Month: May 2016

Authored by Mark St.Cyr,

I was on the phone the other day with a friend, who is also my accountant. We’ve been friends going on 30 years. Once in a while our discussions will veer off into what is commonly known as “shop talk” where we find we’ve suddenly gone from “just gabbing” to a multi-hour intense conversation about markets, the economy, and more. This past one was a little more of “the exception” rather than just the average swing into the generic.

What I discerned from many of his responses was just how inadequately prepared, justifiably frightened, as well as, an overwhelming sense of foreboding was lying right below the surface of those many might deem from the outside looking in as people of wealth, industry leaders, or people who are just assumed to be “well off.”

What was just as illuminating was how many he explained “are just rolling the dice, thinking nothing could be as bad as 2008.” The additional problem? They think (or believe) if it happens again all they’ll have to do is the same as they did last time e.g. Hunker down, wait for the storm to blow over. Rinse, repeat.

The problem (in my opinion) with that thinking is this: What you think you can do this time, has already been severely handicapped or, removed all together. And most have no clue.

This is where the real issue lies for not only the Fed per se, but rather, the entire political as it is currently known. For if a “black swan” does indeed hit once again in the very near future? Once people realize just how systematically they’ve been cut off from those “assumed” resources, especially during a crisis?  All hell is going to break loose in ways the academic class, as well as, the political never envisioned. For when the time comes (and there is no more important “time” than that during a crisis of confidence) where words truly matter, and everyone no longer believes? Everything changes. And I do mean: everything.

The subject which initially fueled the discussion to take off was when I cavalierly made a comment of, “I’ll bet you haven’t even noticed the change on your latest deposit slip from the bank?” To which of course he said, “What change?”

I relayed the fact that if you now deposit cash (and “cash” means just that: cash) into your account as per the deposit slip it now reads “Further review may result in delayed availability of this deposit.” (this incident was at Chase™ I’m quite sure it’s at others, and if not, will be coming soon to a bank near you)

Or, said differently: “Just because you deposited cash, it no longer means, or can be inferred, as an instant credit to your account which has been the case for years. And that’s a real problem many business people, never mind, your average person are going to find out the consequences of the hard way.”

Why is this such a problem? I’ll use myself as the example, but I know I’m far from alone.

I don’t use them (as in banks) or a lot of other “payment” or “money” systems the way in which so many do today. Call me “old school” or “Neanderthal” all you want; but I’ve had many a (for the sake of politeness) “less than thrilling” experiences or dealings with banks over my business and personal career.

What a few of us (i.e., old timers) still do is to actually either carry some cash on us. Or, have a little “on top of the fridge” for those just in case moments. Not some vast sums. Just what used to be known as “walking around money.” For if I go to a store I don’t know, or a flea market, fair, or other such venue. I want to pay in cash rather than give my card and turn my account info over to someone I have no clue about. Yes, they may never use my card in nefarious ways, but there’s a whole lot of money to be made in selling that info to those that will. And once you’ve had your cards compromised (which I have) much like contracting seafood poising (again, which I have) – it only takes once to never allow it to happen again.

So with that said, I like many others also keep a very close balance when it comes to a debit or checking card and keep a running tally of my expenses as to know, and keep, me away from an overdraft. There are always times where you run things a little close, or make an impulse buy and the balance goes a little too low for one’s comfort level. As was always the case I would just hop over to my local branch and make a deposit. However, just a few months ago something changed.

It was a late Saturday afternoon when I felt my balance was a little too close and decided to deposit a few hundred dollars (actually $300) to give me a more comfortable cushion. For I had some outstanding checks and pending charges still floating and didn’t want any headaches. Guess what? The ATM wouldn’t let me do it. After several attempts I finally figured out it maxed out at $260. And that’s all I could deposit.

Why that number? I have no clue but can only assume (and for an assumption I think it’s as good as any) $260 is just about what a person earning $10 an hour working 40 hours would be in take home pay, there about, after taxes. Anything above that? You must have received it by nefarious means. Or, at least that’s the now implied assertion because when I went back to the bank on Monday to make the rest of the deposit? I was instructed I needed to show my ID (even though this was my local branch, not my first visit, she had my card, my personalized deposit slip, and my account open!) to deposit the rest. I was informed “all cash deposits now require a picture ID.”

So why is this little “inconvenience” such a big deal some might ask? After all as the saying goes “get with the times!” Ah yes, about those times…

How about those times when you suddenly find yourself overextended in your account yet – you have the cash in hand to cover it? Oh, oh; better hope it’s not a time when you’re instructed to use those delightful 24hr accessible ATM’s because the bank is now closed.

Let’s say you have just $3K in checks outstanding for you just wrote out the monthly bills via checks but you just can’t remember when trying to reconcile your current balance if you accounted for that $300 purchase the week prior. Guess what? You’ve got a problem. And more than likely – many more, as in compounding fees and such. What might be just as big a problem? You probably never knew there could be one to begin with until you just read this. And if you are one of those that never knew? That alone should show you just how problematic things can get if there is another swan styled event.

“Well that’s just for people who don’t want to take part in today’s modernized systems” some will say. Well yes, some will say that. But what “they” say is irrelevant and inconsequential. For the very act of thinking that way shows just how naive they truly are. Let me use another example to expand only we’ll use a business example.

You’re running a business and everything is going fine. Then, out-of-the-blue, one of your most trusted, as well as, important customers calls you on the phone late Saturday afternoon to inform you the latest payment (as in check) that you deposited on Friday is no good as in: It will bounce at Monday’s open if its processed.

This has never been an issue before and you’ve been dealing with this customer for years. So clockwork like are their payments you have built the habit of mailing your own accounts payable on Saturday afternoons at the local post office. All those “payables” by the way are based on those funds clearing that Monday as they have week after week, month after month, year after year.

Now here’s the conundrum: Good news! This customer knows what it is to be in your shoes for they’ve been there themselves. They inform you to “swing by and they’ll make the check good via cash right now.” Your problem? Your bank ATM just might not let you deposit it. Or worse, even if they do? Remember that little new added comment that now appears on your deposit slip? For those who need reminding: “Further review may result in delayed availability of this deposit.”

So, even if you get the machine to accept it – doesn’t mean it’s going to be “available.” Remember: we’re talking cash – not a check. Now: cash has to “clear.” Think an “academic” who’s never started or run a business understands this scenario, or has contemplated its plausibility? Hint: No.

My accountant was stunned. Not only did he not know, but what he expressed most concernedly was that he could only assume: neither does anyone else. For he works exclusively with either business entities or high net worth individuals. And to his bewilderment he was utterly shocked on how this (and its varying scenarios) had slid under not only his own radar, but most assuredly, under everyone else’s. (which by the way is also why we talk)

You could find yourself racking up fees (as in bounced checks both coming and going) and giving reasons for automatic “dings” to your credit report, all while you not only have the cash to cover it, but also; deposited that very cash into the bank all before the funds against them were applied for payment.

The above scenario can apply to either a business, as well as, your average bank account holder. And most don’t even know it. What’s worse? Those that say “get with the times” don’t assume that one of those checks that “might not clear” could in fact be their own pay check.

Far too many in the U.S. forget most people are employed by small businesses – not some XYZ conglomerate. The above business scenario is more likely to happen, and the risk keeps getting elevated with every passing day. If you want an analogy I’ll put it this way: The portending tail-risk of an extreme event has surpassed fat-tail and is now swinging to and fro beneath “the rocker” of the Fed Chair’s next policy edict.

As I said earlier “this was what fueled the start.” As we delved deeper it became increasingly obvious just how much was transpiring at such a rapid pace that it was nothing but a blur to even those who consider themselves “well abreast” of most financial matters when concerning business or wealth.

Another of the points raised was that concerning “the money markets.”

As I’ve implored so many times “if you want to look for clues, keep a keen eye to anything pertaining to the money markets.” (MM)  And during this discussion the MM came up as usual when in passing he told me that some of his clients had either sold out some or all of their interests and were squirreling away most (if not all) of their proceeds into the MM because they were just too scared as to do anything else. (For those wondering; we would never get specific with any names of either a business, or individual. Everything is always in the general, as it should be.)

I swore I heard either the phone hit the floor, or, maybe it was his jaw when I asked: “Did you see where money in your MM is now a bond rather than cash?” Once again to which he replied, “What!?”

I reiterated the story of how the rules were changed in the MM as to now they could be “gated.” However, it seemed to really make quite the impact when I followed up with, “And you do know that many brokerages are now putting (as in forcing) those MM funds people still believe are far more liquid than they currently are into “U.S. government securities” right?” It was then the phone seemed to go silent for a bit when another “What!?” came forth.

Here is where I reiterated the story (using Schwab™ as just the latest) at the beginning of this month (e.g. May) announced it will “…invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund’s net assets will be invested solely in U.S. government securities including repurchase agreements. ”

So what’s to worry about, right? I mean; who cares about whether or not you need access to funds immediately if for the sake of “protection” you can be denied access to them but the balance will remain the same? That’s not a play on words – read it again and you’ll start to understand just how this will be framed if (or when) the next monetary crisis comes swooping in the wings of some rather ominous looking bird.

As I iterated to my friend:

“Just how many do you think are opening their statements, or looking at the last email notice from their broker where such a statement is made and not only not-reading it, but rather, understand the implications of it?

 

I’d wager dollars-to-doughnuts less than 25% of recipients will ever read it, and less than single digits of that even understand its implications. After all, you of all people know first hand just how many people throw their statements in a drawer and don’t open them till you see them 3 days before tax day. Now imagine them finding out what you now know in the middle of a crisis? Of any size. Imagine their reactions to suddenly find out what they “believed” was available to them (as in cash) was actually not only not-readily accessible, but actually, may be denied for who knows how long?

 

Forget days or weeks. You could be talking months or years depending on the severity. What do you think will be the reaction then? Think it will cascade? Don’t answer that, I’ll do it for you – you know it will. And it won’t just be fast; it’ll be more like light-speed. People will absolutely freak! Everything will grind to a halt. The only unknown after that will be – for how long?”

The above is just a few of the topics we discussed. There were many others with just as impending disruptions which could affect businesses in general. For what many people forget is this: if the business community grinds to a halt – everything shuts down. And I do mean just that: e-v-e-r-y-t-h-i-n-g.

And it is here where the academics within the Ivory Towers are going to find themselves in a quandary they have yet to experience.

Just when people will need to believe and trust what is being told to them within times of crisis, is precisely where they’ll (as in the Fed. or other monetary officials) will find the more they speak or promise – the more people will not only tune out, but maybe turn on them. For they’ve been told and sold these past 8 years “The Fed. is omnipotent.” So if that is true – than how did another “black swan” event happen to begin with is all that will be on everyone’s tongues.

That’s when much like geese – once you see one land, rest-assured, the flock is right behind. Along with the ensuing mess they’re sure to leave.

via http://ift.tt/1WUNMHP Tyler Durden

Having pledged to end the wars of his predecessor, President Obama came into office almost eight years ago as an anti-war candidate but instead has now been at war longer than any other American president. Mr. Obama, who won the Nobel Peace Prize in 2009, has made endless promises of “bring the troops home” or “no boots on the ground” but will have a longer tour of duty as a wartime president than Franklin D. Roosevelt, Lyndon B. Johnson, Richard M. Nixon or his hero Abraham Lincoln. As the anti-war candidate speaks today as president to remember the fallen heroes, just days after his visit to Japan, one wonders who will be delivering this address next year.

Laying the Wreath at the Tomb of the Unknown Soldier (begins at 1100ET)…

 

Speech – Live Feed (President Obama is due to speak at 1120ET)…

 

So as President Obama, fresh from his trip to Hiroshima, remembers the war-dead (and maybe laments his warmongering decisions over the past eight years), we leave AntiWar.com’s Justin Raimondo to reflect on the plague of amnesia that appears to wash over America at least once a year…

We might as well get rid of Memorial Day, for all the good it does us. Originally “Decoration Day,” the last Monday in May has been the designated time for us to remember the war dead and honor their sacrifice – while, perhaps, taking in the lessons of the many conflicts that have marked our history as a free nation. In line with the modern trend of universal trivialization, however, the holiday has been paganized to mark the beginning of summer, when we get out the barbecue grill and have the neighbors over for hamburgers and beer. As for contemplating the meaning of the day in the context of our current and recent wars, that is left to those few pundits who pay attention to foreign policy issues, or else to writers of paeans to the “Greatest Generation” – World War II being the only modern war our panegyrists deign to recall, since it is relatively untouched by the ravages of historical revisionism.

Indeed, as far as our wars are concerned, the very concept of historical memory has vanished from the post-9/11 world. It seems the earth was born anew on September 11, 2001, and only ragged remnants of our mystified past – mostly from World War II and the Civil War – survived the purge. In the new version our victories are exaggerated and glorified, while our defeats – e.g. Vietnam, Korea, our nasty little covert wars in Central and South America – are not even mentioned, let alone considered in depth.

The abolition of historical memory is one of the worst aspects of modernity: it is certainly the most depressing. For the modern man, it’s an effort to recall what happened last week, never mind the last century. The news cycle spins madly and ever-faster, and the result is that we are lost in the blur of Now: for all intents and purposes, we are a people without a history, who recall past events – if we remember them at all – as one would summon a vague and confusing dream.

The Vietnam war was the last major conflict that caused us to reconsider our foreign policy of global intervention for any length of time, and at this point it has been thoroughly buried in the public imagination. For a brief moment the so-called Vietnam Syndrome was bemoaned by the political class, who complained it prevented them from indulging their desire to intervene anywhere and everywhere at will. And the memory of that futile crusade did have a restraining effect for some years – until the passage of time, the collapse of Communism, and – finally – the 9/11 terrorist attacks wiped the slate clean.

Never mind remembering the lessons of Vietnam – we’ve repressed even the bitter lessons of our most recent “past” conflict, the disastrous invasion and occupation of Iraq. No sooner had we fallen into that quicksand then we promptly forgot who pushed us in – which is why the authors of that disaster continue to function as foreign policy mavens and political seers whose reputations are considered sterling. The neocon clique, and any number of politicians of both parties who fulsomely supported that war, today act as if they have nothing to apologize for, and nothing to regret: far from being repentant, they are, if anything, proud of their advocacy, secure in the knowledge that “everyone” believed Iraq possessed “weapons of mass destruction,” and smug in the certainty that no one of any consequence has anything to gain by raising the subject.

Who really remembers the Kosovo war – that is, the war as it unfolded? We were told as many as a hundred-thousand Kosovars were being exterminated, and yet at war’s end we found a few thousand – Serbs and Kosovars in equal number – had been murdered. The trial of a man named Ratko has the War Party mythologizing that conflict, as is its wont: unfortunately for them, the kangaroo court known as the Hague Tribunal has been adjourned in that case, perhaps permanently, on account of the prosecution’s withholding of evidence. That’s par for the course: withholding evidence, suppressing truth, editing the historical record has been their modus operandi from the start, but apparently the judges had an attack of conscience in this case, and it looks like the NATO-crats won’t get their show trial after all.

Who really remembers the Korean war? Not even writers whose major interest is foreign policy are capable of recalling it as it was actually fought. Rachel Maddow, MSNBC anchor and liberal voice, recently wrote an entire book based on the premise that Republicans are primarily responsible for “the unmooring of American military power” from either constitutional or political restraints – forgetting (if she ever knew) it was Harry Truman who set that precedent when he sent US troops to Korea without bothering to ask Congress first.

I don’t blame Rachel: history is a forgotten discipline, practiced selectively when it is invoked at all. These days it is best not to contemplate the past too much, or too intently, because comparison with the present is bound to depress us. An ice-cream cone bought for a Memorial Day picnic used to cost a dime: today nothing costs a dime, not even alms to a beggar.

To recall past wars is to recall their folly, and no one wants to be reminded of their moral and cognitive shortcomings: so we resort to mythology that valorizes the victors and paints the defeated in various shades of black – and when that’s not possible, amnesia is our last resort.

So I say: let’s rid ourselves of Memorial Day, and at least be honest with ourselves in this one instance. Let’s acknowledge we’d much rather forget our history of mass murder, and rename the last Monday in May in honor of some pagan holiday – because Memorial Day is an oxymoron in a nation of amnesiacs.

via http://ift.tt/1qXonQ6 Tyler Durden

In the latest tragic news from the world of finance, earlier today Zurich Insurance, the largest Swiss insurer which employs 55,000 people and provides general insurance and life insurance products in more than 170 countries, reported that Martin Senn, the company’s former chief executive officer who stepped down in a December reshuffle, has committed suicide. He was 59.

Senn had been a long-time employee of the insurer, serving as its chief executive for six years before stepping down in December. 

The family informed Zurich Insurance that Senn had taken his own life on Friday, according to the statement. “We are profoundly shocked by the news of the sudden death,” the company said. According to Bloomberg, Senn was found in his holiday house in Klosters, a Swiss ski resort, Blick newspaper reported. The cantonal police of Grisons wouldn’t confirm the death but said officers had been deployed on Friday in connection with Senn.

Former Zurich Ins CEO Martin Senn

Senn started at Zurich in 2006 as CIO and became CEO in 2010. He joined from Switzerland’s biggest life insurer, Swiss Life Holding AG, and held several positions at Credit Suisse Group AG. When he was 26, Senn became treasurer of the Hong Kong branch of Schweizerischer Bankverein, today known as UBS Group AG.

During Senn’s five years as CEO, Zurich Insurance rose about 19 percent and paid out record dividends of 17 Swiss francs a share. In his biggest acquisition, he bought a 51 percent stake in Banco Santander SA’s insurance division for $1.67 billion in 2011.  Senn in December acknowledged “setbacks” in the months before his departure after higher-than-expected claims at the general-insurance unit forced the company to abandon a takeover bid for RSA Insurance Group Plc.

Senn said he was confident that Zurich was well positioned to meet its targets at the time of his resignation, but did acknowledge some “setbacks.” The company had been planning a large acquisition of the U.K. insurance firm RSA Group, but the deal was scuppered in September due to a “deterioration in the trading performance of Zurich’s general insurance business,” according to an RSA statement.

That part of the company’s business was under pressure after it was forced to pay out $275 million in claims related to last summer’s major port explosion in Tianjin, China. 

According to Bloomberg, Senn’s “conservative approach” helped Zurich Insurance perform well during the financial crisis, when he was the chief investment officer, said Andreas Schaefer, an analyst at Bankhaus Lampe. “Zurich’s asset side never caused any problems and the company did well compared with its peers,” he said. Schaefer has a hold rating on the stock.

Mario Greco, the former CEO of Italy’s Assicurazioni Generali SpA, assumed Senn’s role in March. UBS Group AG CEO Sergio Ermotti was set to take over as president of the chamber of commerce in June.

But what is most shocking about the news is that this is the second high profile suicide of an executive at the Swiss company. Recall that in 2013 Senn oversaw the suicide of none other than the firm’s former CFO, Pierre Wauthier, who hanged himself after a spat with then Chairman, and former Deutsche Bank CEO, Josef Ackermann, whom he accused of creating

An investigation by the Swiss Financial Market Supervisory Authority later found that Wauthier was under no “undue pressure.” .

Wauthier’s note brought on an ugly episode in which his widow accused the company of creating an unbearably working environment.

As we reported over two years ago, the “widow of former Zurich Insurance CFO Pierre Wauthier said she and her family cannot accept Zurich’s claim that his death wasn’t brought on by undue stress. Switzerland’s biggest insurer said in November that no “undue pressure” was put on Wauthier, who said in a suicide note that then-Chairman Josef Ackermann had created an unbearable working environment. But, his wife is demanding to know why her husband’s former boss resigned if he had not accepted blame for the death, and why details of tensions at work were not made public. Her anger is clear, as she blasted “I am not worth talking to… or is it that I would raise unbecoming questions????“

it is not clear who will be blamed for Senn’s suicide or if the former CEO left a note; however, one thing is clear – with Europe’s NIRP and increasingly more ludicrous monetary policies, many more insurance company CEOs will be departing in the coming years, hopefully in less tragic circumstances.

via http://ift.tt/1TSASrP Tyler Durden

Via NorthmanTrader.com,

Still no break up or break down. The ping pong match continues as markets remain in range, but the tempting affair with new highs is again making the bullish pot stir following yet another rally toward the 2,100 level on the $SPX. The question is whether such an attraction will prove fatal as all new highs in the past 2 years have resulted in sizable pullbacks.

The most recent rally came at a critical time.

Recall I had outlined a technical red flag, specifically the weekly 50 MA crossing over the 100MA. I had outlined this in “The Golden Key” and most recently on CNBC as I covered the following key point:

If markets break below 2025-2030 support by the end of the month, then markets are at risk of repeating a major topping pattern. This level was key: “The S&P 500 must stay above the 2,025 to 2,030 range”

Following the segment the S&P 500 dropped to 2025.91 precisely and bounced. So the level was spot on. While May has not concluded at the time of this writing, it appears unlikely at this stage that we will close the month below this level.

What are the implications? Here’s what I’m seeing:

Firstly let’s recognize that despite the recent rally the MA crossover is still in effect:

The first conclusion I’m drawing from this is simple: The 2025 level has been validated as critical support and as long as markets are staying above this level bulls can feel relatively secure. Hence the building attraction of new highs coming and certitude that nothing bad will happen.

We won’t crash. Don’t you know:

Accompanied by certitude that new highs are coming:

Stocks will go up because sentiment is so bearish. http://pic.twitter.com/yB8DG1vcbD

— Northy (@NorthmanTrader) May 25, 2016

 

It may well all be true and as I’ve indicated repeatedly we can squeeze higher and even make new highs. As you may recall I’ve been outlining technical targets to the upside in both “The Big Move” and in the chart shown on CNBC. I reiterate: All these targets are still on the table as long as we remain in range. While that may seem like fence sitting it is nevertheless a reality as the battle between money supply and GAAP earnings rages on and we remain in range to date:

The main narrative in favor of new highs has shifted dramatically from last year. Last year’s bulls stuck to their 2200-2300 S&P targets in the face of declining breadth, deteriorating high yield and sinking oil prices. They didn’t matter then. Now they cite improvement in all three as a sign of their original targets coming to fruition after all. So now they matter. Ok. But fair enough, what was bad is now improving. Note however one narrative has completely disappeared from the landscape and that is: Earnings.

And this remains my gripe about this market along with the structural weakness of it all: It’s expensive as hell and getting more expensive by the day. This fact is largely being ignored by those attracted to new highs. But that can backfire as we know:

Let me put this GAAP issue in a historical context:

Let’s observe:

A. At Friday’s closing price of 24.25 the GAAP P/E ratio is now higher than during any bull market in the past 20 years. The only time it was higher was during crashes/recessions as earnings disappeared, or one time during the bubble of 2000 which led to a crash.

 

B. GAAP earnings are either increasing or decreasing during most cycles, but they have experienced 2 periods of flatlining before again moving higher. Currently we are declining not flatlining.

 

C. During periods when GAAP earnings are declining markets can experience strong counter trend rallies. See 2001 and 2002 and even into May 2008 we saw such moves.

I would also highlight that the 1998-2000 period saw a flatlining period prior to resumption of a trend higher in earnings facilitating the record new highs in 2000. This is not the case now.

Have GAAP earnings bottomed? Perhaps, but the evidence is still hope based as opposed to confirmed.

Consider that according to FactSet 72% of S&P 500 companies reporting so far have issued negative guidance for Q2 on top of declining earnings for Q1:

Also ignored:

The S&P price to sales ratio is at an all time high:

And global debt to GDP just keeps rising:

Which brings us to the here and now and some structural concerns:

First off note that the $VIX has again been pummeled to a pulp, there is zero fear or concern out there. However if we have learned anything over the past few years it is that the $VIX does not like to stay below its lower daily Bollinger band:

Also note that the MACD line is near center, which implies any $VIX spike here will likely get the MACD to cross easily back into bullish territory. The message: the $VIX may not be as weak as it appears and that makes this rally a bit suspect and open to a sudden peck on the cheek:

Next, note this recent rally not only came on some of the lowest volume of the year, but was also mostly driven by complete non participation: 3 major gap ups and open ramps, leaving gaps unfilled and most price discovery completely untouched by actual trading of size:

So here we are, the $VIX dropped below its daily Bollinger band and stocks pushed above their’s meaning they are no longer oversold but rather look stretched to the upside:

So we’re short term overbought, with 3 unfilled gaps below and lower highs still in place with stocks being the most expensive in years and yet $NYSE still below key resistance:

Ignore it all if you find yourself attracted to new highs. They may indeed come, just remember who gets hurt when the attraction proves fatal:

What would get me excited about new highs? Accelerating revenue/earnings growth and broad participation with the leaders, well, leading. At this stage of the game I see neither, but a market that’s 16.5% more expensive then same time last year. I see steam emerging.

Who’s ready for some tea?

Maybe not:

But we all know how this all ultimately ends:

via http://ift.tt/1WUI60v Tyler Durden

As the barbeque-bonanza and shopping-fest, that Memorial Day has become for many, takes shape, we thought a little reflection was necessary on the deeper meaning behind this important celebration honoring those who fell in the armed services of America during its wars.

 

 

Memorial Day Quotes

“Ask not what your country can do for you – ask what you can do for your country.”

— John F. Kennedy

“I have long believed that sacrifice is the pinnacle of patriotism.”

— Bob Riley

“Liberty, when it begins to take root, is a plant of rapid growth.”

— George Washington

“The legacy of heroes is the memory of a great name and the inheritance of a great example.”

–Benjamin Disraeli

“It doesn’t take a hero to order men into battle. It takes a hero to be one of those men who goes into battle.”

— H. Norman Schwarzkopf

“They hover as a cloud of witnesses above this Nation.”

— Henry Ward Beecher

“Extremism in the defense of liberty is no vice. Moderation in the pursuit of justice is no virtue.”

— Senator Barry Goldwater

“Life is eternal; and love is immortal; and death is only a horizon; and a horizon is nothing save the limit of our sight.”

— Rossiter W. Raymond

What Do People Do On Memorial Day? – Infographic

The national signal flare that summer is here is just days away.  What will people be doing?   WalletHub did the research for this infographic.  Of note are:

• 1.3 million have lost their lives in service of the United States of America which is the single reason this day of remembrance exists
• 3:00pm is the national moment of remembrance as declared by Congress in 2000
• 25 cities have laid claim to be the birthplace of Memorial Day.   LBJ declared it was Waterloo, NY  in 1966 but there’s still gray area about an actual birthplace
• 62% of Americans plan to Barbeque
• 25% more home cooking fires happen on Memorial Day than average
• 44% of all traffic fatalities over the holiday weekend are alcohol related
• See more interesting facts below.

Remember those who made the ultimate sacrifice this weekend.  Have fun at the celebrations but be safe!

 

Source: Valuewalk.com, WalletHub.com, and Townhall.com

via http://ift.tt/1XZBwWn Tyler Durden

Submitted by John Rubino via DollarCollapse.com,

One of the defining traits of the past few years’ “recovery” has been the torrent of money flowing from big banks to favored clients, and from there into trophy properties like high-end real estate, superyachts, and fine art. This might be the first financial bubble to completely bypass the 99%.

And now it’s ending. Falling oil prices and negative interest rates (rich people own a lot of government bonds) seem to have sucked the animal spirits out of the 1%, leading to stories like this:

A Worrisome Pileup of $100 Million Homes

(New York Times) – One of the latest symbols of the overinflated luxury housing market is a pink mansion perched above the Mediterranean on the French Riviera.

The 13,000-square-foot property, built and owned by the fashion magnate Pierre Cardin, is composed of giant terra cotta orbs arranged in a sprawling hive. The home’s name befits its price. “Le Palais Bulles,” or “the Bubble Palace,” is being offered for sale at approximately $450 million.

 

The listing is part of a global pileup of homes listed for $100 million or more. A record 27 properties with nine-figure prices are officially for sale, according to Christie’s International Real Estate. That is up from 19 last year and about a dozen in 2014.

 

If you add in high-priced “whisper listings” that are offered privately, brokers say the actual number of nine-figure listings worldwide could easily top 40 or 50.

“It’s a bumper crop,” said Dan Conn, chief executive of Christie’s International Real Estate. “It’s just a new world in terms of what people are building and offering for sale.”

 

The rise in nine-figure real estate listings comes just as sales of luxury real estate have cooled. Many say the sudden surge in hyperprice homes — often built and sold by speculative investors — is the ultimate bubble signal.

 

“When you have a record number of homes for sale at a price point of $100 million or more, that tells you these homes aren’t selling,” said Jonathan Miller, president of Miller Samuel Inc., a real estate appraisal and research firm. “It’s not as deep a market as some might hope.”

 

Still more nine-figure homes are on the way. Real estate agents and developers say a home under construction in Bel Air is likely to have more than 50,000 square feet of living space, with finishes rivaling a superyacht’s. The price will be yacht-like, too, at around $300 million. Among the home’s amenities: the world’s largest safe.

And this…

Trophy Corporate Jets Were All the Rage, Until They Weren’t

(Bloomberg) – The private jet Janine Iannarelli is selling for a Russian client has leather seats, wood paneling, a satellite phone and can fly nonstop from Tokyo to Los Angeles. The price has dropped $3 million since September and is still falling.Iannarelli today is hawking the 10-year-old Bombardier Global 5000 for $14.5 million but recommends that her client cut the price further as the market for large-cabin business jets keeps weakening. A new Global 5000 lists for $50.4 million.

 

“There’s absolutely no evidence of a recovery on the horizon,” says Iannarelli, founder of Houston-based aircraft brokerage Par Avion Ltd. “None of the jet models has hit bottom.”

 

Rarely seen bargains abound for big corporate aircraft as tumbling oil wealth, a stronger dollar and a downturn for emerging-market giants from Brazil to Russia cripple demand. As owners from foreign tycoons to Archer-Daniel-Midlands Co. try to sell their planes, Bombardier Inc., General Dynamics Corp.’s Gulfstream unit and other planemakers are cutting output and chopping list prices to cope with a glut of new and used business jets.

 

Former Prize

 

The slump extends even to the Gulfstream G650 — just two years ago an aircraft so coveted by well-heeled buyers that some would pay $10 million above list for a used jet rather than wait four years for a new model. Now there are 19 G650s for sale, about 11 percent of the global fleet in operation. One 2013 plane that first was posted for sale in June at $68 million has had its asking price cut twice, to $58.8 million.

 

 

 

“It’s probably one of the best times I’ve seen in my career to get the values for a big-cabin jet,” says Brian Foley, a business-aircraft consultant who spent 20 years as director of marketing for the North American jet unit of France’s Dassault Aviation SA.

Last but not least, Miami condos — the bank vaults of the Latin American elite — are looking a lot like 2007:

Miami’s Condo Frenzy Ends With Inventory Piling Up in New Towers

(Bloomberg) – Miami’s crop of new condo towers, built with big deposits from Latin American buyers and lots of marketing glitz, are opening with many owners heading for the exits.A third of the units in some newly built high-rises are back on the market, though most are listed for more than their owners paid in the pre-construction phase. At the current sales pace, it would take 29 months to sell the 3,397 condominiums available in the downtown area, according to South Florida development tracker CraneSpotters.com.

 

With the U.S. dollar strong, South American investors who piled into the downtown Miami market after the real estate crash are now trying to unload their recently built condos, adding inventory to an area where 8,000 units are under construction and nine towers were completed since the end of 2013. Some are offering homes at a loss as demand cools. Condo purchases from January through April slid 25 percent from a year earlier, while the average price fell 6 percent on a per-square-foot basis, CraneSpotters data show.

 

“The problem is that investors are no longer buying, and now they’re going to be looking to sell,” said Jack McCabe, a housing consultant based in Deerfield Beach, Florida. “And what buyers are going to replace those other than vulture buyers looking for deals?”

 

 

The strong rental market is giving many would-be sellers the opportunity to cover their costs. But there’s also a flood of new, professionally managed apartments under construction. And apartment vacancies in the downtown Miami area rose to 11.8 percent in the first quarter, double the rate two years earlier, according to property-data provider Reis Inc.

 

“The ticking time bomb is based on rental rates,” said Peter Zalewski, owner ofCraneSpotters. “When some of the foreign investors sitting on the sidelines have to dig into their pockets and subsidize renters, that’s the fuse that will lead to a correction.”

In a “modern” monetary regime, decision making — and the resulting spoils — are concentrated in a small group of insiders, so that’s where all the irrational exuberance lives. Which makes sense: How can you not be exuberant if you’re a corporate CEO making 500 times your workers’ pay, or if your family trust is invested in equities and bonds that are soaring because of QE.

But excess begets its opposite, and now the 1% is running scared as the realization dawns that no one is left to buy their trophies.

via http://ift.tt/1TR8ghu Tyler Durden

When the main economic event this week hits this Friday at 8:30 am EDT, when the BLS releases the May payrolls report, Wall Street consensus wil be expecting a 160,000 print, a number which will have a big impact on market expectations for a Fed rate hike at the June or July FOMC meeting. However, consensus may be disappointed for one reason: the Verizon strike could chop off as much as 35,000 workers from the headline payrolls print.

As DB’s Joe LaVorgna explains, the May Nonfarm payrolls (+135k forecast vs. +160k previously) should show a substantial impact from 35k striking Verizon workers during the survey period. Private payrolls are likely to increase by only 125k (vs. 171k). This is one reason why the unemployment rate should remain steady at 5.0% for the third consecutive month. Average hourly earnings (+0.1% vs. +0.3%) could also be impacted by the Verizon workers as there is historical evidence that strikes of similar magnitude have distorted AHEs and hours worked.

Andrew Zatlin of Southbay Research, once called the “Moneyball of Economics“, likewise lowered its NFP forecast by 20K to account for the Verizon strike:

On Friday (yesterday) the BLS released the Strike Report in which 35K Verizon strikers were identified. It can be found here: http://ift.tt/25tpSFj

WHY INCLUDE NOW

 

The original SouthBay forecast did not include the Verizon strike because I was not sure if the BLS would include it.  That may sound strange given that the strike met all the criteria for being included in the payroll figures (for example, it lasted the entire period under coverage).  But one never knows with the BLS.  In any case, the official BLS Strike Report officially records it and that forces my hand.

 

NET IMPACT: (-20K) Payrolls

 

The Strike Report identifies 35K Verizon workers on strike but I estimate the payroll impact to be ~(-20K).

 

To manage the impact, Verizon undertook several steps.

 

First, they hired temps.  Second, they backfilled many of the positions with internal workers.  Third, some secondary support businesses benefited from the strike (like hotels & restaurants – many temporary workers had to be housed and fed).

 

I have direct experience with the Verizon issue

 

One of the major issues in the strike is that Verizon is overstaffed but unions are blocking corporate efforts to rationalize the redundancy.  I came across this exact issue many times while at Cisco Systems: modern telephony equipment gets more-and-more productive and requires fewer-and-fewer workers but unions prevent staffing re-alignment.  In the old days, telco equipment failures happened and linemen were dispatched to troubleshoot.  In today’s world, the equipment fails less often and problems can be remotely diagnosed without having to send out a worker.

 

True or not, my experience with management at telcos is that they regard union workers as inefficient and less productive than non-union workers.  Sprint dealt with this issue in 2008 by selling their landline business to Centurylink: goodbye union workers.

 

A major reason the strike was less impactful is that a huge chunk are call-center employees.

 

With enough training, these jobs are relatively easy to backfill: the work is essentially reading from a book.  Most service problems follow the Pareto effect where 80% of the calls are easily fixed (either because they are user created or because the problem is well known and the fix is documented).  So Verizon took a lot of junior operations employees (finance, sales, etc) and deployed them into these jobs.

 

It means that Verizon was less exposed than one would expect if 35K workers walked off.

 

It also means that, in terms of net impact on payrolls, there will be a hit because they weren’t 100% offset by new hires

All of the above likely means that in case Friday’s NFP is a material miss to expectations, it will hardly be sufficient to derail any potential rate hike intentions as the miss will be “explained” by the now concluded Verizon strike.

* * *

Aside from payrolls, the holiday shortened week will be busy as DB’s Jim Reid lays out:

With the public holiday in the US today and bank holiday in the UK it’s an unsurprisingly quiet start to the week although today in Europe we will get the May CPI report for Germany, confidence indicators for the Euro area and also Q1 GDP data out of France.

Tuesday is kicking off in Japan where we’ll get industrial production data along with the latest jobless rate data and various housing market indicators. In Europe we start in France with CPI and PPI reports, before we then get German unemployment data and the May CPI report for the Euro area (headline -0.1% yoy reading expected). Euro area money supply data and the unemployment rate will also be released. Over in the US on Tuesday it’s a busy afternoon of data. The April core and deflator PCE’s, personal spending and income data are all due. There will be more regional manufacturing data in the form of the Chicago and Dallas Fed reports, while the S&P/Case-Shiller house price index is also set to be released. Consumer confidence for May is also released in the afternoon.

It’s all eyes on China on Wednesday morning with the official manufacturing and non-manufacturing PMI’s for May due out, while in Japan the latest capital spending and company profits numbers are set to be released. In Europe on Wednesday we’ll get the final manufacturing PMI’s for May as well as a first look at those in the periphery, while in the UK mortgage approvals and money and credit aggregates are set to be released. In the US on Wednesday the big focus will be on the ISM manufacturing and new orders figures where the former is expected to decline 0.4pts to 50.4. Construction spending, the final manufacturing PMI revision, vehicles sales for May and the Fed’s Beige Book are also due out.

Thursday morning starts in Europe with the latest Euro area PPI data. That’s before the ECB meeting at midday while over in the US we’ll get the ADP employment change print, initial jobless claims and the ISM NY. We close the week on Friday in Asia with a wrap up of the non-official May PMI’s in China and Japan. The European session will also see the final revisions to the services and composite PMI’s (as well as first looks at the periphery) while Euro area retail sales is also due out.

Over in the US on Friday afternoon the big focus will be on the May employment report including nonfarm payrolls. As well as that we’ll also get the final revisions to durable and capital goods orders, factory orders and the ISM services print (expected to nudge down 0.3pts to 55.4).

* * *

Finally, here is the full breakdown of just key US events, with consensus and firm estimates from Goldman Sachs:

Monday, May 30

• Memorial Day. There are no data releases and all markets are closed.

Tuesday, May 31

• 8:30 AM Personal income, April (GS +0.5%, consensus +0.4%, last +0.4%)
• Personal spending, April (GS +0.9%, consensus +0.7%, +0.1%)
• PCE price index, April (GS +0.3%, consensus +0.3%, last +0.1%)
• Core PCE price index, April (GS +0.18%, consensus +0.2%, last +0.1%)
• PCE price index (yoy), April (GS +1.1%, consensus +1.1%, last +0.8%)
• Core PCE price index (yoy), April (GS +1.6%, consensus +1.6%, last +1.6%)

We expect personal income to rise by 0.5% in April. Wage growth has picked up in both the March and April payroll reports. Payroll growth softened, but this is likely due to payback from weather-related gains in earlier months. We expect core PCE prices to edge up by 0.18% in April following a 0.19% gain in the April core CPI. The core PCE price index likely rose by 1.6% over the past year.

• 09:00 AM S&P/Case-Shiller home price index, March (GS +1.0%, consensus +0.8%, last +0.7%)

The Case-Shiller home price index appears to have been influenced by seasonal adjustment challenges recently. We expect a +1.0% gain in house prices in the March report based on the pattern seen last year. Over the past year, the 20-city index has increased 5.0%.

• 09:45 AM Chicago PMI, May (GS 50.0, consensus 50.6, last 50.4)

We expect the Chicago PMI to remain roughly unchanged at 50.0, the breakeven level. The series has been a bit volatile of late, showing sizable swings between expansion and contraction reads.

• 10:00 AM Conference Board consumer confidence, May (GS 95.0, consensus 96.3, last 94.2)

We expect consumer confidence to edge up in May. The University of Michigan’s final estimate of consumer sentiment for May moved down last week, although it remains at its highest level since mid-2015.

• 10:30 AM Dallas Fed manufacturing index, May (consensus -8, last -13.9)

Wednesday, June 1

• 09:45 AM Markit Flash US Manufacturing PMI, May final (consensus 50.5, last 50.5)

The Empire State weakened in May, in line with the other manufacturing surveys pointing toward a softening in manufacturing activity. We find that the flash Markit PMI does contain some predictive power for the ISM.

• 10:00 AM ISM manufacturing, May (GS 49.8, consensus 50.5, last 50.8)

Manufacturing surveys were weak across the board in May, pointing to a broader softening in domestic manufacturing activity. The Empire State survey declined sharply (-18.6pt to -9.0), and the Richmond Fed survey contracted (-15.0pt to -1.0). The Kansas City Fed (to -5 from -4) and the Philly Fed (-0.2pt to -1.8) surveys moved down as well. On net, our manufacturing survey tracker—which is scaled to the ISM index—edged down 2.4pt to 49.3.

• 10:00 AM Construction spending, April (GS +0.5%, consensus +0.5%, last +0.3%)

We expect construction spending to rebound after a softer-than-expected report last month.

• 02:00 PM Beige Book, June FOMC meeting period

The Fed’s Beige Book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The April Beige Book reported continued expansion at a modest pace, continued strengthening of the labor market, signs of a pick-up in wages, and notably reported a rebound in manufacturing activity. In the June Beige Book, we will look for additional anecdotes related to wage growth, continued improvement in manufacturing, and the state of the domestic energy and manufacturing sectors.

• 4:00 PM Total vehicle sales, May (GS 17.4mn, consensus 17.3mn, last 17.3mn); Domestic vehicle sales, May (GS 13.9mn, consensus 13.5mn, last 13.5mn)

Our auto analysts expect total vehicle sales to accelerate slightly from April.

Thursday, June 2

• 08:15 AM ADP, May (GS +173k, consensus +180k, last +156k)

Based on our understanding of how ADP filters its own proprietary data with other publicly available information, we expect a 173k gain in ADP payroll employment in May.

• 08:30 AM Initial jobless claims, week ended May 28 (consensus 270k, last 268k);Continuing jobless claims, week ended May 21 (consensus 2,157k, last 2,163k)

Consensus expects initial jobless claims to remain roughly in line with the previous week. We continue to read the trend in claims as consistent with low layoff activity nationally.

Friday, June 3

• 03:45 AM Chicago Fed President Evans (FOMC non-voter) speaks

Federal Reserve Bank of Chicago President Charles Evans will be discussing the economy in London. Q&A is expected. Recently, President Evans remarked that inflation data are likely to heavily inform the Fed’s decision to raise interest rates.

• 8:30 AM Nonfarm payroll employment, May (GS +165k, consensus +160k, last +160k)
• Private payroll employment, May (GS +155k, consensus +154k, last +171k)
• Average hourly earnings (mom), May (GS +0.2%, consensus +0.2%, last +0.3%)
• Average hourly earnings (yoy), May (GS +2.4%, consensus +2.5%, last +2.5%)
• Unemployment rate, May (GS 4.9%, consensus 4.9%, last 5.0%)

Economic data have been mixed this month. Regional Fed manufacturing and service sector surveys were weaker on net while initial jobless claims remained near post-crisis lows and measures of consumer confidence improved. We anticipate a May payroll gain of 165k after a 160k read in April, accounting for the Verizon strike of 35,100 workers that occurred during the survey period. We expect the unemployment rate to edge down to 4.9%, and average hourly earnings to rise at a pace of +0.3%.

• 08:30 AM Trade balance, April (GS -$40.9bn, consensus -$41.0bn, last -$40.4bn)

The new advanced goods trade report showed a slightly wider goods deficit in April (-$57.5bn from -$57.1bn), reflecting a rebound in both exports and imports. We expect the services balance to be little changed in April. Overall, we expect the total trade deficit to be -$40.9bn.

• 9:45 AM Markit Flash US Services PMI, May final (consensus 51.4, last 51.2)
• 10:00 AM ISM non-manufacturing, May (GS 54.8, consensus 55.5, last 55.7)

Service sector surveys were mostly weaker in March. The Philly Fed (-8.9pt to +4.6) and the Richmond Fed (-4pt to +11) both declined while the New York Fed (+2.9pt to +5.4) survey rose (the New York survey is a relatively new and not seasonally adjusted series). The Markit Services PMI also declined (-1.6pt to 51.2), escaping contractionary levels. The ISM non-manufacturing index rose by 1.2pt last month.

• 10:00 AM Factory orders, April (GS +2.6, consensus +0.5%, last +1.1%)

Factory orders likely accelerated in April, after a better-than-expected durable goods report.

via http://ift.tt/1UdSUQZ Tyler Durden