Federal Budget Deficit Growing – Bad News Is It Makes US Economy Look Good
by ilene - July 17th, 2019 6:37 pm
Federal Budget Deficit Growing – Bad News Is It Makes US Economy Look Good
Courtesy of Lee Adler, Liquidity Trader
The US Federal Budget Deficit is growing. That makes the US economy look good. And that’s bad news.
Federal Tax revenues rose in June. The calendar also made government outlays look smaller than they were. Thus the deficit looked smaller than it really was.
To the media’s credit, most reported that the deficit grew on a year to date basis. Others reported that the June decline was due to timing of payments, and would have been larger if not for the calendar. So for once, they got it right.
But they left out what it means to you as an investor. It is emphatically not good news. Here’s why.
Growing Federal Budget Stimulates the US Economy
What was hidden in June showed up in July. The budget deficit continues to grow. That’s stimulus. It boosts US economic numbers.
But those numbers don’t tell the true story of the bifurcation of the US economy, which shows up in other tax data. That data shows that the few do very well indeed, boosting the top line data. But the majority are struggling to keep up. As more consumers fall behind, the US economy is being hollowed out.
This report is excerpted and modified from Federal Budget Deficit Simultaneously Stimulating and Eviscerating Won’t End Well.
That doesn’t matter to the stock market in the short run. But it remains to be seen if a bull market can continue to be built upon an ever-narrowing economic foundation.
Revenue Comparisons Are Improving But Below Pre Cut Level
Meanwhile, year to year revenue comparisons have been improving since February. That comparison is now with like to like tax rates effective after the big 2018 tax cut. The monthly comps now show modest growth. The question will be how much is due to real growth and how much will be due to inflation, with employee earnings inflating at 5% in June and 3.3% on average this year.
Proponents of the 2018 tax cut have said
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Aussie Dollar About To Send Bullish Message To Precious Metals?
by kimblechartingsolutions - July 17th, 2019 11:15 am
Courtesy of Chris Kimble.
The Australian Dollar and its ETF (NYSEARCA: FXA) have traded sideways for much of the past 4 years (see blue shaded area on chart above).
And since the Aussie Dollar and precious metals are highly correlated, this hasn’t helped gold and silver.
But this setup may be changing soon as a big test comes into play for the AU$.
It is currently testing falling resistance on a bullish falling wedge pattern.
If it succeeds in breaking out at (1), it will send metals and commodities a short-term bullish message. Stay tuned!
This article was first written for See It Markets.com. To see the original post CLICK HERE
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To become a member of Kimble Charting Solutions, click here.
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Three Iranians Caught Smuggling “Many Tons” Of Nuke-Related Material Out Of US
by Zero Hedge - July 17th, 2019 9:05 am
Courtesy of ZeroHedge. View original post here.
A major case involving three Iranian citizens who for years allegedly smuggled nuclear related materials into Iran from a US broker has been revealed this week in a New York federal court.
The scheme involved illegally exporting “many tons” of carbon fiber out of the United States between 2008 and 2013, which federal prosecutors say violated existing US sanctions and a UN embargo, given the direct military and nuclear use capability of the substance.
One of the three accused, Behzad Pourghannad, was successfully extradited from Germany but the other two, Ali Reza Shokri and Farzin Faridmanesh, remain at large. The conspiracy involved an unidentified broker shipping the banned substance out of the US to Iran via third parties in Europe and the UAE, while paperwork was fabricated to circumvent US export laws.
In a statement, US attorney for the Southern District of New York, Geoffrey S. Berman described that, “Carbon fiber has many aerospace and defense applications, and is strictly controlled to ensure that it doesn’t fall into the wrong hands. Pourghannad and his co-defendants allegedly went to great lengths to circumvent these controls and the United States’ export laws. Together with our law enforcement partners, we will continue to protect our nation’s assets and protect our national security.”
And a statement published to the Department of Justice website noted, “Pourghannad is alleged to have sought to procure for Iran large amounts of carbon fiber — a commodity that can be used in the enrichment of uranium.” The DOJ and FBI further described the conspiracy as seeking to assist ”Iran’s destabilizing efforts and make Americans less safe.”
An FBI counterintelligence division chief added, “Iran remains determined to acquire U.S. technology with military applications, and the FBI is just as determined to stop such illegal activity,” according to NBC.
The indictment doesn’t reveal precisely how much carbon fiber is believed to have made it to Iran, and the American-based source of the UN embargoed material is not named, and it’s further unclear if the source was consciously involved in trying to evade sanctions on Iran. The men each face multiple 20-year sentences, but it’s unknown if law enforcement are close to apprehending two…
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Will We Hold It Wednesday – S&P 3,000 Edition
by phil - July 17th, 2019 8:33 am
So far, so good.
Just a few days into earnings season but no major blow-ups yet and the S&P 500 is holding up over the 3,000 line but the volume finally increased yesterday and it was down volume, not up. We have to hold 3,000 for the whole weak to make a meaningful breakout and this evening we get earnings from a lot of heavy-weights like EBAY, NFLX and IBM and MSFT reports tomorrow evening so we'll have some clues as to how Big Tech is doing.
Bank earnings have been good so far and Dow components JPM, GS and even JNJ beat their estimates yesterday though the overall index still finished lower as sellers showed up and found not enough buyers to keep the prices level. That's the great danger in a low-volume rally: When it comes time to sell, there's no one to buy it from you and prices can drop very quickly.
We're in a very strange market at the moment where earnings are clearly coming down but the market just keeps going up. There's a huge disconnect from reality and, as I've said before, Fear of Missing Out (FOMO) is keeping people in but this market can turn ugly very quickly and it's VERY important to have hedges in your portfolios and, keep in mind, CASH!!! is the best hedge there is.
We'll be reviewing our Short-Term Portfolio (STP) this morning (and in our Live Trading Webinar at 1pm, EST) and making sure those hedges are enough to protect our Long-Term Portfolio (LTP) and, if not, then either we need more hedges or less positions!
Our Money Talk Portfolio has its own hedges and we last reviewed that over at Seeking Alpha on May 16th at $112,908 and, since we only adjust this portfolio live on BNN's Money Talk show and since I haven't been on since (will be on in August), the positions remain untouched but on track as we're now up to $135,583, so it's been a very good two months with a $22,675 gain, which is 45% of our $50,000 base! SQQQ calls expired worthless and TZA had a reverse split but nothing else has changed but the rally has given us a huge chunk…
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Global Rally Fizzles As Bank Earnings Muzzle Low-Volume Euphoria
by Zero Hedge - July 17th, 2019 8:18 am
Courtesy of ZeroHedge. View original post here.
S&P futures pared gains, and traded unchanged as mixed Q2 earnings and disappointing hints by banks on future revenue gave traders concerns about the sustainability of the rally, while European stocks struggled for traction amid fresh trade tensions.
US equity futures gave up some of their earlier (low-volume) gains after Bank of America’s net interest income fell short of analysts’ expectations, though CEO Brian Moynihan said the economy appeared to be improving. The Stoxx Europe 600 index nudged higher amid a mixed bag of reports from companies including Swatch, Ericsson and ASML. In the US, earnings from the big banks JPMorgan, Citigroup and Wells Fargo this week have raised concerns that lower interest rates will pressure profits at a time when revenue growth is already slow.
Adding some nervousness to markets was a threat from U.S. President Donald Trump to tax another $325 billion worth of Chinese goods. And in the latest evidence that trade tensions were hurting businesses, railroad CSX reported a quarterly profit that missed estimates and lowered its full-year revenue forecast, sending its shares 7.2% lower. Also worth noting, on Tuesday more dovish comments from Federal Reserve Chairman Jerome Powell did little to stir markets, suggesting easing may be fully priced in as Bloomberg points out.
Meanwhile, in Europe, strong quarterly profit from Dutch chip equipment maker ASML helped semiconductor makers including Advanced Micro Devices, Micron Technology, Intel and Applied Materials rise between 0.4% and 1.6%. Qualcomm jumped 5.6% after the U.S. Justice Department asked a federal appeals court to pause the enforcement of a sweeping antitrust ruling against the mobile chip supplier.
Earlier in the session, Asian stocks slipped for a second day, with South Korean shares leading declines amid regional and global trade tensions. Technology and energy were among the weakest sectors after U.S. President Donald Trump reiterated that he could impose additional tariffs on Chinese imports if he wants. Most markets in the region dropped, while Australia bucked the trend with the S&P/ASX 200 gauge up 0.5%, supported by BHP Group after the miner forecast iron ore production will rise as much as 6% this fiscal year. China’s Shanghai Composite Index fell as large financial companies led losses. The Kospi retreated 0.9%, dragged by Samsung Electronics and SK Hynix, while the Topix closed 0.1% lower. India’s Sensex added 0.2%, with Kotak Mahindra Bank and Infosys…
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BofA Net Interest Margin Unexpectedly Tumbles, As Lower Rates Add To Woes
by Zero Hedge - July 17th, 2019 7:42 am
Courtesy of ZeroHedge. View original post here.
With Bank of America reporting Q2 earnings this morning, the results of the big-4 are now all out, and the emerging picture is one where declining interest rates and future rate cuts threaten to gut the core revenue stream of the largest US banks to the point where US banks are in danger of being Europeanized.
To wit: for Q2, Bank of America reported an 8% increase in net income, which rose to $7.3BN from a year ago, resulting in EPS of $0.74, better than the $0.71 expected even as revenue of $23.1BN, up 2% on the year, came just short of the $23.25 expected. The 8% jump in net income was largely the result of cost-cutting with noninterest expense of $13.3 billion flat on the year, while interest tax expense actually declined by 6% to $1.6 billion, resulting in the net income jump.
As a result of modest revenue growth and flat or declining expense growth, BofA reported positive operating leverage for the 18th consecutive quarter.
Of course, with investors focused first and foremost on bank trading results, BofA came largely as expected, with 2Q trading revenue excluding DVA $3.27 billion, just above the estimated $3.26 billion, but 10% below last year’s $3.63 billion. The decline “reflects lower sales and trading revenue and lower investment banking fees, partially offset by a gain on sale of an equity investment (excluded from sales and trading revenue).”
Looking at the trading segments, FICC was a small beat while equities were a miss to expectations:
- 2Q FICC trading revenue excluding DVA $2.13 billion vs estimate $2.08 billion, and -7.1% y/y primarily due to lower client activity across most products.
- 2Q equities trading revenue excluding DVA $1.15 billion vs estimate $1.18 billion, and -12% y/y primarily due to weaker performance in EMEA derivatives vs. a stronger year-ago quarter.
At the same time, non-interest expense decreased 2% vs. 2Q18, driven by lower revenue-related compensation, while VaR remained subdued, at just $34 in Q2, down from 37 in Q1.
The average returns from trading came even as BofA had another perfect, literally, quarter, with CFO Donofrio saying that “we had no days with trading losses in the quarter.“
Yet while BofA’s trading division was lackluster for another quarter, similar to most of its peers, it was…
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EU Launches Amazon Anti-Trust Probe
by Zero Hedge - July 17th, 2019 7:34 am
Courtesy of ZeroHedge. View original post here.
Now that the EU’s anti-trust regulator is finished fining the bejeezus out of Alphabet, the European Commission is turning its attention to another American tech giant: Amazon.
The e-commerce giant is facing a formal EU anti-trust probe over its treatment of third-party merchants on its platform, a premise that doesn’t sound all that different from the EU’s investigation into Google’s AdSense advertising business (the EU hit Google with three multi-billion anti-trust fines over the past few years). In addition to the Amazon probe, the EU is also juggling investigations into Facebook, Apple and Twitter over violations of the EU’s new GDPR privacy laws.
According to WSJ, Amazon is suspected of “abusing its dual role as both the provider of a marketplace where independent sellers can offer products and a retailer of products in its own right.” In particular, the probe will explore whether “Amazon is using sensitive data from independent merchants to compete against them.”
The investigation could lead to formal charges, fines and orders to change business practices – but they could also be dropped, WSJ says.
Though, if the past is any guide, the latter option is unlikely. Also, the timing of this announcement is interesting, coming one day after Congressional hearings where lawmakers from both parties attacked Amazon, Apple, Facebook and Google for their market dominance. That hearing comes just weeks after the DOJ and FTC divvied up oversight of the big tech companies in preparation for what’s expected to be a major anti-trust push.
It used to be that the Europeans were leading the anti-trust charge against the tech giants because, well, they’re all American companies, and there would be no political risks to fining American companies. Now, breaking up Amazon and the other tech giants might be the only issue that Elizabeth Warren and President Trump agree on. Facebook’s ill-timed push into finance with its Calibra foundation has only further incensed lawmakers, as evidenced by yesterday’s hearing.
On a related note, Germany’s antitrust regulator on Wednesday said Amazon has agreed to change its terms of service on its marketplace platform for third-party sellers after an unrelated, eight-month probe.
What only months ago looked like a remote possibility – the breakup of the big four tech giants – is looking increasingly probable. And though the…
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Apple To Shift Some AirPod Production To Vietnam From China As Exodus Continues
by Zero Hedge - July 17th, 2019 7:30 am
Courtesy of ZeroHedge. View original post here.
At this point, the trade war-inspired manufacturing exodus out of mainland China as companies like Apple (and, more importantly, suppliers like Foxconn), Nintendo, HP, Dell and others "diversify" their supply chains has been well documented.
And with President Trump once again threatening to slap tariffs on the $320 billion+ Chinese goods, Nikkei Asian Review brings us the latest development in this trend: Apple is about to start trial production of its AirPods wireless headphones in Vietnam as it accelerates its diversification plans (it's also reportedly planning to start manufacturing some iPhones outside of China, including at suppliers' factories in India).
GoerTek, a Chinese firm that is one of Apple's key contract manufacturers, will start testing the resilience of its manufacturing processes for the new generation of AirPods at one of its factories in northern Vietnam. This will mark the first production of wireless earbuds outside of China.
To help Goertek, Apple has asked its other suppliers to "support" Goertek's efforts (by not hiking prices on components during this trial stage until Goertek can improve its economies of scale).
Apple has written to components suppliers to ask them to support Goertek's efforts despite initially very small volumes, according to a communication seen by the Nikkei Asian Review. "Suppliers are requested to keep the pricing unchanged for the trial production stage, but this can be reviewed once volumes are increased," said one of the sources with direct knowledge of the communication.
"The initial output will be limited, but it is easy to increase capacity once all the manufacturing procedures are running smoothly," the person said.
Apple has long sourced its traditional EarPods – connected to the iPhone with wires – in Vietnam. However, until now, AirPods have been made in China by suppliers Inventec, Luxshare-ICT, and GoerTek. Apple refused to comment on production plans for AirPods.
The decision to shift AirPod production to Vietnam comes as Apple works to move 15% to 30% of production outside of China, where rising labor costs (a byproduct of the country's accelerating development) and the trade-war tariffs have made depending completely on the mainland untenable.…
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Senator Compares Facebook’s Libra Association to Spectre in James Bond Movie
by ilene - July 17th, 2019 7:27 am
Courtesy of Pam Martens
Yesterday the U.S. Senate Banking Committee assembled to hear Facebook’s David Marcus explain how the company wants to create a global digital currency called Libra, to be run by a Switzerland-based global organization called the Libra Association, made up of 27 members from the fields of payment systems, technology, telecommunications, blockchain services, venture capital, nonprofits and academic institutions.
Given Facebook’s serial history of abusing the privacy rights of its users and selling their data without their permission, not to mention its role in facilitating Russian interference in the 2016 presidential election, we immediately went to check out the names of the nonprofits that had signed up to monitor this sprawling international monetary system cooked up in a Facebook lab in a year’s time. We were hoping to see names like American Civil Liberties Union, Public Citizen, Consumer Federation of America, or Center for Constitutional Rights. No such luck. Here’s who Facebook lists under nonprofits, multilateral organizations and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking. We have to admit to ignorance of any of these groups.
At the end of the hearing, after Facebook’s Marcus had struggled to explain the checks and balances of his short-on-specifics plan, Senator Chris Van Hollen (D-MD) said he suspected that Americans were going to view this organization as something like Spectre (the evil international surveillance organization) from the James Bond movie series.
It felt like Van Hollen had just read our minds.
Senator Sherrod Brown (D-OH), the ranking member of the Committee, made opening remarks at the hearing that were so on-point and poignant to the interests and concerns of the American people that we’ve printed them in full below.
…
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Supreme Court Justice John Paul Stevens Dies At 99
by Zero Hedge - July 17th, 2019 7:26 am
Courtesy of ZeroHedge. View original post here.
John Paul Stevens, the former leader of the Supreme Court's liberal wing who started his career as a Republican anti-trust lawyer, died Tuesday at a hospital in Fort Lauderdale, Fla. He was 99.
According to the New York Times, which cited a statement from the Supreme Court, Stevens died from complications of a stroke that he suffered on Monday.
When Stevens retired from the Court in 2010, he was the second-oldest and second-longest serving justice to ever sit on the court after Oliver Wendell Holmes, who was eight months older than Stevens was when Holmes retired in 1932, and William Douglas, who served 36 years on the court (compared with Stevens' 35).
Stevens has been relatively quiet in retirement, but he made headlines a couple of months ago when he spoke to WSJ to tout his new book "The Making of a Justice: Reflections on My First 94 Years."
Stevens was nominated to the court by President Ford, and while many expected him to move the court to the right (he came from a family that was known for its opposition to FDR's 'New Deal'), he swiftly became a liberal leader.
In one of his final interviews, with WSJ, Stevens expressed frustration with the court's unwillingness to take on the issue of partisan gerrymandering: "I’ve been disappointed in their failure to treat political gerrymandering just like racial gerrymandering, because it’s certainly easier to identify which voters belong to a particular party than knowing what their race is," he said.
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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