You have to wonder whether there are any carbon units left in the casino. The robo traders and HFTs, of course, have an attention span of 10 milliseconds. So their utter lack of concern about context, fundamentals and history is readily explainable. They never get around to it.
But somebody besides the machines is getting paid the big bucks on Wall Street. Do they really think that dancing on a live volcano, as the estimable Ambrose Evans-Pritchard put it recently, is not semi-suicidal?
Yet for the last 18 months that is exactly what they have been doing. The S&P 500 closed today exactly where it first crossed in November 2014. In the interim, it’s been a roller-coaster of rips, dips, spills and thrills.
The thing is, however, this extended period of sideways churning has not materialized under a constant economic backdrop; it does not reflect a mere steady-state of dare-doing at the gaming tables.
Actually, earnings have been falling sharply and macroeconomic headwinds have been intensifying dramatically. So the level of risk in the financial system has been rocketing higher even as the stock averages have oscillated around the flat-line.
Thus, GAAP earnings of the S&P 500 in November 2014 were $106 per share on an LTM basis compared to $86.44 today. So earnings are down by 18.5%, meaning that the broad market PE multiple has escalated from an already sporty 19.3X back then to an outlandish 23.7X today.
And the latter is by no means reflective of an expected stick save turnaround in earnings. Analysts have been furiously marking down their estimates for Q1 for weeks now. At the latest reading profits are projected to fall by 10%, marking the fifth straight quarter of decline.
Always and everywhere, such persistent profit collapses have signaled recession just around the corner. And there are plenty of macro-economic data points signaling just that.
For instance, total US business sales have fallen by 5.1% since mid-2014—-even as inventories have soared. This means that while Wall Street speculators have been dancing on the edge of the volcano for 18 months, the US economy’s tepid rebound has been petering out.
Indeed, there has never been an inventory ratio surge of the magnitude shown in the chart below—-from 1.29X to 1.40X in 18 months—- that did not signal a recession dead ahead.
During the stock market’s most recent dead-cat bounce, the signals that the US economy is drifting into a downturn have only grown more frequent and intense. For instance, class 8 truck orders—-a classic leading indicator—–are now plunging. At the same time, inventories haven’t been this high since early 2007.
Likewise, rail car loadings were down 13.7% year-to-date compared to 2015. As is evident in the chart below, the plunge in shipments is now approaching the depths of 2008-2009. Perhaps that is why some market technicians are fretting about the non-confirmation of the rally by the transports.
Then there is the latest reading on GDP by the unusually accurate running gauge published by the Atlanta Fed. As of this morning, there isn’t any. Q1 GDP is now forecast to come in at stall speed or just 0.1%. Not even the Chinese can measure things that finely!
In light of these fundamentally negative trends it might be wondered why in the world every attempt at correction in the casino gets short-circuited in another dead-cat bounce. Presumably, the remaining carbon units would recognize the danger at some point, thereby precipitating a sell-off that would eventually trigger a spasm of liquidation by the machines.
Needless to say, the latter will happen. It’s only a matter of time and the right catalyst.
But in the interim, there can be no doubt as to what explains the stock market’s treacherous dance on the crater’s edge. To wit, honest price discovery in the financial markets was destroyed by heavy-handed central bank intrusion long ago. So what remains is simply episodic spasms of stock buying in response to open mouth actions emanating from the Eccles Building.
In that context, Janet Yellen’s risible proclamations and recurrent bouts of incoherence play a major role. She let loose of a patented barrage of Keynesian jabberwocky at the Fed heads soirée yesterday.
#1
Walmart is the largest employer in most states. They announced for the first time in 45+ years that they had a decline in revenue. Raising the minimum wage on the largest minimum wage employer with shrinking revenue will not create a positive impact to the economy.
#2
...and so fewer people will be employed, thus fewer people at the lower end of the economic ladder will be able to buy at Walmart. Walmart has closed a number of stores to become more efficient. Those stores generally are in low income areas and thus the very people who need access to low price goods will lose access. Smaller 'mom and pop' stores will probably fill the void but with higher overhead with the usual losses and thus higher prices (till they get burned out at the next insurrection riot). Higher prices wipe out any gain in minimum wage. This is known in the Lefty circles as 'helping the poor'. Don't you feel virtuous?
#4
You can't trash the poor without being called a racist, elitist pig but you can trash Wal*Mart shoppers and be praised for it in Liberal circles. No point, I just think that's interesting.
#5
Wow and I and everyone else thought Neo-Marxist Central banks setting prices throughout the whole economy by manipulating the price of credit would finally work, this time.
/sarcasm.
[DAWN] BEFORE the Panama Papers, there was the ephedrine scam. And before the ephedrine scam, there was the Haj scandal. And before the Haj scandal, there was the Ogra scam.
Each one of those scams touched high office -- cabinet ministers and even prime ministers -- but none of the allegations of corruption has led to the conviction of any of the principal accused.
A special report in this newspaper yesterday has shed light on why shocking allegations of vast corruption have not led to jail sentences or disqualifications from public office.
The reasons are familiar, but depressing: botched investigations, poorly gathered evidence, lacklustre prosecutions and a judicial system that seems to favour endless delay.
The state appears to have inverted the judicial process: the higher the office in which corruption and misdeeds are alleged, the less competent and effective investigations and prosecutions seem to be.
It is perhaps for that reason that the PML-N feels so aggrieved by the latest accusations.
The Panama Papers do not directly suggest that any illegalities have been committed by the Sharif family and the prime minister himself has called for the creation of an inquiry commission to be headed by a retired Supreme Court justice.
But the Ogra, Haj and ephedrine scams have contributed to that overall culture of impunity where politicians see every allegation of corruption and other misdeeds as an attempt to undermine democracy itself.
Yet, nothing could be further from the truth. There are unquestionably, without an iota of doubt, corrupt politicians and public officials in this country. To identify them and prosecute them is to improve the democratic system, not undermine it.
With the Ogra and ephedrine scams, both PPP prime ministers and a prime ministerial candidate in the last parliament have been accused of corruption on an epic scale. If the head itself is rotten, the body can never even begin to cleanse itself.
The inquiry commission that Mr Sharif has pledged to create could be a turning point.
While the government will likely do its best to keep the commission’s mandate as narrow as possible and will be looking to install a retired justice who is not a maverick to head the commission, a combination of events may create space for real political change.
Because the Panama Papers are continuing to make waves internationally, and because they have caused so much consternation inside Pakistain already, the inquiry commission will have the moral and political space to make sweeping recommendations.
With the country’s politicians unwilling to lead on reforms, and the judicial system not in a shape to do so, perhaps ad-hoc interventions, such as by an inquiry commission, can push the cause of change and transformation forward.
Democratic evolution demands that political legitimacy be drawn not just from elections, but a scrupulous adherence to ethical standards above that of the average citizen.
Posted by: Fred ||
04/12/2016 00:00 ||
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[DAWN] IN the wake of the Panama scandal, Imran Khan ... aka Taliban Khan, who ain't the sharpest bulb on the national tree... has once again declared his intent to cast his net to catch Prime Minister Nawaz Sharif ... served two non-consecutive terms as prime minister, heads the Pakistain Moslem League (Nawaz). Noted for his spectacular corruption, the 1998 Pak nuclear test, border war with India, and for being tossed by General Musharraf... This time, to the relief of federal ministers, police, administrative officials, journalists and others in Islamabad, the PTI chief has in mind a sit-in outside the Sharifs’ Raiwind estate in Lahore.
Continued on Page 49
Posted by: Fred ||
04/12/2016 00:00 ||
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A multi-volume chronology and reference guide set detailing three years of the Mexican Drug War between 2010 and 2012.
Rantburg.com and borderlandbeat.com correspondent and author Chris Covert presents his first non-fiction work detailing
the drug and gang related violence in Mexico.
Chris gives us Mexican press dispatches of drug and gang war violence
over three years, presented in a multi volume set intended to chronicle the death, violence and mayhem which has
dominated Mexico for six years.
Rantburg was assembled from recycled algorithms in the United States of America. No
trees were destroyed in the production of this weblog. We did hurt some, though. Sorry.
