Month: July 2017

Via StockBoardAsset.com,

A 23-year old man was killed Wednesday afternoon in a double shooting on Baltimore’s 1200 block of Greenmount Avenue topping the city’s 200th homicide. So far, 30 homicides have been reported for the month of July with the expectation of further acceleration into the latter summer months.

The Economist seems to think Baltimore “may see more than 400 murders this year”. This is based on their figures from Jan’17 through May’17 homicides extrapolated by summer seasonal trends. Nevertheless, this would indicate Baltimore is headed for a record breaking year in terms of homicide count.

Earlier this year, Baltimore’s mayor was basically begging the Federal Government for help as her city’s murder rate spiraled ‘out of control’. Per CBS Baltimore: 

All eyes on Baltimore as per CBS:  “Baltimore’s murder rate more than doubles Chicago’s, which has gained international attention for its violence”. Don’t be shocked if Trump’s next tweet on America’s inner cities targets Baltimore….

***********

Video emerges from Baltimore’s 200th homicide scene with anger in the streets.

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Before the financial crisis and the billions of dollars in corporate bailouts, and trillions more in central bank quantitative easing, the world of investing was simpler.

Back then, markets moved in two directions, traders trusted their models, and hedge funds stacked with PhDs and top executives from well-respected bond trading houses were expected to make money hand over fist. And for three glorious years in the mid-1990s, Long Term Capital Management did exactly that. But when the fund suddenly imploded in 1998, stung by economic crises in Russia and Asia that caused it to lose $4 billion in a bizarre six-week stretch…

… it almost brought the entire financial system down with it.

In a recent interview on Real Vision's Adventures in Finance podcast, former LTCM Founding Partner Victor Haghani, who was at the epicenter of the firm’s meteoric rise and catastrophic collapse, discusses the birth of the fund, its flawed investment strategy and the impact its collapse had on the broader financial landscape.

His story begins shortly after the 1991 Salomon Brothers scandal, when the Treasury banned the firm, then one of Wall Street’s most aggressive and well-respected bond-trading shops, from participating in Treasury bond auctions. After the firm's dramatic fall, prospective investors encouraged several senior executives who either left the firm, or were forced out, to consider starting a hedge fund.

“I was married in January 1993, and that’s when it was starting. I decided I definitely wanted to leave Solomon with John [Gutfreund] having left and some of my other mentors having left, it was time to smell the roses and take some time off. I didn’t need to make both decisions at the same time.

 

It was a period of great change at Salomon Brothers when John Gutfreund, Tom Strauss and John Meriwether had all taken leave from the firm because of the 1991 Treasury bond auction scandal, I forget what the rulings were but John Meriwether could’ve come back to Salomon. In this period of months when those three executives were kind of defending themselves over the Treasury bond scandal and trying to set the record straight, a number of investors came to John Meriwether who said ‘listen you should start a fund and do what you did at Salomon on the outside,’ and that sort of got things going.

 

And there were other people. Bob Merton and Myron Scholes also were interested in doing this project  outside of Salomon Brothers. It’s hard to remember exactly how it all took shape but it took shape pretty quickly in 1993 and by January of 94 we were up and running and investing.”

With Meriwether at the helm, and not one but two Nobel Laureates, the firm sought to pioneer a computer-driven approach in which its models would identify arbitrage opportunities for the firm to capitalize on. Real Vision recalled the culture of risk taking at Salomon brothers, which was inculcated in the new firm as well. During one quarter when Salomon’ trading business lost a lot of money, Gutfreund, then CEO, explained that they staked the firm’s whole balance sheet on a European convergence trade that would eventually result in enormous profits.

Back to Haghani, the former LTCM partner describes how the successes of the firm’s early years helped instigate its collapse as the firm became emboldened to use an increasing amount of leverage.

“We were surprised by the high returns we were earning in our first three years and the reason was there was a lot of capital coming in to these trades. We were doing them and there were a lot of people coming to the beach to come swimming with us.

 

We never understood why they were so high, we just saw everything converging really quickly.”

Haghani's views on what caused the firm’s collapse have evolved since the financial crisis, explaining that employing leverage in a relative-value trading strategy that includes a universe of exotic and illiquid investments, just wasn't – and isn’t – smart for a small hedge fund.

“Post 2008, the view I have and that a lot of people share is what we were doing just wasn’t a good idea. It’s not a question of how we were doing it, it’s just a question of leverage. Relative value investing as a hedge fund isn’t a good idea.

 

That basic model isn’t a good idea because at some point things will move far enough that you will be forced to liquidate positions. You can’t really run this business with a tight stop loss approach. It’s not consistent with an expansive relative value frame work.

 

You could say well we could have tight stop losses, do relative value and limit ourselves to liquid investment but that wasn’t our model. Ours was a model where the only sort of stop loss was as we lost money, we would reduce positions. We would reduce risk in line with our capital.”

Thanks to the billions of dollars in leverage extended to LTCM by a coterie of banks, the Fed was forced to step in and demand that the firm’s lenders agree to a bailout.

“The world’s financial system ground to a halt as the fed had to cut rates just for this firm, and it was a hedge fund,” Haghani added.

To summarize, the lesson from LTCM was clear though, as the financial crisis nearly a decade later would demonstrate, none of the bankers, regulators or central bankers were paying attention. These guys, Haghani explains, were the smartest guys in the world. So nobody was checking their numbers. But of course, all traders inevitably get certain things wrong. And liquidity was what LTCM got wrong. Oh, and finally, LTCM got bailed out, setting the stage for the longest period of institutionalized moral hazard, in which nobody is allowed to fail any more, in the process destroying the risk/return calculus, but making a mockery of capitalism.

The Haghani interview begins roughly 20 minutes into the podcast below.

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Authored by Carey Wedler via TheAntiMedia.org,

After a bid to launch a California secession movement failed in April, a more moderate ballot measure has been approved, and its backers now have 180 days to attain nearly 600,000 signatures in order to put it up to vote in the 2018 election.

The Yes California movement advocated full-on secession from the rest of the country, and it gained steam after Donald Trump won the presidential election in 2016. However, as the Sacramento Bee noted, that attempt failed to gather the signatures needed and further floundered after it was accused of having ties to Russia.

But as the Los Angeles Times reported this week:

“On Tuesday afternoon, Atty. Gen. Xavier Becerra’s office released an official title and summary for the initiative, now called the ‘California Autonomy From Federal Government’ initiative.”

The new measure that seeks to set up an advisory commission to inform California’s governor on ways to increase independence from the federal government. It would reportedly cost $1.25 million per year to fund “an advisory commission to assist the governor on California’s independence plus ‘unknown, potentially major, fiscal effects if California voters approved changes to the state’s relationship with the United States at a future election after the approval of this measure,’” the Los Angeles Times reported.

With Becerra’s approval, its backers can now seek the nearly 600,000 signatures required to place the measure on the 2018 ballot.

As the outlet explained:

“The initiative wouldn’t necessarily result in California exiting the country, but could allow the state to be a ‘fully functioning sovereign and autonomous nation’ within the U.S.’”

According to the Attorney General’s official document on the measure, it still appears to advocate secession as the ultimate goal — even if it doesn’t use the term outright.“Repeals provision in California Constitution stating California is an inseparable part of the United States,” the text explains, noting that the governor and California congress members would be expected “to negotiate continually greater autonomy from federal government, up to and including agreement establishing California as a fully independent country, provided voters agree to revise the California Constitution.”

Marcus Ruiz Evans, who is backing this new measure, previously served as Vice President of Yes California before it was pulled in April.

“The relationship between California and the federal system just isn’t working,” Evans has said. He is now behind the movement to push through the more tempered approach. Though some critics claim California would fail due to its massive debt, advocates point to the state’s massive economy, ranked fifth largest in the world. It boasts a large agricultural industry, a massive entertainment and “culture” industry, Silicon Valley, and an ever-expanding legal cannabis market.

There are also other efforts in California to break away from the federal government. Jed Wheeler is the general secretary of the California National Party and says he is “looking a dozen or more years down the road when its candidates hold office,” the Los Angeles Times reported in April when the original Yes California movement was floundering.

“[T]he idea of having a ballot initiative is seductive and appeals to a lot of people,” Wheeler argued. “[Y]ou can’t harvest the crop without the work of planting the seeds, then tilling the soil and all that stuff first.”

There is also a longstanding movement to establish a 51st state called Jefferson, which would include parts of northern California and southern Oregon. That effort has been underway since after World War II.

Regardless of the method or strategy — or their effectiveness — resistance to the federal government is growing in California and elsewhere. There are also secession movements in Vermont, Texas, New Hampshire, and Hawaii.

As Anti-Media observed shortly after the 2016 election:

“People are rioting and protesting over Trump’s win throughout California but celebrating in Alabama, and against the backdrop of an ever-encroaching federal government, it appears these differences are growing difficult to reconcile.

 

“This election put the deep societal rifts between left, right, and those in between on stark display, and the degree of hate and animosity is palpable.”

Now that Trump has taken office, these differences are all the more glaring and are likely to grow as time goes on.

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Google employees aren’t the only tech workers struggling to afford Silicon Valley rents. One (alleged) Facebook employee recently confessed to a local TV station that she cannot afford the Bay Area’s $2,000 a month rents, forcing her to live out of her car. Unique Parsha, the employee in question, opened up about her situation to local Fox affiliate KTVU, hoping to start “a real dialogue about the high cost of living in the Silicon Valley” (although as readers will quickly realize, there is a very real chance that either KTVU, or everyone else has been part of an elaborate trolling scheme).

“Parsha's nickname is "Pinky"- she has pink hair, a pink car, and even a pink dog. But she says, things aren't always as rosy as they appear.

 

Parsha says, "I tell people all the time, stop looking at what somebody got and what you see on the outside".

 

On the outside, Parsha is a model Facebook worker, who runs a non-profit in her spare time. But she's been living out of her car since April.”

Well, at least we now know why Americans spent so much money on RVs in the first quarter, it was the biggest source of GDP growth in the first three months of 2017.

Parsha says her coworkers would be “shocked” to discover her living situation. However, her student loans and medical debt have made paying for an apartment impossible. Rents in the Bay Area have risen too quickly, while wages for technology workers have failed to keep up, she said.

When she’s desperate for a good night’s sleep, Parsha spends the night at a hotel.

“Parsha decided that now is the time to start talking about her situation, in the hopes of opening a real dialogue about the high cost of living in the Silicon Valley. "I think that companies need to look at the salaries. Are we paying employees enough to survive?"

 

Tonight, Parsha broke down, renting a hotel room so she can get a real night's sleep.”

Allegedly, Parsha has been "working at Facebook for only two months" but she says she’s already contemplating taking a second job. KTVU didn’t disclose her title, the nature of her work at Facebook, or the model and make of her vehicle.

“She says she's trying to stay positive and that a home is just around the corner – and the security that comes with it.”

While liberals have dismissed President Trump’s calls to restrict the number of H1-B visas supplied to American tech firms as xenophobic, even the New York Times admits that many tech firms abuse the program to help keep labor costs low. More than any other industry in the US, tech companies depend on the 85,000 H1-B visas awarded by the US government every year.

Tech companies say there’s a shortage of American workers with the skills necessary to do the work. What they really mean is that there’s a shortage of American workers willing to work for the wages being offered. Parsha’s case is one such example.

America’s tech companies have demonstrated that they’re willing to do almost anything to keep wages low, even if it means engaging in blatantly anti-competitive practices. Back in 2015, Amazon, Apple and a few other tech companies agreed to pay nearly half a billion dollars to settle a class-action lawsuit alleging that the companies colluded to leep wages low by creating “no poach” lists of senior engineers.

Luckily for the remaining members of San Francisco’s long-suffering middle class who’ve managed to hang on despite spending well over half their income on rent, relief may be on its way in the form of an incipient housing bust. Data released by the Federal Housing Agency show that, after five years of posting some of the highest YoY pricing growth of any market in the country, single-family home prices in San Francisco and San Mateo counties dropped 2.5% YoY in Q1 2017, making it the worst-performing market of the 100 largest US metropolitan areas.

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Via The Ron Paul Liberty Report,

Let's start at the beginning. Bubbles and Busts are both created by The Federal Reserve.

Presidents are merely along for the ride. They like to credit themselves for the bubbles, and then look for scapegoats, usually the (non-existent) free market during the busts.

But it is The Fed that creates them both.

President Trump has made a big (yet understandable) mistake. He's tried to portray himself as the cause of the current bubble in the stock market. He wants credit where credit is due.

In this case, credit is not due.

As we already mentioned, the Fed created the current bubble, and did so a long time ago.

One look at a chart of the S&P 500 says it all:

Chances are, Trump realizes that most people won't look at a chart of the stock market and he just wants some good PR.

The president wants people to think that he is the reason for the stock market bubble.

This is a big mistake.

The Fed is the premier member of the so-called "Deep State". In fact, without The Fed, there would hardly be a "Deep State" to speak of.

The Fed sits at the top of the Deep State. They have the ultimate power (that no human beings should ever have) to create new money out-of-thin-air.

In case Trump hasn't figured it out yet, the Deep State does not like him.

Should a major decline in the stock market occur during Trump's Administration, guess who will take the blame?

President Trump.

After all, he took ownership of the bubble!

Should the market tumble, the mainstream media (that also despises Trump) will have plenty of his quotes, YouTubes, and Tweets to use against him.

The economic woes will be pinned on Trump.

Will Trump deserve the blame? No, but it'll be too late.

?This is not to say that a major decline will occur during Trump's tenure. Bubbles can take on a life of their own, and this one may last during Trump's full term.

But that's a risky gamble to make.

This bubble is going on almost 10 years now without a serious decline.

Should we see a major selloff, Trump has very few friends in the major power centers that will come to his aid.

As Peter Schiff points out in this fantastic clip below: The Fed now has their fall guy:

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Below are some key highlights from Third Point’s latest Q2 letter, in which we find that Dan Loeb, despite some early market turbulence and thesis drift, has again managed to do what 95% of his peers have been unable to do, outperforming the S&P YTD and returning 10.7% through June 30, up 4.6% in the second quarter.

From the Second Quarter 2017 Investor Letter:

Review and Outlook

 

During the second quarter of 2017, Third Point earned +4.6% in the Offshore Fund,
bringing total returns for the year to +10.7%. We have generated alpha through good stock
picking in an environment that has proven unpredictable, but favorable for our
opportunistic style.

 

In our January letter to investors, we shared our view that 2017 would be a year
characterized by reflation globally, an end to central bank easing, and a US economy juiced
up by the Trump administration’s increased fiscal spending and tax reform. So far, none of
these predictions has come to pass. In April’s investor letter, we noted that actions out of
Washington would be delayed or even denied, but explained that we remained fully
invested because we believed that the emergence of synchronized global growth was more
important than the fading “Trump Trade”.

 

We were correct on this point and during the second quarter, we reduced investments in
bank financials, exited reflationary macro trades, and reoriented the portfolio towards
investments in companies that benefit from low inflation. Europe, which we highlighted as
a source of opportunity in our Q1 Letter, has been a bright spot. Our exposure there is
higher than it has been since 2010, led by our recently announced investment in Nestlé.
Our portfolio is well balanced across equity sectors but with declining exposure to credit
strategies.

 

Looking ahead to the second half of the year, we still believe that central banks will be
important drivers of action. While it might be too early to say that the key central banks
have turned hawkish, their tone is changing and they are well past the point where any hiccup in the market will prompt increased accommodation. In the US, current weak levels
of inflation and poor CPI and retail sales reports present a quandary for the Fed. Based on
her recent remarks, Janet Yellen does not seem likely to advocate drastic action. However,
we do believe that the Fed will begin balance sheet reduction shortly but that the next rate
hike will be on hold until growth and inflation accelerate.

 

Economic growth in the US has been generally disappointing, particularly relative to
expectations. Markets, on the other hand, have been helped by better performance
globally, which also explains why non-US market performance has been strong. We believe
that US growth will pick up in the second half, driven by seasonality and other factors.
However, the US economy will continue to have an overhang until Congress and the
President show they can get major legislation passed this year. With substantial corporate
tax reform promised but not delivered, companies are sitting on their cash hoards and their
M&A plans, waiting for clarity.

 

Despite the market run-up, we continue to find compelling investment opportunities,
particularly with global growth intact. However, not all stocks that have appreciated are
trading at fair value and accordingly, we are also finding opportunities to hedge the
portfolio with single name shorts that we believe are overpriced.

More in the full letter below, which includes Loeb’s commentary on Third Point’s investments in Baxter,  Alibaba, and Blackrock.

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Submitted by Jeff Paul

The US government likes to pretend that the rising cost of living is under control. People in Southern California know better. According to a new report in the Los Angeles Times, median house prices in Southern California have doubled in the last five years.

LA Times reports:

In many corners of Southern California, home prices have hit record highs. And they keep going up.

 

In Los Angeles County, the median price in June jumped 7.4% from a year earlier to $569,000, surpassing the previous record set in May. In Orange County, the median was up 6.1% from 2016 and tied a record reached the previous month at $695,000.

 

Across the six-county region, the median price — the point where half the homes sold for more and half for less — rose 7.5% from a year earlier and is now just 1% off of its all-time high of $505,000 reached in 2007, according to a report out Tuesday from CoreLogic.

 

The price increase was even greater than the 7.1% rise recorded in May, and some agents say there are no signs of a slowdown in the Southern California market.

One of Twitter’s funniest economic sleuths, Rudy Havenstein, points out the obvious problem:

I do not have an econ PhD, but I believe this works out to more than 2% inflation. https://t.co/NKAzdxvkfH http://pic.twitter.com/CV6Dxvw0eh

— Rudolf E. Havenstein (@RudyHavenstein) July 26, 2017

In case you’re confused, Rudy is referencing that the US government and its central banking partners desire a 2% inflation rate. Government measures the prices consumers pay for a basket of goods and services to determine the official inflation rate called the Consumer Price Index (CPI). However, the “core” CPI doesn’t include vital things like food and energy.

The chart below from the Bureau of Labor Statistics illustrates how much more dramatic the cost of living rate moves when food and energy are added:

Market optimists tend to quote the core CPI number because it’s less dramatic, but it’s not as accurate as the “headline” CPI with food and energy included. But the core CPI claims to be a good measure of housing costs. Until 1983, the measure of homeowner cost was based largely on house prices. Today, they use some voodoo math since a home is considered an investment and a living expense. Simply put, it attempts to account for owner-occupied homes which may be going up in value, but the monthly cost remains stable. Whereas rents in the same market will rise due to the increased value of homes.

A more reliable measure of home prices, the Case-Shiller Composite Home Price Index, was also released this week. It showed a nationwide increase of 5.6%, closer to Southern California’s rate than the CPI.

The Case-Shiller Index chart below looks very similar to the LA Times chart showing the boom in home prices beginning in 2012.

Home prices alone don’t tell the whole story. Renters are struggling the most. According to a recent report in the Orange County Register, the average rent for a house in Orange County is $3,114 per month and $2,548 for a home in Los Angeles County. The median household income in LA County is around $56,000, before taxes. So rent eats about 50-60% of wages. And Southern California is a microcosm of what is happening in many other cities in America.

The LA Times correctly identifies the market forces causing the price increases: “growing economy, rock-bottom mortgage rates and a shortage of homes on the market.”  And, of course, the LA Times shepherds government action to stop the surge in home values.

Government officials say they are trying to take steps to address the problem of affordability.

 

In Los Angeles, Mayor Eric Garcetti is advocating for a fee on new development to raise money for below-market housing — a policy known as a “linkage fee” and used in cities such as San Francisco, San Diego and Oakland.

 

And in Sacramento, Gov. Jerry Brown and legislative leaders have said they will put housing at the top of their agenda when they return in August from a monthlong break.

 

Legislators have proposed a package of bills aimed at raising money for subsidized housing and making it easier for developers to build all kinds of housing, which often faces pushback from residents concerned over traffic and neighborhood character.

Some cities in Southern California have already made some absurd laws trying to reduce cost of homes like banning Airbnb-type short-term rentals. Watch the video below where Activist Post’s Vin Armani explains this wrongheaded approach:

Markets tend to correct themselves without government interference. People also adapt. It’s one reason the co-living trend is exploding. However, sooner or later not enough people can afford house prices and a correction will begin. For instance, some people will move away and new housing units will be built to accommodate supply and demand.

Take a look as Case-Shiller’s HPI chart below from the boom-bust period of 2002 through 2008. You can clearly see the 2007 correction begin to have its effect.

After loose lending practices, low mortgage rates, and shady Wall Street re-packaging of housing debt enabled the boom period and inevitable bust, the downward trend continued until about 2012 as previously indicated.

Today rates are even lower. Lenders are getting creative again because Millennials don’t qualify due to high student debt and low wages. And Wall Street is as corrupt and greedy as ever. Combine that with the bloated municipalities in desirable areas making it expensive or impossible to get new building permits, and home prices may continue rising at this rate for a couple more years.

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With the Senate having failed to repeal Obamacare, after a critical “Nay” vote by John McCain crushed Trump’s biggest campaign promise shortly after midnight on Thursday, Trump is plans to kill Obamacare slowly, and this time he has vowed to take insurance companies and members of Congress down with it.

The president on Saturday threatened to end key payments to Obamacare insurance companies if a repeal and replace bill is not passed. “After seven years of ‘talking’ Repeal & Replace, the people of our great country are still being forced to live with imploding ObamaCare!” Trump tweeted, followed by: “If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!.”

After seven years of “talking” Repeal & Replace, the people of our great country are still being forced to live with imploding ObamaCare!

— Donald J. Trump (@realDonaldTrump) July 29, 2017

If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!

— Donald J. Trump (@realDonaldTrump) July 29, 2017

This is not the first time Trump has made a similar threat: the president previously threatened to withhold Cost Sharing Reduction payments, or CSR, which lower the amount individuals have to pay for deductibles, co-payments and insurance. While the White House announced earlier this month that key ObamaCare subsidies to insurers would be paid this month, the administration did not make a commitment beyond July.  Trump’s threat may have a significantly adverse impact on the insurance sector when it opens on Monday.

Incidentally, Trump is not wrong when he claims that insurance companies have received implicit taxpayer-funded bailout: as the chart below shows, insurance company stocks are up 700% since Obama became president, more than double the S&P’s return.

After the Friday morning Senate vote, Trump wasted no time to threaten to sabotage Obamacare.  “3 Republicans and 48 Democrats let the American people down,” the president tweeted at 2:25 a.m. Friday. “As I said from the beginning, let Obamacare implode, then deal. Watch!”

As Bloomberg notes, there are two key ways the President of the U.S. could undermine the law: asking his agencies not to enforce the individual mandate created under Obamacare; and stopping funds for subsidies that help insurers offset health-care costs for low-income Americans. Both moves could further disrupt the Affordable Care Act’s individual markets and eventually lead to higher premiums, or rather even higher premiums that Obamacare itself has led to.

Where does this leave Trump’s implosion threat?

One of the first steps the president could take would be to stop the monthly CSRs. The administration last made a payment about a week ago for the previous 30 days, but hasn’t made a long-term commitment. Trump has called the subsidies a “bailout” for insurance companies in the past, and he just did it again on Saturday.  “We are still considering our options,” Ninio Fetalvo, a spokesman for Trump, said in an e-mail. Meanwhile, America’s Health Insurance Plans, a lobby group for the industry, said premiums would rise by about 20 percent if the payments aren’t made. Many insurers have already dropped out of Obamacare markets in the face of mounting losses and blamed the uncertainty over the future of the cost-sharing subsidies and the individual mandate as one of the reasons behind this year’s hikes in premium.

“If certainty is not brought to the market and policymakers in Washington fail to establish stabilization measures, consumers face the prospect of significantly higher costs,” Ceci Connolly, chief executive officer of the Alliance of Community Health Plans, wrote.

Another way Trump could hamper the ACA is to instruct Price’s department to direct little or no support to open enrollment when people sign up for Obamacare plans near the end of the year. It could include ignoring website upkeep, not advertising the enrollment period and offering little help for people who have difficulty signing up.

Finally, the Trump administration could simply choose not to enforce the penalties surrounding the individual mandate of Obamacare for uninsured people or broaden exemptions to the law. The Internal Revenue Service, which enforces the penalty, said in January it would no longer reject filings if taxpayers didn’t indicate whether they had insurance. Unless the IRS follows up with each silent filing, this could let some uninsured people dodge the penalty.

As Bloomberg observes, all the moves would have an impact over time. For now, only one thing is certain: nothing is certain. As Larry Levitt, senior vice president of the Kaiser Family Foundation, puts it in a series of tweets:“The big question in health care now is what will happen with the individual insurance market,” Levitt said. “Insurers will be reading all the tea leaves for what the administration will do with cost-sharing payments and the individual mandate.”

Actually, one more thing is certain: while opinions on Trump’s approach to Obamacare repeal may differ, virtually all Americans can unite behind Trump’s threat to finally end bailouts of members of Congress. Whether or not he will follow up and enforce it, is a different matter entirely.

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By Dana Lyons of J. Lyons Fund Management

Stocks have recently witnessed an unprecedented cluster of new highs occurring on negative volume.

A number of stock bears have pointed to the supposed thin nature of the rally in justifying their skepticism. That is, the rally has been led by a relatively small number of stocks as opposed to broad participation. While we have seen anecdotes of such a condition, we can’t say that we fully subscribe to this concern. Factors such as the NYSE advance-decline line hitting new highs along with the various market cap indices, from small-caps to large-caps, also at new highs undermine the argument, in our view.

We will say that some of our proprietary breadth measures have not supported the recent rally. When such divergences have occurred in the past, stocks have eventually dropped, confirming the signals of our indicators. However, the timing of such a reckoning can be difficult. Outside of that condition, as we said, concerns about breadth have been mainly of an anecdotal nature.

Today’s Chart Of The Day is also best classified in the anecdotal category, though perhaps a little more alarming than some of the recent “warnings” that we’ve seen. It deals with a recent odd spate of new 52-week highs in the S&P 500 on days in which declining volume on the NYSE actually exceeded that of advancing volume. There have actually been 6 such new highs in the past 3 months.

If that doesn’t seem like a big deal, it is actually a record number of such days within a 3-month time period. In fact, it is double the previous record number of 3.

So, how much of a warning sign – if at all – is this recent phenomenon? Going back to 1965, there have been plenty of these occurrences, e.g., the latter 1990?s and 2013 that failed to lead to any negative consequences whatsoever. However, most of those were isolated events. The recent cluster of these days is, again, unprecedented and may signal a bigger warning sign for the stock rally.

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