Business Insider counts the ways. Click here for full article and here for some context by Pew Research:
The data cited in this video are quite surprising and will confound your priors. Take the 15 minutes to view it. Well worth your time.
Our good friend tweeted this out today.
Maybe America’s hard left turn to Nordic capitalism won’t be so bad after all (except for the 0.5 percent).
Growing up in L.A., I became friends with Casey in the twilight of his double header. How cool it was to hang with Casey at his house and sit in his rocking chair he used as manager of the Yankees.
Here is some “Stengelese” from the “Old Perfesser.”
(QOTD = Quote of the Day)
Though wage inflation came in nice and cool on Friday, the following chart illustrates why upward pressure on long-term interest rates will continue. We updated our Who’s Funding The U.S. Budget Deficit chart with the just released Flow of Funds data.
The Q4 2017 data show the Rest of World (ROW), primarily foreign central banks, and the Fed were net sellers of Treasury securities to the tune of $319 billion on a seasonally adjusted annual basis. This could be the reason why interest rates have spiked over the past three months. Note the Fed and other central banks have financed most of the U.S. budget deficit over the past ten years and foreign central banks were the largest financier of the Treasury leading up to the credit crisis. The main factor contributing to Greenspan’s bond market conundrum and what some believe the cause of the credit bubble.
We know with certainty, unless they reverse course, the Fed is going to be a big net seller over the next few years as they runoff their balance sheet. It is unclear as to what foreigners will do, but if they continue to reduce holdings or significantly cut back on their net Treasury purchases, real interest rates are heading north. Probably much quicker than the market expects.
Ironically, President Trump’s aversion toward trade deficits could lead to higher interest rates. If the administration succeeds in artificially suppressing the current account deficit by erecting trade barriers, foreign central banks will have less dollars to recycle back into the domestic Treasury bond market and may even become forced sellers. A potential train wreck in the making.
No more red and gold, and the reason why my Treasury position is sold.
How’s that for hip-hop?
Keep it on your radar.
There is not much to say about last week except the Goldilocks employment number on Friday, which Trumped and thumped all bearishness and the market bears. The Trump Tariffs were watered down, and trade diversion to Mexico and Canada will render them ineffectual as far as expanding steel capacity and employment on a structural basis in our opinion. Gary Cohn’s resignation except for a quick dip lower was a nonburger.
The big focus next week will be politics, the special election in Pennsylvania’s 18th congressional district. President Trump is campaigning there as we write.
The Nasdaq made a new high on Friday, and the S&P500 has recovered 75 percent of its losses and now only 3 percent off its high. The recovery has been relatively narrow. The Dow and NYSE Composite have recovered just about half of their losses.
The key to stocks now is to see how interest rates behave. Do they stay below 3 percent or begin to creep higher? We think the later as the technical position is not positive. Lot’s of supply and Fed and other central bank demand has gone away. The decline in demand may be partially offset as interest rates in Euro land remain well behaved.
Next week is make or break (or delay) for the JFK-Trump analog. The Trump S&P500 is a little over 2 percent higher than the JFK S&P500 on Day 335 after election day. Note the JFK market rolled over on Day 338. So sometime in the next week or two, the S&P500 should rollover again for it to stay true to the analog. The catalyst for that will probably have to be the 10-year yield blasting through the 3 percent.
Today’s big rally on the back of the Goldilocks employment report, i.e, strong jobs growth and moderate wage pressures, took the Nasdaq, with its 45 percent tech weighting, to an all-time high. Not the overall market, however, as the NYSE Composite has only recovered a little over 50 percent of its loss. Moreover, the Dow has not even recovered 50 percent of its loss.
The recovery has therefore been narrow but it feels the path of least of resistance is higher as we just don’t see sustained selling by real money accounts.
Thus, after today’s economic data and how the market behaved after the Gary Cohn resignation here is our view: short-term – impossible to predict but not going to stand in the way of the freight train, which wants to move higher; medium-term – we are bearish based on extreme valuations, higher interest rates, and declining global liquidity; long-term – always bullish as stocks follow the economy and the natural state is for the economy to grow. Buyer after the bear market takes valuations back to reasonable levels, which we expect sometime this year. Always a seller at extreme valuation peaks.
Remember, the 11th commandment of trading,
Those who remain flexible shall not be broken – Moses of the S&P
…yesterday on politics driving the tariff “proclamation.”
It is All Politics
Note, today’s announcement on tariffs was a proclamation, not even a legal document. Only words, and we know, for certainty, with this president, words can mean whatever he wants them to, and can change day to day.
The timing of the announcement is hollow as it is political.
President Trumps plans to stump in Pennsylvania’s 18th congressional district this weekend, where the Democratic candidate, Conor and Republican, Rick Saccone, both support steel tariffs. The 18th is definitely steel country.
The special election in the Penn 18th is seen as a bellwether for the November midterms and an indicator of a potential major thumping of the Republicans. – GMM
I do worry about a world where the rich get to write the rules which the rest of us have to obey……We might be on the edge of a precipice. – Angus Deaton
Must view. Confirms our view of a potential hard left turn in American politics.
Does a decades-long rise in suicide among white Americans signal an emerging crisis for U.S. capitalism and democracy? Nobel prize-winning economist Angus Deaton, and his wife, fellow Princeton Prof. Anne Case, share their provocative theory with WSJ’s Jason Bellini in this episode of Moving Upstream. – WSJ
Global Macro Monitor 