The U.S. Securities and Exchange Commission is finding it harder to brush off online attacks, especially from one unnammed online foe who has prompted the agency to go so far as to try and hire a reputation-management expert to improve its image, according to Bloomberg.
The information comes from a July 22 job posting on a federal job site, which doesn’t name the mystery detractor by name. The person “isn’t a well-known executive like Musk or Cuban,” said someone familiar to the matter. The SEC has accused its mystery adversary of violating securities laws and “assailing agency officials online”, while purposefully taking steps to make sure that Google and other search engines picked up the critiques.
The contractor’s duties will include monitoring content about employees in the SEC’s vaunted enforcement division on the web and removing anything that’s “false or harmful.”
SEC spokesman John Nester said: “In the course of protecting investors and enforcing our securities laws, individual SEC staff members can unfortunately become the target of personal attacks online, which are appropriate for us to counter vigorously.”
The request shows that even regulators can have trouble quieting critics on sites like Twitter. While former lawyers at the SEC say they were “routinely bashed”, they can’t recall the agency hiring this type of consultant in the past.
John Reed Stark, who spent about 20 years in the SEC’s enforcement division said: “It’s very unusual. I wish they had it back in the day. It would’ve given me some comfort.”
Stark said the threats he got never went beyond online posts, but that he did occasionally contact federal authorities to make sure he wasn’t in danger.
Many of the SEC’s staff have LinkedIn and Facebook accounts, which makes them targets outside of traditional stock message boards. According to the listing, the reputation manager may work up to 3 years with compensation not exceeding $250,000.
But not everyone is blatantly supportive of the measure. Chris Ullman, who now runs his own public relations firm said: “The safety of employees and the integrity of the investigative process is important, but this proposal raises serious free speech issues. The proposal is so broad as to possibly infringe on the public’s ability to criticize the commission.”
The SEC continues to try and rehab its image over the last decade after failing to spot Bernie Madoff’s ponzi scheme and the warning signs of the 2008 crisis. Over the last decade, the SEC has brought a record number of cases and sought billions in penalties. The most recent and profile of which was alleging fraud from Tesla CEO Elon Musk – a charge he took so seriously that he may have just violated the terms of his settlement with the SEC for the second time in as many years, as we wrote about yesterday.
via ZeroHedge News https://ift.tt/2MvG87L Tyler Durden
Have we finally hit peak Trump Derangement Syndrome?
The Washington Post published an article entitled Even one of Trump’s favorite foods has a hidden Russia connection.
Yes, really.
The article is behind a paywall but is subtitled ‘the hamburger inspired Soviet food fad you’ve never heard of‘.
From the Magazine: Even one of Trump’s favorite foods has a hidden Russia connection https://t.co/cDHpenCxvn
— The Washington Post (@washingtonpost) July 31, 2019
The Post is so obsessed with ‘muh Russia’ conspiracy theories, it’s now suggesting (albeit tongue in cheek one would presume) that Trump’s love for burgers is another sign that he is a secret Russian agent.
The newspaper got completely destroyed in the Twitter thread.
“Your Russia collusion conspiracy theory pieces are my favorite. Thank you for holding on, all evidence to the contrary,” remarked Mollie Hemingway.
Your Russia collusion conspiracy theory pieces are my favorite. Thank you for holding on, all evidence to the contrary.
There is a war on free speech. Without your support, my voice will be silenced. Please sign up for the free newsletter here. Donate to me on SubscribeStar here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown.
via ZeroHedge News https://ift.tt/2MwSUCV Tyler Durden
If there is anything today’s violent reversal in the market demonstrated, where this morning’s inexplicable levitation (well, maybe explicable now that “terrible news is great news” again) was smashed with stocks plummeting once Trump tweeted that the China trade war ceasefire is dead, and the US would impose “a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country”, it is that algos, quants, and systematic funds remain the marginal price setters of the US stock market.
Indeed, as Bloomberg’s Andrew Cinko said when commenting on today’s early morning levitation, it “looks more like it’s being driven by ETF flows or perhaps quant- or multi-strategy firms. That’s money that tends to go out as quickly as it came in, leaving the S&P vulnerable to a reversal as the bid dissipates.” Ironically, just minutes later we got definitive proof of just how fast the passive, or algo money, flees in the milliseconds following Trump’s tweet.
So with the question of who did all the buying and subsequent selling today laid to rest, it makes further sense to ask what happens next, now that the ETFs, quants and generally math PhDs are in charge.
Well, according to Nomura’s quant insight team led by Masanari Takada, the answer is nothing good.
As Takada writes in his FOMC post-mortem analysis, he notes that in his baseline scenario, he expects selling of equities by CTAs and other such market participants “to not go beyond the clearing out of long positions; we would not expect these investors to start staking out new short positions unless the US economy were to suffer an obvious loss of momentum.” Which is precisely what Trump’s restart of the US-China trade war virtually assures.
Looking over the positioning of various speculative traders, Nomura says that it appears that the selling of US equities has been led by trend-following algos (CTAs, risk-parity funds). For the moment, then, the selling thus appears to be mostly technically driven.
As the Nomura quant notes, “trend-following CTAs seem to be prioritizing exits from long positions in US equity futures. Having recently built up sizable net long positions in both S&P 500 futures and NASDAQ 100 futures, CTAs are now paring those positions in response to uptick in volatility and shift in market tone that followed the FOMC meeting.”
However, the selling by CTAs is as of yet just a matter of profit-taking. According to Takada, the average break-even line for CTAs’ net long position in S&P 500 futures is at around 2,960, below which the selling will accelerate in linear fashion. Which is precisely where the S&P is trading as of this moment.
Furthermore, the net long position itself is only about 15% smaller now than it was at the most recent peak on 16 July. Similarly, CTAs’ net long position in NASDAQ 100 futures breaks even at around 7,220 on average, and the position has shrunk by only around 11% since the 11 July peak.
Risk-parity funds are mostly waiting out the rise in volatility in DM equity markets, although they are slightly more inclined to sell than to buy. However, if stock market volatility were to rise in a more pronounced fashion in August, Nomura is certain that they would likely take urgent steps to rebalance their portfolios by selling equities and buying bonds.
Meanwhile, when looking at global macro hedge funds, as of August 1st, it still seems possible that the steep drop in US equities will turn out to be just a matter of temporary undershooting, but what happens over the next two or three days should bring some clarity. Of particular importance is whether global macro hedge funds and other fundamentals-oriented investors pile in to buy a perceived dip in US equities over the next few trading days.
While fundamentals-focused global macro hedge funds seem to still be bullish on US equities, their swing to bullishness in July can be explained by a combination of the dovish turn that the Fed took in June and the improvement observed in the US economic surprise index.
Yet, despite looking bullish on US equities now, macro-oriented market participants that had latched onto the dovish tone that the Fed struck in June may take the July FOMC meeting outcome as a reason to become less optimistic about US equities. If the market loses some of the buying support it has been getting from macro-oriented funds and longer-term investors, systematic selling pressure could gain the upper hand for a while. In that event, the US stock market as well as the global stock market could, true to form, be faced with the customary August volatility shock.
So once the stops are taken out, Nomura then sees the S&P 500 being taken down into the 2,850-2,900 range. Meanwhile, Takada also warns that “the US rates market may well start moving in a way that pressures the Fed to cut policy rates again in September”, a way such as this for example, which saw the 2Y yield plummet after the Trump tweet…
… lending indirect support to the US stock market.
And here comes the punchline, because according to the Nomura quants, “if the latter half of August brings increasingly clear signs that the pick-up in US economic indicators is running out of steam, there could be a global run of stock-selling by CTAs and fundamentals-oriented investors alike.” In that event, Takada believes there would be a plausible tail risk of US stocks sinking into crisis-driven market conditions in September comparable to those that prevailed at the time of the Lehman crisis. If this were to happen “the Fed, having fallen behind the curve, would be dragged into making an emergency rate cut of at least 50bp.“
Some more details on how this August risk off/September crisis scenario would look like:
Fluctuations in CTAs’ net long position in S&P 500 futures tend to be restricted to a range that is consistent with US economic growth momentum. Although CTAs’ trades are driven by technical considerations in the short term, it appears that they seldom stray far beyond the constraints imposed by fundamentals over the longer term. The US ISM Manufacturing PMI for July came in just below expectations, but because it held near the same level in August, Nomura estimates that CTAs’ net position in S&P 500 futures (indexed) should fall in a range with a lower end of 0.09, still in net long territory. In other words, selling of equities by CTAs will go no further than the complete liquidation of outstanding longs, provided that there is no clear downward break in US economic growth momentum.
Incidentally, just prior to the FOMC meeting, CTAs had been leaning towards closing out long positions in 10yr USTfutures (TY). However, the average cost of CTAs’ recently accumulated longs corresponds to a 10yr UST yield of around 2.06%, so we yields below this would not be conducive to such selling.
So having gone over NOmura’s baseline forecast scenario, Takada lays out the risk scenario, which in the aftermath of Trump’s tweet, now appears will come true as any hope of a trade deal between the US and China has been crushed. According to the Nomura quants, if the latter half of August brings increasingly clear signs that the pick-up in US economic indicators is running out of steam, fundamentals-oriented investors could well decide to join CTAs in selling off stocks. In this scenario, Nomura warns that “the possibility of US stocks sinking into crisis-driven market conditions in September comparable to those that prevailed at the time of the Lehman crisis stands as a plausible tail risk.“
Nomura concludes by noting that if this were to happen, the Fed, having fallen behind the curve, would most likely be dragged into making an emergency rate cut of at least 50bp.
The problem is that – just like during the financial crisis of 2008 – by then it would be too late to stop what may soon be the biggest crash in capital markets history.
via ZeroHedge News https://ift.tt/2ytL9FV Tyler Durden
People who retired after spending decades working for department store Sears came together early in 2019 to protest the company’s plan to terminate their life insurance as part of its bankruptcy, according to Bloomberg.
And it seems as though they have good reason to. Benefits that once would have been worth as much as tens of thousands of dollars have been priced at just $135 by the Sears estate in a proposal to its former employees.
It’s another blow in a long line of disasters for Sears employees who have worked for – or are still working for – the company through its transition into bankruptcy. Sears filed for bankruptcy last year and sold its stores and most of its assets to the Eddie Lampert-owned ESL Investments, Inc. in the beginning of this year.
The Sears estate, responsible for settling old debts, was left behind.
The plan for retirees provided policies to about 29,000 former workers with benefits between $5,000 and $14,000. A smaller group of senior executives had policies with death benefits that ranged from $356,000 and $2.7 million.
The new proposal would terminate the plan altogether and award employees an unsecured claim of $5,000. But due to the estate’s limited resources, unsecured claims would get about 2.3% to 2.7% of what they are owed in payouts. This would be between $115 to $135.
Ronald Olbrysh, chairman of the National Association of Retired Sears Employees said:
“The new plan is totally unacceptable to the retirees. Many Sears retirees aren’t able to obtain new life insurance policies now because they’re too old. It’s totally unfair, what Sears is attempting to do.”
Retirees who died after the plan was terminated but before the proposal was approved would receive an administrative claim of $5,000. Administrative claims get higher priority for payment, which means these plans would likely pay out the full amount.
The estate did away with the retiree plan in March and offered participants the choice to pay into a new individual life insurance policy at their own cost. Lawyers for the retirees objected to the termination and the court approved the formation of a committee to represent the interests of retired workers in June.
A Sears estate lawyer in court last month said that the estate tried to make Lampert’s ESL Investments assume the retiree benefits, but that they were unsuccessful.
via ZeroHedge News https://ift.tt/2ZqlWIa Tyler Durden
In the race to determine who will serve as Commander in Chief of the most powerful military force in the history of civilization, night two of the CNN Democratic presidential debates saw less than six minutes dedicated to discussing US military policy during the 180-minute event.
That’s six, as in the number before seven. Not sixty. Not sixteen. Six. From the moment Jake Tapper said “I want to turn to foreign policy” to the moment Don Lemon interrupted Congresswoman Tulsi Gabbard just as she was preparing to correctly explain how President Trump is supporting Al-Qaedain Idlib, approximately five minutes and fifty seconds had elapsed. The questions then turned toward the Mueller report and impeachment proceedings.
Night one of the CNN debates saw almost twice as much time, with a whole eleven minutes by my count dedicated to questions of war and peace for the leadership of the most warlike nation on the planet. This discrepancy could very well be due to the fact that night two was the slot allotted to Gabbard, whose campaign largely revolves around the platform of ending US warmongering. CNN is a virulent establishment propaganda firm with an extensive history of promoting lies and brazen psyops in facilitation of US imperialism, so it would make sense that they would try to avoid a subject which would inevitably lead to unauthorized truth-telling on the matter.
But the near-absence of foreign policy discussion didn’t stop the Hawaii congresswoman from getting in some unauthorized truth-telling anyway.
Attacking the authoritarian prosecutorial record of Senator Kamala Harris to thunderous applause from the audience, Gabbard criticized the way her opponent “put over 1,500 people in jail for marijuana violations and then laughed about it when she was asked if she ever smoked marijuana,” “blocked evidence that would have freed an innocent man from death row until the court’s forced her to do so,” “kept people in prisons beyond their sentences to use them as cheap labor for the state of California,” and “fought to keep the cash bail system in place that impacts poor people in the worst kind of way.”
Harris, who it turns out fights very well when advancing but folds under pressure, had no answer for Gabbard’s attack, preferring to focus on attacking Joe Biden instead. Later, when she was a nice safe distance out of Gabbard’s earshot, she uncorked a long-debunked but still effective smear which establishment narrative managers have been dying for an excuse to run wild with.
“This, coming from someone who has been an apologist for an individual, Assad, who has murdered the people of his country like cockroaches,” Harris told Anderson Cooper after the debate.
“She who has embraced and been an apologist for him in a way that she refuses to call him a war criminal. I can only take what she says and her opinion so seriously and so I’m prepared to move on.”
That was all it took. Harris’ press secretary Ian Sams unleashed a string of tweets about Gabbard being an “Assad apologist”, which was followed by a deluge of establishment narrative managers who sent the word “Assad” trending on Twitter, at times when Gabbard’s name somehow failed to trend despite being the top-searched candidate on Google after the debate. As of this writing, “Assad” is showing on the #5 trending list on the side bar of Twitter’s new layout, while Gabbard’s name is nowhere to be seen. This discrepancy has drawn criticism from numerous Gabbard defenders on the platform.
“Somehow I have a hard time believing that ‘Assad’ is the top trending item in the United States but ‘Tulsi’ is nowhere to be found,” tweeted journalist Michael Tracey.
It really is interesting how aggressively the narrative managers thrust this line into mainstream consciousness all at the same time.
The Washington Post‘s Josh Rogin went on a frantic, lie-filled Twitter storm as soon as he saw an opportunity, claiming with no evidence whatsoever that Gabbard lied when she said she met with Assad for purposes of diplomacy and that she “helped Assad whitewash a mass atrocity”, and falsely claiming that “she praised Russian bombing of Syrian civilians“.
In reality all Gabbard did was meet with Assad to discuss the possibility of peace, and, more importantly, she said the US shouldn’t be involved in regime change interventionism in Syria. This latter bit of business is the real reason professional war propagandists like Rogin are targeting her; not because they honestly believe that a longtime US service member and sitting House Representative is an “Assad apologist”, but because she commits the unforgivable heresy of resisting the mechanics of America’s forever war.
MSNBC’s Joy Reid gleefully leapt into the smearing frenzy, falsely claiming that “Gabbard will not criticize Assad, no matter what.” Gabbard has publicly and unequivocally both decried Assad as a “brutal dictator” and claimed he’s guilty of war crimes,much to the irritation of anti-imperialists like myself who hold a far more skeptical eye to the war propaganda narratives about what’s going on in Syria. At no time has Gabbard ever claimed that Assad is a nice person or that he isn’t a brutal leader; all she’s done is say the US shouldn’t get involved in another regime change war there because US regime change interventionism is consistently and predictably disastrous. That’s not being an “Assad apologist”, that’s having basic common sense.
“Beware the Russian bots and their promotion of Tulsi Gabbard and sowing racial dischord [sic], especially around Kamala Harris,” tweetedNew York Times and CNN contributor Wajahat Ali.
All the usual war cheerleaders from Lindsey Graham to Caroline Orr to Jennifer Rubin piled on, because this feeding frenzy had nothing to do with concern that Gabbard adores Bashar al-Assad and everything to do with wanting more war. Add that to the fact that Gabbard just publicly eviscerated a charming, ambitious and completely amoral centrist who would excel at putting a friendly humanitarian face on future wars if elected, and it’s easy to understand why the narrative managers are flipping out so hard right now.
To repeat: There is no quote in which Tulsi praises, supports, or otherwise “apologies for” Assad. I checked the record a long time ago, and it doesn’t exist. This is just a smear intended to delegitimize diplomatic engagement https://t.co/Iyww1C5Ew0
War is the glue that holds the empire together. A politician can get away with opposing some aspects of the status quo when it comes to healthcare or education, but war as a strategy for maintaining global dominance is strictly off limits. This is how you tell the difference between someone who actually wants to change things and someone who’s just going through the motions for show; the real rebels forcefully oppose the actual pillars of empire by calling for an end to military bloodshed, while the performers just stick to the safe subjects.
The shrill, hysterical pushback that Gabbard received last night was very encouraging, because it means she’s forcing them to fight back. In a media environment where the war propaganda machine normally coasts along almost entirely unhindered in mainstream attention, the fact that someone has positioned themselves to move the needle like this says good things for our future. If our society is to have any chance of ever throwing off the omnicidal, ecocidal power establishment which keeps us in a state of endless war and soul-crushing oppression, the first step is punching a hole in the narrative matrix which keeps us hypnotized into believing that this is all normal and acceptable.
Whoever controls the narrative controls the world. Whoever disrupts that narrative control is doing the real work.
* * *
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Just as investors thought it was safe to buy-the f**king-dip after Powell’s plunge, President Trump steals the jam out of their donut by announcing new China tariffs…
“… on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country “
In a series of tweets, Trump laid out the state of the China trade deal… in a word – terrible…
Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal. We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing. More recently, China agreed to…
…buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die! Trade talks are continuing, and…
…during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%…
…We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!
And just like that – gains were gone…
And 10Y Treasury yields crash to 1.92% – the lowest since 2016…
via ZeroHedge News https://ift.tt/2GGVIK7 Tyler Durden
Over the last 18-months, there has been a continual drone of political punditry touting the success of “Trumponomics” as measured by various economic data points. Even the President himself has several times taken the opportunity to tweet about the “strongest economy ever.”
But if it is the “strongest economy ever,” then why the need for aggressive rate cuts which are “emergency measures” to be utilized to offset recessionary conditions?
What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world….
First, it is hard to have an “aggressive rate-cutting cycle” when you only have 2.4% to work with.
Secondly, I am not sure we want to be like China or Europe economically speaking, and running a $1.5 Trillion deficit during an expansion, suspending the debt ceiling, and expanding spending isn’t that much different.
Nonetheless, I have repeatedly cautioned about the risk of taking credit for the economic bump, or the stock market, as a measure of fiscal policy success. Such is particularly the case when you are a decade into the current economic cycle.
Economic growth is more than just a reported number. The economy has been “in motion” following the last recession due to massive liquidity injections, zero interest rates, and a contraction in the labor force. Much like a “snowball rolling downhill,” the continuation of economic momentum should have been of little surprise.
As an example, we can look at full-time employment (as a percentage of 16-54 which removes the “retiring baby boomer” argument) by President. The rise in full-time employment has been on a steady trend higher following the financial crisis as the economic and financial systems repaired themselves.
As discussed previously, economic data is little more than a “wild @$$ guess” when it is initially reported. However, one-year and three-years later, the data is revised to reveal a more accurate measure of the “real” economy.
Unfortunately, we pay little attention to the revisions.
While there are many in the media touting “the strongest economy ever” since Trump took office, a quick look at a chart should quickly put that claim to rest.
Yes, there was a spurt in economic growth during 2018, which did seem to support the claims that Trump’s policies were working. As I warned then, there were factors at play which were obfuscating the data.
“Lastly, government spending has been very supportive to the markets in particular over the last few quarters as economic growth has picked up. However, that “sugar-high” was created by 3-massive Hurricanes in 2017 which has required billions in monetary stimulus which created jobs in manufacturing and construction and led to a temporary economic lift. We saw the same following the Hurricanes in 2012 as well.”
“These “sugar highs” are temporary in nature. The problem is the massive surge in unbridled deficit spending only provides a temporary illusion of economic growth.”
The importance is that economic “estimates” become skewed by these exogenous factors, and I have warned these over-estimations would be reversed when annual revisions are made.
Last week, the annual revisions to the economic data were indeed negative. The chart below shows “real GDP” pre- and post-revisions.
This outcome was something I discussed previously:
“With the Fed Funds rate running at near 2%, if the Fed now believes such is close to a ‘neutral rate,’ it would suggest that expectations of economic growth will slow in the quarters ahead from nearly 6.0% in Q2 of 2018 to roughly 2.5% in 2019.”
However, there is further evidence that actual, organic, economic growth is weaker than the current negative revisions suggest. More importantly, the revisions to the 2019 data, in 2020, will very likely be as negative as well.
“Months from now, the Establishment Survey will undergo its annual retrospective benchmark revision, based almost entirely on the Quarterly Census of Employment and Wages conducted by the Labor Department. That’s because the QCEW is not just a sample-based survey, but a census that counts jobs at every establishment, meaning that the data are definitive but take time to collect.”
“The Establishment Survey’s nonfarm jobs figures will clearly be revised down as the QCEW data show job growth averaging only 177,000 a month in 2018. That means the Establishment Survey may be overstating the real numbers by more than 25%.”
There is nothing nefarious going on here.
It is the problem with collecting data from limited samples, applying various seasonal adjustment factors to it, and “guesstimating” what isn’t known. During expansions, the data is always overstated and during recessions it is understated. This is why using lagging economic data as a measure of certainty is always erroneous.
“In 2018, the Federal Government spent $4.48 Trillion, which was equivalent to 22% of the nation’s entire nominal GDP. Of that total spending, ONLY $3.5 Trillion was financed by Federal revenues, and $986 billion was financed through debt.
In other words, if 75% of all expenditures is social welfare and interest on the debt, those payments required $3.36 Trillion of the $3.5 Trillion (or 96%) of revenue coming in.”
The “good news” is, if you want to call it that, is that Government spending does show up in economic growth. The “bad news” is that government spending has a negative “multiplier” effect since the bulk of all spending goes to non-productive investments. (Read this)
Nonetheless, the President suggests we are “winning.”
….As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn’t have started in the first place – no inflation. We are winning anyway, but I am certainly not getting much help from the Federal Reserve!
The problem is that economic growth less government spending is actually “recessionary.”
As shown in the chart below, since 2010 it has taken continually increases in Federal expenditures just to maintain economic growth at the same level it was nearly a decade ago. Such a “fiscal feat” is hardly indicative of “winning.”
As Mike Shedlock noted, part of the issue with current economic estimates is simply in how it is calculated.
In GDP accounting, consumption is the largest component. Naturally, it is not possible to consume oneself to prosperity. The ability to consume more is the result of growing prosperity, not its cause. But this is the kind of deranged economic reasoning that is par for the course for today.
In addition to what Tenebrarum states, please note that government transfer payments including Medicaid, Medicare, disability payments, and SNAP (previously called food stamps), all contribute to GDP.
Nothing is “produced” by those transfer payments. They are not even funded. As a result, national debt rises every year. And that debt adds to GDP.”
This is critically important to understand.
While government spending, a function of continually increasing debt, does appear to have an economic benefit, corporate profits tell a very different story.
The Real Economy
I have been noting for a while the divergence between “operating earnings” (or rather “earnings fantasy”) versus corporate profits which are what companies actually report for tax purposes. From “Earnings Growth Much Weaker Than Advertised:”
“The benefit of a reduction in tax rates is extremely short-lived since we compare earnings and profit growth on a year-over-year basis.
In the U.S., the story remains much the same as near-term economic growth has been driven by artificial stimulus, government spending, and fiscal policy which provides an illusion of prosperity.”
Since consumption makes up roughly 70% of the economy, then corporate profits pre-tax profits should be growing if the economy was indeed growing substantially above 2%.”
We now know the economy wasn’t growing well above 2% and, as a consequence, corporate profits have been revised sharply lower on a pre-tax basis.
The reason we are looking at PRE-tax, rather than post-tax, profits is because we can see more clearly what is actually happening at the corporate level.
Since corporate revenues come for the sale of goods and services, if the economy was growing strongly then corporate profits should be reflective of that. However, since 2014, profits have actually been declining. If we take the first chart above and adjust it for the 2019-revisions we find that corporate profits(both pre- and post-tax) are the same level as in 2012 and have been declining for the last three-years in particular.
Again, this hardly indicates the “strongest economy in history.”
These negative revisions to corporate profits also highlight the over-valuation investors are currently paying for asset prices. Historically, such premiums have had rather horrific “paybacks” as markets eventually “reprice” for reality.
Trump’s Political Risk
While the media is quick to attribute the current economic strength, or weakness, to the person who occupies the White House, the reality is quite different.
Most fiscal, and monetary, policy changes can take up to a year before the impact shows in the economic data. While changes to “tax rates” can have a more immediate impact, “interest rate” changes take longer to filter through.
The political risk for President Trump is taking too much credit for an economic cycle which was already well into recovery before he took office. Rather than touting the economic numbers and taking credit for liquidity-driven financial markets, he should be using that strength to begin the process of returning the country to a path of fiscal discipline rather than a “drunken binge” of spending.
With the economy, and the financial markets, sporting the longest-duration in history, simple logic should suggest time is running out.
This isn’t doom and gloom, it is just a fact.
Politicians, over the last decade, failed to use $33 trillion in liquidity injections, near zero interest rates, and surging asset prices to refinance the welfare system, balance the budget, and build surpluses for the next downturn.
Instead, they only made the deficits worse and the U.S. economy will enter the next recession pushing a $2 Trillion deficit, $24 Trillion in debt, and a $6 Trillion pension gap which will devastate many in their retirement years.
While Donald Trump talked about “Yellen’s big fat ugly bubble” before he took office, he has now pegged the success of his entire Presidency on the stock market.
It will likely be something he eventually regrets.
“Then said Jesus unto him, Put up again thy sword into his place: for all they that take the sword shall perish with the sword.” – Matthew 26, 26:52
via ZeroHedge News https://ift.tt/311NhAS Tyler Durden
Former FBI Director James Comey will avoid prosecution after illegally leaking personal memos in the hopes of instigating the special counsel’s investigation into the 2016 US election, as reported yesterday by The Hill‘s John Solomon and confirmed today by Fox News.
According to Solomon, DOJ Inspector General (IG) Michael Horowitz referred Comey for possible prosecution under laws governing the handling of classified information, however Attorney General William Barr has declined to prosecute – as the DOJ does not believe they have enough evidence of Comey’s intent to violate the law.
“Everyone at the DOJ involved in the decision said it wasn’t a close call,” an official told Fox News. “They all thought this could not be prosecuted.”
That said, it’s important to note that this decision was the result of a ‘carve-out’ investigation separate of the IG probe on FISA abuse.
This is NOT the Inspector General Michael Horowitz report on DOJ and FBI FISA abuse.
This is a carve-out.
…
From the outset it was reported and confirmed that U.S. Attorney John Huber was assigned to assist Inspector General Michael Horowitz. Huber’s job was to stand-by in case the IG carved out a particular concern, discovered during his investigation, that might involve criminal conduct.
Earlier this week Matt Whitaker said: “John Huber is reviewing anything related to Comey’s memos and the like.”
Put the two data points together and what you realize is that during the OIG review of potential DOJ and FBI FISA abuse… IG Horowitz investigated the Comey Memo’s and then passed that specific issue along to John Huber for DOJ review.
The IG criminal referral for the James Comey memo leaking was a carve-out sent to U.S. Attorney John Huber.
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This is not the inspector general report on DOJ and FBI FISA abuse. This is an IG report carved out of the larger investigation. –Conservative Treehouse
In short, we will first see an IG report just covering Comey, with a more comprehensive report to follow on FISA abuse.
via ZeroHedge News https://ift.tt/2MyZrgn Tyler Durden
The number of migrants reaching the US-Mexico border hit a five-month low in July following the deployment of the National Guard to address the problem of illegal migration, according to Mexico’s top diplomat.
Speaking with reporters on Tuesday, Secretary of Foreign Affairs Marcelo Ebrard announced a 39% drop in migrants traveling through Mexico towards the United States since May, when there were 144,278 migrants vs. 87,648 in July. This marks the lowest number since February, when 76,533 migrants were recorded, according to the Associated Press.
Ebrard said the drop is the result of greater Mexican enforcement of its immigration laws, as well as investment in job creation in Central America.
Ebrard said Mexico would hold a conference soon to attract international donors for a Central America development plan.
He said Mexico would not provide shelters for all the migrants sent back to Mexico by the United States while awaiting resolution of their U.S. asylum requests.
That has become an issue in the Mexican border city of Nuevo Laredo, where hundreds of migrants have been bused from the dangerous border town to the city of Monterrey, and simply left at a bus station. –Associated Press
According to Ebrard, the problem of overcrowding in cities with migrants waiting to file asylum claims with the US has declined in some areas.
Marcelo Ebrard shakes hands with Donald Trump
“People shouldn’t think that at all points along the border we are going to receive more migrants every day,” he said. “In Tijuana there has been a very, very, very big drop. In Yuma, on our side in Sonora, in Ciudad Juarez, there has been a significant decrease.”
According to a poll released earlier this month by local daily Reforma and the Washington Post, 64% of Mexicans think migrants are a burden on the country, while 51% agree with the decision to use the National Guard to combat illegal migration.
via ZeroHedge News https://ift.tt/2Koc2Rc Tyler Durden
There are clearly a lot of disgruntled traders out there. They’ll get over it. As soon as their positions get back to where they want them and make some decisions about how much they, as members of the collective group of investors, want to be engaged in the tricky month of August. This will happen sooner than thought. Although, ironically enough, there will be an ongoing yearning to receive greater clarity from Fed speakers. Which is the last thing anyone should expect. I suspect market commentators will take longer to regain their equilibrium.
It’s probably overly-harsh to rake Chairman Jerome Powell too much over the coals for a less-than-spectacular performance at the press conference. He didn’t have a lot to work with. He had to be the voice of an obviously divided committee. The meeting minutes will be more than anxiously anticipated. Try not to be disappointed. Events could make them out of date very rapidly.
But, make no mistake, the short-lived market mayhem wasn’t just an overreaction to the “mid-cycle adjustment” line. That was merely an unfortunate necessity to appease the dissenters and fence-sitters. And, perhaps, a reminder to others that he views only financial conditions indexes as having the right to threaten their institutional independence.
The scramble was caused by having too many traders skew their books in response to the recent comments made by New York Fed President John Williams. The subsequent clarification fell on many a deaf ear.
He slipped up. But it wasn’t by letting the cat out of the bag. And those with positions who got their game theory wrong all had to try to right themselves using the same pool of late-day liquidity. A very small taste of what can happen when everyone is the same way around.
Now, traders will have to decide if they want to further liquidate their marginal positions, sit tight or add at better levels. And, while it is comforting to assume option number two will be the clear choice, we first need to see how this dollar break-out plays out. Especially as it broke through resistance on the last day of the month. Technical analysts will be salivating. In any case, we all know where the stops will be if it corrects back lower.
While the damage done in equities, fixed income, credit and commodities has been minimal, if over-hyped, they won’t be able to indefinitely ignore an ever strengthening dollar. Emerging markets look to be the most immediately affected and are definitely looking queasy. They should be front and center, along with the dollar, on all traders’ screens. No matter what you trade. Because we all are in never-ending search for tells and canaries.
Should the dollar continue on its way, it will ultimately affect everything else. Perhaps even your central bank. Not to mention, there are an awful lot of portfolios structured around the assumption of a weaker dollar. Throw in a growing dollar funding squeeze and things could get very interesting… in the Chinese curse sense of the word. When the currency gets up a true head of steam, it takes a lot more than simple verbal intervention to turn it around. Which is why this is all unlikely to be a one-day phenomenon.
Meanwhile, there will be some important economic releases over the next two days. And while it is tempting to think they have been put on the back burner given yesterday’s events, that couldn’t be further from the truth. The second guessing game aside, the dollar is in play. Which means it will respond to the results. And how it does react will necessarily influence the portfolio allocation decisions that will define trading imperatives across the whole spectrum of assets.
via ZeroHedge News https://ift.tt/2Ztc14A Tyler Durden
