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Wednesday, August 10, 2022

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Super Tuesday – G7 Fails to Guarantee Free Money

What the Hell were people expecting?

The markets rallied insanely yesterday on expectations of a 50-point rate cut along with coordinated cuts around the World and tax cuts and Santa Clause, etc., etc. – total idiocy.  This morning the futures are turning down already as the G7 "Emergency Meeting" has not actually come up with any actual emergency measures – it's more like one of those "hopes and prayers" messages after a school shooting – good luck guys!  

 Of course the G7 doesn't have the power to do much – only to suggest and, as Trump pointed out, the Australian Central Bank lowered their rates by another 0.5% but keep in mind that Australia was on fire a few weeks ago and NOW they have the virus AND their primary trading partners are China and Japan – that's a little worse off than we are.

Image result for mnuchin g7 cartoonKeep in mind the lunacy that is going on here – we are having emergency G7 meetings led by Steve Mnuchin (a Goldman Sachs Bankster) who is telling the Global Finance Leaders that they must lower rates to prop up the markets BECAUSE THEY ARE 8% below their all-time record highs.  Propping up the markets is very expensive and it adds to government debt and it only helps the Top 1%, who own 90% of the stocks – what is the real agenda here?

Remember that Steve Mnuchin's primary experience after leaving Goldman Sachs in 2002 was overseeing the complete collapse of Sears as a Board Member from 2005 until 2016 when Trump decided he was the perfect guy to supervise the collapse of the United States of America as well…

Going more into debt can't be the answer for every problem – especially when it's "Let's go more into debt by giving more money to rich people."  The money doesn't trickle down – it's been 40 years of this BS and it has NEVER trickled down – it's a ridiculous strategy that used to be called "Voodoo Economics" until the Republicans realized they could win elections and, more importantly, win campaign contributions by making it the cornerstone of their economic platform.

Image result for adelson trump cartoonThat's why Shelly Adelson, who's worth $37Bn, is giving $25M to Trump and $100M to other GOP candidates this year – Trump's tax policies have already saved him Billions of Dollars and will save him Billions more over the next 4 years if Trump is re-elected while Bernie Sanders thinks Wynn (WYNN) Casinos should pay more than the (negative!) -$497M on $1.25 BILLION in Operating income they (un)paid in 2018 and perhaps Shelly should pay more than 12% taxes on his $4.2Bn income.  

It's Super Tuesday today with 14 states holding primaries including Texas and California and it's very possible that Bernie will sweep and essentially lock up the nomination – that will make things interesting for Corporate Profit forecasts as roughly 20% of corporate profits are the results of the Trump Tax Cuts, something Bernie and a Democratic House will quickly put a stop to in 2021.

And well they should as we are $1.2Tn in debt this year and, if Trump does get more stimulus pushed through to boost his re-election chances then Bernie, like Barack will come into the White House in a year that we are already running a $1.5Tn annual deficit.  No wonder Shelly is fighting so hard to keep Trump in office, 3% of that deficit has been going right in Adelson's pockets!

Image result for trump vegasObviously, it would be unfair for a man earning 76,363 times more than the Average American ($55,000) to pay more taxes than the Average American ($17,000) but it would be nice if at least we didn't have to PAY HIM $497M to fund the expansion of his casino in China.  What's more likely to happen under Trump is that we will be bailing out Mr. Adelson as his "vital" casino business is having a rough quarter due to the virus.  After all, who else do we know who owns a casino that might want a bailout?  

We'll be watching those bounce lines this morning and nothing less than taking back the strong bounce lines and holding them (without failing) for 2 days will convince us the sell-off is over.  Until then, we will patiently watch and wait:

  • The S&P, for example, fell from 3,400 to 2,900 so 500 points and a bounce is 20% of the drop so 100 points so 3,000 is a weak bounce and 3,100 is a strong bounce.  
  • The Dow was 29,500 to 25,000 so 4,500 would be 900 but we'll call it 1,000 as it's not an exact science and 100 points on the Dow is 10 seconds these days – and the Dow loves round numbers.  So 26,000 is weak and 27,000 is strong. 
  • Nasdaq fell from 9,600 (because 8,000 is the base so it's the 20% line and that overrules any other spike around it) to 8,400 because we have 400-point lines working so 8,800 is weak and 9,200 is strong.  8,400 is the weak bounce line off 8,000.  
  • Russell 1,600 is the main line and 1,400 is strong support so that's the range but we fell from 1,700 back to 1,450 so 250 means 50-point bounces to 1,500 (weak) and 1,550 (strong) 

While yesterday's recovery was very impressive – it didn't happen because the virus disappeared or the supply chains restarted or all the cancelled conferences are back on.  No, it happened because people think we are getting AT LEAST a 1/2-point rate cut and we can go back to blowing our market bubble – until the virus takes the breath from our lungs, anyway...

 

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lol! "minuet" is not a typo, then, StJean?

LOL, thats most of Trump's base.

The Bug/Phil – well, there will likely be a vaccine in a year or so, and in a decade or so the elderly will be people who had mild cases and are therefore probably immune. So, no annual elderly die-off – at least not from COVID-19.

No need to fix social security and Medicare then Phil!

If we didn't already run a $1T deficit, I would say, maybe we can fiscally stimulate our way through this, but we are already so stretched. And not just the US.. Although in our case, just plain stupid moves. I can already see getting a Democrat elected to clean up the next GOP mess! And then getting blamed for the actions needed to fix the mess. 

However we'll break the country on healthcare spending saving the other 98% of the useless old people so there's that to think about too. Bernie's $60 trillion of idiocy over the next ten years will end up being $100 trillion. And there aren't enough 1%ers to pay that bill so the middle class is going to get put in the poorhouse. 

Just like when they passed the 16th amendment by telling everyone that only the rich people are going to have to pay and it's high time they paid their fair share. Well they never did and they still aren't. It's the middle class that gets fucked every time and this time will NOT be different.

Box Office – hmm. What about a super hero action flick fighting people crazed by Corona virus, and destroying the villain's lair where the virus was produced?

And if it's been done already, so much the better. Hollywood loves reruns.

All (now) 9 COVID-19 US deaths are in my county. Are we winning yet?

Only 1 new case in China today. Nothing to see here folks. Let's plant some rice!

When Italy hits about 4000 cases that will be the same as China as a % of total population. If you believe China's numbers. 

Anybody have a good indication why, despite the huge drop in the t-bill, there's still not a whole lot of movement on mortgage interest rates?  I'm still seeing my option from 2 weeks ago as the best deal around despite a nearly 0.5% drop in the t-bill over that time.

Phil / PFE – been waiting on this one for a bit – at 34 ish with a 4.3% div.  it's getting a bit interesting.  I know they are I the middle of a transition with the spinoff of the generic unit, ( although they will still own 57%) of the combined co along w/ Mylan.  In addition it will be a choppy year w/ election in this space in general.   They have significant cost savings in process which make a marked impact in '22 and this should help margins and EPS.  I'm wondering at what point you think it makes sense to get in – If the really 31 / 32 I think it makes sense to maybe buy stock and sell some puts/ calls around the position.  What are your thoughts on this?n. thanks,

Phil . PFE –  they are sitting at a 12 EPS which is historically low.  are usually in the 15 to 20 EPS range.  I'm projecting a EPS as flow for '20 – '22

2.7 / 3.3 / 3.6 with a multiple 12 to 15 gets you to a 34 to 45 / sh price  

JPH/Mtge Rates – Call around. You should be able to land low 3s for a 30 year fixed rate. Specific to your question mortgage rates are correlated to the 10 year but don't track perfectly. There is basis risk associated with mortgage bond pricing. Mortgages trade in MBS or Mortgage Backed Security pools. MBS is about a $6 trillion market. In addition to credit risk the MBS investor takes on prepay risk (you can refi at any time w/out penalty) and for that reason in a large rate rally, mortgage bonds can lag Treasuries as the investors aren't quick to pay more for bonds with loans that are "in the money" to refinance.  Also,when rates get really low lenders can reach operational capacity so they are able to take margins up versus lowering rates.  Hope that helps

thanks musicman.  I have been calling around but seeing figures that don't make much sense.  My best quote right now is 3.25% on a 30 year with $1600 in fees and $2900 in lender credits but that was a quote I got two weeks ago with the tbill around 1.5%.  I think it's a great price but I'm shocked to not see better rates after a half point move in the tbill.

I used to work in the mortgage industry and when we were already crazy busy with refi demand, we did not always drop our rates when the MBS market rates fell.  Just bumped up our margins.  Supply & demand, there are only so many mortgages we could close in a 60 – 90 day window.

One of the biggest conferences in my industry (translation) just got postponed to September! They expected people from around the world, so I guess that was a no-brainer!

30 year is 3.25 in Ohio

My brother worked for penny mack until yday and he said all there channels are backed up with refi with no relief in site could be awhile before rates move lower

I hate to have on a tin foil hat again…

There is a disconnect between the information I am getting from 3 state public health departments, the US Government, Dr. Fauci and data I have from colleagues in China, Korea and Japan. 

The interesting part:  What Dr. Fauci is saying and the information I have from my Asian colleagues is consistent!

“When you have a brand new virus, in which no one has had any experience before, that kind of gives the virus an open roadway to spread,” he said.

He also warned of the infection’s alarming mortality rate.

“If you look at the people who have just come to the attention of the health authorities, that’s 2 to 2-and-a-half percent,” Fauci said. “But even if it goes down to 1 percent, that’s still very, very serious.”

“So if it went from 2 percent to 1, [it is] still 10 times more lethal than the standard influenza that we get on a seasonal basis,” he added.

https://nypost.com/2020/03/03/top-us-doctor-says-coronavirus-now-an-outbreak-possibly-a-pandemic/

Dawgy -"However we'll break the country on healthcare spending saving the other 98% of the useless old people so there's that to think about too."

That's a terrible thing to say.  This is the generation who helped make America great. Now that they're old, they are useless ?

The baby boomers made this country great?  My God, it's  the boomers that sold the country to the financial institutions…

https://www.youtube.com/watch?v=aTZ-CpINiqg

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