en Hedge Funds Abandon OPEC, Near 'Shortest' Since Oil Crisis Began <p>While the <strong>fundamental outlook for oil appears weak</strong>, with U.S. shale drillers continuing to add extra rigs (despite the downturn in prices), <a href="">Reuters&#39; John Kemp</a> warns that <strong>positioning data suggests the risk of a short-covering rally is increasing</strong>.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>The hedge fund community placed enormous faith in OPEC&rsquo;s ability to accelerate oil market rebalancing </strong>through cuts announced late in 2016 in association with key non-OPEC producers.</p> <p>&nbsp;</p> <p><strong>Fund managers accumulated a record net long position</strong> of almost 1 billion barrels by the middle of February <strong>only to suffer a sharp reversal in prices starting early the next month.</strong></p> <p>&nbsp;</p> <p><strong>The accumulation of long positions for a second time in April was similarly rewarded with a brutal sell off in oil prices</strong>, leaving many fund managers struggling with large losses for the year.</p> <p>&nbsp;</p> <p>OPEC&rsquo;s decision to leave production unchanged last month, rather than cut more deeply, has sparked a third sell off, and <strong>extinguished any remaining bullishness and emboldened short sellers.</strong></p> </blockquote> <p>And now, hedge funds and other money managers have<strong> abandoned their previously symbiotic relationship with OPEC&#39;s &#39;open-mouth operations&#39;, </strong>slashing formerly bullish, buy-the-fucking-dip-on-any-OPEC-headline bets.</p> <p><a href=""><em>As Reuters Energy guru John Kemp notes,</em> </a><strong>hedge fund managers cut their net long position in the three main futures and options contracts linked to Brent and WTI by 109 million barrels </strong>in the week to June 20...</p> <p><img height="466" src="" width="600" /></p> <p>Fund managers <strong>now hold just two long positions for every one short position,</strong> which ranks among the <strong>most bearish positions since oil prices started to tumble in the middle of 2014</strong>...</p> <p><img height="429" src="" width="600" /></p> <p>Kemp notes that extreme bearishness extends to refined fuels, where hedge funds have a net short position of 27 million barrels in U.S. heating oil and a near-record net short position in U.S. gasoline of 21 million barrels.</p> <p>In fact, <strong>hedge funds have added short positions faster and more aggressively than during any previous short-selling cycle in the last three years</strong>...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 457px;" /></a></p> <p>But, as Kemp warns, <strong>the extreme pessimism across the entire petroleum complex is raising the risk of a reversal and future rise in prices (just as it did in January 2016).</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1071" height="766" alt="" src="" /> </div> </div> </div> Business Cartels Finance Hedge Hedge fund OPEC OPEC Organization of Petroleum-Exporting Countries Petroleum industry Petroleum politics Price of oil Primary sector of the economy Reuters Mon, 26 Jun 2017 22:05:00 +0000 Tyler Durden 598687 at James Rickards: The Fed Is Going To Cause Recession <p><a href=""><em>Authored by Valentin Schmid via The Epoch Times,</em></a></p> <p>James Rickards, author of &ldquo;The Road to Ruin,&rdquo; has successfully predicted Federal Reserve (Fed) policy in the past. In this interview with The Epoch Times, <strong>he explains why the recent tightening could lead to a recession and why he recommends gold as a &ldquo;crisis hedge.&rdquo; He also explains why he thinks bitoin is in a bubble.</strong></p> <p><iframe frameborder="0" height="379" scrolling="auto" src="" width="674"></iframe></p> <p><strong>The Epoch Times:</strong> Why did the Federal Reserve (Fed) hike rates last week, and what&nbsp;will its policy look like in the future?</p> <p><strong>James Rickards:</strong> <strong>They&rsquo;re trying to prepare for the next recession. They&rsquo;re not predicting a recession, they never do, but they know a recession will come sooner rather than later. </strong>This expansion is 96 months old. It&rsquo;s one of the longest expansions in U.S. history. It&rsquo;s also the weakest expansion in U.S. history. A lot of people say, &ldquo;What expansion? Feels like a depression to me.&rdquo;</p> <p>I think it is a depression defined as depressed growth, but we&rsquo;re not in a technical recession and haven&rsquo;t been since June 2009. So it&rsquo;s been an eight-year expansion at this point, but it won&rsquo;t fare well, and the Fed knows that. When the U.S. economy goes into recession, you have to cut interest rates about 3 percent to get the United States out of that recession.</p> <p>Well, how do you cut interest rates by 3 percent when you&rsquo;re only at 1 percent? The answer is, you can&rsquo;t. You&rsquo;ve got to get them up to 3 percent to cut them back down, maybe to zero, to get out of the next recession. So that explains why the Fed is raising interest rates. That&rsquo;s the fourth rate hike getting them up to 1 percent. They would like to keep going; they would like to get them up to 3, 3.5 percent by 2019.</p> <p><strong>My estimate is that they&rsquo;re not going to get there. The recession will come first. In fact, they will probably cause the recession that they&rsquo;re preparing to cure. </strong>So let&rsquo;s just say we get interest rates to 1 percent and now you go into recession. We can cut them back down to zero. Well, now what do you do? You do a new round of quantitative easing (QE).</p> <p><strong>The problem is that the Fed&rsquo;s balance sheet is so bloated at $4.5 trillion. How much more can you do&mdash;$5&nbsp;trillion, $5.5 trillion, $6 trillion&mdash;before you cause a loss of confidence in the dollar?</strong></p> <p>There are a lot of smart people who think that there&rsquo;s no limit on how much money you can print. &ldquo;Just print money. What&rsquo;s the problem?&rdquo; I disagree. I think there&rsquo;s an invisible boundary. The Fed won&rsquo;t talk about it. No one knows what it is. But you don&rsquo;t want to find out the hard way.</p> <p><strong>The Epoch Times:</strong> What about balance sheet reduction, reversing the QE that you are talking about?</p> <div class="wp-caption aligncenter" id="attachment_2260723" style="width: 640px;"><a class="light-box" href=""><img alt="*" class="wp-image-2260723" src="" style="width: 601px; height: 493px;" /></a><br /> <div class="wp-caption-text">James Rickards thinks bitcoin is a bubble, he prefers gold as a crisis hedge.</div> </div> <p><strong>Mr. Rickards:</strong> You probably want to get from $4.5 trillion, down to $2.5 trillion. Well, you can&rsquo;t sell any treasury bonds. You destroy the market. Rates would go up, putting us in recession, and the housing market would collapse. They&rsquo;re not going to do that. What they&rsquo;re going to do is just let them mature.</p> <p>When these securities mature, they won&rsquo;t buy new ones. They won&rsquo;t roll it over, and they actually will reduce the balance sheet and make money disappear. They&rsquo;re going to do it in tiny increments, maybe $10 billion a month or $20 billion a month.</p> <p><strong>They want to run this quantitative tightening in small increments and pretend nothing&rsquo;s happening. But that&rsquo;s nonsense. It&rsquo;s just one more way of tightening money in a weak economy; it will probably cause a recession.</strong></p> <p><strong>The Epoch Times:</strong> If it does, the stock market will probably correct, and you recommend people buy a small allocation in physical gold to insure themselves against this outcome.</p> <p><strong>Mr. Rickards:</strong> If the economy weakens, as I expect it will, and you see the stock market correct and inflation go down, the Fed&rsquo;s going to have to flip-flop for the ninth time since May 2013.</p> <p><strong>Once they send out the signal, they are going to throw in the towel, at least temporarily. They&rsquo;re not going to raise rates.&nbsp;You take the rate hike expectations out of the market that looks inflationary at the margin, and that&rsquo;s very bullish for gold. So I look for gold to have a very strong second half.</strong></p> <p><strong>The Epoch Times:</strong> You also talk about price manipulation and that the ultimate price potential for gold may only be realized in the long term.</p> <p><strong>Mr. Rickards:</strong> Every five, six, seven years, financial crises happen. It&rsquo;s been eight years since the last one. How long do you think we&rsquo;re going to go? So that is a catalyst for much higher gold prices.</p> <p>But I don&rsquo;t worry much about manipulation. I know it goes on, and I know why it goes on, as I spoke to the statistician&rsquo;s expert witnesses in some of the pending litigation on gold manipulation.</p> <p>On June 6th,&nbsp;for example, gold got whacked 2 percent because somebody sold $4 billion&rsquo;s worth of future contracts on the COMEX. Gold was getting close to $1,300 an ounce.</p> <p><strong>The impact on the markets is like selling $4 billion in&nbsp;gold. But it wasn&rsquo;t gold. It was paper gold.</strong></p> <p>Four billion dollars&rsquo; worth of gold is 90 tons. Do you think you could sell 90 tons of physical? You can&rsquo;t source 90 tons of real gold. You are lucky if you can get a couple of tons of gold. All the mines in the world produce a little over 3,000 tons a year. Those 90 tons are close to 3 percent of all the output of all the gold in the world, with one phone call.</p> <p><strong>But the point is, all manipulations fail. Jim Fisk and Jay Gould ran a gold corner in 1869, and it failed. The London Gold Pool in the late 1960s failed.</strong></p> <p>So just get your gold allocation&mdash;I recommend 10 percent of investable assets&mdash;and put it in a safe place, keep out of the banking system, and sit tight.</p> <div class="wp-caption alignright" id="attachment_2260168" style="width: 395px;"><a class="light-box" href=""><img alt="Rickards expects a crisis of confidence in the dollar at some point in the near future. " class="wp-image-2260168" src="" style="width: 600px; height: 460px;" /></a><br /> <div class="wp-caption-text">Rickards expects a crisis of confidence in the dollar at some point in the near future.</div> </div> <p><strong>The Epoch Times:</strong> What about the electronic currency bitcoin?</p> <p><strong>Mr. Rickards:</strong> <strong>Dollars, euros, yuan, gold, and bitcoin are five different kinds of money, but they&rsquo;re not investments. They&rsquo;re money.</strong> If I buy stock in a company, I can look at management, I can look at earnings, I can look at a whole bunch of things to come up with an evaluation.&nbsp;That&rsquo;s an investment.</p> <p><strong>But bitcoin is not an asset class. It&rsquo;s not an investment. It&rsquo;s just money. If I buy bitcoin, I&rsquo;m swapping one kind of money for another.</strong></p> <p>So when you see bitcoin go from $1,000 to $2,000 or $3,000, what&rsquo;s happening? If one bitcoin is my unit of measurement, then the dollar is going down. So one possibility is that people are losing confidence in the dollar.</p> <p>Is there any other evidence for that? If people are losing confidence in the dollar, it would be reflected in a lot of places. Gold would be going up. Oil would be going up. Real estate would be going up.</p> <p>Except that what we have is bitcoin going up and everything else not. Gold&rsquo;s up a little, but you know all these things go up a little bit, not by&nbsp;a lot. Bitcoin&rsquo;s the only one that&rsquo;s going up a lot. So that tells you empirically that this is not a generalized loss of confidence in the dollar or the euro and other currencies. I think that will come, but we&rsquo;re not there yet.</p> <p><strong>So if that&rsquo;s not the explanation, what is? One is the greater fool theory, which is, &ldquo;I&rsquo;ll pay $2,000 for bitcoin because I think there&rsquo;s some sucker who will pay me $3,000.&rdquo; And that guy says, &ldquo;Well, I&rsquo;ll pay $3,000 for a bitcoin because of some sucker that will pay me $4,000.&rdquo; That&rsquo;s called the greater fool theory.</strong></p> <p>That works until it doesn&rsquo;t. There comes a time when you&rsquo;re the sucker&mdash;as the old joke goes,&nbsp;if you&rsquo;re in a poker game and you don&rsquo;t know who the sucker is, you&rsquo;re the sucker.</p> <p><strong>There is no evidence that there&rsquo;s a general collapse in the dollar. I expect that will happen for other reasons at a different time, but not yet. Bitcoin looks like a bubble.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="555" height="304" alt="" src="" /> </div> </div> </div> Alternative currencies Bitcoin Bitcoin Business Cryptocurrencies Fail Federal Reserve Housing Market Quantitative Easing Real estate Recession US Federal Reserve Yuan Mon, 26 Jun 2017 21:40:00 +0000 Tyler Durden 598672 at Germany Tells Erdogan His Bodyguards "Not Welcome" At Next Week's G-20 Summit <p>Ahead of the G-20 summit to be held in Hamburg next week where Turkey will be present, Germany has warned Turkey that members of President Recep Tayyip Erdogan's security detail who were involved in a bloody melee in Washington last month <strong>"are not welcome in Germany</strong>." The reason for the snub - which won't go over too well with Erdogan - is that last month numerous Turkish security officials, including several of Erdogan's personal guards, brawled with protesters outside the Turkish ambassador's residence in Washington, landing 9 protesters in the hospital.</p> <p><a href=""><img src="" width="500" height="284" /></a></p> <p>Quoted by <a href=";linkId=39118196">CNN</a>, Martin Schafer, a spokesperson for the German Foreign Ministry, said Monday: "<strong>Some foreign security services of the Turkish delegation did not abide by the law and therefore those people are not welcome in Germany for the foreseeable future.</strong>"</p> <p><a href="">Die Welt adds </a>that the German Foreign Ministry received a list of 50 people who were to accompany Erdogan to the G20 summit, some of whom were involved in the incident in Washington, and responded that the Ministry told Turkey not to bring those bodyguards to the summit. While Schafer refused to confirm or deny the report, he made it clear that everyone attending the summit must respect German law. "The Turkish side just like all other guests who travel to Germany must abide by German law," he said. "This is what our Turkish partners also know."</p> <p>As a reminder, <a href="">the bloody brawl took place on May 16 </a>after the first official meeting between Erdogan and President Trump at the White House. Nine people ended up in hospital when Turkish security officials, including Erdogan's personal bodyguards, got into a fight with demonstrators outside the Turkish ambassador's residence in Washington. Video showed Erdogan looking on as Turkish guards beat up protesters, before heading into the ambassador's home.</p> <blockquote class="twitter-video"><p dir="ltr" lang="tr">Erdo?an'?n Korumalar? Kavgaya Kar??t? <a href="">@VOATurkish</a> <a href=""></a> <a href=""></a></p> <p>— Mutlu Civiroglu (@mutludc) <a href="">May 17, 2017</a></p></blockquote> <script src="//"></script><p>Quoted by CNN, a senior State Department official said at the time that the Turkish officials involved in the fight appeared to be a mix of Turkish embassy staff and Erdogan's personal guards. The official also confirmed that two members of Erdogan's detail "were briefly detained during the altercations and subsequently released" and returned to Turkey with Erdogan. </p> <p>One month later, Washington police issued warrants for 12 of Erdogan's security officers in mid-June however Erdogan denied his security detail had done anything wrong and questioned the legality of the warrant.</p> <p><a href=""><img src="" width="500" height="281" /></a></p> <p>"They didn't do anything (to the protesters). In addition to that, yesterday, they detained two of our brothers who intervened ... they issued arrest warrants for 12 of my security officials. What kind of law is this? What kind of legal system is this?" Erdogan said, who in turn blame US authorities: in a statement issued by the Turkish Foreign Ministry, Erdogan said the decision to issue warrants was "wrong, biased and lacks legal basis" and said the brawl was "caused by the failure of local security authorities to take necessary measures," and that "Turkish citizens cannot be held responsible."</p> <p>The presence, or absence, of Erdogan's bodyguards will only be a sideshow in next week's G-20 summit, where as many 100,000 protestors are expected. Some will be protesting the presence of President Trump and Russian President Vladimir Putin, but Kurdish groups are also expected to turn up to protest Erdogan's policies. </p> <p>In other words, stocks will make new all time highs.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="550" height="312" alt="" src="" /> </div> </div> </div> Authoritarianism Department of State G-20 G20 German Foreign Ministry Germany Politics Politics of Turkey Recep Tayyip Erdo?an Turkey Turkey Turkish embassy Turkish Foreign Ministry Turkish people Twitter Twitter Vladimir Putin Washington police White House White House Mon, 26 Jun 2017 21:27:54 +0000 Tyler Durden 598712 at GOP Leadership To Health-Care Holdouts: "Do You Really Want To Be Remembered For Saving Obamacare?" <p>With <a href="">Chuck Todd reporting that as many as eight Republican Senators </a>are leaning toward voting against Trumpcare, <strong>the Republicans&rsquo; Senate leadership faces a difficult road if it intends to accomplish its ambitious goal of sending the bill to President Donald Trump&rsquo;s desk by the end of the week.</strong></p> <p>And unsurprisingly, they&rsquo;re taking a hard line in whipping up votes, <a href="">as the Hill reports&hellip;</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;<strong>Do you want to be known as the Republican who killed the repeal of ObamaCare?</strong> That&rsquo;s the question every GOP senator will weigh over the next week,<strong> and it&rsquo;s an integral part of the Republican leadership&rsquo;s strategy to get the prized legislation a step closer to President Trump.&rdquo;</strong></p> </blockquote> <p>Senate Majority Leader Mitch McConnell is expected to force a vote this week, despite complaints from conservatives that his draft bill doesn&rsquo;t really repeal Obamacare, and reservations from centrist Republicans who believe it goes too far. Three influential senators took to the weekend talk shows to discuss their reservations about the bill, <a href="">with Sen. Susan Collins of Maine saying she feared the impact of Medicaid cuts on chronically ill constituents,</a> while Sen. Rand Paul said the bill doesn&rsquo;t go far enough in repealing regulations adopted under Obamacare.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 332px;" /></a></p> <p>During an appearance at a Koch Network donor summit over the weekend, <a href="">Sen. John Cornyn said he expects procedural votes to begin Wednesday,</a> though he admitted that the vote was &ldquo;going to be close.&rdquo;<br />The plan is to push the bill through before the Senate&rsquo;s summer holiday begins at the end of the week.</p> <p><a href="">As the Hill notes</a>, <strong>McConnell has little margin for error, as he can afford just two defections from his conference with all Democrats expected to oppose the bill. Vice President Mike Pence could then be called in to break the tie.</strong></p> <p>Meanwhile, the Congressional Budget Office is expected to issue its analysis of the bill this week, which <a href="">Politico notes</a> could add to the leadership&#39;s difficulties.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;The CBO is poised to tell Senate Republicans this week that their health plan will leave millions more uninsured than Obamacare &mdash; with the losses estimated from 15 million to 22 million over a decade, according to a half dozen budget analysts polled by POLITICO.&rdquo;</p> </blockquote> <p>The report could be particularly problematic for three unconfirmed moderates, <a href="">according to Politico.</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;Still-uncommitted moderates like Sens. Rob Portman (R-Ohio), Lisa Murkowski (R-Alaska) and Shelley Moore Capito (R-W.Va.), will face increasing pressure to oppose the bill. All hail from states that have expanded Medicaid, where hundreds of thousands of newly covered Americans may lose coverage.&rdquo;</p> </blockquote> <p>The CBO score of the House bill, which was released 10 days before an initially planned floor vote and projected a coverage decline of 24 million people, was a factor in House Speaker Paul Ryan&#39;s decision to cancel the vote in late March.</p> <p><u><strong>Here are some <a href="">initial takeaways from the draft bill, </a>which was unveiled last week:</strong></u></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Ends ACA mandates for individuals AND employers</p> <p>&nbsp;</p> <p>Funds the ACA&#39;s cost-sharing subsidies through 2019 but then only provides tax credits for people with incomes up to 350% of the federal poverty level</p> <p>&nbsp;</p> <p>Tax cuts largely similar to those in the House bill. That includes repealing a 3.8% tax on investment income retroactively to January 2017 and delaying the repeal of a 0.9% payroll tax until 2023<br />Contributes $62 billion to a &quot;State Innovation Fund&quot;</p> <p>&nbsp;</p> <p>Seeks funding for insurers through 2021</p> <p>&nbsp;</p> <p>Allows &#39;children&#39; to stay on parental plans until the age of 26</p> <p>&nbsp;</p> <p>Bill suspends &#39;Cadillac Tax&#39; on employer health plans through 2025</p> <p>&nbsp;</p> <p>Medicaid:&nbsp; The plan would roll back the Affordable Care Act&rsquo;s Medicaid expansion more gradually than the House version would, but would ultimately make deeper cuts to the program. While states&#39; funding from Washington would be capped for the first time in the history of the Medicaid program, states would be given a choice of the formula used -- &#39;block grants&#39; or &#39;per capita caps&#39; -- to curb it under the bill.</p> <p>&nbsp;</p> <p>Planned Parenthood: The bill would strip federal funding from Planned Parenthood Federation of America for one year. It also prohibits tax credits from being used to purchase plans that offer abortion coverage.</p> </blockquote> <p><em><strong>You can read the </strong></em><a href=""><em><strong>full text of the bill here.</strong></em></a><br />&nbsp;</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="751" height="499" alt="" src="" /> </div> </div> </div> 111th United States Congress 115th United States Congress American Health Care Act Congressional Budget Office Congressional Budget Office Donald Trump Internal Revenue Code John Cornyn Medicaid Mitch McConnell Obamacare Patient Protection and Affordable Care Act Patient Protection and Affordable Care Act replacement proposals Planned Parenthood Federation of America Politics Presidency of Barack Obama Republican Party Republicans’ Senate Senate Shelley Moore Capito Social Issues State Innovation Fund Statutory law Susan Collins United States Mon, 26 Jun 2017 21:15:00 +0000 Tyler Durden 598665 at Hindenburg Omen Reappears As Main Market Supports Get Kicked Away <p>In the last week, the controversial Hindenburg Omen has started to<strong> cluster ominously once again</strong>.</p> <p><a href=""><img height="305" src="" width="600" /></a></p> <p>Combined with<strong> divergent market internals </strong>and rates off the zero-bound (and global central bank <strong>balance sheets actually shrinking</strong>), John Hussman warns of the rising likelihood of an <strong>interim market loss on the order of 50-60% </strong>over the completion of the current cycle.</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 315px;" /></a></p> <p><a href=""><em>As Hussman Funds&#39; John Hussman explains,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>On the basis of the most reliable valuation measures we identify (those most tightly correlated with actual subsequent 10-12 year S&amp;P 500 total returns), <strong>current market valuations stand about 140-165% above historical norms.</strong> No market cycle in history, even those prior to the mid-1960s when interest rates were similarly low, has failed bring valuations within 25% of these norms, or lower, over the completion of the market cycle. On a 12-year horizon, we project likely S&amp;P 500 nominal total returns averaging close to zero, with the likelihood of an interim market loss on the order of 50-60% over the completion of the current cycle.</p> <p>&nbsp;</p> <p><strong>As I&rsquo;ve observed for decades, even a richly overvalued market can move higher,</strong> provided that investors remain inclined to speculate, which we infer from the uniformity of market action across a broad range of market internals (when investors are inclined to speculate, they tend to be indiscriminate about it). In prior market cycles across history, however, <strong>even favorable market internals were overruled once extreme &ldquo;overvalued, overbought, overbullish&rdquo; syndromes emerged</strong>. The half-cycle since 2009 was different. In the face of zero interest rates, yield-seeking speculation persisted even after those extreme syndromes emerged. The best indication of that speculative mindset is that market internals remained uniformly favorable during most of the period prior to mid-2014. Importantly, even since 2009, the S&amp;P 500 has lost ground, on average, in periods when extreme overvalued, overbought, overbullish syndromes were accompanied by deteriorating market internals. That&rsquo;s the situation we observe at present.</p> <p>&nbsp;</p> <p>Put simply, <strong>with market internals unfavorable and interest rates off the zero bound,<u> the two main supports that made the half-cycle since 2009 &ldquo;different&rdquo; have already been kicked away</u></strong>. From here, we expect the dynamics of this market cycle to resemble other periods when offensive valuations and extreme overvalued, overbought, overbullish syndromes were joined by deteriorating market internals (particularly when interest rates were off their lows). Short term market outcomes are anybody&rsquo;s guess, but across history, that overall combination has typically defined crash dynamics.</p> <p>&nbsp;</p> <p><strong>Notably, we&rsquo;ve observed a widening of internal dispersion in recent weeks.</strong> For example, weekly NYSE new lows have averaged about 4% of traded issues recently, with nearly 6% last week, even with the S&amp;P 500 near record highs. Meanwhile, nearly 40% of stocks are already below their 200-day averages. I&rsquo;ve noted before that raw <u><strong>&ldquo;Hindenburg Omens&rdquo; </strong></u>(days when both NYSE new highs and new lows exceed about 2.5% of traded issues) are typically not ominous at all. <strong>The exception is where they are accompanied by a broader syndrome of tepid market breadth</strong> even with the major indices still elevated, when multiple signals appear in close succession, and when market internals are unfavorable on our own measures.<strong> On that note, we&rsquo;ve observed 4 such daily signals in recent weeks, with two last week alone. We saw similar widening of internal dispersion in December 1999, July and November 2007, and July-August 2015.</strong> Still there are a few signals such as 2006 and 2013 that were followed by only minor hiccups. That improves the average outcome, though the average is still negative overall.</p> <p>&nbsp;</p> <p><strong>Overall, our current market outlook remains strongly negative, but we would be inclined to adopt a more neutral outlook if our measures of market internals were to improve.</strong> As I&rsquo;ve often observed, the most favorable market return/risk profile we identify typically emerges when a material retreat in valuations is joined by an early improvement in market action. Whether that occurs after a moderate correction, or after a market collapse, that&rsquo;s the combination most likely to move us to a constructive or aggressive outlook, depending on the status of valuations and other conditions at that point. The most extreme overextended syndromes we identify are now accompanied by deteriorating market internals and interest rates that are well off the zero bound. <strong>My impression is that without a shift back to uniformly favorable market internals, the continued faith in monetary support may prove to be the same awful bet it was during the 2000-2002 and 2007-2009 collapses, both which were accompanied by aggressive monetary easing all the way down.</strong></p> <p>&nbsp;</p> <p>We&rsquo;ll take our evidence as it arrives.</p> </blockquote> <p>Finally, we note that two things are different than the last time the market flashed numerous &#39;failed&#39; Hindenburg Omens: 1) as the chart above shows, The Fed is no longer printing money ad nauseum like it was during QE3 (and in fact is heading towards unwinding its own balance sheet), and 2) <strong>the global central bank balance sheet has actually begun to shrink - the most since December - in the last 8 days...</strong></p> <p><a href=""><img height="290" src="" width="600" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="962" height="489" alt="" src="" /> </div> </div> </div> Business Economy Finance Financial economics Financial markets Futures contract Investment John Hussman Market Market Breadth Market Cycles Market Internals Market timing Money S&P 500 US Federal Reserve Mon, 26 Jun 2017 20:55:00 +0000 Tyler Durden 598693 at CBO Says 22 Million More Uninsured Under Senate Bill, Premiums Initially 20% Higher Then 30% Lower <p>The CBO has scored the Senate version of the healthcare bill, which was passed by the House as H.R.1628, and found a few more modest improvements relative to its scoring of the Healthcare Bill as of May 24 . Here are the apples to apples comparisons with the last proposed version of the bill:</p> <ul> <li>Under the Senate Bill, the US budget deficit would be reduced by $321 billion between 2017 and 2026, which is $202 billion better than the House version, which would have cut the cumulative deficit by $119 billion. This </li> <li>The CBO also found that the number of Americans expected to lose their health coverage would rise to 22 million in 2026, which is 1 million fewer than the 23 million forecast in the May scoring of the House bill. It is also a little over 100% more than are currently enrolled in Obamacare. </li> <li>The CBO concludes that in 2026, an estimated 49 million people under age 65 would be uninsured, compared with 28 million who would lack insurance that year under current law. Under the last CBO estimate, the number of Americans wihtout insurance in 2026 was 51 million of Americans under 65, so an improvement of 2 million.</li> <li>Under the Senate bill, average premiums for benchmark plans for single individuals would be about 20% higher in 2018 than under current law, mainly because the penalty for not having insurance would be eliminated, Those premiums would be about 10 percent higher than under current law in 2019.</li> <li><strong>However, in 2020, average premiums for benchmark plans for single individuals would be about 30 percent lower than under current law. </strong></li> </ul> <p>Below is the "bridge" of the budget deficit reduction from the CBO. Of note: virtually all of the $541 billion in cumulative increase in deficits due to "non-coverage provisions" shown below, is the result of <strong>"repeal or delay of taxes on high-income people."</strong></p> <p><a href=""><img src="" width="500" height="635" /></a></p> <p>Some quickly highlighted the only two categories that matter:</p> <blockquote class="twitter-tweet" data-partner="tweetdeck"><p lang="en" dir="ltr">The Senate bill in basically one chart: <a href=""></a> <a href=""></a></p> <p>&mdash; Charles Ornstein (@charlesornstein) <a href="">June 26, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>And comparing budget outlays in the Senate bill and current legislation:</p> <p><a href=""><img src="" width="500" height="355" /></a></p> <p>The White House took aim at the CBO's forecasting skills, although it appears to have launched another round of mockery regarding what base the White House's 100% comparison was referring to.</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">FACT: when <a href="">#Obamacare</a> was signed, CBO estimated that 23M would be covered in 2017. They were off by 100%. Only 10.3M people are covered. <a href=""></a></p> <p>— The White House (@WhiteHouse) <a href="">June 26, 2017</a></p></blockquote> <script src="//"></script><p>The key highlights from the official score: </p> <ul> <li>CBO and JCT estimate that, over the 2017-2026 period, enacting this legislation would<br /> reduce direct spending by $1,022 billion and reduce revenues by $701 billion, for a net reduction of $321 billion in the deficit over that period (see Table 1, at the end of this document): </li> <li>The largest savings would come from reductions in outlays for Medicaid— spending on the program would decline in 2026 by 26 percent in comparison with what CBO projects under current law—and from changes to the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance (see Figure 1). Those savings would be partially offset by the effects of other changes to the ACA’s provisions dealing with insurance coverage: additional spending designed to reduce premiums and a reduction in revenues from repealing penalties on employers who do not offer insurance and on people who do not purchase insurance.</li> <li>The largest increases in deficits would come from repealing or modifying tax provisions in the ACA that are not directly related to health insurance coverage, including repealing a surtax on net investment income and repealing annual fees imposed on health insurers.</li> </ul> <p>Some other observations from the CBO, first a chronology of major proposed changes:</p> <ul> <li>In 2018, the legislation would provide funding to health insurers to stabilize premiums and promote participation in the marketplaces. </li> </ul> <ul> <li>In 2019, four major coverage provisions would take effect: <ul> <li>Appropriating funding for grants to states through the Long-Term State Stability and Innovation Program.Requiring insurers to impose a six-month waiting period before coverage starts for people who enroll in insurance in the nongroup market if they have been uninsured for more than 63 days within the past year.</li> <li>Setting a limit whereby insurers would charge older people premiums that are up to five times higher than those charged younger people in the nongroup and small-group markets, unless a state sets a different limit.</li> <li>Removing the federal cap on the share of premiums that may go to insurers’ administrative costs and profits (also known as the minimum medical loss ratio requirement) and effectively allowing each state to set its own cap.</li> </ul> </li> <li>In 2020, the following additional major coverage provisions would take effect: <ul> <li>Changing the tax credit for health insurance coverage purchased through the nongroup market and repealing current-law subsidies to reduce cost-sharing payments. People with income below 100 percent of the federal poverty level (FPL) who are not eligible for Medicaid would become eligible for the tax credit, and people with income between 350 percent and 400 percent of the FPL would no longer be eligible. The maximum percentage of income specified by the bill that people would pay at different ages toward the purchase of a benchmark plan would be lower for some younger people and higher for some older people. The benchmark plan used to determine the amount of the tax credit would have a lower actuarial value.</li> <li>Capping the growth in per-enrollee payments for nondisabled children and nondisabled adults enrolled in Medicaid at no more than the medical care component of the consumer price index (CPI-M) and for most enrollees who are disabled adults or age 65 or older at no more than the CPI-M plus 1 percentage point, starting in 2020 and going through 2024. Starting in 2025, the rate of growth in per-enrollee payments for all groups would be pegged to the consumer price index for all urban consumers (CPI-U).</li> </ul> </li> <li>Starting in 2021, the bill would reduce the federal matching rate for funding for adults made eligible for Medicaid by the ACA; that rate would decline 5 percentage points per year through 2023 and then fall to equal the rate for other enrollees in a state in later years.</li> </ul> <p>And most importanly, Effects on Premiums and Out-of-Pocket Payments </p> <ul> <li><strong>The legislation would increase average premiums in the nongroup market prior to 2020 and lower average premiums thereafter, </strong>relative to projections under current law, CBO and JCT estimate. To arrive at those estimates, the agencies examined how the legislation would affect the premiums charged if people purchased a benchmark plan in the nongroup market. In 2018 and 2019, under current law and under the legislation, the benchmark plan has an actuarial value of 70 percent—that is, the insurance pays about 70 percent of the total cost of covered benefits, on average. In the marketplaces, such coverage is known as a silver plan. </li> <li><strong>Under the Senate bill, average premiums for benchmark plans for single individuals would be about 20 percent higher in 2018 than under current law, mainly because the penalty for not having insurance would be eliminated, inducing fewer comparatively healthy people to sign up</strong>. Those premiums would be about 10 percent higher than under current law in 2019—less than in 2018 in part because funding provided by the bill to reduce premiums would affect pricing and because changes in the limits on how premiums can vary by age would result in a larger number of younger people paying lower premiums to purchase policies. </li> <li><strong>In 2020, average premiums for benchmark plans for single individuals would be about 30 percent lower than under current law</strong>. A combination of factors would lead to that decrease—most important, the smaller share of benefits paid for by the benchmark plans and federal funds provided to directly reduce premiums.</li> <li><strong>That share of services covered by insurance would be smaller because the benchmark<br /> plan under this legislation would have an actuarial value of 58 percent beginning in 2020.<br /> </strong>That value is slightly below the actuarial value of 60 percent for “bronze” plans currently<br /> offered in the marketplaces. Because of the ACA’s limits on out-of-pocket spending and<br /> prohibitions on annual and lifetime limits on payments for services within the EHBs, all<br /> plans must pay for most of the cost of high-cost services. To design a plan with an<br /> actuarial value of 60 percent or less and pay for those high-cost services, insurers must<br /> set high deductibles—that is, the amounts that people pay out of pocket for most types of<br /> health care services before insurance makes any contribution.<strong> Under current law for a<br /> single policyholder in 2017, the average deductible (for medical and drug expenses<br /> combined) is about $6,000 for a bronze plan and $3,600 for a silver plan. CBO and JCT<br /> expect that the benchmark plans under this legislation would have high deductibles<br /> similar to those for the bronze plans offered under current law.</strong> Premiums for a plan with<br /> an actuarial value of 58 percent are lower than they are for a plan with an actuarial value<br /> of 70 percent (the value for the reference plan under current law) largely because the<br /> insurance pays for a smaller average share of health care costs.</li> </ul> <p>And looking all the way at the end of the 10 year horizon: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>By 2026, average premiums for benchmark plans for single individuals in most of the country under this legislation would be about 20 percent lower than under current law, CBO and JCT estimate—a smaller decrease than in 2020 largely because federal funding to reduce premiums would have lessened. </strong>The estimates for both of those years encompass effects in different areas of the country that would be substantially higher and substantially lower than the average effect nationally, in part because of the effects of state waivers. Some small fraction of the population is not included in those estimates. CBO and JCT expect that those people would be in states using waivers in such a way that no benchmark plan would be defined. Hence, a comparison of benchmark premiums is not possible in such areas.</p> </blockquote> <p>Full estimate is below (<a href="">link</a>)</p> <p> <iframe src=";view_mode=scroll&amp;access_key=key-8pSacLYIyVruedJ9uYWd&amp;show_recommendations=true" width="100%" height="600" frameborder="0" scrolling="no"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="640" height="360" alt="" src="" /> </div> </div> </div> 111th United States Congress 115th United States Congress American Health Care Act Budget Deficit Business Economy Economy of the United States Finance Health Health insurance Healthcare reform in the United States Insurance Internal Revenue Code Internal Revenue Service Labor Medicaid National debt of the United States Obamacare Patient Protection and Affordable Care Act Presidency of Barack Obama Presidency of Lyndon B. Johnson Senate Social Issues Statutory law Twitter Twitter United States United States federal budget White House White House Mon, 26 Jun 2017 20:35:02 +0000 Tyler Durden 598705 at SCOTUS "Mostly" Reinstates Trump Travel Ban; Schedules October Hearing <p><span style="text-decoration: underline;"><strong>Update:</strong></span></p> <p>It appears that Trump has been handed a 'partial' victory on his travel ban by the Supreme Court.&nbsp; While SCOTUS revived a "narrowed" ban, they found that it can not be applied to people with a <strong>"credible claim of a bona fide relationship with a person or entity in the United States."&nbsp; </strong><strong><br /></strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <ul> <li>SUPREME COURT TEMPORARILY NARROWS TRAVEL BAN</li> <li>SUPREME COURT LIFTS MOST OF INJUNCTION THAT BLOCKED TRUMP'S TRAVEL BAN ON SIX MUSLIM-MAJORITY NATIONS</li> <li>COURT SAYS BAN CAN APPLY TO PEOPLE WITHOUT U.S. RELATIONSHIP</li> <li>U.S. SUPREME COURT AGREES TO HEAR TRUMP APPEALS OF RULINGS BLOCKING TRAVEL BAN ON SIX MUSLIM-MAJORITY NATIONS</li> </ul> </blockquote> <p>The ban will <strong>exclude people visiting a close family member, students who have been admitted to a university or workers who have accepted an employment offer,</strong> the court said. But the court said people can’t avoid the travel ban by entering into a relationship solely to enter the U.S.</p> <p>The policy will suspend entry into the U.S. by people from <strong>Iran, Libya, Somalia, Sudan, Syria and Yemen</strong> for a period of 90 days and it will take effect in 72 hours.</p> <p>Justices Clarence Thomas, Samuel Alito and Neil Gorsuch said they would have let the entire ban take effect immediately.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <ul> <li>THOMAS, ALITO, GORSUCH ISSUE PARTIAL DISSENT ON TRAVEL BAN</li> </ul> </blockquote> <p>It seems that we won't know more until October.</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">Travel ban will be argued in October</p> <p>— SCOTUSblog (@SCOTUSblog) <a href="">June 26, 2017</a></p></blockquote> <script src="//"></script><p>&nbsp;</p> <p>Meanwhile, it seems that SCOTUS may be taking tweeting tips from the President...though we're not entirely sure...<strong>maybe "bona dude" is a technical term.</strong></p> <p><img src="" alt="SCOTUS" width="600" height="464" /></p> <p>&nbsp;</p> <p>Here is the full SCOTUS decision:</p> <p><iframe src=";view_mode=scroll&amp;access_key=key-NLcAHNEujugBYbhUjCHA&amp;show_recommendations=true" width="100%" height="600" frameborder="0" scrolling="no"></iframe></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>* * *</p> <p>The Supreme Court of the United States (SCOTUS) will wrap up its 2017 session today and will likely issue a decision on Trump's controversial travel ban.&nbsp; As you may recall, Trump's "travel ban" was designed to impose a 90-day pause in travel from citizens of <strong>Iran, Libya, Somalia, Sudan, Syria and Yemen.&nbsp; Decisions are expected to be revealed publicly at 10AM EST.</strong></p> <p>Of course, the case has ended up in the Supreme Court because two federal appellate courts ruled against the Trump travel policy on the basis of religious and "nationality-based" discrimination. Per <a href="">CBS</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The 4th U.S. Circuit Court of Appeals in Richmond, Virginia, said the ban was <strong>"rooted in religious animus" toward Muslims</strong> and pointed to Trump's campaign promise to impose a ban on Muslims entering the country as well as tweets and remarks he has made since becoming president.</p> <p>&nbsp;</p> <p><strong>The San Francisco-based 9th U.S. Circuit Court of Appeals said the travel policy does not comply with federal immigration law, including a prohibition on nationality-based discrimination.</strong> That court also put a hold on separate aspects of the policy that would keep all refugees out of the United States for 120 days and cut by more than half, from 110,000 to 50,000, the cap on refugees in the current government spending year that ends Sept. 30.</p> </blockquote> <p>Trump's first executive order on travel applied to travelers from the six countries as well as Iraq, and took effect immediately, causing chaos and panic at airports over the last weekend in January as the Homeland Security Department scrambled to figure out who the order covered and how it was to be implemented. A federal judge blocked it eight days later, an order that was upheld by a 9th circuit panel. Rather than pursue an appeal, the administration said it would revise the policy.</p> <p>In March, Trump issued a narrower order, but it too was promptly blocked.</p> <p>Of course, back in June, during what became a fairly public dispute with his own Attorney General, <strong>Trump blasted the "watered down, politically correct" version of his travel ban that is currently before the Supreme Court.</strong></p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">The Justice Dept. should have stayed with the original Travel Ban, not the watered down, politically correct version they submitted to S.C.</p> <p>— Donald J. Trump (@realDonaldTrump) <a href="">June 5, 2017</a></p></blockquote> <script src="//"></script><p>&nbsp;</p> <p>Meanwhile, today's session could also draw buzz as rumors have surfaced of late that <strong>Justice Kennedy could announce his retirement.</strong>&nbsp; Moreover, it is expected that Kennedy's retirement would push SCOTUS even further to the right as he was often considered the "center of the court."&nbsp; More from <a href="">Axios</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>White House sources think Justice Anthony Kennedy, the Supreme Court's ideological fulcrum, may announce his retirement today, as the justices gather on the bench for the last time this term.</p> <p>&nbsp;</p> <p>Trump's first Court appointment, of Justice Neil Gorsuch, was a one-for-one ideological swap for the late Justice Antonin Scalia.</p> <p>&nbsp;</p> <p><strong>Replacing Kennedy would be even more historic and consequential: a momentous chance to edge the Court right, since Kennedy is the center of the Court </strong>— the one most willing to listen to both sides. On a controversial case, both sides pitch to him. It's been called "Kennedy's Court."</p> <p>&nbsp;</p> <p>No one's predicting: Court watchers say no one knows, and Kennedy has said nothing publicly. He could well wait one more year: The Court buzz is that it'll be this year or next.</p> <p>&nbsp;</p> <p>Lyle Denniston, who has covered the Supreme Court for 58 years, headlines a post on his website, <strong>"High drama: Supreme Court term is ending": "[R]umors have continued to make the rounds that ... Kennedy, who will be 81 in July, could reveal plans [today] to end his career. ... The longest serving of the Justices, Kennedy joined the court more than 29 years ago."</strong></p> </blockquote> <p>If true, of course, this would give the Trump administration the opportunity to replace a second Supreme Court justice within the first year of his administration.&nbsp;</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="592" height="337" alt="" src="" /> </div> </div> </div> 4th U.S. Circuit Court of Appeals 9th U.S. Circuit Court of Appeals American people of German descent Anthony Kennedy Antonin Scalia Antonin Scalia Climate change skepticism and denial Conservatism in the United States Donald Trump Executive Order 13769 First 100 days of Donald Trump's presidency headlines Homeland Security Department Iran Iran–United States relations Iraq Kennedy's Court Law Libya–United States relations Neil Gorsuch Political positions of Donald Trump Politics Samuel Alito SCOTUS Somalia Sudan–United States relations Supreme Court Supreme Court of the United States Syria–United States relations The Apprentice Trump Administration U.S. Supreme Court UN Court United States United States courts of appeals White House White House WWE Hall of Fame Mon, 26 Jun 2017 20:34:38 +0000 Tyler Durden 598659 at A Stock Market Crash Scenario <p><a href=""><em>Authored by Charles Hugh Smith via OfTwoMinds blog,</em></a></p> <p><em>The one thing we can know with certainty is it won&#39;t be easy to profit from the crash.</em></p> <p><strong>After 8+ years of phenomenal gains, it&#39;s pretty obvious the global stock market rally is overdue for a credit-cycle downturn,</strong> and many research services of Wall Street heavyweights are sounding the alarm about the auto industry&#39;s slump, the slowing of new credit and other fundamental indicators that a recession is becoming more likely.</p> <p>Few have taken the risk of projecting a date for the crash, this gent being a gutsy outlier: <a href="" target="resource">Hedge Fund CIO Sets The Day When The Next Crash Begins</a>.</p> <p>Next February is a good guess, as recessions and market downturns tend to lag the credit market by about 9 months.</p> <p><strong>My own scenario is based not on cycles or technicals or fundamentals, but on the psychology of the topping process,</strong> which tends to follow this basic script:</p> <p><img align="middle" border="0" class="wide" src="" /></p> <p>When there are too many bearish reports of gloomy data, and too many calls to go long volatility or go to cash, the market perversely goes up, not down.</p> <p>Why? This negativity creates a classic <em>Wall of Worry</em> that markets can continue climbing. (Central banks buying $300 billion of assets a month helps power this gradual ascent most admirably.) The Bears betting on a decline based on deteriorating fundamentals are crushed by the steady advance.</p> <p><strong>As Bears give up, the window for a <em>Spot of Bother</em> decline creaks open, however grudgingly,</strong> as central banks make noises about ending their extraordinary monetary policies by raising interest rates a bit (so they can lower them when the next recession grabs the global economy by the throat).</p> <p>As bearish short interest and bets on higher volatility fade, insiders go short.</p> <p>A sudden air pocket takes the market down, triggered by some bit of &quot;news.&quot; (Nothing like a well-engineered bout of panic selling to set up a profitable <em>Buy the Dip</em> opportunity.)</p> <p>And since traders have been well-trained to Buy the Dips, the Spot of Bother is quickly retraced.</p> <p>Nonetheless, doubts remain and fundamental data is still weak; this overhang of negativity rebuilds the wall of Worry.</p> <p>Some Bears will reckon the weakened market will double-top, i.e. be unable to break out to new highs given the poor fundamentals, and as a result we can anticipate a nominal new high after the Wall of Worry has been rebuilt, just to destroy all those who reckoned a double-top would mark <strong>The Top.</strong></p> <p>Mr. Market (and the central banks) won&#39;t make it that easy to reap a fortune by going short.</p> <p>As the market lofts to new nominal highs, the remaining Bears will be hesitant to go short, and Bulls will note that despite the dire warnings of analysts and the gloomy data on auto sales, credit expansion, productivity, wages, etc., the market keeps chugging higher.</p> <p><strong>This will infuse participants with complacency</strong> and a general sense that the market has weathered the worst than could be thrown at it.</p> <p>When the surviving Bears have become wary, and the market&#39;s resilience in the tide of negative news seems to point to further gains--<strong>at that point, the market finally rolls over and &quot;surprises&quot; everyone.</strong></p> <p><strong>Nice, but when will this happen?</strong> Nobody knows, but the key is there can&#39;t be a crowd of analysts predicting a decline and begging everyone to go to cash. There can&#39;t be huge short interest and massive bets on higher volatility. Everyone betting the farm on a decline and a spike in volatility must first be destroyed before the market can possibly fall.</p> <p>The crash has to catch almost everyone off guard--those who lost their shirts betting on the market responding rationally to deteriorating data (i.e. those who bet on rising volatility and a market decline), those steeped in complacency and those secure in their quasi-religious faith that the central banks &quot;have our backs and will never let the market drop.&quot;</p> <p>When these conditions are met, the Crash-o-Meter pegs the upper limit of vulnerability.</p> <p><strong>Pavlovian training is deeply embedded, so the first drop will trigger a Buy the Dip frenzy.</strong> This reverses the downturn and creates the <strong>last exit point.</strong> But so well-trained are traders, few take the last exit; most feel assured that further gains are just ahead.</p> <p>Central banks are presumed to be all-powerful, and the past 8 years support the conventional belief that a new central bank policy announcement will always reverse any downturn.</p> <p><strong>But contrary to expectations, selling momentum builds</strong> and the trading bots start selling in earnest, the goal being to liquidate the position entirely to escape risk. Central bank pronouncements steady the market and trigger wild spikes higher--but only for a few hours. <strong>Things have changed.</strong> Central banks cannot reverse the tide of fear, and spikes higher are seen as selling opportunities.</p> <p><strong>Alas, every bot has the same goal, and the bid disappears.</strong> That&#39;s one crash scenario; there are many others. The one thing we can know with certainty is <em>it won&#39;t be easy to profit from the crash</em>.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="290" height="145" alt="" src="" /> </div> </div> </div> Auto Sales Behavioral finance Business Central Banks Economy ETC Finance Financial markets Global Economy Market Crash Market sentiment Mathematical finance Money Recession Short Short Interest Technical analysis Volatility Volatility Wall of Worry Mon, 26 Jun 2017 20:10:20 +0000 Tyler Durden 598656 at Bitcoin Bloodbath Leads Tech Stock Tumble; Gold Gouged As Credit Curve Crushed To New Lows <p>hmmm....</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="" width="560"></iframe></p> <p>&nbsp;</p> <p>We started the day with a <strong>gold flash-crash...</strong></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 351px;" /></a></p> <p>&nbsp;</p> <p>Then Durable Goods data and The Chicago Fed&#39;s National Activity Index both tumbled and massively missed expectations -smashing the <strong>Citi Macro Surprise Index to its weakest since August 2011</strong>...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 317px;" /></a></p> <p>&nbsp;</p> <p>Then Nasdaq (led by FANGs) tumbled at the cash open after levitating overnight&nbsp; -<strong> oddly reactive to the tumble in Bitcoin</strong>...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p><strong>Bitcoin was clubbed like a baby seal </strong>- down over 15% - the biggest drop since Jan 2015...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 302px;" /></a></p> <p>&nbsp;</p> <p>On the day, only Nasdaq closed closed weak (NOTE, the European close saw a buying panic reappear in Nasdaq briefly)</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 371px;" /></a></p> <p>&nbsp;</p> <p>FANG Stocks fell most since the day after the tech-wreck closing NOT &quot;off the lows&quot;...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 301px;" /></a></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 302px;" /></a></p> <p>VIX was smashed back to a 9 handle...But as the chart below shows, it didn&#39;t help push stocks back up...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 297px;" /></a></p> <p>&nbsp;</p> <p>Treasury yields all fell on the day - even the short-end was bid in a very strong auction. The drop started on the dismal data early...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>The Treasury yield curve slumped flatter once again with<strong> 2s10s dropping to a 78bps handle - lowest since Aug 2016</strong></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 304px;" /></a></p> <p>&nbsp;</p> <p>2s30s tumbled again to 134bps - the flattest since the last recession begain...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 306px;" /></a></p> <p>&nbsp;</p> <p>The Dollar Index roller-coastered to end the day slightly higher...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>Yen was sold hard today (and Yuan weakened)...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 316px;" /></a></p> <p>&nbsp;</p> <p>Both Gold and Silver flash-crashed overnight but rallied on the weak US data...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 346px;" /></a></p> <p>&nbsp;</p> <p>On the bright side, WTI Crude saw a modest bounce today... testing below $3 briefly...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 351px;" /></a></p> <p>&nbsp;</p> <p>We note that while Bitcoin was battered today, <strong>it found support at its exponential trendline off March lows...</strong></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p>All 20 of the largest cryptocurrencies were deep in the red...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 718px;" /></a></p> <p>&nbsp;</p> <p>Finally, we note that <strong>at least one corner of the equity market might be getting nervous</strong> about the S&amp;P 500 Index hovering near&nbsp;all-time highs.&nbsp;<strong>Options contracts that pay off with a drop in the benchmark gauge outnumber those betting on a gain by a rate of more than 2-to-1, the most since January 2016,</strong> according to data compiled by Bloomberg.</p> <p><a href=""><img height="276" src="" width="600" /></a></p> <p>Since the start of the bull market,<em><strong> the S&amp;P 500 has lost 0.3 percent in the 10 days following put-to-call ratios at or above the current level, </strong></em>compared with a 0.6 percent gain in all 10-day stretches during that period.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="600" height="57" alt="" src="" /> </div> </div> </div> 2s10s 2s10s 2s10s. 2s30s Alternative currencies Bitcoin Bitcoin Business Chicago Fed Citi Macro Surprise Crude Cryptocurrencies Digital currency Economy Finance Financial cryptography flash Money NASDAQ NASDAQ Payment systems Recession S&P 500 VIX Yen Yield Curve Yuan Mon, 26 Jun 2017 20:02:24 +0000 Tyler Durden 598703 at Congress Explained <p><em>...goes round in circles but <strong>accomplishes nothing</strong>...</em></p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="441" /></a></p> <p><a href=""><em>Source:</em></a><a href=""><br /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="670" height="492" alt="" src="" /> </div> </div> </div> Conservatism in the United States None Politics of the United States Technology The Heritage Foundation Townhall Mon, 26 Jun 2017 19:55:00 +0000 Tyler Durden 598690 at