealth will be erased from U.S. equity market capitalization over the completion of the current market cycle.


While any given holder can sell their securities here, somebody else has to buy those same securities. The fact that valuations are obscene doesn't mean that the economy has created more wealth. It just means that existing holders of stocks and long-term bonds have a temporary opportunity to obtain a wealth transfer from some unfortunate buyer. Whoever ends up holding that bag will likely earn total returns close to zero on their investment over the coming 10-12 year horizon, with profound interim losses on the way to zero returns.

Investors who fail to understand the difference between paper wealth and value are likely to learn that distinction the same way they did during the 2000-2002 and 2007-2009 collapses, both which we correctly anticipated, with a constructive shift in-between. So not to throw stones in our own glass house, see the “Box” in The Next Big Short for a narrative of the challenges we encountered in the speculative half-cycle since 2009, as the Federal Reserve intentionally encouraged yield-seeking speculation long after previously reliable warning signs appeared. This has created what is now the third financial bubble in 16 years, the third most offensive valuation extreme next to 2000 and 1929, and the single most extreme point of valuation in history for the median stock.

Part of the discussion below repeats portions of recent commentaries. While we may or may not observe further short-run speculative extremes, I can't think of a more important set of principles that a long-term, risk-conscious investor should understand at present.


The higher the price an investor pays for a given stream of future cash flows, the lower the long-term return the investor can expect to achieve over time. As the price of a security rises, what investors considered “expected future return” only a moment before is suddenly converted into “realized past return.” The higher the current price rises, the more expected future returns are converted into realized past returns, and the less expected future return is left on the table. Because of this dynamic, the point where a security seems most enticing on the basis of realized past returns is also the point where the security is least promising on the basis of expected future returns. See Blowing Bubbles: QE and the Iron Laws for a straightforward demonstration of this idea.

This is why good valuation measures, such as the ratio of market capitalization to corporate gross value-added, are inversely related to actual subsequent market returns across history. Bubbles do not create wealth. They simply raise the current price of a security, lower the future expected long-term return, and, at best, leave long-term cash flows unchanged.

I say “at best” because there’s no evidence that yield-seeking speculation, encouraged by central banks, has any positive effect on long-term cash flows at all. Indeed, I don’t think there’s any real doubt that the crisis and disruption following the collapse of prior yield-seeking bubbles is precisely what has crippled the accumulation of productive capital at every level (real investment, work experience, infrastructure) in the real economy. Given that the accumulated stock of productive capital is the basis for the net worth of our nation (as detailed above), it follows that yield-seeking speculation, intentionally encouraged by the Federal Reserve, is perhaps the single most destructive force in the U.S. economy, and in the lives of the American people.

If one looks at the chart below, it may appear that American households are “wealthier” than they have ever been, in the sense that financial assets held by households have never been higher as a fraction of disposable income (the Federal Reserve Z.1 flow of funds data include non-profit organizations in this figure, but the effect is comparatively small). As I observed in May, one might imagine that a high value of financial assets relative to disposable income is actually a good thing, and that it reflects greater saving by households. Unfortunately, since 2000, saving as a fraction of household income has plunged to half the savings rate observed in the previous half-century. No, the elevated level of financial assets reflects extreme valuations, not an increase in the rate of financial investment.



Unfortunately, the chart above only depicts paper wealth, and not surprisingly, it turns out that the best moments for paper wealth are actually the worst moments for future investment returns. The chart below shows the same data as above, but places financial assets / disposable income on an inverted log scale (blue line, left). Actual subsequent 12-year S&P 500 nominal total returns are plotted in red (right scale). Though alternative measures vary slightly, the implication of roughly zero, or even negative, expected total returns on the S&P 500 over the coming 12-year period is broadly consistent with other reliable valuation measures that are most closely correlated with actual subsequent market returns (see Choose Your Weapon).


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Re: RED FLAG
« Reply #17 on: July 06, 2016, 08:10:27 AM »


Unfortunately, the chart above only depicts paper wealth, and not surprisingly, it turns out that the best moments for paper wealth are actually the worst moments for future investment returns. The chart below shows the same data as above, but places financial assets / disposable income on an inverted log scale (blue line, left). Actual subsequent 12-year S&P 500 nominal total returns are plotted in red (right scale). Though alternative measures vary slightly, the implication of roughly zero, or even negative, expected total returns on the S&P 500 over the coming 12-year period is broadly consistent with other reliable valuation measures that are most closely correlated with actual subsequent market returns (see Choose Your Weapon).




Understand that what appears to be a substantial amount of paper “wealth” embodied in securities here is actually a reflection of massive overvaluation, relative to the stock of productive investment and the cash flows (from value-added production) that will actually be delivered into the hands of security holders over time. These rich valuations imply poor long-term investment returns, but in the end, these securities will deliver a stream of cash flows that is no different than the stream of cash flows that investors would receive at lower valuations. Again, paper wealth may change as valuations fluctuate, but the value of any security is embodied in those future cash flows.

The return/risk profiles of investment securities are not constant

Investors tend to believe that the return/risk characteristics of a particular investment class are given, associating bonds with “safety” and equities with “growth, though with greater volatility.” But a central feature of bubbles, always overlooked by investors until the collapse, is that an extended period of speculation dramatically changes the return/risk characteristics of whatever market is involved. Throughout the housing bubble, for example, mortgage debt was considered safe, gains were attributed to “fundamentals,” and a generalized decline in the national housing market was seen as inconceivable. In the words of Ben Bernanke as the housing bubble was in full swing:

“Unquestionably, housing prices are up quite a bit; I think it's important to note that fundamentals are also very strong. We've got a growing economy, jobs, incomes. We've got very low mortgage rates. We've got demographics supporting housing growth. We've got restricted supply in some places. So it's certainly understandable that prices would go up some. I don't know whether prices are exactly where they should be, but I think it's fair to say that much of what's happened is supported by the strength of the economy.”

Despite Bernanke's assurances, speculation in mortgage debt had already changed the return/risk characteristics of the housing market, fueled by yield-seeking speculation in response to a Federal Reserve that dropped short-term interest rates to just 1% after the tech bubble collapsed. A market that had historically been safe and nearly immune from widespread loss ended up provoking the deepest economic crisis since the Great Depression. Likewise, speculation in equities, junk debt and even investment grade debt has dramatically changed the return/risk profile of these asset classes in recent years, to the point where they bear no resemblance to what passive investors might expect based on historical norms. When one stops to realize that the amount of global debt yielding negative interest rates now exceeds $12 trillion, it should be clear how extreme central bank distortions have become. To imagine that equity valuations have not already fully responded to this situation after years of yield-seeking competition is, quite frankly, ignorant both of reliable valuation measures and of financial history.

Over the completion of the current market cycle, we expect the S&P 500 to retreat by 40-55%; a decline that would be merely run-of-the-mill in the sense that it would bring the most historically reliable measures of valuation back into a range that has been visited or breached during the completion of every single market cycle in history (including cycles prior to the 1960’s when interest rates were often quite low). With the yield on the 10-year Treasury bond currently just 1.45%, investors already know that they will earn next to nothing on their investment over the coming decade, the only question being whether to hold out for a few percent in gains that might be available in a recessionary environment that drives yields below 1%. Across the corporate bond market, and not only in junk debt, the combination of steep increases in corporate debt, justified by temporarily high profit margins that make these debt burdens seem reasonable, is likely to unravel into a much deeper default problem than investors seem to anticipate. While default rates remain quite low for now, and “investment grade” debt rarely defaults in one fell-swoop, I expect a cascade of downgrades in the coming years as “transition probabilities” from high-grade to lower-grade rankings soar beyond their historical norms.

Head of the snake

The evidence, if one cares to examine it, is that Fed-induced yield-seeking speculation is not the cure but the cause of economic malaise. Much of America has still not recovered from the violent consequences of the last yield-seeking bubble the Fed engineered. Now the Fed has engineered another, and has drawn nearly every pendulum to an extreme.

For me, probably the saddest part of this whole spectacle was watching an earnest, well-meaning congressman asking Janet Yellen, during her Humphrey-Hawkins testimony two weeks ago, why the Fed was not doing “more” on behalf of unemployed people of color. The problem here is that the underlying assumption is false. If one actually examines data across history, there is no reliable or economically meaningful relationship between activist monetary policy and subsequent changes in output or employment. This congressman was essentially begging the Fed to deliver poison to his community.

I distinguish “activist monetary policy” from “rules-based monetary policy”; the fluctuations in interest rates and the monetary base that can be predicted from past values of non-monetary variables alone, such as GDP, inflation, and unemployment. Statistically, it’s difficult to determine whether that “predictable” component of monetary policy is economically useful or not, since by definition, it's perfectly correlated with non-monetary data and “spans the same space.” What we can say, however, is that deviations from those predictable monetary responses - “activist” policy interventions - have no reliable or economically significant impact on the subsequent performance of the economy, other than to create yield-seeking bubbles that exert violent long-term injury when they collapse.

Virtually nobody cares to look at the utterly weak and insignificant correlation between monetary policy and desired outcomes, apparently preferring a dogmatic insistence on some little graph or model they learned in Economics 101. While Janet Yellen showed enough conceit to give the Fed credit for millions of new jobs since 2009, the path of the economy since the crisis has been nearly identical to what one would have anticipated in the absence of all of this monetary insanity (a result that one can demonstrate using vector autoregression). The crisis itself was not “fixed” by monetary policy, but ended the same week that the Financial Accounting Standards Board announced it would waive the requirement for financial institutions to mark their assets to market value, allowing them “significant judgment” in how they valued those assets, and eliminating the specter of widespread insolvency with the stroke of a pen.

The bottom line is this: speculation does not create wealth. The true wealth of a nation is in its accumulated stock of productive capital, stored resources, infrastructure and knowledge. This wealth contributes to the nation’s income and welfare when it is used to create value-added output - goods and services did not exist before, that have a greater value than the inputs used to produce them. It shouldn’t be surprising, then, that the ratio of market capitalization to corporate gross value-added is the single most reliable valuation indicator we identify, with a 93% correlation with actual subsequent 10-12 year total returns in the S&P 500 (see The New Era is an Old Story).

From an investment standpoint, the value of any security is inherent in the long-term stream of cash flows it will deliver to investors over time. Artificially jacking up financial securities through reckless monetary policy doesn’t change the cash flows that those securities will deliver over time; it only converts future expected return into past realized return, leaving nothing but risk on the table for years to come. Central bank intervention is not a benefit to long-term economic prosperity. It is the head of the snake.



We expect $10 trillion of “paper wealth” to be wiped from the U.S. equity market over the completion of this cycle, because it is not “wealth” at all. Again, since every security that is issued has to be held by someone until it is retired, the main consequence of Fed-induced speculation is the opportunity for wealth transfer - the chance for existing holders to sell their overvalued securities to some poor bagholder who will reap the whirlwind over the completion of the market cycle. We wish this on nobody, but it’s unavoidable that someone must assume that role. Those bagholders would best be those who understand our concerns and either accept the risks or choose to deny them.

As I’ve regularly emphasized, an improvement in our measures of market internals to the kind of uniformity that prevailed prior to about mid-2014 would indicate a shift back to risk-seeking among investors, in contrast to the current trend of increasing risk-aversion. When investors are in a speculative mood, they tend to be indiscriminate about it, so uniformity of market internals across a broad range of individual stocks, industries, sectors, and security types provides a useful signal of that disposition. Fresh speculation would do nothing to improve the dismal outlook for stocks over the completion of this cycle, or over the coming 10-12 year period, but could extend this topping phase enough to preclude a hard-negative market outlook until internals deteriorated again. At present, the combination of obscene valuations on historically reliable measures, coupled with broadly unfavorable market action and internals on our measures, holds us to a defensive outlook for now.

If we learned one lesson during the half-cycle since 2009, it was that the Fed’s recklessly experimental policy of quantitative easing was able to encourage yield-seeking speculation long after the emergence of warning signs that were reliably followed by market plunges in previous market cycles, so one had to wait for market internals to deteriorate explicitly before adopting a hard-negative market outlook. We need no further lessons on that subject.

Meanwhile, keep in mind that central bank easing only reliably encourages speculation when investors are already inclined to seek risk. As we’ve demonstrated in both U.S. and Japanese data, central bank easing fails to support stocks (beyond an immediate knee-jerk rally) once market action has deteriorated and investors are inclined toward risk aversion. In a risk-averse environment, safe liquidity is a desirable asset, not an inferior one, so creating more of it doesn’t ignite yield-seeking. The Japanese stock market has suffered two separate losses in excess of 60% since 2000 despite short-term interest rates that were regularly pegged at zero, and never above 1%, during the entire period.

On Friday, interest rates went negative on the entire stock of Swiss government bonds. German government yields are now negative beyond a 15-year maturity. From current valuations, the prospect of positive 10-12 year investment returns on U.S. stocks has also died. Still, the relationship between equity valuations and bond yields is far weaker than investors seem to recognize (the “Fed Model” is an artifact of the 1980-1997 disinflation), and low interest rates have never durably removed equity market volatility, downside risk, or the tendency for compressed equity risk premiums to be restored over the completion of the market cycle. So maintain a patient, disciplined confidence that this market cycle will be completed, valuations will change, and fresh opportunities will emerge. We’ll respond to new evidence as it arrives.

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Re: RED FLAG
« Reply #18 on: July 06, 2016, 05:06:41 PM »



風暴明燈、美債殖利率破底!料下探1.25%、恐釀泡沫
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MoneyDJ新聞 2016-07-06 10:44:22 記者 陳苓 報導
英國脫歐憂慮再起、義大利銀行壞帳又恐怕會引爆另一波危機,全球瘋狂避險,美國公債成了投資人最愛的避風港,5日美債殖利率打破空前新低。專家警告,美債買氣飆升並非好事,可能引發債市泡沫、並導致美元續強。
CNNMoney、巴倫(Barronˋs)、路透社報導,投資人爭相搶購美債,10年期和30年期的美債殖利率雙雙改寫新低,跌破2012年歐債危機時的歷史低點。10年期美債殖利率5日摔至1.367%,眾人仍無視空前低利狂買美債,主因德國、日本等公債已經轉為負值;也就是說,買這些負殖利率公債不但沒利率可賺,還得倒貼。相較之下,美債殖利率雖創新低,仍高於其他主要國家。
舉例而言,瑞士的負殖利率公債5日進一步擴大到50年期長債,代表投資人為了尋找安全避難所,不惜貼錢拜託政府借錢。法興資深利率策略師Ciaran OˋHagan指出,這顯示歐洲和全球經濟展望極差,債券殖利率由通膨和成長帶動,如今沒有通膨也沒有成長;經濟奠基於市場信心,沒有信心,經濟難有發展。

信評機構惠譽估計,全球負殖利率公債總值已達11.7兆美元,創下前所未見的新高。
美債殖利率處於相對高檔,吸引大量買氣。MND Partners交易員Tim Anderson憂慮,投資人瘋買美債,可能造成債市泡沫,也會人為炒高股市。Anderson指出,當前美股處於高檔,但是表現最佳個股多為嬌生(Johnson & Johnson)、金百利克拉克(Kimberley Clark)等高孳息股,可能表示債市投資人為了尋求收益,轉往股市,萬一利率走高,股市將受重創。
除此之外,美債買氣太旺,也會推升美元,強勢美元會使得美國商品更為昂貴,不利美企獲利。
究竟美債殖利率會跌到多低?FTN Financial的債券專家Jim Vogel說,10年期公債殖利率有相當可能會摔到1.25%。JPMorgan預估,要是美債殖利率跌破1.38~1.40%防線,下一個關卡可能是1.12~1.15%。
MarketWatch報導,道瓊報價顯示,紐約債市5日尾盤,10年期公債殖利率重挫7.9個基點至歷史低點的1.367%。30年期公債殖利率也大跌10.7個基點至歷史低點的2.141%。公債價格與殖利率呈現反向走勢。
英國央行5日決定降低當地銀行的資本適足率,為銀行增加約1,500億英鎊(相當於1,990億美元)的授信能力(銀行不可用多出來的資本拉高配息)。央行總裁卡尼同時警告,英國的銀行體系前景堪憂,還說經濟可能明顯趨緩。


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Re: RED FLAG
« Reply #19 on: July 07, 2016, 07:55:39 AM »
Defective SMRT trains were still fit and safe for service: LTA ~ 7 Jul 2016
http://www.channelnewsasia.com/news/singapore/car-body-replacement-for/2935514.html

SMRT train defects found in late 2013: Transport Ministry ~ 6 Jul 2016
http://www.channelnewsasia.com/news/singapore/smrt-train-defects-found/2933242.html

Defects on SMRT trains 'not safety-critical', to be repaired by manufacturer: LTA ~ 5 Jul 2016
http://www.channelnewsasia.com/news/singapore/defects-on-smrt-trains/2931802.html

26 SMRT trains recalled by China manufacturer due to defects ~ 5 Jul 2016
https://www.youtube.com/watch?v=hbxgiuoizTw

China train manufacturer secretly recalls 35 trains from S'pore due to cracks - Part 1 of 2 ~ 5 Jul 2016
https://www.youtube.com/watch?v=Nlc_jO0LNF8

China train manufacturer secretly recalls 35 trains from S'pore due to cracks - Part 2 of 2 ~ 5 Jul 2016
https://www.youtube.com/watch?v=fMSBcy89Xyo

Upcoming Malaysia-Singapore high-speed rail sparks interest from train makers ~ 5 May 2016
http://www.channelnewsasia.com/news/asiapacific/upcoming-malaysia/2759028.html



國產列車現裂紋 星洲疑秘密退貨 港鐵已向同一供應商大量訂車 ~ 5 Jul 2016
http://hk.apple.nextmedia.com/realtime/finance/20160705/55317610



【國產列車】列車中國製電池曾爆炸!質素太差 癱瘓星洲地鐵 ~ 5 Jul 2016
http://hk.apple.nextmedia.com/realtime/finance/20160705/55317716



Mainland manufacturer for MTR secretly recalls 35 trains from Singapore due to cracks ~ 5 Jul 2016
https://www.hongkongfp.com/2016/07/05/mainland-manufacturer-mtr-secretly-recalls-35-trains-singapore-due-cracks/

US firm scraps plan for China to build LA-Vegas rail line ~ 9 Jun 2016
http://www.dailymail.co.uk/wires/afp/article-3633875/US-firm-scraps-plan-China-build-LA-Vegas-rail-line.html



China’s investment in embattled 1MDB throw Malaysian Prime Minister a lifeline - but carry a hidden price tag ~ 12 Jan 2016
http://www.scmp.com/news/china/diplomacy-defence/article/1900056/chinas-investment-embattled-1mdb-throw-malaysian-prime

Analysts said China was now in pole position to win the construction tender for the rail link, one of the country’s largest pending infrastructure projects, with an estimated cost of RM70 billion.



First of 45 new trains for SMRT arrives ~ 21 May 2015
http://www.straitstimes.com/singapore/transport/first-of-45-new-trains-for-smrt-arrives



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Re: RED FLAG
« Reply #20 on: July 07, 2016, 08:56:57 AM »



能源業閃邊!金融業恐成墮落天使、銀行債或淪垃圾
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MoneyDJ新聞 2016-07-07 08:15:41 記者 陳苓 報導
低利率環境下,全球銀行哀哀叫,財報頻傳噩耗。如今信評機構警告,金融業或許會取代能源業,成為新的「墮落天使」,也就是說,銀行恐因體質欠佳,被摘除投資等級評等,打入垃圾債,這會大幅拉高借貸成本,引發新風暴。
MarketWatch 6日報導,由投資等級淪落垃圾的公司債,被稱為「墮落天使」,先前能源業頻遭降評,如今恐換金融業接手。S&P Global Ratings稱,6月8日為止,68家可能痛失投資評等的公司,有25%(17家)都是金融業,比例高得出奇。S&P Global Ratings常務董事Diane Vazza表示,看看墮落天使的候選名單,未來金融機構可能是降評的主要受害者。
銀行債信評等搖搖欲墜,主因原物料價格崩盤、能源業者違約多,重創銀行的資產負債表,加上全球經濟成長遲緩、利率低迷,銀行難以放貸獲利。Vazza說,金融業艱苦掙扎,原因不只一個,而是多方因素造成,包括受油氣業者拖累、對波多黎各債務曝險、全球經濟疲軟等。

公司喪失投資評等、淪為墮落天使的例子並不多見,但是一旦發生,通常會影響整體市場。這是因為被剝奪投資評等後,發債成本將大增,會讓脆弱的業者再受打擊。垃圾債和政府公債的殖利率利差高達300~600個基點,而投資等級債和公債殖利率的利差則極小。
銀行情況有多糟?Fortune 5日報導,投行大老高盛,要求員工減少差旅支出,若沒有拜會新客戶或拉攏新生意,盡量不要報公帳出差。
MoneyDJ新聞報導,銀行業厭惡低利率,但英國公投決定退出歐盟,全球央行忙著收拾殘局,這意謂著低利率或負利率政策將進一步延長。德國商業銀行、德意志銀行6日分別下挫3.73%與2.62%,都收在歷史新低。除此之外,身處震央的英國抵押貸款業龍頭駿懋銀行(Lloyds Banking Group)重挫6.8%,收在三年新低。
德意志銀行執行長John Cryan、行政長Karl von Rohr 7月1日官網公開信指出,內部調查顯示不到一半的受訪員工自豪能在德銀工作。德銀兩大高層坦承對於這樣的調查結果感到不滿意、但也表示不意外會有這樣的低迷數據,因為公司持續執行的轉型計畫以及隨之而來的裁員引發許多的疑慮與不確定性。
華爾街日報6月29日報導,根據國際貨幣基金組織(IMF)公布的金融部門評估計畫,德意志銀行是全球金融系統的最大潛在威脅。IMF指出,在全球系統性重要銀行(G-SIB)當中德意志銀行似乎是系統性風險的最重要淨貢獻者,其次為匯豐(HSBC)、瑞士信貸(Credit Suisse)


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Re: RED FLAG
« Reply #21 on: July 09, 2016, 08:01:23 AM »



The EVERYTHING Bubble: What's Coming Will Be Much Worse Than 2008

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by Phoenix Capital...
Jul 8, 2016 11:59 AM
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The amount of negative issues the markets are ignoring is staggering.

1.     Italy’s banking system is on the verge of collapse. Nearly 20% of loans are non-performing (meaning garbage). This is not Greece. We’re talking about a €2 trillion banking system.

2.     The US is in recession. Consensus is that all is well, but industrial production, labor market conditions, the corporate bond market, C&I Delinquencies, the Conference Board Leading Indicator, Inventory Accumulation and ISM are screaming “RECESSION.”

3.     China continues to devalue the Yuan at an annualized pace of 12% year to date. This is exporting a massive wave of deflation to the West.

4.     The US Dollar has begun the next leg up in its bull market. The first leg crashed Oil, commodities, and emerging markets. This leg will crater US corporate profits and stocks as well.


5.     Corporate are more leveraged than they were in 2007. Meanwhile, earnings are at 2012 levels while stocks flirt with their all-time highs.



The whole mess is just like late 2007/ early 2008 all over again. Brexit was the Bear Stearns moment. Italy or Spain will likely be the Lehman moment.


The big difference between now and 2008? Central Banks have already spent $14 trillion propping the system up. And they’ve created the single biggest financial bubble in history.



H/T Jesse Felder

The time to prepare for the next Crash is NOW, before it hits.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming crash will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We are giving away just 1,000 copies of this report for FREE to the public.

To pick up yours, swing by:

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

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Re: RED FLAG
« Reply #22 on: July 09, 2016, 08:04:03 AM »



Weekend Reading: Central Banks Save The World

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by Tyler Durden
Jul 8, 2016 4:30 PM
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Submitted by Lance Roebrts via RealInvestmentAdvice.com,

You have to admit it is really quite amazing. Two weeks ago, Central Bankers and leading politicians were exclaiming that if Britain left the E.U. it would be a catastrophic economic event on the magnitude of a “Lehman” moment. However, despite all of the “hand-wringing,” if you had been asleep over the last month, as shown in the chart below, you wouldn’t know something had happened.

SP500-Monthly-YTD-070716

Of course, it was the “rapid response” team of the Federal Reserve, Bank of England and ECB that provided “bulls” the fuel to push asset prices back to recent levels as I discussed last weekend.

For now, Central Banks have seemingly accomplished the rescue of the entire global financial system by one again lofting asset prices higher. The problem, however, remains the underlying fundamental issues of weak earnings, slowing economic growth and a collapsing Chinese economy.


There is a point, unknown to anyone currently, where the failure of monetary policy will occur. The resulting impact will likely be one of the worst financial disasters in human and financial history. But that is a topic for later.

For now, here is your reading list for the weekend.

“Things are shaky and feeling dangerous.”  – Jeff Gundlach

Offline zuolun

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Re: RED FLAG
« Reply #23 on: July 12, 2016, 06:39:12 AM »
Bank Run July 2016 ~ 11 Jul 2016
https://www.youtube.com/watch?v=OD_KCpmXHao

The economist explains: Why Europe’s next crisis may be in Italy ~ 11 Jul 2016
http://www.economist.com/blogs/economist-explains/2016/07/economist-explains-7

Is a run on Italian banks a possibility? ~ 5 Jul 2016
http://www.bloomberg.com/news/videos/2016-07-05/is-a-run-on-italian-banks-a-possibility


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Re: RED FLAG
« Reply #24 on: July 12, 2016, 07:13:24 AM »



The potential costs of “short-termism” to U.S. economic growth

By Nick Bunker | July 11, 2016
(AP Photo/Richard Drew, File)
(AP Photo/Richard Drew, File)
Policymakers are worried about the pace of U.S. economic growth for a number of reasons. Productivity growth seems to have slowed to a crawl, the population is aging, and there are concerns businesses are underinvesting in their productive capabilities. This last concern is animated by several trends, but the most interesting is a possible increase in “short-termism” among businesses.

A number of policymakers, economists, and other analysts are concerned about businesses prioritizing short-term goals, such as payouts to shareholders and hitting quarterly projected earnings or profits. One common hypothesis is that firms will cut back on research and development to hit these projected short-term profit goals. Does this actually happen? And does this actually do any harm? One research paper tackles these questions.

The paper, by economist Stephen J. Terry of Boston University, looks at the behaviors of around 4,000 public companies over the course of 1983 through 2010. Terry links two datasets so that he not only can see how much firms actually made and invested in a quarter, but also the expectations of investment analysts for earnings and profits in that quarter. In this way, Terry can look at how actual profits ended up looking compared to the expectations of the “Street.”

A sign of short-termism in company decision-making would first be a bunching of announced profits right above the projected profits for that quarter. This would mean that lots of firms are just meeting the expectations the public markets have set for them. How much of this is a coincidence versus a tweaking of financials depends upon the firm. Terry does find bunching of profits just above expectations.

More importantly, Terry uses this threshold of missed-versus-exceeded expectations to see if firms that get just above the threshold invest in their own firms differently. What Terry finds is that there is a real decline in expenditures in research and development for firms that just get over that threshold. Growth in research and development is 2.5 percent slower for those companies. The effect eventually dissipates, but the short-term response means short-termism is affecting the volatility of businesses’ research and development rather than its long-term growth.

What factors inside companies drives such short-changing of companies’ research and development? Data on executive compensation shows why firms will cut back on these investments. Total pay for chief executives takes about a 7 percent hit when a CEO’s firm doesn’t hit market expectations. In other words, chief executives have a very strong short-term incentive to hit targets. Research and development, with its uncertain long-term pay-off and certain short-term cost, is always ripe for cutting.

Terry also builds a model of the U.S. economy and fits it to data incorporating his findings about short-termism. The result is that short-termism slows economic growth, as the resulting volatility in research and development shaves 0.1 percent off economic growth. Terry’s specific model might not be convincing to everyone, but the paper presents some quite convincing evidence of short-termism in public companies. How much this affects economic growth is up for debate.

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Re: RED FLAG
« Reply #25 on: July 15, 2016, 07:52:03 AM »



"All-Time-Highs"

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by Tyler Durden
Jul 14, 2016 8:23 AM
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Submitted by Jim Quinn via The Burning Platform blog,



The stock market has reached new all-time highs this week, just two weeks after plunging over the BREXIT result. The bulls are exuberant as they dance on the graves of short-sellers and the purveyors of doom. This is surely proof all is well in the country and the complaints of the lowly peasants are just background noise. Record highs for the stock market must mean the economy is strong, consumers are confident, and the future is bright.

All the troubles documented by myself and all the other so called “doomers” must have dissipated under the avalanche of central banker liquidity. Printing fiat and layering more unpayable debt on top of old unpayable debt really was the solution to all our problems. I’m so relieved. I think I’ll put my life savings into Amazon and Twitter stock now that the all clear signal has been given.

Technical analysts are giving the buy signal now that we’ve broken out of a 19 month consolidation period. Since the entire stock market is driven by HFT supercomputers and Ivy League MBA geniuses who all use the same algorithm in their proprietary trading software, the lemming like behavior will likely lead to even higher prices. Lance Roberts, someone whose opinion I respect, reluctantly agrees we could see a market melt up:

“Wave 5, “market melt-ups” are the last #~ of hope for the “always bullish.” Unlike, the previous advances that were backed by improving earnings and economic growth, the final wave is pure emotion and speculation based on “hopes” of a quick fundamental recovery to justify market overvaluations. Such environments have always had rather disastrous endings and this time, will likely be no different.”

As Benjamin Graham, a wise man who would be scorned and ridiculed by today’s Ivy League educated Wall Street HFT *, sagely noted many decades ago:

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

Short-term traders can make immediate profits using momentum techniques, following the herd, and picking up ****** in front of a steamroller. Remember your brother-in-law who was getting rich day trading stocks in 1999? Remember your cousin who was getting rich flipping houses in 2005? Remember The Big Short, where the Too Big To Trust Wall Street banks were getting rich creating fraudulent mortgage derivatives and selling them to *? There are always profits to be made for awhile. Then the bottom drops out, because fundamentals, cash flow, valuations, and reality matter in the long run.

Lance Roberts points out some inconvenient facts, and I’ll point out a few more.

“It is worth reminding you, that while the markets are moving higher and pushing new highs currently, it is doing so against a backdrop of weak fundamentals, high valuations, and deteriorating earnings.”

History might not repeat itself, but it certainly rhymes. Late in 2007, as the housing collapse was well under way, the stock market hit all-time highs of 1,575 in October. The bulls were exuberant, even as the greatest housing crash in history was evident to everyone except Bernanke and Paulson. Corporate earnings were falling. Valuations were at levels only seen in 1929 and 2000. The so called “doomers” like Hussman, Shiller and Schiff were warning of an impending crash. Very few heeded their warning. In retrospect, the economy was already in recession by December 2007 despite economic reports saying otherwise. GDP and other falsified economic indicators were revised negative years after initially being reported as positive. Familiar?

The stock market dropped 20% from the October high by March of 2008, as Bear Stearns collapsed and struck fear into the hearts of the Wall Street sociopaths. But the Fed and their Wall Street puppeteers needed to keep the game going a little longer so they could short their own fraudulent derivative creations and screw over their clients once more. JP Morgan, which was just as insolvent as Bear Stearns, bought them and restored confidence in the ponzi scheme. The market proceeded to soar by 12% over the next two months. All was well!!! Until the bottom fell out in September. By March 2009, the market had fallen 58% from its October 2007 high.

The market topped out in May of 2015  at 2,126. Since then, corporate profits have been in freefall, consumer spending has been in the toilet, GDP has been barely positive, and virtually every economic indicator has been falling. Valuations are now higher than at the 1929, 2000, and 2007 peaks. The median existing home price of $239,700 is 55% higher than the median price in 2012. At the peak of the housing bubble in 2005/2006 the median price to median wage ratio reached 9.5. In 2012 it had fallen to a reasonable level of 5.6. It currently stands at a bubble like level of 8.3.

The market meandered about for the next seven months going nowhere. It then suddenly dropped in January and February, falling 13% from its May 2015 high. This was unacceptable to central bankers around the globe who believe stock market gains are the only factor reflecting the health of our economic system. Maybe it’s because they are only beholden to bankers, oligarchs, corporate chieftains, corrupt politicians, and unaccountable bureaucrats. Central bankers from around the world have come to the rescue by buying stocks and providing unlimited liquidity to banks and corporations so they can buyback their own stocks. The result, is new record highs.



It has the feel of JP Morgan “rescuing” Bear Stearns and saving the world in early 2008. Smoke, mirrors, negative interest rates, debt creation, money printing and the artificial elevation of stock valuations by central bankers and their politician co-conspirators is not creating wealth. It is creating epic bubbles in stock markets, bond markets, home real estate markets, commercial real estate markets, and automobile markets. John Hussman chimes in with a reality based assessment of their reckless actions:

“Instead, central bankers seem to view elevated security valuations as “wealth.” The longer this fallacy persists, the worse the subsequent fallout will be. I have little doubt that future generations will look at the reckless arrogance of today’s central bankers no differently than we view speculators in the South Sea Bubble and the Dutch Tulip-mania. Unfortunately, there is no mechanism by which historically-informed pleas of “no, stop, don’t!” will penetrate their dogmatic conceit. Nor can we change the psychology of investors.”

Today is just a continuation of the bubble blowing policies of the Fed and their central banker cohorts at the ECB and BOJ. These policies are deranged, illogical, and always result in the destruction of real wealth. Promoting financial engineering, while destroying the incentive to save and invest in the real economy has gutted true investment in our country. This is why good paying jobs have disappeared and we are left with the gutted remains of decades of financialization and globalization. As Hussman points out, our real economy has died a long slow death, drowning in debt.

“One of the hallmarks of the bubble period since the late-1990’s is that the growth rate of real U.S. gross domestic investment has slowed to less than one-quarter of the rate it enjoyed in the preceding half-century. Yet because central banks have stomped on the accelerator at every turn, the quantity of outstanding debt has never been higher, and the combined value of corporate equities and debt (“enterprise value”) is now at the highest multiple of corporate gross value-added since the 2000 bubble extreme.”

Artificially boosting stock prices through convoluted liquidity schemes, devious machinations, backroom central banker deals, sending Bernanke to Japan, and helicopter money dropped on Wall Street only, has just exacerbated the wealth inequality permeating the world. The anger over this blatant pillaging by the .1% who rule the world is reflected in the chaos across Europe and the brewing civil war here in the U.S.

As Hussman notes, no wealth is being created because no productive investments are being made. Mega-corporations buying back hundreds of billions of their own stock to enrich their executives is not a productive wealth creating venture. We are in the midst of a sickening crisis created by appalling incentives, driven by sociopathic corporate and political leadership captured by their greedy desire for power wealth and control. The sickness is pervasive and terminal.

“In a healthy economy, savings are channeled to productive investment, and the new securities that are issued in the process are evidence of that transfer. In an unhealthy economy, and particularly one with very large wealth disparities, a large volume of securities may be created, but they are often simply a way of supporting debt-financed consumption. As a result, no productive investment occurs, and no national “wealth” is created. All that occurs is a wealth transfer from savers to dis-savers. Over the past 16 years, U.S. real gross domestic investment has crawled at a growth rate of just 1.0% annually, compared with a growth rate of 4.6% annually over the preceding half-century. There’s your trouble.”

A chart that caught my eye this week, along with dozens of other data points from the real world, reveals the phoniness of the stock market rally and the underlying weakness of this tottering edifice of debt. We are supposedly in the seventh year of an economic recovery. Corporate profits have been at record highs. Interest rates are at record low levels.

The Fed and the FASB have colluded to allow banks and commercial real estate companies to fake their financial statements and pretend their assets are worth more than they are and to pretend rental income from non-existent tenants in their malls and office buildings can cover their debt payments. And somehow delinquencies and charge-offs are soaring by levels seen during the height of the 2008/2009 financial crisis. It seems all those vacant mall storefronts and all those FOR LEASE signs in front of every other commercial building across America are finally coming home to roost.

http://i1.wp.com/dollarcollapse.com/wp-content/uploads/2016/07/US-yield-curve-July-16.jpg

This faux economic recovery has been driven by debt, with much of it subprime. The shale oil scam was built on high yield debt and false promises. The Wall Street banks reported fake profits for years by relieving their loan loss reserves created in 2009. Now the table has turned.

The three largest banks in the US—Bank of America, JPMorgan Chase, and Wells Fargo—disclosed that the number of delinquent corporate loans increased by 67% in Q1.

 JPMorgan’s delinquent corporate loans increased by 50% to $2.21 billion
 Bank of America’s delinquent loans increased 32% to $1.6 billion
 Wells Fargo’s delinquent loans increased by 64%, to $3.97 billion
The banking industry added $1.43 billion to the total money it has set aside to cover bad loans in Q4 2015, according to the FDIC. Making bad loans to deadbeats can make profits look spectacular in the short-term, but interest and principal can’t be paid with a cool business plan and a narrative. Cash flow is a necessary ingredient to servicing debt in the real world. The fun has just begun. Fitch Ratings just reported that the default rates for junk bonds rose to 3.9% this month, up from 2.1% in April 2015.

The “tremendous” auto recovery which drove sales (I use the term loosely since 31% of sales are actually leases and the rest are financed over an average of 67 months) from 10 million in 2010 to 18 million in 2015 has been completely driven by easy money provided to Wall Street. It’s amazing how many vehicles you can sell by doling out $350 billion in 0% loans and allowing “buyers” to finance 100% of the purchase.



When they started to run out of legitimate * who liked being perpetual debt slaves, they used the tried and true method that worked so well with housing in the mid-2000s – loaning money to losers who weren’t capable of repaying them. This Wall Street mindset is driven by the free money provided them by the Fed. You borrow from the Fed at 0%, lend it to deadbeats at 12% for 72 months so they can “buy” that $40,000 Cadillac Escalade and boost the economy. Over 20% of all auto loans are now being made to subprime (aka deadbeat) borrowers. Now the #### is hitting the fan belt.



 

Financing 100% of overpriced automobiles, extending terms, pretending you will get repaid, and recording it as a sale is the corporate/banker method of creating wealth. Auto loan terms between 73 and 84 months  more than doubled between 2010 and 2015. One quarter of all loans originated in Q3 2015 were between 73 and 84 month terms, compared to just 10% in Q3 2010. The average new-car loan rose to $29,551 during the fourth quarter of 2015, up more than 4% over the past year, according to Experian, one of the three major credit-reporting agencies.

The chickens are coming home to roost for subprime auto lenders and investors, with Fitch Ratings warning delinquencies in subprime car loans had reached a high not seen since October 1996. The number of borrowers who were more than 60 days late on their car bills in February rose 11.6% from the same period a year ago, bringing the delinquency rate to a total 5.16%. Subprime lending always ends in tears. Wall Street is probably betting against these packages of subprime slime while simultaneously selling them to their muppet clients. History rhymes.

These subprime auto loans look positively AAA compared to the hundreds of billions in subprime student loans distributed like candy by Obama and his government minions to artificially lower the unemployment rate and again boost the economy. Student loan delinquencies are already skyrocketing before the $400 billion doled out in the last four years has come due. The official delinquency rate reported by the government of 11% is another falsehood.  The delinquency rate is really 17% when loans in deferment and forbearance — for which payments are postponed due to any reason — are included. The taxpayer will eventually foot the bill for at least $400 billion in losses.

Student Loan Delinquencies are Sky High [Chart]

We’ve been borrowing from the future for the last 16 years because real economic growth was killed by Greenspan, Bernanke, Yellen and the rest of the Fed yahoos. The stock market has returned 60% since the 2007 peak, three times the growth in corporate profits and GDP. The all-time highs in the stock market have been driven by the $3.4 trillion increase in the Fed’s balance sheet, hundreds of billions in stock buybacks, PE expansion, and ZIRP. The valuation of the median stock is now the highest in history.



For all I know the stock market could continue to rip higher. Madness knows no bounds. The general public is not involved in this madness. They were wiped out twice in the space of eight years. Wall Street and their media mouthpieces have been unable to lure the average Joe back into the casino because the average Joe has been impoveri

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Re: RED FLAG
« Reply #26 on: July 17, 2016, 02:35:06 PM »



2016-07-17 08:39
意大利银行业会成欧洲下一个火药桶吗?
今年的欧洲风波不断:二战后最严重难民危机仍在持续;英国公投“脱欧”带来巨大不确定性;从比利时到法国恐怖袭击不断。疲弱的欧洲经济如今还面临另一大风险:沉疴已久的意大利银行业仍无改善迹象,人们不禁担心意大利银行业会否引爆欧洲新一轮危机?

(图:新华社)
(比利时‧布鲁塞尔17日讯)今年的欧洲风波不断:二战后最严重难民危机仍在持续;英国公投“脱欧”带来巨大不确定性;从比利时到法国恐怖袭击不断。疲弱的欧洲经济如今还面临另一大风险:沉疴已久的意大利银行业仍无改善迹象,人们不禁担心意大利银行业会否引爆欧洲新一轮危机?

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意大利银行状况有多糟

“世界上最古老银行”与“世界上状况最糟糕银行”,不幸的是,这是同一家银行。意大利西雅那银行成立于1472年,是全球最古老的银行之一,也是意大利第三大商业银行。该银行股价在2008年全球金融危机前一度高达93欧元,如今只可怜地徘徊在0.3欧元左右。

危机源于金融危机前夕进行的“灾难性”收购,西雅那银行损失巨大,并从此“一病不起”。自2008年以来,该银行已进行数轮融资,但仍无法走出困境。2014年10月,西雅那银行在欧洲银行业健康状况评估中被认定为“状况最差”的银行之一。银行官网显示,截至2015年底,其不良资产高达469亿欧元。

其他意大利银行的情况也不容乐观。意大利银行业规模在欧元区19国中排名第四,但17%的银行贷款是坏账,不良资产总额达3600亿欧元,占欧元区银行不良资产总额的三分之一,是意大利国内生产总值(GDP)的五分之一。

自去年以来,意大利银行业股价持续下行,英国公投“脱欧”后,投资者恐慌加剧,意大利银行股价更是一路暴跌。其中,西雅那银行“灾情”最为严重,意大利监管当局不得不于本月初宣布,暂时禁止对其股票的卖空操作。

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意大利银行业深陷泥淖的根本原因是意大利经济持续低迷。同时,意大利破产法极其僵化,也阻碍了银行清理资产负债表。而欧洲央行实施的“负利率”政策,更进一步挤压了银行利润空间。

如何改革银行业面临两难

2015年底,离罗马不远的港口奇维塔韦基亚,68岁退休老人路易吉诺.德安杰尔在家中自杀身亡。在给妻子的遗书里,他说自己受到了意大利埃特鲁利亚银行的“羞辱和欺诈”。

德安杰尔是该银行长达50年的老客户,倾其毕生积蓄购买了该行约11万欧元次级债券。然而近年来埃特鲁利亚银行深陷危机,为避免包括其在内的四家意大利小银行破产,意大利政府批准一项救助计划对他们进行资产重组,但代价是银行债券持有者也要承担损失。

和德安杰尔一样购买了埃特鲁利亚银行高风险债券的5万名小额投资者的投资一夜间化为乌有。意大利银行债券持有者中三分之一是小额散户,这意味着他们预见风险和承受损失的能力都很弱。

这起自杀事件也令意大利新上台总理马泰奥.伦齐备受压力。伦齐内阁上台后,大力推行机构改革,包括改善银行坏账率、推动设立不良贷款交易市场、加速破产流程、制定推动银行合并新规。

伦齐政府还希望说服欧盟同意其动用400亿欧元公共资金救助银行业,但已被欧盟委员会驳回。欧债危机爆发后,欧盟规定成员国政府不能直接动用公共资金为银行“纾困”。

因而,意大利政府面临两难困境:动用政府资金救助银行违反欧盟规定,而如果让德安杰尔这样的散户去承受重组银行的代价,将损害执政党选举利益。意大利10月还将就政治改革举行公投,这将是对伦齐政府的一次“大考”。

欧盟不松口市场很担心

欧元区财长11日在布鲁塞尔开会,重点本是讨论西班牙和葡萄牙预算赤字不达标的“烦心事”,但意大利银行危机问题“抢了风头”。

不过欧盟态度相当明确。欧元集团主席戴塞尔布卢姆表示:“意大利银行不良贷款问题确实需要处理,但应以渐进方式解决。”他还“强烈反对”动用公共资金重组银行。

德国被认为是坚决反对意大利对银行业进行国家救助的“强硬派”。德国财长朔伊布勒说:“我们都很清楚,当初吸取了金融危机和银行危机教训才制定了现在的规则。”

国际货币基金组织本月调低了意大利经济增长预期,认为受英国公投和意大利银行危机影响,意大利今年经济增长率将低于1%,明年增长则仅为1%。

专家认为,鋻于意大利经济总量位列欧元区第三,一旦发生银行业危机将影响深远。“摇摇欲坠的意大利银行将是欧洲下一个危机,”英国《经济学人》如此警告。(新华社)

文章来源:
星洲网‧2016.07.17

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Re: RED FLAG
« Reply #27 on: July 19, 2016, 07:02:34 AM »



Stock market's moonshot to record highs is all hype, Cornerstone's Worth says
Rebecca Ungarino   | @ungarino
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S&P breakout or fake out?   S&P breakout or fake out?
Monday, 11 Jul 2016 | 5:31 PM ET|05:01
Even as stocks hit record highs, one technical analyst says that the rally is not all it's cracked up to be.

By Friday's market close, the Dow Jones Industrial Average closed a five-day streak of record highs, while the S&P 500 Index posted a four-day record of closing highs.

Many investors flocked to stocks during the rally, while big bank earnings and strong retail sales data drove stocks higher. However, Cornerstone Macro's Carter Worth says that equity performance has actually been rather disappointing.

"I think the issue here is that we know on an absolute basis, one has nothing to show for having been in the market now since May of a year ago," said Worth recently on CNBC's "Fast Money."

Investors can get bullish at highs, and bearish at lows, said Worth. That said, "nothing's happened ...in fact [for ]a very long time on a risk-adjusted basis," citing his chart work showing year-over-year change for key assets.

'Have to go meaningfully higher'

When weighed against other key indicators like Treasury bonds, gold and real estate—nearly all up in the double-digits—stocks are the worst-performing major asset class since last May, up less than one percent.

In looking at the S&P total return index, its trajectory falls below the S&P 30-year bond futures total return index.
"So the total return of just being in the bond market versus the stock market, no result, and yet again, all the volatility, if you adjust for the risk, it's not parity at all," Worth told CNBC.

And when adjusted for inflation, Worth said the S&P has still not taken out its March 2000 high, a record set during the tech bubble.

"We would have to go meaningfully higher," said Worth, "to start to compensate for the risk that's been associated with owning equities not only for the last 18 months, but for quite some time."

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Re: RED FLAG
« Reply #28 on: July 19, 2016, 08:17:49 AM »



There’s something eerily familiar about the recent market bounce
Alex Rosenberg   | @AcesRose
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S&P 500 hits record high, again   S&P 500 hits record high, again
Friday, 15 Jul 2016 | 2:33 PM ET|02:41
If the S&P 500 fails to close this week's trading above last Friday's close, history-conscious investors might feel a sinking sense of deja vu.

As Neil Azous of advisory firm Rareview Macro pointed out in a Monday morning note, the S&P made its closing weekly high for 2015 on July 17. And while stocks managed to climb higher in the following session, the index didn't have a higher weekly close until two Fridays ago.

The potential similarities between then and now don't just come down to the weather outside. July 17, like July 15, marked July options expiration; in other words, the prices at which stocks and indexes closed that day determined the profit or loss made on relevant derivatives contracts.

For Azous, this is no mere coincidence. He reports that "there was an extraordinarily large amount of short call options outstanding for last Friday's expiration, which created an unnatural demand for equities." In other words, into the expiration event, traders purchased long positions on the S&P so as to hedge their outstanding (inverse) exposure to the market through short call options.

This might go some way toward explaining the dramatic move higher last week, which occurred on little in the way of bullish news.

And if Azous is correct that "unnatural" conditions played a large role in the climb, it means that even more will have to go right for the market in order for stocks to continue climbing.

Otherwise, a rerun of last year's weekly trading pattern may be in store

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Re: RED FLAG
« Reply #29 on: July 19, 2016, 08:33:17 AM »



A FINAL & Terrible Crash is IMMINENT! – Bo Polny
Posted on July 18, 2016 by The Doc   33 Comments   6,063 views
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Home » Gold » Gold News » A FINAL & Terrible Crash is IMMINENT! – Bo Polny


freefallBo Polny warns The FINAL TOP is IN, and a Final and Terrible Crash is Imminent…

 

90% Junk Silver $100 FV Bags
$1.49/oz Over Spot!


Submitted by Bo Polny:


What is the ‘Dow Theory’?

 

The theory was derived from 255 Wall Street Journal editorials written by Charles H. Dow (1851–1902), journalist, founder and first editor of The Wall Street Journal and co-founder of Dow Jones and Company.

 

The Dow Theory is a theory which says the market is in an upward trend if one of its averages (industrial or transportation) advances above a previous important high, it is accompanied or followed by a similar advance in the other.

 

Two (2) basic tenets of Dow Theory are described below:

 

Stock market averages must confirm each other.  In Dow’s time, the US was a growing industrial power. The US had population centers but factories were scattered throughout the country. Factories had to ship their goods to market, usually by rail. Dow’s first stock averages were an index of industrial (manufacturing) companies and rail companies.  To Dow, a bull market in industrials could not occur unless the railway average rallied as well, usually first. According to this logic, if manufacturers’ profits are rising, it follows that they are producing more. If they produce more, then they have to ship more goods to consumers. Hence, if an investor is looking for signs of health in manufacturers, he or she should look at the performance of the companies that ship the output of them to market, the railroads.  The two averages should be moving in the same direction. When the performance of the averages diverge, it is a warning that change is in the air.
 

Trends exist until definitive signals prove that they have ended.  Dow believed that trends existed despite “market noise”. Markets might temporarily move in the direction opposite to the trend, but they will soon resume the prior move.
Let us have a look at today, July 13, 2016…

DOW Theory states…  ‘An upward trend if one of its averages (industrial or transportation) advances above a previous important high…’

Looking at the DOW chart, the DOW currently trades at 18,355 above the 2015 top, has a Bull new market has resumed?

1. DOW

 

DOW Theory also states…  ‘It is accompanied or followed by a similar advance in the other (transportation)… a bull market in industrials could not occur unless the railway average rallied as well, usually first… The two averages should be moving in the same direction. When the performance of the averages diverge, it is a warning that change is in the air.’

 2. TRAN

 

So has a Bull new market has resumed?  Before this question can be answered, based on DOW Theory, we must look at the Transportations.  Looking at the DOW Transportations chart, the Transportations currently trades at 7,875 far BELOW the 2015 top!   DOW Theory indicates… a warning that change is in the air!

Lastly, recall in 2015 we forecast an exact top on a US stock market using our 777 cycle calculation we provided within our videos (CLICK HERE FOR LINK).  Our calculation was based on the NASDAQ specifically, see original calculations within the two (2) slides below.  Beginning on March 24, 2000 the first 777 cycle put in the exact cycle top on the NASDAQ October 31, 2007.

2001

Next, beginning at October 31, 2007 the second 777 cycle put in the exact and FINAL Top on the July 20, 2015 at 5231, the exact day of our Interview calling the top (LINK HERE).

2008

Today the NASDAQ trades at 5011 as I write, far below the July 2015 top we forecast.  Below is the current 2016 Chart on the NASDAQ.

3. COMP

 

DOW Theory warns… ‘change is in the air… they (the markets) will soon resume the prior move!’

Our 777 cycle analysis indicates July 20, 2015 was the FINAL TOP and a final and terrible crash is imminent

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Re: RED FLAG
« Reply #30 on: July 20, 2016, 07:24:13 AM »



'Elevator Down' Looms As Market Reaches 3-Standard Deviation Extreme

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by Tyler Durden
Jul 19, 2016 4:55 PM
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Submitted by Lance Roberts via RealInvestmentAdvice.com,

Yesterday, I discussed the importance of risk management and reviewed the 15-rules that drive my portfolio management discipline. I needed to lay that groundwork for today’s discussion of why those rules need to be implemented right now.

As shown in the chart below, the market has currently surged nearly 9% from the “Brexit” fear lows driven by a massive increase in Central Bank interventions.

SP500-MarketUpdate-071916

The problem, as I have pointed out previously, continues to be that while prices are increasing, that increase in price is coming at the expense of declining volume. While volume is not a great timing indicator for trading purposes, it does provide insight to the “conviction” of participants to the advance of the market.


But do not be mistaken about the importance of the drivers behind the advance. As Doug Kass recently penned:

“Global economic growth’s weak trajectory and Washington’s stark partisanship have combined to produce fiscal inertia. This puts the responsibility for stimulus on central banks, which have in many cases taken interest rates into negative territory. This has disadvantaged savers and put investors and traders on an arguably dangerous path of malinvestment in a search for yield.“
The current market extension has currently extremes which are more normally associated with short to intermediate term-corrections. As shown in the next chart, on a daily basis the market is pushing 3-standard deviations of its 50-dma moving average.

SP500-MarketUpdate-071916-4

Like stretching a “rubber band” as far as you can in one direction, the band must be relaxed before it can be stretched again.

However, as noted in the chart above, there is a difference in pullbacks.

A pullback to 2135, the previous all-time high, that holds that level will allow for an increase in equity allocations to the new targets.
A pullback that breaks 2135 will keep equity allocation increases on “HOLD” until support has been tested.
A pullback that breaks 2080 will trigger “stop losses” in portfolios and confirm the recent breakout was a short-term “head fake.”

The magnitude of the current extension of the market above its 50-day moving average can be seen if put into context of a long market cycle. The chart below shows the number of times the market has reached 3-standard deviations of the 50-dma. In the vast majority of cases, it was not long until the market experienced a pullback, correction or worse.

SP500-MarketUpdate-071916-3

We can see the same idea by slowing down the price action from daily to weekly. While there are fewer occurrences, the importance of extreme extensions becomes clearer.


SP500-MarketUpdate-071916-2

Of course, at the same time market prices have advanced sharply higher, the “fear of a correction” by investors, as measured by the volatility index, has dropped sharply lower. Again, as with extreme extensions, sharp drops in volatility have been historically associated with near-term peaks, and potential starts of deeper corrections.

VIX-MarketUpdate-071916-1

Doug noted the same:

“Stocks continue to defy all odds and reject untoward events of almost any kind, but I remain wary. It’s true that stocks and bonds’ recent relentless climb has calmed most investors — making them far less fearful of a possible major downturn (what I call the Bull Market in Complacency).”
What is clear is the risk of at least a short-term correction is near. For many individuals, the recent parabolic advance has bailed them out from what could have been a more painful correction had Central Banks not bailed out the markets once again. Therefore, it is prudent to use this recovery to clean up portfolios and rebalance risk accordingly. These actions would include:

Tightening up stop-loss levels to current support levels for each position.
Hedging portfolios against major market declines.
Taking profits in positions that have been big winners
Selling laggards and losers
Raising cash and rebalancing portfolios to target weightings.
There is no rule that states that you MUST be fully exposed to the markets at all times. This is the equivalent of betting “all in” on every hand in poker. You may think you are getting wealthy while your “hand is hot” but you are eventually guaranteed to poorer than when you started.

This market is no different currently, and the “hot hand” being dealt has gotten investors once again over confident in their own abilities. This tends to end badly more often than not.

Anthony Mirhaydari nailed this point yesterday:

“Bond investors — and by extension, stock market investors — should be feeling very, very nervous. The global financial system is incredibly complex and increasingly threadbare. And a surge in central bank asset purchases to levels not seen since 2013, combined with hopes of even more purchases, has helped push stocks to fresh highs.
 
But stocks are incredibly vulnerable. Only 28 stocks in the S&P 500 (less than 6 percent of the index) are at new highs. Less than 72 percent of the stocks in the S&P 500 are even in uptrends.
 
Any hiccup, from a reversal in the yen; a backup in rates; indications that the Fed is sticking to its two-quarter-point rate hike forecast for 2016; disappointment in the BoJ; realization that valuations and earnings are a problem; a return of geopolitical fears; a continuation of recent energy price weakness (with U.S. oil rig counts growing at the fastest pace since 2011); or even a realization that anti-establishment/anti-globalization candidate Donald Trump has risen in some polls (especially in critical swing states) against global elitist/status quo candidate Hillary Clinton could quickly reverse the gains we’ve seen over the last three weeks.
 
You know the old adage: Stocks take the stairs up but the elevator down. With everything so expensive, the bull market among the oldest in history, and risks multiplying as fundamentals fade, caution is a virtue here.“
I agree. Taking in some profits from the recent advance will likely look smart sooner rather than later

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Re: RED FLAG
« Reply #31 on: July 21, 2016, 02:40:17 PM »



More than US$600 bil is at stake as Japan probes LNG deals
By Bloomberg / Bloomberg   | July 21, 2016 : 2:20 PM MYT   
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(July 21): Japan’s probe into whether the resale restrictions in most of its liquefied natural gas contracts violate fair trade laws may lead to the renegotiation of more than US$600 billion worth of deals that run until almost the middle of the century.

The world’s biggest buyer of the fuel has agreements for at least 1.46 billion metric tons of supply between next year and 2040, according to Bloomberg New Energy Finance. Removing contracts that either don’t bar resale or originate in countries that traditionally don’t restrict reselling leaves about 1.03 billion tons linked to agreements that may include the limitation, worth 66.6 trillion yen (US$628 billion) at last year’s average price.

The country’s Fair Trade Commission is in the preliminary stage of investigating if so-called destination clauses impede competition laws, and its finding may be announced as early as this year, Bloomberg News reported last week. Existing contracts may be renegotiated if the restrictions are found to be in violation, as happened last decade in Europe, according to BMI Research.

“Every contract, one by one, would have to be inspected to see if the JFTC’s findings apply,” said Hiroshi Hashimoto, a senior analyst with the Institute of Energy Economics, Japan. “That may turn out to be a difficult task.”

The European Commission decided in October 2004 the clauses restricted competition. Japan may need to resolve any contractual disputes after the decision via government-level negotiations, as was done in Europe, because many of the suppliers are state-owned companies, said Yoshizumi Tojo, a professor of law at Rikkyo University in Tokyo.

Bargaining Power

“Japan could stop the JFTC’s specific query into a contract in return for getting a compromise from a supplier that they remove the clause,” said Tojo.

The contracts are being reviewed as the bargaining power of LNG buyers strengthens, amid a global glut and may accelerate the shift by Japanese LNG buyers from traditional importers into international sellers. The country is forecast to have a surplus of 12.2 billion cubic meters of LNG in 2017, 8.1 billion in 2018 and 8.6 billion in 2019, according to a February report from BMI Research.

“If destination clauses are found to be illegal, it will give Japanese buyers more bargaining power to renegotiate existing contracts for flexibility,” said Lu Wang, an analyst at Bloomberg Intelligence.

Supply Contracts

Other Asian LNG consumer countries may try to follow Japan, analysts including David Hewitt at Credit Suisse Group AG said in a report Thursday.

“We would be surprised to see sellers permanently remove the restriction without the threat of a legal requirement,” according to the report. “But some sellers may choose to temporarily ease the restriction (say a three year easement) to help with the near term over-supply pressure.”

Barriers to re-shipping LNG will still exist, even if destination restrictions are ended. Many sellers, such as Qatar, have their own LNG tanker fleets and have contracts structured so that the buyers only take possession of the fuel once its been delivered. That means the buyer would have to pay for the added cost of reloading and reshipping fuel it wants to resell.

“The added costs of reload have to be supported by wide regional price spreads,” Trevor Sikorski, an analyst with London-based Energy Aspects Ltd. said by e-mail. “That’s something you don’t really have at the moment.”

To estimate the volume of Japanese supply bought via long-term deals with destination clauses, Bloomberg News stripped out 435.5 million tons from the country’s contracts listed in BNEF’s global LNG database that either don’t include a destination clause or originate from the U.S., which traditionally has no export restrictions. The remainder — from countries including Australia, Brunei, Indonesia, Malaysia, Papua New Guinea, Qatar and Russia — account for about 70% of Japan’s total 1.463 billion tons of supply.

BNEF’s database includes more than 150 contracts. Each contract is negotiated separately and certain details of individual LNG supply deals — including destination restrictions and pricing — are typically not publicly available.

Asian spot prices for LNG have slumped more than 60% since September 2014, amid new supplies from Australia and the U.S. Japan paid about 64,838 yen per metric LNG ton last year, according to the Ministry of Finance

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Re: RED FLAG
« Reply #32 on: July 22, 2016, 07:35:44 AM »



Complacency Is Creeping Back Into The Stock Market

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by Tyler Durden
Jul 21, 2016 3:10 PM
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Via Dana Lyons' Tumblr,

With stocks’ steady drift through all-time high territory, investors’ relative near-term volatility expectations have plummeted to near record lows.

One of the hallmarks of the post-February rally in stocks has been a healthy dose of investor skepticism and anxiety. But for brief periods, e.g., towards the end of April, investors have been slow to embrace the move. Such disbelief is one trait that has helped prolong the intermediate-term rally, now more than 5 months old. In recent weeks, we have mentioned in posts and interviews that perhaps the one thing that will usher in greater enthusiasm on the part of investors is a new high in the major averages. Perversely, that was one potential development, we surmised, that may shift sentiment far enough to the bullish side that it could finally place the intermediate-term rally in jeopardy. That scenario appears to be possibly playing out.

Why do we say that? Well, one piece of evidence suggesting a new-found elevated level of investor complacency comes from the volatility market. One way to judge investor comfort or anxiety is to look at the level of expected stock market volatility via instruments such as the S&P 500 Volatility Index, or VIX. Presently, the VIX is plumbing one of its lowest levels since 2007, so investors are displaying very low expectations for stock market volatility at the moment.

Another way of using volatility to measure the extent of investor nervousness is by comparing near-term volatility expectations versus those farther out. For example, the VIX is actually the 1-month volatility index. Meanwhile, the VXV is the 3-month volatility index. Typically, the VIX will be lower than the VXV as there is less time in the near-term for volatility rises to occur. When investors get especially nervous (usually during a selloff), near-term volatility expectations can actually rise above those farther out, i.e., the VIX/VXV ratio rises above 1.00, or 100%. Conversely, during times of complacency, the VIX can drop to relatively low levels versus the VXV, historically under 0.80, or 80%. That’s where the VIX/VXV ratio currently finds itself – and then some.


As of yesterday, July 19, the ratio stood at 76.0%, one of the most complacent readings since the inception of the VXV in 2007.


image

 

As the chart reveals, this was just the 14th reading under 77.9% since 2007 (with none coming prior to 2012). The previous occurrences were clustered in March and August of 2012 and December 5, 2014. So how did investors fare following such extreme displays of complacency? As you may have guessed, the complacency was not well-timed.

Here is the S&P 500′s performance following the previous 13 days showing a VIX/VXV reading under 77.9%:

image

As you can see, in the short-term, there was little edge as returns in the S&P 500 were a toss-up. Therefore, while complacency may not be advised at this juncture in the market, perhaps there is no reason to panic either. After that, things get interesting.


At the 3 month mark, all 13 events were negative, with a median return of -3.9%. Perhaps that is the time frame in which to expect some market drawdowns. The 6-month and 1-year results, however, would suggest that short sellers best not overstay their posture. That’s because all 13 events would reverse their losses and show positive returns over those 2 time frames.

We’ll remind you that the 13 precedents were clustered around just 3 periods. Therefore, the sample size is even smaller than “13″ would suggest. However, unanimous is always an intriguing result so we would not necessarily dismiss either the intermediate-term weakness nor the longer-term strength.


Is this data point enough to override the constructive, post-breakout price structure in the S&P 500? We’d say, no. Is it enough to counteract ongoing positive breadth conditions? No, again. However, we will say that this measure of investor complacency is enough, in the intermediate-term, to at least remove sentiment from the “tailwind” category for stocks.

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Re: RED FLAG
« Reply #33 on: July 24, 2016, 09:47:33 AM »



Trends Forecaster Gerald Celente Warns Panic of 2016 is at the Doorstep
Posted on July 22, 2016 by The Doc   15 Comments   10,460 views
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Jim Willie collapseHow Close Are We to the “Panic of 2016”?
Gerald Celente says, “We are at the doorstep, and it’s ready to go…”

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Re: RED FLAG
« Reply #34 on: July 24, 2016, 09:49:04 AM »



A FINAL & Terrible Crash is IMMINENT! – Bo Polny
Posted on July 22, 2016 by The Doc   47 Comments   16,586 views
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Home » Gold » Gold News » A FINAL & Terrible Crash is IMMINENT! – Bo Polny


freefallBo Polny warns The FINAL TOP is IN, and a Final and Terrible Crash is Imminent…

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Re: RED FLAG
« Reply #35 on: July 24, 2016, 09:50:55 AM »



Will Deutsche Bank Be the Trigger? The Doc On Biggest Risks to Financial System
Posted on July 22, 2016 by The Doc   3 Comments   2,202 views
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Home » Gold » Gold News » Will Deutsche Bank Be the Trigger? The Doc On Biggest Risks to Financial System


Jim Willie gunWould a Collapse of Deutsche Bank really be 5 x Bigger Than the Collapse of Lehman Brothers?
The Doc Joined Kennedy Financial to Discuss the Biggest Risks Facing the Global Financial System…

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Re: RED FLAG
« Reply #36 on: July 24, 2016, 06:33:21 PM »



Goldman: The Last Two Times P/E Multiples Expanded This Much, The Result Was A Historic Crash

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by Tyler Durden
Jul 23, 2016 4:18 PM
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It's not just former Fed economists who are getting worried. So is Goldman.

As we wrote last weekend, "With "Stock Valuations At Extremes" Goldman's Clients Are Asking Just One Question", namely how much longer can the rally continue.  This followed another Goldman warning from two weeks ago, where as we noted before, "Goldman Warns Of A Sharp Plunge In Stocks In "Next Few Months."



 


Who knows: maybe Goldman will be right and the market will plunge - it certainly isn't trading at all time highs and 25x GAAP multiples on fundamentals. But for now those who heeded Goldman's warning and traded ahead of a 10% "pullback" have gotten crushed.


So has Goldman's chief equity strategist David Kostin finally thrown in the towel?

Not yet. In fact, Kostin appears to be doubling down, and as he observes (correctly) overnight, the one sole reason behind the market rally in recent years - clearly not earnings growth as we wrote earlier - namely, multiple expansion, is now substantially overdone. And not just that: as Kostin points out, there have been only two time in history when the P/E multiple has expanded as much (75%) or more as it has in the current cycle: 1984-1987 and 1994-1994. Both ended with historic crashes. To wit:

The current P/E expansion cycle is now one of the largest in history. Since September 2011, S&P 500 forward P/E has grown by 75% (from 10x to 18x). This expansion has only been surpassed twice since 1976, when the multiple rose by 111% from 1984-1987 (ending with the 22% Black Monday collapse) and by 115% from 1994-1999 (ending with the Tech Bubble pop). During the nine previous P/E expansion cycles the multiple typically climbed by 50%.
Thanks, David, we get it. It's going to end very badly. Just maybe tell your friend Bill Dudley to stop pushing it ever higher and assuring the resulting crash will be that much worse, maybe?

And speaking of that, will the market continue to levitate on even more multiple expansion or is a sharp drop just around the corner? According to Goldman, the answer is the latter:

Last week’s commentary highlighted several reasons why we believe the current 75% P/E multiple expansion cycle is unlikely to continue:
already extended P/E multiple of 18x represents the 88th percentile of historical valuation;
lack of earnings growth with full-year 2016 adjusted EPS expected to be flat for the third consecutive year (operating EPS up 9%);
downside EPS risk as low interest rates boost pension obligations and constrain Financials’ profits;
rising wage inflation that will pressure current near-record high margins;
the prospect of a more hawkish Fed than the market now expects. 
We maintain our S&P 500 year-end 2016 price target of 2100, although 5%-10% near-term downside risk remains high.
Instead of ending it on an apocalyptic note, here is Goldman with a useful detour on the most topical issue right now: the Fed model.

The impact of low interest rates on equity valuations is a hotly debated topic among investors. The Fed model compares the gap between the earnings yield of equities (5.7%) and the 10-year US Treasury yield (1.6%). The current yield gap equals 415 bp, slightly below its 10-year average (440 bp) but well above its 40-year average (250 bp). See Exhibit 1.

 
The Fed model paints a similar picture for S&P 500 valuation when using Treasuries, TIPS or BBB yields. A common criticism of the traditional Fed model is that it compares equity returns in real terms to Treasury yields in nominal terms. An inflation-adjusted time series such as Treasury Inflation Protected Securities (TIPS) may arguably provide a more accurate representation of the yield gap. However, the yield gap relative to history is little changed when using TIPS. The current yield gap using TIPS equals 560 bp, slightly below the 10-year average of 640 bp. Similarly, some investors prefer to use BBB corporate bond yields instead of 10-year US Treasuries to represent the cost of capital faced by firms. The current gap using BBB yields equals 240 bp, in line with the 10-year average of 235 bp.
 
As we noted last week, the yield gap may narrow from either direction (rising bond yield or falling earnings yield which means higher P/E multiple). However, the yield gap has already fallen by 393 bp this cycle (from a record 807 bp in 2011 to 415 bp). Assuming the 10-year Treasury yield rises to 3.1% and the earnings yield remains unchanged at 5.7%, the yield gap would be equal to long-term average of 250 bp and imply a S&P 500 level of 2230, 3% above the current level. Conversely, if the bond yield remains static at 1.5%, mean reversion of the yield gap would require the earnings yield to fall to 4.0% equivalent to a P/E multiple of 25x and an index level of 3070, up 42%. A more modest bull case would involve a compression of the yield gap to 350 bp with interest rates remaining at 1.8%, implying a  P/E of 19x and a S&P 500 level of 2320, 7% above the current level (see Exhibit 2).
 

 
A rise in the P/E multiple above 20x is unlikely, in our view. Although equity valuations are typically highest during periods of low interest rates, the current 18x P/E stands at the upper end of the  historical valuation range. During the last 40 years the only instance in which S&P 500 forward P/E exceeded 20x was the Tech Bubble (peak of 24x in December 1999).
Finally, some thoughts on what has been the better trade YTD: stocks or bonds...


Bonds have delivered a higher risk-adjusted return than stocks YTD. Bonds have returned 7.6% YTD as rates fell from 2.3% at the start of the year to 1.6% today with realized volatility of 5. The S&P 500 has posted a similar absolute return YTD (+7.2%) but has been on a rollercoaster path (volatility of 12). The YTD Sharpe Ratio for equities is just 0.6 versus 1.5 for bonds.
... and what will be going forward:

Consensus expects S&P 500 will generate a higher risk-adjusted return than bonds. A weighted average of consensus price targets for all S&P 500 constituents implies an index level of 2330 in 12 months (+9.8% return with dividends). Implied volatility for the S&P 500 over the next 12 months equals 15.9 leading to a prospective Sharpe Ratio of 0.62. Futures imply a 12 month return of 0.7% for 10-year Treasuries (ending yield of 1.7%). Implied volatility of 5.1 results in a prospective Sharpe Ratio of 0.15 for bonds.
 
In contrast, we forecast a similar 12-month risk-adjusted return for equities as the futures market implies for Treasuries. Our 12-month S&P 500 target equals 2150, reflecting a potential total return of 1.5% including dividends. The resulting equity Sharpe Ratio would be 0.10, similar to the 0.15 ratio for bonds. Since 1990, the risk-adjusted returns for equities have typically been roughly equal to bonds (0.98 vs. 1.01).
What Goldman does not touch on, however, is the circular nature of fund flows, where if bond yields do surge - as some are warning may happen soon on fears of an inflationary spike - it will lead to not only a rates VaR shock and massive MTM losses (as big as $2.5 trillion), but also to downstream liquidation in equities, which in turn will lead to a flight to safety... right back into bonds. And so on until something finally does break

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Re: RED FLAG
« Reply #37 on: July 25, 2016, 03:08:53 PM »



Bo Polny Predicts Worst Stock Market Crash in History By End Of Jubilee Year October 2
Posted on July 24, 2016 by The Doc   21 Comments   3,478 views
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Home » Headlines » Finance News » Bo Polny Predicts Worst Stock Market Crash in History By End Of Jubilee Year October 2


collapseBo Polny has just made one of the Boldest Financial Forecasts EVER,
Predicting the DATE of the Greatest Financial Crash in Human History…

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Re: RED FLAG
« Reply #38 on: July 26, 2016, 07:27:23 AM »



Stocks Redline As Key Sentiment Metric Leaves "Complacency" And Enters "Mania" Phase

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Jul 25, 2016 2:17 PM
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Ever since the unprecedented Brexit bounce in markets, underpinned by loud guarantees from central bankers around the globe that risk assets will simply not be allowed to sell off, increasingly more vocal concerns have emerged about trader complacency, culminating this morning in an article by Mohamed El-Erian titled "Calm markets raise big risks for complacent investors" in which the chief economic advisor to Allianz says that "A sustained period of low volatility manufactured by central banks cannot disguise growing problems." True, but it can and always does help ignore them until such time as the central-bank induced complacency goes away, usually amid cries that central bankers are losing control.

However, is it really complacency? According to one of our favorite charts by Deutsche Bank's Jim Bianco which looks at the ratio of the trailing S&P500 PE to the quarterly average VIX, the market was not actually complacent. Instead, it went almost overnight from "Realistic and disciplined", skipping "Complacency", and is now on the cusp of "Mania."

The latest reading is shown by the highlighted triangle in the chart below. It has never been higher.



Why is this important? Because every time this ratio approached the mania phase, most notably in 2000 and 2007, stocks tumbled shortly after.



Furthermore, if instead of using increasingly spurious non-GAAP EPS numbers, and opting for GAAP data instead, the PE/VIX ratio has never been higher. However, it should be added, risk assets have never had this level of explicit central bank backstop and support either.

Perhaps for the S&P500 to finally crack we have to break beyond the mere "Mania" phase, which at this rate is no longer inconceivable, and boldly go where this particular index has never gone before.

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Re: RED FLAG
« Reply #39 on: July 26, 2016, 04:24:30 PM »



2016-07-26 15:57
新兴亚企面临倒债危机
亚洲各新兴经济体最可能在2017年1月到2019年12月间爆发企业倒债危机,主因这3年间非金融业美元及欧元公司债到期总额达2197亿美元,而新兴货币对美元贬值更使企业偿债压力加重。
(美国‧纽约26日讯)亚洲各新兴经济体最可能在2017年1月到2019年12月间爆发企业倒债危机,主因这3年间非金融业美元及欧元公司债到期总额达2197亿美元,而新兴货币对美元贬值更使企业偿债压力加重。

广告

 
公司债到期的最高峰是在2019年,欧元及美元公司债到期额将创870亿美元新高,中国便占508亿美元。

更严重的是上述债券中许多都是在过去3年间发行,而从2013年3月迄今亚洲货币对美元汇率全面贬值,部份货币的贬幅还达两位数字,使亚洲企业以本国货币计算的债务负担更重。

债券到期高峰,加上货币贬值,结果显然是倒债案件将大幅增加。过去两年违约案已经增加,幸好美、日利率超低,情况还不致太糟;但今年来企业无法按期支付利息的发债金额为33亿美元,是2012年来最高水准。

未来情况只会更糟,因为亚洲企业面临多项挑战,包括中国经济成长减缓,使全亚洲区的企业获利率萎缩。

穆迪机构指出,中国以外的亚洲民间部门过去5年间由于负债加重,财务非常脆弱。目前亚洲垃圾级公司债中,有三分之一属于高风险类,与发债时相比风险已大幅提高。

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煤、钢铁、石油服务及水泥业的债务风险固然提高,投资人更需注意银行业可能受到的冲击,因为当企业无法偿付公司债本利时,同样也可能无法偿还银行贷款,使银行的不良贷款增加。

幸好由于目前全球货币政策普遍宽松,因此情况不会像1998年亚洲金融风暴时那样严重;但如果2019年之前全球货币政策转趋紧缩,情况将非常难看。

文章来源:
星洲日报‧财经‧2016.07.26

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Re: RED FLAG
« Reply #40 on: July 28, 2016, 11:45:09 AM »



WW3 To Prevent Worst World Market Crash in History – Gerald Celente
Posted on July 27, 2016 by The Doc   1 Comment   3,946 views
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Home » Headlines » Finance News » WW3 To Prevent Worst World Market Crash in History – Gerald Celente


nuclear bombIn this Explosive Interview, Gerald Celente warns WW3 is about to be unleashed to prevent the worst global financial clash in history…

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Re: RED FLAG
« Reply #41 on: July 29, 2016, 02:35:46 PM »



Market Analyst Issues Warning: “In The Next Week Or Two We Should See A Significant Move To The Downside”
Posted on July 28, 2016 by The Doc   16 Comments   5,013 views
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Home » Headlines » Finance News » Market Analyst Issues Warning: “In The Next Week Or Two We Should See A Significant Move To The Downside”


crashThe real tell here will be moving into the next week or two… in the next week or two we should see a significant move… or at least the beginning of a significant move to the downside in this market.

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Re: RED FLAG
« Reply #42 on: July 30, 2016, 09:13:02 AM »



Gundlach: "Sell Everything, Nothing Here Looks Good"

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by Tyler Durden
Jul 29, 2016 5:58 PM
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Two weeks ago, an already bearish Jeff Gundlach appeared to hit the "glass floor" of negative sentiment, and smash right through it.

On July 13, the new bond king said that there is "big money" to be made on the "short side." Gundlach added that he has been selectively betting against shares in the Standard & Poor's 500 index and continues to favor emerging market bonds over high-yield "junk" debt. Gundlach was just as skeptical about bonds, warning that the yield on the 10-year Treasury note at around 1.38% to 1.39% "is a terrible trade location. It is the worst trade location in the history of the 10-year Treasury."

His caution seemed prophetic: it was followed by the biggest two-day spike in 10Y yields in 5 years.  However, just like Gross' infamous "Bund Spike" last May, the selling in TSYs now appears to be over, and following a series of lousy data reports yields are once again sliding.

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Re: RED FLAG
« Reply #43 on: July 30, 2016, 02:32:03 PM »



China, Not Brexit, Is the Biggest Problem for the World By Chase Carmichael | July 29, 2016 — 11:00 AM EDT
     
 
 
On June 24, 2016, massive selling in stock futures sent the Standard & Poor’s 500 Index (S&P 500) contracts into a limit-down trading curb. Amid the Brexit vote, E-mini futures in the S&P 500 Index dove to 1,999, dropping 5.07% before trading was halted. Investors worry that Britain’s decision to leave the European Union (EU) threatened domestic and international economic stability, as evidenced by the downgrade of U.K. sovereign debt from AA+ to AA rating. However, the recent drop in U.S. stock prices pales in comparison to the 12% plunge following the contagion caused by China’s currency devaluation in August 2015.

Renminbi Devaluation
Albert Edwards of the Societe Generale Group believes that the ongoing stealth renminbi (RMB) devaluation presents a greater danger for the worldwide economy than Britain’s exit of the EU. Since August 2015, China’s trade-weighted currency basket has tumbled 10%, continuing to decline even as the RMB/dollar exchange rate has stabilized. The devaluation of the RMB by the People’s Bank of China (PBOC) is quite foreboding as it signals considerable weakness in the world’s second largest economy. Attempting to preserve gross domestic product (GDP) growth, the PBOC has resorted to exporting deflation to prevent the contraction of the country’s largest sector, exports. Not only does this place further pressure on commodity prices, but more importantly, China’s actions risk starting a currency war. During this scenario, export-dependent countries competitively devalue their currencies, warding off deflation at the cost of global growth.

Massive Debt Burden
In addition to the brewing currency crisis, the PBOC continues to foster an increasingly precarious credit situation through an accommodative monetary policy that supports the creation of bad credit via lax regulation and cheap lending. As a result, China’s total banking assets have risen by 210% in seven years, amounting to over $31 trillion as of the first quarter of 2016. Of that $31 trillion, net debt amounts to $25 trillion, including both domestic and foreign borrowing. In fact, at the end of 2015, China’s total private and public debt stood at 350% of GDP, well above the 250 to 300% level that expert studies credit to a decrease in economic growth.


Credit Inefficiency
China has reached the highest point of debt inefficiency since 2009, requiring the input of four units of credit to produce a single unit of GDP. A large factor surrounding debt inefficiency has been the increased use of new lending by both the public and private sectors to finance existing credit obligations. In 2014, the Chinese government agreed to allow the issuance of bonds by local municipalities. Since then, the income generated from 97.5% of municipal bonds has gone to paying outstanding debt obligations. Additionally, 44% of corporate bonds issued in 2015 went to repaying existing debt, which is a considerable amount when you take into consideration that China has the highest corporate debt ratio at 160% of GDP. Moreover, the International Monetary Fund (IMF) predicts that China’s potential losses from corporate loan defaults would total over 7% of the country’s GDP. As of June 2016, China’s ratio of nonperforming loans hit 1.7%. Nevertheless, world-renowned management consulting firm McKinsey & Company’s credit analysis predicts this ratio could hit 15% in 2019 if China continues on its current path of exorbitant lending.

Rapid Pace in New Lending
Thus far, China has only expanded its rate of credit creation. In the first quarter of 2016, the Chinese economy experienced the biggest three-month surge in new borrowing on record, increasing credit by 6.2 trillion yuan and pushing the rate of new lending to more than 50% ahead of 2015’s pace. According to McKinsey & Company, if China continues its current borrowing trend, the cost of handling bad debt could appreciate from 1 trillion to 3 trillion yuan every year


Read more: China, Not Brexit, Is the Biggest Problem for the World | Investopedia http://www.investopedia.com/articles/markets/072916/china-not-brexit-biggest-problem-world.asp#ixzz4Fs29SBuM
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Re: RED FLAG
« Reply #44 on: July 30, 2016, 02:40:28 PM »



Peter Schiff: Expect An Economic Crisis Infinitely Worse Than 2008 (Videos)
Thursday, July 28, 2016 11:45
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(Before It's News)

Crisis

Want to understand why people MUST begin to prepare for the worst economic crash in global history. Here it is as plainly as it can be put, with tons of supporting links at the bottom. In the following video, AMTV interviews Peter Schiff after yesterday’s Fed meeting, and as an enormous fan of Peter’s for over a decade, as well as a client of his, I can’t help but laugh when only :18 into the interview Peter gives his first eye roll. Frankly, I don’t know how the man keeps his eyes in their sockets without them rolling right out. He’s always swimming upstream against the mainstream media outlets, and it has to be tiring.

The main reason I feature so many Peter Schiff videos is so that people who don’t regularly follow economic issues or trends can get the information they need in a very simple to understand language. Peter is extraordinarily gifted when it comes to making a topic that most people consider too boring or to too complex to follow, very simple to understand.

It’s important people understand, because they need to prepare. A crash like no other crash in world history is coming. Peter himself has said: The Collapse of the U.S. Dollar Will Be the Single Biggest Event in All of Human History. That’s not a joke. Not at all.

For the naysayers who think that the current stock markets at their record highs are a sign of economic health, within the first 3:00 of the interview below, Peter gives a high level breakdown of why the U.S. Dollar absolutely WILL collapse, taking the stock markets and everything else with it.

The record highs are all fake. The stock markets have been artificially propped up by money from central banks. Even IF investors sold their holdings today for record gains, unless they put those gains into something not denominated in U.S. dollars, those same gains won’t be worth the paper they’re printed on when the Dollar goes bust, and THAT is what Americans are NOT grasping.

In the first 3:00, Peter speaks very high level, so below I add the supporting information for readers. He says:

There will be no more rates hikes this year at all. Expect a cut back to zero

WHY: The only time the Fed has raised rates in 7 years was in December of 2015, and they only raised them .25%. After just a tiny rate hike of .25%, U.S. stock markets had the worst opening in the history of the stock markets in 2016. The economy is far too weak to handle a rate hike regardless of the rhetoric people are hearing. That was the proof.

The endgame for the U.S. economy is oblivion. 2008 was a minor correction compared to the eventual collapse of the U.S. Dollar.

WHY: After the dot.com bubble burst in 2000, Fed chairman Alan Greenspan-led the Federal Reserve through a series of interest cuts that brought down the Federal Funds rate to 1% by 2004. The bubble created by those years of cheap Fed money at 1% resulted in U.S. households losing a total wealth of almost $14 TRILLION in the 2008 crisis. Stock markets fell by almost half for losing $7.9 trillion, and the housing market lost $6 trillion.

FAST FORWARD TO TODAY: We’ve had 7 years of interest rates at 0%. As a result, there is more than just a housing bubble this time. There’s a stock bubble, a housing bubble, a bond bubble, a student loan bubble, and I could go on. As Peter explains, the Fed only has ONE option at this point: Continue to fake it for as long as possible by printing more money (otherwise known as “quantitative easing”), or let the whole system come crashing down.

BE SURE TO CHECK THELASTGREATSTAND.COM FOR SURVIVAL GEAR!

Survival-2-2

FREE DETAILED GUIDE TO SURVIVING ECONOMIC COLLAPSE OR MARTIAL LAW HERE

HERE IS THE REALITY: The world has caught on, and the gig is up. Under Obama’s stewardship, the U.S. national debt has gone from $10 Trillion, to what will be $20 Trillion by the time he leaves office, with nothing more than 100 MILLION Americans out of work, and 50 MILLION in poverty and on food stamps.  That’s what cheap money bought for us. It was all “borrowed” cheap money too, making it infinitely worse, and the world is tired of lending.

The only reason countries still lend us money, is because as the World Reserve Currency, the Dollar is needed to settle global trades. When that need is gone, THAT is when the Dollar will collapse. THAT is why countries have been turning away from the Dollar at record pace. When enough of the world no longer settles their trades in U.S. Dollars, a process well underway I might add, THAT is when the ponzi scheme goes boom, and THAT is when we’ll witness what Peter Schiff describes as: The Single Biggest Event in All of Human History.

Sadly, the only people who don’t know a crash of biblical proportions is coming to the U.S., are the U.S. citizens, because our media and our leaders are so dishonest. Need proof the world is turning from the Dollar? Ten years ago almost 75% of all global trade was in U.S. Dollars. Today that numbers is around 37%, and dropping like a rock. It’s “IF” the U.S. Dollar collapsed, it’s “WHEN.”

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Re: RED FLAG
« Reply #45 on: July 31, 2016, 08:56:48 AM »



In 50 Years This Has Never Failed To Trigger A Bear Market

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by Tyler Durden
Jul 30, 2016 6:10 PM
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Authored by Jesse Felder of TheFelderReport.com,

It’s earnings season once again and it looks as if, as a group, corporate America still can’t find the end of its earnings decline since profits peaked over a year ago. What’s more analysts, renowned for their Pollyannish expectations, can’t seem to find it, either.

So I thought it might be interesting to look at what the stock market has done in the past during earnings recessions comparable to the current one. And it’s pretty eye-opening. Over the past half-century, we have never seen a decline in earnings of this magnitude without at least a 20% fall in stock prices, a hurdle many use to define a bear market.



In other words, buying the new highs in the S&P 500 today means you believe “this time is different.” It could turn out that way but history shows that sort of thinking to be very dangerous to your financial wellbeing.

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Re: RED FLAG
« Reply #46 on: July 31, 2016, 09:40:01 AM »



Julian Assange Claims Next Leak Will Lead to Arrest of Hillary Clinton
Posted on July 30, 2016 by The Doc   9 Comments   2,307 views
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Home » Headlines » World News » Julian Assange Claims Next Leak Will Lead to Arrest of Hillary Clinton


Hillary-JailWhile many are blaming Russia for the Democratic National Committee (DNC) email leak, WikiLeaks founder Julian Assange says there is no evidence to suggest that the DNC was hacked by the Russian government.
Furthermore, Assange claims the next leak will lead to the arrest of Hillary Clinton…

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Re: RED FLAG
« Reply #47 on: August 02, 2016, 08:52:09 AM »



The Greatest Market Crash In HISTORY Only Weeks Away?
Posted on August 1, 2016 by The Doc   4 Comments   390 views
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polnyBo Polny is blunt about what is about to take place:  A tremendous market crash of historical proportions that will leave most investors STUNNED and broke. He believes the time to get out of the stock market is growing short and that one ought to take profits and place them in gold and silver while it is still possible…

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Re: RED FLAG
« Reply #48 on: August 03, 2016, 08:51:47 AM »



Trump Says It's Time To Sell Stocks, Warns Of "Very Scary Scenarios" For Investors

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by Tyler Durden
Aug 2, 2016 7:19 PM
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It is hardly a secret that few things could help Trump's presidential campaign as much as a stock market crash.

As we reported back in January, while Wall Street typically worries about how politics might affect the market, Presidential candidates worry about how the stock market might affect their political outcomes. The reason for this is that historically, the market performance in the three months leading up to a Presidential Election has displayed an uncanny ability to forecast who will win the White House… the incumbent party or the challenger. Since 1928, there have been 22 Presidential Elections. In 14 of them, the S&P 500 climbed during the three months preceding election day. The incumbent President or party won in 12 of those 14 instances. However, in 7 of the 8 elections where the S&P 500 fell over that three month period, the incumbent party lost.



There are only three exceptions to this correlation: 1956, 1968, and 1980. Statistically, the market has an 86.4% success rate in forecasting the election!


A simple explanation for this relationship is because the stock market reflects, at least in theory, the economic outlook in the weeks leading up to the election; in practice - now that central banks push up the market the worse the global economy gets - it is the opposite, but a rising stock market certainly does miracles to one's sense of financial net worth, and an unwillingness to deviate from the status quo. Clearly, a rising stock market indicates an "improving economy", something Obama has pointed out so many times in the past several years, which means rising confidence and increases the chances of the incumbent party’s re-election.


Therefore, as we said in January, one's time might be better spent from August through October watching the stock market rather than the debates if you want to know who will be President for the next four years.

* * *

Well, we are now almost exactly three months away from the November 8 election, and if Trump wants to really boost his chances, a market crash right now would be certainly most welcome by his campaign.

That may be why Trump on Tuesday urged his supporters holding 401-(k) to get out of equities as interest rates set by the Federal Reserve are inflating the stock market.

“I did invest and I got out, and it was actually very good timing,” the Republican presidential nominee said in a phone interview with Fox Business. “But I’ve never been a big investor in the stock market.” “Interest rates are artificially low,” Trump said. “The only reason the stock market is where it is is because you get free money.”

Trump also warned of "very scary scenarios" ahead for investors.

To be sure, Trump's previous commentary on a stock market bubble has not won him many fans at the Fed, and certainly not Janet Yellen, whom he said back in May, he would "most likely" replace. Amusingly, Yellen has repeatedly said the Fed intends to raise interest rates gradually, as volatility and sudden drops in jobs and GDP, have delayed such plans. As a result, many have also said that a Fed rate hike before the presidential election is out of the question.

In an amusing tangent, Bloomberg here notes that "Republican and Democratic administrations alike typically don’t comment on the Fed’s monetary policy, out of respect for the central bank’s independence." We can only assume that Bloomberg does not refer to the Fed's "independence" from Goldman Sachs, which numerous civil and criminal cases have shown is not the case, the same Goldman which just happens to be one of Hillary's biggest fans.

And an amusing paradox emerges when considering that none other than both Jeff Gundlach and, as of Sunday night, Goldman Sachs both urged investors to sell equities. One wonders if just like Trump was accused of being a Putin spy for diverging from the mainstream anti-Russia narrative, accusations will now emerge that he is also a Goldman double agent, seeking to crash the market just so Goldman can load up on the cheap

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Re: RED FLAG
« Reply #49 on: August 03, 2016, 08:56:55 AM »



Donald Trump says sell stocks now
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 "I did invest, and I got out, and it was actually very good timing," the Republican presidential nominee said.
"I did invest, and I got out, and it was actually very good timing," the Republican presidential nominee said. AP
by Suzanne Woolley
Saving for retirement? Avoid stocks. Big-league.

That's according to you-know-who.

Donald Trump told Fox Business on Tuesday that the Fed's "artificially low" interest rates have pumped up stock market valuations.

"I did invest, and I got out, and it was actually very good timing," the Republican presidential nominee said.

Sounds a bit like market timing, actually-jumping in and out of investments based on the news and on short-term performance. That's a strategy with a pretty bad long-term record.

Fidelity Investments looked at the returns for 401(k) savers who moved out of equities at or near the market bottom in late 2008 or early 2009 and stayed out as of the end of 2015, comparing them with returns for investors who kept a stake in stocks. The resilient investors were about $US82,000 better off.

During the stock selloff last August, Trump told the New York Times that he'd gotten out of stocks three or four weeks before the August 24 dive in the markets, but he advised investors to hold on to their stocks in the wake of the turmoil, saying, "I'd hate to see [the stock market] rebound and [investors] end up with the short end of both deals" - both selling at a low and missing any rebound.

It was good advice. From August 25, 2015, to August 1 of this year, the S&P 500 has risen 16.2 per cent, and the Dow is up 17.5 per cent.

Then, on January 7, at a campaign rally in Burlington, Vermont, Trump said: "By the way, speaking of stock. You see the bubble, a little bubble. It's starting to go a little bad." He went on, darkly: "Some bad numbers are coming out. Some really bad things. And you better be careful. Be careful."

The market did take a painful fall in January. The S&P 500 was down 2.6 per cent as of January 6 and ended the month down more than 5 per cent.

Still, a retirement portfolio should be structured so investors can live with market volatility. If a portfolio's equity stake has gotten out of whack due to appreciation in the stock market, sure, trim it back. But as Trump critic Warren Buffett has said, "You shouldn't own common stocks if a 50 per cent decrease in their value in a short period of time would cause you acute distress."

Buffett has also said: "A prediction about the direction of the stock market tells you nothing about where stocks are headed, but a whole lot about the person doing the predicting."

How good a stock market investor is Trump? It's hard to say. In his book Crippled America, he wrote that 40 of 45 of his stock purchases "rose substantially in a short period of time".

A Bloomberg story about that claim cited an analysis by Evercore ISI of 670 institutions that had held 20 to 50 stock positions as far back as 2011. "The New York-based research and investment firm measured both the positive strike rate, or the percentage of stocks that are positive each quarter, and the outperform strike rate, the ones that beat the S&P 500," the story said.

It continued: "The record Trump claims, 40 positive out of 45 stocks, would put him in the 97th percentile among comparable institutions in the first quarter of 2015 and better than all of them in the second and third, according to ISI. Among hedge funds, he'd be in the 94th percentile in the first quarter and beat them all in the second and third."

And that would be yuge.

Bloomberg



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Re: RED FLAG
« Reply #49 on: August 03, 2016, 08:56:55 AM »