Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements, according to government officials and economic commentators with knowledge of the matter.
Lin Caiyi, chief economist at Guotai Junan Securities Co. who has been outspoken about rising corporate debt, a glut of housing and the weakening Chinese currency, received a warning in recent weeks, these people said. It was her second. The first came from the securities regulator, and the later one, these people said, from her state-owned firm’s compliance department, which instructed her to avoid making “overly bearish” remarks about the economy, particularly the currency.
At least one Chinese think tank, meanwhile, was told by propaganda officials not to cast doubt on a planned government program to help state companies reduce debt.
Gao Shanwen, chief economist at brokerage Essence Securities Co., told investors that “a lot of the official data aren’t reliable” and the economy still faces “big problems,” according to people who attended the closed-door event.
Words of those remarks crackled across social media. Two days later, Mr. Gao issued a clarification on his public account in the popular Chinese messaging app, WeChat, saying those remarks were “made up.” He then released a report on the economy shorn of critical commentary. Mr. Gao and representatives at his firm didn’t return requests for comment.
While restrictions on foreign media have always been tight, they are becoming tighter, with a growing list of foreign publications having their websites blocked from view within China, including The Wall Street Journal.
I am proud to be in the list of blocked sites (Global Economic Analysis was – not sure if
“Ted Cruz suspended his campaign for the White House on Tuesday night, all but confirming Donald Trump as the Republican nominee and almost certainly setting up a general election that will see the New York tycoon face off against Hillary Clinton.”
After six months of failed coalition attempts, Spain’s King Felipe dissolved parliament and announced new elections.
I reported on this last week, but the official document dissolving parliament was signed today. New elections are on June 26.
Will the results be any different?
There are 350 seats in Spain’s parliament. Courtesy of the BBC, the 2015 election went like this (blue highlights mine).
PPOE – Former Prime Minister Mariano Rajoy
PSOE – Pedro Sanchez
Podemos – Pablo Iglesias
Ciudadanos – Albert Rivera
PSOE and PPOE could have formed a coalition, but the result would not have been stable. The party leaders do not get along and the left and right generally don’t mix.
The three leftists parties could have formed a coalition, but Podemos is eurosckeptic and in favor of letting Catalonia have a vote on independence. The other two leftist parties are staunch nationalists as well as staunch euro supporters.
Ciudadanos ruled out forming a coalition with Podemos for philosophical reasons noted above.
Ciudadanos was formed as an anti-corruption party and wants nothing to do with Mariano Rajoy and his totally corrupt PPOE Popular Party either.
Last week, Rasmussen Reports gave voters the option of staying home on Election Day if Hillary Clinton and Donald Trump are the big party nominees, and six percent (6%) said that’s what they intend to do for now. Clinton and Trump were tied with 38% support each; 16% said they would vote for some other candidate, and two percent (2%) were undecided.
But Trump edges slightly ahead if the stay-at-home option is removed. Trump also now does twice as well among Democrats as Clinton does among Republicans.
A new Rasmussen Reports national telephone survey of Likely U.S. Voters finds Trump with 41% support to Clinton’s 39%. Fifteen percent (15%) prefer some other candidate, and five percent (5%) are undecided.
Trump now has the support of 73% of Republicans, while 77% of Democrats back Clinton. But Trump picks up 15% of Democrats, while just eight percent (8%) of GOP voters prefer Clinton, given this matchup. Republicans are twice as likely to prefer another candidate.
Among voters not affiliated with either major party, Trump leads 37% to 31%, but 23% like another candidate. Nine percent (9%) are undecided.
Cruz’s Image Plummets, Trump’s Improves Among Republicans
Republicans’ views of Cruz are now the worst in Gallup’s history of tracking the Texas senator. His image among Republicans and Republican-leaning independents is at 39% favorable and 45% unfavorable, based on April 24-30 interviewing, for a net favorable score of -6. The last few days have marked the first time we have seen Cruz’s image underwater since we began daily tracking in July.
In sharp contrast to the recent trajectory of Cruz’s image, we find Trump’s image on an upswing in recent days.
The accompanying chart shows the pattern of movement between the two GOP candidates over the past nine months among Republicans — based on net favorable ratings.
Barring a last minute rules change, this campaign is over. Don’t expect a rules change either, given the surge in Trump’s popularity and a plunge in Cruz’s.
Stocks [had] a rough open [on Tuesday] and the Nasdaq led the carnage. The tech component of the Nasdaq looked even worse.
Tech is important for the market. It’s the source of a lot of the dividend growth and earnings growth that investors are expecting. It’s one of the only areas capable of secular revenue growth in a time of global sluggishness. It’s comprised of the highest profile companies that are changing our world.
And it’s a massive weighting in the S&P 500.
There are other sectors within the NDX, like consumer discretionary and biotech, that also have many stocks breaking lower. But tech is still the big wheel.
Jon Krinsky at MKM Partners points out the relative weakness in the NDX that’s begun to develop on the heels of some not-so-great earnings reports from the likes of Apple and Microsoft…
The ratio of the NDX vs. SPX hit a 52-week low last week, something it hasn’t done since 2013. Much of this can be attributed to the weakness in some marquee large-cap tech names (AAPL, GOOGL, MSFT, INTC). Those four represent ~30% of the NDX. Historically the implications of this relative weakness have not necessarily been bearish (spring 2013 for example), but given that these names have a big weighting on the SPX, further deterioration would clearly be a headwind for the overall market.
His chart here:
Josh here – what’s notable is that the SPX failed at the old highs just as tech the Nasdaq was weakening. In my chart below, you can see the XLK (S&P 500 tech sector ETF, price return) break south and take the SPX down with it:
Given how closely these two indices have traded over the last 18 months, it shouldn’t be surprising that market players are now worried about a catch-up leg down for the broad markets as tech slides further.
Back in the Neutral Zone
MKM Partners – May 1st 2016
Stealing small amounts of food to stave off hunger is not a crime, Italy’s highest court of appeal has ruled.
Judges overturned a theft conviction against Roman Ostriakov after he stole cheese and sausages worth €4.07 (£3; $4.50) from a supermarket.
Mr Ostriakov, a homeless man of Ukrainian background, had taken the food “in the face of the immediate and essential need for nourishment”, the court of cassation decided.
Therefore it was not a crime, it said.
In 2015, Mr Ostriakov was convicted of theft and sentenced to six months in jail and a €100 fine.
However, his case was sent to appeal on the grounds that the conviction should be reduced to attempted theft and the sentence cut, as Mr Ostriakov had not left the shop premises when he was caught.
Italy’s Supreme Court of Cassation, which reviews only the application of the law and not the facts of the case, on Monday made a final and definitive ruling overturning the conviction entirely.
“The condition of the defendant and the circumstances in which the seizure of merchandise took place prove that he took possession of that small amount of food in the face of an immediate and essential need for nourishment, acting therefore in a state of necessity,” wrote the court.
Given that theft is no longer a crime, I expect an enormous outbreak of theft from Italian grocery stores.
Analysts forecast industry-wide sales will rise 5% in April to set a new monthly high and the selling pace will eclipse 17.5-million vehicles, putting the auto industry back on track to beat last year’s sales record.
Fiat Chrysler Automobiles NV on Tuesday posted a 5.6% rise in April sales, driven by continued demand for its Jeep brand. It was the Italian-U.S. auto maker’s best April in 11 years as Jeep brand sales climbed 17% for their best April yet, with the Renegade and Compass logging their best monthly sales ever.
Ford Motor Co. logged 3.6% growth to 229,739 light vehicles sold in the month. Ford brand SUVs saw their best April sales ever, while F-series pickups passed the 70,000 mark for a second month.
General Motors Co.’s U.S. sales fell 3.5% in the month due to a pullback on fleet business. Retail sales rose 3.3%, helped by stronger sales at its Buick, GMC and Chevrolet brands.
“Following a disappointing March, we expect sales to get back on track in April,” said Kelley Blue Book analyst Tim Fleming.
Car makers benefited from an extra selling day in April, as well as the Easter holiday falling in March, giving them five full weekends of sales. Typically, new-car sales start to pick up in the spring when there is better weather and longer days.
Overall, automakers on Tuesday are expected to report the best-ever April for vehicle sales in the United States, adding fuel to the fire for another record-breaking year.
Analysts anticipate the industry to have sold more than 1.51 million car and trucks last month, a roughly 4 percent increase from a year ago that would top the April sales record of just over 1.5 million in 2005.
“Even though Q1 ended with a relatively lackluster March, the industry still as strong as ever, and this month’s
On April 21, Wall Street On Parade reported that the U.S. government (also known as the U.S. taxpayer) was on the hook for potentially tens of billions of dollars in derivative losses at Freddie Mac and Fannie Mae – the two companies the government put under conservatorship during the Wall Street financial collapse of 2008. (See related article below.)
This morning, Freddie Mac is adding further angst to this potential derivatives blowup scenario by reporting that it lost $4.56 billion in its derivatives portfolio in just the first three months of this year – a stunning 90 percent increase over what it lost in derivatives in the first quarter of 2015. That brings its derivative losses for all of 2014, 2015 and the first quarter of 2016 to $15.54 billion. (See chart below.) This is certain to bring gasps from some members of Congress.
While positive net income has offset the derivative losses in recent years, making Freddie Mac profitable overall, the company said in its press release this morning that it had an overall $354 million net loss for the first quarter of this year, meaning the derivative losses fully wiped out the earnings it makes from its portfolio of mortgages and other sources of positive income such as the fees it collects for guaranteeing mortgages.
Despite acknowledging that its net worth is a mere $1 billion, Freddie Mac said in its press release that it would not be drawing further from the U.S. Treasury at this time. Under the conservatorship arrangement, the U.S. Treasury has already infused over $187.5 billion into Freddie Mac and Fannie Mae. But according to a government audit released by the Government Accountability Office (GAO) on February 25 of this year, the U.S. Treasury has committed taxpayers to an additional $258.1 billion that Freddie Mac and Fannie Mae can draw down.
The original conservatorship plan called for the government to receive senior preferred stock in both companies that would pay a 10 percent dividend. (Since both were insolvent at the time, the rate was set high as it would be for a junk-rated company.) After years of the 10 percent dividend being paid by additional draw downs of money from the Treasury (sort of like taking out a home mortgage and asking the same bank to advance you the money to pay the mortgage interest instead of…
I hope it's not a great shock to discover all the incentives in our status quo are perverse: those who rig the financial system while creating zero real value, jobs, goods or services reap all the big profits; those who take near-zero responsibility for their own health are subsidized by those who take responsibility for their own health; those who try to start enterprises and hire workers are saddled with endless regulations, junk fees and taxes while those who game the system to get welfare (household or corporate) skim the cream for doing nothing for their community or for the nation.
Systems in which all the incentives are perverse implode under their own weight. Those who struggle to pay the mounting costs of Imperial Over-Reach, crony-capitalism and all the skimmers and scammers eventually go bankrupt or quit in disgust, while the army of state dependents and cronies explodes higher.
It has taken decades for the incentives to become so perverse, so we no longer notice the perversity or the pathological consequences.
High-frequency traders and financiers with the ready ear of well-paid political lackeys, stooges, toadies and sycophants run never-lose skimming operations and pay lower tax rates than self-employed and small business owners.
Corporations have increased their share prices not by earning more money by producing more goods and services but by borrowing cheap money from the Federal Reserve and buying back outstanding shares.
Corporations pay less tax if they move production overseas and keep their profits in other countries.
If I wreck one vehicle after another due to reckless irresponsibility, what happens to my insurance premiums? They skyrocket, of course, reflecting the higher risks that result from my behavior and poor choices. Nobody thinks safe drivers should subsidize irresponsible drivers.
But if I wreck my health by recklessly pursuing risky behaviors, I pay the same as people who are careful "drivers" of their health. What sort of incentives does this system generate?
If I want to buy an over-priced home, the system is loaded with incentives to encourage that potentially poor financial decision. But if I want to launch a small enterprise, the incentives are all perverse: steep upfront fees, taxes from the first dollar,…
A respected reporter recently asked me what were a few important things I had learned from all this and all of that during the past decade and I surprised myself and perhaps him by answering that I now realized that younger generations ...
The economic mover and shaker this week is Friday's employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, the most publicized being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository).
Today we have the April estimate of 156K new nonfarm private employment jobs from ADP, a decrease from March's 194K, a downward revision from 200K.
The 156K estimate came in well below the Investing.com forecast of 196K for the ADP number.
By Jacob Wolinsky. Originally published at ValueWalk.
The 2016 Sohn Conference starts on Wednesday (May 4th) at David Geffen Hall, Lincoln Center10 Lincoln Center Plaza New York City. As is our custom at ValueWalk we will be providing in-depth coverage of the most anticipated event of the year. The line up this year once again does not disappoint.
Over the past 12-15 months, the majority of global stock markets have been in a down trend, creating a series of lower highs and lower lows. The German Stock market peaked around 6-weeks ahead of the S&P 500 last year and could be considered a global trend leader, creating a domino effect.
Below updates the pattern in the DAX index-
CLICK ON CHART TO ENLARGE
The DAX index remains inside of long-term rising channel (A), no doubt ...
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Remember this? It was Monday. PRGO is down from around $130 to under $100 since I started following it LAST WEEK. That's down almost 25% in a week, and almost 50% in the last year. So I wrote,
"Perrigo CEO Joseph Papa leaves Perrigo (PRGO) to lead Valeant (VRX) while PRGO issues a warning about missing earnings expectations. Not surprisingly, PRGO stock plummeted today.
Robert Ingram, Chairman of the [Valeant] Board, stated, "The Board has conducted a thorough search process and believes that Joe is the ideal leader for Valeant at this time. He has a strong shareholder orientation,...
Although we try to stay focused on finding and managing promising trade ideas, the comments in the comment section sometimes take a political turn (for access, try PSW — click here!). So today, Jean Luc writes,
The GOP debate last night was just unreal – are these people running to be president of the US or to lead a college fraternity! Comparing tool size? The only guy that looks semi-sane is Kasich. The other guys are just like 3 jackals right now.
And something else – if Trump is the candidate, that little Romney speech yesterday is probably already being made into a commercial. And all these little snippets from the debate will also make some nice ads! If you are a conservative, you have to be scared now.
Phil writes back,
I was expecting them to start throwing poop at each other &n...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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