dinsdag 23 januari 2018

"That Was Easy"; Stocks Up, Bonds Up, Gold Up, Crypto Up And Dollar Down Again

Come on now...


Nasdaq was the day's big winner, Dow flatlined...

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Nasdaq was all about NFLX...

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Futures show the chaos best from the shutdown shrug and un-shutdown buying-panic...

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AAPL took another hit this afternoon on a JPM report and FANGs soared, again (after NFLX huge gains)...

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VIX rallied overnight, but was chaotic for most of the day, then VIX was dumped into the close desperate to keep The Dow green, BUT FAILED...

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HYG rallied again today, bouncing up to technical resistance once again...

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As stocks rallied on the day, so did bonds with the short-end outperforming...

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The yield curve steepened modestly, testing 2018 technical support again...

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Another day, another dollar dump after Asia closes...

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Today was the lowest close for the dollar since Dec 2014! Some early weakness in cryptos was quickly vanquished as Bitcoin bounced off $10,000 to break back above its 100DMA and Ethereum rallied back above $1000...

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It seems Bitcoin investors have been rotating back to the other alternative currency...

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Gold jumped notably, to its highest close since 9/8/17 (gold has only seen 4 down days since The Fed hiked in December)...

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Silver had a chaotic day, tumbling to its 50DMA before pushing back above its 100- and 200DMA...

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"Rigged" much? WTI/RBOB were higher on the day as the dollar drooped ahead of tonight's inventory data...

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"Something Strange Is Going On With VIX"

At the end of last week, we noted that VIX and the S&P 500 were behaving in an unusual manner. Specifically, for the second week in a row, S&P and VIX were higher together, the first time since Nov 2013...

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And VIX was drastically decoupled from stocks since 2018 began...

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But, even more 'odd' as noted by Eric Robertsen, head of global macro strategy and FX research at Standard Chartered, "something very strange is happening with the VIX term structure." Typically, as Bloomberg reports, the VIX curve flattens during market selloffs as investors bid up front-end volatility. In recent days, however, the curve has flattened as the market kept rallying. Here's a look at the five-day moving average of the gap between 3rd-month and 1st-month VIX contract...

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It appears that the front-end of the vol index curve moved up as investors bought call options to chase equity gains. That can be seen in the recent increase in the call/put ratio for the S&P. Notably, as Bloomberg reports, as U.S. stocks trade at all-time highs, the price tag on bearish options has dropped to a trough relative to bullish contracts. The spread between the price of one-month, 25-delta puts and calls for the S&P 500 is roughly two standard deviations below its five-year mean, data compiled by Bloomberg show. It’s an indication of the greed, or lack of fear, in the market suppressing the Cboe’s volatility gauge. This is a record low skew - bullish/greed, lower than at the peak of the market in 2007...

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The persistent decline in put prices, paying less for downside protection, drove the downtrend in the measure known as skew during most of last year’s second half. Since Jan. 3, investors chasing upside have led to an increase in the cost of calls, contributing to the historically significant level of bullish positions, the data show. At a minimum, it suggests that it's less appealing to sell long-dated vol as carry is diminishing. It is also a sign that equity investors are getting too complacent....

Loonie, Peso Spike After Trump Says "Nafta Talks Moving Along Pretty Well"

The currencies of the NAFTA nations, loonie and peso, spiked after sliding overnight following Trump's announcement of solar and washing machine tariffs - after Trump offered some clarification comments on what many assumed was the first shot in a trade war deal, telling reporters in the Oval office that "Nafta talks are moving along pretty well." "I happen to be of the opinion that if it doesn’t work out we’ll terminate it, but I think you’re doing pretty well, Bob,” Trump added, referring to U.S. Trade Representative Robert Lighthizer. "We’re renegotiating our deal with South Korea, which has turned out to be a disaster for this country." That alone was enough to send a bid behind the peso and loonie...

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Trump spoke during the signing of the new executive orders to impose tariffs on imported washing machines and solar products, announced on Monday and which sent shockwaves across EM currencies, which have promptly rebounded on what appears to be a modest conciliation by the president...

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With Bloomberg also quoting Trump as reminding that he is looking at potential tariffs for both steel and aluminum, Reuters adds that Trump does not expect a trade war to result from any new tariffs and notes that his upcoming "special address" in Davos will be about investing in the US....

The Financial System Just Made a Tectonic Shift

Perhaps the best tool for anticipating major shifts in the financial system is the ratio between Treasury Inflation Protected Securities (TIPS): and the Long-term Treasuries ETF (TLT). In its simplest form, when this ratio rallies, the financial system is anticipating IN-flation. When this ratio falls, the financial system is anticipating DE-flation. Below is a 10 year chart for this ratio. And as you can see, it has just broke out of a 10-year deflationary channel. TIP:TLT ratio breaks out...

TIP:TLT ratio breaks out

This is an absolute game-changer. If this breakout continues, then we have a confirmed shift in the entire financial system away from fearing deflation to expecting inflation. The impact this will have on all asset classes will be massive. And it’s about to blow up the Everything Bubble. Bonds trade based on inflation. If inflation rises, so do bond yields. When bond yields Rise, bond prices FALL. And when bond prices FALL, the massive debt bubble begins to burst. On that note, the yield on the most important bond in the world: the 10-Year Treasury, has already broken above its 20-year trendline. US Treasury Yields Breaking Out...

US Treasury Yields Breaking Out

The US is not alone, the yield on 10-Year German Bunds has also broken its downtrend. German Bund Yields Breaking Out...

German Bund Yields Breaking Out

Even Japan’s sovereign bonds are coming into the “inflationary” crosshairs with yields on the 10-Year Japanese Government Bond just beginning to break about their long-term downtrend. Japanese Bond Yields Breaking Out...

Japanese Bond Yields Breaking Out

Globally the world has added over $60 trillion in debt since 2007 and all of this was based on interest rates that were close to or even below ZERO. All of this is at risk of blowing up courtesy of this spike inflation. And it's going to collapse most asset classes in ways we haven't seen since 2008....

S&P Futures Suddenly Slide Amid Growing Trade War Fears

After earlier tracking the latest daily rally in global equities amid surging investor optimism, rising earnings and a spending bill to end the U.S. government shutdown which saw Asian stock hit new all time highs, US futures encountered an unexpected air pocket, with the E-mini sliding as much as 10 points from session highs...

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There was no immediate catalyst for the move although the previously noted sharp move lower in the USDJPY, which dropped below 110.40 after trading above 111 following Tuesday's BOJ announcement, may have been a factor behind the move...

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Furthermore, as some trading desks point out, this latest risk off move is not unique to USDJPY, with US yields dipping lower, gold popping while S&P futs, which seemed to lead the move, slipped to $2831 at time of print.
# What caused risk sentiment to sour abruptly? It is unclear, but two possible triggers have been discussed: first, Trump announced tariffs on imported solar panels and washing machines late Monday. While the sectors are not of huge economic significance, it has since sparked concerns that more protectionist moves could follow. Additionally, a tsunami alert has been issued for entire West Coast of US after a 7.9 magnitude earthquake was recorded in the Gulf of Alaska at 04:31 EST. For those who missed it, the US imposed a 30% tariff on solar imports to the US and approved safeguard tariff action on imported washing machines. This resulted to various comments from other nations including China which said it was dissatisfied with the tariffs on US solar imports. Furthermore, Mexico said it regretted that it was not excluded from the measures, while South Korea stated it is seeking to reinstate tariffs on US products and have asked WTO to stop trade concessions The news followed the reopening of the US government, when first the US Senate voted 81 vs. 18 to pass the stop gap spending bill to reopen government and fund it through to February 8th, followed by the House which also voted 266 vs. 150 for the 3-week stop gap measure which President Trump later signed to end the shutdown.
As Bloomberg notes, investors will be closely watching how markets respond to Trump’s import tariffs. Any positive impact from his signing of a temporary government spending bill that ended a three-day partial shutdown appears to have faded, perhaps because the deal simply delayed tough decisions for a few weeks And while the aftershock from the quake will come and go, concerns about a growing trade war are only just beginning. The shockwave from the steep drop in the ES and USDJPY has moved to Europe where the Stoxx 600 is up less than 0.1%, trimming earlier advance of as much as 0.4%, mirroring the US move: European banks erased earlier advance of as much as 0.4%, while miners are worst performers among European sectors following the overnight rout in iron ore. The Stoxx 600 basic-resource index slides 1.8%, most in 2 months and halting a 3-day winning streak, as copper, iron prices drop. Earlier, the MSCI Emerging Markets Index advanced an eighth day, helped by stronger oil prices. West Texas crude futures climbed toward $64 a barrel, buoyed by forecasts for a record run of declines in U.S. crude stockpiles. As reported earlier, the BoJ kept policy unchanged as expected in which QQE with YCC was maintained and NIRP held at -0.10%.
The decision on YCC was made by 8-1 vote with Kataoka the dissenter again and the central bank also extended the deadline for its loan program by 1yr. BoJ commented that inflation is likely to continue increasing to 2% target but risks to prices tilted to the downside and that inflation expectations have been more or less unchanged, while the central bank affirmed all forecasts for Real GDP and Core CPI. BoJ Governor Kuroda says day-to-day JGB buying operations do not indicate future course of monetary policy and is closely watching FX markets. As described earlier, the reaction to the BOJ statement sent the USDJPY on a tubulent stop hunt first lower, then higher, and finally lower again. In macro and FX, the dollar found early strength from BOJ Governor Kuroda’s comments that policy makers aren’t at a stage to consider reducing monetary stimulus and reversed its Asia session drop. Even though the yen managed to eventually recover its losses, the greenback stayed generally stronger against G-10 in European session before fading to flat as U.S. govt. reopens and administration enacts selected import tariffs. European euphoria continued, with the German ZEW Survey handily beating expectations while the current conditions index hit a record high as optimism prevails in Germany.
*ZEW Economic Sentiment (Jan) 20.4 vs. Exp. 17.8 (Prev. 17.4) 
*ZEW Current Conditions (Jan) 95.2 vs. Exp. 89.8 (Prev. 89.3)...

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Commenting on the ZEW, CapEco notes that "January’s rise in ZEW investor sentiment confirms that investors are upbeat about Germany’s economic prospects despite the recent rise in the euro. The increase in the headline Economic Sentiment Indicator (ESI), from +17.4 to +20.4, more than reversed the previous month’s fall and was far stronger than the consensus expectation of a rise to +17.8. What’s more, the current conditions jumped to a record high of 95.2, leaving it far stronger than the previous record of 91.5. The historic relationship between the ZEW ESI and annual GDP growth is very loose, but for what it’s worth January’s rise leaves the ESI pointing to growth of around 2%." Elsewhere, in rates, TSYs rally and the curve flattened, with US 10Y yield back below 263bps level. Peripheral EGBs well supported, led by Spain despite expected large 10y syndication. The combination of higher prices and the prospect of a more investor-friendly government is making Chile’s mining industry hopeful of a resumption in large projects after years of cost cutting. As a result iron ore futures sank by the most this year while copper declined 1%: it may have much more to drop. Scheduled earnings include Johnson & Johnson, Procter & Gamble, Verizon and Texas Instruments. Economic data include Richmond Fed Manufacturing Survey for January....

Tsunami Headed For Alaska After 8.2 Magnitude Earthquake

A powerful 8.2-magnitude earthquake detected in the Gulf of Alaska has triggered tsunami warnings in Alaska and tsunami watches across several Western states through British Columbia all the way down to San Diego... Earthquake watches are also in effect for Hawaii “Based on all available data a tsunami may have been generated by this earthquake that could be destructive on coastal areas even far from the epicenter,” the Pacific Tsunami Warning Center said. The earthquake struck about 175 miles southeast of Kodiak, Alaska, shortly after midnight in Alaska local time, according to preliminary figures from the United States Geological Survey. The quake had a depth of about 6 miles, according to USGS. That depth, meteorologists pointed out, is relatively shallow, raising the risk of dangerous tsunamis in Alaska...

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In Kodiak, first responders drove through the streets warning residents to "evacuate immediately".
# Haricot Vert @harrycovair @KoloheBoy @saimin @PHOTOlulu saw 1 data on one of the buoys in the AK area went up 32 feet. PHUQUE! @Meteo_Reporter: https://www.youtube.com/3er67, VIDEO:#Tsunami Warning after 8.2 #Earthquake in #Kodiak, #Alaska | Jan 23, 2018 
Tsunami waves move surprisingly quickly, one meteorologist said, point to the following graphic.
# NWS Tsunami Alerts @NWS_NTWC...


The U.S. Geologic Survey gave a preliminary magnitude of 7.9, while the National Weather Service put the final magnitude at 8.2...

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# Warning; In its warnings, USGS stated: "If you are in a tsunami warning area: Evacuate inland or to higher ground above and beyond designated tsunami hazard zones or move to an upper floor of a multi-story building depending on your situation. "If you are in a tsunami watch area: Prepare to take action and stay alert for further information. If you’re on the beach and the tide suddenly goes out, head inland immediately." Nathaniel Moore was on a boat docked in Kodiak when he felt the ground "shake really good for a minute." He said the fishing vessel's crew got off the boat after the earthquake to head for higher ground amid the tsunami warning. "The whole town is evacuating," he told CNN early Tuesday. Heather Rand, who was in Anchorage, Alaska, told CNN that the earthquake "was a slow roller, so it was felt for at least a minute before the real rolling started. Nothing fell off the walls and I didn't have to wake my kiddo." She said it felt like the longest earthquake she had ever experienced. "It was a very long, slow build up. Creepy, more than anything. Definitely the longest, and I was born here," Rand said. She reported no damage besides cracks in the drywall. Waves should be reaching the Alaska shoreline in an hour or so, meteorologists said....

Berlusconi, Italeave And How To Checkmate Germany

As the Italian election season heats up it’s clear that Silvio Berlusconi is right where he wants to be. In the spotlight. And because of that, his coalition with the Lega Norda (Northern League), while leading in the polls overall isn’t unified on much more than containing the electoral success of Movimiento 5 Stelle (5 Star Movement, or M5S). As I talked about over the weekend Lega Norda’s candidate, Matteo Salvini, is moving farther along the populist route, declaring himself a Trump-like change agent while excoriating the EU for its immigration policy. On the other hand, Berlusconi is tempering his tone with each passing day.
First it was not leaving the euro, so-called Italeave, and more recently EU rules on budget deficits. Ultimately, that’s Berlusconi’s job, to sell the EU to an Italian electorate reaching their breaking point. M5S, the most radical of parties is leading the polls with anywhere from 26 to 30% overall. No other party including the Democrats of sitting Prime Minister Paolo Gentolini comes close. In fact, the Democrats are looking at support dropping below 20%. Leaving the euro is supposedly only backed by 30% of the people. Brexit was supposed to fail by 10-12 points and Hillary had a 98.5% chance of winning on election day. So, while Italy’s new rules for the make-up for parliament almost guarantee a minority government, there is still a possibility of a grand coalition, similar to what Martin Schultz and Angela Merkel are trying to swindle voters into accepting in Germany. But, the problem for Berlusconi and the Democrats, if that is their plan, is that it’s becoming obvious he is their stalking horse in this election. He and Salvini do not see eye to eye on the subject of the euro, taxes, immigration or much else.
# Euro-nly a Pawn; Salvini is out there stumping that the euro is a ‘crime against mankind’. Mr Salvini said: “I believe that one single currency for 18 economies, each different in its own way, just won’t work in the long term." But statistics here is more important than anything else. “Since the introduction of the current currency, Italy’s debt has risen by €900bn. This experiment has failed and we should not go any further down this road.” And he’s right. But, the reality is that, as of right now, exiting the euro is not a winning political talking point. Everyone is backing away from it while at the same time, everyone knows it’s in Italy’s best interest.
# Including Germany; Let’s say the current situation holds and Berlusconi and Salvini et.al. limp across the finish line with around 40% of the vote, while M5S takes 30% and the rest is divvied up between the Democrats and minor parties. Then, with the changes to the representation rules in parliament Berlusconi could easily cut a deal with the Democrats for a Grand Coalition that sells out Italy to Brussels. But, Salvini will still wind up as Prime Minister. Regardless of how far Lega Norda has come to become a national party, Salvini will still backed directly by a far smaller percentage of the population than M5S’s Luigi De Maio. So, despite Berlusconi’s best maneuverings, politically, it still leaves Italy with a very weak government, which may be the point. The difference here is that M5S will have a strong enough voice to support Salvini in any debt relief negotiations with Germany, which will have to come to pass this year. AfD in Germany only got 13.5% of the vote. They are the official opposition. But, M5S is the front-runner being obviously squeezed out by politicians loyal to Brussels first and Italy second (if that). And the door opens up for him to go to the people and make the case for Italeave after dealing with Brussels. All he has to do is invoke how Greece was treated in 2015...

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# Italeave Trumps Grexit; Because if Germany tries to play the hardball tactics it did with Tsipras, it likely won’t work in Italy. Tsipras didn’t expect to win. He wasn’t prepared for the game. His finance minister, Yanis Varoufakis was. But Tsipras sold him out and enslaved two generations of Greeks to a debt yoke that is choking the life out of the country. Salvini, if elected, will be facing the same thing. But will have support from Five Star Movement. So, it will be very hard for him to betray Italy to Brussels the way Tsipras did Greece. In fact, the path of least resistance for him is to call the EU’s bluff and allow the Italian Banks in trouble to fail. This throws the decision back to Brussels to deal with the problem. Because remember one thing, Salvini is right, Italy’s debt is 134% of GDP. Most of the Italian banks are dealing with portfolios with NPLs (Non-performing loans) that top 40%. Italy’s banking system is in terminal decline. Something is going to have to happen. And if Salvini and Berlusconi continue at loggerheads over basic issues like retirement, taxes and spending, then the market is not going to look upon that kindly and will continue selling Italian debt. Let’s not forget that the ECB will be forced by The Fed to end its bond-buying program and allow rates to rise. So, when, not if, Italy’s debt situation becomes untenable and another crisis breaks out Salvini would be in a very good negotiating position. Why? Because of the old adage then when you owe the bank a thousand dollars it’s your problem. But when you owe the bank $2 trillion dollars it’s the bank’s problem. And the bank in this case is the ECB along with most of the rest of Europe. The only reason anyone still owns Italian debt is because the ECB has been a buyer. But as the chart above shows, every0ne else has been selling to the ECB for the past two years. Checkmating the Troika So, unless there is the political will to consolidate all of Europe’s debt under one roof, this problem lands squarely at the feet of the ECB, the Bundesbank and the farce that is German politics. This puts the decision on the Troika (The ECB, The IMF and the European Commission) to bail them out directly or kick Italy out of the euro.
And that’s smart politics. Make Brussels the bad guy. And Salvini is already playing that tune perfectly. If they were all smart, they would have the Lira ready to deploy if things go south. Since Wolfgang Schauble stepped down as Finance Minister in Germany, there is no one ready to take his place as Mrs. Merkel’s attack dog in these negotiations. I suspect part of the reason talks between Merkel and the Free Democrats broke down was because the FDP head, Christian Lidner, was in favor of kicking countries like Italy out of the euro-zone. Merkel talks a tough game on this, but ultimately is about EU integration over everything else. Schauble was as well. And Varoufakis knew he had them dead to rights in 2015 but Tsipras folded a winning hand. Schauble was the one who threatened euro expulsion on the Greeks which both he and Tsipras knew was unpopular. It’s why Tsipras folded. He wasn’t prepared to pay the political price to do what was in Greece’s best interest. 
# Does Salvini? Does Berlusconi? The market at this point is handicapping that they don’t. The headlines are all ablaze with all the Italian parties having backed off on Italeave. But is it real or just a vote-buying tactic? For M5S it’s the latter. The question is still out on Salvini and the Lega Norda. If Germany tries to strong-arm Italy the same way that they strong-armed the Greeks, I don’t see it going the same way. Ultimately, despite Berlusconi’s wrangling, a plurality of Italians are backing fundamentally Euroskeptic parties. If Salvini is the real deal, he would use his alliance with Berlusconi to raise Lega Norda’s profile to 20%, then build a coalition with M5S after the votes are tallied, freezing out any chance of hijacking the process. In the end, it won’t be hard for whoever is in power to make the argument in the face of a major banking and sovereign debt crisis. Framing Germany as the bad guy will be easy and at that point the EU dives head first into its first real challenge to its authority.

Jeremiah Johnson; "The Public's Attention Is Being Diverted From What Is Really Happening"

The Russian surveillance vessel the Viktor Leonov was reportedly leaving the Caribbean over the weekend bound toward the U.S. East Coast. Florida will be reached by next Friday, and before this, the King’s Bay ballistic missile submarine base in Georgia is also along their projected route. This comes on the heels of what has gone largely unreported by the Mainstream Media. On Friday, 1/19/18, a report from U.S. National News emerged, entitled Submarine off of NJ/DE/MD coasts? US Navy deploys NINE Anti-Submarine Aircraft off East Coast Fearing Sub Missile Launch Against US.
Here is an excerpt: The East Coast of the United States may be subjected to attack by submarine launched missile(s) and the US Navy has scrambled NUMEROUS P-8A POSEIDON anti-submarine aircraft, to repeatedly search coastal waters from New York City to Washington, DC ALL DAY Thursday into Thursday Evening. According to flight records, at least NINE anti-submarine warfare aircraft were sortied Thursday off the US East Coast, and Flight Records show they were engaged in very active hunting for submarine(s) off the East Coast, well WITHIN the 12-mile territorial limit of the United States. This article has plenty of photos, and some with the locations of CAP (Civil Air Patrol) enlisted to aid the U.S. Navy with the “shortfall” in radar coverage and area surveillance. The article also gives the disposition of numerous aircraft and shows the locations of monitored Russian submarines. While all of this has been happening, “statesman” Rex Tillerson just came out and declared this at Stanford University on Wed., 1/17/18, as reported by RT News:
# "The Japanese have had over a 100 North Korean fishing boats that have drifted into Japanese waters. Two-thirds of the people on those boats have died.” "The fishermen are being sent in the wintertime to fish because there are food shortages. And they are being sent out to fish with inadequate fuel to get back. So, we are getting a lot of evidence that these [sanctions] are really starting to hurt." 
Honorable Secretary of State Rex Tillerson. Pure statesmanship, pure diplomacy? No: pure extortion. This coming from a country (the U.S.) that wanted to depose Assad for the “brutal human rights violations” against civilians…but when it involves the civilians of a country we want to crush, what are a few hundred starving North Korean fisherman’s lives worth? Hey, the sanctions work! We oust leaders for human rights violations, but our policies and sanctions are “humane,” and “altruistic.” Let them join the IMF and World Bank, become a vassal, then they can shop at Costco. Then: let them eat cake! North Korea has the resolve to see through any paper-tiger sanctions initiated by a country that is a dying empire backed up by a “toothless” UN. China and Russia have the resolve to be positioning their assets now, prior to the conflict, the war that is forthcoming. It has been reported that the Chinese have moved troops and radiation detectors along their border with North Korea. Just about a week ago, the RAF had to scramble Typhoons to escort Russian bombers conducting practice runs along the Cold War routes that cover the UK.
# A very in-depth article came out that reports Russia and China to be skeptical concerning the U.S.’s gold supply. Economics is another form of warfare: should they prove the U.S. to not have on hand the gold reserves it claims to have, or (as it states) that the gold is of inferior quality to that traded by the rest of the world? This may very well be the final kicker to persuade nations to distrust the falling Petrodollar and remove the dollar as the World Currency exchange. Such would establish the positions of gold-backed Rubles and Yuan that also have oil to trade, to further bolster that worth on a global economy. For those who still watch television, enjoy your football and the upcoming Olympics. But keep this in mind: the powers that be will not rest in their inexorable march toward global government. It would not be the first time that bread and circuses were used to keep the mob entertained and distracted from the sinister actions and purposes of their leaders and governments. In the meantime, other nations are preparing and positioning their forces, as well as conducting intelligence and surveillance on us, prior to the war that may come anytime. If the politicians are any indicator of how we’ll fare, the prognosis doesn’t look good. All of it can be avoided with diplomacy, but war is a money-maker, and a game changer for an incumbent whose ratings are flagging. War is their solution. Why? Because they live off our labors and our tax dollars ensure they’ll be safe and sound in their bunkers. Their world: opulent feasts, riches, maintaining power, with armies and unlimited resources...it will remain intact. Ours will not....

If Bitcoin Doesn’t Hold On Here, Bulls Get Hurt

Below looks at Bitcoin from two different time frames. The chart on the left looks at Bitcoin on a weekly basis over the past few years and the chart on the right looks at it on a Daily basis over the past 5-months. The left chart highlights that Bitcoin has spent the majority of the past 5-years inside of rising channel (1). Bitcoin hit the top of this channel last month, where selling pressure has started taking place...


Once Bitcoin hit the top of the channel last month, it could be forming new falling channel (2), where lower highs and lower lows are taking place. The bottom of falling channel (2) looks to have started on a bullish reversal pattern at (3), which took place at the 11,200 level. Last week this level was tested, where bullish reversals took place. Key support is being tested again today at (4), where Bitcoin bulls have their fingers crossed that support holds. If support does not hold at (4), Bitcoin could end up testing the bottom of falling channel (2) again....

"Something Is Very Wrong With The Global Economy": Richest 1% Made 82% Of Global Wealth In 2017

It is appropriate that as the world's richest and most popular and influential celebrities, thought leaders, economists, pundits and politicians sit down in Davos this week to discuss such topics as wealth inequality and populism, that the global charity Oxfam released its latest annual study which found that global inequality is not only worsening, but 2017 may have been the worst year ever for the split between rich and poor. There are now 2,043 billionaires worldwide, according to the report titled “Reward Work, Not Wealth." "The billionaire boom is not a sign of a thriving economy but a symptom of a failing economic system," Oxfam executive director Winnie Byanyima said in a statement...

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In addition to finding that the world’s richest 42 people own the same amount of wealth as the poorest 50% of people worldwide, a number that is fast approaching 4 billion, the report also showed that 2017 saw the biggest increase in the number of billionaires in history, with new ones created at a rate of one every two days. Their wealth has increased by 13% a year on average in the decade from 2006 to 2015. In other words, in 2017 the world's richest one % raked in 82% of the wealth created last year while the poorest half of the population received none, Oxfam said just hours before the world's elite prepared to mingle at the World Economic Forum in Davos and pretend to care about the plight of the world's poor...

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Just as concerning, if only in theory, to the fake warriors for wealth and income equality in Davos, is that the three richest Americans have the same amount of wealth as the poorest half of the U.S. population. Bill Gates, Jeff Bezos and Warren Buffett are the three Americans whose combined wealth matches that of the poorest 160 million Americans, about $250 billion. Among the other findings: the wealth of the super-rich increased by $762 billion in just 12 months to March 2017 which is enough to end extreme poverty seven times over. Nine out of 10 of the world's 2,043 billionaires were men. Separately, chief executives of the top five global fashion brands made in just four days what garment workers in Bangladesh earn over a lifetime. "The people who make our clothes, assemble our phones and grow our food are being exploited to ensure a steady supply of cheap goods, and swell the profits of corporations and billionaire investors,"said Byanyima... 

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According to Mark Goldring, chief executive of Oxfam, the statistics signal that “something is very wrong with the global economy. The concentration of extreme wealth at the top is not a sign of a thriving economy but a symptom of a system that is failing the millions of hard-working people on poverty wages who make our clothes and grow our food," he said, and while he is right, the rich have little incentive to actually do anything about this record wealth divergence - besides pretending they are horrified by it, of course - at least until more Brexits, and more Trumps emerge, and eventually, a global uprising against the super wealthy. “Inequality is reaching such extreme levels that it might actually be bad for really wealthy people because it’s slowing down economic growth and leading to political disruption,” said David Hulme, an expert global development at the University of Manchester. Hulme added that “globally, across the world’s 7.6 billion people, extreme poverty is actually reducing. It’s only when you look at the top group, the richest people, that wealth is concentrating amazingly. Both of those things can happen at the same time.” Over the next 20 years, the report claims that 500 of the world’s richest people will give $2.4 trillion to their heirs, a sum larger than the GDP of India, which has 1.3 billion people...


The World Inequality Report 2018, a separate report published in December last year, noted that income inequality varies greatly across the world. When defined as the share of total national income accounted for by a nation’s top 10% earners, it is lowest in Europe (37%) and highest in the Middle east (61%). The United States (47%) lags China (41%) and Russia (46%). Oxfam said the massive inequality is being driven by factors that include excessive financial returns to company owners and shareholders at the expense of ordinary workers and the rest of the economy; the ability of rich individuals and corporations to use tax havens that allow them to evade or shield trillions of dollars from tax authorities; public policy that permits market conditions that push down wages and infringe on labor rights; and extreme wealth that is inherited, not earned. Byanyima blamed “tax dodging” as one of the major causes of global inequality and urged leaders to crack down on tax havens and inject money into education, healthcare and jobs for young people. "It reveals how our economies are rewarding wealth rather than the hard work of millions of people,” Byanyima told Reuters, adding “The few at the top get richer and richer and the millions at the bottom are trapped in poverty wages." 
# As noted above, the study was released on the eve of top political and business figures meeting at a luxury Swiss ski resort and private jet parking lot for the annual World Economic Forum, which this year says it will focus on how to create "a shared future in a fractured world". "It's hard to find a political or business leader who doesn't say they are worried about inequality," said Byanyima. "It's even harder to find one who is doing something about it. Many are actively making things worse by slashing taxes and scrapping labor rights"....

Jeff Thomas; Destroying The "Capitalism Has Failed" Narrative

Today, more than at any time previously, Westerners are justifying a move toward collectivist thinking with the phrase, “Capitalism has failed.” In response to this, conservative thinkers offer a knee-jerk reaction that collectivism has also had a dismal record of performance. Neither group tends to gain any ground with the other group, but over time, the West is moving inexorably in the collectivist direction. As I see it, liberals are putting forward what appears on the surface to be a legitimate criticism, and conservatives are countering it with the apology that, yes, capitalism is failing, but collectivism is worse. Unfortunately, what we’re seeing here is not classical logic, as Aristotle would have endorsed, but emotionalism that ignores the principles of logic. If we’re to follow the rules of logical discussion, we begin with the statement that capitalism has failed and, instead of treating it as a given, we examine whether the statement is correct. Only if it proves correct can we build further suppositions upon it. Whenever I’m confronted with this now oft-stated comment, my first question to the person offering it is, “Have you ever lived in a capitalist country?” That is, “Have you ever lived in a country in which, during your lifetime, a free-market system dominated?” Most people seem initially confused by this question, as they’re residents of either a European country or a North American country and operate under the assumption that the system in which they live is a capitalist one.
# So, let’s examine that assumption. A capitalist, or “free market,” system is one in which the prices of goods and services are determined by consumers and the open market, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority. Today, none of the major (larger) countries in what was once referred to as the “free world” bear any resemblance to this definition. Each of these countries is rife with laws, regulations, and a plethora of regulatory bodies whose very purpose is to restrict the freedom of voluntary commerce. Every year, more laws are passed to restrict free enterprise even more. Equally as bad is the fact that, in these same countries, large corporations have become so powerful that, by contributing equally to the campaigns of each major political party, they’re able to demand rewards following the elections, that not only guarantee them funds from the public coffers, but protect them against any possible prosecution as a result of this form of bribery. There’s a word for this form of governance, and it’s fascism. Many people today, if asked to describe fascism, would refer to Mussolini, black boots, and tyranny. They would state with confidence that they, themselves, do not live under fascism. But, in fact, fascism is, by definition, a state in which joint rule by business and state exists. (Mussolini himself stated that fascism would better be called corporatism, for this reason.) In recognizing the traditional definition of fascism, there can be no doubt that fascism is the driving force behind the economies of North America and Europe. In addition, the concept of any government taking by force from some individuals the fruits of their labour and bestowing it upon others is by no means free-market. It is a socialist concept. And, in any country where roughly half of the population are the recipients of such largesse, that country has, unquestionably, settled deeply into a socialist condition. However, this is by no means a new idea. As Socrates asked Adeimantus: Do not their leaders deprive the rich of their estates and distribute them among the people; at the same time taking care to preserve the larger part for themselves?

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# So, which is it? Are we saying here that these countries are socialist or fascist? Well, in truth, socialism, fascism, and, indeed, communism are all forms of collectivism. They all come under the same umbrella. So, what we’re witnessing is liberals, rightfully criticising the evils of fascism, but failing to understand it for what it is, a form of collectivism. Conservatives, on the other hand, do their best to continue to operate under their countries’ socialist laws, regulations, and regulatory bodies, whist continuing to imagine that a remnant of capitalism remains. And so we return to the question, “Have you ever lived in a country in which, during your lifetime, a free-market system dominated?” Such countries do exist. It should be pointed out, however, that even they tend to move slowly toward collectivism over time. (After all, it’s in collectivism that they gain their power.) However, some countries are “newer,” just as the US was in the early nineteenth century and, like the US, the governments have not yet had enough time to sufficiently degrade the economies that have been entrusted to them. In addition, some citizenries are feistier than others and/or are less easy to convince that, by allowing themselves to be dominated by their governments, they’ll actually be better off. Whatever the reasons, there are most certainly countries that are far more free-market than the countries discussed above. But, what does this tell us of the future? What can be done to turn these great powers back to a more free-market system? Well, the bad news is that that’s unlikely in the extreme.
To be sure, we, from time to time, have inspired orators, such as Nigel Farage or Ron Paul, who remind us what we “should” do to put these countries back on track, so that they serve the people of the country, rather than its leaders. But, historically, such orators have never succeeded in reversing the trend one iota. History tells us that political leaders, in their pursuit of collectivism, never reverse the trend. They instead ride it all the way to the bottom, then bail out, if they can. However, it is ever true that, in some locations in the world, there have always been free-market societies. Over time, they deteriorate under the hands of their leaders and, as they do, others spring up. The choice of the reader is to look upon the world as his oyster, to assess whether he is more or less content with the country he’s in and confident that it will continue to be a good place in which to live, work, invest, and prosper, or, if not, to consider diversifying, or even moving entirely, to a more rewarding, more capitalist jurisdiction....

SEC Cracks Down On "Overnight Blockchain" Companies

One month after the addition of "blockchain" to a company's name, or business model, became a joke in financial circles, not to mention a shortcut to soaring market cap for countless micro-cap companies, the SEC is finally getting involved. As Reuters reports, the SEC is scrutinizing public companies that change their name or business model overnight in a bid to capitalize upon the hype surrounding blockchain technology, SEC Chairman Jay Clayton said on Monday. Dozens of little-known companies - and not so little-known in the case of Kodak and its infamous KodakCoin, across the globe saw their share prices surge higher in recent months after unveiling plans to enter the bitcoin industry or that of its underlying distributed ledger blockchain technology...

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The topic of "blockchain" renaming euphoria was a prominent topic in the latest investor letter from Upslope Capital Management in which George Livadas wrote the following: If most investors are indeed “all-in,” we’d expect to see signs of reaching for returns and questionable risk-taking behavior. That’s exactly what we are starting to see, in my view. If there is an “obvious” bubble, it’s Bitcoin and all things blockchain-related. The phenomenon seems to be bleeding into equity markets, where almost every week, another stock jumps on reports of (often highly questionable) involvement in Bitcoin, blockchain, etc. “I know this idea is crazy, but it’s going to get crazier!” is an oftenmentioned investment thesis here. The mood was captured perfectly in a January 2nd CNBC headline that read: “Tiny company that owns some Hooter’s restaurants says it will use blockchain for rewards program, boosting stock by 50%.” Lest you think this was an isolated incident, note the eye-popping returns (over just 60 days) for the stocks listed below. Many of these companies pulled off similar gimmicks...

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And now it is the SEC's turn, although to be fair, the SEC already got involved back in December, when the regulator suspended trading in the shares of Crypto Company, a small firm that saw its stock rise more than 2,700 percent after signing a deal to buy a cryptocurrency data platform. Addressing the trader euphoria in this small corner of the market, Clayton warned that "it was not acceptable for companies without a meaningful track record in the sector to dabble in blockchain technology, change their name and immediately offer investors securities without providing adequate disclosures around the risks involved." Although in light of the recent performance gains one doubts whether a 100 page powerpoint presentation of risk factors would do anything to dent the mania as long as the overall momentum was higher. "The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering", the SEC chair said at a conference on Monday. Clayton also said the SEC had seen “disturbing” evidence that legal professionals have been wrongly counseling clients that initial coin offerings do not need to comply with federal securities law.
Previously, the SEC has said that such fundraisings should comply with securities law and has warned investors more broadly over the risks of cryptocurrency fraudsters. “I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar,” Clayton said. Today's crackdown on "blockchain" companies comes just days after the SEC effectively blocked the path for any bitcoin-based ETFs, warning that they are far too risky for the general public, which should instead invest its money in the stock market which is currently in its "blow off top" meltup phase, and trading at Shiller PE of over 34x, roughly 4 turns higher than where it was just before the Great Depression....

maandag 22 januari 2018

Netflix Explodes To Record Highs After Smashing Subscriber Expectations, Will Burn Up To $4BN In 2018

Netflix stock is exploding higher to new all time highs, a repeat of what it did last quarter, soaring above its record high price and up over 9% after hours, rising above $247 per share after reporting Q4 numbers which while beating slightly on revenues ($3.29Bn, Exp. $3.28Bn), and in line on non-GAAP EPS (Adj. EPS$0.41, exp. $0.41), were far more remarkable for the subscriber numbers, which absolutely smashed expectations especially on the international streaming side, as follows:
- Q4 total net streaming additions 8.34MM, Exp. 6.34MM 
- Q4 domestic net streaming additions 1.98MM; Wall Street exp. 1.29MM, guidance 1.25MM 
- Q4 international net streaming additions 6.36MM, Wall Street exp. 5.05MM, guidance 5.05MM 
The addition of 8.4 million subs in Q4 was the company's largest ever quarterly increase. Netflix' Q1 2018 outlook was also far above expectations, with the company now expecting Q1 net streaming adds of 6.35 million (1.45MM in the US and 4.9MM internationally) well above the consensus estimate of 5.18 million, although this will come at a cost: Netflix expect to burn between $3 and $4 billion in cash in 2018. The company expects $3.686 billion in Q1 revenue, also above the consensus estimate of $3.49 billion, generating EPS of 63 cents, above consensus of 55 cents...

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In addition to the stellar subscriber adds, one thing that investors will focus on is the company's content spend for next year, which Netflix is increasing once again: having previously said they would spend $7 billion, they are raising that by as much as a $500 million on the low end forecasting that "we’ll spend $7.5-8 billion on content on a P&L basis in 2018." The previous range was $7.0-$8.0 billion. Also, it will come as no surprise that with Wall Street expecting the company to spend $8.7 billion this year on content...

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It will continue spending an ungodly amount. Netflix now has 117.6 million subscribers worldwide, but the success has come at a steep price and as of Sept.30, NFLX's total content obligations were a record $17 billion. The company's historical content spending is as follows:
2018: $7.5-$8 billion (forecast)
2017: $6 billion
2016: $5 billion
2015: $4 billion
2014: $3 billion
2013: $2 billion
Also, as one would expect, the company remains in its near-record cash burning ways, reporting that in Q5 it burned $523 million, modestly below the $639 million it burned one year earlier but above the $465 million it burned in Q3...

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The Q4 burn brought Netflix full year 2017 FCF to -$2.0 billion, "at the lower end of the -$2.0 to -$2.5 billion range we had previously indicated." However, this means that FCF in 2018 will jump as Netflix said the calendar effect means content payments "will now occur in 2018." It gets scarier, because as Netflix admits, "we’re growing faster than we expected, which allows us to invest more in original content than we had planned, so our FCF will be around negative $3B-$4B in 2018." While there was no discussion of the Kevin Spacey elimination from the company's House of Cards juggernaut, Netflix did note that it took a $39m non-cash charge in Q4 for unreleased content we’ve decided not to move forward with.
# However, judging by the afterhours stock response, which sent NFXL to a new all time high with a market cap above $100 billion for the first time ever, investors are far less worried about the relentless cash burn, and the $17 billion in already accrued content commitments, and instead are more impressed with the subscriber additions, as a result sending the stock 9% higher. And as shown on the chart below, the stock is now 30% higher YTD...

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Government Un-Shutdown Sends Stocks To Record Highs, Bonds "Most Oversold" In 13 Months

"Don't worry, be happy"...


While stocks soared to new record highs, the dollar was completely unexcited and bonds ended the day unchanged...

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Spot the odd one out...

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US Equity futures show the immediate selling pressure at Sunday's open (the shutdown occurred after the close Friday) a panic bid at the US cash open. And then another leg higher on the actual Senate vote. And the ubiquitous melt-up into the close...

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But record highs for all four major US equity indices by the close. Nasdaq was the day's big performer despite AAPL weakness...

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As AAPL slid, so FANGs were bid (ahead of NFLX earnings tonight) High yield bonds underperformed once again, again...

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Treasury yields ended the day broadly unchanged with the long-end very modestly bid (30Y -1bps)...       
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This left the yield curve modestly flatter on the day once again...

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Treasuries are now the most oversold in 13 months...

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The Dollar Index just refused to hold on to any gains once again today, mounting a brief algo ramp on the Senate vote only to fade back into the red...

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Copper, Crude and Gold managed gains on the day as silver slipped...

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Cryptos had another ugly day, with Ripple down 20% from Friday's close...

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With Bitcoin below $11k and Ethereum below $1000...

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Finally we note that Jeff Gundlach's favorite 10Y yield indicator is very close to recoupling...

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2Y Treasuries now yield 27bps more than the S&P 500, the most in 10 years...

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