by ilene - December 1st, 2015 7:39 pm
Lee Adler at Wall Street Examiner shows that the stock market continues to mirror his composite liquidity indicator, with both the S&P and the liquidity indicator moving higher. Here is Lee's composite liquidity indicator chart:
Macroliquidity increased slightly last week. The trend is still positive, although at a much shallower angle than during the years when the Fed was doing QE. The growth rate this year has only been around 2%.
I was expecting a Wile E. Coyote moment if the market did not buckle in the wake of the $100 billion in Treasury supply settling on November 27 and 30. It hasn’t happened yet. Instead the market rallied on December 1. It forces us to consider the idea that the money printing by the ECB and BoJ is sufficient to keep the pot boiling in the US. The same worldwide dealers and institutions are drinking from the worldwide trough of central bank swill.
For most of this year that has not been enough to keep prices trending upward, but it has been sufficient to keep prices from falling off the cliff when they threatened to. As a result, the players have once again been emboldened, and the central bank Draghi-Kuroda wizard tandem are pulling off amazing feats of market levitation.
Lee speculates that stocks are holding on to their gains because the "central bank Draghi-Kuroda wizard tandem are pulling off amazing feats of market levitation." Of course that doesn't tell us when liquidity will decline or when the current rally will become undone. But it does tell us that for now, it's rally on.
by ilene - December 1st, 2015 5:43 pm
By Biz Carson at Business Insider
Mark Zuckerberg announced Tuesday that he's giving away 99% of his Facebook shares — valued at $45 billion today — to charity during his lifetime.
The Facebook CEO announced the news in a letter to his newborn daughter, Max.
Zuckerberg and his wife, Priscilla Chan, created the Chan Zuckerberg Initiative. Its mission mimics much of what Zuckerberg and Chan's donations have focused on in the past: personalized learning, curing diseases, and connecting people.
The move is not surprising given that five years ago Zuckerberg signed the "Giving Pledge" — along with other tech billionaires such as Bill Gates — to give away the majority of his wealth.
[Picture at BI: Rick Wilking/ReutersMark Zuckerberg and his wife, Priscilla Chan.]
More from ZeroHedge:
Moments ago, in a joint letter with his wife Priscilla, Facebook founder Mark Zuckerberg announced that his wife had just given birth to a daughter, Max, but the real highlight of the letter is the part in the text in which he discloses that in order to "advance human potential" and "promote equality" for all children in the next generation, Zuckerberg begins the Chan Zuckerberg Initiative, and that in order to advance this mission, Zuckerberg will give 99% of his Facebook shares, currently worth $45 billion, to "advance this mission"
From the letter:
For your generation to live in a better world, there is so much more our generation can do.
Today your mother and I are committing to spend our lives doing our small part to help solve these challenges. I will continue to serve as Facebook’s CEO for many, many years to come, but these issues are too important to wait until you or we are older to begin this work. By starting at a young age, we hope to see compounding
by ilene - December 1st, 2015 4:36 pm
Courtesy of Wade of Investing Caffeine
It’s that time of year again when an estimated 135 million bargain shoppers set aside personal dignity and topple innocent children in the name of Black Friday holiday weekend, doorbuster discounts. Whether you are buying a new big screen television at Amazon for half-off or a new low-cost index fund, everyone appreciates a good value or bargain, which amplifies the importance of the price you pay. Even though consumers are estimated to have spent $83 billion over the post-turkey-coma, holiday weekend, this spending splurge only represents a fraction of the total 2015 holiday shopping season frenzy. When all is said and done, the average person is projected to dole out $805 for the full holiday shopping season (see chart below) – just slightly higher than the $802 spent over the same period last year.
While consumers have displayed guarded optimism in their spending plans, Americans have demonstrated the same cautiousness in their investing behavior, as evidenced by the muted 2015 stock market gains. More specifically, for the month of November, stock prices increased by +0.32% for the Dow Jones Industrial Average (17,720) and +0.05% for the S&P 500 index (2,080). For the first 11 months of the year, the stock market results do not look much different. The Dow has barely slipped by -0.58% and the S&P 500 has inched up by +1.01%.
Given all the negative headlines and geopolitical concerns swirling around, how have stock prices managed to stay afloat? In the face of significant uncertainty, here are some of the calming factors that have supported the U.S. financial markets:
- Jobs Piling Up: The slowly-but-surely expanding economy has created about 13 million new jobs since late 2009 and the unemployment rate has been chopped in half (from a peak of 10% to 5%).
Source: Calafia Beach Pundit
- Housing Recovery: New and existing home sales are recovering and home prices
by ilene - December 1st, 2015 4:30 pm
Courtesy of Lance Roberts of STA Wealth Management
As we enter the final month of the year, stocks (as measured by the S&P 500) have made little progress for the year. Unfortunately, many hedge and mutual funds are lagging well behind on a year-to-date basis. As I stated recently:
"Historical tendencies suggest a bias to the upside. This is particularly the case given the weakness this past summer which has left many mutual and hedge funds trailing their benchmarks. The need to play 'catch-up' will likely create a push into larger capitalization stocks as portfolios are 'window dressed' for year end reporting.
Importantly, the traditional 'Santa Claus' rally does not guarantee the resumption of the ongoing 'bull market' into 2016. In early November, I laid out the expectation of a market decline back to support which would facilitate the year-end advance. Here is the updated version of that chart:
So far, the expectation the strong October advance would experience a pull-back to support setting up the year-end push towards overhead resistance continues to play out.
It is quite likely that over the next couple of weeks the markets will experience a higher degree of volatility as mutual funds begin their annual distributions of short and long-term capital gains, dividends, and interest. Following those distributions, the last half of the year should be more positively biased as managers position for the end of the year reporting.
The forecast for the end of the year, however, does not carry over into 2016. With declining profitability, a weak economic outlook, surging inventories, a stronger dollar and a potential for higher rates there are may headwinds that currently exist. However, my biggest worry comes from the rising utterances of "it's a Goldilocks economy."
The Goldilocks Warning
Just this year there has been a rising number of articles suggesting that we have once again entered into a "Goldilocks Economy."
by ilene - December 1st, 2015 4:04 pm
Courtesy of Tyler Durden, Zero Hedge
Even before any major world powers were willing to go public (so to speak) with their involvement in Syria’s five-year, bloody civil war, it was difficult to keep track of the myriad rebel factions, militant groups, and jihadists battling the Assad regime for control of the country.
In a testament to just how confusing (not to mention terrifying) the situation had become by the time Iran began to mull asking the Russians for help, in April, 18,000 civilians ended up trapped in the Yarmouk refugee camp near Damascus where al-Nusra, ISIS, Hamas, the FSA, and the Assad regime were all fighting each other simultaneously in what UN Secretary General Ban ki-Moon called “the worst circle of hell.”
At that juncture, the conflict was still largely a true proxy war. That is, sure there were probably some US Spec Ops running around with the Kurds and perhaps with the FSA and there were almost undoubtedly a handful of Iranian commanders shuttling back and forth between Damascus and Tehran while coordinating with Hezbollah, but the war didn't look anything like it does now in terms of overt military action by multiple world powers.
After Quds commander Qassem Soleimaini visited the frontlines in Latakia in June, the general vowed to "surprise the world," with Iran's next move. Weeks later Soleimaini was in Moscow plotting a Russian intervention with The Kremlin. By the end of September, Russia had built an air base at Latakia and on September 30, a three star general strolled into the US Embassy in Baghdad and informed the Americans that Russian airstrikes in Syria "begin in 1 hour."
The rest, as they say is history and as we reported earlier today, things just got more complicated as it now appears both Britain and Germany are set to enter the fray. All of this is made immeasurably more difficult to grasp when you consider that it's nearly impossible to sort through which rebel groups are Saudi, Qatari, and Turkish proxies.
Now that the tense standoff between Ankara and Moscow looks set to usher in a new phase in the conflict
by ilene - December 1st, 2015 3:14 pm
By Tony Sagami
The holidays, a much-needed boost in sales for retailers, are just around the corner. A growing number of retailers, however, continue to report shrinking traffic and disappointing sales—no matter whether it’s Gucci or Red Wing.
This is what the growth of retail sales looks like for the last three months: August 0.0%, September 0.0%, October 0.1%—far below the +0.3% Wall Street was expecting.
The retail landscape is getting muddier in a matter of weeks. And recent reports make it crystal clear to me that the Grinch is definitely going to steal Christmas for retailers.
More Retailers Report Shrinking Profits
Walmart, Macy’s, and Nordstrom are the three high-profile retailers to disappoint Wall Street, but they have lots of company.
Shoe retailer DSW, Inc. lowered its full-year earnings forecast from $1.80 – $1.90 per share to $1.40 – $1.50 per share. The problem? Slow customer traffic.
The Gap reported that its October same-store sales dropped by 15% at Banana Republic and by 4% at Gap stores. Additionally, the company warned that it would miss Q3 expectations.
Urban Outfitters reported Q3 sales of $825.3 million, well below the Wall Street pipe dream of $868.9 million. Urban Outfitters’ shares closed down 7.4% to a four-year low after spitting up that revenue hairball.
Imports Are Going Down
The biggest confirmation of the retailing woes came from the Port of Long Beach, the second-busiest US port.
The Port of Long Beach handled 307,995 containers in October, down from 310,482 and 0.8% less from the same month last year. More troublesome is the 14% plunge in imported containers since August.
That tells me retailers are cutting back their pre-Christmas orders in anticipation of disappointing holiday sales and due to already bulging inventories.
Stay Away from Retail Stocks
by ilene - December 1st, 2015 2:27 pm
Courtesy of Mish.
Construction Spending Hits 8-Year High
The construction of single-family homes and apartments climbed 1 percent in October, also reaching their highest level since December 2007. Manufacturers boosted their construction spending by 3 percent. And federal government building soared 19.2 percent, the biggest increase since October 2006.
Americans are staying in rental apartments for longer, rather than buying a home. That spurred a nearly 28 percent jump in apartment and condo construction in October from a year earlier. Nearly a third of buildings completed so far this year were apartments and condos, compared to just 27 percent before the recession began in late 2007.
Public construction of schools, highways and other infrastructure rose 1.4 percent in October to its highest level in five years. It has risen 6.6 percent in the last 12 months
Construction Spending Beats Estimates
The consensus estimate for construction spending was +0.6% but the actual month-over-month reading was +1.0%.
Construction is one of the highlights of the 2015 economy with spending up a solid 1.0 percent in October for the best rate since May. Despite mixed signals from the housing sector, spending on residential construction is very solid, up 1.0 percent in October for a seventh straight gain and all of them convincing. Year-on-year, residential construction is up 16.6 percent vs 13.0 percent for total spending.
The monthly gain in the residential component is led by the key subcomponent of single-family homes, up a very strong 1.6 percent for a seventh straight gain. New multi-family homes, which have been leading the residential component all year, rose 1.4 percent. And these gains are not tied to remodeling which dipped slightly in the month.
Private non-residential spending rose 0.6 percent in October with the year-on-year rate at plus 15.3 percent. Strength here is led by outsized gains for manufacturing that are offset in part by weakness in the power and especially the commercial subcomponents.
Public spending is holding down totals with educational construction unchanged in the month though Federal spending did jump, up 19.2 percent for the largest gain in nine years that takes the year-on-year rate to plus 10.7 percent. This is
by ilene - December 1st, 2015 12:24 pm
Courtesy of Mish.
After flirting with contraction for three months, the Manufacturing ISM fell into negative territory with a 48.6 reading, below the lowest Econoday estimate of 49.7. The Econoday Consensus guess was 50.5, an improvement over the October reading of 50.1
After skirting right at the breakeven 50 line since September, ISM's manufacturing index broke below in November to 48.6 which is more than 1 point below Econoday's low-end estimate for the lowest reading since June 2009. The decline includes a significant dip for new orders which are down 4.0 points to 48.9 and the lowest reading since August 2012. At 43.0, backlog orders are in a six-month streak of contraction. With orders down, ISM's sample cut back on production, down nearly 4 points to 49.2, and cut back on inventories, down 3.5 points to 43.0. Employment firmed but remains soft at 51.3.
A convincing detail in the report is the breadth of weakness with only five of 18 industries reporting composite growth in the month. Transportation equipment, getting a boost no doubt from aircraft and motor vehicles, is among those in the plus column while the negative column includes petroleum as well as a number of capital goods industries including machinery, primary metals, and fabricated metals. Weakness in these industries points to weakness in business expectations.
Exports have been the Achilles heal [heel] of the factory sector all year. New export orders in this report held steady at 47.5 for the sixth straight sub-50 reading. Another weak detail is a second month of contraction for import orders (49.0) which are suffering their worst run in four years. Prices paid remains in deep contraction at 35.5.
Glimmers of Hope Extinguished
The ISM index came in at 50.2 last month, vs. a consensus estimate of 50.0, providing economists with glimmers of hope.
Economists then did what they normally do, which is take the prior reading and expect the next month to be better, explaining this month's consensus guess of 50.5.
That was the lowest reading since June 2009. But don't worry, there's no recession warning here, just glimmers of hope.
And with that hope, let's further dive into the numbers straight from the ISM Report.
by ilene - December 1st, 2015 12:21 pm
Courtesy of EconMatters
I have to admit that I am a news junkie. So my TV was glued to CNN on the day of the Paris terrorist attack. During its coverage, one of the CNN commentators mentioned that ISIS makes about $2 million a day in oil revenue. That piqued my curiosity and decided to find out more about ISIS oil operation.
Oil as a Strategic Weapon
According to FT, ISIS oil strategy has been long in the making since the group emerged in Syria in 2013. The group saw oil as a funding source for their vision of an Islamic state, and identified it as fundamental to finance their ambition to create a caliphate. ISIS controls most of Syria's oil fields where it created a foothold in 2013. Crude is the militant group's biggest single source of revenue.
ISIS has derived its financial strength from being the monopoly oil producer in a huge captive market in Syria and Iraq. Despite a US-led international coalition to fight ISIS, FT describes a "minutely managed" sprawling ISIS operation akin to a national oil company in just two years with an estimated crude production of 34,000-40,000 barrels per day (bpd).
$1.5 million a Day to Fund The Terrorist Group
The group sells most of its crude directly to independent traders at the wellhead for $20-$45 a barrel earning the group an average of $1.5 million a day. Without being able to export, ISIS brought hundreds of trucks and started to extract the oil and transport it. According to an FT interview of a local sheikh, an average of 150 trucks is filled daily with about $10,000 worth of oil per truck. Most traders can expect to make a profit of at least $10 per barrel.
Son of Turkey's President Is In on ISIS Oil?
The arbitrage had the potential to go a lot more than $10 a barrel when oil prices were high. Russia has accused Turkey of buying ISIS oil (allegedly the son of Turkey's President is involved, and also allegedly the U.S. is aware of it), reselling it to Japan and Israel for huge profits. Smugglers have been using boats, pumps, carrying on foot,…
by ilene - December 1st, 2015 10:45 am
Courtesy of Pam Martens.
Fed Chair Janet Yellen Takes Her Seat at an Open Meeting of the Federal Reserve Board of Governors on November 30, 2015 to Vote on a New Bailout Rule
Yesterday, the Federal Reserve Board of Governors voted 5-0 to approve a new rule that was required under the 2010 Dodd-Frank financial reform legislation to rein in the type of vast, secret, and below-market-rate lending the Fed engaged in during the 2007 to 2010 financial crisis.
But rather than rein in its hubris, the Fed seems to have gone out of its way to emphasize that it has the power to make loans to “persons,” not just financial firms whose illiquidity might pose a threat to the nation’s overall financial stability.
Most Americans understand that the U.S. is experiencing unprecedented wealth inequality and that there are many billionaires in the U.S. whose net worth exceeds that of many regional banks (think Koch brothers or the Walton family behind Walmart). But if individual “persons” should get in a financial bind, is it really the job of the Federal Reserve to put taxpayers at risk with emergency bailouts?
We seem to have devolved from a central bank whose job it was to set monetary policy to a central bank with added supervisory oversight of Wall Street banks, vast emergency lending powers, a whopping balance sheet of its own of over $4 trillion and now it’s adding carefully crafted language to its rules that make it perfectly legal for the Fed to make loans with no set dollar limits to “persons.”
The summary of the new rule that the Fed placed in the Federal Register repeatedly makes reference to its ability to lend to persons. For example, one section reads: