Month: September 2017

Overnight, one day after the now former CEO of Equifax, Richard Smith, announced his “retirement” from the humiliated, and hacked company, but not before collecting an exit bonus as much as $90 million, his replacement, interim CEO Paulino do Rego Barros Jr. penned another apology, this time in the WSJ:

On behalf of Equifax , I want to express my sincere and total apology to every consumer affected by our recent data breach. People across the country and around the world, including our friends and family members, put their trust in our company. We didn’t live up to expectations. 

 

We were hacked. That’s the simple fact. But we compounded the problem with insufficient support for consumers. Our website did not function as it should have, and our call center couldn’t manage the volume of calls we received. Answers to key consumer questions were too often delayed, incomplete or both. We know it’s our job to earn back your trust.

And just to show how “serious” the company – which was entrusted with the personal, and highly confidential information of over 143 million Americans – is about “earning your trust”, as of yesterday the company announced it is hiring for a position which… it probably should have filled a few years ago, namely a Fraud Monitoring Leader who is “responsible for the management of a team of Fraud Monitoring Analysts. These analysts are responsible for monitoring; analyzing and investigating interactions to identify fraudulent access or attempted access to Equifax consumer facing systems in near real-time.” More:

One of the primary purposes of this position is to identify, create and execute strategic fraud prevention and detection solutions to minimize risk and exposure of Equifax data. The Fraud Monitoring Leader is responsible for the monitoring team, associated process, and interacting with the related individuals and groups to constantly iterate this capability. Management of the team is accomplished through reviewing and tracking analyst research and through maintaining performance metrics.  This function is a critical line of defense for Equifax and integral to business goals.

And some more details:

Responsibilities:

• Develop, implement and maintain fraud monitoring standards and processes that are aligned with industry best practices.
• Establish a means of reporting relevant findings to leadership in a clear and concise manner.
• Proactively explore and implement process improvements and efficiencies, working with other team-members to test new strategies.
• Establish metrics and regular oversight to make certain appropriate monitoring steps are being completed.
• Remain current on industry and regulatory matters impacting and related to the protection and monitoring of identity data and access.
• Develop and maintain internal and external business relationships needed to effectively handle review and investigation of potential fraudulent activity and influence appropriate process and or system changes to minimize risk.
• Provide direction, training, support and leadership to the team.
• Recruit, develop and retain top talent.

Requirements:

• Bachelor’s degree
• 5 years of fraud detection or related fraud/security experience
• Minimum 7 years of professional experience
• Strong analytical, problem solving and critical thinking skills
• Ability to manage analytical and process oriented individuals and systems
• Technical knowledge including understanding of operating systems and databases
• Experience in creating process and procedural documents
• Proven track record in fraud prevention, detection and identifying patterns of fraudulent behaviors
• Incident response experience
• Flexible work schedule and ability to travel internationally

Primary Location:

• USA-Atlanta-One-Atlantic-Center

Function:

• Function – Security Governance and Compliance

Schedule:

• Full time
• Equifax is an Equal Employment Opportunity employer and all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, protected veteran status, or disability status.

* * *

What, no music majors?

For those future scapegoats career professionals who want to be tasked with rounding up the the hacked 143 million horses long after they’ve left the barn, they can apply for the job at the following link.

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Authored by Bryce Coward via Knowledge Leaders Capital blog,

Indicators of market breadth are often useful in confirming or telegraphing important trend changes in equity markets. In simple terms, indicators of market breadth measure the level of participation of individual stocks in the general trend of the market. At bear market lows, almost all stocks have been going down and readings like the percent of stocks in up-trends and the percent of stocks making new lows hit extremes. At these junctures, an improvement in market breadth (read fewer stocks participating in the bear market) is often an early sign that the worst of the decline has past. Conversely, market breadth indicators often start to deteriorate ahead of important intermediate and long-term highs even as the general trend in the market still appears to be strong. Large divergences between market breadth and stock prices is an early warning sign to market participants that all may not be well underneath the surface.

This brings us to the topic du jour, which is that we are taking note of an early deterioration in some of our most useful market breadth indicators even as the stock market continues to make new highs. That is to say, the stock indexes are making new highs, but the number of stocks participating in that trend is waning. In each of the charts below the market breadth indicator is marked by the blue line plotted on the left axis and the price level index is marked by the red line plotted on the right axis. For this post we’ll focus just on stocks in our United States index, which covers the largest 85% of companies and is a near replica of the MSCI USA index.

In this first chart we show the percent of stocks with their 50-day moving average price above their 200-day moving average price overlaid on the price level of our United States index. This is a blunt tool to measure the percent of stocks that are in an up-trend. As readers can see, our breadth indicator has been deteriorating for some time even as the overall market has been grinding higher. Similar patterns were seen before market declines in 2010, 2011. 2012 and 2015.

This next chart shows the net number advancing stocks over the last 200 days overlaid on the price level index. The number of net advancing stocks is simply the number of stocks trading higher now compared to 200 days ago minus the number of stocks trading lower now compared to 200 days ago. It peaked at the end of 2016 even as the market has marched higher so far through 2017. This indicator peaked before declines in 2010, 2011 and 2015, so a further deterioration would be troubling.

Our third chart shows the percent of stocks with positive performance over the last 200 days overlaid on the price level index. With the market moving higher, we would expect a large and growing number of companies to be trading at a higher price now compared to 200 days ago, but we’re seeing the opposite, just as we did before the 2010, 2011, and 2015 declines.

The final chart shows the percent of stocks making new 65-day highs in price compared the price level index. Generally speaking, strong market trends are characterized by a large and/or growing number of stocks making new highs all the time. Since the end of 2016 the market has moved strongly higher, but the actual percent of stocks making new highs keeps declining. We saw a similar divergences in each of the major market declines over the last decade.

Negative divergences such as these can persist for long periods of time before the trend in the overall market changes and are just one aspect of a scenario that leads to a major downdraft in stocks. Combining signals from market breadth indicators with measures of economic momentum and valuations can oftentimes give investors a more holistic perspective of risks and opportunities.

Currently, economic momentum (at least as measured by PMIs) may prove resilient in the near term as we highlighted here and here, but valuations as measured by a number of different indicators are high or even excessive.

Therefore, the current situation of declining market breadth and high valuations calls for careful stock picking and a relatively conservative asset allocation to help buffer a portfolio in the event of market turbulence ahead. This may include allocating to stocks with less valuation risk (i.e. to areas that haven’t played this bull market), picking higher quality stocks, or picking stocks that have historically weathered declines far better than the average or median stock.

A more conservative asset allocation may include adding exposure to things like cash, government bonds or gold, or other assets with a zero or negative beta to the stock market.

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Following Roy Moore’s decisive win in Alabama earlier this week (something we covered here), Steve Bannon has predictably seized on the momentum vowing that it is only the beginning of his “war” against the Republican establishment.  Per McClatchy:

“There’s a time and season for everything under heaven. And sometimes there’s a time for peace. And sometimes there’s a time for war,” he told a raucous, religious revival-style crowd packed into a barn.

 

“Yeah!” a woman yelled back.

 

“We’re not going to hug out our differences,” he continued. “We’re going to have to fight for our differences.”

With several seats opening up in the Senate in 2018, including Senator Bob Corker’s of Tennessee who recently announced his retirement, conservatives see no reason why they can’t beat out establishment Senators across the deep south.

The hard-right’s fight for total control of Donald Trump’s Washington is just getting started.

 

The victory of deeply conservative candidate Roy Moore in Tuesday’s hotly contested Alabama Senate primary has emboldened activists and potential candidates alike, threatening to set off a wave of tough GOP races and ushering in a new era of internecine Republican warfare that party leaders had hoped would end when they won control of the government.

 

“There’s no doubt in my mind that this is going to be a determining factor for a lot of Deep South states, no question,” said Mississippi State Sen. Chris McDaniel, who lost a hugely controversial primary contest against Sen. Thad Cochran in 2014 but is considering another Senate primary run in 2018. “If Alabama can send a true conservative to Washington, and Texas can send a true conservative to Washington, so can Mississippi and Tennessee and Florida and other states.”

Of course, it’s not just the deep south.  Arizona is also likely to draw a lot of attention from Bannon allies as Senator Jeff Flake, a consistent and vocal Trump Critic, is up for re-election and Senator John McCain is suffering from severe health issues which could result in another special election at any moment.

Led by Breitbart News head Steve Bannon, Trump’s former chief strategist, they sought to make the race a referendum on Senate Majority Leader Mitch McConnell, who has grown increasingly unpopular with the base. And they took Moore’s win as a sign that other incumbents will be vulnerable to the same kind of anti-Washington messaging, even though it’s the Republican Party that controls the White House, the House and the Senate.

 

“If you can defeat a guy like Luther Strange by simply tying him to Mitch McConnell, what does that mean for guys like Jeff Flake and Dean Heller, who are literally Never Trumpers, or a guy like Roger Wicker, who’s in Senate leadership?” said Andy Surabian, a senior adviser to Great America Alliance, a group with close ties to Bannon that supported Moore in Alabama. His comment was in reference to GOP senators from Arizona, Nevada and Mississippi. “I hope none of them have a long-term lease in Washington D.C.”

 

Arizona is an obvious next priority for many of these Trump-aligned activists and organizations.

 

There, Flake—a frequent and vocal Trump critic whom Trump has clashed with repeatedly—is already facing a primary challenge from Kelli Ward, who unsuccessfully primaried Sen. John McCain last cycle but this time around has received Twitter support from Trump. Pro-Ward efforts have been boosted by major Trump donor Robert Mercer, who is close to Bannon. Eric Beach, the co-chair of Great America Alliance who is also assisting Ward, devoted space to the race in a broader USA Today op-ed published after Alabama.

 

“Establishment, beware,” he wrote. “We’re coming for you in 2018.”

Meanwhile, Nevada also looks to be a target…

Some conservative activists have also turned their attention to the Nevada Senate race. Trump, as president, hasn’t been as critical of Heller as he has been of Flake, but some see an opportunity to highlight Heller’s past criticism of Trump from the 2016 campaign, something they expect will rile up a conservative base already miffed that Hillary Clinton won Nevada (though Heller said last month—close to a year after the election—that he did vote for Trump).

 

On Tuesday night, Heller’s primary challenger, Danny Tarkanian, tweeted his congratulations to Moore and added: “Primary voters showed they’ll drain the swamp across country.” In an interview with McClatchy ahead of the election, he argued that Heller would be in a weaker position with the staunchly pro-Trump GOP base than Strange was, because Strange embraced Trump.

 

“I haven’t seen that Luther Strange was a Never Trumper, that he did anything against Trump,” said Tarkanian, who has run for office multiple times before but met with Bannon recently. “On the contrary, Heller was one of the first Never Trumpers in Nevada. He cost Trump the election in Nevada.”

And while it’s impossible to predict how these various races will play out, it seems fairly certain that 2018 won’t be a predictable and/or tame off-year election season.

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With just two days left until the end of the third quarter, what happened in Q2 will hardly provoke a market reaction, which is why when the BEA announced that the final Q2 GDP print was revised from 3.0% to 3.1%, (or specifically from 3.049% to 3.06%) it hardly inspired a move in risk assets, even though it did come in fractionally better than the 3.0% expected, and more than double the 1.2% Q1 GDP print.

The revision to the third estimate of GDP growth mainly reflected an upward revision to private inventory investment, notably farm inventories. Personal consumption rose 3.3% in 2Q after rising 1.9% prior quarter, while its contribution to the change in GDP was 2.24% in 2Q, slightly below the 2.28% in the previous revision. Nonresidential fixed investment, or spending on equipment, structures and intellectual property rose 6.7% in 2Q after rising 7.2% prior quarter.

The increase in real GDP in the second quarter primarily reflected positive contributions from PCE, nonresidential fixed investment, exports, federal government spending, and private inventory investment that were partly offset by negative contributions from residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

 

The acceleration in real GDP in the second quarter reflected an upturn in private inventory investment, an acceleration in PCE, a deceleration in imports, and an upturn in federal government spending that were partly offset by a downturn in residential fixed investment, a deceleration in exports, and a downturn in state and local government spending.

For the inflation watchers, the GDP price index rose 1.0% in 2Q after rising 2.0% prior quarter, while Core PCE q/q rose 0.9% in 2Q after rising 1.8% prior quarter

Real gross domestic income (GDI) increased 2.9% in the second quarter, up from 2.7% in the first. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 3.0 percent in the second quarter, compared with an increase of 2.0 percent in the first quarter (table 1

The BEA also reported that Corporate Profits Rose 0.7% Q/Q in Q2, after falling 2.1% in prior quarter.  On an annual basis , corporate profits were up 6.4% in 2Q after rising 3.3% prior quarter. Notably Financial industry profits declined 7.1% in 2Q after falling 7.9% prior quarter.

Federal Reserve bank profits down 10.6% in 2Q after rising 2.7% prior quarter. Finally, nonfinancial sector profits rose 4.9% in 2Q after rising 0.3% prior quarter.

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With just two days left until the end of the third quarter, what happened in Q2 will hardly provoke a market reaction, which is why when the BEA announced that the final Q2 GDP print was revised from 3.0% to 3.1%, (or specifically from 3.049% to 3.06%) it hardly inspired a move in risk assets, even though it did come in fractionally better than the 3.0% expected, and more than double the 1.2% Q1 GDP print.

The revision to the third estimate of GDP growth mainly reflected an upward revision to private inventory investment, notably farm inventories. Personal consumption rose 3.3% in 2Q after rising 1.9% prior quarter, while its contribution to the change in GDP was 2.24% in 2Q, slightly below the 2.28% in the previous revision. Nonresidential fixed investment, or spending on equipment, structures and intellectual property rose 6.7% in 2Q after rising 7.2% prior quarter.

The increase in real GDP in the second quarter primarily reflected positive contributions from PCE, nonresidential fixed investment, exports, federal government spending, and private inventory investment that were partly offset by negative contributions from residential fixed investment and state and local government spending. Imports increased.

The acceleration in real GDP in the second quarter reflected an upturn in private inventory investment, an acceleration in PCE, a deceleration in imports, and an upturn in federal government spending that
were partly offset by a downturn in residential fixed investment, a deceleration in exports, and a downturn in state and local government spending.

For the inflation watchers, the GDP price index rose 1.0% in 2Q after rising 2.0% prior quarter, while Core PCE q/q rose 0.9% in 2Q after rising 1.8% prior quarter

The BEA also reported that Corporate Profits Rose 0.7% Q/Q in Q2, after falling 2.1% in prior quarter.  On an annual basis , corporate profits were up 6.4% in 2Q after rising 3.3% prior quarter. Notably Financial industry profits declined 7.1% in 2Q after falling 7.9% prior quarter. 

Federal Reserve bank profits down 10.6% in 2Q after rising 2.7% prior quarter. Finally, nonfinancial sector profits rose 4.9% in 2Q after rising 0.3% prior quarter.

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Emerging markets were much weaker than the S&P 500 from 2011 to 2016, underperforming the S&P by more than 60%. Over the past 10-months, Emerging markets (EEM) have been much stronger than the S&P 500. Below highlights the strength of EEM over SPY the past year.

CLICK ON CHART TO ENLARGE

The ratio has created a uniform rising channel, that hit dual resistance at (1) around 6-weeks ago. Since hitting dual resistance, EEM has underperformed the S&P for the past 6-weeks, as it is now testing rising support at (2). This is a big test of support at (2), due to the 10-year trend of lower highs remains in play.

Below looks at EEM on a monthly basis over the past 13-years-

CLICK ON CHART TO ENLARGE

As the month is nearing a close, EEM could be forming a bearish reversal pattern (bearish wick) at dual resistance at (1), while momentum is the highest since the peak in 2007. If weakness would happen to start taking place at (1), would send caution message to EEM bulls. Emerging markets bulls want to see a breakout at (1), not weakness taking place!

EEM peaked in 2012, 2013 and 2014 just below the $45 zone. Bulls would get an encouraging price message if resistance is taken out. We humbly feel what takes place at this key price point at (1), is one of the most important tests in years for EEM! Might be worth keeping a very close eye on what happens here.

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Wholesale Inventories jumped 1.0% MoM in August, the fourth consecutive build in inventories in a row and the fastest monthly build since Nov 2016.

This is the fastest annual growth rate for inventories since June 2015 as it appears producers embrace the idea that ‘if they build it, they will come’.

Perhaps most notably, motor vehicles saw the biggest rise (+1.2% MoM, +7.4% YoY) as sales collapse.

This appears positive for Q3 GDP (restocking) but we wonder with Auto sales dumping (and automaker shuttering plants), what could go wrong?

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President Trump ordered the Jones Act to be waived for shipments to hurricane-ravaged Puerto Rico immediately, according to White House press secretary Sarah Sanders this morning.

At the request of Puerto Rico Governor Ricardo Rossello, Trump “has authorized the Jones Act be waived for Puerto Rico. It will go into effect immediately.”

At @ricardorossello request, @POTUS has authorized the Jones Act be waived for Puerto Rico. It will go into effect immediately.

— Sarah Sanders (@PressSec) September 28, 2017

On Wednesday, DHS officials said that the administration was considering lifting the law, which bans foreign-flagged ships from carrying freight between U.S. ports.

As a reminder, The 1920 Jones Act requires shipments of goods between two U.S. ports to be made with American-flagged vessels, limiting the amount of shipping and driving up its cost, and had been holding up shipments of much needed support equipment and supplies for Puerto Rico.

A number of lawmakers had urged the Trump administration to waive the law and to do it immediately. Among them is Sen. John McCain (R-Ariz.), who wrote a letter Tuesday to acting Homeland Security Secretary Elaine Duke demanding she take action.

“It is unacceptable to force the people of Puerto Rico to pay at least twice as much for food, clean drinking water, supplies and infrastructure due to Jones Act requirements as they work to recover from this disaster,” McCain wrote. “We must treat this emergency relief with urgency ? every day that business owners are unable to recover their assets and account for lost business, the economy will retreat even further into devastation.”

The Department of Homeland Security has gotten emergency waivers to the Jones Act twice in the last month to help with recovery efforts in Texas and Florida after hurricanes Harvey and Irma. But during testimony Wednesday before the Senate Homeland Security and Government Affairs Committee, Duke said DHS can issue waivers only if they are related to national defense matters. The waivers for Texas and Florida were to help aid fuel shortages, she said, which fall under the category of national security.

“We don’t know of fuel shortages on the island of Puerto Rico,” Duke said. “If there are fuel shortages, we are looking at the Jones Act. … We will use it appropriately.”

Presumably, they do now.

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In the latest example of a natural cataclysm displacing tens of thousands of people, and as reported earlier this week, the number of people taking shelter in makeshift evacuation centers on the Indonesian island of Bali has surged to around 104,000, officials said on Thursday, as residents fled the area around a rumbling, active volcano that is expected to erupt momentarily.

Mount Agung, the largest volcano on the island, located some 50 miles from the tourist hub of Kuta, has been shaking since August, and its tremors have increased in both intensity and strength, prompting the Balinese government to evacuate prisoners from local jails and evacuated tourists and residents away from the base of the volcano. The island’s government has declared a state of emergency, according to Reuters.

Thousands more people have been forced to flee in recent day as the government set up an exclusion zone around the volcano's perimeter.

According to experts who spoke with the Guardian, an eruption is imminent.

Last week Indonesian authorities announced the highest possible alert warning, and besides the evacuations they’ve also set up an exclusion zone that stretches 12km from the crater in some places. Scott Bryan, an associate professor from the Queensland University of Technology, says there have been “very good indications” that an eruption is imminent.

 

“The fact that the seismic tremors beneath the volcano are increasing in number, intensity, and the reduction in their depth in the last week or so, is a very good indication that magma is moving up to the surface,” he said.

As white smoke started rising from the mountain earlier this week, the Balinese government raised Mount Agung’s alert status to the highest level last week. The last time the mountain erupted, in 1963, a thousand people were killed, hundreds were injured and thousands more villagers had to abandon their homes.

With the volcano deemed too dangerous for humans, the government is housing evacuees in tents, school gyms, and government buildings in neighboring villages. Reuters reports that, while there are plentiful stocks of food, water, medicines, and other supplies, evacuees are worried that the eruption could leave them permanently displaced. One farmer worried the lava flows could destroy his house, leaving him destitute.

“If my house is destroyed I don’t know how to restart my life. I don’t know where my kids will sleep and all I can do now is pray,” said Gusti Gege Astana, 40.

Officials said there are also 30,000 cattle within the danger zone around the volcano, and efforts are being made to move the livestock so as not to leave farmers financially ruined. An elderly woman who was alive during the 1963 eruption told Reuters that the evacuation instructions came earlier this time.

“Back then we weren’t evacuated until it got really dangerous. Life went on as normal when ash and gravel was falling on us, until the big lava came out and destroyed everything,” said 82-year-old Gusti Ayu Wati.

Indonesia has nearly 130 active volcanoes, more than any other country. Many of these show high levels of activity but it can be weeks or even months before an eruption occurs.

Meanwhile, the country’s tourism agency issued a letter reassuring travelers that the island remains safe to visit, and that flights are operating normally. The letter was issued following reports that some tourists were reconsidering visiting the island.

“The island is safe except for areas around Mount Agung. We urge tourists to continue visiting,” the letter said.

About 1.2 million Australians visit Indonesia each year, and tens of thousands are expected to flock to Bali in the next few weeks as most states break for school holidays, the Guardian noted. In 2015 thousands of Australian vacationers were stranded as the eruption of Mount Raung, another Balinese volcano, erupted.

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