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Friday, December 29, 2017


On this year, the dollar tanked (worst since 2003), stocks and bonds (the long-end) soared higher, commodities rebounded dramatically, cryptocurrencies exploded, and gold had its best year since 2010 as VIX saw its lowest average in history...  and all that driven by the biggest increase in central bank balance sheets since 2011... anyone else feel like this... (our estimate is we are at around the 30 second mark currently)

 

RECORDS>

2017...

Now that was a year for stocks...

  • The Dow is up 25% over 2017, putting it on track for its second straight annual increase, as well as its best year since 2013.
  • The S&P is up 20% year-to-date. Like the Dow, it is set for its second straight annual increase and its best year since 2013.
  • The Nasdaq is up 29% in 2017, its best year since 2013. 2017 is set to be the Nasdaq’s sixth straight annual gain. According to the WSJ Market Data Group, this is the longest streak for the Nasdaq since a six-year streak lasting from 1975 to 1980.
  • The Russell has gained 13.6% in 2017. The index is set for its second straight annual gain.
  •  

Additionally, The Nasdaq also has posted a record number of all-time high closes this year.

 

Vols across every asset class collapsed to multi-year (if not record) lows...

 

 

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The collapse in the yield curve (2s30s) is the biggest flattening since 2007...

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This is the flattest yield curve since Oct 2007...

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The Dollar was a bloodbath this year - the biggest loss for the greenback since 2003...

 

 

In December...

  • The Dow is up 2% in December. This will mark its ninth straight monthly rise, its longest such streak since 1959.
  • The S&P is up 1% thus far this month. This will also be the S&P’s ninth positive month in a row, representing its best streak since 1983.  On a total-return basis, however, the S&P is set for its 14th straight monthly gain, which will lengthen a record... and is the first "perfect year" of 12 straight months in one calendar year gains.
  • The Nasdaq is up 0.5% in December, which will represent its sixth straight monthly increase. The tech-heavy index has risen in 13 of the past 14 months.
  • The Russell is down 0.5% in December. breaking its longest winning streak since Feb

Ugly close to the month...

 

 

Finally, if there is one chart that sums up 2017, it is this...

 

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*  *  *

Happy New Year to all... and remember, on Tuesday... It's...

1

 

 

SOURCE> https://www.zerohedge.com/news/2017-12-29/record-smashing-2017-ends-stock-market-whimper-bitcoin-bonds-bullion-best

Wednesday, December 20, 2017


Enjoy and hope he is batting 1K !

 

Surprise #1: President Trump's Behavior Finally Does Matter

Surprise #2: Politics is Upended in 2018. As the U.S. Electorate Pushes Left in Mid-Term Elections

Surprise #3: The Tax Bill Fails to Buoy S&P Earnings Anywhere Near Expectations of 7% to 10% Incremental Growth

Surprise #4: The Cryptocurrency Bubble Pops and Gold Makes New All-Time Highs

Surprise #5: The S&P Index Roars Into the 2017 Close and Makes a 2018 High on Jan. 2, 2018

Surprise #6: A Congressional Subcommittee Meeting Called by Sen. Dianne Feinstein Leads to a Regulatory Attack on Google and Facebook That Slows Their Expansion Plans and Market Share Gains

Surprise #7: Stagflation Emerges in the Last Half of 2018 and the Fed Tightens Four Times

Surprise #8: The 2020 Presidential Front Runners Are Mike Pence and Howard Schultz, but Many Shadows Remain

Surprise #9: Volatility Spikes, Causing a Major Flash Crash

Surprise #10: The Athens Stock Market Is the Best International Performer in 2018

Surprise #11: Company Share Buybacks Drop Dramatically

Surprise #12: European Bonds Sour

Surprise #13: Twitter Is Acquired

Surprise #14: Berkshire Hathaway Makes a $75 Billion Acquisition in Early 2018

Surprise #15: Tesla Stalls Out

 

Source. https://realmoneypro.thestreet.com/dougs-daily-diary?published[value][date]=2017-12-19#my-15-surprises--20171219

Tuesday, December 5, 2017


Authored by Patrick Watson via MauldinEconomics.com,

According to the more cynical pundits, government programs usually achieve the opposite of their intended goal. And sometimes they do.

For example, Richard Nixon’s “War on Drugs” is still in progress, but the drugs are definitely winning.

Some government programs, however, are more effective. Firefighters are doing a pretty good job extinguishing fires. The US Coast Guard saves lives every day. Public school teachers educate students who would rather be elsewhere.

And then there’s our increasingly dysfunctional Congress. Where to begin?

I’ve written recently how Congress’s new tax plan misses a chance to boost economic growth. Now I think it may be even worse. Instead of merely failing to stimulate growth, the tax changes could actually launch a recession. I’ll tell you why in a moment.

But first, a quick reminder: our Mauldin Economics VIP program is open to new members until December 13. VIP members get all our premium investment services, including my own Yield Shark and Macro Growth & Income Alert, for one low price. I suspect they’ll be even more useful if we go into recession, so click here to learn more.

 

 

Long and Weak Expansion

I explained two weeks ago why tax cuts won’t stimulate the economy as much as Republican lawmakers think. Most CEOs say they will use any tax savings for stock buybacks or dividends, not new hiring or expansion.

Since then, the Joint Committee on Taxation, Congress’s nonpartisan scorekeeper, found the Senate tax bill would spur only 0.8% of economic growth, split over 10 years, and add a net $1 trillion to the national debt.

But let’s set aside debt for now. What if, instead of little or no growth, this tax bill sets off an outright contraction?

The current economic expansion is now the third-longest since World War II. It’s also the weakest. Here’s a chart I showed last summer.


Source: BCA Research

The yellow line is the current recovery that began in 2009. Only the 1960s and 1990s growth periods went on longer—and both had much higher growth.

So, just by length of time, we’re already due or overdue for recession. Yes, the economy could improve further from here… but probably not for long.

Potential Achieved

Last week, the Commerce Department revised its third-quarter inflation-adjusted GDP estimate to a 3.3% annualized pace. While that was good news, it also marked something ominous.

 
 

Long and Weak Expansion

I explained two weeks ago why tax cuts won’t stimulate the economy as much as Republican lawmakers think. Most CEOs say they will use any tax savings for stock buybacks or dividends, not new hiring or expansion.

Since then, the Joint Committee on Taxation, Congress’s nonpartisan scorekeeper, found the Senate tax bill would spur only 0.8% of economic growth, split over 10 years, and add a net $1 trillion to the national debt.

But let’s set aside debt for now. What if, instead of little or no growth, this tax bill sets off an outright contraction?

The current economic expansion is now the third-longest since World War II. It’s also the weakest. Here’s a chart I showed last summer.


Source: BCA Research

The yellow line is the current recovery that began in 2009. Only the 1960s and 1990s growth periods went on longer—and both had much higher growth.

So, just by length of time, we’re already due or overdue for recession. Yes, the economy could improve further from here… but probably not for long.

Potential Achieved

Last week, the Commerce Department revised its third-quarter inflation-adjusted GDP estimate to a 3.3% annualized pace. While that was good news, it also marked something ominous.

 

In addition to actual gross domestic product, economists track “Potential GDP.” That’s how fast the economy is capable of growing, considering the number of available workers, productivity, and other factors.

If subsequent data confirms last quarter’s 3.3% growth, it will mark the first time since 2007 the US economy achieved “maximum sustainable output.”

Saturday, December 2, 2017


I think you guyz will enjoy the best read I have found about Wealth & Bubbles...

Fasten your seatbelts, Its going to be fun in 2018 !

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I hate to break it to you, but chances are you're just not prepared for what’s coming. Not even close. 

Don't take it personally. I'm simply playing the odds.

After spending more than a decade warning people all over the world about the futility of pursuing infinite exponential economic growth on a finite planet, I can tell you this: very few are even aware of the nature of our predicament.

An even smaller subset is either physically or financially ready for the sort of future barreling down on us. Even fewer are mentally prepared for it. 

And make no mistake: it's the mental and emotional preparation that matters the most. If you can't cope with adversity and uncertainty, you're going to be toast in the coming years.

Those of us intending to persevere need to start by looking unflinchingly at the data, and then allowing time to let it sink in.  Change is coming – which isn't a problem in and of itself. But it's pace is likely to be. Rapid change is difficult for humans to process. 

Those frightened by today's over-inflated asset prices fear how quickly the current bubbles throughout our financial markets will deflate/implode. Who knows when they'll pop?  What will the eventual trigger(s) be? All we know for sure is that every bubble in history inevitably found its pin.

These bubbles – blown by central bankers serially addicted to creating them (and then riding to the rescue to fix them) – are the largest in all of history. That means they're going to be the most destructive in history when they finally let go.

Millions of households will lose trillions of dollars in net worth. Jobs will evaporate, causing the tens of millions of families living paycheck to paycheck serious harm.

These are the kind of painful consequences central bank follies result in. They're particularly regrettable because they could have been completely avoided if only we’d taken our medicine during the last crisis back in 2008.  But we didn't. We let the Federal Reserve --the instiution largely responsible for creating the Great Financial Crisis -- conspire with its brethern central banks to 'paper over' our problems.

So now we are at the apex of the most incredible nest of financial bubbles in all of human history.

One of my favorite charts is below, which shows that even the smartest minds among us (Sir Isaac Newton, in this case) can succumb to the mania of a bubble:

How Newton's Fortune Fell To Earth chart

It's enormously difficult to resist the social pressure to become involved.

But all bubbles burst -- painfully of course. That’s their very nature.

Mathematically, it's impossible for half or more of a bubble's participants to close out their positions for a gain. But in reality, it's even worse. Being generous, maybe 10% manage to get out in time.

That means the remaining 90% don’t. For these bagholders, the losses will range from 'painful' to 'financially fatal'.

Which brings us to the conclusion that a similar proportion of people will be emotionally unprepared for the bursting of these bubbles.  Again, playing the odds, I'm talking about you.    

How Exponentials Work Against You

Bubbles are destructive in the same manner as ocean waves. Their force is not linear, but exponential. 

That means that a wave's energy increases as the square of its height. A 4-foot wave has 16 times the force of a 1-foot wave; something any surfer knows from experience.  A 1-foot wave will nudge you.  A 4-foot wave will smash you, filling your bathing suit and various body orifices with sand and shells.  A 10-foot wave has 100 times more destructive power. It can kill you if it manages to pin you against something solid. 

A small, localized bubble -- such as one only affecting tulip investors in Holland, or a relatively small number of speculators caught up in buying swampland in Florida -- will have a small impact.  Consider those 1-foot waves.

A larger bubble inflating an entire nation’s real estate market will be far more destructive. Like the US in 2007. Or like Australia and Canada today.  Those bubbles were (or will be when they burst) 4-foot waves. 

The current nest of global bubbles in nearly every financial asset (stocks, bonds, real estate, fine art, collectibles, etc) is entirely without precedent. How big are these in wave terms? Are they a series of 8-foot waves? Or more like 12-footers? 

At this magnitude level, it doesn't really matter. They're going to be very, very destructive when they break.

Our focus now needs to be figuring out how to avoid getting pinned to the coral reef below when they do.

Understanding 'Real' Wealth

In order to fully understand this story, we have to start right at the beginning and ask “What is wealth?”

Most would answer this by saying “money”, and then maybe add “stocks and bonds”. But those aren't actually wealth. 

All financial assets are just claims on real wealth, not actually wealth itself.  A pile of money has use and utility because you can buy stuff with it.  But real wealth is the "stuff" -- food, clothes, land, oil, and so forth.  If you couldn't buy anything with your money/stocks/bonds, their worth would revert to the value of the paper they're printed on (if you're lucky enough to hold an actual certificate). It’s that simple. 

Which means that keeping a tight relationship between 'real wealth' and the claims on it should be job #1 of any central bank. But not the Fed, apparently. It's has increased the number of claims by a mind-boggling amount over the past several years. Same with the BoJ, the ECB, and the other major central banks around the world. They've embarked on a very different course, one that has disrupted the long-standing relationship between the markers of wealth and real wealth itself. 

They are aided and abetted by both the media and our educational institutions, which reinforce the idea that the claims on wealth are the same as real wealth itself.  It’s a handy system, of course, as long as everyone believes it. It has proved a great system for keeping the poor people poor and the rich people rich.

But trouble begins when the system gets seriously out of whack. People begin to question why their money has any value at all if the central banks can just print up as much as they want. Any time they want. And hand it out for free in unlimited quantities to the banks. Who have their own mechanism (i.e., fractional reserve banking) for creating even more money out of thin air.

Pretty slick, right?  Convince everyone that something you literally make in unlimited quantities out of thin air has value. So much so that, if you lack it, you end up living under a bridge, starving. 

Let's express this visually.

“GDP” is a measure of the amount of goods and services available and financial asset prices represent the claims (it's not a very accurate measure of real wealth, but it's the best one we’ve got, so we’ll use it). Look at how divergent asset prices get from GDP as bubbles develop: 

Asset Prices vs GDP chart

(Source)

What we see in the above chart is that the claims on the economy should, quite intuitively, track the economy itself.  Bubbles occurred whenever the claims on the economy, the so-called financial assets (stocks, bonds and derivatives), get too far ahead of the economy itself.

This is a very important point. The claims on the economy are just that: claims.  They are not the economy itself!

Yes the Dot-Com crash hurt.  But that was the equivalent of a 1-foot wave.  Yes, the housing bubble hurt, and that was a 2-foot wave.  The current bubble is vastly larger than the prior two, and is the 4-foot wave in our analogy -- if we’re lucky.  It might turn out to be a 10-footer.

The mystery to me is how people have forgotten the lessons of prior bubbles so rapidly.  How they cannot see the current bubbles even as the data is right there, and so easy to come by.  I suppose the mania of a bubble, the 'high' of easy returns, just makes people blind to reality.

Saturday, November 25, 2017


Which brings us to one of the most striking VIX charts we have seen: as Citi's strategists note, over the last six months, VIX has spent more than 40 days below 10. Putting this staggering outlier in context, the index has never managed to accumulate more than 6 days that low, measured over the same time interval, over the last 30 years. Or, as today's central bankers would say after one look at the chart below which they have created "perfectly normal."

Commenting on the above charts, Citi, which has turned increasingly bearish on credit in recent weeks, says that "implied vol is, in other words, sailing in the same unchartered waters as corporate credit", and concludes sarcastically, "why buy vol if you believe that any selloff is impeded by a central bank backstop?"

Why indeed?

So keep selling vol until one day vol finally explodes as CBs lose control, wiping out trillions in fake wealth in the process; just please don't use the words "market" and "price discovery" until that happens.

 

However, while the Friday VIX snap - which is still on the feeds and thus wasn't a fat finger error - is yet another indication of just how broken, and/or how overrun by vol sellers the market is, below we present two even more striking, longer-term perspectives on the VIX courtesy of Citi.

As Citigroup notes, even after the recent backup, the VIX index is in its 0.5th percentile – that is, historically it has been wider than currently on 199 out of every 200 days. In other words, the "you are here" on the chart below has never been more to the left.

But it is not just a question of having reached this low level of implied volatility. As much as anything it is about the extended period of time we seem to be spending there.

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