Potpourri for $500, Alex

By Michael Ashton

When I don’t write as often, I have trouble re-starting. That’s because I’m not writing because I don’t have anything to say, but because I don’t have time to write. Ergo, when I do sit down to write, I have a bunch of ideas competing to be the first thing I write about. And that freezes me a bit.

So, I’m just going to shotgun out some unconnected thoughts in short bursts and we will see how it goes.


Wages! Today’s Employment Report included the nugget that private hourly earnings are up at a 2.8% rate over the last year (see chart, source Bloomberg). Some of this is probably due to the one-time bumps in pay that some corporates have given to their employees as a result of the tax cut, and so the people who believe there is no inflation and never will be any inflation will dismiss this.

On the other hand, I’ll tend to dismiss it as being less important because (a) wages follow prices, not the other way around, and (b) we already knew that wages were rising because the Atlanta Fed Wage Tracker, which controls for composition effects, is +3.3% over the last year and will probably bump higher again this month. But the rise in private wages to a 9-year high is just one more dovish argument biting the dust.

Continue reading Potpourri for $500, Alex

Sleep Walking Into the Next Crisis?

By Kevin Muir

Quick – the United States suddenly backtracks on half century of globalization and enters a trade war with almost all of its trading partners – do you buy or sell equities? And how about bonds?

Don’t mistake this question as me going full tinfoil-hat – I know we are far from a trade war – but it is an interesting exercise to contemplate.

I don’t have an answer how a trade war would affect financial markets. The reality is that “it depends”. I know, I know – the old joke about the one-handed economist is probably applicable here, but the financial repercussions from a trade war are not as obvious as they might seem at first.

Trade wars cause rising prices – no denying that point. But whether that causes stock and bond prices to rise or fall depends a lot on the reaction function of the central bank.

Continue reading Sleep Walking Into the Next Crisis?

Wrapping Up an Eventful Week in Bonds and Stocks

By NFTRH

US Treasury Bonds/Yields

On May 20 we presented a case in NFTRH 500 that the bearish bond play (bullish yields) was done, at least temporarily, from a contrarian perspective.

About Those Bond Yields

That was written before I realized – thanks to an alert NFTRH subscriber – that Thursday, May 31 would be another Fed SOMA (or QT) day, as bonds are allowed to hit maturity.*

The day after this bond maturation yields again went up (bonds down) as the stock market shook off the media-manufactured fears that ostensibly started in Italy but actually were destined to crop up regardless in one place or another (there was a lot of trade war noise this week).

See this NFTRH Premium update, now unlocked to the public, as it was presented in-day and in real time to give perspective for subscribers (and myself) as the media were scaring the herds into risk ‘off’ behavior and the perceived safety of Treasury bonds.

Continue reading Wrapping Up an Eventful Week in Bonds and Stocks

Is Anyone Really Surprised DB’s Problems Had Nothing To Do With The DoJ Fine?

By Jeffrey Snider

You need only go back a little less than two years for an example. In later 2016, Deutsche Bank was a huge problem everyone was discussing if only because they couldn’t avoid it. Despite “reflation” then gripping much of the world, the German institution stood out for all the wrong reasons.

Those were easily dismissed as nothing other than an impending fine for housing bubble era wrongdoing. The US Department of Justice was going to slam the bank with an enormous penalty and its potential size was supposedly the reason investors were getting nervous. Rumors were swirling that it could be more than $10 billion, perhaps $14 or $15 billion. At that level the bank’s capital stance would be severely threatened (and might trigger coco’s and such).

In January 2017, Deutsche settled for $7.2 billion. It would pay $3.1 billion in civil penalties (under FIRREA) while also covering $4.1 billion in “relief” to various affected parties (such as homeowners). A serious forfeit, but nowhere near as much as had been feared.

After falling below $13 per share (on the NYSE) in September 2016, DB’s stock rose as prospects for a reduced settlement gained in perception. By the time it was announced, the stock had recovered to more than $20. End of story?

Not quite. As I wrote in September 2016:

Continue reading Is Anyone Really Surprised DB’s Problems Had Nothing To Do With The DoJ Fine?

Inflation? Core PCE Deflator YoY Hits 2.0% For April…

By Anthony B. Sanders

…As Sears Closes Another 72 Stores

The inflation numbers are out for April and the numbers show that the Core Personal Consumption Expenditure Deflator remained the same as March at 2.0% YoY. Although increasing, “inflation” remains tepid since The Great Recession ended (mostly under the 2% Fed inflation target).

coreinfl

While inflation remains tepid, things are anything but “business as usual” at Sears.  Sears’ stock price never quite recovered from The Great Recession and, like many big box retailers, has been “Bezos’d”.

Continue reading Inflation? Core PCE Deflator YoY Hits 2.0% For April…

Notes on Heartache and Chaos

By James Howard Kunstler

I was interviewing a couple of homesteaders on an island north of Seattle at twilight last night when they noticed that the twelve-year-old family dog, name of Lacy, had not come home for dinner as ever and always at that hour. A search ensued and they soon found her dead in the meadow a hundred feet behind the house with two big puncture wounds in her body. Nobody had heard a gunshot. We’d just been talking inside and a nearby window was open. They suspect the dog met up with a black-tailed deer buck out there and was gored to death. We hadn’t heard a yelp, or anything. A week ago, an eagle got one of their geese, and some land-based monster got its companion just the other day.

Nature is what it is, of course, and it’s natural for human beings to think of its random operations as malevolent. That aspersion probably inclines us to think of ourselves as beings apart from nature (some of us, anyway). We at least recognize the tragic side of this condition we’re immersed in, and would wish that encounters between its denizens might end differently — like maybe that two sovereign creatures meeting up by sheer chance on a mild spring evening would exchange pleasantries, ask what each was up to, and go on their ways.

Continue reading Notes on Heartache and Chaos

Waiting on the Echo of Crude Oil’s Big Drop

By Tom McClellan

Oil's leading indication for DJIA
May 31, 2018

10 years ago in June 2008, oil prices were making a top above $140/barrel, which turned out to be an exhaustive blowoff top.  A steep collapse ensued, taking oil prices down to below $40 in January 2009.

Crude oil gives us a 10-year leading indication for what the stock market is going to do.  It is a phenomenon which has only been working for the entire 122-year history of the DJIA, so that may not be long enough yet for some people to believe in it.  Making things more complicated, it is not a precisely perfect model of future stock market action.  It is merely very good.

Continue reading Waiting on the Echo of Crude Oil’s Big Drop

Novo Resources (NVO.v): A NR, a Chart and a No Comment

By Otto Rock

A NR Here.

A chart here:

As for comment, this humble corner of cyberspace has nothing further to add to this post and message of late November 2017. Here’s how that ended:

4. The issue: how to prove QH is right. And it’s here where I have my major issue with NVO as an investment today because for the life of me, I don’t know how anyone can prove what’s there under the sand without digging it all up first. We’ve already seen drill assays are going to be a non-starter to get to an accurate resource because of quite literally the nugget effect (x100). We’re about to get results from one small area and they’ll be talked up/down by both sides of the argument no matter what they contain, they will not provide any sort of resolution. So, Large Scale Bulk sampling? Yup, take 500kg from here there there and here. Process it. Then tell me all the areas between the samples are the same. Okay. Time for that? Expense? F___ dude, suddenly you’re just mining!

5. Now I know you like the play geologically. All good, but where’s the investment? Honestly, I see this stock trading where it is for years (or diluted as new paper becomes treasury) because it simply doesn’t have any way of proving anything. It’s ultimately risk management and the de-risking of the NVO equity is going to be very difficult.

Bottom line: I have no issue with the geological arguments, no matter which side is eventually proven right. But the key word is “eventually”, I see years of price inertia as the most probable near, medium and long-term future for NVO.

And nothing has changed since, either. Neutral NVO, staying that way, not falling for the BS hype being slathered all over the unwitting fools by people with hidden agendas over at CEO dot CA, either.

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Weakness and Strength

By Tim Knight

Well, “BTFD” has worked for the 1,730th time in a row. It’s no surprise people believe in that simple strategy so much.

The market continues to be a mixed bag. Utilities, for example, my favorite index short, is still looking picture perfect from a moving averages perspective (which is all I am showing in this post). The crossovers are exactly what I want to see.

The Major Market Index is just scraping right along – – we’ve already got a bearish crossover, and it might just hold – – but today’s powerful rally is putting it at-risk. It won’t be clear until day’s end to see if this crossover survives or not.

Continue reading Weakness and Strength

Global Equity Fundamentals

By Callum Thomas

Equity market fundamentals are looking pretty strong around the world.  Key indicators like interest coverage ratios and profit margins have improved to cyclical highs.  Interest coverage has also been helped by a couple of notable trends such as lower borrowing costs.  But, somewhat counter-intuitively, it looks like investors in global equities were rewarded more over the medium-long term when these indicators were in a cyclical downturn…

The main points on the cycles/trends in global equity fundamentals are:

-As a result of low borrowing costs and improved profitability, global interest coverage ratios are looking healthy.

-Globally, profit margins have improved since the earnings recession (EM + Commodities) of 2015/16.

-It all looks pretty good, although the chart shows that investors were usually rewarded more for buying when profit margins were cyclically low vs cyclically high.

1. Global Equities – Interest Charge Coverage:  Globally there has been a noticeable uptrend in interest coverage ratios over the past 30 years.  As with many fundamental indicators, there is a clear cycle around the trend as well.  During the 2015-16 earnings recession there was a deterioration in interest coverage ratios, which has since unwound as the indicator has recovered to a cyclical high.

Naturally factors like the level of interest rates and leverage/debt loads likewise have a significant impact.  So from a cyclical stand point, you would expect the interest coverage ratio to rapidly deteriorate towards the end of a business/market cycle as profitability comes under pressure and policy tightening pushes up borrowing costs.  We saw this in the last two cycles, and thus it’s something worth monitoring.

Continue reading Global Equity Fundamentals

The Bullish Tendency of the Thursday after Memorial Day

By Rob Hanna

Thursday after Memorial Day has been a day that has exhibited a bullish bias for many years. I last showed this on the blog last year. The chart below shows updated results.

2018-05-30

Single-day seasonality can certainly be overrun by other forces, but the Thursday after Memorial Day has been a good one for many years. That may be something that traders want to keep in mind for Thursday.

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Support 100% ad-free Biiwii.com by making a donation of your choice!

Subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas. You can also keep up to date with plenty of actionable public content at NFTRH.com 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 Biiwii.com.

The ‘Alt-Right’ Has New Theme Song, And It Is Everything You Want It To Be!

By Robyn Pennacchia

Conservatives, to put it lightly, are not good at art. They want to be, of course, because they enjoy the way art has influence over people, but they don’t want to invest the actual time it takes to become good at it, like some hippie loser.

To that end, a bunch of talent-free White Nationalists have established the “White Art Collective” — a sad, Geocities-style website devoted to promoting the work of a grand total of eight Nazi “artists.”

One of the musicians showcased on the site is one Bryn Dolman, who has written and produced what may be the most goddamned pathetic song I have ever heard in my entire life, titled “It’s OK To Be White.” Bryn manages a café near a cemetery and also does “life coaching.” Because who doesn’t want to get life advice from a Nazi Barista?

The song has already proved popular with the kind of creeps who write for for Christopher “Crying Nazi” Cantwell’s website, because of course it has.

PREPARE TO CRINGE.
Continue reading The ‘Alt-Right’ Has New Theme Song, And It Is Everything You Want It To Be!