Archive for 2015

China’s Sneeze – Our Cold

 

China’s Sneeze – Our Cold

By The Banker 

ChinaIn real economic terms, and as the second-largest economic power in the world since 2005, China has been a global player for a few decades.

In global financial market terms, however, China became interesting to the rest of the world for the first time this Summer.

I use the word ‘interesting’ the way it’s meant in the disguised curse ‘may you live in interesting times.’’[1]  Interesting financial problems in China became the world’s problems for the first time recently, as we witnessed the first global financial market-swoon attributed to trouble in Chinese financial markets.

Economy v. financial markets

China right now represents a case study in the difference between an ‘economy’ and ‘financial markets.’

We kind of already know that these two things – ‘economy’ and ‘financial markets’ – are distinct, but linked. Also, they interact.

The 2008 Crash in the United States was an example of trouble in the financial markets crashing the real economy, as excessive losses from sub-prime structured mortgages, followed by further excessive losses from illiquid structured products among financial firms, eventually caused construction halts, unemployment, and foreclosures – in other words, real-economy misery.

Causation just as typically runs the other way, in which a decline in real-economy profits leads to a slow-down in financial volumes and asset prices.

A real economy and its financial markets each influence the other, but can – for a time at least – differ drastically.

The distinction between the real economy and financial markets matters when viewing China’s struggle this year, especially in light of financial market fragility.

The real Chinese economy

I think we in the US forget to acknowledge – or in our narrow-minded patriotic competitiveness we prefer to overlook – the economic miracle of China.

For my part, I think the wealth gains for hundreds of millions of Chinese represents the greatest miracle for humanity over the last 50 years.

Among urban Chinese, only 10 percent could be considered middle class or above as recently as 2002. Just ten years later, 70 percent of urban Chinese achieved middle…
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China’s “S&P” Limit Up 10%, Banks Plunge 5% As Xinhua Confirms “Stock Market Stabilized”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Presented with little comment aside from a snarky glare as Xinhua's headline "After a roller coaster rush since July 2014, China's stock market has stabilized and risks have been released to some extent, the securities regulator said Sunday." CSI-300 was limit up 10% shortly after the open, then was hammered 5% lower. CSI Banks Index is down 5% and Shanghai Composite was not as easily manipulated and is down 0.5%!!

But China Banks are geting hammered…

Who was responsible for the magical levitation? Simple!!

Spot The Difference!

Welcome to the "markets"

Charts: Bloomberg





China’s “S&P” Limit Up 10%, SHCOMP Down 1% As Xinhua Confirms “Stock Market Stabilized”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Presented with little comment aside from a snarky glare as Xinhua's headline "After a roller coaster rush since July 2014, China's stock market has stabilized and risks have been released to some extent, the securities regulator said Sunday." CSI-300 was limit up 10% shortly after the open, then was hammered 5% lower. CSI Banks Index is down 5% and Shanghai Composite was not as easily manipulated and is down 0.5%!!

But China Banks are geting hammered…

Who was responsible for the magical levitation? Simple!!

Spot The Difference!

Welcome to the "markets"

Charts: Bloomberg





CyberWar & The False Comfort Of Mutually Assured Destruction

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Jim Rickards via Bonner & Partners,

During a recent financial war-game exercise at the Pentagon, I recommended that the SEC and New York Stock Exchange buy a warehouse in New York and equip it with copper-wire hardline phones, handheld battery-powered calculators, and other pre-Internet equipment. This facility would serve as a nondigital stock exchange with trading posts.

The SEC would assign 30 major stocks each to the 20 largest broker-dealers, who would be designated specialists in those stocks. This would provide market making on the 600 largest stocks, covering more than 90% of all trading on a typical day.

Orders would be phoned in on the hardwire analog phone system and put up for bids and offers by the specialists to a crowd of live brokers. This is exactly how stocks were traded until recently. Computerized and algorithmic trading would be banned as nonessential. Only real investor interest would be represented in this nondigital venue.

In the event of a shutdown of the New York Stock Exchange by digital attack, the nondigital exchange would be activated. The U.S. would let China and Russia know this facility existed as a deterrent to a digital attack in the first place.

If our rivals knew we had a robust nondigital Plan B, they might not bother to conduct a digital attack in the first place.

Russia Strikes the Nasdaq

Financial warfare attacks vary in their degree of sophistication and impact. At the low end of the spectrum is a distributed denial of service (DDoS) attack. This is done by flooding a targeted server with an overwhelming volume of message traffic so that either the server shuts down or legitimate users cannot gain access. In such attacks, the target is not actually penetrated, but it is disabled by the message traffic jam.

The next level of sophistication is a cyberhack, in which the target, say, a bank account record file or a stock exchange order system, is actually penetrated. Once inside, the attacking cyberbrigade can either steal information, shut down the system, or plant sleeper attack viruses that can be activated at a later date.

In 2010, the FBI and Department of Homeland Security located such an attack virus planted by Russian security services inside the Nasdaq stock market system. You have probably noticed that unexplained stock…
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Should We Change the Name “Labor Day” to “Robot Day”?

Courtesy of Mish.

Happy Labor Day!

Here's the question of the day, on this Labor Day weekend: Will a robotic economy do away with human work?

That's what Barron's suggests in its pay-walled editorial commentary: The End of Labor?

The message is clear, although it’s delivered by a voice that sounds almost as mechanical as the process it describes: “Automation is inevitable. It’s a tool to produce abundance for little effort. We need to start thinking now about what to do when large sections of the population are unemployable through no fault of their own. What to do in a future where, for most jobs, humans need not apply.”

That's the only clip non-subscribers see.

Reader John pinged me with this inside quote "America will have to change the name of Labor Day to Robot Day — at least until artificial intelligence catches up, and robots become citizens."

Doom for Workers?

PBS NewsHour asks Do labor-saving robots spell doom for American workers?
 

The onslaught of automation that's replacing human workers — from golf caddies to bank tellers — may be putting us on a path to humanitarian crisis, says Jerry Kaplan, author of "Humans Need Not Apply." As technology grows and jobs become obsolete, income inequality and poverty could follow for millions of Americans. Economics correspondent Paul Solman reports.

 

My Take

Automation has always been with us.  We went from horses to cars. Candles to electricity. Phone operators to wireless.

Jobs never vanished. And standards of living rose every step of the way.

Is it different now? If so, why?

Mike "Mish" Shedlock

 




China Stocks “Death Cross”, Default Risk Hits 2-Year High As Regulators Promise G-20 ‘Whatever It Takes’ To Stabilize Market

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Even before China reopened from its 5-day holiday, regulators were pitching Chinese stocks as cheap (37.3x P/E) and less-margined (+108% YoY) and promised to "safeguard stability" in a "variety of forms" seemingly pouting cold water on The FT's recent report (and the malicious instigator of China's market crash). All of this is quite ironic, given China's chief central bankers admitted "the chinese bubble has burst." As stocks open, CSI-300 (China's S&P 500) has confirmed a 'Death Cross' which in 2008 was followed by a further 60% decline. More troubling, however, is the incessant rise in interbank rates as despite CNY530bn of liquidity injected in the last 3 weeks, overnight rates have doubled. China credit risk jumps to 2-year highs and AsiaPac stocks are generally lower at the open (as US futures dumped'n'pumped) not helped by Japanese weakness on BoJ tapering concerns. PBOC strengthened the Yuan fix for the 4th day in a row – the most since Sept 2010.

After 3 days of stronger Yuan fixes into Wednesday of last week (before China closed), PBOC went even further – fixing Yuan 0.21% stronger, extending the streak to 4 days and 0.73% stroger – the biggest 4-day move in 5 years…

  • *CHINA SETS YUAN REFERENCE RATE AT 6.3584 AGAINST U.S. DOLLAR

China's "S&P 500" just suffered a Death Cross (50-day moving average crossing below the 200-day moving-average)…

It did not end well on previous occasions and we note that Shanghai Composite is likely to suffer this technical signal within the next week also.

AsiaPac stocks are weaker…

  • *MSCI ASIA PACIFIC INDEX EXTENDS LOSS TO 1%
  • *FTSE CHINA A50 INDEX FUTURES FALL 1.1% IN SINGAPORE

Dow Futures algorithmically extinguished all the stops above Friday's highs and below Friday's lows before tumbling back to unch…

*  *  *

However, even before tonight's weakness began…

Speaking via the government's unofficial mouthpiece – Xinhua – China Securities Regulatory Commission promised…

*CHINA'S ECONOMY IS STABILIZING, IMPROVING, NDRC SAYS

*NDRC SEES CHINA ABLE TO ACHIEVE ANNUAL ECONOMIC GROWTH TARGET

we want to continue to stabilize the market and prevent systemic risk as a primary task to stabilize the market – to repair market…

when violent abnormal fluctuations in the market which may lead to systemic risks, the China Securities Finance Co., Ltd. will continue


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SeX WiTH AN EMaiL SeRVeR…

Courtesy of ZeroHedge. View original post here.

Submitted by williambanzai7.

EMAIL SEX





Why The New Car Bubble’s Days Are Numbered

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Having recently detailed the automakers' worst nightmare – surging new car inventories – supply; amid rapidly declining growth around the world (EM and China) – demand;

Automakers just unleashed a massive production surge to keep the dream alive…

With inventories at record highs (having risen for 61 straight months)…

Which would be fine if sales were keeping up – but they are not…

It appears the bubble in new car sales is about to be crushed by yet another unintended consequence of The Fed's lower for longer experiment.

Edmunds.com estimates that around 28% of new vehicles this year will be leased – a near-record pace…

Which means…

13.4 million vehicles (leased over the past 3 years in The US) – compared with just 7 million in the three years to 2011 – are set to spark a massive surplus of high-quality used cars.

Great for consumers (if there are any left who have not leased a car in the last 3 years) but crushing for automakers' margins as luxury used-care prices are tumbling just as residuals have surged.

As The Wall Street Journal explains,

Consumers focused on the dollar amount of their monthly payment have taken advantage of low interest rates to sometimes buy more car than they might otherwise be able to afford.

But, aside from the actual cost of the vehicle, rates are only part of the equation determining monthly payments. The other is what auto makers and their financing arms think the residual value will be once a typical 36-month lease is up.

Those values surged after the financial crisis.

Now, a surfeit of off-lease vehicles is starting to depress prices, particularly for expensive vehicles.

Three-year old, used premium luxury-car prices are down by nearly 7% from a year ago, according to Edmunds.com data. Along with Fed interest-rate increases, that would make leases less of a bargain and used cars more attractive.

That new-car smell may soon involve more of a splurge.

And if you are relying on more easing from The PBOC… it has made absolutely no difference whatsoever in the past 10 years…

And all of this on top of the fact that the subprime auto loan market is set to collapse…

We're gonna need a biggerer bailout… or
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The “Great Unwind” Has Arrived

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Doug Noland via Credit Bubble Bulletin,

It’s my overarching thesis that the world is in the waning days of a historic multi-decade experiment in unfettered finance. As I have posited over the years, international finance has for too long been effectively operating without constraints on either the quantity or the quality of Credit issued. From the perspective of unsound finance on a globalized basis, this period has been unique. History, however, is replete with isolated episodes of booms fueled by bouts of unsound money and Credit – monetary fiascos inevitably ending in disaster. I see discomforting confirmation that the current historic global monetary fiasco’s disaster phase is now unfolding. It is within this context that readers should view recent market instability.

It’s been 25 years of analyzing U.S. finance and the great U.S. Credit Bubble. When it comes to sustaining the Credit boom, at this point we’ve seen the most extraordinary measures along with about every trick in the book. When the banking system was left severely impaired from late-eighties excess, the Greenspan Fed surreptitiously nurtured non-bank Credit expansion. There was the unprecedented GSE boom, recklessly fomented by explicit and implied Washington backing. We’ve witnessed unprecedented growth in “Wall Street finance” – securitizations and sophisticated financial instruments and vehicles. There was the explosion in hedge funds and leveraged speculation. And, of course, there’s the tangled derivatives world that ballooned to an unfathomable hundreds of Trillions. Our central bank has championed it all.

Importantly, the promotion of “market-based” finance dictated a subtle yet profound change in policymaking. A functioning New Age financial structure required that the Federal Reserve backstop the securities markets. And especially in a derivatives marketplace dominated by “dynamic hedging” (i.e. buying or selling securities to hedge market “insurance” written), the Fed was compelled to guarantee “liquid and continuous” markets. This changed just about everything.

Contemporary finance is viable only so long as players can operate in highly liquid securities markets where price adjustments remain relatively contained. This is not the natural state of how markets function. The bullish premise of readily insurable/hedgeable market risks rests upon those having written protection being able to effectively off-load risk onto markets that trade freely without large price gaps/dislocations. And, sure enough, perceptions of liquid and continuous markets do create their own reality (Soros’ reflexivity).…
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The IMF Just Confirmed The Nightmare Scenario For Central Banks Is Now In Play

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The most important piece of news announced today was also, as usually happens, the most underreported: it had nothing to do with US jobs, with the Fed’s hiking intentions, with China, or even the ongoing “1998-style” carnage in emerging markets. Instead, it was the admission by ECB governing council member Ewald Nowotny that what we said about the ECB hitting a supply brick wall, was right. Specifically, earlier today Bloomberg quoted the Austrian central banker that the ECB asset-backed securities purchasing program “hasn’t been as successful as we’d hoped.

Why? “It’s simply because they are running out. There are simply too few of these structured products out there.”

So six months later, the ECB begrudgingly admitted what we said in March 2015, in “A Complete Preview Of Q€ — And Why It Will Fail“, was correct. Namely this:

… the ECB is monetizing over half of gross issuance (and more than twice net issuance) and a cool 12% of eurozone GDP. The latter figure there could easily rise if GDP contracts and Q€ is expanded, a scenario which should certainly not be ruled out given Europe’s fragile economic situation and expectations for the ECB to remain accommodative for the foreseeable future. In fact, the market is already talking about the likelihood that the program will be expanded/extended.

… while we hate to beat a dead horse, the sheer lunacy of a bond buying program that is only constrained by the fact that there simply aren’t enough bonds to buy, cannot possibly be overstated.

Among the program’s many inherent absurdities are the glaring disparity between the size of the program and the amount of net euro fixed income issuance and the more nuanced fact that the effects of previous ECB easing efforts virtually ensure that Q€ cannot succeed.

(Actually, we said all of the above first all the way back in 2012, but that’s irrelevant.)

So aside from the ECB officially admitting that it has become supply*constrained even with security prices at near all time highs, why is this so critical?

Readers will recall that just yesterday we explained why “Suddenly The Bank Of Japan Has An Unexpected Problem On Its Hands” in which we quoted BofA a rates strategist who said that “now that GPIF’s…
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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...



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ValueWalk

The Competition For Capital Has Made Stocks Cheap

By Michelle Jones. Originally published at ValueWalk.

The new year is upon us, and now is the time many investors look at what 2018 was and prepare for what 2019 might be. Recession jitters are starting to pick back up again, especially now that the full picture of 2018 is in the books. But what if you could pick only one theme for 2018? Jefferies strategist Sean Darby and team have a suggestion which is especially timely given that it appears to mark the end of an era.

StockSnap / PixabayVolatility carries into the new year

This past year was one of extremes, and the markets ended i...



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Phil's Favorites

Divisive economics

 

Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Insider Scoop

Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

Reminder: We are available to chat with Members, comments are found below each post.

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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