No (Wall Street) Bank Left Behind!

Authored by John Rubino via DollarCollapse.com,

Times have been hard for Wall Street banks lately, what with record amounts of cash pouring in and causing all kinds of bookkeeping headaches.

So – big-hearted people that we are – Americans stepped up and helped by lowering the banks’ taxes. From Today’s Wall Street Journal:

The Four Biggest U.S. Banks Made $2.3 Billion From Tax Law – in One Quarter

Big banks just cashed in the first installment of benefits corporate America will reap from the new federal tax law.

The haul: more than $2.3 billion.

That is how much the combined earnings of the four major national banks— JPMorgan Chase, Wells Fargo. Citigroup, and Bank of America, — increased in the first quarter because of the lower corporate rates under the tax-overhaul law enacted in December, according to an analysis of the banks’ results by The Wall Street Journal.

That amount is only a modest-size chunk of the banks’ total first-quarter earnings—less than 10% of their combined net income applicable to common shareholders. But it comprises a major chunk of their year-over-year earnings growth.

Without the tax savings resulting from the new lower corporate tax rate, Wells Fargo’s earnings would have declined from a year ago instead of increasing, and much of the year-over-year growth at Citigroup and Bank of America would be gone. At JPMorgan, losing the tax bump would have cut its earnings growth to 28% from 35%.

The $2.3 billion boost isn’t the entire story. For one thing, other provisions of the tax law prompted some of the same banks and many other companies to take big charges against their earnings in the fourth quarter. From that perspective, the first-quarter boosts merely help even things out.

The Journal’s analysis calculated what each bank’s results for the latest first quarter would have been if the effective tax rate from last year’s first quarter was still in effect.

Each bank’s tax rate has declined dramatically since then. Wells Fargo, for instance, had an 18.8% effective tax rate in the latest first quarter, down from 27.5% in the year-ago quarter. Applying a 27.5% effective tax rate to the latest quarter’s pretax income would have shaved about $636 million off earnings, cutting Wells Fargo’s diluted earnings per share to 99 cents from the actual $1.12. (Wells’ first-quarter 2017 earnings were $1.03 per diluted share.)

Citigroup, which had a 23.7% effective tax rate this quarter, would have seen about $452 million cut off its first-quarter earnings if its year-ago 31.1% effective tax rate had been in effect. That would have eliminated most of its roughly $530 million in net-income growth from a year ago.

The tax overhaul added about $798 million to Bank of America’s net-income growth. At JPMorgan, it added about $470 million to its earnings.

While all four banks disclosed the figures for their current and year-ago pretax income, excluding the effect of taxes altogether, Bank of America highlighted them in the headline of its press release, noting that its pretax income had risen 15%, even as its diluted EPS rose 38%.

Mr. Gomatam notes not all companies will see the kind of tax-rate reductions the big banks did, and some tax savings could go to a company’s customers or employees rather than profits. Investors “need to see that all of the tax savings are falling to the bottom line.”

Investors may have looked through the numbers and realized that much of the banks’ earnings growth came from a tax cut, not from operations. In the two trading days since the first big U.S. banks announced earnings Friday morning, Wells Fargo shares fell 3.6%, JPMorgan’s slipped 2.8% and Citigroup’s lost 2.9%.

As the Wall Street Journal points out, we taxpayers were generous, but not overly so:

 “That amount is only a modest-size chunk of the banks’ total first-quarter earnings—less than 10% of their combined net income applicable to common shareholders.”

Still, it’s the thought that counts. And you can bet that many who read this will definitely be thinking about Wall Street’s banks as we contemplate our own just-completed taxes.

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WTI/RBOB Surge After Across-The-Board Inventory Draws

WTI/RBOB has surged since last night’s across-the-board bullish API report, and while DOE showed that US crude production rose to a new record high, it confirmed API’s draws across all components.

Bloomberg Intelligence Senior Energy Analyst Vince Piazza explains that, impelled by WTI discounts to Brent of greater than $5 a barrel, domestic refinery runs are expected to push higher.

Strength in crude exports, relative to last year, should persist even with recent sequential softness. While summer driving season presents a demand catalyst, U.S. crude production remains robust.

API

  • Crude -1.047mm (+650k exp)

  • Cushing -1.015mm (-650k exp)

  • Gasoline -2.473mm

  • Distillates -845k

DOE

  • Crude -1.071mm (+650k exp)

  • Cushing -1.115mm (-650k exp)

  • Gasoline -2.968mm

  • Distillates -3.107mm

DOE data confirmed the API across-the-board inventory drawdown.

As rig counts continue to rise, so US crude production is accelerating, rising 15k b/d to yet another new record high…

Which remains the big impediment to OPEC achieving its goal…

“They are willingly over-tightening this market,” said Jan Stuart, an oil economist at consultant Cornerstone Macro LLC in New York. “It’s not self-defeating if what you are looking for is a little extra money. If the idea is to get a ton of money in the door now, then they’re probably doing the right thing.”

“Would they declare victory now and stop? No way,” said Mike Wittner, head of oil market research at Societe Generale SA. “They’re happy to see inventories continue to go down, to see prices of $70 or $80. In the end, it’s about revenues. The question is at what point do they become uncomfortable with higher prices?”

 

WTI/RBOB prices accelerated overnight on OPEC chatter after extremely bullish API data and spiked further on the DOE confirmation…

 

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Nomura: It’s 2017 All Over Again As X-Asset Vols Get Crushed; Here’s Why

From Charlie McElligott, Managing Director, cross-asset strategy at Nomura

2017 REDUX, AS ‘GROWTH SCARE’ IS OUT, FED NORMALIZATION IS RESUMED = RISK ON, VOL SMOKED

Summary (more or less):

  • 2017 all over again as cross-asset vols are crushed—why?
  • Perception of “growth scare” evidenced over the past month (disappointing global growth / outright BAD EU data) now seeing a nascent ‘calming’ / sentiment pivot back to expectations for “mean-reversion” HIGHER in economic surprises
  • Last week’s US inflation data shows strong PPI trend and YoY core CPI above 2% (but not “too hot” either), along with this week’s US Retail Sales and IP beats (plus inline Chinese GDP and better Retail Sales) acts to ‘cool’ recent slowdown fears
  • Resumption of US inflation (and broad) U.S. data confidence / stabilization = again “pricing-in” a more aggressive Fed
  • Thus, the powerful yield curve flattening of the past two weeks extends, as the front-end continues to sell-off against both foreign and domestic RM drive long-end buying (lots of cash which still needs yield), wrecking the recently popular tactical macro steepener trade
  • Credit another strong day, with six high-grade issuers pricing $13.6B of issuance consumed with negligible concessions, massive compression from IPT and large orderbook oversubscriptions—reiterating “hunt for yield” with return of low vol / carry market
  • Systematic CTA Trend community again adding SPX exposure with resumption of momentum—potential for additional +$14B of SPX to buy if we close north of 2718
  • Surprise, surprise—Earnings tailwind drive legacy equities “Momentum” positioning (and broad index strength), with “Secular Growth” longs massively outperforming “Cyclicals” and “Defensives” = great day for both equities Hedge- and Mutual- Funds
  • Secular Growth” (i.e. Tech) is the biggest winner of the “Fed sweepstakes” (stuff that can “grow” despite tightening) and CONFIRMING what we said after Powell’s Fed presser: equities wants ongoing Fed policy normalization (more “hawkish” than “dovish” on the margin) as a sign of confidence that better growth will drive higher a “neutral rate,” making the overall move higher in interest rates “manageable” for stocks
  • Tactically, “Cyclicals” can still work too, as a “growth-ier” worldview is driving further rally in commods complex: Crude +1.4%, Copper +2.2% already today
  • Final point on equities which fits my view of “tactical melt-up” in cyclicals- and inflation-linked risk assets thesis: thematic “glide path” likely ahead, as historic Nomura 1Y Momentum Factor seasonality shows a “pivot” off the March / April “reversal / unwind” lows and breaks higher over the next 3 months–May (best month for “Momentum” in post-GFC period since ‘10), June (3rd best month) and July (2nd best month) string together quite a +++set-up coming out of EPS season

COMMENTARY:
 
Risk markets are again “melting-up” as the perception of a “global growth scare” evidenced over the past month via the slowdown in data trajectory is now viewed as “calming,” coming off the back of last week’s U.S. inflation data and bounce in Retail Sales & IP prints, alongside steady Chinese GDP and a beat in their own Retail Sales.  
 
As markets are again seeing confidence is this “resumption of U.S. inflation- and growth-” story, we are again pricing-in a more active Fed normalization—as evidenced by the below chart of market expectations for 2018 Fed hikes going to new highs (spread btwn Apr ’18 / Jan ’19 FFF):

Thus, as yield curves have resumed their violent flattening, cross-asset vol & term structure too is being smoked.  

CROSS-ASSET VOLS SPANKED BACK TO JANUARY LEVELS:

As confidence in inflation expectations is restored, breakevens widen alongside a stronger commodities complex / higher equities.

RESUMPTION OF CONFIDENCE IN U.S. INFLATION SEES BREAKEVENS AGAIN TESTING MULTI-YEAR RESISTANCE LEVEL:

HIGHER BREAKEVENS / HIGHER COMMODITIES / HIGHER NASDAQ:

Stocks are currently benefiting from the telegraphed ‘calm’ of earnings season, as headlined by the massive performance boost across both MF and HF via the NFLX “halo effect” (huge outperformance day for MF’s yday, while HF’s saw a good day but obviously with shorts squeezing as a performance drag).  In turn, consensual positioning long ‘secular growth’ against underweights in ‘defensives’ and ‘cyclicals’ benefitted tremendously, which due to the enormous weighting of  the Tech sector, took broad index with it.
 
U.S. EQUITIES PERFORMANCE YESTERDAY ADDS FURTHER NET LENGTH:

This multi-day index-level “gap higher” is critical, because it has again drawn-in the systematic community as an INCREMENTAL BUYER after turning seller over the past month.  Per Nomura Quant Strategy’s CTA model, SPX exposure has gone from 33% up to 42% “long” over the past week.  And there is more ammo from here, as a close above the 2718 level tonight would see an additional +$13.5B of SPX buying, getting them to +54.5% “long”:

So taking this all back to the original points made on the “resumption of above-trend inflation- and growth-“ perception: equities price-action tells us that they want ongoing Fed policy normalization (more “hawkish” than “dovish” on the margin) as it relays confidence that higher interest rates are going be driven by “growth” (a higher “neutral rate”).

This was the point I was making after many were left scratching their head regarding the equities weakness following Powell’s first Fed meeting.  Many (especially in fixed-income) were surprised that stocks sold off on what they perceived to be a “hawkish” message.  My view was that across equities, it was viewed actually as incrementally more dovish than what was expected, especially with regards to his downplaying of the Fed’s own economic projections.

Tech in particular is a “winner” when the Fed has inflation- and / or growth “ammo” to get more hawkish, as it can “grow” EPS despite tightening financial conditions which eventually will slow the “cyclical” economy. 

Want some evidence?  Look at the chart below of the earlier “expectations priced-in for remaining 2018 hikes” against NFLX–

U.S. EQUITIES ‘STATUS QUO’ SHOWS NFLX (PROXY FOR ‘MOMENTUM’ / ‘TECH’ / ‘SECULAR  GROWTH’) WANTS FED HIKES AS CONFIRMATION OF GROWTH:

And similarly, the “expectations priced-in for remaining 2018 hikes” chart against equities “growth” proxy “PEG” factor:

YOU CAN SEE THE SAME RELATIONSHIP OVER THE PAST YEAR WITH THE “2018 HIKE EXPECTATIONS” CORRELATION TO EQUITIES “GROWTH” METRIC (PEG FACTOR):

So now one final point on where this goes from here, which fits nicely into my view of a “tactical melt-up” of inflation- / cyclically-geared- assets “thesis” (in typical “late cycle” fashion): there is a thematic “glide path” likely ahead, as historic data on the Nomura 1Y Momentum Factor seasonality shows a “pivot” off the March / April “reversal / unwind” lows and breaks higher with the best three months of equities “momentum” in the post-GFC period coming over the next three consecutive months–May ( the best month for “Momentum” since ‘10), June (3rd best month) and July (2nd best month)…all in, stringing together quite a +++ set-up coming out of EPS season along with the resumption of buyback.

HERE COMES THE ‘MOMENTUM SNAPBACK’ WITH THE THREE BEST MONTHS OF EQUITIES MOMENTUM IN THE POST-GFC PERIOD (’10 ONWARD) COMING OVER THE NEXT THREE CONSECUTIVE MONTHS:

 

 

 

 

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Dr. Helen Fisher on How Brain Chemistry Determines Personality and Politics: New at Reason

If libertarians are bold, impulsive, quick witted, adventurous, analytical, and willing to ignore social norms, is that because we have especially active dopamine and testosterone systems in our brains?

That’s the hypothesis of the biological anthropologist Helen Fisher, who has developed a pioneering framework for classifying human temperaments. She spoke at the Reason Foundation’s annual donor weekend in West Palm Beach Florida.

Click here for full text, a transcript, and downloadable versions.

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Loonie Drops As Bank Of Canada Holds Rates (As Expected)

With Canadian economic data at its most disappointing in 20 months, domestic trade-wars over oil pipelines exploding, and a housing market on the verge of collapse, The Bank of Canada held rates unchanged (as expected), sending a weak signal that sparked Loonie selling

Bank of Canada Holds Benchmark Overnight Rate at 1.25%

2018 has not been a good one for Canada’s economy…

but BOC writes off 1Q growth weakness, saying it will rebound in 2Q.

Slower economic growth in the first quarter primarily reflects weakness in two areas. Housing markets responded to new mortgage guidelines and other policy measures by pulling forward transactions to late 2017. Exports also faltered, partly owing to transportation bottlenecks. Some of the weakness in housing and exports is expected to be unwound as 2018 progresses.

Also says the economy will be slightly above potential over the next 3 years, crediting federal and provincial budget measures.

But the FX market is not buying it…

The central bank played down a faster-than-expected pick-up in inflation as temporary, arguing the shocks of higher gas prices and minimum wages in some provinces will dissipate by 2019.

These releases codify Poloz’s narrative the expansion can be prolonged without fueling inflation.

Key highlights (vis Bloomberg):

  • BOC reiterates that “Governing Council will remain cautious with respect to future policy adjustments” and be “guided by incoming data”

  • BOC: “Higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed”

  • Inflation expected to average 2.3% over 2018, from 2.0% previously; Core measures have edged up to near 2 percent, “consistent with an economy operating with little slack”

  • Wage growth is firming, but Bank “will continue to assess labour market data for signs of remaining slack”

  • Bank of Canada makes upward revision to 2019 growth: GDP expected to grow 2.0% in 2018 and 2.1% in 2019, from 2.2% and 1.6% respectively;

  • Housing will not contribute to growth in 2018 and 2019, exports will not contribute to growth in 2018 (from +0.6pp previously)

  • Export growth is “being increasingly limited by capacity constraints in some sectors”, and both exports and business investment are “being held back by ongoing competitiveness challenges and uncertainty about trade policies”

  • Export contribution to growth in 2018 revised down to 0.0pp, from 0.6pp in last MPR

  • BOC: “The prospect of a notable shift toward protectionist global trade policies remains the most important risk affecting the outlook”

  • BOC outlook on geopolitics and trade: “Escalating geopolitical and trade conflicts” could undermine global expansion; “Wide range of outcomes” still possible for NAFTA; “Monetary and fiscal policy are expected to support economic activity over the projection horizon and to help mitigate the drag on business investment and exports associated with trade-policy uncertainty and trade competitiveness challenges”

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The Yield Curve Continues To Collapse…

As stocks soar back towards record highs shrugging off every fear as if it was 2017 all over again, the Treasury market is starting to scream ‘trouble ahead’…

Since The Fed hiked rates in March, the yield curve has collapsed…

2s30s is below 60bps for the first time since Oct 2007…

2s10s is at 41bps intraday!!

5s30s is testing 30bps…

And 10s30s is back to just 17bps…

Even The Fed’s Williams warned yesterday that he would view “yield curve inversion as warning signal” noting that a “inverted curve was a powerful recession signal” and added that “if the yield curve inverted, her would take it seriously.”

Perhaps that’s why stocks are up… in the irrational mind of today’s central-banker-inspired investors, the closer we get to inverted, the closer The Fed is to ending its tightening cycle and hey presto… more QE, stocks go up!!??!!

“probably nothing…”

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Barclays Summarizes 89-Page Tesla-Bashing Report To 5 Tweets For Dumb Americans And Tech Investors

At exactly 3:38pm GMT on Tuesday, Barclays released an exhaustive, 89-page pdf research report titled “iNDUSTRIE 4.0 VS. Tesla’s ‘lights out’?”, which if it wasn’t clear by the title, explained “why Tesla is deeply overvalued.” A terrific report, and one which an increasingly insecure Elon Musk will be quick to deride and mock, it had just one problem: nobody read it, especially not Americans, and certainly not tech investors, at least according to Barclays.

In an amusing post-mortem note published shortly after the full report was distributed to Barclays clients, its author Kristina Church, slammed not only TSLA CEO Elon Musk, but also the “tech investor” collective which has elevated Musk on a pedestal, and – for good measure – also took a shot at, well, Americans in general because why not, to wit:

“while European readers may if anything view this tome as skimpy, we recognize that many US investors, and dare we say especially those on the tech side, need a Twitter-length summary of it.”

So with that fantastic trolling of its US and tech clients in mind, here are Barclays’ five “quick 140-character takes” provided by Barclays to underscore its point, “all of which support our view that BMW’s modular strategy and near-term SUV mix improvements are deeply underappreciated by the market, whilst Tesla’s stock is deeply overvalued and a structural short.” (incidentally, we hope all other sellside desks adopt this practice of summarizing nearly 100-page reports into a few pithy soundbites):

  1. Hey @elonmusk: German OEMs & other dinos you have mocked will be rolling out exciting new BEVs — 6 new models in ’18, & 13 in’ 19 (p. 27-28)
  2. Production hell, nein; Industrie 4.0, ja: German mfg is state of the art now & gets better w/ a harmonious blend of humans + robots, AI, IoT
  3. TSLA went a robot too far? Despite the quest for an “Alien Dreadnought” @elonmusk admitted that automation needs to be dialed back, is that good for gross margins?
  4. Showdown on scale: German OEMs will leverage scale economies either thru large native EV platforms (VW) or modular approaches (BMW)
  5. With solid & profitable EVs coming while TSLA struggles, legacy OEMs deserve rerating – BMW (European OW, Top Pick) and GM (OW in US Autos)

And while we will have more details from the full report shortly, here for the benefit of “dumb Americans and tech investors” is Barclays’ primer explanation which summarizes the 89-page pdf into “only” 42 slides.

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Jeff Sessions’ Plan to Put Strict Limits on Painkiller Manufacturers Will Only Make the Opioid Crisis Worse: Reason Roundup

Jeff Sessions proposes D.E.A. control country’s supply of legal opioids. Once again misdiagnosing the problem entirely, Attorney General Sessions on Tuesday proposed to combat America’s opioid-addiction issues by exerting extreme control over the inventories of legal painkiller manufacturers. Under Sessions’ proposal, the federal government would force pharmaceutical companies to account for and justify all pills sold to medical providers.

“If D.E.A. believes that a company’s opioids are being diverted for misuse, then they will reduce the amount of opioids that company can make,” said Sessions.

Sigh. For all the well-deserved attention to opioid-related harm and deaths in this country, few manage to avoid mystifying the crisis or making it into a more complicated issue than it is. Surely it’s true that some people are abusing heroin to fill existential voids brought on by economic hardships, just as some people got hooked on prescription opioids due to careless prescribing by pharma-bought doctors—though far fewer of the latter than many people suppose. But what makes “the opioid epidemic” so particularly dramatic and deadly at this current moment is more pharmacological than psychological. The market is flooded with fentanyl (or similarly strong synthetic opioids), and nobody outside a lab knows how to dose it right.

One of the simplest things the government could do to ease the pain of the fentanyl problem is to make it easier for people to test heroin and black-market pills to see what they really contain. At the very least, it could stop pushing people away from heroin alternatives by limiting access to detox-friendly drugs like methadone and making medical professionals afraid to prescribe opioids to people in serious pain. Instead, our authorities see shady drug cartels everywhere, and fantasize about busting up both Mexican ganglords and pharmaceutical companies alike.

For more on why Sessions has the wrong approach here, see Reasoners Jacob Sullum (“Don’t Blame Pain Pills for the Opioid Crisis” and “Jeff Sessions’ Cruel Prescription for Pain“) and Ron Bailey (“Misdiagnosing Causes and Casualties in the Opioid War“) and the Cato Institute’s Jeffrey A. Singer (“Making the Case, Once Again, That the Opioid Crisis Is a Product of Drug Prohibition, Not Doctors Prescribing to Patients” and “Stop Calling it an Opioid Crisis—It’s a Heroin and Fentanyl Crisis“).

As Sullum has previously noted, strict limits on the number of pills people can legally sell or prescribe tends to mean more opioids sold through the black market (and a greater likelihood for harm to users). In January 2018, “Arizona became the 15th state since 2016 to impose a statutory limit on the length of initial opioid prescriptions for acute pain,” wrote Sullum. “The rationale for such laws is that shorter prescriptions will mean fewer pills in circulation and less potential for abuse and diversion. But recent research suggests the opposite may be true, because patients tend to get refills when the initial prescription is too short.”

FREE MINDS

Tour guides await federal court ruling on city-mandated quizzes. After hearing the case from Charleston, South Carolina, tour guides last week, U.S. District Judge David Norton said folks can expect an opinion from him by August. The Institute for Justice (IJ) helped several city tour guides file the federal suit challenging Charleston’s requirement that all tour guides register with the city and be licensed by showing off historical knowledge. To obtain the license, tour guides—even those doing specialty tours not dependent on conventional Charleston history—previously had to pass an oral exam and a 200-question written test with a score of 80 percent. After the lawsuit was filed, the city relaxed these rules to nix the oral portion and only require a 70 percent score on the test.

FREE MARKETS

Sotormayer skeptical small businesses can afford new sales-tax regime. The Supreme Court heard oral arguments yesterday in the momentous sales-tax case covered here earlier this week. The case concerns whether states can order online merchants—including the likes of individual sellers on platforms like Amazon and eBay—to charge state sales tax even if the business or seller has no presence in that state. From that discussion:

Justice Sonia Sotomayor: So there’s going to be a host of questions. What happens when the tax program breaks down, as it already has for the states who are using it, and merchants can’t keep track of who they’ve sold to? All of these are questions that are wrought with difficulties.

What Sotomayor seems to be contemplating is whether state authorities are (or should be) prepared to start investing massive enforcement efforts into collecting sales tax. She also questioned “what are we going to do with the costs that [this would] put on small businesses?” and didn’t seem impressed by South Dakota Attorney General Marty Jackley’s insistence that it was “that small business on Main Street” being hurt under the current tax regime.

JUSTICE SOTOMAYOR: Actually, they’re put at disadvantage … by the fact that there are massive discount sellers, not just on the Internet, but even in stores now. I — I’m talking about the added cost of doing business for the small businessman, someone — one of the briefs said it was a $250,000 cost to implement one of these sales programs, one of these sales tax programs?

MR. JACKLEY: That brief left out that it begins — it’s to scale, and it begins at $12 a month for 30 transactions. When you look at the cost associated with collection, it -­ it really depends -­

JUSTICE SOTOMAYOR: That doesn’t include auditing. It doesn’t include integrating the program with the existing sales program of the company. It doesn’t account for the maintenance of the program. There’s lots of costs that are inherent in a process of this type.

You can read the full oral arguments here.

QUICK HITS

Pompeo spent Easter with Kim Jong Un in North Korea. Dress for the job you want, not the job you have? Over Easter weekend, CIA Director—and President Trump’s pick for secretary-of-state—Mike Pompeo flew to North Korea at Trump’s behest for a secret sit-down with Kim Jong Un. This morning on Twitter, Trump confirmed that Pompeo had met with Kim to pave the way for Trump’s talk with Kim in the near future.

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Uncharted Territory For Stock Valuations

Authored by Bryce Coward via Knowledge Leaders Capital blog,

Another month and another new high in equity valuations, at least relative to sales.

Indeed, the median company in our developed world index (which covers the top 85% of companies in each country) just achieved a price to sales ratio that eclipsed the 2000 peak.

There are of course fundamental reasons for this ranging from low interest rates to high profit margins, but the fact that valuations today exceed peak bubble valuations of 2000 is a tough nut to swallow for equity investors expecting to achieve an historically average 7% annual rate of return.

What’s more, unlike in 2000 when the median valuation was driven higher primarily by tech stocks, leaving plenty of “value” areas to flock to, valuations today are extended across the board, from staples, to industrials to tech to materials.

Save energy as the one sector without peak, or near peak valuations.

This scenario should put ever more importance on stock picking and risk management going forward.

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Turkish Stocks, Lira Surge After Erdogan Announces Early Elections

For the first time in party history, Turkish President Recep Tayyip Erdogan called for early elections on June 24, moving them forward by more than a year from their scheduled date.

As Bloomberg notes, Erdogan’s ruling party has never called early elections in the nearly 16 years it’s been in power, and had repeatedly rejected speculation that it’d call them this year.

Erdogan cited Syria and macro balances as factors for calling an early vote to eliminate uncertainties.

The election is set to transform the political system of the region’s largest economy, eliminating the prime minister job and centralizing power in the presidency.

Which for now, markets seem to like the news – presumably because it means that markets will not have to wait another year for the elections and this will minimize the risk of further deterioration in macro picture – as the Lira and Turkish stocks are rebounding…

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