Category: zerohedge

Confused by today’s whipsawed market action, which as much about month end flows, as it is about newsflow, post Powell jitters, breakevens, inflationary fears, and of course, whatever it is that Gartman may be doing? You are not alone: in its intraday macro update, the bank that is also the world’s largest currency trader, had some (very) simple advice for its clients: “Don’t try to make sense of this.”

It then clarifies, and we use the term loosely: “Price action today has been messy to say the least. The shortest explanation is, it’s month end and so there is little point in making sense of the move.”

Still, it highlighting a few notable moves:

• Looking at broader markets, there’s a sense of risk reduction. It’s a sea of red in equities, yields and commodities. After discouraging signs in the DoE inventory report, the bears have taken WTI through one big figure to trade below $62, which seems to be weighing on energy shares. Some market observers have attributed this to be the trigger behind equities turning red. Elsewhere, bear flatteners have characterized the yield curve in the US, while European yields have sold off across the board.
• Month end models suggested USD buying today, and we can see that has clearly played out. GBPUSD is the biggest underperformer today. The pair has traded through three big figures since the EU withdrawal agreement draft suggested further Brexit drama. The pair now trades at 1.3790, although major supports are approaching around 1.3765-1.3780 (converging 55d MA, trend line and February low). USDCAD meanwhile is above 1.28 for the first time since the Christmas period. The oil rout is unlikely to help and we could see a move towards 1.29
• GBP performance in the crosses is arguably worse. GBPJPY has squeezed through the 200d MA at 147.78 to trade at 147.17 currently, levels we haven’t seen since September 2017. This has helped JPY be today’s top performer against USD, with the pair trading at 106.73 at time of print. 106.60-70 big level on the downside to break, contrasting sharply to CHF performance. USDCHF is back to testing the neckline of a major double top around 0.9440.

What is however most troubling – and fascinating – by far, is that having gone short overnight, Gartman appears to be right this time.

via Zero Hedge http://ift.tt/2oGJXtd Tyler Durden

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Imagine a world with two investment options, apples and oranges. Investors are best served to reduce their holdings of apples and to replace them with oranges when demand for apples drives the price too high. The simple logic in this example is applicable across the full spectrum of economics, and it holds every bit as true in today’s complex world of investing. The question every investor should have is, “When does the price of “apples” make “oranges” the preferred holding”? Most of the time, answering that question is not easy. Occasionally however, the evidence becomes too obvious to ignore.

Replace apples and oranges with stocks and bonds and you have defined the majority of investors’ asset allocation schematic. Unlike our fruit example, the allocation decision between stocks and bonds, is based on many factors other than the price of those two assets relative to each other. Among them, recent performance and momentum tend to be a big influence in both raging bull markets and gut-wrenching bear markets. In both extremes, valuations tend to take a back seat despite historical data providing ample evidence that equity valuations alone should drive allocation decision.

Current equity valuations and nearly 150 years of data leave no doubt that investors are best served to ignore yesterday’s stock market momentum and gains and should be shifting to bonds, as we will demonstrate.

Valuations

How often do you hear someone touting a stock because its share price is low, or advising you to sell because the price is too high? This nonsense does not come from just Uber drivers and novice investors; it is the primary programming line-up of the main-stream business media.  The share price on its own is meaningless. However, the stock price times the number of shares outstanding provides the market capitalization (market cap) or the dollar value of the company. Inexplicably, market cap is a number you rarely hear from those giving stock tips.

Market cap allows investors to take the aforementioned corporate worth and compare it to earnings, cash flow, revenues and a host of other fundamental data to provide a logical valuation platform for comparison to other investment options.

While we use a slew of different valuation techniques, we tend to prefer the Cyclically-Adjusted Price-to-Earnings (CAPE) Ratio as devised by Nobel Prize winning economist and Yale professor Robert Shiller. The ratio adjusts for inflation and as importantly, uses ten years of earnings data to derive a price to earnings ratio that encompasses business cycles. Shiller’s approach eliminates short-term noise that tends to make the more popular one-year trailing price-to-earnings ratio erratic and potentially misleading.

Currently, the CAPE on the S&P 500 is 33.41. Looking back as far as 1871, today’s valuation has only been exceeded by a brief period in the late 1990’s. To help link return expectations and CAPE valuations we plot below every historical monthly instance of CAPE to the respective forward ten-year returns. Each of the 1,525 dots represents the intersection of CAPE and the ten year total return that followed since 1871.

Data Courtesy: Robert Shiller

Apples or Oranges

While the analysis is telling, investors should compare the returns versus those from a ten-year U.S. Treasury note to determine whether the returns on stocks adequately compensated investors for the additional risk.

The graph below shows the returns above minus the prevailing ten-year U.S. Treasury note.  Essentially, the graph shows the excess or shortfall of the returns provided by stocks versus those of ten-year Treasury Notes in the ten years following each monthly CAPE instance. Negative returns indicate the 10-year Treasury yield exceeded the 10-year total return on stocks.

Data Courtesy: Robert Shiller

To better highlight the data and put a finer point on current prospects, consider the bar chart below.

Data Courtesy: Robert Shiller

The chart above aggregates the data from the prior chart into ranges of CAPE as shown on the x-axis. It also displays the mean, maximum and minimum of the excess ten year returns of stocks at the various CAPE ranges. This information can be used to create expectations for future performance given a stated CAPE.

With the current CAPE at 33.41 as circled, investors should expect an annualized excess return for ten years of -2.04%. Based on historical data which includes 32 full business cycles dating back to 1871, the best excess return experienced for all instances of CAPE over 30 is 0.39%. Over this 147 year period, there have been 57 monthly instances in which the CAPE was above 30. Only four of these instances provided an excess return over Treasuries and the average was a paltry twenty basis points or 0.20%.

Call us cynical, but the prospect of equity market excess returns  for the next ten years measuring in the fractions of a percent is not nearly enough compensation for the distinct possibility of underperforming a risk-free asset for ten years.

Summary

History, analytical rigor and logic all argue in favor of shifting one’s allocations away from stocks. Investors have no doubt become accustomed to the easy gains provided by equity markets over the past ten years, and old habits are hard to break but we know valuations to be mean-reverting. Given current extremes, this comparison offers compelling evidence that compounding wealth most effectively depends on breaking that habit.

via Zero Hedge http://ift.tt/2GQkfdd Tyler Durden

Just days after President Trump exclaim-tweeted that “there is no collusion” and this is a “witch hunt,“ NBC News reports that Special Counsel Robert Mueller’s team is asking witnesses pointed questions about whether Trump was aware that Democratic emails had been stolen before that was publicly known.

Mueller’s investigators have asked witnesses whether Trump was aware of plans for WikiLeaks to publish the emails. They have also asked about the relationship between GOP operative Roger Stone and WikiLeaks founder Julian Assange, and why Trump took policy positions favorable to Russia.

And furthermore, a breathless Katy Tur reports, questions have been asked as to whether he was involved in their strategic release, according to multiple people familiar with the probe.

The line of questioning suggests the special counsel, who is tasked with examining whether there was collusion between the Trump campaign and Russia during the 2016 election, is looking into possible coordination between WikiLeaks and Trump associates in disseminating the emails, which U.S. intelligence officials say were stolen by Russia.

Trump has repeatedly denied any collusion.

NBC News goes on to note that in one line of questioning, investigators have focused on Trump’s public comments in July 2016 asking Russia to find emails that were deleted by his then-opponent Hillary Clinton from a private server she maintained while secretary of state.

The comments came at a news conference on July 27, 2016, just days after WikiLeaks began publishing the Democratic National Committee emails. “Russia, if you’re listening, I hope you’re able to find the 30,000 emails that are missing,” Trump said.

Witnesses have been asked whether Trump himself knew then that Clinton’s campaign chairman John Podesta, whose emails were released several months later, had already been targeted. They were also asked if Trump was advised to make the statement about Clinton’s emails from someone outside his campaign, and if the witnesses had reason to believe Trump tried to coordinate the release of the DNC emails to do the most damage to Clinton, the people familiar with the matter said.

So to summarize NBC News’ post – Some Trump-related people have been asked lots of Russia-related questions… with no reported results.

Does this seem like just another ‘old news’ dredged up as new ‘fake news’ story to anyone else?

Of course, with Gates and Manafort on the block, this would seem like a well-timed leak from Mueller’s tightly-run ship to send a message to President Trump designed to perhaps spook him?

via Zero Hedge http://ift.tt/2owBz09 Tyler Durden

The United States Navy has a new vision for what its high-tech stealth destroyer could do: launching nuclear cruise missiles at extended ranges. 

According to the Military Times, the Nuclear Posture Review (NPR) includes a long-term strategy that could equip the new USS Zumwalt (DDG-1000) stealth destroyer with nuclear cruise missiles. Released earlier this month, the NPR calls for the development of smaller warheads that the Pentagon believes would be seen more “usable” against China, Iran, North Korea, and or even Russia.

“In support of a strong and credible nuclear deterrent, the United States must…maintain a nuclear force with a diverse, flexible range of nuclear yield and delivery modes that are ready, capable, and credible,” stated the report, which serves as the first updated document the Pentagon has released about its perceived nuclear threats since 2010.

Air Force Gen. John Hyten, StratCom, said the Pentagon’s program to develop a new, low-yield nuclear Sea-Launched Cruise Missile (SLCM) “would not be limited to using ballistic submarines as the sole launch platform, as many assumed when the NPR was endorsed by Defense Secretary Jim Mattis earlier this month.”

“It’s important to know that the NPR, when it talks about the Sea-Launched Cruise Missile, does not say ‘Submarine-Launched Cruise Missile,’ ” Hyten said earlier this month at the National Defense University’s Center for the Study of Weapons of Mass Destruction.

During the speech, Hyten replied to a question, “we want to look at a number of options — everything from surface DDG 1000s into submarines, different types of submarines” for the nuclear cruise missiles.

“That’s what the president’s budget has requested of us — to go look at those platforms, and we’re going to walk down that path,” Hyten said.

Moar war…

The Military Times sheds some color on the unreliability of the USS Zumwalt, along with some of its failures during sea trials. Further, the Military Times outlines the growing nuclear threats from Russia and China, which may explain why the Pentagon is rushing to strap nuclear cruise missiles on the USS Zumwalt.

The USS Zumwalt, the first of three new stealthy destroyers billed by the Navy as the world’s largest and most technologically advanced surface combatants, experienced numerous cost overruns in construction and problems in sea trials. It also broke down while transiting the Panama Canal in 2016.

The second ship in the Zumwalt class, the Michael Monsoor, had to cut short sea trials in December because of equipment failures.

The NPR called for the development of two new, low-yield nuclear weapons — the SCLM and a new submarine-launched ballistic missile.

Hyten said the U.S. will be modifying “a small number of existing submarine-launched ballistic missile warheads to provide a prompt, low-yield capability, as well as pursuing a modern nuclear-armed sea-launched cruise issile in the longer term.”

He added, with some regret, that both are necessary to enhance U.S. deterrence against growing tactical and strategic nuclear threats from Russia and China.

“I don’t have the luxury of dealing with the world the way I wish it was,” he said. “We, as a nation, have long desired a world with no or at least fewer nuclear weapons. That is my desire as well. The world, however, has not followed that path.”

New developments with the Xian H6K strategic bomber, a version of the Russian Tupolev Tu-16 twin-engine bomber, has given China a nuclear triad of bombers, land-based missiles and submarines “for the first time,” Hyten said.

He also cited repeated statements from Russian President Vladimir Putin about modernizing his own nuclear force and developing a new generation of low-yield weapons. “Russia has been clear about their intent all along,” he said.

In the question-and-answer period at National Defense University, an official from the Russian Embassy in Washington challenged the general’s assessment of the threat posed by his country.

Hyten responded, “We listen very closely to what your president says, and then watch closely” through a variety of means to see Putin’s thoughts put into action. “We have to consider those a threat.”

Pentagon policy chief David Trachtenberg said the newly amended NPR report developed by the Trump administration is not a divergence from the 2010 NPR established by the Obama administration.

“Contrary to some commentary, the Nuclear Posture Review does not go beyond the 2010 NPR in expanding the traditional role of nuclear weapons,” said Trachtenberg.

“The goal of our recommendations is to deter war, not to fight one,” he said.

“If nuclear weapons are employed in conflict, it is because deterrence failed, and the goal of the 2018 NPR is to make sure that deterrence will not fail,” he added.

However, “it is clear that our attempts to lead by example in reducing the numbers and salience of nuclear weapons in the world have not been reciprocated,” Trachtenberg said.

Paul Craig Roberts describes the US nuclear posture as a reckless, irresponsible, and destabilizing departure from the previous attitude toward nuclear weapons.

The Trump administration and the Pentagon are eagerly arming America’s high-tech war machines with atomic weapons. Why? Perhaps, the insane escalation in such a rapid timeframe is to challenge an emerging multipolar world order led by China, Russia, and other rising global powers. The reshaping of the global order is well underway, and the Pentagon feels threatened. War is coming…

via Zero Hedge http://ift.tt/2HRO92l Tyler Durden

Authored by John Rubino via DollarCollapse.com,

The Money Bubble is inflating at different speeds in different places. But apparently no culture is immune:

Household Debt Sees Quiet Boom Across the Globe

(Wall Street Journal) – A decade after the global financial crisis, household debts are considered by many to be a problem of the past after having come down in the U.S., U.K. and many parts of the euro area. But in some corners of the globe—including Switzerland, Australia, Norway and Canada—large and rising household debt is percolating as an economic problem. Each of those four nations has more household debt—including mortgages, credit cards and car loans—today than the U.S. did at the height of last decade’s housing bubble.

At the top of the heap is Switzerland, where household debt has climbed to 127.5% of gross domestic product, according to data from Oxford Economics and the Bank for International Settlements. The International Monetary Fund has identified a 65% household debt-to-GDP ratio as a warning sign.

In all, 10 economies have debts above that threshold and rising fast, with the others including New Zealand, South Korea, Sweden, Thailand, Hong Kong and Finland.

In Switzerland, Australia, New Zealand and Canada, the household debt-to-GDP ratio has risen between five and 10 percentage points over the past three years, paces comparable to the U.S. in the run-up to the housing bubble. In Norway and South Korea they’re rising even faster.

The IMF says a five percentage-point increase in household debt over a three-year period is associated with a hit to GDP growth of 1.25 percentage points three years down the road. The historical record suggests that large debts lead to a short-term economic boost but long-term struggles, as a greater share of the economy’s resources go to servicing the spending binge associated with high debts. The IMF also finds rising household debts are associated with greater risks of banking crashes and financial crisis.

“When household credit goes up too fast, the fact is, it doesn’t end well,” said Guillermo Tolosa, an economist at Oxford Economics.

The disparate economies on this debt list, though far apart geographically, actually have much in common. They are mostly wealthy with well-developed financial systems and avoided the worst of last decade’s global financial crisis. Their housing markets didn’t collapse dramatically. They weren’t the focus of fiscal debt crises. When nearly the entire world was in recession in 2009, Australia, New Zealand and South Korea managed to keep growing.

Compared with the euro area, the U.S., or Japan they looked like little outposts of stability.

But as economist Hyman Minsky once said, stability can be destabilizing. They attracted capital and their interest rates followed the rest of the world’s rates lower, sparking housing booms that are now a source of risk.

During the U.S. housing bubble, home prices nearly doubled from 2000 to their peak in 2006, according to the Case-Shiller home price index. In Canada, Australia, New Zealand and Sweden home prices have more than tripled by some measures.

Collectively, those 10 economies have $7.4 trillion in total economic output and a household debt stock about the same size. Taken as a whole, that’s more than the output of Germany or Japan. Moreover, many of them have a large stock of adjustable-rate mortgages that could suddenly become more costly to service should global interest rates rise.

Note that this article’s first sentence — “A decade after the global financial crisis, household debts are considered by many to be a problem of the past after having come down in the U.S., U.K. and many parts of the euro area.” — was outdated before it was written. As the chart below illustrates, US consumers are back to borrowing like it’s 2006. November was a credit card orgy and December was about twice the year ago level.

And has there ever been a case of a country’s house prices tripling in a decade without causing a crisis? That kind of data doesn’t seem to be available but it’s a safe bet that the answer is either “rarely” or “never.”

via Zero Hedge http://ift.tt/2HTMMQH Tyler Durden

It looks like all those Saturday Night Live sketches portraying Jeff Sessions as an obsequious diminutive imp have gotten to the attorney general.

In a stiffly-worded response to President Trump – who earlier today castigated the AG for ordering the Justice Department’s inspector general, an Obama-era holdover, to investigate FISA abuses – Sessions defended his handling of the FISA investigation by saying he followed the “appropriate process” by ordering the IG to investigate and that, as long as he remains attorney general, he will “continue to discharge my duties with integrity and honor.”

 

AG SESSIONS STATEMENT: “We have initiated the appropriate process that will ensure complaints against this Department will be fully and fairly acted upon if necessary….” (1/2) https://t.co/MXsl6QF0r3

— Adam Levine (@cnnadam) February 28, 2018

 

AG SESSIONS STATEMENT CT’D: “As long as I am the Attorney General, I will continue to discharge my duties with integrity and honor, and this Department will continue to do its work in a fair and impartial manner according to the law and Constitution. “ (2/2) https://t.co/MXsl6QF0r3

— Adam Levine (@cnnadam) February 28, 2018

 

Of course, as one twitter user reminds us, Senate Republicans have said they will not confirm another AG nominee if Sessions is forced out.

 

Senate Republicans have already stated they will not confirm another AG nominee if Sessions is fired or forced out.

— Stephen 74 (@Hydraman40Black) February 28, 2018

 

The statement elicited a wave of incredulous responses from twitter users, who were surprised by Sessions’ strongly worded response.

 

The statement is a remarkable public response from Sessions to another critical comment from President Trump directed at him and the Justice Department

— Steve Brusk (@stevebruskCNN) February 28, 2018

His response begs the question: Will their spat end here? Or will we soon hear from a (no doubt infuriated) Trump?

via Zero Hedge http://ift.tt/2oE8VK0 Tyler Durden

Two months ago, when the world was feverishly following every twist of the growing Harvey Weinstein sexual abuse scandal, we predicted that it was only a matter of time before the it hit Wall Street front and center, where some of the stories heard in recent years would make even Harvey blush.

Today, that scandal hit home for two Bank of America staffers who were fired by the bank for not sufficiently disclosing information related to allegations against a prime brokerage executive who left last month following a complaint of inappropriate sexual conduct.

According to Bloomberg, Joe Voboril and Valerie Ludorf worked under Omeed Malik at the bank’s prime brokerage unit. Malik left the firm in January, a month after a woman in her 20s claimed that he had made unwanted advances.

Omid Malik,38, left the bank after a roughly three-week inquiry, which included interviews with other staff, turned up additional concerns, a person with knowledge of the situation said last month.

On Wall Street, Malik was known as a charismatic figure with close ties to the hedge fund world.

His renown grew in part because of his attendance at prominent hedge fund conferences. He also threw splashy parties, including a birthday party for himself that featured a number of celebrities — photos of which were posted online by several well-known celebrity photographers.

This is how the NYT reported his departure one month ago:

A senior executive at Bank of America in New York departed last week after an internal investigation into a young female banker’s accusation of inappropriate sexual conduct, according to people at the bank who were briefed on the investigation.

The executive, Omeed Malik, 38, was a powerful figure in the hedge fund world. He was a managing director and helped run the prime brokerage business that raises money for hedge funds.

Among his roles, Malik was an adviser to Jon S. Corzine, the former New Jersey governor and United States senator, as Mr. Corzine started a hedge fund, and he was a speaker at a high-profile hedge fund conference organized by Anthony Scaramucci.

Malik, a former lawyer at Weil Gotshal & Manges, a prominent New York firm, also was a member of the Council on Foreign Relations.

Malik’s close ties to Corzine were forged while Malik worked at MF Global, the big commodities trading firm that collapsed in bankruptcy under Corzine’s leadership. Last year, Corzine sought to return to Wall Street with a hedge fund that Malik helped promote.

The young woman, who is employed by Bank of America as an analyst, complained about Malik in January, the NYT reported. The bank then opened an investigation. Officials from human resources interviewed as many as a dozen people who have worked with Mr. Malik. He left roughly two weeks before annual bonuses were to be handed out.

“Joe fully cooperated with the investigation and did all that was asked of him. He was fully forthright and the firm never told him that he failed to disclose information or cover anything up,” said Kim Michael, a partner at Wechsler & Cohen LLP and counsel for Voboril. “We believe the real reason he was terminated was part of Bank of America’s attempt to discredit anyone whose truthful answers didn’t fit into the bank’s narrative about Omeed.”

Allegations of sexual harassment and discrimination have cropped up at Bank of America in the past. Two years ago, it reached a settlement with a female managing director in its fixed income group who had filed a lawsuit claiming the bank fostered a “bros’ club” culture, mistreated female employees and paid them less than men in comparable jobs. The terms of that settlement were not disclosed.

via Zero Hedge http://ift.tt/2FbCGfn Tyler Durden

Authored by John Coumarianos via RealInvestmentAdvice.com,

In this past weekend’s Real Investment Advice Newsletter, I wrote about financial advisor Larry Swedroe’s excellent article on the “Four Horsemen of the Retirement Apocalypse:”

• low stock returns,
• low bond yields.
• increased longevity; and,
• higher healthcare expenses.

In his article, Swedroe mentions that high yield (junk) bonds won’t save investors, who haven’t historically been rewarded well for taking on their risk.  Swedroe also says high yield bonds correlate well with stocks, which means they don’t provide much diversification.  Swedroe writes from the point of view of modern portfolio theory, which looks for ways to increase volatility-adjusted returns in a portfolio. In this post, I’ll treat junk bonds a little differently, showing why now is a terrible time to own them. My analysis doesn’t completely contradict Swedroe’s though; it supports his thesis that stocks and junk bonds are highly correlated.

Unlike Swedroe, I don’t dislike junk bonds per se. These loans to decidedly less-than-blue-chip companies are just like any other asset class.

They can be priced to deliver good returns, as they were in early 2009, or not.

Right now, they’re not.

Everyone looks at junk bonds initially by observing the starting yield or yield-to-maturity. Right now, the iShares High Yield Corporate Bond ETF (HYG) is yielding 5.53%. That can look attractive to some investors. After all, where else can you get over 5%?

Other people look at the spread to the 10-Year U.S. Treasury. 5.53% is around 2.7 percentage points more than the 2.8% yield of the 10-year U.S. Treasury. That might look find to some too. Of course, a little bit of research shows that spread is lower than the historical average of around 5.7 percentage points.

Still, investors seeking higher yield may be undisturbed by a historically low spread. Some people need the extra yield pick-up over Treasuries, however small it might be by historical standards, and that’s enough for them to make the investment.

Yield Isn’t Total Return

There’s one extra bit of analysis, however, that should make investors think again about owning junk bonds – a loss-adjusted spread. The problem high yield investors often fail to consider is that junk bonds default. And that means the yield spread over Treasuries isn’t an accurate representation of what high yield investors will make in total return over Treasuries. It’s easy to forget about defaults and total return because defaults don’t occur regularly. They tend to happen all at once, giving junk bonds a kind of cycle and encouraging complacency among yield-starved investors during calm parts of the cycle.

Default rates for junk average about 4.2% annually, according to research from Standard & Poor’s. And investors have typically recovered 41% (or lost a total of 59%) of those defaults, according to this Moody’s study from 1981 through 2008. That results in an annual loss rate for an entire portfolio of around 2.5%. So the iShares fund’s 5.53% yield isn’t quite what it seems to be. In fact, if we subtract 2.5 from 5.53, the result is 3.03, meaning investors in junk bonds are likely to make only 20 basis points more than the 2.8% they could capture in a 10-Year U.S Treasury currently.

Now, a more careful analysis should consider an “option-adjusted” spread, which accounts for the fact that issuers can call bonds prior to maturity and lenders or bondholders can sell bonds back to the issuer at prearranged dates. This adjustment usually adds something to the spread, making higher yielding bonds slightly more attractive. So we took the options adjusted spread data, and adjusted it for an annual loss rate of 2.5 percentage points. Remarkably, there have been times such as immediately before the financial crisis when investors weren’t making anything on an options-adjusted basis above Treasuries to own junk bonds. Now at least it’s around 1 percentage point.

Still, even with the option adjustment, one percentage point over Treasuries is still very little, especially considering that the option-adjusted spread we used compares a junk bond index with Treasuries. In other words, the 0.50% expense ratio of most junk bond ETFs isn’t factored into the equation. At a 0.50% or so yield pickup over Treasuries, investors just aren’t making enough from junk bonds to justify owning them. Also, advisors pushing junk bonds on yield-hungry clients aren’t doing much due diligence. The mark of a good advisor is one who can say “No” to a client and bear the risk that the client will go to another advisor doing less due diligence.

via Zero Hedge http://ift.tt/2GTZ36d Tyler Durden

A teacher was in custody after police responded to reports of shots fired at a high school in Georgia.

The Dalton Police Department tweeted at about 12:30 p.m. that a subject, believed to be a teacher, was barricaded in a classroom at Dalton High School.

There is a barricaded subject in a classroom. It is believed to be a teacher.

— Dalton Police (@DaltonPD) February 28, 2018

No children were hurt or in danger, the police later said.

UPDATE: The teacher is in custody.

— Dalton Police (@DaltonPD) February 28, 2018

The police said there is “No info to release right now about identity of the subject who was barricaded or what caused the situation.”

No info to release right now about identity of the subject who was barricaded or what caused the situation.

— Dalton Police (@DaltonPD) February 28, 2018

Dalton High School is located in northwest Georgia, near the Tennessee-Georgia border, about 90 miles (145 kilometers) north of Atlanta.

The incident comes two weeks after a gunman opened fire at a high school in Parkland, Fla., killing 17 people and injuring several others.

 

 

via Zero Hedge http://ift.tt/2Fbzi48 Tyler Durden

At the start of February, just before the great vol-quake, we highlighted  that a curious correlation was emerging between the VIX – and therefore the broader market as would be confirmed just days later – and bitcoin. We referenced a recent note from Deutsche Bank according to which “cryptocurrencies are closely watched by retail investors, affecting their risk preferences for stocks and other risk assets.” It continued:

Although institutional investors recognize that stocks and other asset valuations may have entered bubble territory (US equities’ average P/E is around 20x), they cannot help but continue their risk-taking. Now, a growing number of institutional investors are watching cryptocurrencies as the frontier of risk-taking to evaluate the sustainability of asset prices. The result is that institutional investors, who are supposed to value assets using their sophisticated financial literacy, analysis, and information-gathering strengths, are actually seeking feedback about the market from cryptocurrency prices (which are mainly formed by retail investors). 

Adding to this, we pointed out the correlation that had emerged between bitcoin and the VIX…

… and added that “the correlation between Bitcoin and VIX can increase as more institutional investors begin trading Bitcoin futures.”

Last year, cryptocurrencies experienced “melt-up,” a situation where prices surged, irrespective of fundamentals, because a flood of investors seeking capital gains outstriped supplies. If the current “triple-low environment” persists, and inflation rate and the likelihood of a recession remains low, we believe this “melt-up” phenomenon could spread to other products, creating massive asset bubbles.

Two weeks later, and just days after the first market correction in years which some say was presaged by the crash in cryptos just prior, none other than Bank of America’s Chief Investment Strategist Michael Hartnett made the same, apocryphal for some, observation namely that “the next lead indicator is…Bitcoin.”

Continuing this theme, last Friday “bond king” Jeff Gundlach spoke to CNBC and said that “if you want to know where stocks are going, watch bitcoin.”

“Strangely, bitcoin seems to be the poster child for social mood and market mood,” Gundlach said: “We had a vertical rise from Sept. 7 which was led and epitomized by bitcoin. Bitcoin started at about $4,500 and went up to about $20,000 or so.”

“Bitcoin peaked out in mid-December and it crashed. That sort of presaged the volatility in the stock market,” he said, noting the cryptocurrency has stabilized recently. “If stocks are going to take another tumble, I think it would be preceded by a bitcoin decline.”

And the punchline: “Weirdly, I’m actually using the sentiment regarding speculative assets like bitcoin as a guide to maybe what the future will bring.”

Which brings us to the 64,000 bitcoin question: are cryptocurrencies really a leading indicator for the entire market, as not only we, but some of the biggest financial luminaries now think?

The answer is, at best, limited: after all there is very limited historical data to use for statistical analysis purposes, and the correlation in peaks and subsequent drop be simply a case of spurious correlation. Still, some like DataTrek’s Nicholas Colas see a distinct pattern emerging.

As Colas wrote in a letter to clients this week, “the notion that bitcoin is a “Stub” asset (the riskiest piece of a capital structure) in global capital markets is getting some traction lately.” The idea, in a nutshell, is that crypto currencies are increasingly part of the financial mainstream (numerous haters notwithstanding) and their fortunes are inherently tied to the risk tolerances that support all assets. “Higher price correlations should therefore follow, even if bitcoin remains a very volatile asset.”

These starting parameters prompted him to update his statistical work on the relationship between bitcoin’s price and the S&P 500.

This is what he found:

Short-term price correlations (measured in 10 day rolling averages) during the recent selloff in US stocks absolutely exhibit a high degree of linkage, but we need to call out a few caveats as well:

• The 10-day historical correlations between bitcoin and the S&P 500 reached 0.79 on February 6th, right in the middle of the sharp decline in US stocks. For those of you with a statistical bent, that is an R-squared (coefficient of determination, rather than correlation) of 62%. Not bad for a one-variable model, to be sure.
• This 10-day measure also shows that the relationship between bitcoin and stocks declined rapidly in the days that followed. By February 21st they had turned negative. As of today, the correlation was just 0.37.
• It is also worth noting that 10-day price return correlations between bitcoin and the S&P have been high several times in recent years, and long before it was widely followed by the financial press. Examples include: February 22, 2016 (0.77 correlation), July 14th 2016 (0.80), April 21st, 2017 (0.81), and September 8th (0.80).

Bottom line: high short-term correlations between bitcoin and stocks are nothing new. (And one word of explanation: financial services professionals typically refer to correlations in percentage terms, even though they are obviously an index between -1.0 and +1.0. We follow that convention in our other work, but we find that bitcoin gets a lot of attention from math/stats people who are real sticklers about percentages reflecting R-squared data. In deference to them, we use their convention in this note.)

Now, over the longer term, there is a statistical story about bitcoin and US stocks being increasingly tethered to the same market appetite for risk. The data here:

• We’ve included two charts below. One shows the 90-day correlation between the S&P 500 and bitcoin, the other highlights the correlation between US large cap Tech stocks (using the XLK exchange traded fund) and the crypto currency.
• With this longer-term timeframe, you can see that bitcoin now shows a much higher correlation to US stocks than for much of the last 2 years (the graph starts in January 2016). The lift-off point was in August 2017 when bitcoin went from a history of almost complete non-correlation to a 0.10 correlation coefficient and (more recently) 0.25-0.30.

• Statistically minded people will note that this translates only to a 6-9% R-squared. Markets people will look at the chart and say “the trend is not the friend” of considering bitcoin as a non-correlated asset going forward.
• Since bitcoin is a technology as well as a crypto currency, a comparison between it and US large cap Tech stocks is also worth a look. The data shows essentially the same relationship between bitcoin and US stocks, although a modestly tighter fit during last Fall.

As Colas concludes, the upshot here is twofold:

• Bitcoin seems to track US stocks when they fall (witness earlier this month) more than when they rise. That makes sense to us. A sudden shift in risk tolerances pulls capital out of all risk assets. The same thing happened with gold during the Financial Crisis, when the yellow metal was down in 2008 along with everything else.
• Over time, bitcoin’s price will be set not by equity prices but by its own fundamentals. The long run correlations show that well enough, and it makes intuitive sense as well.

In other words, while major inflection points in crypto may indicate to a distinct shift in risk-mood, one which can then affect other risk assets, in the long-run the correlation become negligible, it will be up to bitcoin – and stocks, or rather central banks – to justify they prices, whether bubbly or crashy.

via Zero Hedge http://ift.tt/2CPvujL Tyler Durden