Tag: news

As hedge funds continue their ‘monumental struggle’ to outperform passive investments and market indices that have provided impressive and steady double-digit returns over the last decade to earn their modest billions in fees, analysts in the industry – especially those at the mid- and senior-level – are having trouble finding, and keeping, work.

A prime example is David Goldburg, the title character in a Bloomberg profile of the deteriorating hedge fund environment. After working on Goldman Sachs’ prop desk, managing money for Michael Milken and failing at his own attempt to start a hedge fund, he couldn’t even find a job for one simple reason: at the not-so-tender age of 55, and with his experience, he was just too expensive.

That’s why instead of spending high 7-digits (or more) to retain “experienced” talent, hedge funds are instead hiring several younger analysts for the same price of one senior analyst, a process being called “juniorfication”.

There is a good reason for that: despite the S&P rising modestly in 2018, hedge funds have posted deplorable returns this year. In fact, as the Deutsche Bank chart below shows, hedge funds have generated no alpha (or beta for that matter) over the past 4 years.

Goldburg has been swept up by the turmoil gripping the hedge fund space, where analysts as young as 30 are facing an existential crisis in a changing Wall Street where capital markets no longer function without HFTs and central bank intervention. He told Bloomberg:

“It’s pretty brutal out there. If you have more than 15 years experience, and you want to transition to something else or want that next level of opportunity, there’s never been a worse time.”

He has a point: in addition to miserable returns, Bloomberg adds that automated trading, a world awash in data and passive investing have made stock pickers less influential. Hedge fund fees are down, making analysts targets for cuts. European regulations (thanks MiFid) have put researchers out of work. And in a 10-year bull market juiced by the Federal Reserve’s low rates and bond buying, insights more expensive than “buy the dip’’ simply cost too much.

In short, the industry is starting to contract, and analysts – those middlemen who make the 2 and 20 model possible – have no idea how to respond, especially as the growing prominence of (cheap) machines, makes some of their once key tasks no longer important enough to guarantee them work.

Meanwhile, in the last three years, nearly 400 more hedge funds around the world have closed than opened, according to Hedge Fund Research. That means not only are there more people looking for work, there’s little or no movement in existing jobs according to Bloomberg. This means that senior analysts who in years past would’ve gone on to start their own funds suddenly find themselves stuck (assuming they avoid getting fired) so there’s stagnation on the organizational chart.

The surviving so-called single-manager firms, even the ones managing tens of billions, are running leaner, said Ilana Weinstein, founder and chief executive officer of IDW Group, a hedge fund recruiter.

“If we think about the death of the analyst, I think you have to go up one level and talk about the death of most hedge funds,’’ Weinstein said.

To be sure, few analysts are in dire straits. Many of the senior ones were, or still are, making mid-to-high six figures, with plenty of upside in a good year, although 2018 is shaping up as the worst years since 2015 when the global stock market – if not the S&P – experienced a bear market.

But, as Bloomberg notes, many analysts also facing something worse: the panic that comes with realizing their career aspirations will never be attained. They may never make partner or run their own firm. They’re stuck.

And then there is the greatest shame of all: getting laid off, as Balyasny just did when as we reported last night, it laid off 20% of its employees after losing $4 billion in 2018 between poor performance and redemptions.

Those lucky ones who do keep their jobs, are starting to come to terms with the fact that they may not wind up progressing by starting their own firms – which is where the big money has always been – or making partner at their current job.

As if they didn’t have enough to worry about, offshore competition has been increasingly pressuring hedge fund workers, offering far cheaper alternatives half way around the globe. Software companies stocked with former analysts, like Linedata, are popping up and making an impact on the industry.

Jonathan Shapiro, a Linedata senior director said: “They’ve let people go due to their assets shrinking. We provide them with someone who’s just as qualified and is ready and eager to do that work for a fraction of the cost.”

As for Goldburg, who finally found a job outside of the hedge fund world (ironically, inside the “hot, hot, hot” du jour pot industry), he decided to project his personal sentiment to all his former co-workers : “everybody’s miserable and everybody’s trying to grind it out. Everyone wants that better opportunity and that better job, but they don’t exist. And no one wants to leave their existing seat because if you leave your existing seat, it’s like musical chairs – you might not be able to get another seat.”

via RSS https://ift.tt/2zBM08n Tyler Durden

President Trump has followed through on a July promise to reform the US Postal Service (USPS), which he referred to as Amazon’s “Delivery Boy.”

On Tuesday, the Trump administration released a report that recommends a series of measures that the Trump’s USPS task force says are needed to bring in more revenue for the profit-challenged Postal Service, which reported $3.9 billion in losses during fiscal year 2018, according to The Hill. 

“Although the USPS does have pricing flexibility within its package delivery segment, packages have not been priced with profitability in mind,” the report’s executive summary states. “The USPS should have the authority to charge market-based prices for both mail and package items that are not deemed ‘essential services.’” 

The report recommends that the USPS divide its mail and package shipments into essential and commercial service categories. Many e-commerce shipments would fall into the latter category, which would not be protected by existing price caps and thus be subject to rate increases.  

Senior administration officials say the Postal Service would be able to change package rates without an act of Congress. But such a move would likely require re-working negotiated service agreements with Amazon and other companies. –The Hill

While the move is clearly aimed at Amazon – which Trump warned in July over unfair business practices, administration officials have pushed back at the idea that the measures were specifically aimed at the company. “None of our findings or recommendations relate to any one customer or competitor of the Postal Service,” said one senior administration official in an anonymous statement to The Hill. 

The official added that “all companies” dealing in e-commerce, “including Amazon,” would “be impacted by those suggested reforms.” –The Hill

Except, Trump has had Amazon in his crosshairs for years… 

“The Amazon Washington Post has gone crazy against me ever since they lost the Internet Tax Case in the U.S. Supreme Court two months ago. Next up is the U.S. Post Office which they use, at a fraction of real cost, as their “delivery boy” for a BIG percentage of their packages….” Trump tweeted in July. 

The Amazon Washington Post has gone crazy against me ever since they lost the Internet Tax Case in the U.S. Supreme Court two months ago. Next up is the U.S. Post Office which they use, at a fraction of real cost, as their “delivery boy” for a BIG percentage of their packages….

— Donald J. Trump (@realDonaldTrump) July 23, 2018

The changes are part of an initiative Trump began in April when he assembled the USPS task force. The report also covers other areas where it thinks the USPS could improve its finances. 

It called on the Postal Service to restructure pre-payments of employee retirement and health benefits, which business groups say is the main driver of its fiscal woes. But it stopped short of endorsing bipartisan legislation that would end the pre-payments altogether, saying that doing so would place too much of a burden on taxpayers. 

The administration is also recommending the USPS make changes to its internal management, allowing governors to set fiscal targets and allowing the Postal Regulatory Commission to have more power if the goals are not met. –The Hill

 We’re sure Amazon won’t take this change out on their already-overworked warehouse employees…

 

via RSS https://ift.tt/2Pemuel Tyler Durden

Authored by David Stockman via TargetLiberty.com,

When the Donald promised to “drain the swamp” during the 2016 election campaign, it did sound vaguely like an attack on Big Government, and at least a directional desire to shrink the state and let free market capitalism breathe.

After 22 months in office, however, the truth is patently obvious: The only Swamp that Donald Trump wants to drain is one filled with his political enemies and policy adversaries at any given moment in time. Even then, you have to consult his tweetstorm ledger to know exactly who the swamp creatures de jure actually are.

Still, the Donald’s daily Twitter assaults on the Deep State are a wondrous thing. They surely do undermine public confidence in rogue institutions like the FBI, CIA and NSA, which profoundly threaten America’s constitutional liberties and fiscal solvency.

Likewise, his frequently unhinged tweets also lather their congressional sponsors and beltway poo-bahs with well-deserved mud and opprobrium. And the Donald’s increasingly acrimonious public feuding with Deep State criminals like James Comey and John Brennan is just what the doctor ordered.

The Deep State thrives and milks the public treasury so successfully in large part because the Imperial City’s corps of permanent policy apparatchiks like Comey and Brennan (and thousands more) pretend to be performing god’s work. So doing, they preen sanctimoniously to the adoration of their sycophants in the mainstream media, claiming to be above any governance or sanction from the unwashed electorate.

Attacking this rotten perversion of democracy, therefore, is the Donald’s real calling. While he lacks both the temperament and ideas to solve the nation’s metastasizing economic and social challenges and has no hope whatsoever to make MAGA, he is more than suited for his “Great Disrupter” mission.

That is, the existing order needs to be discredited and brought down first, and on that score his primitive economic populism will more than do its part. As we have previously explained, Trump’s deadly combination of Fiscal Debauchery, Protectionism and Easy Money will eventually blow the nation’s debt and bubble-ridden economy sky-high.

Likewise, his crude rendition of America First is not a blueprint for rebooting America’s national security policy, but it is an existential threat to Empire First and the Deep State’s usurpation of constitutional government. And even as the Donald lurches to and fro on Russia, Korea, the Middle East, NATO, globalism and so-called allies, the main job is getting done. That is, the War Party’s self-appointed role as global policeman and the Indispensable Nation is getting thoroughly discredited.

In terms of the Donald’s great mission of wrecking the Deep State, we would only take issue with him to this extent: Why in the world does he not understand that he is actually President and has a far more powerful weapon at his disposal than his Twitter account—-56 million followers to the contrary notwithstanding?

To wit, he has the unquestioned constitutional power to both appoint and fire his own cabinet, sub-cabinet and upwards of 3,000 Schedule C policy jobs; and also to declassify anything lurking behind the Deep State’s massive wall of unjustified secrecy if he deems it in the public interest.

Accordingly, Trump could have and should have fired Jeff Sessions long before he did and Rod Rosenstein even before that. After all, it is the spinelessness of the former and the Deep State treachery of the latter, that launched the hideous Mueller witch-hunt in the first place and that keeps it going from one absurdity to the next ridiculous over- reach.

Can there be anything more pitiful after 17 months of nothingburgers on the phony Russian collusion file than Mueller’s list of indictments. These include:

• 13 Russian college kids for essentially practicing English as a third language at a St Petersburg troll farm for $4 per hour;

• 12 Russian intelligence operatives who might as well have been picked from the GRU phonebook;

• Baby George Papadopoulos for mis-recalling an irrelevant date by two weeks;

• Paul Manafort for standard Washington lobbyist crimes committed long before he met Trump;

• Michael Cohen for shirking taxes and running Trump’s bimbo silencing operation;

• Michael Flynn for doing his job talking to the Russian Ambassador and confusing the confusable Mike Pence on what he said and didn’t say about Obama’s idiotic 11th hour Russian sanctions;

• Rick Gates for helping Manafort shakedown the Ukrainian government and other oily Washington supplicants.;

• Sam Patten, another Manafort operative who forget to register correctly as a foreign agent;

• Richard Pinedo, a grifter who never met Trump and got caught selling forged bank accounts on-line to Russians for a couple bucks each;

• Alex van der Zwaan, a Dutch lawyers who wrote a report for Manafort in 2012 and misreported to the FBI what he told Gates about it. That’s all she wrote and it’s about as pathetic as it gets. If nothing else, the fact that Mueller hasn’t been guffawed out of town on account of this tommyrot is a measure of the degree to which the Imperial City has fallen prey to the Trump Derangement Syndrome.

The Brennan Report – The Foundational Document of the RussiaGate Witch-Hunt

Still, we have to wonder why Trump doesn’t get the joke. Long ago he could have declassified everything related to the foundational RussiaGate document. That is, the January 6, 2017 report entitled, “Assessing Russian Activities And Intentions in Recent US Elections”.

The report was nothing of the kind, of course, and is now well-understood to have been written by outgoing CIA director John Brennan and a hand-picked posse of politicized analysts from the CIA, FBI and NSA. It was essentially a political screed thinly disguised as the product of the professional intelligence community and was designed to discredit and sabotage the Trump presidency.

As presented to the President-elect and released to the public in declassified form, it is all gussied-up with caveats, implying that the real dirt is in the “highly classified” version of the report. Except that’s just the typical Deep State hide-the-ball trick: When it can’t prove its “assessments” and “judgments”, it claims the evidence is top secret.

In the current case, the Imperial City is so red hot with Trump antipathy that any undisclosed smoking guns in the highly classified version would have leaked long ago. So the truth is, there is nothing more to the allegedly sinister Russian “influencing campaign” than the superficial blarney in the public version of the document.

And the latter boils down to ten pages of sweeping insinuations and airballs—plus a loony 9-page appendix which proves the totally public RT America cable TV network doesn’t think much of the Washington’s global meddling!

Indeed, we second the motion. In fact, when we first read this ballyhooed report our thought was that someone at the Onion had pilfered the CIA logo and published a side- splitting satire.

The 9-pager on RT America, which is presented as evidence of “Kremlin messaging”, is so sophomoric and hackneyed that it could have been written by a summer intern at the CIA. It consists entirely of a sloppy catalogue of leftist and libertarian based dissent from mainstream policy that has been aired on RT America on such subversive topics as Occupy Wall Street, anti-fracking, police brutality, foreign interventionism and civil liberties.

Actually, your author has appeared dozens of times on RT America and advocated nearly every position cited by the CIA as evidence of nefarious Russian propaganda. And we thought it up all by ourselves!

So, yes, we do think US intervention in Syria was wrong; that Georgia was the aggressor when it invaded South Ossetia; that the American people have been disenfranchised and need to “take this government back”; that Washington runs a “surveillance state” where civil liberties are being ridden roughshod upon; that Wall Street is riven with “greed” and the “US national debt” is out of control; that the two-party system is a “sham “and that it doesn’t represent the views of “one-third of the population” (at least!); and that most especially after killing millions in unnecessary wars Washington has “no moral right to teach the rest of the world”.

So there you have it: Policy views on various topics that are embraced in some instances by both your libertarian editor and the left-wing Nation magazine; and which are held to be examples of Russian messaging—even alarming evidence of nefarious meddling in our electoral process.

Moreover, it turns out that RT America is not even in the top 95 cable channels according to published rankings, and may have an audience of less than 30,000 viewers per day, according to even the rabidly anti-Putin Daily Beast. Still, by the lights of John Brennan and his coterie of CIA hacks, that’s apparently 30,000 too many citizens being exposed to anti-establishment opinion.

In that regard, we especially got a yuck from the following example of RT’s nefarious attempt to influence American voters. Not only have we uttered these very same thoughts on RT America, but we also conveyed them on the Fox Business network and didn’t even get censored!

Some of RT’s hosts have compared the United States to Imperial Rome and have predicted that government corruption and ‘corporate greed’ will lead to US financial collapse.”

Needless to say, if this is an example of the work being done by the US intelligence community with its $75 billion annual budget, they are giving the idea of pouring money down a rathole an altogether new definition.

In fact, does the juvenille fool who penned this drivel think Washington is purer than Caesar’s wife? The report whines and slobbers about RT America’s indirect support from the Russian government and an alleged $190 million subsidy from the Russian state.

Yet Washington spends upwards of $800 million per year on the U.S. Agency for Global Media, which is the parent organization of its own international propaganda arms: Voice of America, Radio Free Europe/Radio Liberty, Radio y Television Marti, Radio Free Asia and the Middle East Broadcast Networks.

And that’s just the tip of the iceberg. It doesn’t count, for example, the $170 million per year spent by the National Endowment for Democracy (NED) to subvert governments which Washington doesn’t like. Indeed, the two sub-agencies of NED (one for the Dems and one for the GOP) were chaired by two of Washington’s most blood-thirsty regime changers—Madeleine Albright and the late Senator John McWar of Arizona.

Unlike RT America, of course, these two cats caused the deaths of hundreds of thousands of innocent civilians who happened to be domiciled in places they deemed in need of that very special kind of “influencing” that is delivered from the business end of a Tomahawk cruise missile.

Beyond that, there is billions more of “agit prop” and NGO funding that is channeled through the CIA, DOD, the State Department, the Agency for International Development and many more—-all designed to “influence opinion” in dozens of foreign countries where the people need to be advised of the correct line from Washington.

Yet the report’s mendacious attack on the utterly irrelevant RT America is the stronger part of the document!

The main body of the document consists of 10 pages of bloviation which amount to this: The very distinct probability that Vlad Putin strongly dislikes Hillary Clinton, who did liken him to Adolph Hitler; and preferred Donald Trump, who was a wet-behind- the-ears real estate gambler from New York City, thereby still in possession of sufficient common sense to see that Russia is no threat to America and that rapprochement with Putin was in order.

Actually, it gets a lot richer. The US government did spend tens of millions covertly supporting the so-called “color revolutions” on Russia’s doorstep, including the Rose Revolution in Georgia, the Orange Revolution in Ukraine, the Tulip Revolution in Kyrgyzstan, the Jeans Revolution in Belarus, the Grape Revolution in Moldova and, most especially, the so-called pro-democracy protests in Russia during 2011-2013 that were aimed at vilifying and discrediting Vladimir Putin.

Yet Imperial Washington wears absolute blinders with respect to this kind of bald-faced meddling in the internal politics of other sovereign nations. There is not an iota of connection between the safety and security of the American people domiciled between their ocean moats and whatever some two-bit dictator is doing in Belarus or the intrigues of the communist party in Moldova.

Soft Power Aggression—How The Imperial City Makes a Living

The explanation for this kind of soft-power aggression, therefore, is not national security: It’s what Imperial Washington does for a living. That is, the billions of taxpayer money being pumped through the foreign policy agencies, NGOs, think tanks, advocacy organizations and sleazy lobbying operations like those of the Podesta brothers and Paul Manafort finance there own raison d’etre .

via RSS https://ift.tt/2PjJusl Tyler Durden

While not quite as bearish as Morgan Stanley which last week downgraded US stocks to a Sell, in its year ahead outlook for markets and the economy in 2019, Bank of America writes that “the long bull market cycle of excess stock and bond returns is expected to finally wind down next year, but not before one last hurrah.”

The bear market vibe at the end of 2018 is expected to continue, with asset prices finding their lows in the first half of the 2019 once rate expectations peak and global earnings expectations trough; however, BofA Merrill Lynch also forecasts a record high peak in earnings for the S&P 500 next year and plenty of upside potential for investors who make volatility their new best friend.

In short, just like Gartman, the bank is covering all bases being both bearish (near-term), bullish (medium-term) and again bearish to close the year, predicting a “baby bear” market in the early part of 2019, or as Michael Hartnett called it – “big lows” – two weeks ago, before rebounding and rising as high as 3,000 before and closing the year around 2,900, officially a decline from the bank’s 2018 year-end forecast of 3,000.

“In our view, the current weakness in the markets is not a reflection of poor fundamentals. Rather, it’s caused by a confluence of idiosyncratic shocks that create very real risks for investors to be concerned about but also opportunities for vigilant, well-positioned investors to pursue,” said Candace Browning, head of BofA Merrill Lynch Global Research.

For the year ahead, the Research team forecasts modest gains in equities and credit, a weaker dollar, widening credit spreads, and a flattening to inverted yield curve, signaling a tighter squeeze on liquidity that calls for higher levels of volatility. This comes against a backdrop of slowing, but still-healthy economic growth; mild inflation, except in the U.S. where inflationary pressures are building; and a notable slowing in global EPS growth from the torrid pace of 2017 and 2018.

Two big themes are expected to affect asset returns and the pace of economic growth in 2019:

1. An unprecedented level of global monetary policy divergence as the U.S. Federal Reserve continues to hike interest rates and other major central banks don’t; and
2. whether a strong U.S. economy decoupled from the rest of the world, particularly Europe and China, can be sustained. The answer to that question could depend on big wild card risks in 2019: resolution of the trade war between China and the U.S., an EU political/economic crisis, and political gridlock in the U.S. that could slow capital investments and deteriorate investor sentiment.

The bank’s 2019 macro and market forecasts are summarized below:

BofA analysts summarized their views on the market and made the following 10 macro calls for the year ahead:

1. Global profit growth declines: Earnings growth is expected to decline sharply next year, from >15 percent to <5 percent on a year-over-year basis. The BofA Merrill Lynch Research team is bearish stocks, bonds, and the U.S. dollar; bullish cash and commodities; and long on volatility. We expect to turn tactically risk-on in late spring, but to start 2019 with a bearish asset allocation of 50 percent stocks, 25 percent bonds and 25 percent cash.
2. S&P 500 Index peaks: Earnings growth also is likely to slow in the U.S., though the near-term outlook remains somewhat positive. The Standard and Poor’s 500 Index is expected to peak at or slightly above 3,000 before settling in at a year-end target of 2,900. We forecast earnings per share (EPS) growth of 5 percent, which would put the S&P 500 EPS at a record high of $170 next year. Our U.S. equity strategists are overweight health care, technology, utilities, financials and industrials, and underweight consumer discretionary, communication services and real estate.
3. Cash gets competitive: For most of this long cycle, cash yields couldn’t hold a candle to more compelling asset class alternatives like stocks and bonds; with cash yields higher than dividend yields for 60 percent of the S&P 500 already, cash becomes even more competitive in 2019. Our Fed call puts short rates close to 3.5 percent by the end of 2019, well above the S&P 500’s 1.9 percent dividend yield. Moreover, in a rising-rate environment, cash-generative investments have outperformed credit-sensitive assets. Given cash’s re-rating, 2019 boils down to a strategy of buying sources of cash and selling users of cash.

   

4. U.S. economy slows as fiscal stimulus fades: Real U.S. GDP growth of 2.7 percent is forecast for 2019, slowing in the second half of the year as the effects of fiscal stimulus begin to fade. The unemployment rate could reach a 65-year low of 3.2 percent by year-end, pushing wage growth of 3.5 percent in aggregate. Consequently, core price inflation should gradually rise to 2.2 percent through 2019 and hold as rates continue to rise. The housing market is no longer a tailwind for the U.S. economy: we believe housing sales have peaked and home price appreciation is forecast to slow.
5. Global economic growth decelerates: The global economy is forecast to grow 3.6 percent in 2019, down slightly from 3.8 percent in 2018, with inflation hovering around 3 percent. Most major economies are likely to see decelerating activity, with real GDP growth of 1.4 percent in both Europe and Japan, and 4.6 percent growth in aggregate among the emerging markets. Chinese growth is likely to further weaken early next year as a result of still-tight financial conditions and the U.S.-China trade conflict; however, a steady stream of monetary and fiscal stimulus measures to turn the economy around is expected.
6. Global monetary policy divergence: Global monetary policy is expected to become less friendly in 2019. A divided government means that additional fiscal stimulus in the U.S. seems unlikely. Europe is largely frozen in place by its budget rules, and Japan appears ready to implement yet another ill-timed consumption tax hike, in our view. Further divergence in monetary policy between the Fed and other major central banks is expected to continue. We forecast the Fed will hike rates four times in 2019, reaching a terminal funds rate of 3.25-3.50 percent by year-end. Meanwhile, the European Central Bank and Bank of Japan are unlikely to raise policy rates meaningfully above zero for at least another two years.
7. Credit cycle continues despite widening spreads and flattening curves: Globally, the credit markets face high levels of episodic volatility in 2019 with shrinking supply and quantitative tightening putting 25 to 50 basis points of upward pressure on investment grade and high-yield bond spreads. In the U.S., total returns of 1.42 percent are forecast for high-grade corporate bonds and 2.4 percent for high yield. The U.S.-leveraged loan market remains a bright spot in the credit spectrum, with total returns of between 4 and 5 percent. High-grade and high-yield corporate credit are expected to deliver total returns of 1 percent in Europe and, in Asia, 3 percent and 4.9 percent, respectively.
8. Emerging markets: After a major sell-off in 2018, emerging market assets are cheap and under-owned and could be a big winner in 2019 as the dollar weakens, yet EM remains highly vulnerable to spillover effects of U.S.-China trade tensions. We are bullish Brazil and expect its post-election rally to continue, and Russia is expected to improve as we believe sanction risk is priced in. Meanwhile, the outlook is bearish for Mexico, where credit rating downgrades are a concern and volatility surrounds policy changes under its new president.
9. Foreign exchange volatility on a weaker dollar: The U.S. dollar was the best performing asset class in 2018, however, most of the dollar gains appear to be in the past. A weaker dollar is expected in 2019, against a stronger euro and Japanese yen. We forecast the EUR/USD and USD/JPY to reach 1.25 and 105, respectively at year-end. The strength of the dollar will depend heavily on evolution of the trade relationship between China and the U.S., which in the short term may mean selling the dollar against a currency insulated from trade war rhetoric, such as the British pound and Swiss franc.
10. Commodities modestly positive: The outlook for commodities is modestly positive despite a challenging global macro environment. We forecast Brent and WTI crude oil prices to average $70 and $59 per barrel, respectively in 2019; weather-induced volatility is expected in the near term for U.S. natural gas, as cold weather could propel winter natural gas over $5/MMbtu, yet we remain bearish longer term on strong supply growth. In metals, we remain cautious about copper because of Chinese downside risk. We forecast gold prices will rise to an average of $1,296 per ounce, but could rally to as high as $1,400, driven by U.S. twin deficits and Chinese stimulus.

Which leads us to the following “9 Trades” for 2019 from Michael Hartnett:

1. Long VXX (IPATH S&P 500): Q1 long volatility play on liquidity withdrawal, policy impotence & uncertainty, rising recession odds.
2. Long US 2s10s flatteners: H1 play on US yield curve inversion, Fed’s intention to hike 4 times in 2019.
3. Short LQD (iShares iBoxx $ I): 2019 play on excess leverage, shadow banking & credit contagion risk
4. Long KBWB (KBW Bank ETF), short IAI (iShares-DJ BR DL) and PSP (Invesco Global List): 2019 “long liquidity, short leverage” play…long Main St banks, short Wall St banks & Private Equity.
5. Long BRIC vs. short FAANG vs. QQQ (Inv QQQ Trust Ser 1): Long BRIC (Brazil, Russia, India and China), short FAANG (Facebook, Apple, Amazon, Netflix, Google) play on value outperforming growth.
6. Long AUD/USD, long EMB (Ishares): Q2’19 play on China growth inflection, bullish commodities, inflation hedge.
7. Long XHB (S&P Homebuilders): Play on H2’19 peak yields once Fed hikes fully priced in.
8. Long USSWIT5: Play on global policy populism driving fiscal stimulus, infrastructure spending, wage growth.
9. Long SX7E: The most contrarian bull trade of 2019; highest beta to “The Big Low”; ECB rate hike Dec’19.

via RSS https://ift.tt/2SrdkNq Tyler Durden

Despite French President Emmanuel Macron letting his people “eat cake” with a six-month suspension of the government’s new “climate change” fuel taxes, the so-called “Yellow Vest” movement which has been protesting throughout France for more than three weeks is still spitting mad. 

“We didn’t want a suspension, we want the past increase in the tax on fuels to be canceled immediately,” said Yellow Vest organizer Benjamin Cauchy on BFM TV. “Suspending the tax to re-instate it in six months is taking the French people for a ride. French people aren’t sparrows waiting for crumbs from the government.”

The president’s silence drew the wrath of some. “Macron has still not deigned to talk to the people,” said Laetitia Dewalle, a Yellow Vests spokeswoman, on BFM TV. “We feel his disdain. He maintains his international engagements but doesn’t speak to the people.”

Sebastien Chenu, a spokesman for Marine Le Pen’s far-right National Rally party which has supported the Yellow Vests in hopes of capturing their votes, said on LCI that “the French won’t be fooled. The government has understood nothing, it’s just playing for time.” –Greenwich Time

Others, however, may have been assuaged by the “limited time moratorium” on the taxes – as a Tuesday BVA opinion poll for La Tribune reveals that 70% of French citizens surveyed think the postponement justifies stopping the Yellow Vest protests. 

Footage apparently shows “yellow vest” protesters in Narbonne drive forklift hoisting a burning car into a toll booth as worst urban riots in a decade leave France reelinghttps://t.co/z82N6d1ysO pic.twitter.com/CXxNTDAyHM

— DAILY SABAH (@DailySabah) December 2, 2018

Watch police bodycam footage from the police when they clashed with “Yellow Vest” demonstrators in Paris #GilletsJaunes pic.twitter.com/TbiU4liI75

— TicToc by Bloomberg (@tictoc) December 4, 2018

Meanwhile, French police ordered the cancellation of two football matches scheduled for Saturday, while French interior minister Christophe Castaner told lawmakers on Tuesday that additional security personnel would reinforce the 65,000 police and gendarmes during this Saturday’s planned protests. Some police unions have floated the idea of drafting the army as backup, according to Paris-based journalist Catherine Field. 

#French Interior min tells lawmakers additional security personnel will reinforce the 65,000 police & gendarmes on duty this Saturday. With calls for fresh #yellowvest protests in Paris this coming weekend, some police unions asking the gvt to draft in the army as backup. https://t.co/7mdGFb0Jvq

— Catherine Field (@CatherineField) December 4, 2018

French students, meanwhile, have intensified their protests around the country – setting ire to buildings and engaging in violent clashes with the police. The students have “gradually started to get involved” with the Yellow Vest movement, leading to riots in southwest France, Lyon, Marseille, Bordeaux and the city of Orleans. A school in Blagnac, near Toulouse was reportedly set on fire Tuesday, according to Reuters. 

Macron’s backing down comes as his popularity hit a new low. A poll by Ifop for Paris Match magazine and Sud-Radio released Tuesday found the president’s support had fallen six points to 23 percent. Philippe was at 26 percent. While Macron and parliament, where his party holds a majority, don’t face new elections until 2022, the reversal on taxes may undermine the rest of his reform agenda.

The protesters, who started out blockaded traffic across France, brought their fight to Paris over the last two weekends. They defaced the Arc de Triomphe, burned hundreds of cars and blocked roads and fuel depots. –Greenwich Time

Meanwhile, the Yellow Vest protests continue to take their toll on French businesses – with big-box retailers suffering an average 8% decline in sales on Saturday per Nielsen. 

French “Yellow Vest” protests led to an average 8% decline in sales of consumer goods at big-box retailers on Saturday Dec. 1: Nielsen

— zerohedge (@zerohedge) December 4, 2018

With all of that said, it will be interesting to see what Saturday brings. 

via RSS https://ift.tt/2RAW4oT Tyler Durden

Back in late 2016, Jeff Gundlach predicted that the yield on the 10Y Treasury would hit 6% in four or five years (so by 2021) at the latest. Not any more.

DoubleLine’s CEO became the latest bond guru to chime in today on the collapsing yield curve, and specifically the inversion observed between the two- to five-year maturities…

… which to Gundlach suggest “total bond market disbelief in the Federal Reserve’s prior plans to raise rates through 2019.” As discussed repeatedly over the past 24 hours, the 2s5s is now the most inverted it has been since the financial crisis…

… while the closely-watched 2s10s was less than 10bps away from inversion at one point on Tuesday.

Gundlach is right: according to the market not only is the Fed barely likely to hike just once in 2019 (or not even, technically, with just 22bps of hikes priced in) but it is now pricing in a rate cut in 2020 (if partial so far, at -6.5%).

Gundlach also told Reuters that “if the bond market trusts the Fed’s latest words about ‘data dependency,’ then the totally flat Treasury Note curve is predicting softer future growth (and) will stay the Fed’s hand.”

“If that is indeed to be the case, the recent strong equity recovery is at risk from fundamental economic deterioration, a message that is sounding from the junk bond market, whose rebound has been far less impressive.”

As a result, Gundlach believes Powell will need to be especially careful what he says when the FOMC meets later this month to deliver on their promised rate hike, especially after Powell’s Oct.3 “rookie mistake” that sent yields surging and stocks tumbling.

“There can’t be another screwup like last time, when they dropped ‘accommodative’ but simultaneously characterized the Fed Funds rate as ‘a long way’ from neutral”, Gundlach said.

Of course, should Powell double down on his recent dovish tone, it would be seen as merely doing Trump’s bidding with the president repeatedly threatening to “remove” the Fed chair if rate hikes continue, in the process compromising the flawed perception that the Fed is independent, and leading to even more market volatility and confusion.

In short: Powell’s best and only option may be simply to resign and let someone else deal with the mess that Bernanke and Yellen left.

via RSS https://ift.tt/2RuRSal Tyler Durden

Submitted by Jessica Rabe of DataTrek Research

Yesterday’s market action was a rather underwhelming performance given the trade war truce between Presidents Trump and Xi over the weekend, but it was still up over 1% so we’ll take it. We closely track up/down +1% daily returns for the S&P 500 because it’s a useful and more telling barometer of volatility than just looking at the VIX level. Here’s a rundown on the most recent data updated through today, and what it means going forward as we’ve officially entered the last month of the quarter and year:

• The S&P 500 has risen or fallen by 1% or more during 19 trading sessions this quarter (20 including Tuesday). That’s above the Q4 average of 14 since 1958 (first full year of data), with still 17 more days when the market is open this year.

• US stocks have seen a snapback in volatility over the past two months, as there were no 1% days in Q3. That sleepy action was unusual as a zero 1% move quarter has only happened in four other periods since 1958 (one in Q4 2017 and the balance in the early-mid 1960s). That said, there have been more up +1% days (11) than down days (8) this quarter.

• For the year so far, the S&P has gained or lost +1% on 55 days. The annual average is 53 since 1958, so this has been an above-average volatile year with still a month of trading left. Even still, there have been more up +1% days (31) versus down days (24).

• A year with above average one percent days (+53) does not mean the market will likely end the year down. Since 1958, 45% of those years had above-average volatility, but the S&P’s average total return during those years was +7.8%. As we frequently highlight, even 1987 was up by 5.8% on a total return basis by the end of the year despite a volatile last quarter with Black Monday.

• While December has already registered a one percent day on the first day of trading for the month, it is typically the least volatile month when looking at the VIX. The so called “Fear Index” has troughed 8 times during the month throughout the course of the year since it was created in 1990; it peaked once in December 1996. The high so far this year was 37.32 on February 5th. Barring any economic/geopolitical shock, we highly doubt it will surpass that level.

What concerns us is our bar chart of annual 1% days, as there’s a clear pattern over the last six decades: large market swings occur during the beginning of a bull market, abate, and then climb higher towards the end of annual consecutive gains in stocks. This last cycle has been a bit unusual. After peaking at 134 one percent days in 2008, it looked like it was going to trough at 38 in 2014. It jumped to 72 in 2015 followed by 48 in 2016, but hit a new post-recession low of 8 last year.

The fact that the market has experienced above average one percent days this year this late in the cycle means the low vol period is likely done. The next few years could be just as volatile if not more than in 2018.

Overall, we still think the S&P 500 will end the year in the green. Even with a choppier than usual fourth quarter, it is up 4.37% YTD as of Monday. That said, our one percent day data further supports the market’s late cycle worries, and we expect volatility to be more like this current quarter in 2019.

via RSS https://ift.tt/2RtVBoy Tyler Durden

You’ve hear of Brexit. Now it’s time for ‘Faragexit’ (pronounced ‘FAR-AJ-ECS-IT’).

Nigel Farage, the man widely credited as the architect of the Brexit referendum, is leaving the UK Independence Party – a party that he used to lead – because of concerns that its members are becoming too closely associated with Islamophobia, and participating in street gangs.

Farage – who announced his decision on his radio show and in a letter published by the Daily Telegraph – explained his decision by accusing the party of drifting too far to the right. Its members are now too focused on marching in support of far-right groups like the English Defence League and its founder, Tommy Robinson – whom Farage singled out for criticism in his letter – and not focused enough on winning elections.

“And so, with a heavy heart, and after all my years of devotion to the party, I am leaving Ukip today. There is a huge space for a Brexit party in British politics, but it won’t be filled by Ukip.”

Farage presently serves as a minister in the European Parliament.

Farage: The very idea of Tommy Robinson being at the centre of the Brexit debate is too awful to contemplate.

And so, with a heavy heart, and after all my years of devotion to the party, I am leaving Ukip today.

— Asa Bennett (@asabenn) December 4, 2018

Nigel Farage has left Ukip. Is it like the ravens leaving the Tower of London, or does it just leave Gerard Batten & Tommy Robinson to sail serenely into a far-right future?https://t.co/dhPAfN6QkC

— Peter Walker (@peterwalker99) December 4, 2018

Speculation that Farage might join forces with Boris Johnson to start a new pro-Brexit party is already beginning to spread.

With @Nigel_Farage now leaving the wholly irrelevant UKIP, and @BorisJohnson now seemingly unlikely to ever be Tory Leader, will both join forces under this #NewParty?

Having worked together with Vote Leave, anything is possible in this generation’s politics.

— Xenophon Law (@TheXentertainer) December 4, 2018

 

via RSS https://ift.tt/2Pjv7US Tyler Durden