Thursday Thrust – Powell’s Comments are Spun to Blast Market Higher
by phil - June 20th, 2019 8:33 am
“The case for somewhat more accommodative policy has strengthened.”
That is the phrase investors are taking to the bank from Powell's press conference yesterday. While the Fed Chairman didn't bow to Trump's pressure to deliver an immediate cut – he did leave the door open to interpretation that he was willing to cut rates the moment the economy begins to falter – giving investors a "Powell Put" to the market.
It wasn't the US markets that took Powell's statement as bullish but overnight the spin was in and now the Dow Futures are up 250 points as the spin doctors chimed in overnight to take any stray word Powell said and treat is like it was policy:
“The market now knows the Fed is going to ease unless the data dramatically reverse,” said Steven Blitz, chief U.S. economist at TS Lombard.
For the Fed to not cut rates at its July meeting, “it would take all of the data coming in to be consistently strong,” together with an end to trade-related uncertainty, said Seth Carpenter, chief U.S. economist at UBS.
The central bank’s rate-setting committee on Wednesday dropped language from its policy statement describing its stance as “patient”—which implied rates were on hold. Instead, it said uncertainties about the economic outlook have increased, a phrase it has used during past periods of rate cuts. “The committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,” the statement said.
Of course that means that IF Trump makes a Trade Deal with China or tensions with Iran calm down or earnings or economic data improve – then the Fed will have no reason to cut so will good economic news be bad news for the markets going forward? We'll have to see but, for now, the madness continues.
Behind this morning's rally is a collapsing Dollar as we're back to testing the 96 line, down 1% from yesterday's open so of course the markets are up 1% and it's hard to get excited about a 1% pop in the markets that coincides…
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Cannabis quality involves careful science and carefree highs
by ilene - June 20th, 2019 12:12 am
Cannabis quality involves careful science and carefree highs
Cannabis producers must ensure the quality of their products is high, but not too “high.” Dimitri Bang/Unsplash
Courtesy of Michael J. Armstrong, Brock University
Canada’s legal cannabis industry continues to make progress. Product shortages are decreasing. Store numbers are increasing. And edible cannabis regulations have just been finalized.
With these basics falling into place, the industry and its regulators can focus more on competing with black markets. Product quality is one area where legal suppliers might have advantages. But to deliver good quality cannabis, producers must simultaneously aim for both careful science and carefree highs.
This dual goal is partly due to government policy. Cannabis producers and products are federally regulated, much like pharmaceuticals. Health Canada oversees producer licences, package designs and medical cannabis sales.
Meanwhile, cannabis retailing is provincially regulated, much as with alcohol. In Ontario, for example, one provincial agency runs wholesaling and online sales. Another handles retail licences and employee qualifications.
Preventing defects
This regulatory approach emphasizes conformance to rules and specifications. Such conformance quality helps prevent product defects and consumer harm.
For example, cannabis producers must follow Health Canada’s Good Production Practices (GPP). These include testing to ensure products don’t contain pesticides or mould, but do contain the promised levels of THC (tetrahydrocannabinol) and CBD (cannabidiol).
Such testing should help legal products be more reliable than black-market ones. Indeed, some consumers have found their moderate-strength legal products provide the same high as their supposedly high-strength illegal ones did. Evidently some illicit suppliers exaggerate their products’ attributes. They know they won’t be tested.
Health Canada also requires producers and distributors to track all their cannabis. Each month they must report the amounts harvested, processed, or sold.
Many organizations exceed these legal minimums. For instance, retailers aren’t required to test products. But Québec’s cannabis agency tests 10 products per supplier each month to confirm their contents.
Similarly, some producers have adopted international quality standards like ISO 9000. Others have formed a cannabis industry quality association.…
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Record High Wednesday – Will the Fed Pop Us or Drop Us?
by phil - June 19th, 2019 8:25 am
We are so close – again.
Back on May 3rd, I explained how the market was confusing efficiency for a strong economy, noting that Corporations can make more money while the people starve. At the time, I noted that materials sector performance looked too weak for a proper bull market and, for the quarter, we're still in very bad shape with Petrolum down 9%, Natural Gas down 19% and Copper down 7.5% – those are not signs of a strong recovery.
Speaking of Copper (/HGZ19), yesterdsay morning's long trade idea from our PSW Report (subscribe here if you don't want to miss our trade ideas) with contracts jumping from $2.64 to $2.70 for gains of $3,000 per contract before lunch! Our options trade idea for Freeport-McMoRan (FCX) is slower-moving but that stock gained 1% yesterday and will really take off if there's progress with China.
Meanwhile, the indexes blasted higher as Trump tweeted out that he will be meeting with China's Xi at the G20 this weekend and, although that's kind of the point of the G20 – people are very excited about it. Also, as noted in yesterday's Morning Report, Draghi fever spread across the markets and anticipation couldn't be higher that our Fed will also signal that it's ready to cut rates, buy bonds, buy assets – whatever it takes to keep the rally going becuase what on this Earth is more important than making rich people richer?
Nonetheless, we are urging caution into the Fed Report and yesterday, in our Live Member Chat Room, we discussed a good 3-month hedge to take us, not just through today but through the summer:
Hedge/QC – Two factors in selecting a hedge is which index is ahead of the others (that's what the Big Chart is for) and which index is most likely to fail. From the Big Chart, the Dow is now back to the May high S&P close and Nas lagging a bit and RUT lagging a lot so Dow or S&P and BA may come down more and drag the Dow and others if the trade talks blow up so
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With cryptocurrency launch, Facebook sets its path toward becoming an independent nation
by ilene - June 19th, 2019 2:05 am
With cryptocurrency launch, Facebook sets its path toward becoming an independent nation
The world’s newest country? railway fx/Shutterstock.com
Courtesy of Jennifer Grygiel, Syracuse University
Facebook has announced a plan to launch a new cryptocurrency named the Libra, adding another layer to its efforts to dominate global communications and business. Backed by huge finance and technology companies including Visa, Spotify, eBay, PayPal and Uber – plus a ready-made user base of 2 billion people around the world – Facebook is positioned to pressure countries and central banks to cooperate with its reinvention of the global financial system.
In my view as a social media researcher and educator, Facebook CEO Mark Zuckerberg is clearly seeking to give his company even more political power on a global scale, despite the potential dangers to society at large. In a sense, he is declaring that he wants Facebook to become a virtual nation, populated by users, powered by a self-contained economy, and headed by a CEO – Zuckerberg himself – who is not even accountable to his shareholders.
Facebook hasn’t behaved responsibly in the past, and is still wrestling with significant public concerns – and investigations – about its privacy practices, information accuracy and targeted advertising. Therefore, it’s important to see through the hype. People must consider who is reshaping the world, and whether they are doing it in the best interests of humankind – or whether they are just seeking to benefit the new class of elite technology executives.
Humanity needs ethical leadership, and time to think through the potential repercussions of rapid technological change. That’s why, in my view, Facebook’s cryptocurrency should be blocked by financial regulators until its design has been proved to be safe for all of global society.
You might not want to trust this man. Anthony Quintano/Wikimedia Commons, CC BY
Understanding Libra
Technology companies are interested in a global currency that is native to the internet. That could allow companies like Facebook and Twitter to bring in more…
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Facebook claims Libra offers economic empowerment to billions – an economist is skeptical
by ilene - June 19th, 2019 1:53 am
Facebook claims Libra offers economic empowerment to billions – an economist is skeptical
Courtesy of Jay L. Zagorsky, Boston University
Facebook is joining the cryptocurrency craze. Should we be concerned?
The social network site on June 18 said it’s launching a new cryptocurrency called Libra with the help of 27 partners, including MasterCard, Visa, ebay and Uber.
In simple terms, Libra is meant to replace the paper bills in your wallet or purse with a digital equivalent. But unlike other cryptocurrencies like bitcoin, Libra will be directly backed by assets.
The white paper describing the vision for this new currency is filled with laudable goals such as creating economic opportunity and advancing financial inclusion. But it will take time to completely understand the ramifications of Libra, which Facebook hopes to launch in 2020.
As a macroeconomist, I believe there are economic benefits to Facebook’s cryptocurrency – but also some big potential downsides.
The benefits of Libra
Existing cryptocurrencies are not tied to physical assets. This makes them immune to the whims of national governments but also makes them prone to speculative bubbles and flash crashes.
Libra, on the other hand, is going to be 100% backed by assets. Every unit of Libra currency will be backed by an equivalent basket of bank deposits and short-term government securities in various major currencies.
As a result, Libra will not suffer wild price fluctuations. And since it will be backed by a collection of international currencies and assets, it won’t be tied to the fortunes and policies of one country either.
Economist Friedrich Hayek believed in the decentralization of currency. The Mises Institute, CC BY
Another effect of being backed by assets is that it may help lower the risk of high inflation in countries across the world. Nobel Prize-winning economist Friedrich Hayek made this very point in his book “The Denationalisation of Money.” Hayek believed everyone would be better off if people could pick among different types of private money, like Libra, instead of using government-issued money. Hayek believed issuing private money would banish…
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Terrific Tuesday – Draghi Fever Hits the Markets, Blasting Higher
by phil - June 18th, 2019 8:30 am
More free money!
This is why Goldman Sachs put Mario Draghi in charge of the European Central Bank (ECB) – exactly for a moment like this when they need to boost the US markets and this statement couldn't have been timed better – just ahead of the start of the Federal Reserve's 2-day meeting that will lead to a policy announcement tomorrow at 2pm. Draghi said the ECB is "ready to launch another round of stimulus" as inflation remains below targets.
That target is, of course, 2% and if we were over 2%, they would be raising rates to fight it so the entire process is ridiculous but the most ridiculous thing is basing your entire monetary policy on a singly, unreliable data-point. Of course, the inflation target is just an excuse because, over or under, we've seen Central Banksters call it "transitory" – meaning they will totally ingnore it when it suits them. In this case – the Masters want to see all-time highs in the markets – so low inflation is our #1 excuse to jack up the markets.
Low rates aren't free – taxpayers subsidize the wealthy by artificially reducting rates through Government Debt (where the wealthy lend the Government money to subsidize their rate cuts) and we are being forced to do this (year 10) in order to force the prices that we pay to go unnaturally higher (in order to increase Corporate Profits so the wealthy can have more money). Are you beginning to see a pattern here? It didn't take long for the Oligarch-In-Chief to weigh in on the subject:
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Inducing consumer paralysis: how retailers bury customers in an avalanche of choice
by ilene - June 17th, 2019 3:34 pm
Inducing consumer paralysis: how retailers bury customers in an avalanche of choice
Three decades of behavioural experiments show consumers given too many choices are more likely to make a bad or no choice. www.shutterstock.com
Courtesy of Robert Slonim, University of Sydney
Do you think you are paying more than you should for energy, banking, insurance, internet and phone services? You are not alone, and you are probably right.
Companies offer a growing number of deals that supposedly enable you to choose what is best for you. Every basic economics textbook tells us greater choice should deliver cheaper prices. But in reality this isn’t necessarily the case.
So what’s going on?
A big part of the answer is that businesses are taking advantage of the behavioural phenomenon of “consumer paralysis” to maximise profits.
They provide us with many plans and deals to make us feel like we are in control, but too many choices actually leads most of us to make a bad (or no) choice.
Energy pricing
Let’s consider how this works in the context of Australia’s electricity market.
In most areas of the country, residential customers have at least half a dozen retailers to choose from.
Market share by generation capacity by region, January 2018. ACCC, Retail Electricity Pricing Inquiry Final Report
Nonetheless, according to the Australian Consumer and Competition Commission, electricity prices and profit margins are among the highest in the world, and rising. The consumer watchdog calculates that in the decade to 2018 the average residential electricity bill increased by 55% (or 35% in real terms) – and only a very small part of that had to do with alleged culprits such as renewable energy.
Australia’s biggest electricity company, AGL, made a net profit of A$1.6 billion in 2018 – 194% more than the year before.
Depending on where you live, AGL offers up to 11 energy plans to residential customers.…
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Monetary Monday – Market on Pause Ahead of the Fed
by phil - June 17th, 2019 8:35 am
We're wating on the Fed.
We have "the greatest stock market in history" and "the greatest economy in history" with "record employment" but, if the Federal Reserve doesn't lower rates below the current 2.5% they have set – it will be "a disaster". Clearly, to any rational person, something must wrong with those statements existing at the same time but they all come from our President's lips and far be it for me to call Donald Trump a liar – so I guess we just have to accept that it's all true.
30-Year Fixed Mortgages are still 3.5-4.0% yet Home Sales are still trending lower and that's impacting a lot of high-paying construction jobs which, in turn, impacts the materials industry and even banking, as less people look for loans to buy homes and then the Durable Goods crowd can't sell washing machines, refrigerators, couches and TVs and there's less hardware and paint sales, etc., etc.
Housing, as always, is a major driver of the economy and it's kind of hard to ignore it when it begins to falter – but that's exactly what the market is doing at the moment. This is where the panic is coming from as even a 1% rise in rates last year has caused a 10% decline in housing activity and we NEVER came close to getting back to our pre-2008 levels in the first place.
What Trump doesn't understand is that, for the average American, low rates aren't enough to get them to invest in real estate. You can't "take advantage" of low rates on homes you can't afford and very few Americans have $50,000 to plunk down on a $250,000 home – not that there are many $250,000 homes left anymore anyway. Not only that but Property Taxes have risen out of control and Trump has limited their deductability – making the rises much harsher and not many people in the bottom 90% have tax lawyers to get them out of paying their share.
As you can see from this fairly typical example from King…
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Ray Dalio Is Kinda, Sorta, Really Wrong, Part 2
by ilene - June 17th, 2019 3:45 am
Ray Dalio Is Kinda, Sorta, Really Wrong, Part 2
Courtesy of John Mauldin, Thoughts from the Frontline
Last week we started a mini-series in the form of an open letter responding to a series of essays by Ray Dalio, the founder of Bridgewater Associates. I wrote that he was kinda, sorta wrong in Why and How Capitalism Needs to Be Reformed, Parts 1 and 2 but really, really wrong in It’s Time to Look More Carefully at ‘Monetary Policy 3 (MP3)’ and ‘Modern Monetary Theory,’ in which he basically endorsed MMT. Today I continue my response.
As I noted, Ray has done us all a service by pointing out some rarely-mentioned elephants in the room (some tinged with pink). We discuss various parts but seldom the entire creature. By that, I mean the rapidly growing potential for “progressive” control of both Congress and the White House. This stems from frustration over differences between haves and have nots, between the protected and unprotected, combined with a fascination for government solutions to our society’s perceived ills.
Last week, I basically agreed with Ray’s analysis of US income and wealth disparity. It obviously exists. The question is what, if anything, can we do about it? I think this is an important conversation, not just between two people but throughout the entire nation. The answers will make a huge difference to both our society and our children’s futures. Not to mention our own futures.
And if the response from my readers is any indication, you are also passionate about this conversation. Last week’s letter generated many long, thoughtful reader comments. Clearly, it is not just Ray and I who are worried about the country’s future direction. I find that encouraging. A national conversation is precisely what we need in these serious times.
So let’s pick up where we left off last week.
Dear Ray,
…As you can see, I really agreed with almost all of Part 1of your essay. In Part 2, I begin to see things a little differently, especially your suggested actions.
I am going to quote somewhat liberally from Part 2, primarily some portions you put in bold thus highlighting those points. They…
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Colorado Hits $1 Billion In Marijuana State Revenue
by Zero Hedge - June 15th, 2019 11:00 pm
Courtesy of ZeroHedge
Colorado has passed another major marijuana milestone, surpassing $1 billion in state revenue since it legalized the drug in 2014.
Source: Colorado.gov
Up to May of this year, Statista's Niall McCarthy notes that the state has seen more than $6 billion in total marijuana sales since the industry was given the green light.
You will find more infographics at Statista
According to CNBC, Colorado now has 2,917 licensed marijuana businesses and 41,076 people licensed to work in the industry.
As SafeHaven.com's Alex Kimani notes, marijuana companies face a pretty hostile tax environment.
First off, they are not allowed any tax deductions or credits for business expenses which can mean effective federal tax rates of as high as 90 percent. Hemp producers are luckier since recent changes to the law now allows them to deduct ordinary business expenses for tax purposes on condition that their products contain no more than 0.3 percent THC.
Second, most banks and financial institutions will not touch them with a 10-foot pole, meaning they have to pay their taxes in cash and not through checks or electronic means.
Yet, they continue to tough it out, making an important mark where they are officially recognized. According to the Tax Policy Center, states with marijuana taxes are obligated to put a portion of their funds toward important social programs ranging from education programs in Colorado and Nevada to administrative costs in California and crime reduction in Alaska.
Luckily, the IRS is trying to get a handle on the situation and hopefully, cannabis companies will soon be able to enjoy the same benefits that other industries take for granted.
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site
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