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The CEO of Assurant appeared on Bloomberg TV to explain why demand for his services is likely to increase: the chief executive of the mobile phone insurer said he expects a surge in demand as carriers charge customers more to replace their devices. “If you think back five years ago, you as a consumer didn’t know how much that phone cost, you thought it was free or close to free,” Assurant’s Alan Colberg said Monday. “Now you’re paying $600, that’s a lot. So we’ve actually seen the attachment rate, or the number of people buying the product, going up a little bit in the last couple of years.”

He then proceeded to give Bloomberg his traditional sales pitch: Assurant is counting on growth at its business covering phones and appliances to help counter a decline in the segment that insures foreclosed homes for lenders. While improvement in the real estate market has limited the number of vacant homes, Colberg said there are still many cash-strapped consumers.

It is what he said next that caught our attention: “The reality is, half of Americans can’t afford to write a $500 check,” Colberg said. He spun that stunning statistic by saying that when US customers sign up for a cellular plan, they’re willing to buy protection in case “they lose that phone or something happens to it.”

In other words, there are millions of Americans who don’t have $500 in the bank but are willing to dish out more than that on a cell phone, and then are stupid enough to make monthly payments that ultimately end up being far higher than $500 to protect their purchase… which they clearly couldn’t afford in the first place.

* * *

That said, we decided to look into the CEO’s claim about the woeful state of US finances. What we found is that according to a recent Bankrate survey of 1,000 adults, 57% of Americans don’t have enough cash to cover a mere $500 unexpected expense. Turns out the CEO was right. And while that may appear dire, it is a slight improvement from 2016, when 63% of U.S. residents said they wouldn’t be able to handle such an expense.

The survey’s findings have shed light on how the so-called recovery of the past 8 years has skipped about half of the US population, which literally live paycheck to paycheck, and reflects a country in which many households continue to struggle with their basic finances more than seven years after the official end to the recession.

Putting the numbers in context: despite steady job growth during the Obama administration – which have been focused on minimum wage industries – wages have been predictably slow to recover, with the typical American household still earning 2.4% below what they brought home in 1999, when income peaked. Meanwhile, costs for essentials such as housing and child care have surged faster than the rate of inflation, placing stress on household budgets and making the accumulation of wealth, i.e., savings, impossible.

The bottom line:  About four out of 10 Americans said they had enough in savings to cover a surprise $500 expense. Another 21% said they would rely on a credit card, while 20% said they’d cut back on other expenses. Another 11% said they’d turn to family or friends for the money.

What is even more striking is that among Americans who earn more than $75,000 per year – a third more than the typical U.S. household earns – almost half also said they wouldn’t be able to cover a $500 surprise expense. Ironically, Millennials represent the generation most equipped to handle an emergency cost, with 47 percent saying they have enough in savings to cover one.

The Bankrate survey findings echoed research published last year by the Federal Reserve, which found that 46% of respondents said they would be challenged to come up with even less, or $400, to cover an emergency expense, and would likely borrow or sell something to afford it. When the Fed asked what types of emergency expenses Americans had actually faced in the last year, more than one out of five cited a major unexpected medical expense. The average expense: $2,782, or almost seven times higher than the Fed’s hypothetical $400 surprise bill.

How do cell phones fit in all of this? When it comes to reducing spending, dining out is the first place where consumers would cut back, with 6 out of 10 respondents saying they would eat out less. What is the “stickiest” expense? According to Bankrate, the least likely expense to face the chopping block are mobile phone plans, with the survey finding that only 35% said they would cut back on their wireless plans to save money.

In other words, Americans would rather be hungry than cell phone free. In retrospect, it may turn out be that Assurant’s CEO, whose business model is a big bet on human stupidity, just may have a goldmine on his hands.

 

 

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Via Ron Paul of The Ron Paul Institute for Peace & Prosperity,

History shows that, if individuals have the freedom to choose what to use as money, they will likely opt for gold or silver.

Of course, modern politicians and their Keynesian enablers despise the gold or silver standard. This is because linking a currency to a precious metal limits the ability of central banks to finance the growth of the welfare-warfare state via the inflation tax. This forces politicians to finance big government much more with direct means of taxation.

Despite the hostility toward gold from modern politicians, gold played a role in US monetary policy for sixty years after the creation of the Federal Reserve. Then, in 1971, as concerns over the US government’s increasing deficits led many foreign governments to convert their holdings of US dollars to gold, President Nixon closed the gold window, creating America’s first purely fiat currency.

America’s 46-year experiment in fiat currency has gone exactly as followers of the Austrian school predicted: a continuing decline in the dollar’s purchasing power accompanied by a decline in the standard of living of middle- and working-class Americans, a series of Federal Reserve-created booms followed by increasingly severe busts, and an explosive growth in government spending. Federal Reserve policies are also behind much of the increase in income inequality.

Since the 2008 Fed-created economic meltdown, more Americans have become aware of the Federal Reserve's responsibility for America's economic problems. This growing anti-Fed sentiment is one of the key factors behind the liberty movement’s growth and represents the most serious challenge to the Fed's legitimacy in its history. This movement has made “Audit the Fed” into a major national issue that is now closer than ever to being signed into law.

Audit the Fed is not the only focus of the growing anti-Fed movement. For example, this Wednesday the Arizona Senate Finance and Rules Committees will consider legislation (HB 2014) officially defining gold, silver, and other precious metals as legal tender. The bill also exempts transactions in precious metals from state capital gains taxes, thus ensuring that people are not punished by the taxman for rejecting Federal Reserve notes in favor of gold or silver. Since inflation increases the value of precious metals, these taxes give the government one more way to profit from the Federal Reserve’s currency debasement.

HB 2014 is a very important and timely piece of legislation. The Federal Reserve’s failure to reignite the economy with record-low interest rates since the last crash is a sign that we may soon see the dollar’s collapse. It is therefore imperative that the law protect people’s right to use alternatives to what may soon be virtually worthless Federal Reserve notes.

Passage of HB 2014 would also send a message to Congress and the Trump administration that the anti-Fed movement is growing in influence. Thus, passage of this bill will not just strengthen movements in other states to pass similar legislation; it will also help build support for the Audit the Fed bill and legislation repealing federal legal tender laws.

This Wednesday I will be in Arizona to help rally support for HB 2014, speaking on behalf of the bill before the Arizona Senate Finance Committee at 9:00 a.m. I will also be speaking at a rally at noon at the Arizona state capitol. I hope every supporter of sound money in the Phoenix area joins me to show their support for ending the Fed’s money monopoly.

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Judging by today's VIX crush and USDJPY ramp, this was the sound coming from The Eccles Building…

 

8 years ago today, the S&P 500 bottomed at 666…S&P earnings are up 78% since then.. and the S&P is up 247%

 

The Dow bottomed on 03/09/09 at 6547 – 30Y yields were at 3.57%; The Dow is now at 21,000 and 30Y yields at 3.10%… (and the 2s30s yield curve has collapsed from 260bps to 175bps)

 

Something very different today: Bonds and stocks were sold together (same as happened on Thursday but much more pronounced)

 

And Risk Parity funds had their worst 2-day drop since mid-December…

 

On the day, Trannies and Small Caps were worst…

 

Despite desperate efforts to ramp USDJPY and crash VIX, stocks could not get green…

 

Notably, Small Caps slipped back into the 'old range'…

 

Financials (red) had their worst 3-day drop in 7 weeks… almost filling the gap from last week's meltup…

 

Snap crackled…then dropped and has erased all of its post-IPO gains…

 

And Camera-on-a-Stick crashed to new record lows (on the heels of a Goldman downgrade)

 

Bonds sold off into and through the US open but once Europe closed a bid reappeared…2Y ended unch

 

The Dollar rose on the day led by notably cable weakness…

 

Crude clung to unchanged (despite USD strength), Copper plunged on China lower growth, PMs drifted lower…

 

Finally – a quick question – who does The Fed work for? Main Street or Wall Street?

Real earnings are up 2.5% off the 2009 lows, The Dow is up 210%

 

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Via ConvergEx's Nicholas Colas,

Valuation won’t ever tell you if a stock is heading higher or lower.  Valuation is math, and math is not an investment edge; it is only helpful because it tells you what the market believes.  Figure out why that’s wrong (and it generally is), and now you have something useful.  Take the companies of the Dow Jones Industrial Average.  On average, they trade for 18.6x 2017 consensus earnings, and 16.6x next year’s estimates.  Built into those numbers is expected earnings growth of 11% from 2017 to 2018. 

 

Since corporate earnings have been relatively stagnant for the last 3 years, that’s the first hurdle to jump.  Beyond that, you need a point of view on how much better/worse things will be. The best case scenario (every Dow stock earns what the most optimistic Street analyst thinks they can earn) leaves us with US equities trading at 14.8x next year.  That is clearly cheap.  And if every Dow stock earns only what the most pessimistic analyst has in their model?  Then US stocks trade for 18.6x next year.  With US rates as low as they are, that is expensive but not horribly so.

 

Bottom line: if you believe that some parts of the “Trump agenda” will pass at any point this year, the upside earnings case is correct (if not low).  And if you don’t, sell.  Now.

“There are two times in a man’s life when he should not speculate; when he can afford it, and when he can’t.”  Mark Twain

“The wages of sin are death, but by the time taxes are taken out, it’s just sort of a tired feeling.”  Paula Poundstone

“Dogs have no money.  They’re broke their entirely lives.  You know why dogs have no money?  No pockets.”  Jerry Seinfeld

No reason for those quotes, aside from a little levity.  Last week was a long week, with the post-Trump speech rally, the market suddenly realizing the Fed may be serious about raising rates this month, and today’s Snap IPO all making for a busy time.  And it’s not quite over yet.  Fed Chair Yellen has a speech to the Executives’ Club of Chicago at 1pm on Friday afternoon.

Therefore we’ll keep this note brief and simply address one question: “Are US stocks too expensive to either buy or continue to own?”  No, it’s not an easy question.  And its only truthful answer is, sadly, another question.

“What do you believe?”  Since asset prices reflect the market’s baseline investment scenario, valuation analysis is really the business of measuring how different you are from the herd that sets those prices.  Simply doing a Price-Earnings ratio isn’t much of an investment edge.  Everyone has access to a calculator. But by knowing the market’s expectations for financial results and operating metrics, you can place your beliefs in sharp relief with the market’s perspective.  When your expectations are markedly different from those that other investors believe, you’ve got yourself an investment case.

Let’s take a simple example – the companies of the Dow Jones Industrial Average.  The 30 companies of the Dow have scores of Wall Street analysts following them, each publishing an earnings model with estimates for 2017 and 2018 earnings.  Some are higher than average, and some are lower.  Typically, investors assume that the most likely outcome is close to the average, plus a few pennies (companies tend to beat the consensus by a few percentage points).

Based on the consensus numbers, here’s the current valuation for the Dow:

• On average, analysts expect the 30 companies of the Dow to grow earnings by 11% from 2017 to 2018.
• Mean valuation multiples for the Dow companies are 18.6x 2017 earnings estimates and 16.6x next year.
• On balance, analysts expect that every Dow company will grow their earnings per share in 2018 versus this year. The range here goes from 3% (IBM and Verizon) to 16/18% (Visa and ExxonMobil) to 32-42% (Chevron and Caterpillar).
• Based on this data, most investors would say that US stocks are “Fairly valued” on this year’s almost-19x multiple. The more charitable ones might say “If you can wait until the end of this year, you might see stocks trend higher because that 16.6x multiple on 2018 is still cheap.”

Now, here’s the trick to this analysis: it’s wrong. It is either:

• Too high because analysts always start out too high and bring their numbers down as the year progresses.
• Or too low because despite a very obvious equity rally on expectations for lower corporate taxes and infrastructure investment, not one analyst we know has yet raised their numbers to reflect that fact.

We went through and pulled not just the consensus earnings numbers for the Dow names, but also the highest and lowest numbers any analyst is willing to put in print. That analysis is below.

The upshot of this analysis is the following:

• If every best-case-scenario estimate is correct, the Dow trades for 17.3x this year’s earnings per share and 14.8x next year. Instead of 11% earnings growth, these numbers work out to 16% growth.
• If the worst case scenario is correct, those multiple are 19.7x and 18.6x for 2017/2018 numbers, respectively. Average Dow company earnings growth in this scenario is just 6%.
• Remember: best case scenario estimates still include little-to-no adjustments for lower tax rates from a Trump economic plan.
• While admitted a crude measure, PE ratios of 17x/14x for the bull case look cheap and 20x/19x for the bear case are clearly too expensive for 6% earnings growth in a rising rate environment. (Remember those 3 rates increases we’re baking into asset prices for the year?)

My takeaway: this valuation work shows two things:

• You have to believe there will be some change in US fiscal policy to continue to own equities. Stocks are too expensive otherwise.  Now, it doesn’t have to be the Trump Trifecta of lower personal/corporate taxes, deregulation and infrastructure.  Any two of the three in sufficient scale probably gets us more than 11% earnings growth next year.  Frankly, changes to the tax code alone probably get us there if corporations end up paying 20% instead of 35% of pretax profits.
• Everything else has to go right. Remember that corporate profit margins are higher than long run averages, unemployment is relatively low, and long term interest rates are still below 2.5% on the 10 year US Treasury.  At current valuations we can’t afford to lose any of those natural tailwinds to economic growth and corporate earnings.

It could well be that US investors are taking to heart the words of Oscar Wilde: “Anyone who lives within their means suffers from a lack of imagination.”  US stock markets clearly do not have that problem at the moment.

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Over the weekend, CNN released ‘spy cam’ footage of a “fiery” meeting in the oval office and used it to report that an angry President Trump lashed out at his senior staff in an “expletive-laced” tirade over their “fumbling” of the Sessions recusal which he thought was premature and overshadowed his speech to Congress.   

Of course, while the mainstream media was all too eager to spread the word of more dysfunction in the Trump White House, no one seemed to care to ask the obvious question of why it is suddenly ok for CNN to be filming private, and potentially classified, meetings in the Oval Office.  Moreover, if it is somehow permissible to film potentially classified meetings, which we can’t imagine it is, we do wonder where all of CNN’s footage is of Obama’s oval office meetings?  We’re sure they “do not recall.”

 

Meanwhile, it’s painfully obvious that CNN completely fabricated the narrative around the meeting as their own ‘news’ anchor even admits that their “anonymous” sources were not aware of what the meeting was even about.  Moreover, since the meeting was ‘closed door’, it’s difficult to understand how CNN’s source could have possibly known Trump’s demeanor and/or whether he used “a lot of expletives”, as the story states, unless that source was actually in the meeting.

That said, here is the narrative that CNN linked to the meeting:  

President Donald Trump is extremely frustrated with his senior staff and communications team for allowing the firestorm surrounding Attorney General Jeff Sessions to steal his thunder in the wake of his address to Congress, sources tell CNN.

 

“Nobody has seen him that upset,” one source said, adding the feeling was the communications team allowed the Sessions news, which the administration deemed a nonstory, to overtake the narrative.

 

On Thursday, Sessions recused himself from any current or future investigations into ties between Russia and the Trump campaign after it was reported he had met with the Russian ambassador to the US, something he had previously failed to disclose.

 

In particular, the renewed focus on Russia is seen as a major letdown after Tuesday when top officials were riding high, congratulating one another on Trump’s speech to Congress.

 

“The staff fumbled,” Trump told the team for not being prepared when the Sessions story came out, according to another source.

 

When the President returned to the White House Thursday evening from a day trip to Virginia, there were “a lot of expletives.” The source said for more than a week Trump had been lamenting that his senior staff “just keep getting in their own way.”

Meanwhile, just a couple of hours after the Oval Office meeting, Trump tweeted his now infamous accusations that Obama ordered the tapping of his Trump Tower phone lines.

Terrible! Just found out that Obama had my “wires tapped” in Trump Tower just before the victory. Nothing found. This is McCarthyism!

— Donald J. Trump (@realDonaldTrump) March 4, 2017

Is it legal for a sitting President to be “wire tapping” a race for president prior to an election? Turned down by court earlier. A NEW LOW!

— Donald J. Trump (@realDonaldTrump) March 4, 2017

I’d bet a good lawyer could make a great case out of the fact that President Obama was tapping my phones in October, just prior to Election!

— Donald J. Trump (@realDonaldTrump) March 4, 2017

How low has President Obama gone to tapp my phones during the very sacred election process. This is Nixon/Watergate. Bad (or sick) guy!

— Donald J. Trump (@realDonaldTrump) March 4, 2017

 

So, just to summarize, in the end, all CNN really revealed was that i) they have a spy cam setup to film the oval office and ii) Steve Bannon pointed his finger at someone. Yet another great piece of ‘fake news’ courtesy of CNN.

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Via Howard Kunstler of Kunstler.com,

Halloween’s coming super-early this year and it will be a shocking surprise to those currently busy looking for Russians behind every potted plant in Washington DC. First, accept the premise that your country has lost its mind.

This is what happens when societies (and individuals) can’t face the true quandaries of a particular moment in their history. All of their attention gets channeled into fantasy: spooks, sexual freakery, conspiracies, persecution narratives, savior fairy tales. It’s been quite a cavalcade of unreality for the past six months, with great entertainment value for connoisseurs of the bizarre — until you’re reminded that the fate of the nation is at stake.

The questions Americans might more profitably ask ourselves: can we continue living the way we do? And by what means? These matters of home economics have been sequestered in some forgotten storage unit of the collective mind for at least a year while a clock ticks in the time-bomb that sits on the national welcome mat. That bomb is made of financial plutonium and it’s getting ready to blow. When it does, all the distracting spookery and freakery will vaporize and the shell-shocked citizens will have a clear view of the bleak, toxic, devastated landscape they actually inhabit.

March 15 is when the temporary suspension of the national debt ceiling — engineered in a 2015 deal between Barack Obama and then House Speaker John Boehner — finally expires, meaning the government loses its authority to continue borrowing money. The chance that congress can pass a bill raising the debt ceiling to enable further borrowing is about the same as the chance that Xi Jinping will send every American household a dim sum breakfast next Sunday morning by FedEx. The US treasury will then be left with around $200 billion in walking-around money, at a burn rate of about $90 billion a month — meaning that that around June sometime the country won’t be able to pay invoices, issue salaries, send out entitlement checks, or do anything, really. It means pure government paralysis. It means no infrastructure spending jamboree, no “great” wall, no military shopping spree, none of the Great Expectations sewn into the golden fleece of Trumptopia.

Meanwhile, over the next few weeks, Janet Yellen and her crew of economic astrologasters at the Federal Reserve will have to put up or shut up vis-à-vis raising the interest rate on the basic overnight lending rate. The Las Vegas odds of it being raised currently stand at around 95 percent. So, they will be running that play around the time that the debt ceiling issue materializes into a live-action event. Of course, the Fed could welsh on its carefully-scripted previous hints and utterances and do nothing. But that option would probably extinguish the last remaining shreds of the Fed’s credibility, since they’ve been jive-talking about raising rates since they began “tapering” the QE bond-buying spree in the spring of 2013, i.e., a long time ago. The Fed’s credibility is synonymous with the dollar’s credibility. Look out below.

If those 95 percent odds are correct, the end of all that lovely cheap money will be the death of the Trumphoria stock market zoom as all algo hell breaks loose in Wall Street’s server farms and the trend is no longer anyone’s friend. Enter, stage left, the unintended consequences and diminishing returns of computer technology ripping apart the financial expectations of every banking official from Shanghai to 20^th Street and Constitution Avenue. The American public will be left out in the parking lot with its head spinning.

So, enjoy the last few weeks of artificial Russia hysteria and LBGTQ bathroom neurosis. You’ll have other things to think about as the daffodils come peeping through the garden loam – like what to use for money to buy stuff if, perchance, the ATM machines go to lockdown, and anyway, after three days of that there won’t even be anything to buy (or steal)  at the local supermarket, given the fragility of our supply chains. I know this sounds a little extreme, like Zombie Apocalypse, but you won’t actually see any zombies around. They were just part of the perpetual freak show of the mind that is being shoved aside for the starker theatrics of reality.

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