by ilene - February 17th, 2017 8:33 pm
Courtesy of Joshua M Brown
The Wall Street Journal is reporting this morning that household debt grew in 2016 by the most in almost a decade. The composition is different (more auto, less mortgage) but this is exactly what the Federal Reserve has been trying to produce all this time – velocity of money moving throughout the economy.
Total household debt climbed by $226 billion in the final three months of 2016, according to a report Thursday from the Federal Reserve Bank of New York. Total household debts are now just $99 billion shy of the all-time peak of $12.7 trillion set in the third quarter of 2008 just as the banking system began crashing down. The New York Fed estimates that debt is highly likely to set a new record in 2017.
But “a new record” should be looked at in the context of the overall economy, not nominally. We’re not nearly in the same place we were headed into the financial crisis when viewed correctly, as Josh Zumbrun points out:
The New York Fed doesn’t adjust its figures for inflation. When measured against the broader economy, total household borrowing today is 67% of nominal gross domestic product, compared with about 85% in 2008.
The bad news is that much of the growth in household indebtedness has come from student and auto loans. The Fed’s data on auto loan delinquencies this week is somewhat troubling. Here’s the New York Post:
Auto loan delinquencies in the fourth quarter hit their highest level since the financial crisis, a report out Thursday revealed.
About $23.27 billion in loans were 30 days or more late as of Dec. 31 — a whopping 14 percent increase from the year earlier and the most since the $23.46 billion in the third quarter of 2008, according to the New York Federal Reserve.
Delinquencies have moved up as the credit quality of the loans has deteriorated and the length of the auto loans has increased — sometimes to 84 months.
by phil - February 17th, 2017 8:42 am
2,002 trading days.
That's how long this bull market has been going on. That is also exactly how long the 1920s bull market lasted so today is the great Crashiversary of that historic event – happy Black Friday to you all!
There is, of course, no reason to expect a significant correction today – we are simply passing a milestone that makes this the longest bull rally in history (assuming we survive the day). Of course, like many pre-crash markets, the volume sucks:
"For decades rising volumes have preceded a rise in prices in the stock market. Likewise, declining volume leads to a decline in prices,"Michael Paulenoff of Pattern Analytics said.
"Right now volumes are 50% lower in the S&P than they were in the weeks leading up to the November election when the markets saw a streak of declines," he added. "The VIX is all messed up, we are somewhere around 11 and 12 when we should be at 8."
Using Fibonacci levels, a technical analysis tool used by traders 'to identify strategic places for transactions to be placed, target prices or stop losses,' Raymond James identified the resistance point for traders to exit the market the S&P 500 at around 2,335, right above the current level of 2,349.
For me, I don't buy into that technical mumbo-jumbo. I think the market is going to pull back simply because it's ridiculously overvalued and is not taking into account all the potential negatives that lie ahead including Trade Wars, Currency Wars and Rate Hikes – among the things most likely to happen before Q1 ends in 45 more days. At which time we will have to face the reality of Q1 earnings – the ones that are supposed to be flying higher to justify these ridiculous valuations.
By the way, you are welcome on oil – down another $500 per contract on /CL Futures and that's $2,000 worth of winning oil plays alone that we've given you this week so don't tell me you can't afford to subscribe you cheap bastard! More to the point – can you afford not to in this trading environment?
by ilene - February 16th, 2017 8:33 pm
Courtesy of Joshua M Brown
How about a round of applause for Warren Buffett!
He’s in his 80’s but still evolving his investment process, and keeping an open mind to the fact that things change in this world. Unless you know a lot of older people, it’s hard to understand how monumental his latest moves have been.
This week, we learned that Warren Buffett’s Berkshire Hathaway has become the fifth largest investor in Apple after a nearly lifelong aversion to technology stocks.
We also learned that he’s upped his stakes in four airline stocks – American Airlines, Delta Airlines, Southwest Airlines and United Continental Holdings. He is the largest or the second largest holder of each of the four. This after publicly despising the airline business for decades upon decades.
For longtime Buffett watchers, these new investments are not so much of a shock as they might appear to more casual observers. Because what Buffett loves more than anything in the world is paying a fair price for a business with huge barriers to entry. In the parlance of stockpickers, we call these moats (as in the defensive ring of water that surrounded the medieval castles of yore). A good moat means sustainable profit margins and a defensible business model that allows for an investment holding period of (hopefully) forever.
An illustration of Buffett’s love for moats (and disinterest in companies without them) can also be seen in another bit of news we learned from the Berkshire 13F filing this week – he’s almost completely slashed his position in Wal-Mart. Wal-Mart is being disrupted mightily right now for the first time in its history. The story of WMT was always about how good its logistics and efficiencies were. This allowed them to beat everyone on price.
But Amazon is pulling this vaunted advantage down brick by brick, with investments in infrastructure, shipping technology and physical distribution on a massive scale. They’re building their own trucking fleets, warehouses, distribution centers and even their own fleet of UPS-like planes. Wal-Mart is no longer the cheapest or the most efficient retailer in the country – just the one…
by clarisezoleta - February 16th, 2017 1:16 pm
PhilStockWorld.com Weekly Trading Webinar – 02-15-17
For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here
00:01:43 CL Trade
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00:06:22 Seeking Alpha Market News
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00:48:58 Checking on the Markets
00:56:47 Butterfly Portfolio
00:58:07 April Sales
00:59:54 PG Charts
01:04:54 Futures Trading Charts – Light Crude Oil
01:07:43 Futures Trading Charts – Gasoline
01:12:07 Active Trader
01:14:56 More Trade Ideas
01:24:12 Oil & Gasoline Charts
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01:42:07 SLW Charts
01:47:39 Active Trader
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02:01:28 Active Trader
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by phil - February 16th, 2017 8:04 am
How many ways can they tell you?
Every Fed speaker this week has indicated that rates will be going up sooner than later and CPI and PPI coming in at DOUBLE expectations yesterday indicated the Fed is already behind the curve on raising rates and Yellen, yesterday and Tuesday said to Congress "if we do not raise rates we run the risk of causing a Recession" – seems pretty clear to me. Still the markets are only pricing in a 41% chance of a hike at the March 15th meeting – beware the ides of March indeed!
The Fed needs 3 hikes in 2017 and if not March, we're left with May 3rd, June 14th, July 26th, Sept 20th, Nov 1st and Dec 13th. They won't want to raise two meetings in a row so, if not March, then May is a must and every other after that but May is a long time to wait when inflation is double your expectations on Feb 15th. So, unless CPI and PPI have substantially calmed down over the next 30 days – expect a rate hike at the March meeting.
Another thing that's gotten ridiculously inflated is the S&P's Price to Book Value Ratio, now back over 3 for the first time since the catastrophic top of 2007. Ah, good times…
The Book Value of equity is an accounting measure that is based on the historic cost principle, and reflects past issuances of equity, augmented by any profits or losses, and reduced by dividends and share buybacks. Essentially, it's the price a buyer would be expected to pay for the company, as is, in a takeover or liquidation. The Price of an equity is nothing more than speculation on the future value of the company so a PBV of 3 indicates you are paying 3 times more than the stocks are actually worth.
Now, the average company is not going bankrupt, so it's normal to pay something for the operation of the company and your expected future income but 2-2.4 is a more normal PBV, not 3 – 3 is simply about 30% too expensive.
Of course, President Trump promises to lower those nasty taxes but, as…
by ilene - February 15th, 2017 7:13 pm
Clear the Smog
This post first appeared on BillMoyers.com.
Scott Pruitt is an alarming choice to lead the Environmental Protection Agency, yet the Republican majority in the Senate is pushing to confirm him later this week.
This is an agency, remember, that was created to protect our health, our children’s health and our environment from toxic products and pollution. President Richard Nixon, a Republican president, signed it into law.
Pruitt, currently the attorney general of Oklahoma, is on the side of the polluters. He shut down his state’s own environmental enforcement unit. He joined polluters at least 14 times to sue the EPA in order to weaken laws.
He’s a living, breathing, walking conflict of interest. The Intercept’s Sharon Lerner reported on his conflicts earlier this week. Some 15 companies with EPA enforcement actions against them in recent years have either donated directly to Pruitt, to his super PAC or to the Association of Attorneys General when he led it. Those companies include Koch Industries, Murray Energy, Peabody Coal and Monsanto.
Pruitt’s conflicts were so brazen that at the Senate hearing Democrats boycotted the vote to confirm him. Republicans, on whom polluters spend lavishly, pushed his nomination out of committee and onto the Senate floor, where it is to be voted on possibly as soon as Friday afternoon.
More evidence has surfaced that will show just where Pruitt’s loyalties lies: 3,000 emails between Pruitt and fossil fuel companies that could potentially reveal even more cozy ties with the energy industry. Some have been released already, like the letter to the EPA written by lawyers for one energy company which Pruitt then sent with his name on it to dispute the EPA’s methods for estimating methane emissions.
But the public interest group Center for Media and Democracy says Pruitt is withholding many more documents. For more than two years, the center has asked for these emails to be released. They are supposed to be public under Oklahoma’s open records rules. During the confirmation hearing, senators also…