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MARKET OUTLOOK - Global & Local, Perspectives & General Market Feeling
mullokintyre
post Posted: Today, 10:42 AM
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The coming week or so is going to be very interesting.
First we have the UK elections. Will have a bearing on the Euro, the pound, and probably the precious metals.
If the status quo is maintained, namely a hung parliament, it will be deadly for the pound, and a boost for the PM's.
Then in fairly quick order in the US we have the impeachment vote (always good fun these impeachment votes), the new round of tariffs supposed to kick in,
and the big doozy, the quarterly tax payments are due.
if the banks had liquidity problems before this, they will only be exacerbated bu the massive outflows of cash heading to the federal government.
I still have my gold and silver shares.

Mick



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nipper
post Posted: Yesterday, 07:05 PM
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In Reply To: mullokintyre's post @ Dec 10 2019, 06:42 PM

A bit of lateral thinking here?

Millennials should brace for a 'bucket of cold water' when it comes to their investments
QUOTE
Betterment, for example, recommends a retirement-focused portfolio of 90% stocks and 10% bonds for a 30-year-old with a $50,000 income. Vanguard rates its similar 90/10 portfolio as having a risk potential of four out of five, with five being the highest risk category.

A low-risk portfolio is considered to have up to 40% in stocks, while a moderate risk is a portfolio with 40% to 60% invested in the market. Portfolios with more than 70% invested in stocks are generally considered high-risk.

However, other robo services provide a more balanced portfolio. Fidelity Go recommends a portfolio of 70% stocks and 30% bonds for a similarly situated potential investor who responded their risk tolerance was a 5 on a scale of 1 to 10. Meanwhile, Schwab's Intelligent Portfolio product recommends investing 65% in stocks, 24.5% in bonds, 2% in commodities and about 8.5% in cash for a millennial saving for retirement and moderately aggressive.

https://www-cnbc-com.cdn.ampproject.org/v/s...ing-habits.html

- lots of index huggers and neophytes don't know what can/ will/ is going to hit them (sometime) ...when panic> euphoria becomes panic> panic



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

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jacsar
post Posted: Yesterday, 12:48 PM
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In Reply To: jacsar's post @ Yesterday, 12:41 PM


Doug Casey link.... https://www.kitco.com/news/2019-12-09/Who-w...at-matters.html

 
mullokintyre
post Posted: Yesterday, 12:45 PM
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In Reply To: jacsar's post @ Yesterday, 12:41 PM

The Moore Boy does not do much for me.
I sat through the first part, but when he started to bring in religion, and quoting various religious figures as proof of the evisl of capitalism, I turned it off and went and had a bourbon with a bit of ice in it.
far more satisfying.
Mick



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jacsar
post Posted: Yesterday, 12:41 PM
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In Reply To: mullokintyre's post @ Dec 10 2019, 06:42 PM

Hi , like or hate him last nights film by Michael Moore on SBS Capitalism:A love Story showed exactly what is wrong with the USA....one of 3 weekly films just been shown.Saw another interview with Doug Casey the US entrepreneur who when asked as to who will win the election next Nov stated that there could be a military coup engineered by Deep State by then....I know ...fanciful and utterly extreme but fact many times has proved stranger than fiction...as the Chinese curse says "may you live in interesting times"

 
mullokintyre
post Posted: Yesterday, 09:21 AM
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In Reply To: mullokintyre's post @ Dec 10 2019, 06:42 PM

As a follow up to my long post yesterday, there seems to many theories as to why the repocollapse came about.
The one put forward by Quarles doesn't hold water.
Chuck Butler reckons it was because the big banks did not want to lend to the smaller institutions because they feared one or more of them were ion sufficient trouble to go belly up. Nah, most of the money seemed to be going to the big banks themselves according to the BIS.
David Gonigam of the 5 minute forecast reckons it has been a deliberate ploy by the 5 big banks to create a repo crisis as a leverage (read blackmail) to force the FED and Exec government to loosen regulations and ease up on their lending rules. A bit more plausible perhaps.
Another explanation put forward by zero hedge is that the big banks particularly JP Morgan have been dumping loans and buying treasuries, which have left them critically short of cash, hence their visits to the repo market support. This is backed up by a chart supplied by them showing the changes in cash versus treasuries.

But the really intriguing aspect is the prospect that this whole episode is part of the process that the big banks are front running the next round of QE to make even more money
From Zero hedge
QUOTE
at the largest US banks, something we addressed previously when we discussed how JPMorgan gamed the financial system to trigger "NOT QE", and a topic that Bloomberg touches on overnight in "Repo Firepower Reduced by Falling Cash Levels at Big U.S. Banks."

As Pozsar cautions, the core problem at the heart of the repo blockage is that as banks shifted from owning reserves to collateral (mostly Treasuries), for reasons we will address shortly, large U.S. banks like J.P. Morgan that are central to year-end flows spent some $350 billion of excess reserves on collateral since the beginning of the Fed’s balance sheet taper, leaving banks (and especially JPMorgan) dangerously low on reserves.

And while one can debate why banks shifted away from reserves to "collateral", Pozsar has a simple theory: "dealers and banks loaded up on collateral as a trade – a trade they were supposed to be taken out of by eventual coupon purchases by the Fed." In other words, here is a former Fed official admitting that banks were purchasing Treasuries as nothing more than a QE frontrunning ploy, something which the Fed has previously sworn was never the intention behind QE. After all, if it emerges that the Fed is essentially facilitating taxpayer-funded and perfectly legal frontrunning, making bank execs even richer in the process, the US central bank would have even fewer fans. And yet, here is arguably the most respected ex-Fed staffer explaining that one of the core roles of QE is just that.

Alas, here a problem emerged, because "the Fed never did that, and for the first time we’re heading into a year-end turn without any excess reserves."

Indeed, instead of buying coupon bonds as Dealers have been quietly demanding behind close doors, a process which would allow them to sterilize their massive Treasury holdings, the Fed announced in October it would only buy T-Bills in order to not freak out the market that it is officially launching QE 4 (as a reminder, the only semantic distinction between whether the Fed is doing QE or not doing QE is whether it is soaking up duration; the Fed's argument is that since Bills don't have duration, it's not QE. However once Powell starts buying 2Y, 3Y, 5Y and so on Treasuriess, the facade cracks and the Fed will have no more defense that what it is doing is precisely QE 4). And by buying Bills, it is not allowing commercial banks to exchange their coupon holdings for reserves (cash), but merely results in recirculation of sterilized Bill purchases.

Now most people don't understand this, and instead repeat the old maxim "don’t fight the Fed" which they claim is adding liquidity through repos and bill purchases, and what’s not in the system now will be there on year-end, and the turn will be just fine.

Only as Pozsar says "Not so fast!" and explains:

What we need for the [year-end] turn to go well are balance sheet neutral repo operations, or asset purchases aimed at what dealers bought all year: coupons, not bills – the former to get around foreign banks’ balance sheet constraints around year-end, and the latter to ensure that excess reserves accumulate with large banks like J.P. Morgan. Unfortunately, the Fed is doing neither.

He goes on:

Repo operations are done through the tri-party system which means they aren’t nettable, which in turn means that once balance sheet constraints start to bind around year-end, foreign dealers will take less liquidity from it to lend it to those in need on the periphery: central bank liquidity is useless unless primary dealers have balance sheet to pass it on, and that they’ve been passing it on since September does not mean they will at year-end.

Bill purchases are also ill conceived because banks and dealers don’t own any bills and so don’t have anything to sell to the Fed to boost their excess reserves ahead of year-end. In our view, the notion that bill purchases will force money funds down the yield curve to buy short coupons from primary dealers who would then pay off their repos with banks so that banks build up some excess reserves into year-end involves too many moving parts…

Which brings us to the first of the key observations made by Pozsar: since the Fed's repos and T-Bill monetizations have done virtually nothing to boost prevailing reserve levels on a sustained basis, "year-end balance sheet constrains will preclude primary dealers from bidding for reserves from the Fed through the repo facility or through repos from money funds. The slope of money market curves suggest that excess reserves won’t build up at banks, and so U.S. banks will not be able to fill the market making vacuum left by foreign banks."

In other words, the already thin liquidity at year end (which as a reminder, last December 31 sent repo rates soaring even though excess reserves were about $100 billion more than they are now) could get far worse as a result of the Fed's inability to properly address the reserves (cash) shortage plaguing banks.

There is another reason why year-end liquidity is likely to get far worse, and it has to do with bank year-end G-SIB surcharges imposed by regulators on US banks on the last day of the quarter and year. As we discussed two weeks ago, and as Pozsar explains, "running low on excess reserves is only one factor that determines how bad the vacuum
in market making can get around year-end turns. G-SIB scores are the other, as they determine what banks can do with whatever excess reserves they have at year-end: lend them through repos, spend them on Treasuries, or lend them through FX swaps, – in that specific order as repos are less punitive for banks’ G-SIB score than FX swaps."

So they see this problem of lack of liquidity about to get much worse.
I don't pretend to understand a lot of the stuff thats put out about the complex financial instruments used iin the arcane world of interbank finance outlined in the article above.
But the tiny bit i do understand looks ominous.

Mick



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early birds
post Posted: Dec 10 2019, 11:58 PM
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https://www.cnbc.com/2019/12/10/stock-marke...all-street.html

Stock futures turn positive on report US and China are planning for a delay of December tariffs

================

i thought i did right thing to have a shorts on this market ..... as i'm smile that i did right thing then comes this..........poooooooooo!
covered all the shorts, and siting on the fence .................



 
nipper
post Posted: Dec 10 2019, 07:06 PM
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In Reply To: mullokintyre's post @ Dec 10 2019, 06:42 PM

Bravo Mick, for your insights

If things revert to the mean, and they do, the pain will be prolonged.



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
mullokintyre
post Posted: Dec 10 2019, 06:42 PM
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Today I have started selling down my stocks.
I am just too nervous in this market.
Yes, I know that sitting in cash is a very poor return, but investing in over priced assett classes will in my opinion give an even worse return.
I have posted a number of signs that I see as warning flags, and today I have the last one that tipped me over the edge.
The ADP report showed that only 67,000 jobs were created in November. This company does the payroll for huge numbers of American employees, and as such has a real time picture of employment from its stats.
Their full report can be found HERE

The BLS on the other hand, came out a week later with a figure of 266,000 jobs created.
Using their creative jobs adjustment algorithm, they magically came up with the massive figure.
And to top it off, they adjusted upwards the previous two months data by 13,000 and 28,000 respectively.
The BLS is a an organisation that does a statistical guess based on polling.
Something similar to the ABS here in OZ.
The full report can be found HERE

The disparity in reporting is significant enough to ask what the hell is going on.
These sort of disparities in estimates and real world figures were a feature of the GFC if I recall correctly.

Then there was the self serving appearance by Randall Quarles at the banking oversight hearings.

QUOTE
Randal Quarles, the Federal Reserve’s point man on banking supervision, appeared to side with JPMorgan Chase & Co. JPM, -0.47% CEO Jamie Dimon on Wednesday, saying some of the rules put in place in the aftermath of the financial crisis contributed to the recent turmoil seen in short-term lending markets.

“We have identified some areas where our existing supervision of the regulatory framework…may have created some incentives that were contributors” to the stress, Quarles told the House Financial Services Committee.

“They were probably not the decisive contributors, but they were contributors and I think we need to examine them,” he said under questioning from Rep. Patrick McHenry, a Republican from North Carolina, who is the ranking Republican on the House panel.

The postcrisis regulation was intended to make banks indifferent on whether they complied with short-term capital requirements with reserves they park at the central bank or with other short-term securities like Treasurys, Quarles said.

But in practice, the Fed’s rules seem to have had an unintended consequence of putting “a thumb on the scale for central bank reserves,” to meet the requirements, Quarles said.


They were probably not the decisive contributors. Well what the hell were the other contributors??
Looks like a carp, feels like a carp and smells fishy.
A BIS report pored cold water on Quarles explanation.

QUOTE
Yesterday, the Bank for International Settlements (BIS) dropped a bombshell report that torpedoed the Federal Reserve’s official narrative on what has caused the overnight lending market (repo loan market) on Wall Street to seize up since September 17, leading to more than $3 trillion in cumulative loans from the New York Fed as lender of last resort.

The Federal Reserve has said the repo crisis was a result of corporations draining liquidity from the system to pay their quarterly tax payments alongside a large auction of U.S. Treasury securities settling and adding to the cash drain. That excuse was clearly bogus since the Fed has provided hundreds of billions of dollars weekly into the repo market since September 17, while stating that it plans to continue this activity into next year.

The BIS report dropped the bombshell that the “US repo markets currently rely heavily on four banks as marginal lenders.” Curiously, the BIS report was too timid to name the banks.

As Wall Street On Parade has regularly pointed out, there are more than 5,000 Federally-insured banks and savings associations in the U.S. but the bulk of the assets, derivatives and risk to U.S. financial stability are concentrated at just a handful of Wall Street’s “universal” banks — those making high risk trading gambles while also owning federally-insured, deposit taking banks. Ranked by assets, as of June 30, 2019, those are the bank holding companies of JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs Group, and Morgan Stanley. Those six Wall Street banks hold $8.9 trillion of the $18.56 trillion in assets at the 5,213 federally-insured banks and savings associations in the U.S. That’s six banks holding 48 percent of the total assets of 5,213 banks.

The risks posed by a handful of banks in the derivatives market is even more concentrated. According to a quarterly report from the federal regulator of national banks, the Office of the Comptroller of the Currency (OCC), just five banks control 82 percent of the $280 trillion in notional (face amount) of derivatives at the 25 largest bank holding companies. Derivatives played a critical role in blowing up Wall Street banks in 2008 and resulted in the largest taxpayer and Federal Reserve bailout of any industry in U.S. history.

Despite that epic crisis, which produced the worst economic downturn in the United States since the Great Depression, Wall Street lobbyists have continued to stymie meaningful reform and have actually convinced the Trump administration to engage in weakening the inadequate regulations that Congress passed in 2010 under the Dodd-Frank financial reform legislation.


The bombshell section from my perpective is the following:

QUOTE
The problem with all of the narratives that have surfaced thus far on the repo loan crisis is that this market historically has turned over $1 trillion daily in loans in the U.S. Since the Fed is only providing approximately $100 billion a day, clearly the biggest banks and money market funds are making loans to those counterparties that they believe are good risks. This supports the thesis from Wall Street On Parade that the biggest banks are backing away from lending to those institutions that are deemed a bad risk or are heavily interconnected to an institution deemed to be a bad risk – even for an overnight loan since the institution could file for intraday bankruptcy.

This is precisely the scenario that led to credit seizing up and banks refusing to lend to one another in 2008.

Full report Here

And finally, theres [url="https://www.zerohedge.com/economics/november-heavy-duty-truck-orders-resume-collapse-down-39-weakest-2015"


The collapse in heavy duty trucking is getting tougher to blame on difficult YOY comps and is more and more looking like the symptom of a real manufacturing recession in the U.S.

Class 8 orders against collapsed in November, culminating a dismal year that some thought had seen a reprive with October's improved bookings. But new data from FreightWaves shows that the collapse has continued its trend, indicating that the sluggish economy is to blame for lackluster replacement demand.

Orders totaled 17,300 units for the month, which marks the slowest November since 2015 and a 39% collapse from November 2018. The slowdown in orders is prompting layoffs of hundreds of production workers by companies like Daimler Trucks North America, Volvo Trucks North America, Paccar Inc. and Navistar International Corp.

Other names in the Class 8 supply chain are also dealing with the negative effects. For instance, engine manufacturer Cummins Inc. is "laying off 2,000 white-collar employees globally in the first quarter of 2020".

This is highlighted by the fact that the largest trucking bankruptcy in US history has just been announced.

QUOTE
An Indiana trucking company with nearly 4,000 employees said Monday that it filed for bankruptcy and will shut down all operations, just days after two former officials were charged in an accounting fraud scheme.

The Chapter 11 bankruptcy filing by Indianapolis-based Celadon Group left more than 3,000 drivers jobless and, in many cases, stranded across the U.S. after their company gas cards were cancelled, according to local media reports. Another 500 administrative jobs are expected to be eliminated through the bankruptcy, the company said Monday.



Prior to the GFC, some of us used to quote the Baltic Dry Index as the canary in the coal mine. It has never recovered from those halcyon days.

As someone else once said, the ducks are starting to line up.
Sorry for the long post, I was doing my own peronal analysis as I went.

Mick



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mullokintyre
post Posted: Dec 4 2019, 09:06 AM
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At the risk of being a merchant of doom, I can't help but see so many parralells between the build up to the GFC and current conditions.


[quote]James Gorman is the Chairman and CEO of Morgan Stanley. He also sits on the Board of Directors of the Federal Reserve Bank of New York (New York Fed), one of Morgan Stanley’s regulators.

The New York Fed is one of 12 regional Federal Reserve banks – but the only one willing to turn on a multi-trillion dollar money funnel to Wall Street’s mega banks when they need a secret bailout. Since September 17 of this year, the New York Fed has pumped upwards of $3 trillion in revolving loans to trading houses on Wall Street, without naming which firms are getting the money and why they’re getting it. From December 2007 to the middle of 2010, the New York Fed turned on its money funnel to Wall Street to the tune of $29 trillion – a fact it battled in court for years to keep secret.

Today, the New York Fed will only say that it’s making these new loans, which tally up to hundreds of billions of dollars each week, to some of its 24 “primary dealers.” For the most part, those “primary dealers” are the high-risk trading units of big commercial banks in the U.S. and abroad. (See list below.)

One of the primary dealers that is eligible to be taking these multi-billion dollar loans from the New York Fed is Morgan Stanley & Co. LLC. Morgan Stanley describes that unit as follows: “Its businesses include securities underwriting and distribution; financial advisory services, including advice on mergers and acquisitions, restructurings, real estate and project finance; sales, trading, financing and market-making activities in equity and fixed income securities and related products, and other instruments including foreign exchange and commodities futures; and prime brokerage services.”

At 11:36 a.m. on Thanksgiving Day, when households across America were either watching the Macy’s Thanksgiving Day Parade on TV or hustling in the kitchen, Bloomberg News dropped the bombshell report that foreign currency traders at Morgan Stanley had hidden a trading loss of upwards of $140 million. Two of the traders involved in the losses were based in London, according to the Bloomberg report.

There are a number of curious and noteworthy aspects to this report. First, only Bloomberg News was privy to this information. Morgan Stanley had not informed its shareholders via any public statement nor had it informed the Securities and Exchange Commission via a public filing. Thus it is also highly likely that it had not informed the New York Fed, another of its regulators, despite the fact that its CEO, James Gorman, sits on the Board of the New York Fed. The Bloomberg article suggests that the firm itself is just now investigating what actually happened, meaning that an outside news agency attempting to place a realistic figure on the amount of the losses is suspect at best.

In 2012, the Chairman and CEO of JPMorgan Chase, Jamie Dimon, called news reports of its derivative trading losses in London “a tempest in a teapot.” Those hidden trading losses turned out to be over $6.2 billion.
Morgan Stanley, however, can top JPMorgan’s historic trading loss. During the financial crisis, one of Morgan Stanley’s traders, Howie Hubler, lost $9 billion betting on subprime debt. But Morgan Stanley survived the financial crisis because the New York Fed secretly pumped more than $2 trillion into Morgan Stanley from 2007 to the middle of 2010 according to a Fed audit performed by the Government Accountability Office (GAO) and released to the public in July 2011. The audit occurred as the result of an amendment attached to the Dodd-Frank financial reform legislation of 2010 by Senator Bernie Sanders and others.

At the outset of the financial crisis, Morgan Stanley was predominantly an investment bank and a large retail brokerage firm which was not eligible to borrow from the Fed’s Discount Window, which was restricted to deposit-taking banks. In order to funnel trillions of dollars to the trading houses on Wall Street, the New York Fed created an alphabet soup of loan programs. One of those programs was called PDCF (Primary Dealer Credit Facility). For the first time in history, under that program, the New York Fed funneled $8.9 trillion to the trading houses on Wall Street, in many cases taking the unprecedented action of accepting stocks and junk bonds as collateral – at a time when both of those markets were in freefall.

In 2008, at the height of the financial crisis, both Morgan Stanley and Goldman Sachs became bank holding companies, subject to regulation by the New York Fed and with access to its Discount Window./quote]

I am not sure how many people know that the US FED is not a statury government body, but is in fact a private firm, outside of the control and management of the Government.
If anyone needed further proof that the US monetary system is being used and abused by large financial firms, surely this is it.

Full article HERE

Mick




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