NorCal Wildfires Death Toll Climbs To 23 As “Destructive” Winds Fan Flames

After slackening earlier in the week, the dry, nearly hurricane-force winds that have been fanning the flames in Northern California picked up again overnight, revitalizing what some are already describing as the most devastating wildfires in the state’s modern history.

As of Thursday morning, 23 people have been confirmed dead in Sonoma, Napa, Mendocino and Yuba counties. Another 200 are missing. Fires have swallowed more than 3,500 homes and businesses over more than 170,000 acres. And the state’s emergency shelters are rapidly approaching their limits as more than 25,000 people have fled with more than 4,000 staying in the shelters, according to the Washington Post.

The death toll is expected to rise significantly as officers reenter the “hot zones” that were totally destroyed by the fires.

“We can’t even get into most of the areas,” Sonoma County Sheriff Robert Giordano said. “When we start doing searches, I expect that number to go up.”

Though the official cause of the fires has yet to be determined, California utility PG&E has acknowledged that the extreme winds late Sunday and early Monday had knocked trees into power lines, potentially causing dry foliage and grass to ignite.   

Destroyed residential neighborhood in Santa Rosa.

“The historic wind event that swept across PG&E’s service area late Sunday and early Monday packed hurricane-strength winds in excess of 75 mph in some cases,” said Ari Vanrenen, a PG&E spokeswoman, in a statement released after the San Jose Mercury News first revealed a possible link between the wildfires and downed power lines.

“These destructive winds, along with millions of trees weakened by years of drought and recent renewed vegetation growth from winter storms, all contributed to some trees, branches and debris impacting our electric lines across the North Bay,” she said.

Since Sunday, at least 22 separate wildfires have broken out across the region.

In a chilling hint at the potential human toll, 600 people were reported missing, though the sheriff’s office said Wednesday night that 315 have been located safe. Another 285 are still reported missing, but many may have lost cellphones or Internet access, or otherwise been unable to communicate with relatives.

More than 8,000 firefighters are working to contain the fires, which are primarily in Mendocino, Napa and Sonoma counties. In Sonoma County alone, more than a half-dozen separate wildfires have erupted since Sunday. The city of Santa Rosa, the county seat of Sonoma, has been particularly hard hit.

The fires have overwhelmed attempts by state firefighters to contain them, and are now burning mostly uncontrolled. State officials have warned that some of the big fires could merge – the total number of fires has fallen from 14 to eight – even as new blazes erupted, and thousands of people have been told to prepare to leave their homes, if they haven’t already. Evacuations continue, including one order covering the entire city of Calistoga in Napa County. In neighboring Sonoma County, residents in Geyserville were urged to leave Wednesday evening. Two hours later, another evacuation order was issued in the Sonoma Valley.

“This is a serious, critical, catastrophic event,” Cal Fire Chief Ken Pimlott said.

At least 14 wineries have burned, potentially crippling the state’s iconic wine industry.

However, wine isn’t the only “growth industry” that’s been devastated by the wildfires. Marijuana farms in the state’s “Emerald Triangle” in Mendocino Country have burned, possibly constraining supplies just before legal sales are set to begin in January 2018.  And what’s worse, because marijuana-focused businesses often don’t have access to financial services like banking and insurance, the owners could be on the hook for losses, accoding to CNN.

"Nobody right now has insurance," said Nikki Lastreto, secretary of the Mendocino Cannabis Industry Association.

Stories of people fleeing in a blind panic after spotting flames on the horizon – or worse, unsuspecting elderly victims who didn’t detect the fire until it was too late for them to run – have proliferated have caused many to wonder how the fire took so many people in  Sonoma and Napa counties by surprise?

Well, in a disturbing report, the San Francisco Chronicle reveals that Sonoma County authorities decided against sending a mass alert to cell phones Sunday evening warning about the wildfires.

As fires that would prove devastating burned across the North Bay late Sunday, Sonoma County considered sending a mass alert to cell phones in the region to warn of the rapidly spreading flames. But county officials decided against it, worried that doing so might create widespread panic and hinder the ability of first responders to combat the blazes.

 

It’s unclear how much that decision might have affected area residents’ responses to the deadly wildfires, particularly since many cell phone towers were destroyed in the blaze, making such messages undeliverable. But it adds to concerns that some in the fires’ paths were not alerted about the danger, leaving them little time to flee.

After just four days, the cost of the fires will strain the budgets of both state and federal agencies. This year alone, the US Forest Service has spent a record-breaking $2.4 billion to suppress more than 50,000 fires. The Forest

Service’s previous record was $1.7 billion in 2015. Over the last twenty years, the amount the Forest Service has allocated to fight wildfires has tripled from 16% of the overall budget to 52%. The agency estimates that by 2025, that number will increase to 67%.

Meanwhile, the fires are just one of 22 disasters that the Federal Emergency Management Agency is managing across the nation. FEMA says more than 85% of its 9,900 full-time employees are working “in the field” right now.

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Pennsylvania Wants to Get Drunk on Debt

A decade ago, state lawmakers in Pennsylvania faced a budget deficit and political pressure to privatize the Pennsylvania Turnpike, which was then run as a quasi-independent state agency.

Selling the nation’s oldest toll highway to a private operator would have netted billions for the state, but lawmakers and then-Gov. Ed Rendell thought they had a better idea. They sold bonds backed by future toll revenues—a process known in investment lingo as “securitizing”—and turned the Pennsylvania Turnpike into an off-the-books source of borrowing that would, in theory, provide a steady stream of revenue for 50 years.

It didn’t work out that way.

Turnpike tolls climbed every year to meet the new debt obligations since Act 44 passed in 2007. A drive from Philadelphia to Pittsburgh today costs more than double what it did a decade ago. After state audits showed future toll increases would be unsustainable, lawmakers in 2013 had the turnpike subsumed into the state Department of Transportation.

Even with that minor fix, Act 44 has become a case study—see this report from the University of Pennsylvania published last year—in what not to do when states take on debt.

Lawmakers in Pennsylvania, however, are preparing to make nearly the same mistake.

Facing a $1.2 billion budget deficit and political pressure to privatize Pennsylvania’s state-run liquor system, Gov. Tom Wolf wants to securitize future liquor sales to eliminate the debt. Borrowing, Wolf said last week, would “pay off nearly all of our prior year deficit and significantly reduce the need for additional temporary borrowing to pay our bills.”

The analogy with the turnpike isn’t a perfect one. Motorists have options other than toll roads when they want to drive across the state. The Pennsylvania Liquor Control Board is a monopoly on liquor store operators and wine and spirits wholesalers that kicked in $210 million to state coffers last year.

But like the Turnpike deal, borrowing risks long-term problems if the Pennsylvania Liquor Control Board can’t meet its debt obligations. And issuing bonds would also further entrench state-run liquor stores, an outdated system most states abandoned long ago.

The state faces a budget crisis because lawmakers in June delivered a $32 billion spending plan to the governor but have failed to pass a bill specifying how the budget will be funded. Wolf is asking for new taxes on gas drillers and hotels to close the budget gap.

“There are definitely questions,” House GOP spokesman Steve Miskin told WITF’s Katie Meyer this week. “The main concern is, is it legal, and can he unilaterally do it?”

The better question is whether or not he should.

Wolf’s borrowing plan correctly points out the amount the Liquor Control Board contributes to the budget each year is less than what would be required to make annual payments on the $1.2 billion in borrowing. Wolf’s top budget adviser told PennLive’s Charlie Thompson that the annual debt service would amount to about $85 million.

True, but shortsighted. Funds siphoned off to pay for new debt service will not be available for future state budgets.

And a new paper published Thursday by Jarrett Dieterle, a fellow at the R Street Institute in Washington, D.C., questions whether state-run liquor operations charging what amounts to secret taxes in the form of price mark-ups on alcohol are illegal.

The PLCB used to apply a 30 percent mark-up on the wholesale price of liquor, but recently switched to a variable markup that fluctuates from product to product. Either way, that added fee is “a tax in everything but name,” says Dieterle.

The mark-up system lacks accountability, because taxpayers can’t remove PLCB board members at the ballot box. A lawsuit built on Dieterle’s premise could undermine the state’s ability to continue collecting this unseen tax.

“This setup ultimately allows state officials to hide the bill from taxpayers and to rely on what amounts to backdoor taxes to plug budget gaps, all while avoiding politically contentious policy decisions,” Dieterle says.

Borrowing against the liquor system also serves a political purpose. Republicans in Harrisburg have been trying to privatize the state’s liquor monopoly for years, but have faced opposition from Democrats and their public sector union allies. The state-run liquor stores are staffed by public sector workers who would likely lose their jobs if privatization passed.

Burying the Pennsylvania Turnpike in a mountain of debt effectively ended the private operator debate. Piling $1.2 billion of debt onto the liquor system—and those $85 million annual payments—would likely chill the ongoing debate over its privatization.

Bonds could lock-in the current system with language preventing the state from selling the liquor system, says Nathan Benefield, vice president of the Commonwealth Foundation, a free market think tank in Harrisburg that favors privatization. Even if that doesn’t happen, the debt “could make privatization more difficult—or at least more inconvenient, as you’d have to price annual license fees high enough to generate the revenue to pay off the bonds.”

Perhaps the best reason to be skeptical about the plan is that it does nothing to correct the underlying imbalance in the state budget. Even as tax collections hit record high levels, spending continues to outstrip Pennsylvania’s (and many other states’) revenue.

With Republicans in control of the legislature and a Democrat in the governor’s mansion, it’s unlikely spending cuts or massive tax hikes will find their way into law.

A real solution is sorely needed, one not dependent on financially dicey, questionably legal borrowing to paper over a major budget hole. The state has been down this road before; lawmakers should know better this time around.

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What Wall Of Worry? Goldman Finds Investors Are “Unusually Bullish”

One month after Goldman’s proprietary crash indicator rose to 67%, the highest level since the financial crisis and dot com bubble, and suggesting a crash may be imminent, stocks continue to hit new all time highs, stumping anyone who still believes there is such a thing as an efficient market.

So has Goldman thrown in the towel on its bearish posture (recall Goldman’s 2017 year-end price target for the S&P is still just 2,400 rising to only 2,600 by the end of 2019, less than 50 points away from where it is now)? Well no, because in a note from Goldman’s options strategists, John Marshall and Katherine Fogerty, the two caution that “investor positioning is unusually bullish” ahead of earnings season.

Specifically, they look at index and single stock options pricing, which shows that “investors have positioned for near-term asymmetric upside.” As a reminder, we highlighted this earlier this week, when we showed that according to Morgan Stanley data, there has been a near record scramble to buy S&P calls, to wit: “Investors in the SPX options market have bought more delta in the last two weeks than at any point since at least 2007.”  In other words, investors are now finally buying into the rally, but not via stocks, but via levered, upside calls, a stampede which typically takes place when investors are confident there is virtually no downside risk left. It usually precedes periods of sharp risk corrections.”

And now, it’s Goldman turn: picking up where Morgan Stanley left off, Marshall warns that “in the context of the acceleration in the equity rally over the past two months, we believe this options positioning is evidence of a crowded equity market and see it as a negative sign for stocks over the next month.”

What usually happens in cases like this? “Following similar positioning over the past five years, returns were -1.9% below average in the subsequent month.

Yes, not even Goldman is bullish heading into Q3 earnings, and as a result notes that “while we typically recommend buying calls ahead of earnings events due to the strong systematic returns to that strategy, this quarter we suggest a more directionally balanced approach of buying single stock calls and puts across a broad list of names.

Translation: Goldman’s prop traders appear to have been short (unlike the bullish flow side) heading into earnings, and are now hoping for a painless way to get out.

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Facebook’s Sandberg: “We Really Have To Go After Fake Accounts, But Divisiveness Not A Reason To Remove Content”

As Facebook COO Sherly Sandberg completes her desperate DC walk of shame in an attempt to appease Mark Warner and the rest of the Facebook-scapegoaters, she gave Axios an interview to explain (strawman) what the biggest social media platform in the world will do about the Russian menace that has Made America Divided Again (allegedly)…

Sandberg said she had "very productive" meetings yesterday with congressional leaders investigating Russian efforts to use social media to meddle with the 2016 U.S. presidential election.

Sandberg told Axios at a live event today that Facebook owes the American people an apology ("Not just an apology, but determination") for their role in enabling Russian interference during the election.

Headline Dump:

  • *SANDBERG: HILLARY CLINTON WINNING WAS IMPORTANT TO ME
  • *SANDBERG: FACEBOOK HAS `ENOURMOUS' RESPONSIBILITY TO USERS
  • *SANDBERG: ALL RUSSIA-LINKED ADS SHOULD BE RELEASED
  • *SANDBERG: IT IS CONGRESS' DECISION WHEN TO RELEASE RUSSIA ADS
  • *SANDBERG: WE ARE CO-OPERATING WITH OTHER COMPANIES ON ADS
  • *SANDBERG: INVESTING IN MACHINE LEARNING TO COMBAT RUSSIA ADS
  • *SANDBERG: WE HOPE TO SET A `NEW STANDARD' FOR TRANSPARENCY
  • *SANDBERG: THERE HAVE ALWAYS BEEN `BAD ACTORS' AGAINST DEMOCRACY
  • *SANDBERG: HAVE GIVEN CONGRESS ADS AND THE PAGES THEY LINKED TO
  • *SANDBERG: WE WILL GIVE CONGRESS ALL THE MATERIAL THEY WANT
  • *SANDBERG: DIVISIVENESS IS NOT A REASON TO TAKE DOWN CONTENT
  • *SANDBERG: IF CONTENT IS FROM REAL ACCOUNTS, IT SHOULD STAY UP
  • *SANDBERG: WE WANT HELP FROM THE US INTELLIGENCE COMMUNITY
  • *SANDBERG: DECEPTIVE, DIVISIVE ADS A NEW KIND OF THREAT
  • *SANDBERG: WE ARE `DETERMINED' TO DEFEAT FOREIGN INTERVENTION
  • *SANDBERG: `FAKE NEWS' IS INFORMATION THAT IS FACTUALLY FALSE
  • *SANDBERG: FOCUS OF OUR EFFORTS IS ON GOING AFTER FAKE ACCOUNTS
  • *SANDBERG: FACEBOOK SHOULD NOT BE THE ONE FLAGGING INFO AS FALSE
  • *SANDBERG DOESN'T ADDRESS RUSSIA-TRUMP CAMPAIGN COLLUSION

And then she went "off-topic"…

  • *SANDBERG: THE WORLD IS STILL RUN BY MEN, WE NEED TO DO BETTER
  • *SANDBERG: DIVERSITY IS KEY TO ECONOMIC GROWTH
  • *SANDBERG: PEOPLE AROUND HARVEY WEINSTEIN SHOULD HAVE SPOKEN OUT
  • *SANDBERG: OCULUS GO $199 PRICE IS `STILL EXPENSIVE'

Some key excerpts…

"Things happened on our platform in this election that should not have happened, especially troubling foreign interference in a democratic election. We know we have a responsibility to do everything we can to prevent this kind of abuse."

 

"We really have to go after fake accounts,"

 

"In my meetings with the government yesterday, I talked about how we're fully cooperating with their investigation – Congress and the special counsel – we're giving our piece, but they can understand the whole picture. I reiterated that it's important they get the whole picture and explain that transparently to the American public. When they wanted to make a decision, we stand ready to help them."

 

"When you cut off speech for one person, you cut off speech for other people," she said. "The responsibility of an open platform is to let people express themselves. We don't check the information people put on Facebook before they run it, and I don't think anyone should want us to do that."

Something there for everyone – Democrats will be happy that she is cracking down on Russians… but sane realists will perhaps be appeased by her admission that censoring anything that you disagree with is not a good policy path to take.

Full interview below:

 

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Eurofighter Jet Crashes In Southern Spain; Pilot Confirmed Dead

A military plane has crashed Thursday near the Llanos Air Base in Albacete south of Madrid and the pilot has died, according to the Spanish Ministry of Defense.

The First Minister of Castilla La Mancha, Emiliano García Page, confirmed on Twitter that the pilot had died "in Albacete, serving Spain".

Before the crash, the jet was reportedly on its way back from participating in a military parade in Madrid to mark Hispanic Day, according to the Spain Report and Russia Today.

Footage shared on Twitter shows black clouds of smoke emanating from the apparent crash site near a public park called La Pulgosa, Express reported.

 

 

The plane was participating in the military parade of ‘12th of October’ – Spain’s national day –  in Madrid, reports Telecinco.

Local police in Albacete said they were working to secure the crash site and help other first responders. The MoD has opened an investigation.

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Trump Threatens to Censor Cable News, Maine-Size Hole in Antarctic Ice, Bernie Sanders to Open Women’s Convention: A.M. Links

  • “The government … does not have the right to rummage through the information contained on DreamHost’s website and discover the identity of, or access communications by, individuals not participating in alleged criminal activity, particularly those persons who were engaging in protected First Amendment activities,” ruled D.C. Superior Court Judge Robert Morin ruled D.C. Superior Court Judge Robert Morin in a case involving anti-Trump protest organizers.
  • Sen. Bernie Sanders will be the first speaker at a women’s convention organized by the same group that organized the inauguration-weekend Women’s March.
  • President Trump has been threatening cable news media on Twitter for about 24 hours now. He also threatened to pull all emergency personnel from Puerto Rico.

Follow us on Facebook and Twitter, and don’t forget to sign up for Reason’s daily updates for more content.

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JPMorgan Unexpectedly Reverses On Bitcoin, Says “Open-Minded To Regulated Use”

And here comes Citi:

  • CITI CFO SAYS CRYPTO AND DIGITAL CURRENCIES ‘WORTHY OF EXPLORATION’

* * *

It’s probably not a coincidence that on the day bitcoin hit new all time highs above $5,200, and just over a week after the WSJ reported that Goldman is planning a bitcoin trading operation, JPMorgan seems to be changing it tune.

With Bitcoin soaring nearly 100% from the bottom of the sharp selloff following Jamie Dimon’s slam of cryptocurrencies as “frauds” exactly one month ago today, bitcoin was one of the more popular topics on today’s earnings call, where JPMorgan CFO Marianne Lake confirmed what everyone already knew, namely that the technology underlying bitcoin – blockchain – is something the bank is investing in.

However, what was more interesting is that when asked whether the bank would consider looking at opportunities in digital currencies, Lake responded that JPMorgan is “open-minded” to potential use in the future for cryptocurrencies that are regulated.

This just one month after her boss, JPM CEO Jamie Dimon lashed out at the cryptocurrency, calling it a “fraud” which is “worse than tulip bulbs. It won’t end well”, will “blow up” and “someone is going to get killed.” Oh, and that “any JPMorgan trader trading bitcoin” will be “fired for being stupid.”

Fast forward one month, when bitcoin just hit a new all time high due to relentless demand, having completely ignored both China’s ban of exchange trading and Dimon’s rant, and with everyone – including Goldman – wanting to be part of it, JPMorgan clearly has no qualms about its “fiduciary obligation” when it comes to taking clients’ money to help put them in what it has called – on the public record – a fraud.

That said, Jamie Dimon was far less verbose today, and as Bloomberg notes he wasn’t keen to talk about bitcoin again when asked about the cryptocurrency during today’s call.

The question was prompted by Dimon’s comments last month that bitcoin is a “fraud.” But CFO Marianne Lake said the bank is “very optimistic” about the underlying technology of distributed ledgers and blockchain.

Suddenly portraying itself as one of the biggest supporters of crypto tech, Lake said the bank is “at the forefront of trying to look at the efficiency, scaleability of the platforms” and use cases for clients. Lake added that blockchain is “transformational for the financial services industry” and the bank is “working hard [and] investing money” in it. 

Still, Lake said the bank is “very open minded to the potential use cases….for digital currencies that are properly regulated” though that area is “quite nascent.” Which, needless to say, sounds quite  different from “we will fire anyone who is caught trading that tulip bulb fraud”

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What Not To Buy In Today’s Stock Market

Authored by Vitaliy Katsenelson via RealInvestmentAdvice.com,

Dear reader, if you are overcome with fear of missing out on the next stock market move; if you feel like you have to own stocks no matter the cost; if you tell yourself, “Stocks are expensive, but I am a long-term investor”; then consider this article a public service announcement written just for you.

Before we jump into the stock discussion, let’s quickly scan the global economic environment.

The health of the European Union did not improve in the last year, and Brexit only increased the possibility of other “exits” as the structural issues that render this union dysfunctional went unfixed.

Japan’s population has not gotten any younger since the last time I wrote about it – it is still the oldest in the world. Japan’s debt pile got bigger, and it remains the most indebted developed nation (though, in all fairness, other countries are desperately trying to take that title away from it). Despite the growing debt, Japanese five-year government bonds are “paying” an interest rate of –0.10 percent. Imagine what will happen to its government’s budget when Japan has to start actually paying to borrow money commensurate with its debtor profile.

Regarding China, there is little I can say that I have not said before. The bulk of Chinese growth is coming from debt, which is growing at a much faster pace than the economy. This camel has consumed a tremendous quantity of steroids over the years, which have weakened its back — we just don’t know which straw will break it.

S&P 500 earnings have stagnated since 2013, but this has not stopped analysts from launching their forecasts every year with expectations of 10–20 percent earnings growth… before they gradually take them down to near zero as the year progresses. The explanation for the stagnation is surprisingly simple: Corporate profitability overall has been stretched to an extreme and is unlikely to improve much, as profit margins are close to all-time highs (corporations have squeezed about as much juice out of their operations as they can). And interest rates are still low, while corporate and government indebtedness is very high — a recipe for higher interest rates and significant inflation down the road, which will pressure corporate margins even further.

I am acutely aware that all of the above sounds like a broken record. It absolutely does, but that doesn’t make it any less true; it just makes me sound boring and repetitive. We are in one of the last innings (if only I knew more about baseball) of the eight-year-old bull market, which in the past few years has been fueled not by great fundamentals but by a lack of good investment alternatives.

Starved for yield, investors are forced to pick investments by matching current yields with income needs, while ignoring riskiness and overvaluation. Why wouldn’t they? After all, over the past eight years we have observed only steady if unimpressive returns and very little realized risk. However, just as in dating, decisions that are made due to a “lack of alternatives” are rarely good decisions, as new alternatives will eventually emerge — it’s just a matter of time.

The average stock out there (that is, the market) is very, very expensive. At this point it almost doesn’t matter which valuation metric you use: price to ten-year trailing earnings; stock market capitalization (market value of all stocks) as a percentage of GDP (sales of the whole economy); enterprise value (market value of stocks less cash plus debt) to EBITDA (earnings before interest, taxes, depreciation, and amortization) — they all point to this: Stocks were more expensive than they are today only once in the past century, that is, during the dot-com bubble.

In reference to this fact, my friend and brilliant short-seller Jim Chanos said with a chuckle,

“I am buying stocks here, because once they went higher . . . for a year.”

Investors who are stampeding into expensive stocks through passive index funds are buying what has worked – and is likely to stop working. But mutual funds are not much better. When I meet new clients, I get a chance to look at their mutual fund holdings. Even value mutual funds, which in theory are supposed to be scraping equities from the bottom of the stock market barrel, are full of pricey companies. Cash (which is another way of saying, “I’m not buying overvalued stocks”) is not a viable option for most equity mutual fund managers. Thus this market has turned professional investors into buyers not of what they like but of what they hate the least (which reminds me of our political climate).

Less than 10 percent of actively managed funds are outperforming their benchmarks (their respective index funds) on a five-year trailing basis. Unfortunately, the last time this happened was 1999, during the dot-com bubble, and we know how that story ended.

To summarize the requirements for investing in an environment where decisions are made not based on fundamentals but due to a lack of alternatives, we are going to paraphrase Mark Twain:

“All you need in this life [read: lack-of-alternatives stock market] is ignorance and confidence, and then success is sure.”

To succeed in the market that lies ahead of us, one will need to have a lot of confidence in his ignorance and exercise caution and prudence, which will often mean taking the path that is far less traveled.

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Producer Prices Surge At Fastest Rate In Over 5 Years (Thanks To Hurricane Harvey)

Great news America – your standard of living just dropped little more as producer prices rose by 2.6% YoY in September, the fastest rate of increase since Feb 2012 – driven by a surge in energy prices.

Some highlights:

  • Final demand producer prices rose 0.4% in September (as expected)
  • Final demand ex food, energy rose 0.4% m/m vs est. up 0.2%
  • Final demand rose 2.6% y/y, matching estimate
  • Final demand ex food, energy rose 2.2% y/y vs est. up 2%
  • Final demand ex food, energy and trade services rose 0.2% m/m
  • Final demand personal consumption rose 0.5% m/m
  • Final demand personal consumption rose 2.3% y/y
  • Health care services (NSA) rose 1.4% y/y; unchanged m/m

However, Energy prices seem to be the biggest driver…

The index for final demand services increased 0.4 percent in September, the largest rise since moving up 0.5 percent in April. Over 60 percent of the September advance can be traced to a 0.8-percent increase in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Prices for final demand goods rose 0.7 percent in September, the largest increase since moving up 1.0 percent in January. Over 80 percent of the September advance can be traced to the index for final demand energy, which climbed 3.4 percent. (Higher energy prices were likely the result of  reduced refining capacity in the Gulf Coast area due to Hurricane Harvey.)

This no doubt relieves some pressure on the 'transitory' Fed – enabling higher rates (and yet lower living standards)

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Bill Blain: Is Today The Day?

Submitted by Bill Blain of Mint Partners

“When Black Friday comes, I’ll stand by the door and catch the grey men when they dive from the fourteenth floor..”

I’m sorry, but this morning’s porridge isn’t fresh. It was slammed together yesterday afternoon. As you receive this I’ll be doing some showy-off stuff in the City. No freshly scribbled early morning porridge today – just this “warmed up in the micro-wave” pap. (Incidently, one of my favourite words is Poppity-Ping – Welsh for microwave. Don’t say you don’t learn something every day…)

If I write anything profound last night, it might well be mediocre by this morning..

But… today is the day… finally it has arrived. It’s time to suffer..

For the past couple of months, I’ve been confidently predicting October 12th as the day Global stock markets stagger, tumble and correct. It started as a little joke – my primary reason for picking October 12th was simply that it’s the day before a Friday the 13th.. meaning it’s a great day to really ruin everyone’s anticipation of the weekend!

Later I came to the conclusion Oct 12th is as good as any other day for a market correction – and its almost 30-years since the October Hurricane and the Black Monday Crash of 1987 (which I remember well), so why not October 12th.

Amusingly, I’m now being trolled on Zerohedge by oh so erudite Americans calling me all kinds of names for apparently getting it wrong. If I ever become an omnipotent god, the first thing I shall do is bestow the gifts of humour, wit and sarcasm on our cousins across the pond.

Lots of folk say there is not going to be a market correction. The global economy is moving in the right growth direction, and policies, politics, and corporate plans are all aligned for expansion. As a result, they think the markets are impervious to any sell-off. They might be right. They look at the numbers and conclude nothing can possibly go wrong. Perhaps they are right? Perhaps there are no volatility drivers any more, perhaps something has fundamentally changed about markets and perhaps the laws of mean reversion are no longer current?

They believe the waves of political shocks washing across markets are just noise – tittle tattle of no concern for markets.

If the crash/correction doesn’t happen today, I still think we’re going to get a market correction sometime soon!

When Donald Trump is promising us massive and sensible tax reform while simultaneously insulting all and sundry in his own party, when Europe is just so f*r**g European, Nobel Prize winners say they can’t understand why the markets are so high, when leading chartists are warning of Black Swann reversals, when top fund managers are saying they are no longer convinced, and even Astrologers are warning a change in the heavens spells a 13% correction on the Dow, you have to wonder.

Does it really matter anyway?

When the correction comes, and come it will, I shall have my buying boots ready. I saw a fascinating chart showing total returns since the Global Financial Crisis crash of 2007 in dollar terms. Guess what? The best returning asset, beating all others, was US Stocks.

On that happy note, back in the office this afternoon..

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