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Other Investments => Global Markets => Topic started by: king on May 28, 2016, 08:56:14 AM

Post by: king 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

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...
Fmr. Fed Chair Greenspan: Venezuela is about to collapse
Fmr. Fed Chair Greenspan on foreign trade
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.
Title: Re: RED FLAG
Post by: king 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

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.
Title: Re: RED FLAG
Post by: zuolun on June 11, 2016, 11:01:17 AM
The next bear market will be ruthless ~ 10 Jun 2016

Brexit could herald historic gold rush ~ 10 Jun 2016

US stocks join global sell-off as 'Brexit' fears mount ~ 10 Jun 2016

Iran snaps up first sugar purchases since lifting of sanctions ~ 10 Jun 2016

Bad weather in South America threatens crops, prices of sugar, soybeans and coffee fly ~ 9 Jun 2016


Soros seeks safe haven in gold, concerned about possible EU collapse ~ 9 Jun 2016

索罗斯重出江湖 准备大规模沽空 ~ 9 Jun 2016


Goldman says there's an elevated risk of a big market selloff ~ 8 Jun 2016


Commodities: the bear market is over ~ 7 Jun 2016

Vietnam coffee output to hit 4-year low and could shrink further ~ 7 Jun 2016

Cotton futures touch 9-month top, as storm lands heavy rains on US ~ 7 Jun 2016

Commodities enter bull market, ending 5-year selloff: Chart ~ 7 Jun 2016


Drought, ethanol demand send sugar prices surging ~ 6 Jun 2016


On bull-market brink, Citi sees commodity gains as Goldman jeers ~ 4 Jun 2016


Rain worries lift Paris wheat futures to five-month high ~ 3 Jun 2016

Sugar: World markets and trade ~ May 2016

Title: Re: RED FLAG
Post by: zuolun 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

If 'Brexit' wins, fear gets into the marketplace: Bill Gross ~ 10 Jun 2016

EU referendum: Commonwealth trade groups scotch Brexit claims ~ 10 Jun 2016

'Brexit' will have cascading effect in Europe, US will be safe haven: Trader ~ 10 Jun 2016

No single market access for UK after Brexit, Wolfgang Schäuble says ~ 10 Jun 2016

Title: Re: RED FLAG
Post by: zuolun on June 11, 2016, 05:10:53 PM
Why is the EU Referendum so divisive in the UK? ~ 30 May 2016

Sterling falls as Brexit campaign enters final fortnight ~ 10 Jun 2016

EUR/GBP exchange rate forecast to trend lower on further Brexit warnings ~ 10 Jun 2016


Title: Re: RED FLAG
Post by: zuolun on June 13, 2016, 07:27:21 AM
Cox: Slicing global trade with a GE carving knife ~ 9 Jun 2016

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

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

( launches drone delivery in rural Jiangsu ~ 8 Jun 2016

( 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.

Title: Re: RED FLAG
Post by: king 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)
Registered investment advisor, CFA, portfolio strategy, macro
Send Message|The Universal

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
Title: Re: RED FLAG
Post by: king on June 20, 2016, 02:38:16 PM

Nearly All Assets Are Either Absurdly Overvalued Or Worthwhile Bargains
Steven Jon Kaplan   Steven Jon Kaplan⊕Follow(560 followers)
Contrarian, registered investment advisor, ETF investing, portfolio strategy
Send Message|True Contrarian
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.
Title: Re: RED FLAG
Post by: king on June 21, 2016, 07:19:30 AM

Soros – A Rudimentary Theory Of Bubbles

Tyler Durden's picture
by Tyler Durden - Jun 20, 2016 5:45 PM
Submitted by Lance Roberts via,

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.


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.


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
Title: Re: RED FLAG
Post by: king on June 22, 2016, 09:01:47 AM

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Title: Re: RED FLAG
Post by: king on June 29, 2016, 06:11:18 PM

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

Tyler Durden's picture
by Tyler Durden
Jun 28, 2016 8:12 PM
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
Title: Re: RED FLAG
Post by: zuolun on July 02, 2016, 01:59:02 AM
Taiwan mistakenly fires ‘carrier killer’ missile toward China ~ 1 July 2016

Taiwan fires ‘aircraft carrier killer’ missile toward China, hitting trawler in fatal accident ~ 1 July 2016

Title: Re: RED FLAG
Post by: zuolun on July 05, 2016, 03:03:22 PM
M’sian developers with exposure to Brexit give assurance ~ 30 Jun 2016

Nothing to see here

Is there any tax implication for Malaysians due to Brexit?  ~ 29 Jun 2016

Title: Re: RED FLAG
Post by: king 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.

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.
Title: Re: RED FLAG
Post by: king on July 05, 2016, 09:20:23 PM

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

Tyler Durden's picture
by Tyler Durden
Jul 5, 2016 8:05 AM
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
Title: Re: RED FLAG
Post by: zuolun 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


【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


Mainland manufacturer for MTR secretly recalls 35 trains from Singapore due to cracks ~ 5 Jul 2016

US firm scraps plan for China to build LA-Vegas rail line ~ 9 Jun 2016


China’s investment in embattled 1MDB throw Malaysian Prime Minister a lifeline - but carry a hidden price tag ~ 12 Jan 2016

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

Title: Re: RED FLAG
Post by: king on July 06, 2016, 08:09:02 AM

The Poisonous Gap Between Paper Wealth And Real Wealth

Tyler Durden's picture
by Tyler Durden
Jul 5, 2016 4:25 PM
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).

Title: Re: RED FLAG
Post by: king 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.
Title: Re: RED FLAG
Post by: king on July 06, 2016, 05:06:41 PM

回應(0) 人氣(707) 收藏(0) 2016/07/06 10:44
MoneyDJ新聞 2016-07-06 10:44:22 記者 陳苓 報導
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。

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。
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%。

MoneyDJ 財經知識庫
Title: Re: RED FLAG
Post by: zuolun on July 07, 2016, 07:55:39 AM
Defective SMRT trains were still fit and safe for service: LTA ~ 7 Jul 2016

SMRT train defects found in late 2013: Transport Ministry ~ 6 Jul 2016

Defects on SMRT trains 'not safety-critical', to be repaired by manufacturer: LTA ~ 5 Jul 2016

26 SMRT trains recalled by China manufacturer due to defects ~ 5 Jul 2016

China train manufacturer secretly recalls 35 trains from S'pore due to cracks - Part 1 of 2 ~ 5 Jul 2016

China train manufacturer secretly recalls 35 trains from S'pore due to cracks - Part 2 of 2 ~ 5 Jul 2016

Upcoming Malaysia-Singapore high-speed rail sparks interest from train makers ~ 5 May 2016


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


【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


Mainland manufacturer for MTR secretly recalls 35 trains from Singapore due to cracks ~ 5 Jul 2016

US firm scraps plan for China to build LA-Vegas rail line ~ 9 Jun 2016


China’s investment in embattled 1MDB throw Malaysian Prime Minister a lifeline - but carry a hidden price tag ~ 12 Jan 2016

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

Title: Re: RED FLAG
Post by: king on July 07, 2016, 08:56:57 AM

回應(0) 人氣(15) 收藏(0) 2016/07/07 08:15
MoneyDJ新聞 2016-07-07 08:15:41 記者 陳苓 報導
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)

MoneyDJ 財經知識庫
Title: Re: RED FLAG
Post by: king on July 09, 2016, 08:01:23 AM

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

Phoenix Capital Research's picture
by Phoenix Capital...
Jul 8, 2016 11:59 AM
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:

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research
Title: Re: RED FLAG
Post by: king on July 09, 2016, 08:04:03 AM

Weekend Reading: Central Banks Save The World

Tyler Durden's picture
by Tyler Durden
Jul 8, 2016 4:30 PM
Submitted by Lance Roebrts via,

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.


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
Title: Re: RED FLAG
Post by: zuolun on July 12, 2016, 06:39:12 AM
Bank Run July 2016 ~ 11 Jul 2016

The economist explains: Why Europe’s next crisis may be in Italy ~ 11 Jul 2016

Is a run on Italian banks a possibility? ~ 5 Jul 2016

Title: Re: RED FLAG
Post by: king 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.
Title: Re: RED FLAG
Post by: king on July 15, 2016, 07:52:03 AM


Tyler Durden's picture
by Tyler Durden
Jul 14, 2016 8:23 AM
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.

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
Title: Re: RED FLAG
Post by: king on July 17, 2016, 02:35:06 PM

2016-07-17 08:39























Title: Re: RED FLAG
Post by: king 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
Saturday, 16 Jul 2016 | 4:53 PM ET
COMMENTSJoin the Discussion
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 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."
Title: Re: RED FLAG
Post by: king on July 19, 2016, 08:17:49 AM

There’s something eerily familiar about the recent market bounce
Alex Rosenberg   | @AcesRose
6 Hours Ago
COMMENTSJoin the Discussion
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
Title: Re: RED FLAG
Post by: king 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.


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).


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.



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
Title: Re: RED FLAG
Post by: king on July 20, 2016, 07:24:13 AM

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

Tyler Durden's picture
by Tyler Durden
Jul 19, 2016 4:55 PM
Submitted by Lance Roberts via,

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.


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.


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.


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.


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.


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
Title: Re: RED FLAG
Post by: king 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
Title: Re: RED FLAG
Post by: king on July 22, 2016, 07:35:44 AM

Complacency Is Creeping Back Into The Stock Market

Tyler Durden's picture
by Tyler Durden
Jul 21, 2016 3:10 PM
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.



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%:


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.
Title: Re: RED FLAG
Post by: king 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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Home » Gold » Gold News » Trends Forecaster Gerald Celente Warns Panic of 2016 is at the Doorstep

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…”
Title: Re: RED FLAG
Post by: king 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…
Title: Re: RED FLAG
Post by: king 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…
Title: Re: RED FLAG
Post by: king 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

Tyler Durden's picture
by Tyler Durden
Jul 23, 2016 4:18 PM
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
Title: Re: RED FLAG
Post by: king 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…
Title: Re: RED FLAG
Post by: king on July 26, 2016, 07:27:23 AM

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

Tyler Durden's picture
by Tyler Durden
Jul 25, 2016 2:17 PM
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.
Title: Re: RED FLAG
Post by: king on July 26, 2016, 04:24:30 PM

2016-07-26 15:57










Title: Re: RED FLAG
Post by: king 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…
Title: Re: RED FLAG
Post by: king 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.
Title: Re: RED FLAG
Post by: king on July 30, 2016, 09:13:02 AM

Gundlach: "Sell Everything, Nothing Here Looks Good"

Tyler Durden's picture
by Tyler Durden
Jul 29, 2016 5:58 PM
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.
Title: Re: RED FLAG
Post by: king 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

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Title: Re: RED FLAG
Post by: king 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)


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 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.




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.”
Title: Re: RED FLAG
Post by: king on July 31, 2016, 08:56:48 AM

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

Tyler Durden's picture
by Tyler Durden
Jul 30, 2016 6:10 PM
Authored by Jesse Felder of,

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.
Title: Re: RED FLAG
Post by: king 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…
Title: Re: RED FLAG
Post by: king 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…
Title: Re: RED FLAG
Post by: king on August 03, 2016, 08:51:47 AM

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

Tyler Durden's picture
by Tyler Durden
Aug 2, 2016 7:19 PM
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
Title: Re: RED FLAG
Post by: king 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.


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Title: Re: RED FLAG
Post by: king on August 05, 2016, 08:55:06 PM

Deutsche Bank is BANKRUPT, Derivatives Collapse Coming! – Jim Rogers
Posted on August 4, 2016 by The Doc   26 Comments   12,795 views
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nuclear dollarJim Rogers Warns it’s Time to BUCKLE UP, a Derivatives Collapse is COMING
Title: Re: RED FLAG
Post by: king on August 06, 2016, 04:29:24 PM

Carl Icahn Has Never Been More Short The Market, Is Pressing For A Crash

Tyler Durden's picture
by Tyler Durden
Aug 5, 2016 7:24 PM
Three months ago, when looking at the 10-Q of Carl Icahn's hedge fund vehicle, Icahn Enterprises, L.P. (IEP) we found something striking: Carl Icahn had put his money where his mouth was. Recall that over the past year, Carl Icahn had become one of the most vocal market bears with a series of increasingly escalating forecasts. At first, he was mostly pessimistic about junk bonds, saying last May that "what's even more dangerous than the actual stock market is the high yield market." As the year progressed his pessimism become more acute and in December he said that the "meltdown in high yield is just beginning." It culminated in February when he said on CNBC that a "day of reckoning is coming."

Some skeptics thought that Icahn was simply trying to scare investors into selling so he could load up on risk assets at cheaper prices, however that turned out to be wrong when IEP revealed that as of March 31 it had taken its net short position from a modestly bearish 25% net short to an unprecedented for Icahn 149% short position, a six-fold increase in bearish bets.

However, even as other prominent billionaires piled onto the bearish side, the market soared. And then, after Q1, it soared some more to the point where as of the end of June, following the brief Brexit dump, it was just shy of all time highs (where it is now). So there was renewed speculation if Icahn had given up on his record bearish bet. So when overnight IEP released its latest 10-Q, we were eager to find out if Carl had unwound his record short, or perhaps, added more to it. What we found is that  one quarter after having a net short position of -149%, as of June 30, Icahn's net position was once again -149%, or in other words, he has once again never been shorter the market.


This is the result of a relatively flat long gross exposure of 174% (up 10% from the previous quarter) resulting from a 166% equity and 8% credit long, and another surge soaring short book which has  grown even more from -313% as of March 31, 2016 to a gargantuan 323% as of the last quarter, on the back of 301% in gross short equity exposure and 22% short credit.

This is what IEP added as detail:

Of our short exposure of 323%, the fair value of our short positions represented 24% of our short exposure. The notional value of our other short positions, which primarily included short credit default swap contracts and short broad market index swap derivative contracts, represented 299% of our short exposure.
With respect to both our long positions that are not notionalized (167% long exposure) and our short positions that are not notionalized (24% short), each 1% change in exposure as a result of purchases or sales (assuming no change in value) would have a 1% impact on our cash and cash equivalents (as a percentage of net asset value). Changes in exposure as a result of purchases and sales as well as adverse changes in market value would also have an effect on funds available to us pursuant to prime brokerage lines of credit.
With respect to the notional value of our other short positions (299% short exposure), our liquidity would decrease by the balance sheet unrealized loss if we were to close the positions at quarter end prices. This would be offset by a release of restricted cash balances collateralizing these positions as well as an increase in funds available to us pursuant to certain prime brokerage lines of credit. If we were to increase our short exposure by adding to these short positions, we would be required to provide cash collateral equal to a small percentage of the initial notional value at counterparties that require cash as collateral and then post additional collateral equal to 100% of the mark to market on adverse changes in fair value. For our counterparties who do not require cash collateral, funds available from lines of credit would decrease.
There was little incremental detail. One quarter ago, when asked about this unprecedented bearish position, Icahn Enterprises CEO Cozza said during the earnings call that "Carl has been very vocal in recent weeks in the media about his negative views" adding that "we’re much more concerned about the market going down 20% than we are it going up 20%. And so the significant weighting to the short side reflects that."

Considering that since then the market has soared higher on wave after wave of central bank intervention, which has brought the monthly total amount of global QE to just shy of $200 billion, after the latest QE increase by the BOE...


... perhaps Icahn's directional fears were displaced.  On the other hand, since Icahn has shown no interest in unwinding his bearish position, and has kept it identical to a quarter ago, one can conclude that the financier-rapidly-turning-politician, has merely delayed his bet for a day of reckoning for the S&P500.  Perhaps this time he will be right
Title: Re: RED FLAG
Post by: king on August 07, 2016, 08:10:39 AM

Why Oil Under $40 Will Bring It All Down Again: That's Where SWFs Resume Liquidating

Tyler Durden's picture
by Tyler Durden
Aug 6, 2016 7:30 PM
After several months of aggressive selling of stocks in late 2015 and early 2016, the culprit for the indiscriminate liquidation and concurrent market swoon was revealed when it emerged that the seller was not only China (which was forced to sell USD-denominated reserves to offset a surge in capital outflows following the Yuan devaluation), but also Sovereign Wealth Funds belonging to oil-exporting countries, who were dumping billions in risk assets to offset the collapse of the price of oil, which in turn exacerbated current account and budget deficits.

Among the prominent sellers was Norway and Saudi Arabia, arguably the biggest casualties of the death of the Petrodollar to date, as well as Abu Dhabi, Kuwait and most other SWFs, listed on the tabel below.


As JPM calculated back in January, the SWF equity selling was inversely proportional to the price of oil: according to the bank, SWF's would liquidate some $75 billion in equities in 2017 assuming oil at $31 per barrel. Needless to say, the lower oil goes, the more selling there would  be.

"This prospective $75bn of equity selling by SWFs in 2016 is not huge but becomes significant after taking into account the potential swing in equity fund flows," JPM continued, in an attempt to discuss the impact this will have on markets. "Last year retail investors bought $375bn of equity funds globally. This year we expect an amount between 0 and $200bn. Subtracting $75bn of selling from SWFs would leave the overall equity flow from Retail+SWF investors barely positive for 2016."

Then starting in February, oil - which had just tumbled to the low-$20s, its lowest price in over a decade - underwent a miraculous surge catalyzed by erroneous, if constantly reiterated, narrative of an imminent OPEC supply cut, a short squeeze, an algo stop hunt, an unprecedented Chinese importing spree to replenish its now almost full Strategic Petroleum Reserve, and even speculation of central bank intervention to prop up the "black gold." In fact, just a few months after February, oil had doubled, reaching $50 even as we and many others warned, that there simply is not enough demand and far too much supply to sustain such a price.

No matter the cause, the biggest benefit of this oil surge is that the same SWFs which were actively selling stocks in early late 2015 and early 2016 put their liquidation on hold as oil rose above $40. And in this illiquid, low volume market, the absence of a determined seller is all that it took to push the S&P to all time highs, and as of Friday's close, just shy of 2,200, a level which even sellside brokers such as Goldman believe is effectively in bubble territory and in the 99% percentile of all overvalued metrics.

However, just a few weeks later we are now back in a crude bear market, with oil briefly dipping under $40, on the back of concerns about a gasoline glut and fears that the resurgent dollar will further pressure oil. Worse, with oil returns back to the $40 range and threatens to accelerate the move to the downside, it also brings back with it the specter of SWF liquidations, because as JPM's Nikolaos Panigirtzoglou points out in his latest weekly note, that's where the wealth fund selling returns.

Here is why as oil approaches $40, the price of crude suddenly matters a lot to equity bulls:

We had noted in F&L April 22nd what the impact would be of a $45 average Brent oil price on SWF behavior. At the time, we noted that the stability in oil prices meant that the pressure on SWFs to abruptly sell assets would diminish over time. In addition, we argued that SWF selling should focus more on fixed-income securities during the last three quarters of the year, given that SWFs mostly liquidated equity and HF mandates during last year and the first quarter of this year. However, given recent declines in oil prices, we revisit the analysis assuming an average oil price of $40 for 2016 vs $45 before. The YTD average has already fallen to $42.
In our previous analysis based on a $45 average oil price for 2016, we projected the current account balance for oil-producing countries to worsen from around -$70bn in 2015 to -$140bn in 2016. This estimate is based on the same sensitivity of the current account balance to the change in oil prices as last year, i.e. between 2014 and 2015. However, the depletion of official assets could be higher than the current account deficit if these countries also experience capital outflows as it happened last year. If we assume $80bn of capital outflow for 2016, the same level as last year, we project a depletion of $150bn in FX reserves and a depletion of $50bn in SWF assets.
If we assume an average oil price of $40 for 2016 instead, using a similar sensitivity analysis and assumptions as described above, we project the current account balance for oil-producing countries to worsen from around -$70bn in 2015 to -$183bn in 2016. This would imply depletion of $170bn in FX reserves and a depletion of $75bn in SWF assets.
The differences in the SWF selling using the two different average oil price assumptions can be seen in Figure 9.

A $40 average oil price, and assuming that these reserve managers and SWFs sell in accordance to their average allocation, would imply selling of $118bn of government bonds and $45bn of public equities. If we assume reserve managers and SWFs are mostly done with selling equities and that they are more likely to liquidate fixed-income mandates, this would imply selling of around  $120bn-$160bn of government bonds and $10bn-$15bn of corporate bonds. However, should oil prices continue to fall further below $40 on a sustained basis, SWFs would face greater pressure to sell equity mandates, similar to the end of last year and the beginning of this year.
Indeed: the lower the price of oil drops, the faster what until recently had been a paradoxical disconnect (and even a negative correlation between oil and risk assets as we showed earlier), will recouple. And it's not just the SWF selling: recall that earlier this week, JPM's head quant Marko Kolanovic warned that should oil return back to the $30s, it would also trigger program selling of stocks.

CTA signals for oil recently turned from strongly positive to moderately negative. This has contributed to past-month divergence between S&P 500 and oil (~1.5 standard deviations) and is closely monitored by equity and high yield credit investors. It is our view that the risk of CTAs significantly increasing oil shorts over the next 1 month is low. For oil momentum to further deteriorate, oil would need to drop to ~$30 at which point the medium term momentum (strongest signal) would turn negative and trigger selling.
To summarize, if oil were to drop back under $40, not only would it precipitate even more selling of oil as momentum strategies flip, but it would catalyze a liquidation by those SWFs who thought they were done selling equities, leading to a return of the same sellers that pushed the S&P back to the low 1,900s a short 6 months ago.

So for all those curious where stocks are going next, the simple answer is: keep an eye on what oil does next.
Title: Re: RED FLAG
Post by: king on August 29, 2016, 11:53:44 AM

2016-08-29 08:50
本来叶伦上周五在Jackson Hole央行年会前发言,指美国加息的因素在加强,由于叶伦的公信力早已濒临破产,大家都不以为意,美股稍稍一chok便随即挟升,但其后联储局第二号人物副主席费希尔(Stanley Fischer)加多一句“美国今年有加息两次的可能”,道指随即急挫逾200点!
(香港29日讯)本来叶伦上周五在Jackson Hole央行年会前发言,指美国加息的因素在加强,由于叶伦的公信力早已濒临破产,大家都不以为意,美股稍稍一chok便随即挟升,但其后联储局第二号人物副主席费希尔(Stanley Fischer)加多一句“美国今年有加息两次的可能”,道指随即急挫逾200点!







Title: Re: RED FLAG
Post by: king on September 01, 2016, 07:45:32 AM

Bullishness among traders has hit a disturbing 3-year high

   Sam RoAugust 31, 2016
Ignore the warning signs at your peril.View photos
Ignore the warning signs at your peril. (Image:
There’s been an eery calm in the financial markets. The S&P 500 (^GSPC) hasn’t seen an up or down move of greater than 1% in 36 trading sessions.

Wall Street strategists warn that markets aren’t pricing in the slew of uncertainties that lie just beyond the horizon. Catalysts for volatility include the US presidential election, the next Fed rate hike, the evolving Brexit narrative in Europe, etc.

Gluskin Sheff’s David Rosenberg points to a variable in the derivatives markets that may make the stock market more sensitive and vulnerable should things go south.

“The net speculative position on the CME as far as SPX contracts are concerned have ballooned nearly 70% since mid-July to 38,083 net longs, a bullish bet we have not seen since June 2013, and this is one vivid sign of just how complacent the masses are,” Rosenberg wrote on Wednesday.

Traders and sophisticated investors use derivatives such as options and futures contracts to adjust their exposures to stock markets, largely because it’s cheaper and more tax-efficient.

The stock market's buyers are looking exhaustedView photos
The stock market’s buyers are looking exhausted. (Image: Gluskin Sheff)
“The buyers look to have exhausted themselves at this point,” he said.

Elsewhere in the derivatives markets is the CBOE Volatility Index (^VIX). VIX measures the premium people are willing to pay to protect themselves from price volatility. And lately, it’s been way below average.

Rosenberg argues that the low VIX and elevated valuations have been unfavorable for the market’s bulls. And it all speaks to the same theme of complacency and perennial bullishness as the stock market continues to trade near all-time highs.

“As per Bob Farrell and his Rule #5, ‘the general public buys the most at the top and the least at the bottom’,” he warned.

Sam Ro is managing editor at Yahoo Finance
Title: Re: RED FLAG
Post by: king on October 13, 2016, 07:40:45 PM

HSBC: RED ALERT — Get ready for a ‘severe fall’ in the stock market
BOB BRYAN MARKETS    OCT. 12, 2016, 8:35 PM

red warnings flare
Wolfgang Rattay/Reuters
England fans in Lille, France, June 15, 2016.

HSBC’s technical analysis team has   thrown up the ultimate warning signal.

In a note to clients, Murray Gunn, the head of technical analysis for HSBC, said that he is now on “RED ALERT” for an imminent sell-off in stocks given the price action over the last few weeks.

Gunn uses a type of technical analysis called the Elliott Wave Principle, which tracks alternating patterns in the stock market to discern investors behavior and possible next moves (more details here).

In late September, Gunn said the stock market’s moves looked eerily similar to just before the 1987 stock market crash. Of note, Citi’s Tom Fitzpatrick also highlighted the market’s similarities to the 1987 crash just a few days ago. Then on September 30, Gunn said stocks were under an “orange alert” as they looked as if they had topped out.

And now given the 200 point decline for the Dow on Tuesday, Gunn said that the drop is here.

“With the US stock market selling off aggressively on 11 October, we now issue a RED ALERT,” said Gunn in the note. “The fall was broad-based and the Traders Index (TRIN) showed intense selling pressure as the market moved to the lows of the day. The VIX index, a barometer of nervousness, has been making a series of higher lows since August.”

Gunn said that if the Dow Jones Industrial Average falls below 17,992 or the S&P 500 dips under 2,116, the selling would truly set in. The Dow closed at 18,128 on Tuesday, while the S&P settled at 2136.

“As long as those levels remain intact, the bulls still have a slight hope,” said Gunn.

“But should those levels break and the markets close below (which now seems more likely), it would be a clear sign that the bears have taken over and are starting to feast. The possibility of a severe fall in the stock market is now very high.”

Watch out.


Screen Shot 2016 10 12 at 8.10.36 AM

Title: Re: RED FLAG
Post by: king on October 18, 2016, 06:35:39 AM

Stock Market Crash..or No Crash?
Stock-Markets / Stock Markets 2016
Oct 17, 2016 - 02:31 PM GMT
By: Anthony_Cherniawski

Martin Armstrong writes, “Apparently, there are a lot of people calling for a crash in the stock market as usual claiming it looks just like 1987. Sorry, there is nothing of that magnitude showing up at this time. We did elect one Weekly Bearish Reversal back at 18368. However, the main bank of support lies at 17710 followed by 17330. Only a weekly closing below 17330 would hint of a more serious correction.”

I agree that this market does not look like 1987. Trying to make a parallel between this market and another period is usually futile.

However, he points out to PAY ATTENTION to a break of the September 14 low at 17992.21….as I do, as well. This would warn of a drop to a lower level of support.


A lot of Armstrong’s computer analysis is based on pattern recognition. However, he may not have catalogued certain bear market patterns. For example, there is no recognition of the break of the lower trendline of the Ending Diagonal extending back to January 20.

SPX has not broken its 9-month trendline, but it has broken the lower trendline of an Orthodox Broadening Top, which has a high probability (96%) of at least a 10% correction, if not the full monte.

ZeroHedge reports, “World stocks started the week in the red Monday as the dollar touched a 7-month high and U.S. and European government bond yields climbed to their highest since June following the Friday speeches by Eric Rosengren and Janet Yellen which hinted the Fed's next step could be to pursue a steepening of the TSY yield curve the same as the BOJ.

Echoing what we said previously, Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote that "markets are reacting to the possibility that the Fed might join the Bank of Japan in conducting policy to steepen the yield curve. In the Fed's case, this might amount to running the gauntlet of higher inflation with a very slow pace of monetary tightening."

TNX appears to be drifting lower after challenging its 2-hour Cycle top at 17.97 on Friday and probing as high as 18.14 in the futures over the weekend.

The higher probe does not appear to register in today’s action, now that the cash market in Treasuries is open. If that resistance holds, we may have a reversal pattern the portends lower yields.

TNX is scheduled for a Master Cyle low starting in the last week of October. If the Cycles are on a two-week delay as I have suggested, that low may extend through election day.

The Shanghai Index B-shares took a 6.2% hit this morning. The B-Shares are less liquid than the A-Shares that we see in the chart to the left. However, we may wish to watch this market. Thus far we only see a drop of 22.50 points in the Shanghai Composite. However, a drop beneath 3000.00 may set off a panic decline this week.

USD probed to 98.15 over the weekend, just three ticks high than the 98.12 high registered on Thursday. Whether it shows up in the daily cash market is unknown, but it appears that this weekend was marked by the Cycles Model for an (inverted) Trading Cycle high. It is now due for a sharp decline into a Master Cycle low that may not be complete until after the election.

Gold also sports a Triangle Wave (B), as does the SPX. Whatever may be happening may affect stocks and commodities, including Gold, as the USD plummets. I hope that I am wrong and Gold offers a safe haven during the decline, but its looking less and less likely.

We should see a bounce, at least to the mid-Cycle resistance at 1255.50, but the Cycles Model says that the decline may continue for at least another 2 weeks. A drop beneath the Orthodox Broadening Top trendline at 1180.00 may trigger a decline to 900.00 or lower.

Title: Re: RED FLAG
Post by: king on October 19, 2016, 08:20:41 AM

Chart watcher: Stop comparing 2016 stock market to 1987

By William Watts
Published: Oct 18, 2016 5:56 p.m. ET

Getty Images
Black Monday was Oct. 19, 1987.
Stocks have stalled. Bond yields are rising. And perhaps most ominously—it’s October. So it’s no wonder investors are jumpy.

In fact, Wednesday will mark the 29th anniversary of Black Monday. On Oct. 19, 1987, stock markets around the world imploded, with the Dow Jones Industrial Average DJIA, +0.42%  dropping 508 points, or 22%, marking its largest one-day percentage decline on record.

A number of charts have been making the rounds warning of parallels with 1987. Market technical analyst Murray Gunn of HSBC last month warned that a breach of the 2,116-1,991 range by the S&P 500 SPX, +0.62%  or of the 17,992-17,063 area by the Dow could trigger a bigger selloff.


See: The stock market is turning into a sloppy, ugly mess—and it could get worse

Enter Ryan Detrick, senior market strategist at LPL Financial. The analyst offered a pair of charts in a late Tuesday blog post that seeks to put the market’s 1987 and 2016 performances in perspective.

Read: The stock market has been losing its grip on rallies at 3 key times during the day

First up, he acknowledges that the pattern in 2016 and 1987 bear some similarities:

Source:: LPL Financial LLC.
But Detrick argues that there are also some significant differences, as well as ongoing arguments over exactly what caused the 1987 crash. The “bottom line,” he writes, is that 1987 saw stocks rocket higher in a near vertical start to 1987, leaving the S&P 500 up nearly 40% by the end of September. The fact that stocks were “extremely stretched” made a large pullback much more likely.

With that in mind, charting year-to-date percentage returns “shows a totally different story and diffuses much of the worry about a coming 20% drop,” Detrick said, pointing to the chart below:

Detrick isn’t a fan of overlaying a chart from one year on top of another, noting that a similar round of comparisons were made with 1929 in 2014.

“The bottom line is no two years are ever the same and to suggest they are is uninformed,” he wrote
Title: Re: RED FLAG
Post by: king on October 22, 2016, 03:57:17 PM

Obscure and rare chart pattern warns ‘uptrend is over’

By Tomi Kilgore
Published: Oct 21, 2016 5:50 p.m. ET

Dow has closed below its 50-day MA without touching 200-day MA intraday for 31 straight days
AFP/Getty Images
An obscure and rare chart pattern, which on the surface appears to say nothing, is actually sending an important message about the stock market, at least for the near term -- the rally off the February lows has already ended.

The Dow Jones Industrial Average DJIA, -0.09%   closed below its 50-day moving average, which many technicians believe defines the short-term trend, for the 31st straight session. At the same time, the Dow has yet to slip enough to touch its 200-day moving average, which is seen as a dividing line between longer-term uptrends and downtrends, even on an intraday basis.

The next longest streak that the blue-chip barometer was stuck between the two moving averages was the 29-day stretch ending in November 1989.

Mark Arbeter, a chartered market technician and president of Arbeter Investments LLC, said it isn’t uncommon for an index or stock to break below its 50-day moving average, and then stabilize, before heading down to its 200-day moving average.

But as history shows, the current stretch of stabilization is pretty rare indeed.

“What I believe the market is telling us is that the uptrend since February is over and that we need some time to pause/correct,” Arbeter said.

The reason for the bearish bent may be more behavioral than technical.

As any Wall Street trader will tell you, it is a lot easier to sit patiently with a long position, when the market is motionless, but in a bullish technical position, than it is when the market is doing nothing, but just below a key support level.

This type of inactivity is rare because it has to follow a rally strong enough to lift the 50-day moving average well above the 200-day moving average. And the initial pullback into short-term bearish territory had to be shallow enough, and not trigger any panicky follow-through selling, to keep the moving averages from converging too quickly.

The Dow closed Friday down 16.64 points at 18,145.71. That is below the 50-day moving average, which extended to 18,313.50 and has been falling by an average of 5.64 points a day this month, and well above the 200-day moving average at 17,671.17, which has been rising by an average of 4.20 points a day. See Market Snapshot.

Don’t miss: The stock market is caught deep inside ‘no man’s land.’

To break the multidecade streak, the Dow would have to close up over 162 points on Monday, or fall at least 470 points intraday.

In the current environment, the market is taking a much needed breather, Arbeter said, after such a sharp run up -- 19% -- from the Feb. 11 closing low to the August record highs.

“So far, the breather has not led to much price deterioration in the major indices, but we have certainly seen some weakness under the surface with respect to some breadth measurements,” Arbeter said.

For example, Arbeter said less than half of the stocks trading on the New York Stock Exchange are below their 50-day moving averages. “Three months ago, more than 80% of issues were above their 50-day average,” he said
Title: Re: RED FLAG
Post by: king on October 23, 2016, 07:47:27 PM

财经  2016年10月23日
全球化放缓 美国股市面临威胁



他们再度削减了他们所称的全球化溢价(globalization premium),乃至完全消除溢价。












安联投资(Allianz Global Investors)高级市场策略师朔伊雷尔(Stefan Scheurer)称,全球化正在日益受到围困。

瑞士信贷(Credit Suisse)驻欧洲首席投资员奥沙利文(MichaelO’Sullivan)称,美国企业的盈利周期和全球贸易紧密联动,过去两年美国企业利润下滑,全球贸易也放缓。



根据全球贸易预警机构Global Trade Alert研究员的统计,今年迄今为止,在全球范围实施的保护主义措施已增至338项,为该组织2009年开始追踪这一数据以来的同期最高值,去年同期为61项。

Global Trade Alert是由总部位於伦敦的独立智库经济政策研究中心(Centre for Economic Policy Research)协调运作的贸易观察组织。

实现全球贸易自由化的努力也陷入停滯,包括《跨大西洋贸易和投资伙伴关系协定》(Transatlantic Tradeand Investment Partnership),这是美国和欧盟间一项潜在的自由贸易协定。


在美国,彼得森国际经济研究所(Peterson Institute for International Economics)表示,美国总统候选人川普(Donald Trump)和希拉莉(HillaryClinton)提议的贸易政策將放缓生產力的增长,从而对美国经济造成深度伤害。

联邦快递集团(FedExCo.,FDX)首席执行员史密斯(Fred Smith)在该公司最近召开的財报电话会议上表示,他们对民主党和共和党在贸易问题上採取的立场感到非常担忧。


例如,法国资產管理公司Carmignac的克劳尔(Sandra Crowl)指出,即使其它国家(例如美国)正日趋採取贸易保护主义立场,但阿根廷或许会是一个从向全球开放的政策中获益的国家。

Title: Re: RED FLAG
Post by: king on October 25, 2016, 08:05:32 PM

Are Stocks 80% Overvalued? New Evidence Shocks Wall Street
BY JL YASTINE October 24, 2016
Several noted economists and distinguished investors are warning of a 50% stock market crash.

Mark Faber, Dr. Doom himself, recently told CNBC that “investors are on the Titanic” and stocks are about to “endure a gut-wrenching drop that would rival the greatest crashes in stock market history.”

Jim Rogers, who founded the Quantum Fund with George Soros, went apocalyptic when he said, “A $68 trillion ‘Biblical’ collapse is poised to wipe out millions of Americans.”

Unfortunately, these warnings are tame compared to their peers.

“U.S. stocks are now about 80% overvalued,” says Andrew Smithers, the chairman of Smithers & Co. He backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999. And we all know what happened next. Stocks fell by 89% and 50%, respectively.

This simple sandcastle analogy proves an economic collapse is imminent. Click here to see how...
This simple sandcastle analogy proves an economic collapse is imminent. Click here to see how…

Even the Royal Bank of Scotland says the markets are flashing stress alerts akin to the 2008 crisis. They told their clients to “Sell Everything” because “in a crowded hall, the exit doors are small.”

Blue chip stocks like Apple, Microsoft, and IBM will plunge.

But there is one distinct warning that should send chills down your spine … that of James Dale Davidson.

As a renowned economist, best-selling author, and founder of Strategic Investment, Davidson makes the strongest case for a looming crisis — “Right now, there are three key economic indicators screaming SELL. They don’t imply that a 50% collapse is looming, it’s already at our doorstep.”

Editor’s Note: Click Here to See the 3 Indicators That Prove a 50% Stock Market Collapse is Looming.

Davidson’s warning is the most alarming of all his peers.

Not just because he makes the strongest case for a collapse (he uses over 20 unquestionable charts to prove his point), but also because Davidson has a remarkable track record of calling every major economic shift over the last three decades. For example, Davidson predicted the collapse of 1999 and 2007, along with the fall of the Soviet Union and Japan’s economic downfall, to name just a few.

 His predictions are so accurate, he’s been invited to shake hands and counsel the likes of former presidents Ronald Reagan and Bill Clinton — and he’s had the good fortune to befriend and convene with George Bush Sr., Steve Forbes, Donald Trump, Margaret Thatcher, Sir Roger Douglas and even Boris Yeltsin.

Hence, if Davidson calls for a 50% market correction, one should pay heed.

Davidson goes on to say, “I know that everywhere you turn things look pretty good. The market is near all-time highs, the dollar is strong, and real estate is booming again. But remember, the exact same scenario played out in 1999 and 2007. The economy is unraveling right now, and fast. Very fast.”

However, it’s not just a 50% stock market collapse that Davidson is warning about. He also predicts that “real estate will plummet by 40%, savings accounts will lose 30%, and unemployment will triple.” (To see Davidson’s research behind these predictions, click here.)

“I am not a man who likes to preach doom,” Davidson reminded me.

Indeed, during his career, he’s made investment recommendations that have spun off a good deal of money … like the $10 million windfall he banked in a natural-resource company, and the time he told people to scoop up Philip Morris for gains of 405%.

And although our future may seem bleak, as Davidson says, “There is no need to fall victim to the future. If you are on the right side of what’s ahead, you could seize opportunities that come along once, maybe twice, in a lifetime.”

In a new video presentation Davidson not only explains exactly why the economy is already collapsing, but also reveals what he and his family are doing to prepare right now. (It’s unconventional and even controversial, but proven to work.)

While Davidson intended the video for a private audience only, original viewers leaked it out and now tens of thousands are downloading the video every day.

One anonymous viewer wrote “Davidson uses clear evidence that spells out the looming collapse, and he does it in a simple language that anyone can understand.”

Indeed, Davidson uses a sandcastle, a $5 bill, and straightforward analogies to prove his points.

With his permission, I reposted the video on a private website
Title: Re: RED FLAG
Post by: king on October 27, 2016, 06:46:37 AM

Opinion: Biggest risk to economy: Fed-fueled bubbles could pop
By Martin Feldstein
Published: Oct 26, 2016 1:25 p.m. ET

Economy is in good shape, but high asset prices are a danger, writes Martin Feldstein

Stocks prices are about 60% above the long-term average.
CAMBRIDGE, Mass. (Project Syndicate) — Although the United States economy is in good shape — with essentially full employment and an inflation rate close to 2% — a world of uncertainty makes it worthwhile to consider what could go wrong in the year ahead. After all, if the U.S. economy runs into serious trouble, there will be adverse consequences for Europe, Japan, and many other countries.

Economic problems could of course originate from international political events. Russia has been acting dangerously in Eastern and Central Europe. China’s pursuit of territorial claims in the East and South China Seas, and its policies in East Asia more generally, is fueling regional uncertainty. Events in Italy could precipitate a crisis in the eurozone.

But within the U.S., the greatest risk is a sharp decline in asset prices, which would squeeze households and firms, leading to a collapse of aggregate demand. I am not predicting that this will happen. But conditions are becoming more dangerous as asset prices rise further and further from historic norms.


Equity prices, as measured by the price-earnings ratio of the S&P 500 stocks SPX, -0.17%  , are now nearly 60% above their historical average. The price of the 30-year Treasury bond is so high that it implies a yield of about 2.3%; given current inflation expectations, the price should be about twice as high. Commercial real-estate prices have been rising at a 10% annual pace for the past five years.

These inflated asset prices reflect the exceptionally easy monetary policy that has prevailed for almost a decade. In that ultra-low-interest environment, investors have been reaching for yield by bidding up the prices of equities and other investment assets. The resulting increase in household wealth helped to bring about economic recovery; but overpriced assets are fostering an increasingly risky environment.

To grasp how risky, consider this: U.S. households now own $21 trillion of equities, so a 35% decline in equity prices to their historic average would involve a loss of more than $7.5 trillion. Pension funds and other equity investors would incur further losses. A return of real long-term bond yields to their historic level would involve a loss of about 30% for investors in 30-year bonds and proportionately smaller losses for investors in shorter-duration bonds. Because commercial real-estate investments are generally highly leveraged, even relatively small declines in prices could cause large losses for investors.

The fall in household wealth would reduce spending and cause a decline in gross domestic product. A rough rule of thumb implies that every $100 decline in wealth leads to a $4 decline in household spending. The return of asset prices to historic levels could therefore imply a decline of $400 billion in consumer spending, equal to about 2.5% of GDP, which would start a process of mutually reinforcing declines in incomes and spending leading to an even greater cumulative impact on GDP.

Because institutional investors respond to international differences in asset prices and asset yields, the large declines in U.S. asset prices would be mirrored by similar declines in asset prices in other developed countries. Those price declines would reduce incomes and spending in other countries, with the impact spread globally through reduced imports and exports.

I must emphasize that this process of asset-price declines and the resulting contraction of economic activity is a risk, not a prediction. It is possible that asset prices will come down gradually, implying a slowdown rather than a collapse of spending and economic activity.

But the fear of triggering a rapid decline in asset prices is one of the key reasons why the Federal Reserve is reluctant to raise short-term interest rates more rapidly. The Fed increased the overnight rate by just 0.25% in December 2015 and is likely to add just another 25 basis points in December 2016. But that will still leave the federal funds rate at less than 1%. With the inflation rate close to 2%, the real federal funds rate would still be negative.

Market participants are watching the Fed to judge if and when the process of interest-rate normalization will begin. Historical experience implies that normalization would raise long-term interest rates by about two percentage points, precipitating substantial corrections in the prices of bonds, stocks, and commercial real estate. The Fed is therefore trying to tamp down expectations concerning future interest-rate levels, by suggesting that changes in demography and productivity trends imply lower real rates in the future.

If the Fed succeeds, the decline in asset prices may be diminished. But the danger of sharp asset-price declines that precipitate an economic downturn should not be ignored.

This article has been published with the permission of Project Syndicate — What Could Go Wrong in America?
Title: Re: RED FLAG
Post by: king on October 27, 2016, 08:20:33 PM

487点看 2016年10月27日




德意志银行首席美国经济学家Joseph LaVorgna周三在发送给客户的研报中表示,这是该指数近40年来第八次出现同比下滑。LaVorgna写道,在过去七次,有四次随之而来的是经济衰退。(在其他三次当中,两次是虚惊一场,分别在1986-87年和1995-96年;在1981年经济衰退开始不久后,LMCI同比变化变为负值。)






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英国MP Evans集团
Title: Re: RED FLAG
Post by: king on November 05, 2016, 08:39:10 AM

There are four market risks bigger than the election and Fed, financial advisor says
Michelle Fox   | @MFoxCNBC
Thursday, 3 Nov 2016 | 4:37 PM ET
COMMENTSStart the Discussion
 Forget the election and Fed, there are bigger market risks   Forget the election and Fed, there are bigger market risks 
Thursday, 3 Nov 2016 | 2:15 PM ET | 03:51
Investors may be focused on the election and the possibility of a Federal Reserve interest rate hike, but there are bigger risks to the market, financial advisor Ron Carson told CNBC on Thursday.
Specifically, he believes there are four major disruptors investors need to be prepared for, the biggest concern being emerging technology's impact on industries.

"I think we're at the very beginning stages of having total disruption," the CEO of Carson Wealth Management said in an interview with "Power Lunch."

"It's going to replace massive number of jobs."
The other "buses" Carson believes are heading for financial advisors and their clients are the global central banks' unprecedented negative interest rates, regulatory forces in every industry stifling innovation and making growth more expensive, and investors and clients pulling money out of the markets.

His advice to investors is to "hug your risk budget."

"Investor behavior is what destroys wealth because they are not prepared for what can possibly happen," said Carson, who is a member of the CNBC Digital Financial Advisor Council.

"It's expensive to hedge, but it's fire insurance."

Carson said he believes the stock market will be slightly higher in 10 years, maybe by compounded 2 or 3 percent. That means investors need to look for alternative ways to accumulate wealth.

"There will be some real opportunities along the way."

— CNBC's Hailey Lee contributed to this report
Title: Re: RED FLAG
Post by: king on November 06, 2016, 04:45:33 PM

David Stockman warns both Trump and Clinton could lead to 25% sell-off
Brian Price   | @PriceCNBC
11 Hours Ago
COMMENTSJoin the Discussion
 Stockman: Sell everything   Stockman: Sell everything 
Thursday, 3 Nov 2016 | 5:07 PM ET | 05:23

05:23Stockman: Sell everything
Stockman: Sell everything 
11/03/16 5:07 PM ET
03:04Stockman talks election and markets
Stockman talks election and markets 
10/11/16 4:23 PM ET
05:07Trump: So bad he's good?
Trump: So bad he's good? 
09/14/16 5:41 PM ET

David Stockman, the man widely credited as the "Father of Reaganomics", delivered an alarming message to investors.

Sell everything!

inRead invented by Teads

"The markets are hideously inflated," warned Stockman on CNBC's "Fast Money" this week. The former Director of the Office of Management and Budget under President Ronald Reagan urged investors to dump stocks and bonds ahead of the dangers that both Donald Trump and Hillary Clinton pose to markets if either is elected as President.

"If you don't sell before the election, certainly do it afterwards. Government is going to be totally paralyzed regardless of who wins," he said. "There could be a 25 percent draw down on markets."
Stockman posits that, under a Clinton administration, official investigations and new hacked email disclosures from Wikileaks will be non-stop. Furthermore, he reasoned that the "house will become a killing field" for anything Clinton is trying to do. Ultimately, Stockman said the Democrat would enter the Oval Office bruised, bloody and all but lacking in legitimacy.

"For six months, or even longer, there will acrimony, there will be brinkmanship, there will be paralysis. There will be a swarm of house committees doing investigations from all of these wiki leaks!" Stockman said of Clinton's hypothetical early days in the White House.

"Therefore, there will be no baton handed off from the Fed to fiscal policy as we slide into recession," he added.

Stockman, who spent twenty years on Wall Street with Salomon Brothers and Blackstone and served as a Congressman for Michigan, said the IRS is the government agency that is the clearest indicator that a storm is brewing over financial markets.

"The IRS said that last year revenue was up 1 percent and, in the last quarter, it was down 4 percent," explained Stockman. "And, in the five months since May, payroll withholding was barely keeping even with wage inflations. That means the work hours aren't happening."

From here, Stockman reasoned that with a paralyzed congress, a soon-to-expire debt ceiling, a powerless central bank and a market that's been flat for 700 days, that the pieces are in place for a crisis.

"We're in the same place today as we were in December of 2014," explained Stockman. "There's massive risk. So what's the possible reward?"

Indeed, the S&P 500 Index has gained just over 1 percent in nearly two years while the Dow Jones Industrial Average has gained just .70 percent.
Title: Re: RED FLAG
Post by: king on November 06, 2016, 04:49:56 PM

Latest Stock Market Crash Predictions: Warren Buffett

Warren Buffett has not predicted a stock market crash, but he has made some interesting investment decisions in recent years.

Buffett has been shedding his positions in some major U.S. stocks for the past several years, particularly those that rely on consumer spending. For example, between 2012 and 2014, Berkshire Hathaway cut its holdings of Johnson & Johnson (NYSE: JNJ) by 96.8% and slashed holdings of Kraft Foods Group Inc. (Nasdaq: KRFT) by 99.7%.

While Buffett, in a spring interview with CNBC, indicated that he felt optimistic about the market long term, his actions haven't reflected this same level of confidence. Despite still being heavily invested in consumer and financial stocks, a recent SEC filing reveals some interesting news.

Profit Alert: The Subprime Auto Loan Market Is About to Collapse – Here's How to Profit

Buffett is now holding $55 billion in cash, the largest reserve ever held by his company.

Latest Stock Market Crash Predictions: George Soros

In the spring of 2016, Soros made it clear that he believes we're headed for a situation similar to the stock market crash of 2008.

Soros hedged his own positions by purchasing 19 million shares of Barrick Gold Corp. (NYSE: ABX) and began placing "put" options on S&P 500 stocks mid-year. He purchased 2.1 million put options in the spring and increased his holdings to 4 million options as of the end of June. Soros believes that much of the trouble with the current financial markets has to do with China and its overabundance of debt.

Latest Stock Market Crash Predictions: Carl Icahn

Carl Icahn started warning investors of "danger ahead" back in September 2015. While the market took a dip in early 2016, it recovered and many investors turned away from Icahn's prediction.

Icahn is now warning of a "Day of Reckoning" should we not receive some sort of economic stimulus from Washington. Since that isn't likely to materialize, the billionaire investor has also bet big on a stock market crash. At last report, Icahn Enterprises has a net short position of 149%, meaning the value of its short positions far outweighs the value of its long positions.

Latest Stock Market Crash Predictions: Jeffrey Gundlach

CEO of the Los Angeles-based DoubleLine Capital, Jeffrey Gundlach oversees more than $100 billion in investments. Gundlach is a member of the Barron's Roundtable and is considered a top fixed-income investor.

As of this summer, Gundlach announced that he is heavily invested in gold and gold miner stocks while avoiding many other stocks. Gundlach also admitted in September that his firm is shorting consumer discretionary stocks, a sure sign that its market outlook remains dim.

Don't Miss: One of the Best Defense Stocks to Buy Now

Latest Stock Market Crash Predictions: Sandy Jadeja

The name Sandy Jadeja may not be instantly familiar to the average investor, but market experts have learned to listen when he makes a prediction. Jadeja is a technical analyst and chief market strategist at Core Spreads. He also accurately predicted four previous stock market crashes to the precise date and time.

Just a year ago, Jadeja predicted that early January was going to be bad news for the Dow, which went on to lose 11.2% over 11 trading days. While Jadeja's latest date predictions haven't come to pass, they remain an ominous warning of a potential stock market crash in 2016.

Latest Stock Market Crash Predictions: Robert Kiyosaki

Robert Kiyosaki published the book "Rich Dad Poor Dad" in 2001 and changed the way millions of people view money and investments.

What many don't realize is that Kiyosaki also predicted a 2016 stock market crash in his 2002 book "Rich Dad's Prophecy." In the book, Kiyosaki reasoned that 2016 would be the year that a massive wave of baby boomers would hit the age of 70 and begin taking distributions from traditional IRAs, effectively pulling money from the market.

Kiyosaki also blames China's long-running bubble and warns that a lack of economic stimulus is going to trigger a crash. He reports that he is heavily invested in gold and recommends this as a safe haven.

Latest Stock Market Crash Predictions: Shah Gilani

Money Morning Capital Wave Strategist Shah Gilani predicted the 2008 stock market crash and has a similar forecast for 2016. Gilani blames the central banks and their policies, which are devaluing currency and driving investors to stocks, effectively creating an overvalued market.

Gilani points out that, in the United States, growth in GDP (up just 1.2% in Q2) doesn't support these inflated market gains. Gilani is another expert that recommends a short position so that investors can profit from a market crash.

While there are so many experts predicting a stock market crash, the worst thing an investor can do is panic. That's why we've listed several ways for investors to protect themselves from a market crash…

Protect Yourself and Even Profit During a Stock Market Crash

If you were paying attention to what many of these market experts are doing, you already have an idea on how to protect yourself from a market crash. Investing in gold is a safe-haven move that pays off in volatile markets. Money Morning Global Credit Strategist Michael E. Lewitt recommends the SPDR Gold Trust (NYSE Arca: GLD).

While you can place "put" options on individual stocks, that's complicated, risky, and a lot of work. Instead, take a look at the ProShares Short S&P 500 ETF (NYSE Arca: SH), which is a reverse ETF that is going to make you money when the S&P 500 goes down.

And those are only two ways you can profit from a stock market crash. Here's our complete guide on how to protect yourself and even profit during a market crash.

Follow Money Morning on Facebook and Twitter.

Join the conversation. Click here to jump to comments…

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Title: Re: RED FLAG
Post by: king on November 18, 2016, 11:33:23 AM

86点看 2016年11月18日












 点赞 0赞
Title: Re: RED FLAG
Post by: king on December 09, 2016, 08:39:36 AM

Market indicator hits extreme levels last seen before plunges in 1929, 2000 and 2008
Tae Kim   | @firstadopter
7 Hours Ago
 Shiller: It's not a good time, but I'm not saying panic   Shiller: It's not a good time, but I'm not saying panic 
7 Hours Ago | 06:10
While the S&P 500 is reaching all-time highs on optimism over Donald Trump's economic agenda, some Wall Street strategists are increasingly worried about a widely followed valuation measure that's reached levels that preceded most of the major market crashes of the last 100 years.

"The cyclically adjusted P/E (CAPE), a valuation measure created by economist Robert Shiller now stands over 27 and has been exceeded only in the 1929 mania, the 2000 tech mania and the 2007 housing and stock bubble," Alan Newman wrote in his Stock Market Crosscurrents letter at the end of November.

Newman said even if the market's earnings increase by 10 percent under Trump's policies "we're still dealing with the same picture, overvaluation on a very grand scale."

Shiller CAPE PE Ratio Chart


The Shiller "cyclically adjusted price-to-earnings ratio" (CAPE) is calculated using price divided by the index's average historical 10-year earnings, adjusted for inflation. Yale economics professor Robert Shiller's research found future 10-year stock market returns were negatively correlated to high CAPE ratio readings on a relative basis. He won the Nobel Prize in economics in 2013 for his work on stock market inefficiency and valuations.

Other academics agreed the current extreme CAPE ratio of 27.7 is a worrying sign for future returns versus bonds.

"Only when CAPE is very high, say, CAPE is in the upper half of the tenth decile (CAPE higher than 27.6), future 10-year stock returns, on average, are lower than those on 10-year U.S. Treasurys," Valentin Dimitrov and Prem C. Jain wrote in paper titled "Shiller's CAPE: Market Timing and Risk" on Nov. 17.

Even based on the more common price-earnings ratio, the market looks rich. The S&P 500's P/E based on earnings of the last 12 months is 18.9, the highest in more than 12 years, according to FactSet.

"U.S. valuations start off as being high both on a historical basis and also on a peer group. Certainly based on the Shiller PE, the equity market seems expensive," Jefferies chief global equity strategist Sean Darby wrote on Nov. 29
Title: Re: RED FLAG
Post by: king on December 15, 2016, 06:32:02 AM

 1 1 0 2
Stock, bond markets could see sharp declines: U.S. financial watchdog
Reuters | December 14, 2016
Low long-term interest rates have given businesses incentives to borrow and pushed investors to pay more for higher-yielding assets such as equities and commercial real estate, it said.

NEW YORK: Stock and bond markets may be riding for a fall as equity prices soar and interest rates stay low, a federal monitor of U.S. financial stability said on Tuesday, warning that such a tumble could inflict serious damage on banks, life insurers and other important parts of the economy.
The Office of Financial Research found stock valuations, measured by comparing prices to earnings, have reached the same high level that they hit before “the three largest equity market declines in the last century.”
At the same time, commercial real estate prices have climbed while capitalization rates, which measure properties’ returns, are close to record lows, it found.
A price shock in one of these markets could threaten financial stability by hurting funds and banks that have high leverage or rely on short-term funding, the office added in its annual report on the leading risks to the financial system.
In the report it said there were also risks posed by large and interconnected banks, Brexit, computer hacking, swaps clearinghouses, shadow banking and pressures on life insurance companies.
President-elect Donald Trump’s election victory has fueled a stock rally, with the S&P 500 and Dow hitting record highs on Tuesday, which could push valuations further upward. [.N]

The office also found nonfinancial firms went deeper into debt this year to take advantage of low interest rates. A possible wave of defaults by those companies could hurt their lenders: banks, mutual funds, life insurers and pensions. Credit to corporations is growing faster than the U.S. gross domestic product and the ratio of their debt to earnings “is historically high and rising,” it said.
“In the last three decades, corrections in corporate debt, equity prices, and commercial real estate prices have often coincided,” it said. “Continued low interest rates likely have strengthened the links among these markets.”
Low long-term interest rates have given businesses incentives to borrow and pushed investors to pay more for higher-yielding assets such as equities and commercial real estate, it said.
Investors are now vulnerable to “to heavy losses from even moderate increases in interest rates.”
The office was created in the 2010 Dodd-Frank Wall Street reform law to watch for warning signs of another financial meltdown on par with the 2007-09 crisis. It is housed in the Treasury Department, but its research supports the Financial Stability Oversight Council made up of the heads of all the financial regulators. While Trump and Republican lawmakers have pledged to roll back parts of Dodd-Frank, the office’s research is expected to continue.
Currently the government is in a court battle over FSOC’s designation of MetLife Inc (MET.N) as “systemically important,” which can lead to requirements to hold more capital.
In its report, OFR warned that low interest rates have pushed down insurers’ earnings and that the companies are vulnerable to stock market declines. Also, major insurers are connected to large banks and institutions, and there could be spillover effects if one failed, it said.
OFR said that since the crisis the U.S. banks often considered “too big to fail” have become more resilient.
But it added the eight biggest banks “remain large, complex, and interconnected enough to pose potential risks to the U.S. financial system.” The plans known as “living wills” that banks develop for managing a possible failure are weak and demonstrate that a bankruptcy could still threaten stability, it added.
Shadow banking, where companies that are not banks make loans, also poses a risk because lenders do not have government backstops and because there is limited data on the extent of its reach in the financial system, the report also said.
Title: Re: RED FLAG
Post by: king on December 20, 2016, 07:52:37 AM

Don't trust the market rally—a correction is coming
Wilfred Frost   | @WilfredFrost
8 Hours Ago
 What can ruin the Trump rally?   What can ruin the Trump rally? 
Friday, 16 Dec 2016 | 5:01 PM ET | 05:38
As the Dow flirts with hitting 20,000 for the first time ever, having risen more than 8 percent since the election, I am left thinking – SERIOUSLY?

The single biggest factor behind the market's rise over the last decade has been central bank support. That is now either being removed, or ineffective. Even if you think yields are rising for the right reasons, to expect a totally smooth and uneventful transition is hugely optimistic.

The "right reasons" would be moderate and stable inflation caused by sustainable growth. Even in the rosiest of outlooks, where we now transition to that, I would expect there to be bumps (and we are surely at the crest of one after the recent run). But I am also dubious that a significant and sustainable uptick in growth is imminent either way.

Interest rates going up do not have to be a bad thing. However, the world is MORE indebted today than it was coming into the crisis ten years ago. Yes some nations including the U.S. have cut their deficits since 2008 – but this merely slows the pace at which the national debt is increasing each year – it is still rising. In that regard, rising rates are a major headwind, and begs the added question of whether Trump's proposed fiscal expansion is coming too late (something that the low unemployment rate also suggests).

And in certain places leverage has not just continued to tick up but actually soared. China is the clear example. Last week was a great example – retail, manufacturing and fixed asset investment numbers were all encouraging. And then the following day we saw why – lending data shot up. The Chinese economy is propped up on loose policy and credit more than ever.

"The single biggest factor behind the market's rise over the last decade has been central bank support. That is now either being removed, or ineffective. Even if you think yields are rising for the right reasons, to expect a totally smooth and uneventful transition is hugely optimistic."
Plus, like many emerging markets, China is a major loser from the stronger dollar. As we were reminded earlier in 2016 the Yuan has been artificially propped up for years. On Friday, the Yuan was fixed at its lowest level in 8 years despite the PBOC's FX reserves dropping $120 billion in the last two months – the ability to continue to prop up the currency is slipping. Investors are more attuned to this particular issue than they were in January this year, but the potential for a negative China shock in 2017 is very real.

Elsewhere on the international scene there remain huge hurdles in Europe. Yes Brexit, Trump and the Italian referendum have suggested, in hindsight, that markets can overreact to political risk, but countries representing 42 percent of EU GDP face elections in the next 12 months, and that doesn't even include the UK which faces its own battles following the Brexit vote. And when it comes to the economy – and the same is true in Japan too – if the Trump optimism that has caused yields to rise globally does not sustain, what else can the ECB and BOJ do to stimulate what remains very low growth in those places?

One thing that makes me reconsider my bearishness is recent conversations with bank CEO's like Jamie Dimon and Brian Moynihan. Their tones have transformed from just a few months ago. But remember that the huge bounce in bank share prices comes in response not just to underperformance throughout 2016, but underperformance for the last decade.

Low interest rates and QE were good for many equities but not banks. Now, as rates rise it is clearly a boon for banks, and that doesn't even tackle the potential bonus if there is a change of direction in regulation. But – a positive stance on the banks does not necessarily mean good news for everyone.

Finally – even if you are upbeat about GDP growth, that doesn't necessarily mean you should be about equity markets. Correlations between the two are not in fact that strong. By definition rising rates make other asset classes like cash and bonds more attractive relative to the recent past. Plus, markets have run up sharply already – the Dow nearly doubling since 2009. Whilst it is hard to bet against the current upward momentum, a correction is due, and a more prolonged pullback is very possible too.
Title: Re: RED FLAG
Post by: king on December 23, 2016, 08:13:08 AM

Home   Markets   U.S. & Canada   Need to Know GET EMAIL ALERTS
Why January will be the end of any Dow 20,000 hopes
By Barbara Kollmeyer
Published: Dec 22, 2016 2:45 p.m. ET

Critical information for the U.S. trading day
AFP/Getty Images
Sliding back on the slow climb to 20K.
If the Dow was meant to have hit 20,000 by now, wouldn’t it have happened?

It’s a fair question to ask, as investors watch the index back off what seemed a sure thing only a few days ago. Some, like FXTM’s Hussein Sayed, say breaking that psychological level could open the door to more buyers, as it suggests bulls are still in control.

But the index DJIA, -0.12%  has run up 14% year-to-date, which opens up another investor dilemma.

“As gratifying as it would be for the Dow to hit 20,000, there’s an awful lot of potential profit that can be booked from the rally of the last six weeks,” ADS Securities’s Remo Fritschi says in his own note. Nuveen’s Bob Doll would disagree, as his latest advice is don’t hide out in cash.

On to our call of the day, which says forget 20,000 for now, because 19,000 is likely to come first. That is according to Newton Advisors’s Mark Newton, blogging for See It Market.

He expects stock markets will pull back in January, citing these reasons: overbought conditions; so-called exhaustion signals that show a market trend (up in this case) is nearing an end; and overly bullish investor sentiment. Others, like Northman Trader’s Sven Henrich, say red flags are piling up right now.

Newton notes how the Dow took 14 years to get from 10,000 to 15,000, three years to get from 15,000 to near 20,000, and then just two months to rise around 2,000 points.

“The mentioning of these levels, however, DOES play a critical role in giving conviction to those that are long, while nudging others to join the party. This often occurs at the exact wrong time. Investor sentiment tends to grow around round numbers, which is largely media-driven,” says Newton. Ouch!

It doesn’t look like the data is doing much to jolt this market out of its preholiday lull. Read on for more on the last big data dump of 2016.

Key market gauges
The Dow DJIA, -0.12%  and S&P 500 SPX, -0.19%  are tilting south. Read Market Snapshot for the latest.

It’s pretty quiet across most other markets. Asian stocks ADOW, -0.05% finished mostly lower, while European stocks SXXP, -0.21% are going nowhere fast.

The economy
Durable-goods orders dropped for the first time in five months, GDP was raised to a 3.5% growth rate, and weekly jobless claims jumped to a 6-month high.

The buzz
Apple AAPL, -0.18%  and Nokia NOK, -0.84% NOKIA, -4.91%  are getting ready to square off again in a dispute over patents. Report says Apple will release a top-tier iPhone code-named “Ferrari” next year.

Johnson & Johnson’s JNJ, +0.11%  talks to buy Actelion ATLN, +12.50%   are back on.

Report says Apple will release a top-tier iPhone code-named “Ferrari” next year.

Micron MU, -0.30%  shares surged late Wednesday after better-than-expected results.

Alibaba BABA, +0.12%  has been put back on a U.S. list of global marketplaces known for fake goods.

After meeting with President-elect Donald Trump, Boeing’s BA, +0.95%  CEO Dennis Muilenburg says the aircraft maker will get that Air Force One done a little bit cheaper than $4 billion.

The chart
Christmas tree sales are going through the roof. Sales are up an average 10%, versus 7% for last year, and that looks like the best season in a while, says Evercore (h/t The Daily Shot). What that probably means is consumers are just a little more joyful.

Evercore ISI, @modestproposal1, @DeanDijour
The stat
More than 85%—That is how much shares of the world’s oldest lender, Monte dei Paschi di Siena BMPS, -7.48% have fallen this year.

The Italian bank has been trying to stave off a collapse via a multibillion-euro cash call, but it looks like a state bailout is on the cards. Here’s a look at why investors should care about the MBPS crisis.

The quote
“This was a counterproductive exercise in reaffirming to the rest of the country that North Carolina wants to remain mired in this divisive dispute.” — Simone Bell, Southern regional director at gay-rights group Lambda Legal, after North Carolina lawmakers failed to stick to a deal to repeal a controversial bathroom law

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Denys Dlaboha 2 hours ago
Hey Barb - this happens every year in december - you should be fired!

of course volatility is high... everyone is going either on vacation or starting their holidays!!!! that's why the "fear" is kicking in... come january it'll pop! and dow will Shatter through 20K the morning of Monday Jan 23!

Write some real news!

mike chanoski 5 hours ago
who cares about dow20000. I have 10% in short term gains since the election...10% in 6 weeks. that my friends is not chump change! as cramer says bulls make money , bears make money and pigs get slaughtered. speaking of pigs I bought pork loins for 99 cents a pound. farmers gotta be hurting.   ME I JUST SOLD MY GAINS AND WILL WAIT TO SEE WHAT HAPPENS.  hope the weight does not break the wagon
Michael Galaburri 7 hours ago
The DOW is going to hit 20,000 whether we want it to or not, and it will be done anytime from now until the inauguration of January 20th.  After there probably will be somewhat of a pullback, but like it or not, this market is going higher - 22,000 on the DOW my friends.  Yep, you read it here.  The technicals are virtually always right, and though we have our healthy pullbacks, the markets will be rising another
10 to 12 percent in 2017 before there is a major pullback.
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Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. Intraday data delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc. All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More information on NASDAQ traded symbols and their current financial status. Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is at least 60-minutes delayed. All quotes are in local exchange time.
Title: Re: RED FLAG
Post by: king on December 23, 2016, 03:10:37 PM

2016-12-22 15:24







Title: Re: RED FLAG
Post by: king on December 24, 2016, 03:12:52 PM

The Dow hasn't traded in this narrow a range since 2014
Stocks quoted in this article:
12/23/2016 10:24 AM
After a massive post-election rally, the Dow Jones Industrial Average (DJIA) has been much quieter than usual over the past two sessions -- the quietest it's been in years, in fact. On Wednesday, the index traded in its narrowest range since July 2014 (on a percentage basis), and Thursday was another session in which the Dow traded in a span of less than 0.3%. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, these periods of eerily quiet trading could be a bearish signal for the blue-chip barometer.

Below are all the times these signals have sounded since 2012, sorted by the intraday range. The narrowest day was Dec. 30, 2013, with the index moving just 0.2% intraday. As you can see, this past Wednesday and Thursday's intraday ranges rank third and seventh, respectively.

Dow chart 1 Dec 22

Historically, these periods have proved foreboding for the Dow. Going back to 2012, the index has been negative across the board, on average, going out one month after a signal. Plus, the odds of the Dow being positive at any of those points weren't even a coin flip.

Comparing anytime returns since 2012, the Dow's odds of being higher were greater than a coin flip, going as high as 64.1% one month out. What's more, the Dow averages a one-month anytime gain of 0.72%, compared to a one-month post-signal loss of 0.72%. The range-bound behavior tends to beget more range-bound behavior for the Dow, too, as you can see from the the lower-than-usual standard deviation.

Dow chart 2 Dec 22

If history is any indicator, the Dow's dream of taking out the 20,000 level could be postponed in the short term. However, the index is still on pace for its seventh straight weekly win -- the longest since November 2014. And, as Schaeffer's Senior V.P. of Research Todd Salamone recently advised, "If you are a short-term trader, be open to trades on both the short and long side of the market. If you are a long-term investor, do not disturb your bullish positions."
Title: Re: RED FLAG
Post by: king on December 24, 2016, 03:18:25 PM

Stocks could suffer as Trump trade policy takes shape
Published: December 24, 2016 10:11 AM GMT+8


A holiday decoration is seen over Wall Street sign outside the New York Stock Exchange in New York. ― Reuters pic
A holiday decoration is seen over Wall Street sign outside the New York Stock Exchange in New York. ― Reuters pic
NEW YORK, Dec 24 — The year-end stocks rally on the heels of the election of Donald Trump as US president was built on expectations of reduced regulations, big tax cuts and a large fiscal stimulus.

Now signs are emerging from the Trump camp that harsher trade policies that could jeopardize the honeymoon are likely in the offing, and investors would be well advised to give those prospects more weight when gauging how much further an already pricey market has to run.

By naming China hawk Peter Navarro as head of a newly formed White House National Trade Council, the incoming administration is signaling Trump’s campaign promises to revisit trade deals and even impose a tax on all imports are very much alive.

Among the policies favored by Navarro and Trump’s pick for commerce secretary, Wilbur Ross, who has the president-elect’s ear on a range of economic issues, is a so-called border adjustment tax that is also included in House Speaker Paul Ryan’s “Better Way” tax-reform blueprint.

If implemented, economists at Deutsche Bank estimate the tax could send inflation far above the Federal Reserve’s 2 per cent target and drive a 15 per cent surge in the dollar.

Analysts calculate that, all else being equal, a 5 per cent increase in the dollar translates into about a 3 per cent negative earnings revision for the S&P 500 and a half-point drag on gross domestic product growth. The dollar index has already gained more than 5 percent since the U.S. election.

Harsher trade policies may not cause a full economic slowdown, “but I’d expect a localized recession in manufacturing and smaller gains in factory employment as well,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

He said the border tax could trigger retaliation, pouring uncertainty into the market.

“Even if the drafters of the legislation have pure intentions, other countries could use this as a pretext for propping up or subsidizing their own favorite industries.”

Stocks have rallied broadly since November 8, with the S&P 500 advancing by 5.7 per cent and the Dow Jones Industrial Average surging nearly 9 per cent to brush up against the 20,000 mark. Some sectors, such as banks, have shot up nearly 25 per cent in the post-election run.

US equities have gotten substantially pricier from a valuation vantage as well. The forward price-to-earnings ratio on the S&P 500 has risen by a full point since Election Day, from 16.6 to 17.6, Thomson Reuters data shows. That makes stocks about 17 per cent more expensive, relative to their earnings potential, than their long-term average multiple of around 15.

Small caps have gotten pricier still. The forward multiple on the Russell 2000 has risen to 26 from 22 on November 8, up 18 per cent, while the index price has climbed 14 per cent.

S&P 500 earnings are expected to rise 12.5 per cent next year, according to Thomson Reuters Proprietary Research estimates. Anything that impedes companies from achieving that target, such as a bump from a trade spat or further dollar appreciation in anticipation of new trade barriers, would undermine equity valuations.

In the latest Reuters poll of US primary dealers, economists at Wall Street’s top banks cited Trump’s evolving trade policies over other factors, such as fiscal policy, a strong dollar and higher interest rates, as the greatest risk to the near-term economic outlook.

The idea of a tax on imports “should alarm people,” according to Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

“If we do have a trade war that’s going to be a major negative” for stocks, he said, adding that the upward momentum in equities, alongside the lack of participation due to the upcoming holidays, have so far prevented a repricing but “we could cap the rally here, that could very well happen.”

O’Rourke said technology, a sector that represents the globalisation trade, would be among the hardest hit by taxing imports.

Deutsche Bank’s auto sector equities analyst estimated the border tax could slam other industries that rely on global supply chains, with the cost of a new car, for instance, jumping by as much as 10 per cent. — Reuters

- See more at:
Title: Re: RED FLAG
Post by: king on December 25, 2016, 02:32:39 PM

Is the stock market ignoring one of the most important risks of 2017?
By Ryan Vlastelica
Published: Dec 23, 2016 5:23 p.m. ET

Many questions remain about Trump’s policies and geopolitical aims
Getty Images
MOBILE, AL - DECEMBER 17: President-elect Donald Trump speaks during a thank you rally in Ladd-Peebles Stadium on December 17, 2016 in Mobile, Alabama. President-elect Trump has been visiting several states that he won, to thank people for their support during the U.S. election. (Photo by Mark Wallheiser/Getty Images)
In an increasingly tense world, why is Wall Street looking so sanguine?

From a geopolitical perspective, 2016 has been the most volatile year in recent history, with historic elections in Britain, Italy, and the U.S. The election of Donald Trump as U.S. president has ratcheted up anxieties, with the real-estate mogul recently saying that he planned to “greatly strengthen and expand” the country’s nuclear capability, raising the specter of a Cold War-era style arms race.

However, observers may be hard pressed to discern any signs of the swiftly shifting political landscape in the equity markets. After a rocky start, trading this year was marked by a rally that has taken major indexes to repeated records, but despite the tilt higher Wall Street has mostly been marked by a historic level of quiescence.

The CBOE Volatility index VIX, +0.09% a measure of investor anxiety, recently fell to its lowest level since August 2015. According to LPL Financial, the average level for the “fear index” in 2016 was below 16, the fifth straight year it has averaged below 20, the level considered its long-term average. Readings below 12 suggests that the market isn’t betting on any sharp market swings.

Despite that, investors are nearly unanimous that the events of the year have injected huge amounts of uncertainty into the economy. It is unknown what the fallout will be to the U.K.’s vote to exit from out of the European Union, known as Brexit, or the populist movements sweeping Europe. President-elect Donald Trump remains a wild card, as his tweets hint at potentially massive changes to U.S. policy on China, in addition to calling out companies and Wall Street executives.

“The world economy and markets have embarked on a journey into the unknown,” researchers at Pimco wrote in a Dec. 15 note. The firm didn’t adjust its outlook for 2017, but wrote that “our confidence in any particular scenario is low. The reason: the world has now fully arrived in the radically uncertain, ‘stable but not secure’ predicament.”

The most commonly invoked aphorism on Wall Street is “markets hate uncertainty.” So why hasn’t “a journey into the unknown” devolved into wild price swings? Some analysts believe that we might get that at some point—but not yet.

Read: Delayed reaction? Here’s when the latest terror attacks could rattle markets

See also: How Trump and Brexit are shaking up investment portfolios for 2017

Perhaps the biggest question mark among geopolitical issue involves Russia. On Monday, the Russian ambassador to Turkey was assassinated by a Turkish police officer, raising tensions that had already been elevated due to the country’s alleged hacking during the U.S. campaign; Moscow has been charged with stealing and leaking emails in an effort to interfere with the election in favor of Trump.

While top Senate Republicans have joined Democrats in calling for investigations into the issue, Trump has dismissed intelligence assessments of the hack, raising questions about the kind of response will be made by the government, if any.

“These are really big wild cards. You hear guys like [Sen. Majority Leader Mitch] McConnell saying that no matter what Russia did, they’re not our friend. And then Trump comes out to say he’s a fan of Putin—that’s a huge chasm, and we don’t know what side anyone is on,” said Michael Mullaney, director of global market research at Boston Partners, which manages $89 billion.

U.S. intelligence and Homeland security accused Russia of directing a series of cyberattacks to influence the outcome of the presidential election.

“If the election was tampered with, then there should be some kind of retaliation, which would fly in the face of both Trump and Tillerson, who is also very friendly with Putin. Those are significant curveballs, and all they do is add more uncertainty to the market,” said Mullaney.

Read: Wall Street’s ‘fear gauge’ implies that few are prepped for a stock-market shock

Mullaney was referring to Rex Tillerson, the chief executive officer of Exxon Mobil Corp. XOM, -0.18% who was recently named Trump’s secretary of state and has had business dealings with Russian President Vladimir Putin.

Despite the uncertainty, equities have risen steadily since the election, with investors betting that the broad outlines of Trump’s expected economic policy proposals—which include massive corporate tax cuts, deregulation, and heavy infrastructure spending—will accelerate economic growth and spur inflation.

“Markets have factored in the prospect of lower taxes. That’s the numerical rationale for these gains; it’s not just euphoria about a business-oriented president,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group. “We’re not that goofy, overall,” she said of market analysts.

Read: Wall Street’s Trump optimism comes with heavy dose of uncertainty

Trump has released few details about the policies he will pursue, making it difficult to evaluate their impact on the economy or corporate growth. Thus far, however, corporate optimism doesn’t seem to match the expectations conveyed by Wall Street’s rapid rise.

Nick Colas, chief market strategist at the ConvergEx Group, recently noted that 2017 revenue growth estimates for Dow components had fallen to 4.5% from the 4.8% that had been forecast before the election.

“If history is any guide, they will be trimming it further,” he wrote of company analysts in a newsletter. “Moreover, our first look at 2018 revenue [comparisons] for the Dow shows analysts expect top line growth to decelerate further, to just 3.7% versus 2017.”

Don’t miss: Stocks get Trump bounce, but not the real economy

Even if fundamentals don’t show signs of weakening, however, the prospect of elevated tension with military rivals like Russia, or with major trading partners like China or Mexico—both of which Trump has threatened to levy tariffs on—could be enough to bring markets down.

“If you look at headlines about our relationship with China getting choppy, or the degree to which we may become buddies with Russia, or about how Europe manages itself in this political age, then it’s easy to see why we expect volatility will come back into this market,” said Bill Belden, managing director at Guggenheim.

“The current lack of concern seems to be that the dust will settle in a way that’s not too dissimilar from what we have now, but even if that’s true, the path to the dust settling is uncertain.”
Title: Re: RED FLAG
Post by: king on December 25, 2016, 02:40:27 PM

Secular Stock Market Signals Have Occurred Only One Other Time Since 1928
Dec.23.16 | About: SPDR S&P (SPY) Get Alerts
Chris Ciovacco   Chris CiovaccoFollow(6,613 followers)
Multiple asset class via ETFs, proprietary market model, rules based system, Long, special situation short
Send Message|Ciovacco Capital Management

Secular trends typically last five to 25 years.

A secular bull market began in 1982.

Similar set-ups are in place in 2016.

Another Piece Of Long-Term Evidence

In recent months, several pieces of longer-term bullish evidence have surfaced, including a signal that has only occurred ten other times in the last 35 years, a clear and factual message about stocks (NYSEARCA:SPY), a reliable contrarian indicator, weekly charts (1982-2016) painting a bullish picture, and a rare reading from a trend-strength indicator.

Signals Assist With Probabilities

No indicator, signal or piece of evidence can predict a highly uncertain future. They simply provide some insight into the probability of good things happening relative to the probability of bad things happening, which implies bad things are always on the list of possible market outcomes.

Rare Secular Stock Market Signal

This week's stock market (NYSEARCA:VTI) video focuses on a very rare secular signal that has only occurred one other time since 1928.



Small Sample Size

It should be noted the video above covers events with a very small sample size, meaning relying on this evidence in isolation is probably not wise. Therefore, our focus, as always, is on the weight of the evidence.

No Forecasting

Our purpose is not to forecast, but rather to understand the facts we have in hand. If the facts change in a bearish manner, which may very well be the case, flexibility will prove to be valuable. It should be noted the first link in this article goes to evidence that was presented on August 20. Since then, despite many dire forecasts on Wall Street, the S&P 500 has gained over 4%
Title: Re: RED FLAG
Post by: king on March 23, 2017, 09:50:32 PM

主页 > 财经 > 国际 > 5·11是大凶日? 今年炒股买房恐不好过……
1258点看 2017年3月23日








俗称“黑天鹅指数”的偏斜指数(CBOE Skew Index)上周五再度飙升,涨至153.34点,并升破去年6月高峰,再创历史新高。诡异的是,现时“黑天鹅指数”在毫无坏消息的情况下狂升,超越了去年6月、2006年,以及1998年3次顶位,创出新高。回顾2006年是美国楼市泡沫爆破前;1998年则是亚洲金融风暴发生时;去年6月则是英国公投脱欧。




一位过去4次准确预测金融市场大调整的分析员、Master Trading Strategie首席市场策略师、全球著名前50名交易员贾德佳从“循环周期”分析得出,道指恐怕即将要暴跌逾6000点,泻至14,800点水平,即现水平狂插近30%!






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相关课题: 买房炒股
Title: Re: RED FLAG
Post by: king on May 27, 2017, 10:17:50 PM

香港府前高官警告 金融風暴今年可能來襲
 3795点阅   2017年5月27日




房地產價飆升 不尋常

他表示,最近數週先後出現加拿大最大非銀行房貸機構Home Capital Group擠兌危機、巴西股市單日急挫逾10%,全球金融市場卻無動於衷,這是極不尋常的。



文/ 香港 明報

Title: Re: RED FLAG
Post by: king on August 10, 2017, 08:00:43 AM

Why a 1929-style crash isn’t “unimaginable” (it has nothing to do with North Korea)

Published: Aug 9, 2017 11:16 a.m. ET

‘It will be a nightmare for this generation, and a gift for future ones’
Traders working on Wall Street, in New York. October 1929.

Much has been made lately about how the CAPE ratio — a popular valuation measure applied to the S&P 500 SPX, -0.04%  — has ballooned to levels not seen since the dot-com bubble, and before that, all the way back to 1929.

CAPE stands for cyclically adjusted price-to-earnings. It’s also known as the Shiller P/E ratio, named for the Yale professor who created it. While the metric has its share of critics, it’s still considered a standard measurement of market valuation.

Aside from where it stands today, it’s safe to say that only twice before have we seen the CAPE ratio top 30. Both times, the bottom fell out of the market, as you can seen from this chart posted by Michael Batnick of the Irrelevant Investor blog:

In his blog post, Batnick focused on comparisons to the Great Depression rather than the aberration of the late 1990s. He pointed out that, in the 10 years leading up to 1929, the CAPE ratio went from a low of 5.02 all the way up to 32.56.

He cited a Ben Graham article from 1932 in which the legendary investor said, “More than one industrial company in three selling for less than its net current assets, with a large number quoted at less than their unencumbered cash.”

In other words, several businesses were worth more dead than alive.


Of course, it would have to get almost incomprehensibly nasty for companies these days to be selling for less than their net current assets.

“Honestly, for the market to fall 90%, I’m thinking aliens, an asteroid, or another world war seem the most likely culprits,” Batnick said. In any case, this is what the Dow DJIA, -0.17%  would look like if we were to have a 1929 redux:

A Great Depression-esque crash would destroy 28 years of gains and take the blue-chip index all the way back to where it was in May, 1989, Batnick wrote.

Yet there IS a silver lining, no matter how far-fetched it might seem. Those who manage to keep powder dry by stashing cash could very well emerge as big winners, much like those savvy investors sifting through the wreckage after 1929.

Batnick used Amazon AMZN, -0.13%  as an example of what a 21st century bargain would look like if things got really ugly.

“Amazon’s net current assets are $2.061 billion. If you could purchase Amazon for this price, each share would cost you $4.29, down from the $994 its currently trading at; a cool 99.57% discount,” he wrote in his blog post. “This sounds absurd and unimaginable. The latter it is, the former it is not.”

Like Batnick said, it’s not as unimaginable as it sounds.

In October of 2008, Charles Schwab SCHW, -1.45%  had a market cap of $28.8 billion while holding $27.8 billion in cash. At the time, there were 875 other stocks trading below the value of their per-share holdings.

“U.S. stocks have a valuation that is in line with two of the biggest market peaks of all-time, so if this is 1929, it will be a nightmare for this generation, and a gift for future ones,” he wrote. “And while I can’t imagine a scenario that takes us to Dow 2,400... Dow 15,000, a 32% decline, seems well within the realm of possibility.”
Title: Re: RED FLAG
Post by: king on August 16, 2017, 11:09:15 AM

Opinion: A bear market could hit U.S. stocks any time now

Published: Aug 15, 2017 4:15 p.m. ET

Overvalued, no matter how you measure prices
AFP/Getty Images

Expect some incredible fireworks when this incredible bull market finally comes to an end.

That’s because the stock market is overvalued according to almost any standard valuation measure, and it’s at such times that, to use the famous phrase from hedge fund manager Doug Kass, risk happens fast.

Consider how quickly some stocks dropped from their highs at the top of the internet bubble in March 2000 — one of the few times in U.S. history when the stock market was just as overvalued as today. It took just three trading sessions back then for the Nasdaq Composite Index COMP, -0.11%   to drop 10% from its all-time high — satisfying in a blink of an eye the semi-official criterion of a market correction. And it took just 17 sessions for the Nasdaq to drop enough — a 20% decline — to become a major bear market.

Note carefully that there was no obvious external event that triggered these huge drops. That’s worth remembering, given the recent obsession about a possible geopolitical crisis involving North Korea. Many investors are mistakenly assuming, now that such a crisis appears less likely, that happy days are here again — fueling a 135-point rise in the Dow Jones Industrial Average DJIA, +0.02%   on Monday.

We all need to remember that when the stock market is hugely overvalued, as it is today, a major bear market can begin for seemingly no external reason.

Interest rates are on the rise. Here's what this means for your money
How overvalued is the stock market? The chart below paints the depressing picture: According to six widely-used valuation measures, the market currently is more overvalued than it was at between 86% and 100% of the three dozen bull market tops since 1900. (I relied on a bull market calendar maintained by Ned Davis Research for a precise list of those market tops.)

To be sure, the U.S. market by most measures was more overvalued at the top of the internet bubble than it is today. But not according to all of them. The S&P’s 500’s SPX, -0.05%   price-to-sales ratio currently is just as high, if not slightly higher, than where it stood in March 2000. (Precision is difficult, since only quarterly data are available for S&P 500 sales per share, and even then with a lag.)

None of this means that a bear market will begin immediately, of course. The stock market can remain overvalued for a long time, and become more overvalued.

Don’t conclude from this, however, that valuation doesn’t matter. When stocks are as overvalued as they are today, almost anything can become a bear market trigger. And sometimes it takes nothing at all.
Title: Re: RED FLAG
Post by: king on August 17, 2017, 04:05:58 PM

This is the ‘wall of worry’ that stocks have climbed to rally 271% since 2009
Published: Aug 16, 2017 7:12 p.m. ET

Stocks have not been this resilient since 1965

Stocks keep on climbing the “wally of worry” to new heights.
This may be the most sedated stock-market rally of our times.

Even as tensions heightened between the U.S. and North Korea and violence broke out on the streets of Charlottesville, Va., stocks took the alarming news in stride, continuing to scale the “wall of worry” in defiance of doomsday predictions of an imminent selloff.

“It seems like every day the headlines outside of the market get more and more frightening,” said Michael Batnick, director of research at Ritholtz Wealth Management, who illustrated the resilience of the market in the chart below.

Michael Batnick
As the graph shows, since stocks bottomed in March 2009, the S&P 500 index SPX, +0.14%  has soared 271% to multiple records, meandering higher through the European debt crisis, Brexit, and the U.S. presidential election.

Batnick had originally published the chart in March but updated it Wednesday given the recent developments.

“This year has been the perfect reminder that political volatility does not necessarily translate into the stock market, with this being the quietest year since 1965,” he said.

The S&P 500’s daily trading range averaged 0.32% in the first half of the year, the narrowest in over half a century, underscoring the gap between market volatility and the political upheaval that has marked Trump’s presidency so far, according to Batnick.

Stocks finished modestly higher on Wednesday with the Dow Jones Industrial Average DJIA, +0.12%  gaining for a fourth session in a row as investors shrugged off the latest imbroglio out of Washington.

Much of this tranquility can be attributed to strong fundamentals as the economy continues its steady pace of expansion along with robust corporate earnings. Optimism over President Donald Trump’s pro-business agenda, including promises of lower taxes and deregulation, has also helped to keep the market’s upward trajectory intact. Some of that euphoria has waned since the early days of Trump presidency amid a series of political setbacks such as the high-profile failure to repeal and replace Obamacare. But investors, to a large degree, still seem to have faith that the embattled president will deliver the tax reforms he had pledged.

Batnick, meanwhile, believes psychology deserves more credit for keeping stocks buoyant.

“Rising prices attract buyers and falling prices attract sellers,” he said.

Likewise, the analyst believes that when the end comes, it won’t be triggered by the usual suspects like elevated valuations.

“This is sort of a chicken and egg problem,” said Batnick, in response to a question on what will derail this market. “It won’t be a high cyclically adjusted price-to-earnings ratio or news coming out of Washington, the answer to that question is simply falling stock prices.”
Title: Re: RED FLAG
Post by: king on August 18, 2017, 11:49:18 AM

Cramer rationalizes the sell-off — and says it's not happening because of Trump
"Mad Money" host Jim Cramer reacts to Wall Street's many reasons for Thursday's sell-off.
From Washington to earnings, market-watchers have offered various explanations for the pullback.
But none of their explanations seem to be enough to drag stocks lower, Cramer says.
Elizabeth Gurdus   | @lizzygurdus
Published 5 Hours Ago  | Updated 3 Hours Ago
 Cramer: Selloff not happening because of Trump   Cramer: Selloff not happening because of Trump 
4 Hours Ago | 00:59
Jim Cramer is no stranger to August sell-offs.

"Welcome, August. Where you been?" the "Mad Money" host exclaimed on Thursday. "For as long as I've been in this business, August has been a month where we have unexplained or inexplicable, sudden sell-offs, including nasty ones like today."

As the Dow Jones Industrial average fell more than 250 points intraday, experts blamed the decline on everything from President Donald Trump's tiff with the CEOs on his now-disbanded strategic councils to the earnings report from Dow component Cisco.

So Cramer decided to go over the market's many reasons for the decline and explain his reaction to each explanation.

Trump's CEO Problem

The first was the most obvious: investors were selling because they saw Trump's rift with business leaders as an obstacle to the president's economic agenda and thus to the bull market.

"If you're selling stocks because so many CEOs are getting off the Trump train, I've got a news flash for you: you need a better reason," Cramer said. "Trump's economic agenda is stalled because Congress can't get its act together. It can't even pass a debt ceiling bill. If the executive council dismissals is what makes you want to sell, you should've gotten out months ago."

Cramer argued that while the CEOs were in favor of some of the Trump agenda's key points, like tax reform and repatriation, they were more concerned about their shareholders and backing the president's highly controversial comments about the violent protest in Charlottesville, Virginia.

But their public departures did not constitute a reason to sell, he said.

Gary Cohn

The second-most cited reason for selling has been the rumor that one of Trump's top advisors, former Goldman Sachs executive Gary Cohn, is preparing to step down from his role as head of the National Economic Council.

Cramer said that while his departure would justify investors taking profits, the White House's unequivocal denial of the rumor effectively erases any reason to sell on the reports.

"I certainly can see that Cohn's important enough to Trump's economic agenda that his leaving would really hurt the stock market," Cramer said. "But then again, the White House issued a statement saying he's not going anywhere, so it's not a particularly cogent reason to sell."


The market may have shrugged off earnings from Cisco, but Cramer said that really only justified investors are selling their shares of Cisco. The tech giant's success hinged on how shareholders viewed its execution, not because there was a lack of demand for its products, he said.

Shares of Wal-Mart also slid after the retailer reported. Cramer thought it delivered an excellent quarter, and attributed the stock's decline to the market's already-high expectations.


The fatal terrorist attack in Barcelona where a van plowed into pedestrians, killing at least a dozen and injuring more than 50, may have shaken investors, but Cramer pointed out that if markets sold off on every terror attack, they would be below zero by now.

Final Thoughts

Cramer's reason for Thursday's sell-off was simpler than what he saw on his Twitter feed.

"It's August. It's slow. It's thin. It's time for vacation. Stocks have had a big move. Why not sell some?" the "Mad Money" host said. "I bet this sell-off isn't done. It could get uglier. We're due. I also believe we'll get a bunch of sell-offs like this one over the next six weeks because that's what happens every year at this time. I've been telling you this. So, if you haven't done so already, please sell your least favorite stocks tomorrow to raise some cash so that you'll be ready to pick up your most favorites as they come down and become bargains."

And as markets recover from the second-worst day of the year for the Dow and S&P 500 indexes, Cramer asked that investors keep the "August sell-off" track record in mind.

"The calendar and these weak-handed momentum shareholders that have gone along for the ride have coalesced to produce a wave of selling," he said. "Now you have to ask yourself, will the president seize that as an excuse to deflect anyone who wants to link this decline to the White House, blame it on August? Why not? Beats blaming the CEOs who broke with the president, unless you're the kind of guy who just loves having someone to blame."