The End of the Incessant U.S. Bid?

By Kevin Muir

It’s not getting much airplay, but on Friday, a rather important factor to the incessant U.S. financial asset bid expired.

According to Bloomberg’s Brian Chappatta, Friday was the last day U.S. corporations could deduct pension contributions at the 2017 corporate tax rate of 35 percent and will now only be eligible for the new 21 percent rate.

There has been considerable debate amongst the fixed-income community regarding the amount of curve flattening that has been the direct result of corporations accelerating their pension contributions. In fact, Brian’s article is named, “The Yield Curve’s Day of Reckoning is Overblown” and is mostly a rebuke of the idea that this factor has been the driving force to the recent flattening.

Continue reading The End of the Incessant U.S. Bid?

Why Is This Supersafe Bank Scaring the Fed?

By Anthony B. Sanders

Arbing The Federal Reserve

The Federal Reserve did it to themselves. The have one rate at which banks can store deposits with The Fed (currently 1.95%) and another rate for institutional investors (1.75%). If this isn’t a riskless arbitrage opportunity, I don’t know what is.

(Bloomberg Businessweek) — The Federal Reserve is, among other things, a bank for banks: They keep deposits there and earn interest at a rate currently set at 1.95 percent. Big institutional investors that aren’t banks can also deposit money at the Fed, but they use a different program with a lower interest rate: 1.75 percent.

This suggests an obvious trade. An institution could deposit money with a bank, which would then turn around and deposit it with the Fed. The Fed pays the bank 1.95 percent interest, the bank collects a fee for its trouble, and the institution gets the balance—say, 1.9 percent.

Continue reading Why Is This Supersafe Bank Scaring the Fed?

S&P 500 vs. Fund Flows – Divergence

By Callum Thomas

A curious divergence has opened up between the level of the S&P500 and the cumulative level of fund flows into US equity funds (mutual funds and ETFs).  The last time in recent history that we saw a similar type of divergence was in the wake of the 2015/16 twin corrections where fund flows tapered off and then after the election it was game on.  So the open question is whether this divergence in flows vs price will be followed by a similar type of ‘onwards and upwards’.  The counter argument might be that this is actually smart money flows… and a second correction is imminent.  Either way, it’s clear that investors are *not* throwing caution to the wind.

Continue reading S&P 500 vs. Fund Flows – Divergence

There Will Be Warnings!

By Steve Saville

[This blog post is a slightly-modified excerpt from a TSI commentary published about three weeks ago. Not much has changed in the meantime.]

If you rely on the mainstream financial press for your information then you could be forgiven for believing that financial crises happen with no warning. However, there are always warnings if you know where to look.

Here are four leading indicators of financial stress and/or economic confidence that are both easy to monitor and worth monitoring. It’s likely that all four of these indicators will issue timely warnings prior to the next financial crisis and a virtual certainty that at least two of them will.

1) The yield curve, as depicted on the following chart by the 10yr-2yr yield spread.

As explained in many previous commentaries, the yield curve ‘flattening’ to an extreme and then beginning to steepen warns that an inflation-fueled boom has begun to unravel. For example, the yield curve reached its maximum ‘flatness’ in November-2006 and provided clear evidence of a reversal in June-2007. That was the financial crisis warning. By August of 2007 the ‘steepening’ trend was accelerating.

Continue reading There Will Be Warnings!

Semper Fidelis

By Tim Knight

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Never Mind the Bollocks, Here’s the Avocado Toast

By Keith Weiner

For about ten bucks a month, Netflix will give you all the movies you can watch, plus tons of TV show series and other programs, such as one-off science documentaries. They don’t offer all movies, merely more than you can watch. Oh, and there are no commercials.

They don’t just give you old BBC reruns, which you know they can get for a pittance. Netflix is spending money (well Federal Reserve Notes) producing its own original content.

Did we mention that there are no commercials? How is this even possible? According to CNBC, Netflix is spending $8 billion to produce 700 shows. Assuming all of its reported 118 million subscribers pay $10, their production budget eats up more than half a year of their total subscription fee revenue.

CNBC reports that Netflix is exploring the idea of putting ads in its shows. Unfortunately, a quarter of its subscribers say they would leave if that happens. The economics of free vs the economics of losing 25% of your customers in one wrong move. It’s the tiger or the tiger.

Continue reading Never Mind the Bollocks, Here’s the Avocado Toast

Monsters All the Way Down

By James Howard Kunstler

Robert Mueller’s fishing crew was out trawling for Manafort, a blubbery swamp mammal valued for its lubricating oil when, by happenstance, a strange breed of porpoise called a Podesta got caught up in the net. Turns out it was a traveling companion of the Manafort. Back in 2014, the pair swam all the way to a little country called Ukraine via the Black Sea where the Podesta used some Manafort SuperLube on then-president of Ukraine, Victor Yanukovych.

The objective was to grease the wheel of NATO and the EU for Ukraine to become a member. But the operation went awry when Yanukovych got a better offer from the Eurasian Customs Union, a Russian-backed trade-and-security org. And the next thing you know, the US State Department and the CIA are all over the situation and, whaddaya know, the Maidan Square in Kiev fills up with screaming neo-Nazis and Mr. Yanukovych gets the bum’s rush — and despite the major screw-up, the Manafort and the Podesta swim off with a cool few million in fees and return to the comforts of the swamp where they finally part ways.

Continue reading Monsters All the Way Down

Our Extremely Split Market & What That Has Meant Historically

By Rob Hanna

One indicator that has gotten some play in the news lately is the Hindenburg Omen. In last weekend’s subscriber letter I discussed the Hindenburg Omen signal in detail. (Click here for a free trial.) A core premise behind the Hindenburg Omen is that there are a large number of stocks hitting both new highs and new lows. This indicates a split market. When this has happened for multiple days within a short time period, it has often led to market declines. Friday marked the 9th day in a row that NYSE new highs and new lows both exceeded 2.4% of total issues traded. The study below is from the Thursday night subscriber letter, and it looked at streaks of 8 days or more. (I’ll note I also took a quick look this weekend at streaks of 9 days, rather than 8. It barely changed anything.)

… But tonight I simply wanted to look at streaks of these type of split market conditions on their own. With data going back to 1970, I looked for other instances of 8 consecutive days with both new highs and new lows exceeding 2.4% of total issues. Results are below.


There have not been many instances, but the returns after the ones so far have been quite bearish. Below is a list of all the instances assuming a 25-day holding period.

Continue reading Our Extremely Split Market & What That Has Meant Historically

Mother Of All Bubbles (MOAB) And Endless Monetary Stimulus

By Anthony B. Sanders

Is Yellen Really Charles Atlas?

This isn’t a Don Ho “Tiny Bubble.” But the Mother-of-all-bubbles (MOAB). Endless monetary stimulus from The Federal Reserve (and other Central Banks) has led to incredible distortions in asset prices.

If we look at the ratio of financial assets to disposable personal income, you can see the spikes in the ratio corresponding to the bubble of the 1990s, the housing bubble of the 2000s and the everything bubble of the 2100s. The commonality?  Fed interest rate low interest rate regimes. With each successive bubble burst, The Fed had to drop their target rate even further.


But The Fed rate increases in 2008 weren’t enough, The Fed also adopted their QE quantitative easing) programs where they purchased more and more Treasury Notes and Bonds and Agency MBS. Particularly with QE3 (the large spike in the orange line).

Continue reading Mother Of All Bubbles (MOAB) And Endless Monetary Stimulus

Give Him His Due, Porter Stansberry Sure Knows How to Rip Off Dumbasses

By Otto Rock

This from a weekend mailer from the house of iniquity. Talk about ‘know your audience’, Porter Stansberry has done his market research all right. Just count ’em up:

  • Coup
  • Trump
  • Incredible
  • Powerful leaders
  • Secretive
  • Radical
  • Broken silence
  • Stunning details

Also the combo of the word ‘radical’ in there next to a photo with some Arab guy (you can tell, he has that cloth over his head). Wondering how many times that little dog whistle shows up in Stansberry/Casey mailers? I should pay more attention…

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Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at

Global Consumer Sentiment Trends

By Callum Thomas

The global GDP weighted consumer sentiment index dipped slightly in September, but stayed within its upward trend, and continued its divergence against the global manufacturing PMI.  That last point is worth highlighting.  Consumer sentiment is often understood to be more of a lagging/coincident indicator and hence the weakness in the PMI may flow through later.  But it does beg the question once more as to whether the softer PMI readings are purely sentiment effects and simply overreaction to news headlines.  If the consumer is right then before long it will be back to business for global risk assets, but if the manufacturer is right then consumer sentiment could simply be the next shoe to drop.

Continue reading Global Consumer Sentiment Trends

Everybody Loves Copper – Rio Tinto Should Buy Turquoise Hill Stake

By Rob Bruggeman

Markets don’t like uncertainty because uncertainty equals risk.  For this reason and US dollar strength, we’ve seen metal prices plummet over the past few months.  This uncertainty stems from the escalating trade war situation between the US and China, the big fat pig with an insatiable appetite when it comes to metals consumption.

Ironically, despite the recent metal price weakness, large mining companies have never been so eager to acquire large new copper assets.  Lundin (TSX: LUN) is still looking to acquire copper assets, after it lost Nevsun (TSX: NSU) to Zijin.  BHP (ASX: BHP) just acquired a 6.1% equity stake in SolGold (LSE: SOLG), which is advancing a big copper porphyry discovery in Ecuador.

Continue reading Everybody Loves Copper – Rio Tinto Should Buy Turquoise Hill Stake