Tag: finance

Wholesale inventories plunge and Kim shoots off some missiles… but Powell panders to TBTF banks and GOP pushes tax bill = so buy mortimer buy…

 

Overnight saw The National Team step in and save China…

 

But today's market action was dominated by the usual opening idiocy, tax-reform headlines, Jerome Powell comments, and North Korea – of course, all of that meant record high stocks.

Well that de-escalated quickly. After snapping higher on a North Korean ICBM launch, gold was pummeled lower (and stocks higher) and stocks soared after the GOP tax bill was advanced to the senate floor…

 

Nasdaq briefly went red on NK Nukes headlines but then the panic-buying kicked in and Trannies and Small Caps ended best…

 

On the day, Retailers and Banks screamed higher…

 

Financials (XLF) soared most in 8 months back up bear record highs after Powell claimed 'Too-Big-To-Fail' is over and that regulations are too tough.

NOTE – XLF bounced perfectly off its 50DMA

High Tax companies notably outperformed…

 

Today was another huge short-squeeze – the 8th day in a row that "Most Shorted" have risen…(the biggest short-squeeze since the election)

 

The question is – did the ammo for the squeeze just run out?

 

Stocks and VIX were not partying together…

 

Stocks remain massively decoupled from FX carry…

 

And entirely decoupled from bonds…

 

Bonds were very marginally higher in yield across most of the curve with 30Y actually ending lower (in yield)…

 

The Dollar Index gained for the second day in a row…

 

Weakness in EUR, CAD, and JPY helkped offset cable's strength…

 

Cable surged to the highs of the day after headlines that the EU had agreed on the Brexit divorce bill (despite plunging early on Carney's comments about how hard it will be)

 

Bitcoin was up again and according to some exchanges did pass above $10,000. However, our preferred soruces showed it just short…

 

WTI slipped back and closed below $58 (Jan 18 contract) ahead of tonight's API data…

 

And copper was clubbed like a baby seal…

 

Gold futures (Fed 18) topped $1300 (spot did not) on North Korean headlines but were unable to hold it after the tax bill…

via http://ift.tt/2AjNcMN Tyler Durden

While the prevailing outlook by the big banks for 2018 and onward has been predominantly optimsitic and in a few euphoric cases, “rationally exuberant“, with most banks forecasting year-end S&P price targets around 2800 or higher, and a P/E of roughly 20x as follows…

• Bank of Montreal, Brian Belski, 2,950, EPS $145.00, P/E 20.3x
• UBS, Keith Parker, 2,900, EPS $141.00, P/E  20.6x
• Canaccord, Tony Dwyer, 2,800, EPS $140.00, P/E 20.0x
• Credit Suisse, Jonathan Golub, 2,875, EPS $139.00, P/E 20.7x
• Deutsche Bank, Binky Chadha, 2,850, EPS $140.00, P/E 20.4x
• Goldman Sachs, David Kostin, 2,850, EPS $150.00, P/E 19x
• Citigroup, Tobias Levkovich, 2,675, EPS $141.00, P/E 19.0x
• HSBC, Ben Laidler, 2,650, EPS $142.00, P/E 18.7x

… there have been a small handful of analysts, SocGen and BofA’s Michael Hartnett most notably, who have dared to suggest that contrary to conventional wisdom, next year will be a recessionary, bear market rollercoaster.

And then, there are those inbetween who expect a good 2018, but then all bets are off in 2019. Among them is JPM’s chief economist Michael Feroli who has published a special report, aptly titled “US outlook 2018: Eat, drink, and be merry, for in 2019…”

Here are the seven main reasons why JPM believes that the party will continue until December 31, 2018 or thereabouts:

• Growth momentum at the end of 2017 is solid and global headwinds are unusually mild
• Solid growth should put more pressure on resource utilization for an economy operating at capacity
• Wage growth has already firmed, and unemployment rate is expected to fall below 4%
• Core inflation should approach 2% target rate following surprising weakness early in 2017
• Even with tightening labor markets, subdued inflation expectations should limit upside prices pressures
• The Fed is on track to deliver three hikes this year and we believe will step up the pace to four hikes in 2018
• The year-end period usually contains one wild card; this year it is tax reform

At that point, however, it ends.

Here are the key excerpts from the report:

The prospects for the economy at the end of 2017 look about as favorable as they have at any point in this expansion. The animal spirits of both consumers and businesses appear energized; the  ever-present global headwinds of the last half decade have turned to a tailwind; and the domestic fiscal austerity that has acted as a drag on growth since 2011 may now be turning to profligacy. All these factors augur above-trend growth in 2018. The only sticking point is that by many measures the economy already appears to be operating at capacity. This is the fundamental tension in the outlook: does continued above-trend growth tighten labor and product markets enough to threaten higher wage and price inflation or does growth slow enough to limit strains on the rate of resource utilization? Our outlook balances these outcomes. We see growth close to 2% in 2018; while that is somewhat below what we expect will be realized for 2017, it is still about 0.5%-point above our estimate of sustainable, trend growth. This should be enough to push the unemployment rate down into the high 3’s (Figure 1).

 

Inflation has been mysteriously absent this year, but historically it has not been long before unemployment below 4% began to generate firmer wage and price pressures. We expect that to be the case next year as well. Fortunately for the outlook, this will take place from a starting point in which cost pressures are relatively low, so some firming in inflation trends is not to be feared. Even with core PCE moving only slowly back toward the Fed’s 2% goal (Figure 2), we expect the FOMC will maintain a fairly steady cadence of rate hikes next year. At the beginning of 2017 the Committee’s interest rate forecast “dots” foresaw three hikes this year, and it appears that they will match that forecast. For 2018 the latest dots are looking for another three hikes; this, again, looks like a reasonable forecast to us, though we think the ongoing surprising decline in the unemployment rate means that four hikes next year now look more likely than three.

JPM then focuses on the key drivers of growth in 2018. Below we recap some of the key points”

• Consumer spending energized: Consumer spending has pulled its weight in the first three quarters of 2017, expanding at a 2.5% annual rate, about the same growth registered for the economy as a whole. Looking ahead to 2018, we look for a modest step down to around a 2.2% pace. The prospects for cuts to income taxes stand out as a notable positive for consumers. The principal restraint in the forecast is that we see the recent precipitous decline in the saving rate coming to an end (Figure 3). To understand the importance of the saving rate recall the following identity: the percent change in real consumption = the percent change in real disposable income – the change in the saving rate. Saving is future consumption. Households may see less need to save if future consumption can instead be supported by future income growth, or by present wealth growth.
• Little upside left on housing construction:  Despite generally healthy household finances, housing construction has shown signs of outright cooling this year after sluggish but steady growth through most of the recovery. Our 2017 outlook called for modest growth, with real residential investment rising 1.6% (4Q/4Q) and housing starts drifting up to a pace of 1.275 million (saar) by year-end. In fact, the data are on pace to disappoint these modest expectations. We now look for residential investment to decline 1.3% in 2017, and housing starts have managed an average pace of only 1.188 million over the last six months, down from a peak of 1.243 million earlier this year. With supply constraints binding in many areas, continuing sluggish household formation among young adults, and potentially unfavorable monetary and fiscal policy changes on the horizon, we see little reason to expect a return to robust growth in the sector. Our 2018 forecast looks for 1.25% 4Q/4Q growth in residential investment, with housing starts drifting up to about a 1.3 million-unit pace by year-end.
• Capital expenditures send mixed signals:  Turning to the business end of the economy, capital expenditures had a weak run from late 2014 to mid-2016, as the sharp decline in oil prices and rise in the dollar pinched profits and spending in industries linked to oil mining or exports. But as these drags abated, many related indicators have been on a strong run since mid-2016. Somewhat puzzlingly, this strength has been much more clearly apparent in equipment spending than in structures investment. There is a possibility that tax reform will further encourage investment spending in the coming year. In fact, as we write, the current version of the Senate tax proposal would maintain the current 35% corporate tax rate in 2018, while allowing 100% deductibility of equipment investment against that high rate. Such a configuration would provide an incentive to pull forward equipment spending from 2019 to 2018 where possible, although evidence on past investment responses to changes in depreciation deduction is mixed at best.
• Fiscal changes afoot:  Republican control of the executive and legislative branches of the federal government has yet to produce any material changes in fiscal policy, but our forecast looks for this to change soon. As we write, the House and Senate have each produced their own tax reform bills. In the grand scheme of things—considering the many directions the tax reform effort might have gone—the bills are pretty similar. Notably, they both target a $1.5 trillion increase in total deficits over the next 10 years and would bring the top corporate tax rate down from 35% to 20%. The $1.5 trillion in 10-year deficits includes roughly $500 billion that we would chalk up as the continuation of existing policies (notably in the form of “bonus” depreciation deductions and other “tax extenders” that would likely be preserved even in the absence of a major tax bill). Thus the emerging bills look like a tax cut relative to the status quo of about $1 trillion over 10 years. The exact  timing of the cuts remains in flux as the House and Senate debate their preferred method of contorting the plans to achieve the necessary budget score to pass a bill through reconciliation. But if we  think of the plan as a net tax cut of roughly $100 billion per year, the economic effects could be viewed as modest. With annual US GDP of about $20 trillion, a $100 billion tax cut represents 0.5% of GDP. If the cuts tilted toward corporations, estates, and high income households who are unlikely to be cash constrained, we would expect the average propensity to spend out of these cuts to be  modest. And, as discussed below, we suspect any supply-side benefits from stronger productivity growth will also be limited. On net, we continue to pencil in a 25bp boost to the rate of GDP growth for one year beginning in 2Q18.
• Trade shifts towards neutral:  Recent changes in net exports appear to have been affected meaningfully by fluctuations in the value of the dollar (Figure 19). The dollar started appreciating significantly in the middle of 2014 and the trend in real exports weakened shortly afterwards; as a result, net exports persistently dragged on growth from late 2014 until the end of 2016 (Figure 20). More recently, however, the dollar has depreciated throughout much of 2017, and the trend in exports has been stronger than that of imports, leading to a contraction in the trade deficit. Changes in the dollar can have long-lasting impacts on the trade data, and we think that the earlier strengthening in the dollar can still be weighing on the trade deficit even with the partially-reversing depreciation from more recent months. Following the earlier swings in the trade deficit, we expect net exports to be close to neutral for growth in 2018 with exports increasing 3.7% and imports up 1.5% saar (4Q/4Q).
• Solid demand, meet weak supply:  With consumption and business investment expanding at a healthy pace, housing construction and government spending growing more modestly, and international trade about neutral, we look for 2018 real GDP growth to average just under 2.0%. Translating this demand growth into its implications  for jobs and the labor market requires an  assumption on productivity growth, as each quantum of increase in output will need more (less) job growth when productivity growth is slower (faster). So far in this cycle, productivity growth has  been extremely weak, necessitating a relatively firm pace in hiring. Recently, however, there have been hints of a pickup, with nonfarm business sector productivity increasing 1.5% in the four  quarters ending in 3Q17. This is modestly higher than our 1.25% estimate for trend productivity growth and well above the -0.1% growth registered in the prior four-quarter period.
• Productivity pickup will probably pass:  We tend to think we are likely still in a slow productivity growth regime, consistent with our 1.25% trend estimate. Since 2004, nonfarm productivity growth has been stuck in the slow lane, averaging 1.3% annualized growth over those 13 years. The 1.5% growth seen over the last year looks more similar to that period than to the high productivity growth period that preceded it. In fact, besides recessions, productivity growth as weak as 1.5% was rarely seen outside the original Great Productivity Slowdown period, which lasted from 1974-1995 (Figure 21). The NY Fed maintains a productivity regime-switching model which estimates that, even with the 3Q17 data, there is a 94% chance we are in a slow productivity growth regime (which the model defines as 1.3% annual productivity growth).
• Labor market to get even tighter:  With GDP expanding and productivity growth set to remain soft, our 2018 forecast looks for another decent year of job gains. Although the trend for job growth has moderated in each year since the 250,000 average monthly pace reported for 2014 (Figure 27), the latest figures still have been strong enough to push the unemployment rate down by 0.7%-pt  over the most recently reported 12 months. We think that job growth will continue to slow somewhat over time, but that it should remain above the pace needed to keep the unemployment rate steady. For the last several years, we have been forecasting that the national labor force participation rate would remain about flat on average, as drags from an aging population are roughly offset by the pull of a tight labor market. This forecast has performed well, as the participation rate currently stands at the same level as it did in December 2014, despite some volatility along the way and some surprises within individual demographic groups. Our models continue to predict more of the same— population aging should continue to subtract 0.2%- to 0.3%- pt from the participation rate each year, while low unemployment and rising wages pull some younger workers back to the labor force. On net, we look for the participation rate to be roughly unchanged a year from now.
• Profit margins to get squeezed, not pinched:  Firming compensation trends are the number one headwind for corporate profits. Typically, profit margins narrow as the cycle matures and labor costs begin to firm. That pattern has played out this cycle. Profit margins for the nonfinancial corporate sector peaked in 2014. Profits did get a lift in the second half of 2016 as energy prices firmed, though have exhibited less growth in 2017 (Figure 30). In 2018 we expect profits will grow 1.5%, which is less than our anticipated 4.0% growth in nominal GDP. The reason for the shrinking share of profits in GDP is that we expect labor to take an increasing share. Two other mature cycle phenomena should also pose headwinds to profit growth. First, the normalization of capital spending levels means the depreciation expenses will command a larger share of revenue; depreciation expenses began accelerating in 2016 and have recently been increasing at a 4.6% growth rate. Second, as  interest rates go higher, interest expense begins to take a larger share of operating surplus.
• Still holding out for higher inflation:  Arithmetically, firmer growth in unit labor costs means either less growth in non-labor payments—much of which are profits— or faster growth in output prices. We believe both of these outlets will reflect some of the firmer wage growth next year. The link between wage pressures and price inflation is quite loose, but our forecast has nonetheless looked for the tightening labor market to put gradual upward pressure on price inflation. We were thus surprised by the moderation in core consumer price inflation in the second half of this year. Core inflation had been firming and was close to the Fed’s 2% target late last year and early in 2017, with the core PCE deflator—the FOMC’s preferred measure of underlying inflation— up 1.9%oya in many months between August and February. But an unusually large drop in core inflation in March followed by some other soft readings have been weighing on year-ago inflation rates since then—the core PCE price index was up only 1.3% oya in September. The downshift in inflation has occurred despite reasons for inflation to firm. Pricing for many types of services tends to respond to changes in slack, but core services inflation has cooled this year even with continued labor market tightening. And core goods inflation has remained persistently weak even as the decline in the  value of the dollar this year has pushed up import prices (Figure 33). It is therefore hard to use the economic backdrop to explain the recent inflation disappointments. It does appear that part of the  softening was related to special factors that were likely one-time events, including a substantial decline in pricing for cell-phone services back in March.
• A Fed in motion tends to stay in motion: With the labor market continuing to tighten and inflation drifting up, we look for the Fed to stay on the move. At the beginning of 2017 the oft-derided FOMC “dots” indicated the Committee anticipated hiking three times this year. With many Fed speakers leaning toward a mid-December hike, they look quite likely to have hit their forecast. If one counts the September balance sheet normalization announcement (discussed more below) as a form of tightening, then they will have delivered four tightenings this year: once a quarter at the press conference meetings. We anticipate the Fed will hike the funds rate four times next year for the same reason they tightened policy four times this year: with labor market slack diminishing faster than they (and most others) anticipated, concerns about being behind the curve will keep them on a fairly steady path back toward a more neutral policy setting. With an unemployment rate that may soon fall below 4%, leaving the real policy rate in neutral territory, may strike many on the Committee as improper risk management. Two more hikes next year—in March and June—would bring the interest on excess reserve (IOER) rate back to 2.0%, and the real policy rate close to zero. Hikes in the second half of the year should be more data dependent. However, even if inflation runs modestly below the Fed’s 2.0% goal, we believe most Committee members have more faith in the Phillips curve than the market does, and that solid growth would be enough to warrant hikes in September and December.

Those are all the positives. However, then comes 2019, and as JPM concludes, “Eat, drink, and be merry, for in 2019…”

We conclude our discussion of Fed policy, and the 2018 outlook more generally, with a few thoughts about monetary policy beyond next year. If recession risks are indeed nontrivial in 2019 or 2020, then it could well be that the Fed enters that situation with the funds rate not much above 3.0%. This would limit the amount by which the Fed could cut rates before running back into a zero lower bound situation. This problem could be exacerbated by limited space or willingness to employ countercyclical fiscal policies. The deficit next year will already be one of the largest for a full employment economy. Moreover, after the 2009 Recovery Act, the appetite for counter-cyclical fiscal policy has waned in Washington.

 

Given the largely successful experience with negative rates abroad, one may wonder whether the zero lower bound is the effective lower bound. Apparently, the Fed remains reluctant to explore this issue, in part because of questions around whether the Federal Reserve Act allows the Fed to take its administered rates into negative territory. The issue regarding negative rates is emblematic of the main challenge the Fed may face with the next downturn: the political constraint that Congress may exert on the Fed’s creativity. Currently, some of the more academically minded Fed officials have been musing about reinterpreting the Fed’s price stability mandate. For example, raising the inflation target or moving to pricelevel stability have been suggested as alternative operating frameworks that may lessen the severity of recessions in a low real interest rate world.

 

However, the Fed needs to tread carefully. The decision to interpret the Federal Reserve Act’s price stability mandate as 2% inflation was made in the late 1990s, when the institutional prestige of the Fed on Capitol Hill was enormous. Now, with the Fed serving as Congress’ favorite whipping boy, any further innovation in interpreting the Fed’s mandate risks the wrath of lawmakers. In all likelihood, the Fed will enter the next recession with the same meager zero-bound toolbox it had in the last recession: forward guidance and balance sheet expansion.  

And the punchline:

In the aftermath of the last  recession nothing was done to enhance the country’s ability to conduct countercyclical policy; perhaps the pain of the next downturn will motivate reconsideration of fiscal and monetary policies.

But why prepare for a recession, a crash or even a modest correction when the market no longer has an even 1% drop? Until it does of course, which is after the next downturn, expecting a rebound may be generous…

via http://ift.tt/2zNVjEk Tyler Durden

Via The Daily Bell

Employment Ain’t What It Used to Be

The 9-5 is on it’s way out.

You can’t ignore the facts. That traditional model of employment so many Americans sought in the past, is giving way to something new. Fueling that change: dissatisfaction, loss of opportunities, and stagnation. Each forces people and the economy to adapt.

The expectations people have for a job have changed as well.

People want more than just a job. Yet many large businesses and corporations act as stewards of traditional employment. They push the same model of employment on people, but with fewer benefits than in the past.

Job security?

Not likely. Finding security within one company is decreasingly viable. Many people now piece together full-time employment through multiple part-time jobs.

Health benefits?

Almost non-existent. These benefits used to attract employees. Now the government has created so much red tape, healthcare is a liability for companies. They try only to meet the minimum government standards.

What is left to expect from traditional employment?

Monday through Friday, eight hours a day, if not more, your life is given to a company. This, in exchange for moderate financial security and the privilege of spending two days each week as you see fit.

There is no room for taking an afternoon off to reconnect with friends. There is no option of working from an exciting space. And there are not many opportunities to grow as a person.

And people are no longer willing to accept this.

The statistics suggest how this situation drives people to a new kind of employment.

An estimated one in three Americans has given up on the traditional model of employment, opting instead to become freelancers.

The number of businesses that are considered sole proprietorships and home-based businesses is higher than ever before.

The way America views employment has changed.

So, the next question is…

How do you change with it?

Joining the Gig Economy

By 2020 experts believe nearly half of the American workforce will be employed within the gig economy.

What that means varies, but it boils down to one main thing: leaving behind a traditional job in favor of small jobs, or gigs.

People become freelancers, no longer tied to a company but self-employed professionals within an industry.

So how do you join?

Simply put, you find an area of work that is in line with your skill set and start building a client base. You can make almost anything into a freelance job.

And with so many opportunities available, the question is…

What do you enjoy doing?

Finding where you fit into the new market will take a bit of introspection.

But there’s freedom in knowing the choice solely lies with you. You are taking control of your financial freedom, instead of relying on institutions out of your control.

Just browse Craigslist or Freelancer to start seeing all the gigs available. You might be surprised by the range of skills people are looking for.

If you are feeling really adventurous, try to get one of the gigs. That is how you start. By experimenting. How do they respond? What can you do differently next time?

Adapting To Change

For all the freedom and control the gig economy offers, it is not without new challenges.

You can’t be content with work coming to you. You can’t wait out the clock for the end of the workday. Instead, you must take an active role in seeking out opportunities and income.

And while this may be a bit challenging to those just joining the market, with time and practice, it becomes much easier.

As you start…

There are many ways to market your talents and attract high paying clients.

There’s the standard route of building a portfolio and cold pitching potential clients. This takes time but overall leads you to the greatest possibility for success as you continue to develop your skills and land more clients.

Putting in the effort to collect and create an effective portfolio simply will not happen overnight, nor will mastering the perfect cold pitch.

(But New Sales Simplified is a great place to start if you want to go the cold-calling route)

With concentrated effort, the opportunities provided by having a solid portfolio and well-crafted approach to landing new clients will vastly outweigh the energy spent perfecting each. Start now, and in a couple years, you will be happy you did.

There are also freelance marketplaces, like Freelancer and Upwork. These marketplaces and platforms give you an opportunity to engage with clients directly while setting your prices. Sign up and you’re ready to start earning.

These are competitive places. They plunge you into the pool of modern workers. And this is some of the best training you can get.

These marketplaces allow you to further develop your business and marketing skills but in a more conducive environment to landing gigs. And they also offer reliable income, giving you a great place to start building while earning within your field. It’s easier than cold calling.

It is up to you to put in the effort. You may need to cultivate new skills until finding clients becomes easier.

But that is what this new economy is all about.

Experiment, try things out, and most of all, be ready to adapt.

Be prepared to put in more effort than you may have to in your previous careers.

That is the one thing that many people fail to mention when discussing the gig economy. It requires a lot of effort. Being able to set your schedule, set your prices, and be your own boss does not come easy.

But that makes it that much more rewarding. You aren’t a mindless office drone. You are a modern renaissance man.

Expanding your skill set

Once you’ve found an area of interest, the next thing to do is hone your skills.

Whether that means joining a coding academy to learn backend development, enrolling in online writing courses, or simply getting out there to work with clients, finding a way to improve your abilities should be your main focus early on.

So find what drives you, then simply begin working on developing those skills to carry you forward in your new career.

Entering a competitive marketplace…

To make your venture profitable, you’ll have to set yourself apart from others within your industry.

This could mean putting in extra hours learning the latest breakthrough within your industry. Or it could mean continuously enhancing your ability to produce quality work quickly.

Remember, joining the gig economy is a long term decision that requires you to look towards your future while making those plans possible today. It is nice to think that you’ll have several high paying clients down the road, but unless you build the skills to develop those relationships, that plan will be nothing more than simply an idea.

But the gig economy does reward effort. It gives back what you put in.

For example:

Putting the effort into mastering your craft will lead to more clients, which in turn will lead to greater opportunities as you progress and advance your skills within your industry. Whether this leads to you developing a smaller group of higher-paying clients down the road or the beginning of your own firm, is your decision. It begins with doingand learning.

At times it may feel like a slow climb, this is natural. Though the time spent improving upon yourself within the gig economy is rewarded more quickly when compared to the traditional employment model.

The opportunity for advancement will come at you much quicker than simply waiting around for a promotion at your old job.

Freeing Yourself and Finding Fulfillment

There certainly are huge benefits from being ahead of the curve in terms of a changing your employment model. But letting go of a 9-5 does something all the more important, it frees you to decide the course of your life.

No longer are you trapped in an environment you dislike, performing work in which you feel no connection.

Instead, you are able to pick and choose the direction of your life.

So, if you are sick of working for the weekend, for two weeks in the summer, or God-forbid retirement, you should consider the gig economy.

For more inspiration about modern economic opportunities coming out at breakneck speed, check out Bold.

via http://ift.tt/2zNLgPD TDB

Amid efforts to liberate the Iraq region from ISIS, the local army has discovered new details about how the terrorists operated, including their logistical infrastructure in stolen oil (which as a reminder was sold to Turkey in general and Erdogan in particular). A recently emerged video shows secret underground repositories of black gold, which the terrorists were presumably forced to create to hide their stolen wealth from the anti-terrorist coalition.

The video reveals oil tanks with a capacity of several thousand metric tons dug several feet into the ground. In these makeshift underground shelters, the oil repositories would go unnoticed by the Iraqi military and reconnaissance aircraft.

At least, that was the case during the heyday of the Islamic State. Since 2015, ISIS’ wealth in stolen natural resources in Syria and Iraq has been decimated, especially after a concentrated campaign launched by Russian air power to destroy smuggled oil heading for the Turkish border, as we first reported in 2015. In November 2015, the Russian Aerospace Forces launched a major concentrated attack targeting oil tankers, destroying an estimated 1,000 oil tankers, as well as oil refineries and oil storage facilities in a five day campaign in northern and eastern Syria. The US-led coalition reported destroying another 280+ tankers later that month, with both sides launching further strikes.

After a series of Syrian, Russian, and US-led attacks, terrorists from the Islamic State were forced to change their tactics, switching to the use of small, hidden, makeshift refineries and storage facilities, Sputnik reports. In 2016, US analysts estimated that the terrorists were making about $20 million a month from the stolen oil, down from as much as $3 million per day in 2014.

Of course, the Islamic State is now on the verge of defeat in both Syria and Iraq, its local influence virtually non-existent amid separate major Syrian and Iraqi offensives to free their countries from the terrorists. Last week, Syrian forces announced that a patch of territory along the west bank of the Euphrates River is now the only area in Syria where the terrorist group remains operational

via http://ift.tt/2iYCy6M Tyler Durden

Following an eventful morning for Trump that has included everything from a Twitter spat with “Chuck and Nancy” over budget and tax reform negotiations, to yet another North Korean missile launch, the White House has just announced that the President will address reporters at 3pm EST.

via http://ift.tt/2Bm64tP Tyler Durden

Somewhat calming anxiety over the tax reform bill making it out of committee, Senator Ron Johnson confirmed he would vote 'yes'…

Senator Ron Johnson, a Wisconsin Republican, pushed to change the way pass-through businesses would be treated by increasing a proposed 17.4 percent deduction for pass-through business income to at least 20 percent.

 

Johnson would pay for the heftier tax break by eliminating the corporate deduction for state and local taxes.

 

Johnson said he voted to approve the measure "based on the progress" in recent days. “I’m getting commitments we are going to get this fixed,” he said.

And a few minutes later, the budget committee had enough votes to advance the Republican tax bill. Stocks extended their gains, USDJPY spiked and gold dropped…

As Bloomberg reports, the 12-11 party-line vote Tuesday came after Republican leaders addressed objections raised by GOP committee members who threatened to block it. The House passed its own tax-cut measure last month, and Senate Republicans can afford to lose no more than two votes among their ranks to pass the measure without Democratic help.

All those North Korean nuke worries gone…

 

Stocks bounce to record highs…

 

As Gold dumps…

 

That leaves it up to the Senate (and McCain, Corker, and Flake)…The legislation faces an open amendment process on the Senate floor that may spell substantial changes before a final vote that’s expected Thursday.

via http://ift.tt/2AFYYnw Tyler Durden

Authored by Charles Hugh Smith via OfTwoMinds blog,

The basis of this admittedly crazy forecast was simple: capital flows.

image courtesy of CoinTelegraph

I think we can all agree that bitcoin (BTC) is "interesting." One of the primary reason that bitcoin (and cryptocurrency in general) is interesting is that nobody knows what will happen going forward.

Unknowns and big swings up and down are characteristics of open markets. It's impossible to forecast bitcoin's future price because virtually all the future inputs are unknown.

We've lived so long with managed markets that only loft higher that we've forgotten that unmanaged markets are volatile and full of unknowns. We've forgotten that markets are reflections of all sorts of things, from human emotions to herd behavior to changes in the underlying Mode of Production, i.e. how stuff gets done, made, distributed and paid for.

Last May, when bitcoin was around $580, I distributed a back-of-the-envelope forecast of $17,000 per bitcoin to my subscribers and patrons ($5/month or $50 annually). (In June, I presented the case to subscribers of PeakProsperity.com, where I'm a contributing writer.)

The basis of this admittedly crazy forecast was simple: capital flows. There is around $300 trillion in financial "wealth" sloshing around the global economy, and another $200 trillion in real estate. (The sum of financial wealth is now much higher, due to the extraordinary gains in global markets.) I reckoned that if a tiny slice of that financial wealth flowed into bitcoin–1/10th of 1%– the inflow of capital would push bitcoin to around $17,000 per coin.

If 1% of all that wealth sloshing around looking for yield and safety decided to find a home in bitcoin, the forecasted price was an insane $170,000.

Compared to this, $17,000 per BTC looked almost conservative. But since bitcoin was under $600 at the time, $17,000 looked pretty darn crazy. But the math looked compelling to me: $300 trillion in mostly mobile capital sloshing around an inherently unstable system, and little old bitcoin was worth a meager $9 billion. Given that the total number of bitcoin was limited to 21 million, it didn't seem much of a stretch to imagine a tiny sliver of all that capital flowing into BTC.

I heard many reasons why my scenario didn't hold water. Fair enough: the future is unknown, I could have been completely wrong, and BTC could have dropped back to $60 or $6.

I repeated my analysis to my subscribers and patrons in December 2016, when BTC had reached $900.

So now we know bitcoin didn't go to $60, or zero; it has climbed to $9,500 or so, a bit over halfway to my rough and unsophisticated back-of-the-envelope forecast of $17,000. Could BTC suddenly drop to $7,000? Of course it could; given its history, we should expect dizzying declines of up to 30% or more.

The interesting thing to me is that nobody knows what will happen going forward. Not knowing is refreshing. So is the opportunity to be right or wrong. This is what investing is supposed to be about.

There are all sorts of scenarios out there. Some will be right, some will be wrong, some will be half-right, and in all likelihood, stuff will happen that nobody predicted.

Here is a chart prepared by Tuur Demeester way back in 2013. It's interesting because nobody has a crystal ball, so we're all guessing based on what we expect to happen and what we see as the primary dynamics in play.

For what it's worth, here are my notes to subscribers/patrons from last May/June. To me, this was more or less stating what I took to be obvious. As for all the quibbles about centralization and decentralization: yes, yes, yes and yes–I realize fiat currency issued by banks has certain features of decentralization and that bitcoin is vulnerable to the dominance of (or manipulation by) self-serving players. But the question boils down to: what matters most going forward?

Musings Report #21 5-21-16 (emailed to subscribers/major patrons)

Unlike precious metals, crypto-currencies are easy mediums of exchange: you can send or receive bitcoin as easily as you send or receive dollars with PayPal, Dwolla or similar services. The great problem going forward for many people will be transferring their remaining financial wealth out of depreciating currencies in their homeland to some other currency in another more stable country.

When governments clamp down on bank transfers and impose other capital controls, this will become increasingly difficult in conventional channels. Should demand for bitcoin rise, the price will skyrocket. Right now all 17+ million bitcoin in existence are worth about $8 billion–a drop in the bucket of the world economy's $200+ trillion in financial assets and a tiny sliver of gold's global $7 trillion valuation.  It would take very little to push bitcoin's valuation to $80 billion, and this would still be a very thin slice of total financial assets.

Musings Report #22 5-28-16 (emailed to subscribers/major patrons)

The primary reason to follow crypto-currencies such as bitcoin and Ethereum's ether currency is that they are outside the control of the self-serving exploitive elites that control the credit money issued by central banks and states.

Crypto-currencies are revolutionary because they are independent of central banks and an easy medium of exchange. Gold and silver are independent forms of money, but other than silver coins, the precious metals don't lend themselves to acting as mediums of exchange in an increasingly digital world.

The key point here is the current financial system is highly centralized, while crypto-currencies are decentralized. Should a government decide to recapitalize bank losses with a bail-in, i.e. expropriating depositors' money to cover banks' losses, as was done in Cyprus, the depositors have no recourse: the state sends the order to the banks and the depositors' accounts are legally robbed.

While some people believe the government will be able to outlaw the use of crypto-currencies, or expropriate bitcoin just like it does with regular bank accounts, the decentralized nature of crypto-currencies makes this more difficult than in a system dominated by five Too Big To Fail banks and a central bank.

Another reason to follow the growth of blockchain applications (the technology underpinning bitcoin) is that these big banks have jumped on the blockchain and "smart contracts" technology of Ethereum. The politically potent banks recognize that they must either adopt these technologies or they will wither on the vine, and they will not look kindly on any government effort to outlaw the technologies that are their future.

The last reason to follow crypto-currencies is their potential to gain value. In a currency-swap, bitcoin acts solely as a medium of exchange between yuan and dollars. But due to the structural limit on the total number of bitcoin that can be created/mined (21 million, of which 17 million are in circulation), bitcoin is a store-of-value currency as well as a medium of exchange.

Global financial assets total $294 trillion.

All the gold in the world is currently worth about $7 trillion.

All the bitcoin in circulation total $8 billion–an order of magnitude smaller than gold. Were bitcoin to represent 1% of total global financial assets, i.e. $2.9 trillion, that would represent a 362-fold increase, suggesting a price per bitcoin of $172,000.

That sounds insane, so let's say bitcoin becomes a mere 1/10th of 1% of total global financial assets. That equates to a price of $17,000 per bitcoin.

Impossible? let's check back in 5 years in 2021, and in 10 years, in 2026, before we declare this impossible.

In June 2016, I wrote:

The point is that value is ultimately driven by demand, and demand is driven by utility. As bitcoin’s utility increases in a world of rising financial repression, capital controls and expropriations, devaluations, etc., the demand for bitcoin will likely rise as well.

And as bitcoin’s stability and valuation increase, the potential for a self-reinforcing feedback loop increases: as bitcoin’s value rises, it attracts more capital, which pushes prices higher, and so on.

Perhaps bitcoin will remain a financial novelty; perhaps it will suffer some fatal technological snafu. Maybe some new cryptocurrency will replace bitcoin. All of these are possibilities. But at this point, given the seven-year history of bitcoin and cryptocurrencies, the regulatory acceptance of the technology in the U.S., the Gold Rush mentality of major corporations into these technologies, and the rise of financial repression globally, it seems like a reasonably safe bet that cryptocurrencies may not just be around in seven years–they might play a larger role in global finance.

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Back in 2008, one of the biggest arguments in favor of Obamacare was that the legislation would help alleviate bad debt at hospitals created by people who required emergency care but didn’t have health insurance or the financial means to cover their treatment.  Of course, like most promises made about Obamacare, the exact opposite of the Left’s original theories has played out in reality as restructuring lawyers are now warning that the healthcare industry is about to experience a massive wave of hospital bankruptcies.  Per Bloomberg:

A wave of hospitals and other medical companies are likely to restructure their debt or file for bankruptcy in the coming year, following the recent spate of failing retailers and energy drillers, according to restructuring professionals. Regulatory changes, technological advances and the rise of urgent-care centers have created a “perfect storm” for health-care companies, said David Neier, a partner in the New York office of law firm Winston & Strawn LLC.

 

Some signs are already there: Health-care bankruptcy filings have more than tripled this year according to data compiled by Bloomberg, and an index of Chapter 11 filings by companies with more than $1 million of assets has reached record highs in four of the last six quarters, according to law firm Polsinelli PC. Junk bonds from companies in the industry have dropped 1.4 percent this month, a steeper decline than the broader high-yield market, according to Bloomberg Barclays index data.

 

Since 1997, health-care cases have made up only 5.25 percent of all U.S. bankruptcy filings, according to Bloomberg data. Year to date, they already comprise 7.25 percent of all filings. Emergency-room operator Adeptus Health, cancer-care provider 21st Century Oncology, and cancer treatment specialist California Proton Treatment are the largest filings. Those statistics exclude pharmaceutical company Concordia, which is restructuring in Canada, and Preferred Care Inc., one of the U.S.’s largest nursing home groups, operating 108 assisted living facilities.

So what has caused the sudden onset of hospital failures?  Well, because Obamacare’s architects were so certain their legislation would completely eliminate uninsured citizens in the U.S., they decided to offset the costs of the “Affordable Care Act” by eliminating subsidy payments to hospitals that had previously been used to cover losses from treating uninsured patients…

Hospitals, including private rural ones, may be among the hardest hit, Winston & Strawn’s Neier said. The Affordable Care Act, known as Obamacare, reduced payments to hospitals that serve a large number of poor and uninsured patients, known as “disproportionate share hospitals,” on the theory that more patients would be insured under the law. Congress delayed those cuts several times, but didn’t do so for the current fiscal year, which may “single-handedly throw hospitals into immediate financial distress — many operate on less than one day’s cash,” he said in an interview.

 

“Smaller hospitals have already been struggling for years,” said Kristin Going, a partner in the New York office of Drinker, Biddle & Reath LLP. Both lawyers declined to discuss specific companies. Since 2010, a growing number of patients have enrolled in high-deductible health plans that force them to shoulder more of costs when they get treatment, according to the U.S. Centers for Disease Control and Prevention. That has translated into more bad debt from customers for hospitals and other providers.

 

Some publicly traded hospital companies that were already under pressure from high debt loads have been further buffeted by this year’s hurricanes. Community Health Systems Inc., with $1.9 billion in debt maturing in 2019, has suffered doctor revolts over crumbling, cash-strapped facilities, as well as losses linked to the storms in Texas and Florida earlier this year. A representative for Community Health didn’t return a call seeking comment.

…of course, here in reality, things didn’t quite play out so perfectly as surging Obamacare premiums have pushed more and more people into  high deductible plans or have forced them to forego insurance altogether and opt instead to simply pay the tax penalties levied by the legislation.  Shocking that folks could simply absorb a doubling of their healthcare premiums in 4 years.

Just more proof that Obamacare is working perfectly and should be left just as it is…

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Following headlines that North Korea test-fired its first ICBM since September, US equity markets have stumbled (Nasdaq now red for the day), gold jumped (spot testing towards $1300) while the dollar and bond yields drop…

Gold and bonds bid as stocks and the dollar are offered…

 

And Nasdaq is now red…

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