Archive for March, 2017

A Picture Says 1.2 Trillion Words

 

A Picture Says 1.2 Trillion Words

Courtesy of 

From 2007 through 2015, $835 billion was yanked out of active mutual funds and $1.2 trillion plowed into index funds. Below is the most compelling image I’ve seen to explain why this secular change is taking place.

screen-shot-2017-03-28-at-5-56-57-pm

Index funds aren’t perfect, as Ben recently laid out, but assuming you can control your behavior, which is more important than whether you own every stock in an index or only 20% of them, indexing gives investors the best chance of capturing whatever returns the market will deliver.

Check out the whole report from Vanguard, who, with $1 trillion in actively managed funds, knows a thing or two about the topic.

Vanguard: The Evolution of Active Management.





Multiple Bubbles Are Going To Bring America To Its Knees: “The Warning Signs Are There”

Courtesy of ZeroHedge. View original post here.

Authored by Daniel Lang via SHTFplan.com,

If you’ve been paying attention to the ongoing degradation of the American economy since the last financial crisis, you’re probably flabbergasted by the fact that our economy has managed to make it this far without imploding. I know I am. I find myself shocked with every year that passes without incident.

The warning signs are there for anyone willing to see, and they are flashing red. Even cursory research into the numbers underlying our system will tell you that we’re on an unsustainable financial path. It’s simple math. And yet the system has proven far more durable than most people thought.

The only reasonable explanation I can think of, is that the system is being held up by wishful thinking and willful ignorance. If every single person knew how unsustainable our economy is, it would self-destruct within hours. People would pull their money out of the banks, the bonds, and the stock market, and buy whatever real assets they could while their money is still worth something. It would be the first of many dominoes to fall before the entire financial system collapses.

But most people don’t want to think about that possibility. They want the relative peace and prosperity of the current system to continue, so they ignore the facts or try to avoid them as much as possible. They keep their money right where it is and cross their fingers instead. In other words, the only thing propping up the system is undeserved confidence.

Unfortunately, confidence can’t keep an unsustainable system running forever. Nothing can. And our particular system is brimming with economic bubbles that aren’t going to stay inflated for much longer. Most recessions are associated with the bursting of at least one kind of bubble, but there are multiple sectors of our economy that may crash at roughly the same time in the near future. For instance:

  • Eric Rosengren, the president of the Federal Reserve Bank of Boston, recently made a startling tacit admission. We may be in the midst of yet another real estate bubble. Major financial institutions in this country are in possession of over $14 trillion worth of residential real estate loans. That’s well over $40,000 for every man woman and child in America.
  • Low interest rates have fueled a bubble


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California Senator Forced To Pull Bill Banning “Fake News” After Realizing It’s Idiotic

Courtesy of ZeroHedge. View original post here.

California is known far and wide for it’s wacky regulations.  In fact, just last fall we wrote about SB 1383, a very significant piece of legislation signed into law by Jerry Brown which requires a 40% reduction in methane gas emissions from cow flatulence by 2030 (no, really…you can take a look here: “Here Are Some Of The Ridiculous New State Laws That Will Take Effect January 1st – Happy New Year!“)

But a recent piece of legislation introduced by California Assemblyman Ed Chau (D-Monterey Park), “The California Political Cyberfraud Abatement Act or AB 1104 for short, gives the “cow fart” bill a run for its money in terms of its complete idiocy.  The bill, filed Wednesday in the Assembly’s Committee on Privacy and Consumer Affairs, would have effectively made it a crime to be wrong on the Internet.

The text of the bill implicated anyone who writes, publishes or even shares news stories that could be false, if those news stories are later found to have had an impact on an election.  From the bill:

This bill would modify the definition of the terms “political cyberfraud” and “political Web site” to include Internet Web sites that urge or appear to urge the support or opposition of candidates for public office. The bill would also make it unlawful for a person to knowingly and willingly make, publish or circulate on a Web site, or cause to be made, published, or circulated in any writing posted on a Web site, a false or deceptive statement designed to influence the vote on any issue submitted to voters at an election or on any candidate for election to public office.

And even though author Ed Chau described AB 1104 as “an important step forward in the fight against ‘fake news’ and deceptive campaign tactics”, the Electronic Frontier Foundation (EFF), a digital-rights advocacy group, said the bill was “so obviously unconstitutional, we had to double check that it was real.”

Memo to California Assemblymember Ed Chau: you can’t fight fake news with a bad law.

On Tuesday, the California Assembly’s Committee on Privacy and Consumer Affairs, which Chau chairs, will consider A.B. 1104—a censorship bill so obviously unconstitutional, we had to


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Stress Testing Your Portfolio

 

Stress Testing Your Portfolio

Courtesy of 

I recently received an email about a piece of software that would allow us to stress test our portfolios. Some of the scenarios included:

  • What if interest rates rise back to historical levels or above, with 10-year treasury rates at 5%, as a result of renewed growth in the US economy?
  • What if the S&P has a strong correction and falls 20% over a short timeframe?
  • What if 10 year treasury rates rise 100 basis points as interest rates normalize?
  • What if a recovery in global economic growth drives demand for commodities and higher inflation?
  • What if economic growth pushes inflation up to the Fed’s target levels in the US?

This sounds appealing, why wouldn’t you want to know how your portfolio would respond in different environments? The better prepared you are, the more likely you are to remain calm when stress arrives. But there are a few drawbacks to going through this type of exercise:

  • These scenarios are front and center on every investor’s mind. Risk, by definition, is hard to identify in advance.
  • What if one of the scenarios does happen, but it’s not for the reason we assume. For example, what if the 10-year rises to 5%, but not as a result of growth?
  • What if the 10-year does rise to 5%, but it happens gradually over the next few years? And what if it happens in three months?
  • What if we experience a combination of these things? How many simulations should we run? And should we change anything based on the results?
  • What if your portfolio doesn’t respond the way the model predicts it will?

Stress testing your portfolio might sound like a good idea, but it can give investors a false sense of security and expose them to the biggest risk of all, what if your portfolio does respond the way the model predicts, but you’ve overestimated your true risk…
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Caught On Tape In Atlanta: “State Of Emergency, The Entire Bridge Is Compromised”

Courtesy of ZeroHedge. View original post here.

Authored by Mac Slavo via SHTFplan.com,

If you were looking for confirmation that the nation’s infrastructure needs a complete overhaul, a collapsing bridge in Atlanta may have provided it in stark imagery.

Around 6:30 p.m. Thursday night, a fire broke out under a section of the highway bridge on busy I-85 in Atlanta, Georgia. Just thirty minutes later, a huge section of that bridge burst into flames and completely collapsed.

Amazingly, no motorists were injured when this happened:

“This is as serious a transportation crisis as we could have,” Mayor Kasim Reed said, noting that he had spoken with the FBI and terrorism was not suspected at this time.

Authorities still don’t know what exactly caused the fire as the entire area is still too unsafe for crews to examine, but it is believed that PVC piping stored under the bridge (as shown on a screen capture from Google maps below) caught fire first.

screen-shot-2017-03-31-at-5-01-06-am

Georgia Governor Nathan Deal has declared a state of emergency, however, as authorities claim the entire transportation network in Atlanta has been significantly impacted, including five different public bus lines. In addition, DeKalb County Schools were canceled Friday, City of Atlanta government offices won’t open until 10 am, and all non-essential DeKalb County government workers will not be required to report in to work.

City officials have no idea when the bridge in what is otherwise a heavy traffic area will be able to be fixed.

In other words, traffic is going to be a bitch.

Meanwhile, how’s that aging American infrastructure working out?





Does ‘green energy’ have hidden health and environmental costs?

 

Does 'green energy' have hidden health and environmental costs?

Courtesy of Edgar HertwichYale UniversityAnders ArvesenNorwegian University of Science and TechnologySangwon SuhUniversity of California, Santa Barbara, and Thomas GibonNorwegian University of Science and Technology

Image 20170302 14690 o29d4o

Wind turbines require massive structures that are polluting to produce and can harm ecosystems, but these impacts compare favorably with those of fossil alternatives. www.shutterstock.com

There are a number of available low-carbon technologies to generate electricity. But are they really better than fossil fuels and nuclear power? The Conversation

To answer that question, one needs to compare not just the emissions of different power sources but also the health benefits and the threats to ecosystems of green energy.

Production of electricity is responsible for about a quarter of global greenhouse gas emissions, and demand is poised to rise as underserved populations connect to the grid, and electronics and electric vehicles proliferate. So stopping global warming will require a transformation of electricity production.

But it is important to avoid various environmental pitfalls in this transition, such as disrupting ecosystems and wildlife or causing air pollution.

In a research paper, we analyzed the impact of electricity generation from renewable sources, nuclear fission power plants and fossil fuels, with and without CO? capture and storage (CCS) technology for separating CO? and storing it underground. We accounted for the environmental effects associated with the production, operation and dismantling of facilities, as well as the production, transport and combustion of fuels. We then compared a baseline scenario to a low-carbon electricity scenario that would prevent global average temperatures from rising more than two degrees Celsius above preindustrial levels by 2050 – the point climate scientists say will avoid dangerous climate change.

Our study emphatically confirms that fossil fuels – mainly coal – place a heavy burden on the environment and that most renewable power projects have lower pollution-related impacts on ecosystems and human health. Nonetheless, no energy source is without adverse environmental side effects. Power plant siting, project design and technology choice are critical issues that investors and governments should consider…
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Why states are pushing ahead with clean energy despite Trump’s embrace of coal

 

Why states are pushing ahead with clean energy despite Trump's embrace of coal

Courtesy of Bill Ritter, Jr.Colorado State University

Image 20170329 8593 13p35fo

Alamosa Photovoltaic Plan, south-central Colorado. Energy.gov/Flickr

On Tuesday, March 28, President Trump traveled to the Environmental Protection Agency to sign an executive order rolling back a number of climate-related regulations that have taken effect over the past eight years. The president’s team claims this effort will help bring our nation closer to energy independence, and that it will begin the process of resuscitating a coal industry that has experienced serious decline in the past decade. The Conversation

In reality, it will do neither. We do not import coal into the United States. There are no jobs coming back from overseas. Moreover, and somewhat ironically, the chief reason for the decline in the coal industry is not Obama-era regulations, but a rapidly changing energy market.

Any energy market analyst will tell you that advances in hydraulic fracturing and horizontal drilling have provided us with cheap, abundant, natural gas. Add to that declining price curves in wind and solar generation, and one begins to appreciate that a difficult road lies ahead for coal. These are markets that are growing with rapid technological innovation.

USEIA

The shift is underway

The fact is that the Obama administration’s Clean Power Plan codified where the utility industry was already going. With publicly announced retirements, roughly 45 percent of the existing coal capacity in the western grid will be retired by 2030. According to utility integrated resource plans, by 2026, just shy of half of the total energy in the West will be generated from zero-emitting resources.

The 11 western states that my center had been convening around implementation of the Clean Power Plan are, collectively, in compliance with the plan’s 2026 targets under business as usual. Ironically, removing the Clean Power Plan just eliminates a potential for market-based emission trading that would lower costs to consumers and provide some states with a glide path to meet their targets.…
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American Jobs Once Again Flowing Into Mexico After Brief, Trump-Induced Pause

Courtesy of ZeroHedge. View original post here.

After Ford scrapped plans for a new facility in Mexico and continues to flood the White House with press releases detailing normal course capital expenditures to be made on domestic plants, investments that would have been made irrespective of their outsourcing ambitions, it seems as though economics are making a comeback in  guiding the capital allocations of other companies as ‘outsourcing’ is once again picking up steam among American companies.

Big announcement by Ford today. Major investment to be made in three Michigan plants. Car companies coming back to U.S. JOBS! JOBS! JOBS!

— Donald J. Trump (@realDonaldTrump) March 28, 2017

As Bloomberg points out today, after a brief pause, consultants who help American companies relocate to Mexico are once again finding themselves flush with business.

But now the pace is picking back up. Illinois Tool Works Inc. will close an auto-parts plant in Mazon, Illinois, this month and head to Ciudad Juarez. Triumph Group Inc. is reducing the Spokane, Washington, workforce that makes fiber-composite parts for Boeing Co. aircraft and moving production to Zacatecas and Baja California. TE Connectivity Ltd. is shuttering a pressure-sensor plant in Pennsauken, New Jersey, in favor of a facility in Hermosillo.

While Trump hasn’t stopped pounding his America First bully pulpit, and the future of Nafta remains uncertain, “there’s cautious optimism and a hopeful attitude that cooler heads will prevail in Washington,” said Ross Baldwin, chief executive officer of Tacna Services Inc., which facilitates relocations.

Baldwin has seen the evidence: After business ground to a halt back in November, he’s now juggling two Mexico-bound clients. San Diego-based Tacna helps manage 4,500 workers in Mexico, where factory wages are about a fifth of those in the U.S. That may explain why Mexican manufacturing jobs rose 3.2 percent in January from a year ago as they dropped 0.3 percent in the U.S.

In the end, of course, the massive wage divide between the U.S. and Mexico means that, even with a border tax, it’s still cheaper to manufacture certain products in Mexico.

Mexico

Moreover, we suspect that the renewed wave of outsourcing has been sparked, at lease in part, by Trump’s early failures to implement healthcare reform or impose his travel ban as companies grow increasingly comfortable that an import


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The Divergence Between ‘Hard’ & ‘Soft’ Data Explained (And Republican Bulls Won’t Like It)

Courtesy of ZeroHedge. View original post here.

Another dataset, another head-scratching disparity between ostensibly fulsome confidence and evidently sluggish activity.  While markets get whipsawed reacting to divergent hard and soft data points, the question that traders need to ask is whether this gap makes any sense.

Bloomberg’s Macro Strategist Cameron Crise may have the answer… If you’re willing to believe that survey respondents allow their political beliefs to color their answers, then it very well might.

I modeled U.S. economic growth since 1975 using the softest of the soft data releases: consumer confidence and the small business optimism survey. I omitted the ISM because it includes factual questions, i.e. are orders increasing?  The fit is actually pretty good for such a simple model, with an r-squared of 0.51.  As you can see, the model is now pretty upbeat.

I then disaggregated the data and compared the model forecast to actual economic growth for each president since Gerald Ford. The results were fascinating.

  • Under Republican presidencies, average annual growth has been 2.7%…but the model has forecast it at 3%.
  • Under Democrats, growth has been a little higher, at 2.8%…but the model has forecast growth of just 2.3%.

In fact, the model slightly underestimated growth during the Ford and Reagan years. Since George HW Bush, however, the trend is pretty pronounced: survey respondents have been optimistic relative to underlying growth for GOP presidents and pessimistic relative to growth for their Democratic counterparts.

It seems likely that at least some of the recent boost to confidence is evidence of the same phenomenon manifesting itself.  That being said, the model currently projects growth of nearly 3.5%, so even if we were to knock off the usual half a percent for a post-Reagan GOP presidency that would still imply a marked uptick over the post-crisis run rate.

Of course, achieving that growth will probably be contingent on the government enacting some of its more business-friendly campaign promises such as tax reform or deregulation. If they don’t, then the “optimism gap” may close, and not in a way that the White House might like.

Either way, traders will need to keep an eye on government policy and its implications. The efficacy of the Trump administration may not matter on a day-to-day basis for bond markets, but in


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  1. angelcur

    why is there such a hub bub about a like tariff for imprts price point?







 
 
 

Zero Hedge

Visualizing The 150 Apps That Power The Gig Economy

Courtesy of ZeroHedge. View original post here.

Go back in time a decade, and you’d have a tough time convincing anyone that they would be “employed” through an app on their phone.

And yet, as Visual Capitalist's Jeff Desjardins explains, in a short period of time, the emergence of the smartphone has enabled the gig economy to flourish into a multi-trillion dollar global market. And by leveraging apps like Uber, Airbnb, and Etsy, it’s estimated that ...



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Phil's Favorites

What's going on with Blue Apron?

By Ilene 

The Blue Apron business model appears, perhaps, flawed. While the service is convenient, I think it would appeal mostly to very busy people who don't have time to shop for food -- but enjoy cooking -- and have enough money that the trade off between paying for food delivery vs. spending time shopping is worth it. Here's the unfortunate stock chart and some numbers from Yahoo:

The company has been losing money, and is projected to lose money again next year. Revenue is projected to decrease in 2019 from the 2018 level, but pick up again in 2020, though still below 2018's revenue. Maybe a larger company that could integrate APRN's services into its existing infrastructure should acquire APRN and save it from its apparent...



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Chart School

Palladium minor cycle bottom

Courtesy of Read the Ticker.

Once again RealVision TV posts another trade idea, long palladium. We shall review it with our RTT cycle tools and parallel channels.







Any trader will be concerned with the supply shock at $1800 which pushed down price quickly. Profit taking maybe, sure! The question, is there more supply out (or more profit taking) there ready to dump on the market, either now or after any minor advance. This why waiting for the 'C' wave of the A-B-C to form over some more time is a good idea, and once done, we want to see solid buying moving price up before acting, after all we do not want to be early or a lonely bull (Richard Wyckoff logic). 

The parallel channel highl...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Kimble Charting Solutions

Banks Sending Bearish Message To Stocks, Says Joe Friday

Courtesy of Chris Kimble.

Quality bull markets prefer to see Banks stronger than the broad markets or at least keeping up with it. Concerns often crop up when banks reflect relative weakness compared to the S&P.

This chart looks at the Bank Index (BKX) over the past few years, reflecting a falling channel of lower highs and lower lows has taken place inside of falling channel (1). This falling channel has now been in play for the past 15-months.

The index hit the bottom of the channel in December of 2018 and a counter-trend rally took place. The rally off the December lows saw the index hit the top...



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Insider Scoop

Analyst: US Sanctions 'May Not Kill Huawei'

Courtesy of Benzinga.

President Donald Trump signed an executive order Wednesday that limits how "foreign adversaries" conduct business with U.S. companies.

What Happened

The Department of Commerce said China's Huawei and 70 related companies will be included in the "Entity ...



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Biotech

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

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

 

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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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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About Ilene:

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.

Market Shadows >>