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Listening In to Killings – and Everything Else

October 25, 2018

Listening In to Killings – and Everything Else

It was intriguing that the murder of Saudi journalist Jamal Khashoggi in the Saudi consulate in Istanbul on October 2 was apparently recorded in some fashion. The BBC reported that “A Turkish security source has confirmed to BBC Arabic the existence of an audio and a video recording. What is not clear is if anyone other than Turkish officials has seen or heard them. One source is cited by the Washington Post saying men can be heard beating Mr Khashoggi; it adds that the recordings show he was killed and dismembered.”

It seemed pretty much an open-and-shut case. There was evidence that the despotic regime of Saudi monarchy, as always regarding themselves as being above decency, law and civilisation in general, had been so annoyed with a Saudi journalist that they killed him. It was an amateur operation, and Mossad (for example) would have done a better and more discreet job (although their assassination of Mahmoud al-Mabhouh in Dubai was a bit botched), but it achieved the Saudis’ objective and sent the message round the world that any of their nationals daring to speak out against the Trump-supported boy dictator in Riyadh, the ruthless Mohammed bin Salman, would pay the ultimate price.

But then the story about a recording of the torture and killing of Jamal Khashoggi underwent modification. Perhaps there wasn’t a Turkish audio and video recording, after all. CNBC broadcast that “The Turkish newspaper Sabah reported that Khashoggi recorded audio of the alleged killing using an app on his Apple Watch and was able to upload the recording to his iPhone and iCloud account,” but the conclusion was that “It would have been nearly impossible for Khashoggi to record audio and upload it to his iPhone or the internet, and it raises questions as to how Turkish officials obtained the audio and video evidence of the alleged killing.”

…click on the above link to read the rest of the article…

Leon Cooperman: “The Whole Structure Of The Market Is Broken”

October 19, 2018

Leon Cooperman: “The Whole Structure Of The Market Is Broken”

In a wide-ranging interview on CNBC, Leon Cooperman, chairman and CEO of Omega Advisors, explained that he doe snot see the market as ‘cheap’ or ‘expensive’ currently but warns that traditional value-manager-driven strategies face difficulties because ” all these quantitative trading systems are destroying the structure of the market…particularly that group that buy strength and sells weakness.”

Cooperman goes on to reflect on last week’s mini-crash as being overdone, because “credit was relatively flat” but warns that “It’s crazy…selling begets selling because of these quantitative trading systems,” adding that he thinks “all this fixation and fear about interest rates is misplaced.”

However, he does warn that “the strongest economy in 50 years” could be a problem as “it forces the hand of The Fed.”

Full Transcript

Who knows. I mean basically I think that the whole structure of the market is broken. You know when I came into the let’s put it this way. Whatever success I’ve achieved I think I’ve achieved it because I’ve been very lucky. I have a common sense basically. And I have a strong work ethic. And this whole thing now with all these quantitative trading systems are destroying the structure of the marketyou know particularly that group that buy strength and sells weakness.

So, everyone I know that’s accumulated wealth, whether it’s Warren Buffett, Ken Langone, Mario Gabelli – all friends of mine – I think they made their fortunes that by buying weakness and selling strength. What’s happening now [with the algos] is they’re trend followers and they really are exaggerating the trends up and down. The condition is that normally call for a significant market decline are just simply not present.

…click on the above link to read the rest of the article…

Zero-Down Subprime Mortgages Are Back, What Could Possibly Go Wrong?

October 16, 2018

Zero-Down Subprime Mortgages Are Back, What Could Possibly Go Wrong?

Ten years after the collapse of Lehman Brothers, banks are once again taking bets on the same type of loans that nearly collapsed the economy amid a flurry of emergency bailouts and unprecedented consolidations.

Bank of America has backed a $10 billion program from Boston-based brokerage Neighborhood Assistance Corporation of America (NACA), to offer zero-down mortgages to low-income borrowers with poor credit scores, according to CNBC. NACA has been conducting four-day events in cities across America to educate subprime borrowers and then lend them money – with a 90% approval rate and interest rates around 4.5%.

“It’s total upside,” said AJ Barkley, senior vice president of consumer lending at BofA. “We have seen significant wins in this partnership. Just to be clear, when we get those loans with all the heavy lifting here, we’re over a 90 percent approval, meaning 90 percent of the people who go through this program that we actually underwrite the loans.”

Borrowers can have low credit scores, but have to go through an education session about the program and submit all necessary documents, from income statements to phone bills. Then they go through counseling to understand their monthly budget and ensure they can afford the mortgage payment. The loans are 15- or 30-year fixed with interest rates below market, about 4.5 percent. –CNBC

“That’s what’s going to help people who’ve been locked out of homeownership to really become homeowners and to build wealth,” said Bruce Marks, CEO of NACA. “It’s a national disgrace about the low amount of homeownership, mortgages for low- and moderate-income people and for minority homebuyers.”

To participate in the NACA lending scheme, borrowers can have credit scores – but will need to go through the education course and submit all necessary documents, “from income statements to phone bills,” reports CNBC. Then they undergo budget counseling to ensure they can afford the mortgage.

…click on the above link to read the rest of the article…

Weekly Commentary: Contemporary Finance’s Defect

October 6, 2018

Weekly Commentary: Contemporary Finance’s Defect

October 3 – CNBC (Jeff Cox): “Federal Reserve Chairman Jerome Powell said the central bank has a ways to go yet before it gets interest rates to where they are neither restrictive nor accommodative. In a question and answer session Wednesday with Judy Woodruff of PBS, Powell said the Fed no longer needs the policies that were in place that pulled the economy out of the financial crisis malaise. ‘The really extremely accommodative low interest rates that we needed when the economy was quite weak, we don’t need those anymore. They’re not appropriate anymore… Interest rates are still accommodative, but we’re gradually moving to a place where they will be neutral… ‘We may go past neutral, but we’re a long way from neutral at this point, probably.'”

Market bulls grimaced. Powell: “We may go past neutral, but we’re a long way from neutral at this point…” CNBC’s Jim Cramer called it “amateurish.” Chairman Powell was certainly candid, something shockingly unusual for a Fed chair. So atypical was his candor, the Chairman was misconstrued as a novice unschooled in the art of modern central banking.

The bottom line is the Fed waited much too long to begin normalizing monetary policy. Moreover, they pre-committed to an extremely gradual path of rates increases. This policy approach essentially ensured that so-called “tightening” measures would fail to tighten financial conditions. Over-liquefied and speculative markets were content to look right through them, confident that cheap liquidity and easy Credit conditions would run unabated. And, clearly, stock gains in the multiple thousands of basis points easily counteracted a couple hundred basis point increase in short-term borrowing costs.
…click on the above link to read the rest of the article…

They Want You To Do As They Say, Not As They Do

September 27, 2018

THEY WANT YOU TO DO AS THEY SAY, NOT AS THEY DO

“Facts are threatening to those invested in fraud.” ― DaShanne Stokes

Image result for lying ceos

Insiders at US companies unloaded $5.7 billion of their company stock this month, the highest in any September over the past decade, according to TrimTabs Investment Research. Insiders, which include corporate officers and directors, sold over $10 billion of their company stock in August, also at the fastest pace in 10 years. With the stock market at all time highs and valuations, based on all historically accurate measures, off the charts, it makes sense for knowledgeable insiders to sell high. Of course, if they were expecting the profits of their companies to soar because Trump says we have the best economy in history, why would they be selling?

When these Ivy League educated superstar CEOs go on CNBC, Bloomberg, and Fox to tout their companies and field softball questions from bimbos and boobs disguised as journalists, they proclaim a glorious future and declare their stocks to be undervalued and a screaming bargain. Buy, buy, buy. They talk the talk, but don’t walk the walk. They personally do the opposite with their own funds versus what they do with shareholder funds. Ethics among corporate executives has never been one of the required traits. Lying with a straight face is the key to being a successful CEO in today’s warped amoral world.

While dumping stock like there’s no tomorrow these very same CEOs of the largest US public companies have authorized a breathtaking $827.4 billion of stock buybacks in 2018 — already a record for any year, according to TrimTabs. Annualized, these CEOs will will buyback in excess of $1.2 TRILLION when stocks are at all-time highs. In contrast, in 2009 when they could have bought their stocks at 10 year lows, they bought back less than $100 billion. Buy high and sell low. How can they go wrong?

…click on the above link to read the rest of the article…

Heroes & Whores

September 20, 2018

HEROES & WHORES

“Certainly one of the most important things I learned is that numbers can be deceiving. There is a logic to mathematics, but there is also the underlying human element that must be considered. Numbers can’t lie, but the people who create those numbers can and do. As so many people have learned, forgetting to include human nature in an equation can be devastating.” ― Harry Markopolos, No One Would Listen

Image result for harry markopolos

The quote I used from Harry Markopolos’ No One Would Listen book about the Bernie Madoff ponzi scheme in my last article triggered a bittersweet recollection. For me, the experience captured the true nature of our warped financial markets, a culture glorifying wealthy arrogant criminal assholes, while ignoring or ridiculing honest, hard working, highly intelligent truth tellers.

The picture of Markopolos above shows an average looking middle aged guy, with a five o’clock shadow, bad haircut, and wearing a modestly priced suit and tie. Since reading about his fruitless effort to expose Madoff’s Ponzi Scheme and his fifteen minutes of fame in 2009, I have felt an affinity towards him. We both have a brother and sister. We were both brought up in Catholic households and went to Catholic schools. We both have degrees in finance. We have both had financial careers. We are both married with three sons. And we both believe facts and an accurate assessment of the numbers always reveals the truth.

Through his job as a portfolio manager with a small investment firm Bernie Madoff’s investing record was brought to his attention. As a numbers guy, he immediately began assessing the returns. Markopolos said he knew within five minutes Madoff’s numbers didn’t add up. It took him another four hours to mathematically prove that they could have only been obtained by fraud.

…click on the above link to read the rest of the article…

Why WTI Could Crash In The Coming Weeks

September 18, 2018

Why WTI Could Crash In The Coming Weeks

West Texas Intermediate could drop to US$65 a barrel later this year on the back of extra maintenance work at U.S. refineries, Tom Kloza from the Oil Price Information Service has warned. Speaking on CNBC, Kloza said this maintenance season was the last chance for many refineries to hop on the new bunker fuel train by boosting their capacity for low-sulfur diesel and fuel oil.

“The next six to seven weeks we’re going to see demand for crude drop by about 1 to 1.5 million barrels a day. It’s refinery maintenance season,” Kloza said.

The new bunker fuel emission rules, effective from 2020, stipulate that only vessels using fuels with sulfur content of 0.5 percent or less will be allowed to roam the oceans. The change is part of the International Maritime Organization’s strategy to cut carbon emissions from maritime transport by half by 2050.

The change has been touted as beneficial for refiners that are equipped to produce low-sulfur fuel oil and diesel, as well as LNG producers. Yet the adjustment will take time, and during this time demand for crude will be lower. How serious the effect on WTI prices will be remains to be seen, however.

For starters, many of those following WTI must have already factored in maintenance season and winter as weakening demand press down on prices. True, Kloza’s comment that this maintenance season will have a more severe impact on prices makes sense, but this additional maintenance should not come as a surprise to market watchers: there has been a lot of coverage about the IMO fuel rules and there’s likely to be even more in the run-up to its entry into effect.

…click on the above link to read the rest of the article…

Investor’s Warning: ‘I’m Nervous. We’re Getting Closer To A MELTDOWN Scenario’

September 14, 2018

Investor’s Warning: ‘I’m Nervous. We’re Getting Closer To A MELTDOWN Scenario’

According to investor David Tice, who made a name for himself in running the Prudent Bear Fund before selling it to Federated Investors in 2008, the current market is dangerous. Tice was quoted as saying he’s “nervous” because “we’re getting closer to a meltdown scenario.”

According to CNBC, Tice may be known as a “permabear”, but last December he said there was a 50 percent chance stocks would stage a 25 percent rally this year. So far in 2018, the S&P 500 and Dow are both up 8 and 5 percent, respectively. The Nasdaq has rallied about 15 percent. But Tice did say: “Longer term, the market is going to suck.”

According to Tice, the struggling emerging markets could spark a contagion that could hit the United States. The MSCI Emerging Markets Index has lost more than 13 percent of its value this year as of Wednesday’s close. “You look at emerging markets. There’s a lot of trouble in emerging market currencies where we’ve broken to new lows,” Tice noted, as reported by CNBC.

“Everybody is into this market,” he said. “I’m worried about whether the economy could enter a recession faster than a lot of people think.” Tice also made a prediction about the inflation predicament based on the global picture. “Frankly, I think there’s fear of deflation picking up again,” he said. “I think that deflationary trend is likely to continue.” He also pointed to frothy sentiment in the market, which is often perceived as a warning signal to Wall Street.

Tice isn’t the only economic expert that sees trouble on the horizon. Peter Schiff has been warning of a financial bubble collapse for a few years now. And compounded with the nation’s rising debt and the American public’s problem with debt, the next “meltdown” could be disastrous.

…click on the above link to read the rest of the article…

David Stockman Warns “Daredevil” Market Is “Way Over-Priced For Reality”

June 6, 2018

David Stockman Warns “Daredevil” Market Is “Way Over-Priced For Reality”

David Stockman is not backing away from his ultimate bearish position, warning viewers of CNBC that “there are some huge surprises lurking out there” because “we’ve had eight years of monetary expansion that is just off the charts of history.”

He is certainly not wrong there…

President Reagan’s Office of Management and Budget director fears an aging stock market rally combined with potential headwinds from President Trump’s fiscal policy decisions (as well as questionable earnings expectations) means “it’s all risk and very little reward in the path ahead.”

“I call this a daredevil market…This market is just way, way over-priced for reality.”

As Nasdaq and Small Caps surge to new record highs, Stockman warns “the S&P 500 could easily drop to 1,600 because earnings could drop to $75 a share the next time we have a recession.”

“We’re about eight or nine years into this expansion. Everything is crazily priced. I mean the S&P 500 at 24 times at the end, tippy top of a business cycle.”

The current growth cycle has been the second longest on record:

But it has been much shallower than the previous cycles:

As a former budget director, it is likely no surprise that one of his biggest gripes with the bulls is the notion that President Donald Trump’s tax cuts are providing a fundamental lift to stocks.

“These tax cuts are going to add to the deficit in the 10th year of an expansion. It’s just irresponsible crazy,” he said.

“It’s all going to stock buybacks and M&A deals anyway. That doesn’t cause the economy to grow. It’s just a short-term boost to the stock market that doesn’t last.”

Judging by the highest taxed companies performance relative to the market, Stockman may well have another point…

…click on the above link to read the rest of the article…

Don’t Worry “Everything Bad is Priced In”

May 14, 2018

Don’t Worry “Everything Bad is Priced In”

The stock market has turned the corner. Everythig bad is priced in.

Here’s the joke of the day: Stock Market Turns the Corner as Most Risks are Already Priced In.

“By now, investors priced in all the bad things they could price in: concerns about trade wars, geopolitics, rising rates and even fears that earnings growth peaked. But the economy is still growing and earnings are expected to grow by double digits this year and next,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

“We must keep in mind that the first-quarter earnings have been boosted a lot by a one-time tax windfall. But second-quarter earnings are expected to grow by another 20% even without the windfall but as the underlying corporate tax cuts start to kick in,” Cavanaugh added.

Not Priced In

Insane valuations
Mideast war
China slowdown
Eurozone slowdown
Change in attitudes towards stocks

Of those, number 1 and number 5 are standouts.

Blankfein: “Central Banks All Around The World Are Buying All The Risky Assets”

April 18, 2018

Blankfein: “Central Banks All Around The World Are Buying All The Risky Assets”

We can finally put to rest any financial, economic, ideological or simply philosophical debates why stocks have risen over 300% since the March 2009 post-crisis lows of 666, and we have Lloyd Blankfein’s underperformance mea culpa to thank for putting it so simply and succinctly, even a majority of fintwit might actually get it.

From today’s CNBC interview:

Frost: Let’s touch on your earnings yesterday, Lloyd, which was a beat on every line and overall EPS, let’s talk about first of all about the bounceback in trading. There was a lot of focus on trading last year, back this quarter. Can that last the rest of the year or is it a one quarter bounceback, as it were?

Blankfein: If you asked it the opposite way, “this surely would last forever” I’d also discount that. Look, we don’t know. We’re more in the contingency planning business than the forecasting business but the conditions that prevail we’re not top decile or top quartile conditions in the world so, yes, they’re highly replicable I would say. Kind of feels almost standardish.

What didn’t feel standard were the conditions over the last couple of years. People will debate back and forth what’s normal what’s the new normal but conditions where interest rates are zero, yield curves are flat, there’s no risk premium. Where central banks all around the world are buying all the risky assets which then therefore put a damper on volatility and the opportunities to perform, that’s not a natural state.

We have not reversed all of that, but we’re walking that back and walking to so the first indications of a withdrawal from what is an unnatural state. The market becomes a bit more volatile, people get compensated for the risk that they’re taking.

…click on the above link to read the rest of the article…

Peter Schiff: There’s A BIG Problem With The Economy, ‘Americans Are BROKE’

March 23, 2018

Peter Schiff: There’s A BIG Problem With The Economy, ‘Americans Are BROKE’

Financial analyst Peter Schiff says there’s a big problem with the economy even though the mainstream media is reporting that rising interest rates are a good thing. The problem, however, is that Americans are broke, and those interest rates could have a major impact on some of our wallets.

“The bad news is, we are going to live through another Great Depression and it’s going to be very different. This will be in many ways, much much worse, than what people had to endure during the Great Depression,” Schiff says. “This is going to be a dollar crisis.”

“When you are talking about the magnitude of the debt we have, that extra money [raising interest rates] is big. That’s going to be a big drain on the economy to the extent that we have to pay higher interest to international creditors…a lot of this phony GDP is coming from consumption, while the average American who is consuming is deeply in debt and they are going to impacted dramatically in the increase in the cost of servicing that debt…given how much debt we have, and how much debt is going to be marketed the massive increase in supply will argue for interest rates that are higher.” –Peter Schiff

Retail sales “unexpectedly” fell again in February even though most media outlets are touting a booming economy that can support raising the interest rates. It was the third straight monthly drop and the first time the US economy has seen three straight months of declining retail sales since 2012.

Sales fell 0.1% in February even though analysts had expected an uptick of 0.3%.According to CNBC,households cut back on purchases of motor vehicles and other big-ticket items, pointing to a slowdown in economic growth in the first quarter. But Peter Schiff won’t sugarcoat this one for us: Americans are broke.

…click on the above link to read the rest of the article…

The Everything Bubble—Waiting For The Pin

March 10, 2018

The Everything Bubble—Waiting For The Pin

Yesterday we noted that financial markets have become completely uncoupled from reality and that the recent feeble bounces between the 20-day and 50-day chart points were essentially the rigor mortis of a dead bull. As it happened, we were able to share those sentiments with what remains of CNBC’s audience of carbon-based units:

As we also noted as per the chart point mavens, the 20-day average down at 2703 (red line) on the S&P 500 was supposed to represent “support” while the 50-day average (blue line) purportedly functioned as “resistance”.Well, upon the official announcement of the Donald’s lunatic trade war, there she sat at yesterday’s close—less than one point under the 50-day moving average at 2739.8 (blue line).

But rather than “resistance”, which the raging robo-machines ripped through today like a hot knife through butter, we’d say the blue line represents the last frontier of sanity. That’s because a stock market trading at 25X earnings under today’s baleful circumstances is nothing less than a brobdingnagian bubble (i.e. a huuuge one) frantically searching for the proverbial pin.

We essay the razor sharp aspects of the pin below, but suffice it to say here that the cyclical calendar has just plain run out of time. It is way, way too late in the cycle at 105 months of age to be “pricing-in” anything except the end of the party. And this bubblicious party has embodied the most spectacular central-bank fueled mania yet—meaning that the morning after is going to bring a truly hellacious hangover.

Among the many sharp edges of the pin are these:

1) the virtual certainly of a recession within the next two years and a typical 30%-50% drop in earnings;

…click on the above link to read the rest of the article…

Ron Paul Fears “Huge” Correction In Stocks, Warns “It’s Going To Be A Calamity”

March 6, 2018

Ron Paul Fears “Huge” Correction In Stocks, Warns “It’s Going To Be A Calamity”

“I think we have a greater distortion and a financial danger sitting out there bigger than ever before,” warned former presidential candidate Ron Paul in an ominous interview with CNBC this week.

While markets briefly got nervous over Trump’s tariffs last week, Paul warns Wall Street is missing the bigger picture and that the real trouble stems from Fed policy and easy money…

“If the Fed continues on the things that they are sort of planning on doing, it’s going to be a calamity.“

The former Texas congressman explained that The Fed has made critical policy errors that have helped caused a “rigged economy.”

It’s the debt, stupid, is Paul’s clear message…

“Everything is just very burdened with debt, and there’s no stopping it.“

According to Paul’s latest prediction, the February pullback may be just a blip compared to what’s ahead.

“The correction is going to be huge, and I don’t think anybody can predict. But I think this correction we had in ’08 and ’09 wasn’t allowed to really go its course and restore some sensibility to the market. I think that’ll be a mild correction compared to what could happen.”

Paul warns investors should not be shocked by a stock market plunge as deep as 50 percent.

Bob Shiller Warns World’s “Priciest Stock Market” Could “Absolutely Turn Suddenly”

January 23, 2018

Bob Shiller Warns World’s “Priciest Stock Market” Could “Absolutely Turn Suddenly”

Nobel Prize-winning economist Robert Shiller told CNBC Tuesday that a market correction could come at any time and without warning…

“People ask ‘well what will trigger [a market correction]?’ But it doesn’t need a trigger, it’s the dynamics of bubbles inherently makes them come to a sudden end eventually…”

Shiller, who won the Nobel Prize for Economics in 2013 for his work on asset prices and inefficient markets, said that markets could “absolutely suddenly turn” and that he believed the bull market was hard to attribute totally to the U.S. political scene.

“The strong bull market in the U.S. is often attributed to the situation in the U.S. but it’s not unique to the U.S. anyway, so it’s hard to know what the world story is that’s driving markets up at this time, I think it’s more subtle than we recognize,”

Additionally Shiller writes in Project Syndicate that it is impossible to pin down the full cause of the high price of the US stock market, warning that this fact alone should remind all investors of the importance of diversification, and that the overall US stock market should not be given too much weight in a portfolio.

The level of stock markets differs widely across countries. And right now, the United States is leading the world. What everyone wants to know is why – and whether its stock market’s current level is justified.

We can get a simple intuitive measure of the differences between countries by looking at price-earnings ratios. I have long advocated the cyclically adjusted price-earnings (CAPE) ratio that John Campbell (now at Harvard University) and I developed 30 years ago.

…click on the above link to read the rest of the article…

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