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Stocks Have Been This Overbought Before…Once

Via Dana Lyons’ Tumblr,

U.S. stocks recently registered the 2nd most overbought condition in their 150-year history…

Temperatures wrought by the polar vortex here in Chicago have truly reached ludicrous levels. Today’s low is projected to be minus 26 degrees Fahrenheit — without the wind chill. That got me thinking — is that the coldest temperature ever recorded in the city? After 20 seconds of digging, I discovered that it was not the record. It has actually been colder here before — ONCE. 34 years ago, on January 20, 1985, temperatures reached a record cold reading of minus 27.

That near record had me thinking about the stock market — specifically, the degree to which stocks, on a long-term basis, are stretched, or “overbought”. Yes, the recent correction relieved much of the prevailing shorter-term overbought condition. But on a long-term basis, it has hardly made a dent. That’s because, coming into the correction the stock market may not have been at the most overbought condition of all-time — but it was at the 2nd most overbought of all-time.

How did we determine that? We are using the inflation-adjusted S&P Composite data available from Robert Shiller’s site. This composite is essentially the current S&P 500 with re-engineered pricing prior to its inception in the 1950’s with available stock prices from the time. We then used exponential regression smoothing to find the “best fit” trend line on the series since 1871 (h/t to Doug Short for the concept.)

After finding the best fit trend line for the composite, we can measure how far above or below prices are at a given time. As it turns out, this past September saw the composite reach 122% above the trend line, i.e., it was 122% “overbought”. In nearly 150 years, the only months that saw prices more overbought than that were those encompassing the 1999-2000 market top — the most excessive, bubbly top in U.S. market history.

So what does it mean? We aren’t going to go into a long essay on its implications. We posted an excerpt the other day from our 1st Quarter Client Letter about the longer-term risk embedded in the market. Suffice it to say, the stock market is extended. Can it stay extended? The past few years prove that it can.

However, we will emphasize that it is likely not the best time to commit a lot of long-term capital to the U.S. stock market. Sure, the market remained stretched to these levels for more than a year during the 2000 top. So it is possible that the market continues higher unimpeded. However, looking historically, that period was an anomaly. If you are willing to bet on it happening again, go for it. If not, you may consider adopting measures, or managers, to aid in managing risk.

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If you are interested in an “all-access” pass to our research and investment moves, we invite you to further check out The Lyons Share. Given an treacherous emerging market climate, there has never been a better time to reap the benefits of our risk-managed approach. Thanks for reading!

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Portland Cop Told Subordinates To Shoot Random Black People. He’ll Likely Get a $100K Payout.

A Portland police sergeant was fired last year for suggesting to his fellow officers that they should shoot black people for no reason. More than a year later, he’s in line to receive a $100,000 settlement from the city.

Former Sgt. Gregg Lewis’ exact comments were only made public by Portland Mayor Ted Wheeler’s office yesterday, nearly two years after Lewis made them. That’s because the city council is currently debating how to deal with a grievance filed by the Portland Police Association following his termination.

During the council’s debate yesterday, Commissioner Jo Ann Hardesty (D–19) revealed what she claimed were the remarks that got Lewis in trouble. Hardesty later admitted in a statement that “the paraphrased remarks” she remembered were different “from the quotes used in the official report.” Still, Hardesty’s actions prompted Wheeler’s office to release Lewis’ termination notice, reported The Oregonian.

According to the notice, Lewis’ comments, which he admitted to making, came in front of more than a dozen officers and three sergeants as he conducted roll call in February 2017. A fellow officer reported that Lewis was discussing the detoxing of drunk individuals in parking garages. “If you come across a guy in a suit and tie that came downtown and had a little too much to drink,” the officer reported Lewis as saying, “he’s probably not the guy you want to detox straight out of the garage. He will most likely sue you. If it’s a homeless guy, you will probably be safe. I doubt he’s going to sue you.”

At that point in the discussion, one of the cops present brought up a critical reader comment on a newspaper article about the fatal Portland Police shooting several days prior of Quanice Hayes, an unarmed black 17-year-old. “PPB kills black people, but only injures white people,” the comment reportedly read. Lewis allegedly responded: “Well, let’s just go out and kill all the black people.” According to a different officer’s account of what happened, Lewis said: “If they are black, just shoot them.”

Lewis’ comments were investigated by internal affairs and human resources. According to his termination notice, he didn’t deny making them, but insisted he was trying to be humorous. Lewis told an investigator:

There had been these ridiculous statements in the media about the decisions we make when we shoot people. So these conversations had gone on right before roll call in the locker room, there had been conversations about that particular topic. So, as we were just getting finished, I remember saying, and I thought it was kind of humorous, in light of these stupid conversations in the media, so, you know, unless it’s a black guy, then we just shoot them.

Lewis also claimed he has “a habit of sometimes being sarcastic,” though he admitted his comment was “inappropriate.” Regardless, Lewis was fired on January 12, 2018. “Your remarks shocked and left a negative impression on the officers and sergeants who were present,” reads his termination letter, which was signed by Police Chief Danielle Outlaw and Wheeler, who as mayor also serves as police commissioner. “It does not appear you fully understand the impact of your statements and the implication that you were encouraging or condoning mistreatment of a group or class of individuals based on their race.”

But that wasn’t the end of it. The Portland Police Association filed a grievance regarding Lewis’ firing, which the city denied, thus prompting the police union to move toward arbitration, according to Oregon Public Broadcasting.

Under a proposed settlement, Lewis’ firing would be revoked so he could retire, receiving back pay totaling $100,020.53 in the process. However, he would not be able to work for the police department or the city ever again. The city attorney sees this as the best course of action, believing that the city would lose an arbitration fight against the union. In such a scenario, Lewis would be eligible to be re-hired, and he’d probably receive the back pay as well.

It’s a no-win scenario, as several commissioners acknowledged in the council chambers yesterday. “I feel physically ill about supporting this settlement,” Commissioner Amanda Fritz said, according to KPTV. “The most important thing is to get rid of this person on the police force.”

“None of us are happy with this outcome,” added Commissioner Chloe Eudaly. Wheeler senior adviser Berg Nelson, meanwhile, explained that while “nobody’s happy with this decision,” it “is the only way we can ensure this individual never works for the city ever again.”

This case illustrates the immense power police unions hold in the public sector. When unions defend bad cops who do or say terrible things, which they often do, they have a good chance of winning. A bill proposed in the Oregon Senate would prevent arbitrators from overturning disciplinary actions against police officers as long as the facts of the case are not in question. However, this only applies if the discipline “was made pursuant to discipline guide incorporated into agency’s disciplinary policies,” according to the bill’s summary.

As Portland Cop Watch’s Dan Handelman pointed out in public testimony yesterday, the bill might not even apply to this case. According to the Portland Bureau of Police discipline guide, the maximum punishment an officer can receive for “offensive or discriminatory language” is a two-week suspension without pay.

The city council, meanwhile, will vote on the settlement next Wednesday.

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Howard Schultz Lobs Patriotic Microaggressions After Savage Attack By Liz Warren

Starbucks chairman emeritus and potential 2020 candidate for US president Howard Schultz has engaged in a heated spat with Sen. Elizabeth Warren over wealth. 

After telling NPR’s “Morning Edition” on Tuesday that Warren’s plan for a 2% annual tax on households with a net worth greater than $50 million was “ridiculous” and nothing more than a “good headline,” Warren hit back – tweeting “What’s “ridiculous” is billionaires who think they can buy the presidency to keep the system rigged for themselves while opportunity slips away for everyone else.”

Schultz responded – slamming Warren on MSNBC for promoting programs that are too socialist, and then releasing a short video which PJ Media‘s Tyler O’Neil points out is rife with “microaggressions” – those non-inclusive comments which might inadvertently offend someone. 

“Senator Elizabeth Warren said some pretty sharp words about me. She referred to me as a billionaire out of touch with the American people,” Schultz begins, before explaining how he started off with nothing and worked his way up. 

“I grew up in Brooklyn, New York, in Canarsie, in federally subsidized housing, the projects. When I was 7 years old my father, who was a laborer, came home and had a serious accident. He was dismissed from his job, we lost our health insurance. I witnessed the fracturing of the American dream.” 

“What we need right now in America is for the country to come together, and for the Democrats and Republicans who have been unwilling to work together, to finally realize that the American people deserve much more than political slogans and tweets,” Schultz added. “What we need is a government that can work for us, leadership that we can trust.”

Schultz ends by promising: “And if I run for president, what I am going to try to do is restore the faith and the promise of the country and the American dream.” 

Did you spot the microaggressions? 

Sorry Howard, you’re not allowed to mention the American dream anymore. According to a former UC Berkeley economics major and former candidate for California State Assembly, it’s now considered offensive. 

Further, says Chiara, constitutional issues are involved. “Professors essentially have been given a script, with words and phrases that are forbidden,” she says. “They’re not supposed to mention the ‘American Dream,’ or say ‘the most qualified person gets the job,’ because that supposedly ignores latent biases inherent in the American political process and in hiring procedures. –Cal Alumni Association

Whatever you do, don’t point out that Elizabeth Warren’s estimated $8 million net worth, three-story Victorian home in Cambridge, MA and $174,000 salary puts her in the 1% bracket in terms of wealth – a dream for most Americans. 

Schultz has come under heavy fire from the left, as his potential run in 2020 is seen as move which could ensure a 2nd term for Donald Trump. 

Critics from David Axelrod to The View’s Joy Behar to political figures such as Rep. Alexandria Ocasio-Cortez (D-N.Y.) have piled in, ripping Schultz for a sense of entitlement in announcing his intentions. 

“Really? The coffee guy wants to be president?” HBO host Bill Maher tweeted. “Just because you had one profitable insight — people will overpay for coffee— doesn’t mean you can run the world. Government is a different animal, can we please get a pro in there?” –The Hill

Earlier this week, Schultz was heckled at a New York Barnes & Noble by a man who shouted: “Don’t help elect Trump, you egotistical, billionaire asshole.” 

Neera Tanden, president of the Center for American Progress, called for a Starbucks boycott if Schultz enters the race, tweeting: “Vanity projects that help destroy democracy are disgusting. If he enters the race, I will start a Starbucks boycott because I’m not giving a penny that will end up in the election coffers of a guy who will help Trump win.”

$3 gift cards?

Perhaps the most hilarious attack on Schultz is his alleged gifting of low-value Starbucks gift cards – some with as little as $3 on them according to reports. 

Others made light of the gift card anecdotes…

via ZeroHedge News http://bit.ly/2Rwsose Tyler Durden

Bill Weld May Run for President as a Republican, Boston Media Speculates

||| Matt WelchEleven days ago, 2016 Libertarian Party vice presidential nominee Bill Weld told me that “It helps the Libertarian Party to have three or four strong candidates” running for president in 2020, and that “I am very interested….I am going to be involved in 2020.”

Weld, who has spent the past year or so laying the groundwork for a run at the L.P. nomination, has stated repeatedly since November 2016 that he plans to stay in America’s third party. “The Libertarians have a very clear path in Washington, and I intend to participate in that,” he told me on Election Day. “I’m going to stay L.P.” he reiterated one year later.

All of which makes the past week of Boston media coverage that much more eyebrow-raising. On January 23, Boston Herald columnist Joe Battenfeld wrote that Weld “is heading to New Hampshire soon and don’t count him out of the 2020 mix—either as a Libertarian or a Republican.” While Weld didn’t comment, “sources close to him say he’d relish a chance to take on Donald Trump.”

The New York Times on January 26, citing “people who have spoken with him,” reported that Weld “is weighing a challenge to Mr. Trump as a small-government moderate,” and “has discussed either opposing Mr. Trump in the Republican primaries or seeking the Libertarian presidential nomination.”

Then last night WCVB, citing “sources,” reported that Weld “could make an announcement about a possible presidential run as soon as Thursday,” that “he has taken a leave of absence from his law firm,” and that “any possible run would be made as a Republican.”

I contacted Weld last night for comment about the WCVB report, and he emailed “Whatever this is, is not from me.” He also emailed Boston Globe reporter Michael Levenson to say that he’s not leaving his firm, and not announcing anything Thursday: “No, not correct, either item.”

Now Levenson’s out with his own article under the headline, “Weld ponders a presidential campaign, but will it be as a Libertarian or a Republican?” While the former two-term Republican governor of Massachusetts “is declining to detail his thinking for now,” Levenson did get some on-the-record quotes from Weld’s Republican friends about why he might go GOP:

“If the goal is defeating Trump, the best option is for him to run as a Republican because primary challenges have historically weakened sitting presidents,” said Rob Gray, Weld’s former press secretary and a longtime Republican strategist. “Primary challenges get more media coverage and have more political juice so it puts an incumbent in the position of fighting a two-front war, against candidates of a different party and against someone in their own party.” […]

“Nobody is going to invite Trump to debate the Libertarian candidate in New Hampshire,” Gray said. “Whereas, it is likely someone is going to invite the Republican primary candidate to debate him in New Hampshire. Trump can avoid it, but there’s a political risk to that.”

Levenson also quoted Tom Rath, “a former New Hampshire attorney general and elder statesman in the party…who has spoken to Weld about a potential campaign”:

“He has to be taken seriously and this can’t just be a whimsical thing, and he knows that….He has to be more than a protest vehicle to gain traction because this vote, to New Hampshire people, is one of their most important political possessions. They don’t give it away in a trivial fashion.”

I emailed Weld today about whether he’d rule out a GOP bid, and will update in this space if/when he responds. Given that he has had eight days to correct the by-now widespread reporting on a possible return to Republican politics, it seems likely that the publicity suits him just fine.

Libertarian Party members on the other hand, not so much.

“I would absolutely be upset if he went back to the Republicans—most, if not all, Libertarians would be,” Massachusetts state Chair Jeff Lyons told the Globe. “He’s definitely made a lot of comments up to a week and a half ago, saying ‘I’m going to be involved with Libertarians in 2020.’ I’ve observed him give that talk many times over the past year and a half, two years now.”

If Weld indeed re-took the GOP plunge, that would likely be a three-strikes-and-you’re-out situation for many Libertarians. As I wrote in May 2016, just before he squeaked into the veep slot on the second ballot (much to the bafflement of the national press), Weld double-crossed the L.P. in 2006 over the New York gubernatorial race (you can watch his response to those charges here). Then in the final days of the 2016 campaign, he infuriated party members with a series of unusual actions—telling “all those in the electorate who remain torn between two so-called major party candidates whom they cannot enthusiastically support,” and particularly “those Republicans who feel that our President should exhibit commonly accepted standards of decency and discipline,” to vote against the “unhinged” Donald Trump; disputing his own party’s press release about the FBI investigation into Hillary Clinton; and then going on MSNBC’s Rachel Maddow Show to say “I’m here vouching for Mrs. Clinton.”

Then again, the Boston media has gotten a bit too far over its skis about their homegrown Brahmin in the past. In early October 2016, for example, the Globe reported that Weld “said…that he plans to focus exclusively on blasting Donald Trump over the next five weeks, a strategic pivot aimed at denying Trump the White House and giving himself a key role in helping to rebuild the GOP,” and also quoted unnamed Weld aides as criticizing presidential nominee Gary Johnson’s “flubs on national television” and even investigating whether it would be possible to flip the ticket.

Weld disputed those characterizations in real time, saying that he never said “exclusively,” that he’d keep criticizing Clinton (he did, but also vouched for her character), that he wouldn’t be campaigning only in Republican states (true), and that he never looked into a ticket-flip, which was anyway not legally possible. And he has not taken anything like a key role in helping to rebuild the GOP.

For the moment, anyway.

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South Bend Mayor and Possible Presidential Candidate Pete Buttigieg Decries “Endless War”

|||Screenshot via YouTube/CBS NewsPete Buttigieg, the Democratic mayor of South Bend, Indiana, is no fan of perpetual war.

Buttigieg, who served as a lieutenant in the U.S. Navy Reserve and was deployed to Afghanistan, announced the formation of an exploratory committee for the upcoming presidential election just last week. Since that time, he has made a number of media appearances to explain his policy beliefs, including a Thursday appearance at CBS News. It was here that he shared his belief that “endless war cannot continue.”

“We’re on an authorization that was passed in 2001. There are people enlisting right now who weren’t alive for that,” he said, responding to a question about President Donald Trump’s desire to pull American troops from Syria and Afghanistan.

Buttigieg listed some conditions for leaving Afghanistan, which included conversations with America’s enemies to devise a peace plan and obtain assurances to keep the country from turning into a failed state. Buttigieg finished his thoughts by saying, “Afghanistan’s not going to look like Switzerland and that’s okay.” For Buttigieg, the purpose of American intervention was not to establish a Western democracy, but to make sure events within the country did not harm American lives.

Speaking of both American intervention in the Middle East as well as rumors of an intervention in Venezuela, Buttigieg decried the misuse of military resources. “We don’t send troops somewhere because we don’t like the regime,” he said. “We send troops somewhere because it is the last resort to protect American lives.” Buttigieg opined that foreign policy mistakes made at the beginning of the century were the result of taking “eyes off that standard.”

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An Obituary To Fed Credibility

Authored by Sven Henrich via NorthmanTrader.com,

As with many terminal patients the initial hope is that aggressive treatment would work and cure the patient. But when the one time emergency round of drugs didn’t cure the patient additional drugs were needed and turned the patient into a hopeless junkie. After multiple injections a sense of dread was making the rounds. QE1 did not cure the patient, QE 2 and 3 were required with a little twist here and there thrown in. But the Fed doctors kept promising all would be well and the addiction could be stopped and the patient returned to normal.

And so it looks promising for a while. There was that scary flare up in 2016 when the patient regressed and the normalization had to be put on hold, but then a miracle drug came along called Tax Cut and suddenly it seemed as if the removal of drugs from the system could be accelerated.

So jubilant and optimistic were the Fed doctors that they promised further rounds of withdrawal and kept pointing to their dot plot of normalization.

Yet here we are, a mere 3 months later and the Fed doctors are at a loss again. Unable and unwilling to admit to the patient the true nature of the disease the Fed doctors once again decided to stop all withdrawal of the drugs, worse, they indicated they may have to administer new drugs to come. The patient begged for more drugs and the Fed doctors absolved themselves of their hippocratic oath and capitulated once again to the patient’s scream for another high, a scream only drowned out by the dying sigh of the Fed’s credibility, the initial casualty in this war on monetary drug dependency.

For it is true, the Fed doctors failed to wean off the patient:

Because deep down everybody knows, the Fed is the market’s bitch:

It’s not a secret, everybody knew all along:

But now Jay Powell has made it official and killed off the Fed’s credibility in the process.

It’s probably just as well. It’s been painful to watch as everybody knew the probability of survival was low. It was a slow death. And nobody wants to see suffering longer than needed and everybody knew it anyways.

As to the patient? Well, he’s back on the drip, smiling at the prospect of his final fix. The 10 year addiction never ended and the patient remains uncured. Yet the patient can’t get a new high without new drugs and so the current satisfaction at seeing the drip may turn into a great disappointment first before the new drugs finally arrive. See the Fed doctors have been withholding a vital piece of information from the patient: We can’t cure you, we can only get you hooked on drugs to make you feel better. In medical terms that’s called malpractice, which typically kills off the credibility of any medical professional. It shouldn’t be any different for a central bank. And it isn’t.

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via ZeroHedge News http://bit.ly/2CW2CbM Tyler Durden

Amazon Drops After Guiding To Worst Revenue Growth Since 2001, Slowing Prime Subscriptions

After two months of dramatic volatility in its stock, which saw the share price of Amazon first tumble to close 2018 then soar by in the past month, Jeff Bezos’ online retailing titan was expected to report blow out earnings after what the company said was a record holiday period (while news of Bezos’ divorce from his wife came and went without affecting the stock), and moments ago Amazon did not disappoint, when it reported both EPS and revenues which handily beat expectations, even as it reported guidance guidance for the current quarter that came in well below Wall Street estimates.

In kneejerk response, the stock rose over 2% but has since trimmed its gains and was down slightly which perhaps is to be expected after the torrid gains the company enjoyed in the past month.

Here are the details from Amazon’s just concluded Q4:

  • EPS of $6.04, beating estimates of $5.56
  • Revenue of $72.4BN, beating estimates of $71.92BN
  • Operating income of $3.79 billion, also beating consensus estimates of  $3.65 billion

A somewhat troubling trend to some, Amazon’s revenue growth has been slowing in recent quarters, and in Q4 came in at 19.7%, the slowest since Q1 2015.

While Q4 revenue growth was nearly 20% year over year, a strong if slowing number, it came amid a friendly backdrop of high consumer confidence, which was mirrored by robust chain-store sales. Moreover, it was the lowest year-over-year revenue growth for the company since mid-2015 as Bloomberg notes.

Slowing revenue was offset by growing profit margins, and it will be up to the market to determine whether profits are increasing enough to offset the slowdown in overall growth.

Offsetting the strong historical numbers, however, Amazon guided Q1 net sales to be between $56 billion and $60 billion, which however was below the consensus est. of $60.99B. Meanwhile, operating income is expected to come in between $2.3 and $3.3 billion, compared with $1.9 billion in Q4 2017, and also roughly in line with consensus estimate of $2.99 billion.

Also it is worth noting that the midpoint of the first-quarter revenue guidance – $58 billion – would represent year-over-year growth of just 13%. That would be the lowest for Amazon since the recession of 2001.

Another potential red mark this quarter: Amazon’s subscription services, mostly Amazon Prime, saw a sharp slowdown, growing by 26% from a year ago, down from 50%+ growth rates in recent quarters. This may be the result of Amazon raising the price of Prime and its quick-delivery perks in the U.S. to $119 annually last year.

Expect analysts to ask management on the conference call later how the price hike is impacting retention and new memberships.

Going back to the historical data, the all-important Amazon Web Services unit, or AWS, posted sales of $7.4 billion, versus the $7.3 billion analyst outlook.

Amid worries about whether business technology spending might be wavering, AWS’s sales growth rate dipped fractionally to 45% from 46%.

Despite the modest decline in annual revenue growth, a year ago consensus seemed to be that competition from Microsoft and Google would cut into AWS’s growth, but that has yet to happen. The division remains the leader in the rapidly growing cloud computing space, and a perhaps a leading candidate to secure the Department of Defense’s lucrative $10 billion Jedi contract.

On the bottom line, AWS was responsible for operating income of $2.2 billion, a 29.3%profit margin, down from 31.1% last quarter but up from the 26.4% a year ago. In other words, for yet another quarter, AWS was responsible for more than half, or 62% of Amazon’s total operating income.

In addition to AWS, another bright star was Amazon’s advertising business, which as Bloomberg notes, “continued to be a star” with sales in the company’s “other” category, which is mostly advertising, nearly doubled from a year ago, to $3.38 billion. Like cloud computing sales, advertising is more profitable for Amazon than its core retail unit.

Now the not so good news: perhaps as a result of the recent price cut at Amazon’s Whole Foods chain, revenue declined 3% year-over-year in its “physical stores” – a category that mostly includes Whole Foods and also Amazon’s chain of bookstores. The revenue figure was worse than analysts had expected.

As Bloomberg’s Shira Ovide notes, one other spot of growth worry: paid unit sales, which counts individual items sold on Amazon websites, saw year-over-year growth figure slow again to 14%.

That could be a sign that total revenue growth is slowing not only because of a shift by Amazon from selling its own merchandise to being a conduit for merchandise sold by outside companies.

In his remarks in the press release, CEO Jeff Bezos pivoted from focusing on Amazon Business last quarter, and this time it was all about Alexa:

“Alexa was very busy during her holiday season. Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year.

“The number of research scientists working on Alexa has more than doubled in the past year, and the results of the team’s hard work are clear. In 2018, we improved Alexa’s ability to understand requests and answer questions by more than 20% through advances in machine learning, we added billions of facts making Alexa more knowledgeable than ever, developers doubled the number of Alexa skills to over 80,000, and customers spoke to Alexa tens of billions more times in 2018 compared to 2017.

“We’re energized by and grateful for the response, and you can count on us to keep working hard to bring even more invention to customers.”

As noted above, the kneejerk reaction was initially positive, but investors may have been spooked by the company’s poor Q1 guidance, and as a result the stock has slipped modestly after hours.

Developing

via ZeroHedge News http://bit.ly/2Sg40j8 Tyler Durden

China Dumps Treasuries For 6th Straight Month, France Hits Record Exposure

As trade wars reached new levels of anger in November, China dumped $17.5 billion of US Treasuries (and was the biggest seller that month). This is the 6th monthly drop in China’s Treasury holdings and they are now at their lowest level since May 2017…

Norway, Ireland, and Taiwan was also among the biggest dumpers of US Treasuries in November.

On the flip-side, France (+$22bn) and Japan (+18.1bn) added the most US Treasuries in November…

This is the biggest monthly addition by France ever to its highest exposure ever…

However, China remains the US largest debtholder and a little context to France is worth considering…

In aggregate, only agency debt was net bought in November with Treasuries, stocks, and corporates all sold…

  • Foreign net selling of Treasuries at $9.3b

  • Foreign net selling of equities at $5.6b

  • Foreign net selling of corporate debt at $3.4b

  • Foreign net buying of agency debt at $19.6b

Still, it appears “great friend” Xi is not the same as “great friend” Macron…

via ZeroHedge News http://bit.ly/2HJwwWt Tyler Durden

After Worst December In A Century, Stocks Soar To Best January In 32 Years

The Fed capitulation appears to have been seen early by gold and the market is now implying a 13.5bps rate-cut in 2019… as stocks soar…

After the worst December in 100 years, the S&P just experienced its best January since 1987…

 

Is this really what you wanted Mr.Powell? This is how it ends…

 

Chinese stocks were very mixed in January with tech-heavy indices hit hardest (CHINEXT red) and the major industrials outperforming on stimulus, trade-talk optimism…

 

German retail sales collapse and Italy enters recession and Italian stocks soar to its best January since 2011!!

US markets and non-US markets are joined at the Central-bank-driven hip…

 

US equity markets were also exuberant in January (especially the last few days). Small Caps led the majors, soaring over 10% – the best month since Oct 2011 and the best January since 1987…

 

All on the heels of the biggest monthly short-squeeze since September 2010…

 

FANG Stocks soared over 31% off the lows…

 

A big January for banks also…

 

On the week, thanks to Powell’s fold and Lighthizer’s trade comments, we are back in the green…

 

GE was today’s big winner…

 

Credit spreads and VIX collapsed in January… (with credit dramatically outperforming in the last week or so…

 

The last few days have seen Treasury yields tumble – accelerating after Powell – leaving all yields lower in January…

 

30 TSY yields tumbled back below 3.00%…

Financials Conditions have eased dramatically – erasing the last hike’s tightening…

 

The Dollar dropped for the 3rd month in a row (biggest monthly drop in a year) slammed to 4-month lows after The Fed yesterday…

 

Yuan surged in January as the dollar slipped…

 

Despite dollar weakness, cryptos slipped again in January…

 

All major commodities made good gains in January, led by WTI…

 

WTI Crude soared over 18% in January (its best month since April 2016)…

This was WTI’s best January ever…

 

Gold had a great month too…

Ending the sixth straight January with gains…

While gold soared against the dollar, it barely broke-even in January against the Yuan…

Silver also had a solid January (the 7th year of the last 8 with a positive January)

In other commodity news, Nickel just posted its best January in more than two decades.

As Bloomberg notes, the metal, used in stainless steel and electric vehicles, surged 17 percent in the month amid bets that demand will rise as a production deficit deepens. Prices extended gains this week after Vale SA’s dam disaster fueled speculation that shutdowns at some of the company’s iron ore sites could extend to its nickel operations, tightening supplies further.

Finally, amid all the exuberance in January, the month saw the biggest drop in forward earnings expectation in three years…

 

But all stocks care about is how easy Powell can be…

 

“You Are Here”…

*  *  *

“You have meddled with the primary forces of nature, Mr Powell, and we won’t have it! Is that clear? … And you will atone.”

 

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Chinese Company That Paid Debt In Ham Is Running Out Of Pigs

Forget PIK: China’s financial innovation has taken the concept of pay-in-kind bonds to a whole new level: PIG.

Regular readers of Zero Hedge are familiar with money-for-oil loans. But, as we reported last November, one liquidity-challenged pork producer implemented an absurd twist on that concept that has helped to expose the financial dysfunction at many small- and medium-sized Chinese companies.

Instead of receiving cash, holders of local-currency bonds issued by Zhengzhou-based pork producer Chuying Agro-Pastoral Group – which had 1.3 billion yuan in cash against a short-term debt load of 8.4 billion yuan – would be paid with the company’s ham, thanks to an agreement reached between the company and its creditors. The agreement was struck after the company failed to repay a 500 million yuan bond that was due last Nov 5. The spread of African swine fever caused pork demand in China to plummet, creating a cash-on-hand crisis for pork producers.

Well, if you thought that was absurd, you will love what happened next, because according to an announcement on the Shenzhen Stock Exchange, the aptly misnamed Agro-Pastoral Group has run into a new problem: after running low on cash, it is now running low on pigs.

The cash crunch that initially left the pork producer unable to service its debt has now intensified to the point that it’s unable to buy enough feed, which has contributed to the company’s pigs’ death rate being higher than expected.

This, as Bloomberg notes, was the latest twist for the small-cap company that’s been challenged on multiple fronts, from the spread of African swine fever – which has seen more than 900,000 hogs culled across the country – to an economic slowdown to a deleveraging drive by policy makers that’s tightened credit flows to weaker borrowers.

As a result of the latest liquidity – and pork – shock, the central China-based company revised its 2018 performance forecast to an even greater net loss of 3.3 billion yuan, up from 2.9 billion yuan.

However, missing loss expectations may be the least of the company’s worries, which has 2.3 billion yuan of bonds it needs to repay this year, according to data compiled by Bloomberg. It is known the company does not have the cash to make this payment; now it may not even have the pigs to pay “in kind.”

Agro-Pastoral is hardly the first company to propose innovative terms to its creditors: last year, a financing platform under troubled conglomerate HNA Group offered investors air tickets rather than cash for debt repayment. It also won’t be the last: as we reported last year, in 2018 China was hit by a record wave of onshore bond defaults. These defaults have shaken the faith of the country’s bondholders, created anxieties among international investors, who have only recently gained entree to the Chinese bond market, and forced the PBOC to reverse some of its tight-money policies aimed at facilitating a deleveraging in China’s heavily indebted corporate sector.

It has also prompted such arrangement as “Payment In Ham.“

As one fixed-income analyst who spoke with the SCMP recently pointed out, so-called “payment in kind” typically isn’t acceptable to bond holders, although when there is no other value they will take anything, even pigs. And while the “payment in ham” only added to concerns surrounding the solvency of small and medium-sized Chinese businesses, investors shouldn’t worry. Because the Communist Party is coming to rescue them.

“Payment in kind is generally not seen as acceptable for debt repayment,” said Judy Kwok-Cheung, director of fixed income research at Bank of Singapore. This implies increasing liquidity concerns for for small and medium-sized enterprises in China, she said.

“Liquidity injection from the government directed at helping SMEs has eased concerns somewhat, but the market potentially needs more,” according to Kwok-Cheung.

Incidentally, for those wondering, one gift package of Chuying Agro-Pastoral’s ham costs 8,999 yuan or about $1,300. Assuming it takes one pig to make one such package, the company will have to remit just over 255,000 pigs to its creditors in lieu of the upcoming bond maturity, assuming of course that the credit hedge funds who are invested in the pig farmer have space in their office of a few hundred thousand pigs.

via ZeroHedge News http://bit.ly/2S33dmr Tyler Durden