Month: September 2018

The Worst Month Of The Year

Via LPLResearch.com,

Well, here it comes – September. It’s widely considered the worst month of the year for equities for good reason, since it has historically performed the worst. Per Ryan Detrick, senior market strategist:

“September is the banana peel month, as some of the largest slips tend to take place during this month.

Although the economy is still quite strong, and stocks are marking hew highs, this doesn’t mean some usual September volatility is out of the question – in fact, we’d be surprised if volatility didn’t pick up given midterm years tend to see big moves in the months leading up to the November election.”

Here’s some data to consider as September approaches:

  • Since 1950, no month sports a lower average return than September, with the S&P 500 Index down 0.47% on average. June and August are the only other months that are generally in the negative, while November and December tend to be the strongest months of the year.

  • In the past 20 years, September has been the second-worst month, with only August fairing worse. More recently, over the past 10 years, it’s still down on average but comes in at the fifth-worst month.

  • The worst September ever for the S&P 500 was a 30% drop in 1931. In fact, no other month has had more 10% drops than September, at seven. Interestingly, January is the only month that has never been down 10% or more.

  • Since 1950, if the S&P 500 starts September above its 200-day moving average (like 2018 will), it tends to do much better, as it is up 0.4% on average versus down 2.7% if it starts the month below the 200-day moving average.

Last, as we shared last week, when the S&P 500 is up in the five months heading into September (like 2018), the month has historically done quite well, up 2.3% on average and higher four out of five times since 1950.

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Amazon is Far More Dangerous and Powerful Than You Want to Admit

The sneaky thing about Amazon’s increased dominance in so many key aspects of our lives is that much of the perniciousness is hidden. No one’s going to tell you about all the retailers who have gotten pressured or destroyed via its tactics while you’re happily clicking “add to cart” and smiling about 2-day free shipping. In this sense, it can be best compared to the evils of factory farming. Most people just simply have no idea about the immense damage going on behind the scenes as they indulge in incredible convenience and what looks like a good deal.

– From my November 15, 2017 post: Amazon Poses a Serious Threat to Freedom and Free Markets

Today’s post should be seen as an update to last year’s article referenced above. In the months that have followed, I’ve been consistently frustrated by the lack of interest when it comes to the dangers presented by Amazon and its richest man in the world ($165 billion as of last count) CEO Jeff Bezos. The following Twitter exchange is a good example of what I mean:

continue reading

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Chicago Mayor Rahm Emanuel Won’t Run for Re-Election

Mayor Rahm EmanuelChicago Mayor Rahm Emanuel announced today that he will not be running for a third term next year—a surprising statement, given that he had already raised millions for another run.

In a news conference, he declared: “This has been a job of a lifetime, but it is not a job for a lifetime.”

Certainly not for Emanuel. Over the past few years Chicago has seen a significant jump in violent crime, though that has finally begun to decline. Meanwhile, Chicago’s reputation for police misconduct has continued under his administration.

Many Chicagoans will remember Emanuel for City Hall’s attempt to block the release of dashcam footage showing police officer Jason Van Dyke fatally shooting teenaged Laquan McDonald seconds after arriving at a call. Officers on the scene insisted that McDonald had lunged at them with a knife, but the video footage showed that nothing of the sort had happened. A judge had to order the city to release the footage, and Van Dyke was subsequently charged with murder. Probably by sheer coincidence, jury selection for Van Dyke’s trial is scheduled to start this week.

Chicago has tried to improve the relationship between officers and the public, implementing body cameras and giving more officers Tasers (though those themselves are a tool that can lead to death and are frequently misused to force compliance).

But mostly it seemed that under Emanuel, Chicago was focused on trying to rake in more money to deal with the growing debt caused by expensive bureaucracies and underfunded pensions. As Reason‘s C.J. Ciaramella reported earlier this year, Chicago is impounding motorists’ cars and collectively fining the owners millions, often for petty crimes—burying them in debt in the hopes of digging the city out of its own debts. Emanuel has also jacked up property taxes even further. Small wonder that the greater Chicago area has been losing citizens for the past two years, including its millionaires.

And yet, through all of this, Emanuel seemed to think that the problem was not enough government meddling in its citizens’ lives. Under the mayor’s urging, Chicago Public Schools implemented a program requiring high school seniors to submit to a selection of approved post-graduation options in order to actually receive their diploma. “Move as far away from Chicago as I possibly can” was not one of the approved choices.

Emanuel’s legacy is to affirm everyone’s worst perceptions of Chicago’s governance: that it’s utterly corrupt and cares more about keeping the revenue streams that line officials’ pockets and budgets than about holding itself accountable for serving its citizenry.

To read Emanuel’s speech, go here.

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Jon Kyl Is Replacing John McCain. What Will That Mean?

Jon Kyl has been tapped to temporarily fill the late John McCain‘s Senate seat.

Kyl previously served in the Senate from 1995 until 2013. At the time of his resignation, he was minority whip, the second-highest ranking Republican in the upper chamber.

In the years since, he has worked as a Washington-based lobbyist. He also acted as the “sherpa” for Supreme Court nominee Brett Kavanaugh, meaning he escorted the judge around Capitol Hill to his meetings with senators. Kavanaugh’s confirmation hearings began today.

Kyl has agreed to remain in the Senate through the end of year, a representative for Arizona Gov. Doug Ducey tells the Arizona Republic. But with the special election to fill McCain’s seat more than two years away, Ducey might have to appoint someone else if Kyl steps down early.

In 2007, the National Journal ranked Kyl the fourth most conservative senator in the upper chamber. He has spoken out against abortion and Planned Parenthood, and in 2010 he came out against a state ballot measure to legalize medical marijuana. But he might not share the GOP’s obsession with stopping illegal immigration. In 2007, after McCain started negotiating a bipartisan immigration reform bill, he handed the task over to Kyl so he could focus on appealing to conservatives during his presidential run. (The legislation ended up dying in the Senate.)

Kyl has also shown he’s not afraid to criticize President Donald Trump, saying earlier this year that Trump’s “style…is boorish.” It’s conceivable that he could become a rare anti-Trump Republican voice in the Senate. Since he holds mostly conservative views, it will be hard for Trump to criticize him on policy. And he probably has no intention of seeking reelection, so the president would have less power over him anyway. It’s the lame ducks who tend to quack.

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Twitter: Trump Not Immune From Getting Banned, Kicked Off Platform

Twitter said on Tuesday that President Trump is not immune from being kicked off the platform if his tweets “cross a line” with abusive behavior, reports Politico. 

The social media giant has previously said that vitriolic tweets from world leaders with newsworthy statements would be allowed some leeway, however it’s “not a blanket exception for the president or anyone else,” according to comments made to Politico by legal and policy chief Vijaya Gadde, alongside CEO Jack Dorsey. 

Trump tweets almost daily to his 54.2 million followers – heaping abuse on his foes at times, including threats – such as that to North Korea prior to a June summit in Singapore, in which he said that if North Korean leaders continue with their dangerous rhetoric, “they won’t be around much longer!” 

Dorsey, who is set to testify before two congressional committees Wednesday about censorship and other corporate policies, says he receives notifications to his phone when Trump tweets – however he declined to get into specifics when asked if he would weigh in personally to remove Trump from the platform. 

“We have to balance it with the context that it’s in,” he said. “So my role is to ask questions and make sure we’re being impartial, and we’re upholding consistently our terms of service, including public interest.”.

Trump’s Twitter threats and taunts have repeatedly prompted calls for his removal from the platform, such as when he tweeted about Iran’s President Hassan Rouhani in July, “NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE.” In August, Trump, in tweets, called former White House staffer Omarosa Manigault Newman “wacky,” “deranged” and a “dog.“

Amid controversy over Trump’s tweeting back in January, Twitter posted to its corporate blog an unsigned explanation of its thinking around “world leaders” — without calling out Trump by name. It said blocking such leaders or removing their tweets “would hide important information people should be able to see and debate.” Dorsey tweeted the policy, saying “we want to share our stance.” –Politico

Twitter and Facebook have both been under intense pressure from legislators over how the companies decide to censor content, as well as which advertisements they allow to run on their platforms. Dorsey is testifying on Capitol Hill on Wednesday, first before the Senate Intelligence Committee – where he will discuss foreign use of social media for election meddling, and later to the House regarding allegations of bias against conservatives. 

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Kavanaugh Hearings Open With Screaming Protesters and Grandstanding Senators

Supreme Court nominee Brett Kavanaugh has yet to be asked a single question by the Senate Judiciary Committee and already his confirmation hearings have taken on the characteristics of a brawl.

The opening gavel had barely struck this morning before Judiciary Committee Democrats launched an apparently coordinated effort to derail the proceedings, repeatedly interrupting the opening remarks of Committee Chair Chuck Grassley (R-Iowa) with motions to adjourn until tens of thousands of documents from Kavanaugh’s years working in the George W. Bush administration are released. One after another, the Democrats asked the same question to both Grassley and the nominee: “What are you trying to hide?” A visibly irritated Grassley made it clear that he was going to proceed whether they liked it nor not.

At the same time, Capitol police were busily ejecting a series of screaming protesters, roughly two dozen in total. The screamers were somewhat less coordinated in their efforts, as they kept interrupting the Democrats and thereby succeeded in drowning out parts of the anti-Kavanaugh message.

Today’s portion of the confirmation hearings is largely devoted to opening statements, meaning that the senators take turns prattling on and on for the cameras. Perhaps the only real value in these tedious and grandstanding displays is that they reveal the basic partisan battle lines for the coming days.

For the Democrats, the overall approach appears to be combining procedural objections to the hearing itself with strong denunciations of Kavanaugh as a right-wing judicial extremist. Sen. Diane Feinstein (D-Calif.) offered a taste of this in her opening statement, which described Kavanaugh’s “pro-gun” stance as “far outside the mainstream of legal thought.” She also questioned whether he would be a threat to Roe v. Wade, the 1973 ruling that recognized the constitutionality of abortion rights. Expect to hear lots more about guns and abortion as the hearings get going.

For their part, the Republicans will apparently counter the procedural objections with references to past Democratic “borkings” of various GOP judicial nominees. In other words: It’s payback time. As for Kavanaugh, the Republicans will stress his qualifications, his professed constitutionalism, and the wide respect he enjoys in the broader legal community. “If we could just get politics out of this,” said Sen. Orin Hatch (R-Utah).

Of course, getting politics out of a modern SCOTUS confirmation fight is a harder ask than Hatch might care to admit. As both sides of the aisle clearly recognize, Kavanaugh, if confirmed, has the potential to cast deciding votes on a number of crucial legal issues that are likely to come before the Supreme Court. The screaming is far from over.

Related: 5 Questions for SCOTUS Nominee Brett Kavanaugh

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Gold – Projecting Fear Or Optimism?

Authored by Mark Rzepczynski via Disciplined Systematic Global Macro Views blog,

Gold is hard to understand as an investment.

  • Sometimes it behaves like an inflation hedge but at other times it does not.

  • Sometimes it responds to the real cost of funds, and sometime it does not.

  • It can serve as a safe asset, yet it has sold-off in a crisis.

  • It can be the uncorrelated asset of frustration, but a longer examination tells us about investment deep investor expectations.

Gold, over the last decade, can be viewed through three major themes.

1. The debasement fears period  – This was the period of maximum gain in quantitative easing. This period ends with QE2 and when QE policy seemed to be a limited accelerant to the real economy.

2. The adjustment to QE period – Contrary to many analysts the exposure of the Fed balance sheet did not led to a surge in inflation. In fact, large central bank balance sheets did not even allow inflation to get to target levels. Even with negative rates on trillions in bonds, investors did not view gold as essential if there was not going to be a debasement of nominal assets.

3. The “who cares about debasement” or “new normal” period  – The third period began with the tapering and moved to the new period of Fed adjustment with increasing rates. Inflation is closer to target, but the expectation of a monetary debasement of bonds has left investors to be replace by a sense of complacency or normalcy. Investors have found a new equilibrium where they believe central banks will not drive the economy to the monetary brink. Balance sheet holdings will be higher than pre-crisis levels, but the potential for a significant inflation overshoot is minimal. Financial assets have exploded to the upside, but gold has still doubled since 2007 levels.

The question is whether there will be a new fourth period for gold and what will it look like. We may not know what this new gold environment will look like until central banks are forced to again change policy.

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Tropical Storm Gordon Enters Northern Gulf Coast, To Make Landfall As Hurricane Tonight

Tropical Storm Gordon is quickly heading west-northwest at 17 mph with sustained 65 mph winds toward a landfall tonight along the northern Gulf Coast as a Category 1 hurricane.

The National Hurricane Center (NHC) has declared a hurricane warning from the mouth of the Pearl River, Mississippi, to the border between Alabama and Florida. The NHC expects hurricane-force winds (+74 mph) to arrive in the area indicated by late Tuesday evening.

Tropical storm warnings have been published from west of the mouth of the Pearl River, Mississippi, to east of Morgan City, Louisiana, including Lake Pontchartrain and Lake Maurepas, as well as from the Alabama-Florida border to the Okaloosa-Walton County line in Florida.

According to Mike’s Weather Page, Gordon is still moving fast…which is suppressing the strength of the tropical storm for now. The group indicates the composition of the storm is “sloppy” from the overnight — with a firm confirmation that “landfall is coming tonight.”

“Current AM satellite on Gordon. He is racing towards landfall later tonight. Forward speed has helped keep organization down. Hurricane Hunters are in now and seems pressure still above 1000mb. Will watch next several hours and see if he can make a run towards Hurricane status,” said Mike’s Weather Page.

Dangerous rainbands are now moving toward the Florida Gulf Coast, but have cleared the rest of the Florida Peninsula.

According to the NHC, Gordon is projected to be a Category 1 right before it makes landfall on the northern Gulf Coast tonight with landfall expected along the Mississippi Gulf Coast.

The heaviest rainfall from Gordon is expected from the northern Gulf Coast to parts of Arkansas through Thursday. Localized totals in some regions could exceed 12 inches of rain.

By late Tuesday afternoon, tropical-storm-force winds are expected to arrive on the northern Gulf Coast for the posted tropical storm warning area. Hurricane-force winds are expected in the hurricane warning area by late Tuesday evening.

The NHC said the immediate coast near the landfall location (Biloxi, Mississippi) could see storm surges accompanied by large waves. Here are places that NHC has labeled at risk for flooding:

  • Shell Beach, Louisiana, to Dauphin Island, Alabama: 3 to 5 feet
  • Navarre, Florida, to the Dauphin Island, Alabama, including Mobile Bay: 2 to 4 feet
  • Shell Beach, Louisiana, to the mouth of Mississippi River: 2 to 4 feet
  • Mouth of the Mississippi River to the Louisiana-Texas border: 1 to 2 feet

Global Plus Hurricane Models for Gordon

Significant power outages are expected where the tropical storm and hurricane warnings are posted along the northern Gulf Coast.

Oil prices jumped on Tuesday after the evacuation of two Gulf of Mexico oil platforms in preparation for Gordon. Oil assets and Gordon’s path are overlaid in the chart below.

Louisiana Gov. John Bel Edwards declared a state of emergency, saying hundreds of National Guard members would be deployed in coastal areas. The governors of Alabama, Florida, and Texas said they were monitoring developments.

“Our state will be ready for whatever Gordon may bring,” Alabama Gov. Kay Ivey said.

What is social media saying about the storm?

“Ah man this just posted…Jim Cantore landed at our local airport. This means that the news isn’t good for our area!” said one Twitter user.

Another user said “bread and water” cleared out of a local Walmart in Lousiana.

Video of Gordon rolling through South Florida on Monday.

Meanwhile another storm is brewing in the Atlantic

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Global Tree Cover Has Expanded More Than 7 Percent Since 1982

TreesMeryllDreamstimeGlobal tree canopy cover increased by 2.24 million square kilometers (865,000 square miles) between 1982 and 2016, reports a new study in Nature.

Researchers using satellite data tracked the changes in various land covers to find that gains in forest area in the temperate, subtropical, and boreal climatic zones are offsetting declines in the tropics. In addition, forest area is expanding even as areas of bare ground and short vegetation are shrinking. Furthermore, forests in montane regions are expanding as climate warming enables trees to grow higher up on mountains.

Tree canopy in Europe, including European Russia, has increased by 35 percent—the greatest gain among all continents. The researchers attribute much of that increase to the “natural afforestation on abandoned agricultural land,” which has been “a common process in Eastern Europe after the collapse of the Soviet Union.”

The researchers’ satellite data also confirms the effectiveness of China’s large-scale reforestation and afforestation programs, leading to a tree canopy gain of 34 percent in that country. Declining forest cover in the western United States, meanwhile, has been offset by increased tree canopy cover in the eastern part of the country. The result is that overall U.S. tree cover increased by 15 percent in the study period.

The study notes that the expansion of the agricultural frontier is the primary driver of deforestation in the tropics. “The three countries with the largest area of net tree cover loss during 1982–2016 are all located in South America: Brazil (−385,000 km2, −8%), Argentina (−113,000 km2, −25%) and Paraguay (−79,000 km2, −34%),” report the researchers.

These new findings contradict earlier studies that reported a continuing net loss of forest cover. For example, the Food and Agriculture Organization’s Global Forest Resources Assessment 2015 reported, “In 1990 the world had 4,128 million [hectares] of forest; by 2015 this area had decreased to 3,999 million ha. This is a change from 31.6 percent of global land area in 1990 to 30.6 percent in 2015.”

If the Nature study is correct, the world gained 2.24 million square kilometers rather than lost 1.29 million square kilometers in forest area in the past three decades. Expanding woodlands suggests that humanity has begun the process of withdrawing from the natural world which in turn will provide greater scope for other species to rebound and thrive.

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The Senate Battle Simplified In One Picture

Authored by Mike Shedlock via MishTalk,

The midterm election coming up in November. I expect Democrats will take the House. The Senate is iffy for Democrats.

The WSJ reports Trump Looms Over Fight for Control of the Senate.

The fight for the Senate is being fought on a deep red, pro-Trump battlefield that is dramatically different from the suburban landscape where the House majority will be won and lost.

That is why Democrats’ chances for erasing Republicans’ narrow 51-49 Senate margin are longer than their prospects of winning the House majority, which would require them to flip 23 seats.

In recent weeks, the Senate map has shifted for both parties: Democrats are worrying more than expected about deep-blue New Jersey, where Sen. Bob Menendez—whose trial on federal corruption charges ended last fall in a hung jury—faces a well-funded GOP opponent, Bob Hugin.

Republicans are more concerned than anyone thought possible about Texas, where Sen. Ted Cruz’s lead in polls over Democrat Rep. Beto O’Rourkeis narrowing.

Both parties are riveted on Florida, after the upset victory by Tallahassee MayorAndrew Gillum in the Aug. 28 Democratic gubernatorial primary. Some Democrats hope that having Mr. Gillum, an African-American, at the top of the ticket, will boost Democratic turnout for the close race between Democratic Sen. Bill Nelson and the GOP nominee, outgoing Gov. Rick Scott.

President Trump has packed his fall schedule with campaign events, and GOP leaders have a game plan for extending his influence: After the president appears with GOP candidates before crowds of thousands and lays into their Democratic opponents, the footage is quickly sliced up and dropped into attack ads.

Nate Silver

​

Here’s Nate Silver’s House Race Forecast.

I mocked Nate Silver repeatedly in the last presidential election. I had trump a tossup or winning until the last presidential debate after which I expected Trump to lose. The debate was without a doubt a disaster for Trump.

A last minute fiasco for Hillary, involving Comey, changed the tide. I suspect Bernie Sanders would have won. Millennial who failed to vote would have come out for Bernie.

Regarding this forecast, I think Silver has the winning side, but I am nowhere near as confident. I have it at about 60-40.

Senate In Play for Democrats

Contrary to popular opinion, it is not that far-fetched for Democrats to win the Senate. Here’s a Senate Map from Real Clear Politics.

For the Democrats to win, they would need to hold every safe or leaning seat, plus win seven of nine tossups.

Tossups

  1. Ted Cruz (R) just moved into the tossup category for the first time. The latest poll (8-25) has Cruz with a mere 1 point lead in Texas, a state that was supposed to be a shoo-in.

  2. Donnelly (R) is blowing away Braun (D) in Indiana by 12 points but the poll is a bit stale (Early August)

  3. Missouri is a tie in the latest poll (early August)

  4. Tester (D) has a lead in Montana but the poll is stale (July)

  5. Heller (R) has a 1-point lead in Nevada but again, the poll is stale (July)

  6. Cramer (R) has a 4-point lead in North Dakota with a very stale poll (June).

  7. Blackburn (R) has a 4-point lead in Tennessee in an early August poll.

  8. Sinema (D) has a 4-point lead in Arizona a July poll.

  9. Scott (R) has a 6-point lead in Florida in a mid-August poll.

This is looking extremely favorable for the Republicans.

Even if Texas turns out to be a major upset, Democrats need to win all the states that are tied or where they are ahead (Missouri, Montana, Arizona). That would put them at 48, a loss of one seat.Toss in Nevada and North Dakota and you have a 50-50 tie.

This is going to come down to four factors.

Factors

  • Tariffs: They are backfiring, but enough to matter?

  • Turnout: Which party will be more energized?

  • Trump: Will his campaigning directly help?

  • Economy: The economy is looking solid, but there are two months to go.

We need more polls to accurately assess the situation, but Democrats’ odds of taking the Senate while not impossible, appear to be dwindling despite the poor performance of Cruz in a solid Republican state.

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