http://www.zerohedge.com/fullrss2.xml/PhoneBook/_http en China To Test New Weapons, Stage Live Fire Drills In Retaliation To US THAAD Deployment http://www.zerohedge.com/news/2017-04-27/china-test-new-weapons-retaliation-us-thaad-deployment <p>Two days after the US military <a href="http://www.zerohedge.com/news/2017-04-25/us-military-begins-moving-thaad-anti-missile-system-south-korea-deployment-site">began to move the controversial THAAD anti-missile system </a>into its deployment site in a South Korean golf course (over the protests of hundreds of locals who were promptly quieted when the police showed up), despite vocal protests from China which is "resolutely opposed" to the THAAD deployment and&nbsp; believes such a move would destabilize the regional balance of power, China said on Thursday that <strong>it would stage live fire drills and test new weapons to protect its national security, </strong>its Defense Ministry said. </p> <p>"The deployment of the THAAD anti-missile system in South Korea damages the regional strategic balance and stability. The Chinese side is resolutely opposed to this" Defense Ministry spokesman Yang Yujun told reporters on Thursday when asked about the Terminal High Altitude Area Defense system.</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/thaad%20rocket.jpg" width="600" height="310" /></p> <p>He also said that "China’s military will continue to carry out live-fire military exercises and test new military equipment in order to firmly safeguard national security and regional peace and stability," he said, as <a href="http://in.reuters.com/article/northkorea-usa-idINKBN17T0AF">quoted by Reuters</a>.</p> <p>Beijing has been an outspoken opponent of THAAD over fears it will undermine its own deterrence capabilities. In March, and editorial in the state-run Global Times newspaper said Washington should "pay the price" for the deployment of the system, which it said was "on China's front door."&nbsp; Meanwhile, the US insists the system is for purely defensive purposes, against any potential attacks from Pyongyang. US Admiral Harry Harris <a href="https://www.rt.com/usa/386221-thaad-operational-south-korea/">told Congress </a>on Wednesday that it "poses no threat to China." </p> <p>China disagrees. </p> <p>As we reported at the time, a THAAD installation, which was moved onto a golf course in Seongji, South Korea, on Tuesday, is designed to intercept short, medium, and intermediate-range ballistic missiles during their terminal flight phase. It is equipped with long-range radar and is believed to be capable of intercepting North Korea’s intermediate-range ballistic missiles. The system will be operational in the "coming days," according to Harris.</p> <p>As Reuters further adds, the Chinese Defense Ministry's statements come as the US continues to urge Beijing to put pressure on North Korea, as China is the country's main economic lifeline. Referring to the increased tensions between Washington and Pyongyang on Thursday, China said it approves of a recent statement by the Trump administration which said the White House is still "open to negotiations" to achieve stability and "peaceful denuclearization" on the Korean Peninsula.</p> <p>When asked about such statements, Chinese Foreign Ministry spokesman Geng Shuang said Beijing had noted that many US officials had recently made similar remarks.</p> <p>"We have noted these expressions, and have noted the message conveyed in these expressions hoping to resolve the Korean nuclear issue peacefully through dialogue and consultation," he said. "We believe this message is positive and should be affirmed."</p> <p>Earlier this week, China urged restraint from all sides of the conflict during a call with US President Donald Trump, whose administration continues to state that “all options are on the table” when it comes to North Korea. </p> <p>So far, aside from engaging in a massive live-fire drill on Tursday, North Korea has abstained from any provocative moves. </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="900" height="500" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/thaad.jpg?1493304148" /> </div> </div> </div> http://www.zerohedge.com/news/2017-04-27/china-test-new-weapons-retaliation-us-thaad-deployment#comments Aerial warfare Anti-aircraft warfare China China’s military China–South Korea relations Chinese Defense Ministry Chinese Foreign Ministry Congress Defense Ministry Donald Trump Lockheed Martin Military Missile defense national security Newspaper North Korea Politics Raytheon Reuters Terminal High Altitude Area Defense Trump Administration US military US missile defense system in Asia-Pacific Region War War White House White House Thu, 27 Apr 2017 14:46:08 +0000 Tyler Durden 594537 at http://www.zerohedge.com The Fed Has Bankrupted the US In Order to Create Another Bubble http://www.zerohedge.com/news/2017-04-27/fed-has-bankrupted-us-order-create-another-bubble <p>Yesterday&rsquo;s article caused quite a stir. If you missed it, you can read it <strong><a href="http://www.zerohedge.com/news/2017-04-26/bubble-alert-weve-passed-2007-and-are-our-way-1999">here</a>.</strong></p> <p>The basic premise is that when you value the stock market based on objective metrics that cannot be fudged, it&rsquo;s more overpriced than it was at the 2007 peak and is rapidly approaching the 1999 peak.</p> <p>However, the underlying reason that stocks are so ridiculously overpriced has to do with another asset class: <strong><u>bonds.</u></strong></p> <p>The fact is that by keeping interest rates at zero for seven years, the Fed has created a bubble in bonds. Back in 2008, the US&rsquo;s Debt to GDP was just 65%.</p> <p>Thanks to seven years of ZIRP, the US Government was able to go on a massive spending spree, ballooning the Debt to GDP to above 105% where it sits today.</p> <p><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user20289/imageroot/2017/04/24/debt%20to%20GDP.jpg" style="width: 480px; height: 329px;" /></p> <p>How does this impact stocks?</p> <p>&nbsp;According to the Fed Model for valuing assets, stock prices trade based on <u><strong>interest rates (bond yields).</strong></u></p> <p>The equation is the following:</p> <p>(Stock Earnings/ Stock Prices)= 10 Year Treasury Yields.</p> <p>So&hellip; if yields are pushed to <u><strong>record lows courtesy of Fed policy</strong></u>&hellip; and earnings are not growing rapidly to make up the difference, <strong><u>stock prices must soar.</u></strong></p> <p>If this sounds like a load of nonsense to you, it is in fact the primary argument the financial elites are making for why stocks are such a bargain even today.</p> <p style="margin-left:.5in;"><em>&quot;Measured against interest rates, stocks actually are on the cheap side compared to historic valuations,&quot;</em></p> <p style="margin-left:.5in;">~Warren Buffett in an interview with CNBC February 2017.</p> <p>Buffett is indirectly revealing the Fed&rsquo;s whole game here: drive yields down so that stocks will rally. Indeed,this was the entire point of Fed activity post-2008: to reflate another bubble (this time in bonds) forcing capital into the financial markets.</p> <p>So in this sense, stocks are in fact in a <em>derivative</em> bubble&hellip; a bubble that is derived from another bubble (this one in bonds). And it will end as all bubbles do: in disaster.</p> <p>The below chart isn&#39;t a pretty one, but it&#39;s worth keeping in mind as stocks move ever higher into nosebleed territory.</p> <p><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user20289/imageroot/2017/04/24/sc.png" style="width: 460px; height: 284px;" /></p> <p>To pick up a FREE investment report outlining three investments that you could make you a ton of money when this bubble bursts&hellip;&nbsp;</p> <p><strong><a href="http://phoenixcapitalmarketing.com/bondbubble3.html">CLICK HERE!</a></strong></p> <p>Best Regards</p> <p>Graham Summers</p> <p>Chief Market Strategist</p> <p>Phoenix Capital Research</p> <p>&nbsp;</p> http://www.zerohedge.com/news/2017-04-27/fed-has-bankrupted-us-order-create-another-bubble#comments 10 Year Treasury Bond Business Capital structure substitution theory Economic bubble Economy Fed model Finance Financial crises Financial history of the Dutch Republic Investment Money Stock market US Federal Reserve US government Warren Buffett Warren Buffett Thu, 27 Apr 2017 14:28:24 +0000 Phoenix Capital Research 594536 at http://www.zerohedge.com Pentagon Inspector General Launches Investigation Of Michael Flynn http://www.zerohedge.com/news/2017-04-27/pentagon-inspector-general-launches-investigation-michael-flynn <p>Moments ago, AP reported that Trump's embattled former national security advisor Michael Flynn had been warned not to accept foreign government payments in 2014. </p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">BREAKING: Army documents: Ousted National Security Adviser Michael Flynn warned not to accept foreign government payments in 2014.</p> <p>— The Associated Press (@AP) <a href="https://twitter.com/AP/status/857596900920479744">April 27, 2017</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>As <a href="http://www.cnn.com/2017/04/27/politics/michael-flynn-foreign-payments-investigation/index.html">CNN details</a>, former national security adviser Michael Flynn was warned by the Defense Intelligence Agency in 2014 against accepting foreign payments as he entered retirement.&nbsp; </p> <p>"These documents raise grave questions about why General Flynn concealed the payments he received from foreign sources after he was warned explicitly by the Pentagon," said Rep. Elijah Cummings, the top Democrat on the House oversight committee, in a statement. "Our next step is to get the documents we are seeking from the White House so we can complete our investigation. I thank the Department of Defense for providing us with unclassified versions of these documents."</p> <p>This <a href="http://www.zerohedge.com/news/2017-04-25/house-oversight-committee-confirms-flynn-likely-broke-law-overseas-payments">follows a report from earlier this week </a>according to which the House overnight Committe said there was no evidence Flynn properly disclosed payments for his foreign lobbying connected to Turkey and Russia, and noted that Flynn likely broke the law on overseas payments.</p> <p>As The Washington Post reported, Jason Chaffetz (R-Utah) and ranking member Elijah Cummings (D-Md.) said they believe Flynn neither received permission nor fully disclosed income he earned for a speaking engagement in Russia and lobbying activities on behalf of Turkey when he applied to reinstate his security clearance, after viewing two classified memos and Flynn's disclosure form in a private briefing Tuesday morning. "Personally I see no evidence or no data to support the notion that General Flynn complied with the law," Chaffetz told reporters following the briefing. "He was supposed to get permission, he was supposed to report it, and he didn't," Cummings said.</p> <p>Chaffetz confirmed that Flynn had failed to reveal the more than $45,000 he was paid to speak at a 2015 gala for RT, the Kremlin-run TV network, as well as the money he was paid by an air freight company and a cybersecurity firm with direct connections to Russia. Chaffetz added that the White House had refused to provide his committee with information and documents related to Flynn's security clearance and payments from organizations tied to the Russian and Turkish governments. The committee made six requests, and the White House cited reasons it could not comply with each of them, Cummings said.</p> <p>Flynn's life got even more complicated when Cummings also revealed that the inspector general of the Department of Defense opened an investigation of Flynn earlier this month, according to an April 11 letter released by the oversight committee Thursday. </p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en"><a href="https://twitter.com/hashtag/BREAKING?src=hash">#BREAKING</a>: <a href="https://twitter.com/RepCummings">@RepCummings</a> releases three new docs on fired Michael <a href="https://twitter.com/hashtag/Flynn?src=hash">#Flynn</a> <a href="https://t.co/H3FS8tfny8">https://t.co/H3FS8tfny8</a></p> <p>— House OversightDems (@OversightDems) <a href="https://twitter.com/OversightDems/status/857591782967738369">April 27, 2017</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet"> <p dir="ltr" lang="en">.<a href="https://twitter.com/RepCummings">@RepCummings</a> DOD IG on <a href="https://twitter.com/hashtag/Flynn?src=hash">#Flynn</a> ?? <a href="https://t.co/RuxSG8oRpT">https://t.co/RuxSG8oRpT</a> <a href="https://t.co/86OLguR28I">pic.twitter.com/86OLguR28I</a></p> <p>— House OversightDems (@OversightDems) <a href="https://twitter.com/OversightDems/status/857592553323016193">April 27, 2017</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>Flynn's lawyer, Robert Kelner, had previously said that Flynn briefed the DIA on his speech to RT and the payments, but Cummings said Thursday that another document that was declassified this week shows no evidence to support that statement. CNN has reached out to Flynn's attorney Thursday and have yet to receive a response.</p> <p>As Cummings said,"These documents raise grave questions about why General Flynn concealed the payments he received from foreign sources after he was warned explicitly by the Pentagon. Our next step is to get the documents we are seeking from the White House so we can complete our investigation. I thank the Department of Defense for providing us with unclassified versions of these documents."</p> <p><em>This is the full statement <a href="https://democrats-oversight.house.gov/news/press-releases/cummings-releases-three-new-docs-on-flynn">Cummins released this morning</a>:</em></p> <p><strong>Cummings Releases Three New Docs on Flynn</strong></p> <p><em><strong>Pentagon Explicitly Warned Flynn Not to Accept Foreign Government Payments; Newly Unclassified Letter Confirms Flynn Did Not Report Foreign Payments; Defense Department IG Launches Its Own Investigation</strong></em></p> <p>Washington, D.C. (Apr. 27, 2017)—Today, Rep. Elijah E. Cummings, the Ranking Member of the House Committee on Oversight and Government Reform, released new documents relating to Lt. General Michael Flynn, who was fired by President Trump from his position as National Security Advisor after concealing information about his communications with the Russian Ambassador to the United States.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“These documents raise grave questions about why General Flynn concealed the payments he received from foreign sources after he was warned explicitly by the Pentagon,” said Ranking Member Cummings. “Our next step is to get the documents we are seeking from the White House so we can complete our investigation.&nbsp; I thank the Department of Defense for providing us with unclassified versions of these documents.”</p> </blockquote> <p>First, the Oversight Committee has obtained a letter to Flynn on October 8, 2014, from the Defense Intelligence Agency (DIA) Office of General Counsel explicitly warning Flynn, as he entered retirement, that he was prohibited by the Constitution from receiving payments from foreign sources without advance permission:</p> <p><span style="text-decoration: underline;"><strong>“Foreign Compensation Requires Advance Approval</strong></span></p> <p>The Emoluments Clause of the U.S. Constitution, article I, section 9, clause 8, as interpreted in Comptroller General opinions and by the Department of Justice Office of Legal Counsel, prohibits receipt of consulting fees, gifts, travel expenses, honoraria, or salary by all retired military personnel, officer and enlisted, regular and reserve, from a foreign government unless congressional consent is first obtained.&nbsp; Consent is provided by Congress under 37 U.S.C. 908, which requires advance approval from the relevant service secretary and the Secretary of State before accepting employment, consulting fees, gifts, travel expenses, honoraria, or salary from a foreign government. ... Accordingly, if you are ever in a position where you would receive an emolument from a foreign government or from an entity that might be controlled by a foreign government, be sure to obtain advance approval from the Army prior to acceptance.” (emphasis in original)</p> <p>In addition, this week, the Defense Department produced to the Oversight Committee an unclassified, redacted version of a letter that DIA originally sent to the Committee in classified form on April 7, 2017.</p> <p>The new DIA letter counters the suggestion by Flynn’s attorney on Tuesday that Flynn followed appropriate procedures for accepting foreign funds for his trip to Moscow in December 2015 when he dined with Russian President Vladimir Putin.&nbsp; The DIA letter states:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“DIA did not locate any records referring or relating to LTG Flynn’s receipt of money from a foreign source. ... DIA did not locate any records of LTG Flynn seeking permission or approval for the receipt of money from a foreign source.”</p> </blockquote> <p>Flynn’s attorney issued the following <a href="http://www.politico.com/story/2017/04/25/lawmakers-flynn-did-not-disclose-russia-payments-in-security-clearance-application-237576">statement </a>on Tuesday:</p> <p>“As has previously been reported, General Flynn briefed the Defense Intelligence Agency, a component agency of the Department of Defense, extensively regarding the RT speaking event trip both before and after the trip, and he answered any questions that were posed by DIA concerning the trip during those briefings.”<br />In other words, regardless of whether Flynn discussed his trip to Moscow with DIA, the Committee has obtained no evidence that he disclosed the payments he received from the Kremlin-backed propaganda outlet RT or that he obtained permission from the Secretary of the Army and the Secretary of State, as required.</p> <p>The new DIA letter also confirms that the Pentagon warned Flynn explicitly when he retired in 2014 not to accept payments from foreign government sources without obtaining advance approval:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“LTG Flynn was advised of the legal restrictions concerning foreign compensation and instructed to report any potential receipt of compensation in advance.”</p> </blockquote> <p>In another development, on April 11, 2017, the Inspector General of the Department of Defense sent a letter informing the Oversight Committee that it has now launched its own investigation:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“This office has initiated an investigation to determine whether Lieutenant General (LTG) Flynn, U.S. Army (Retired) failed to obtain required approval prior to receiving any emolument from a foreign government.”</p> </blockquote> <p>The White House is still <a href="http://www.cnn.com/2017/04/25/politics/trump-flynn-white-house-russia/">refusing </a>to provide even a single document as part of the Committee’s investigation and has refused to comply with the bipartisan document request sent by Chairman Jason Chaffetz and Ranking Member Cummings on March 22, 2017.</p> <p></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="1242" height="685" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/flynn%20teaser_4.jpg?1493303458" /> </div> </div> </div> http://www.zerohedge.com/news/2017-04-27/pentagon-inspector-general-launches-investigation-michael-flynn#comments army Congress Defense Intelligence Agency Defense Intelligence Agency Department of Defense Department of Justice Department of Justice Flynn Government House House Committee on Oversight and Government Reform House Oversight Committee House Oversight Committee Jason Chaffetz Justice Office Law Lieutenant general Michael T. Flynn Military Military intelligence national security Oversight Committee Pentagon Politics Title of Nobility Clause Turkey Twitter Twitter United States Army United States Department of Defense United States House Committee on Oversight and Government Reform Vladimir Putin Washington D.C. White House White House Thu, 27 Apr 2017 14:23:39 +0000 Tyler Durden 594535 at http://www.zerohedge.com Pending Home Sales Drop In March - Stagnant For 2 Years http://www.zerohedge.com/news/2017-04-27/pending-home-sales-drop-march-stagnant-2-years <p>Contracts&nbsp;to buy previously owned U.S. homes <strong>declined in March after rising a month earlier by the most since 2010</strong>, as perhaps the seasonal exuberance gives way to affordability constraints. Despite NAR&#39;s comments that &quot;home shoppers are coming out in droves this spring,&quot; it is evident from the chart below that <strong>pending home sales have been stagnant for almost two years</strong>.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/04/21/20170426_sales1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/04/21/20170426_sales1_0.jpg" style="width: 600px; height: 311px;" /></a></p> <p>2013 deja vua ll over again?</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/04/21/20170426_sales.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/04/21/20170426_sales_0.jpg" style="width: 600px; height: 302px;" /></a></p> <p>Regionally, <strong>only The South saw a sales increase:</strong></p> <ul> <li> <p>The PHSI in the <strong>Northeast decreased</strong> 2.9 percent to 99.1 in March, but is still 1.8 percent above a year ago.</p> </li> <li> <p>In the <strong>Midwest the index declined 1.2 percent</strong> to 109.6 in March, and is now 2.4 percent lower than March 2016.</p> </li> <li> <p>Pending home sales in the<u><strong> South rose 1.2</strong></u> percent to an index of 129.4 in March and are now 3.9 percent above last March.</p> </li> <li> <p>The index in the <strong>West fell 2.9 percent </strong>in March to 94.5, and is now 2.7 percent below a year ago.</p> </li> </ul> <div> <div id=":185.co"> <p><span dir="ltr"><a href="https://www.nar.realtor/news-releases/2017/04/pending-home-sale-dip-08-in-march"><em>Lawrence Yun, NAR chief economist</em></a>, says&nbsp;<strong>sparse inventory levels caused a pullback in pending sales</strong> in March, but activity was still strong enough to be the third best in the past year. </span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span dir="ltr"><strong>&quot;Home shoppers are coming out in droves this spring and competing with each other for the&nbsp;meager amount of listings in the affordable price range,&quot;</strong> he said. </span></p> <p>&nbsp;</p> <p><span dir="ltr">&quot;In most areas, the lower the price of a home for sale, the more competition there is for it.&nbsp;That&#39;s the reason why <strong>first-time buyers have yet to make up a larger share of the market this year, despite there being more sales overall.</strong>&quot;</span></p> <p>&nbsp;</p> <p>Yun worries that the painfully low supply levels this spring could&nbsp;heighten price growth &mdash; at 6.8 percent last month &mdash; even more in the months ahead.&nbsp;Homes in March came off the market at a near-record pace&nbsp;1, and indicating an increase in the likelihood of listings receiving multiple offers,&nbsp;<u><em><strong>42 percent of homes sold at or above list price (the second highest amount since NAR began tracking in December 2012).</strong></em></u></p> </blockquote> </div> </div> <p>&quot;Take my money!!&quot;</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="960" height="483" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170426_sales.jpg?1493301995" /> </div> </div> </div> http://www.zerohedge.com/news/2017-04-27/pending-home-sales-drop-march-stagnant-2-years#comments Business Lawrence Yun Shoppers Drug Mart Thu, 27 Apr 2017 14:11:58 +0000 Tyler Durden 594534 at http://www.zerohedge.com Crude Oil support break here, could be hard on stocks! http://www.zerohedge.com/news/2017-04-27/crude-oil-support-break-here-could-be-hard-stocks <p><img src="https://www.kimblechartingsolutions.com/wp-content/uploads/2017/04/look-alike-einstein-pic.jpg" alt="EINSTEINS KIMBLE CHARTING SOLUTIONS" title="Crude Oil support break here, could be hard on stocks!" width="400" style="user-select: none; background-position: 0px 0px, 10px 10px; background-size: 20px 20px; background-image: linear-gradient(45deg, #eeeeee 25%, transparent 25%, transparent 75%, #eeeeee 75%, #eeeeee 100%), linear-gradient(45deg, #eeeeee 25%, white 25%, white 75%, #eeeeee 75%, #eeeeee 100%); display: block; margin-left: auto; margin-right: auto;" /></p> <p><span style="color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif; font-size: 14px;">Below compares the price of Crude Oil and the NYSE Index over the past decade. Even though both of these assets don’t always correlate, sometimes they do, for good periods of time. Over the past couple of years, they have correlated and several lows and highs have taken place at the same time. If correlations are to continue, what Crude does next, could be very important for the bull market in stocks.</span></p> <p><a href="https://www.kimblechartingsolutions.com/wp-content/uploads/2017/04/crude-oil-nyse-correlation-high-crude-testing-support-april-27.jpg" title="Crude Oil support break here, could be hard on stocks!"><img src="https://www.kimblechartingsolutions.com/wp-content/uploads/2017/04/crude-oil-nyse-correlation-high-crude-testing-support-april-27.jpg" alt="CRUDE OIL WEEKLY NYSE INDEX WEEKLY KIMBLECHARTING SOLUTIONS" title="Crude Oil support break here, could be hard on stocks!" width="1000" style="user-select: none; background-position: 0px 0px, 10px 10px; background-size: 20px 20px; background-image: linear-gradient(45deg, #eeeeee 25%, transparent 25%, transparent 75%, #eeeeee 75%, #eeeeee 100%), linear-gradient(45deg, #eeeeee 25%, white 25%, white 75%, #eeeeee 75%, #eeeeee 100%); display: block; margin-left: auto; margin-right: auto;" /></a></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif; text-align: center;"><span style="box-sizing: border-box; outline: 0px; background: transparent; color: #0000ff;"><strong style="box-sizing: border-box; outline: 0px; background: transparent;">CLICK ON CHART TO ENLARGE</strong></span></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;">Crude Oil hit falling resistance at (1), which appears to be the top of a narrowing pennant pattern. Once it hit resistance at (1) a couple of weeks ago, Crude has turned rather soft. The decline now has it testing rising support at (2), which appears to be support of the narrowing pennant pattern. If correlations are to remain high between the two, what Crude does at (2), could become very important for the broad markets.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;">Below looks at positions by traders from&nbsp;<a href="https://sentimentrader.com/" style="box-sizing: border-box; background: transparent; color: #2ea3f2; outline: 0px;">Sentimentrader.com.&nbsp;</a></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;"><a href="https://www.kimblechartingsolutions.com/wp-content/uploads/2017/04/crude-traders-positions-april-27.jpg" target="_blank" title="Crude Oil support break here, could be hard on stocks!"><img src="https://www.kimblechartingsolutions.com/wp-content/uploads/2017/04/crude-traders-positions-april-27.jpg" alt=" CRUDE OIL AND SENTIMENT KIMBLE CHARTING SOLUTIONS" title="Crude Oil support break here, could be hard on stocks!" width="1000" style="background-position: 0px 0px, 10px 10px; background-size: 20px 20px; background-image: linear-gradient(45deg, #eeeeee 25%, transparent 25%, transparent 75%, #eeeeee 75%, #eeeeee 100%), linear-gradient(45deg, #eeeeee 25%, white 25%, white 75%, #eeeeee 75%, #eeeeee 100%); display: block; margin-left: auto; margin-right: auto;" /></a></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif; text-align: center;"><span style="box-sizing: border-box; outline: 0px; background: transparent; color: #0000ff;"><strong style="box-sizing: border-box; outline: 0px; background: transparent;">CLICK ON CHART TO ENLARGE</strong></span></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;">If traders and positions is any indicator of the future prices of Crude oil, history would suggest that Crude is closer to a high than a low, due to the chart above.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;">Bottom line with these two charts, Crude and the NYSE remain highly correlated over the past couple of years and Crude Oil is testing rising support. If Crude would happen to break below support and correlations remain high, a break&nbsp;could cause some selling pressure in stocks.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;"> </p><p><strong><span style="box-sizing: border-box; font-style: inherit; font-variant: inherit; font-stretch: inherit; line-height: inherit;"><span style="box-sizing: border-box; font-style: inherit; font-variant: inherit; font-stretch: inherit; line-height: inherit;"><span style="box-sizing: border-box; font-style: inherit; font-variant: inherit; font-stretch: inherit; line-height: inherit;"></span></span></span></strong></p> <p style="margin: 0in; margin-bottom: .0001pt; 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margin: 0in 0in 0.0001pt; font-variant-numeric: inherit; font-stretch: inherit; font-size: 13px; line-height: 1.3; font-family: lucida_granderegular, Verdana, sans-serif;"><span style="box-sizing: border-box; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit; color: #303030;"><strong style="box-sizing: border-box; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;"><br /></strong></span></p> <div class="field field-type-filefield field-field-image-blog"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_blog" width="1569" height="732" alt="" src="http://www.zerohedge.com/sites/default/files/images/user182769/imageroot/crude-oil-nyse-correlation-high-crude-testing-support-april-27.jpg?1493302270" /> </div> </div> </div> http://www.zerohedge.com/news/2017-04-27/crude-oil-support-break-here-could-be-hard-stocks#comments Business Commodity markets Crude Crude Crude Oil Economy Finance Market economics) NYSE Price of oil Pricing Stock market Technical analysis Thu, 27 Apr 2017 14:11:39 +0000 kimblecharting 594533 at http://www.zerohedge.com Atlanta Fed Throws In The Towel: Cuts Final Q1 GDP Forecast To Just 0.2% http://www.zerohedge.com/news/2017-04-27/atlanta-fed-throws-towel-cuts-final-q1-gdp-forecast-just-02 <p>Well that was fast: <a href="http://www.zerohedge.com/news/2017-04-27/jpm-cuts-q1-gdp-forecast-just-03">literally seconds ago we posted JPM's Q1 GDP forecast revision</a>, saying "while we wait to see if the Atlanta Fed will cut its final Q1 GDP estimate ahead of tomorrow's official print to 0% or negative." At precisely the same time as we hit the publish button, the Atlanta Fed came out with its revised forecast and it's a doozy: after starting its Q1 GDP nowcast at 2.5%, rising as high as 3.4%, and plunging recently as low as 0.5%, the Atlanta Fed has "thrown in the towel" on the quarter in which the Fed hiked rates, and while not negative - or 0.0% - it was about as close as it could go without the Fed losing all credibility for having hiked in a contraction quarter. </p> <p><em>Fr<a href="https://www.frbatlanta.org/cqer/research/gdpnow.aspx?d=1&amp;s=tw">om the Atlanta Fed: </a></em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Latest forecast: 0.2 percent — April 27, 2017 </p> <p>&nbsp;</p> <p><strong>The final GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.2 percent on April 27, down from 0.5 percent on April 18</strong>. </p> <p>&nbsp;</p> <p>The forecast of first-quarter real consumer spending growth fell from 0.3 percent to 0.1 percent after yesterday's annual retail trade revision by the U.S. Census Bureau. The forecast of the contribution of inventory investment to first-quarter growth declined from -0.76 percentage points to -1.11 percentage points after this morning's advance reports on durable manufacturing and wholesale and retail inventories from the Census Bureau. </p> <p>&nbsp;</p> <p>The forecast of real equipment investment growth increased from 5.5 percent to 6.6 percent after the durable manufacturing report and the incorporation of previously published data on light truck sales to businesses from the U.S. Bureau of Economic Analysis.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/020170419010704_0.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/gdpnow-forecast-evolution%20%2820%29_0.gif" width="500" height="375" /></a></p> </blockquote> <p>Some context:</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/20170426_comf1_0.jpg" width="500" height="260" /></p> <p>Some more context: if the Atlanta Fed is right, and tomorrow the BEA confirms that GDP was around 0.2% , this will be the lowest GDP quarter in which the Fed has hiked rates since Q4 1980.</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/20170426_comf2_0.jpg" width="500" height="255" /></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="580" height="435" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/gdpnow-forecast-evolution%20%2820%29.gif?1493301564" /> </div> </div> </div> http://www.zerohedge.com/news/2017-04-27/atlanta-fed-throws-towel-cuts-final-q1-gdp-forecast-just-02#comments Atlanta Fed Business Census Bureau Economics Economy Economy of the United States Great Recession in Europe Gross domestic product Recession U.S. Bureau of Economic Analysis U.S. Census Bureau Thu, 27 Apr 2017 13:59:39 +0000 Tyler Durden 594532 at http://www.zerohedge.com JPM Cuts Q1 GDP Forecast To Just 0.3% http://www.zerohedge.com/news/2017-04-27/jpm-cuts-q1-gdp-forecast-just-03 <p>While we wait to see if the Atlanta Fed will cut its final Q1 GDP estimate ahead of tomorrow's official print to 0% or negative, here comes JPM which after slashing its Q1 GDP tracker from 0.6% to 0.4% yesterday, having started the quarter - like most others on Wall Street - at 3%, just trimmed its Q1 GDP estimate to the lowest yet, at just 0.3%.</p> <p><em>Here is the full note from JPM's Daniel Silver</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>We now believe that real GDP increased 0.3% saar in 1Q. </strong>This incorporates the various source data that were released this morning as well as a correction to our treatment of the annual revision to the retail sales data that was released yesterday. The updated details of our forecast are in the table below. </p> <p>&nbsp;</p> <p>In terms of the retail sales data, it appears that this year the BEA will not incorporate the updated figures until the May GDP report, so this Friday’s GDP release will be based on an older vintage of retail sales data. Reverting to the older data, we think Friday’s GDP report will show real consumption at 0.9% saar.</p> <p>&nbsp;</p> <p><strong>Turning to today’s reports, the flurry of information was a negative for 1Q growth on net, mainly through the inventory components.</strong> Wholesale inventories declined 0.1% in March, retail inventories increased 0.4%, and durable manufacturing inventories ticked up 0.1%. These figures continued what has been a weak run for much of the inventory data, <strong>and we now think that the real change in inventories in 1Q will actually be negative (at -$2bn saar). </strong>This very weak inventory figure expected for 1Q should be a positive development for 2Q growth,<strong> but we hold our 2Q growth forecast at 3.0% saar.</strong> </p> <p>&nbsp;</p> <p><strong>Separately, the nominal goods balance widened from -$63.9bn to -$64.8bn in March, with declines in both exports (-1.7%) and imports (-0.7%) during the month. </strong>This was slightly less widening in the deficit than we had been expecting for the month and it looks like net exports will be a small positive for growth in 1Q. However, the trade report did have some negative implications for equipment spending, and we now think that real equipment spending increased 5.2% saar in 1Q despite a modest upside surprise on the core capital goods shipments data that were also released today. Core capital goods orders and shipments have both been trending higher lately, with the latest figures showing core orders up 0.2% in both February and March and core shipments up 0.4% in March after a 1.1% gain in February.</p> </blockquote> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/jpm%20gdp%20q1_0.png" width="500" height="851" /></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="376" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/jpm%20teaser%202_2.jpg?1493300977" /> </div> </div> </div> http://www.zerohedge.com/news/2017-04-27/jpm-cuts-q1-gdp-forecast-just-03#comments 1Q Atlanta Fed Business Gross domestic product Human Interest National accounts Real gross domestic product Wholesale Inventories Thu, 27 Apr 2017 13:50:09 +0000 Tyler Durden 594530 at http://www.zerohedge.com "Amber Warning Sign" Issued For EURUSD Bulls http://www.zerohedge.com/news/2017-04-27/amber-warning-sign-issued-eurusd-bulls <p>While Draghi's conference was supposed to be relatively boring, it was anything but, with the EUR first sliding on the statement's suggestion that more QE is possible, then spiking on upbeat economic comments, then sliding again after Draghi talked down the inflationary outlook but most importantly, when the ECB president said that the ECB did not discuss options for June, nor removing the easing bias for interest rates. This was counter to the latest Reuters trial balloon earlier this week that the ECB were considering changing the language in June.</p> <p>So what were the responses? On one hand there was BofA's FX strategist Athanasios Vamvakidis, who said that Draghi is keeping his rethoric “intentionally” uninspiring for investors as the ECB is in no hurry to act, adding that “they have time" and there is "no need to rock the boat" which makes sense with trillions in European debt still yielding negative. </p> <p>Vamvakidis said that the comment on slightly less negative risks to the economic outlook is positive, but this shouldn’t be a surprise because the ECB wants to prepare the market for a QE tapering later in the year, and as a result the FX trader doesn’t see a sustained impact on the euro.</p> <p>Yet while many interpretations of Draghi's speech are possible, in a separate note by Citi's FXwire team, the bank took a technical approach, and after looking at a chart of the EURUSD, said that it has observed an "amber warning sign" for EURUSD bulls. </p> <p>This is how it explained its warning: </p> <p><strong>EURUSD daily chart is indicating that some caution may be warranted in this up move</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/020170419010704_0.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/citi%20eurusd_0.jpg" width="500" height="320" /></a></p> <p>Some further notes:</p> <ul> <li>Having moved to new highs in this up move above the 1.0906 March high, EURUSD looks to be struggling to sustain those gains</li> <li><strong>As a consequence there is a danger that triple momentum divergence is forming on the daily chart (High, higher high&nbsp; and 3rd higher high on price while momentum has a high, lower high and 3rd lower high)</strong></li> <li><strong>Good support is met at 1.0821-1.0836 </strong>(Trend lines, gap open on Sunday night and 200 day moving average</li> <li>A close below this range, if seen, <strong>would likely complete the triple divergence and flash “RED” that EURUSD may head lower</strong>. </li> <li>Initially a closing of the French election gap at 1.0778 would be a first target followed by support around 1.0570-1.0628.</li> </ul> <p>With the EURUSD trading at session lows and dropping, Citi's "dovish" take appears to be gaining traction. </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="835" height="535" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/citi%20eurusd.jpg?1493300514" /> </div> </div> </div> http://www.zerohedge.com/news/2017-04-27/amber-warning-sign-issued-eurusd-bulls#comments Citigroup Currency Economy Economy of New York City Euro European Central Bank Eurozone flash Midtown Manhattan Reuters Subprime mortgage crisis Thu, 27 Apr 2017 13:42:44 +0000 Tyler Durden 594529 at http://www.zerohedge.com Bernanke 'Terrifies' Stock Investors, Again http://www.zerohedge.com/news/2017-04-27/bernanke-terrifies-stock-investors-again <p><a href="http://www.alhambrapartners.com/2017/04/26/clickbait-bernanke-terrifies-stock-investors-again/"><em>Authored by Jeffrey Snider via Alhambra Investment Partners,</em></a></p> <p><span style="color: #000000;">If you are a stock investor, <strong>you should be terrified. </strong>The most disconcerting words have been uttered by the one person capable of changing the whole dynamic. After spending so many years trying to recreate the magic of the &ldquo;maestro&rdquo;, <strong>Ben Bernanke in retirement is still at it</strong>. In an interview <a href="http://advisorservices.schwab.com/public/advisor/nn/insights_hub/perspectives/pm/0417_bernanke_conversation_bull_market.html?cmp=TKT">with Charles Schwab</a>, the former Fed Chairman says not to worry:</span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="color: #000000;">Dr. Bernanke noted that corporate earnings have risen at the same time; <u><strong>he believes corporate earnings will continue to grow and &ldquo;catch up&rdquo; to asset prices.</strong></u></span></p> </blockquote> <p><span style="color: #000000;"><strong>Obviously, given his track record, that is a chilling statement of contrarian purposes.</strong> Kidding aside, it is interesting that he of all people would feel comfortable enough in making such a claim. For one, that is exactly the market problem at the moment. <strong><em>It is priced for enormous growth, way out in front of actual earnings which for nearly three years now have failed $100 (for the S&amp;P 500).</em></strong></span></p> <p><img class="aligncenter size-full wp-image-44593" height="351" src="http://www.alhambrapartners.com/wp-content/uploads/2017/04/ABOOK-April-2017-Bernanke-Stock-Picker-GDP.png" width="600" /></p> <p><img class="aligncenter size-full wp-image-44595" height="375" src="http://www.alhambrapartners.com/wp-content/uploads/2017/04/ABOOK-April-2017-Bernanke-Stock-Picker-EPS-FV.png" width="600" /></p> <p><span style="color: #000000;"><strong>In order for EPS to &ldquo;catch up&rdquo; will require the kind of growth you actually find in a recovery, at the very least a short burst of intense activity that creates all the follow-on effects that he once talked about igniting through QE.</strong> But that isn&rsquo;t what he actually said in his interview. Like <a href="http://www.alhambrapartners.com/2017/03/16/signs/">Janet Yellen</a>, Bernanke sees only vague improvement, so unsure that he felt compelled to qualify it further.</span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="color: #000000;">Part of the reason the market is up is that the global economy is doing <strong>somewhat</strong> better. [emphasis added]</span></p> </blockquote> <p><span style="color: #000000;">Again, there is truth to his statement, but it fails because it recognizes no standards for such relativity. Making the same statement in 1999 after the US experience with the Asian flu would have been impulsive and foolish; making the same with the global economy as it is in 2017 is a different world altogether.</span></p> <p><img class="aligncenter size-full wp-image-44592" src="http://www.alhambrapartners.com/wp-content/uploads/2017/04/ABOOK-April-2017-Bernanke-Stock-Picker-EPS-Output-Gap.png" style="width: 599px; height: 375px;" /></p> <p><img class="aligncenter size-full wp-image-43515" src="http://www.alhambrapartners.com/wp-content/uploads/2017/03/ABOOK-Mar-2017-CBO-No-Recovery-2017.png" style="width: 600px; height: 367px;" /></p> <p><span style="color: #000000;"><strong>To begin with, being improved from early 2016 is no achievement or cause for celebration. </strong>The history of oil prices and inflation really is instructive in this regard, and not just because of the energy sector&rsquo;s effects on aggregate earnings; you can be enthused that oil is nearly double off the low last year, but you cannot forget or dismiss that it is still more than 50% below 2014.</span></p> <p><img class="aligncenter size-full wp-image-44594" src="http://www.alhambrapartners.com/wp-content/uploads/2017/04/ABOOK-April-2017-Bernanke-Stock-Picker-WTI.png" style="width: 601px; height: 357px;" /></p> <p><span style="color: #000000;"><strong>Up 80% in a year sounds like healing and the return of growth; down 50% three years later instead declares &ldquo;something&rdquo; still very wrong.</strong> Thus, EPS is like other economic stats where improvement has occurred but only in the narrowest sense. What Bernanke and the media talk about is not what has transpired so far but extrapolating acceleration upward forever into the future. We&rsquo;ve seen too many times over the last ten (twenty) years how doing so fails, including 2013-14; the bond market, by contrast, after 2011, gets that risks are enormously weighted downward for reasons of liquidity first of all.</span></p> <p><span style="color: #000000;">That, too, is in important factor because it was liquidity at the very least the QE&rsquo;s were supposed to fix. The path of balance sheet expansion into the real economy was always murky to begin with, no direct channel would ever exist between the purchase of MBS or UST into the wage rates of ordinary Americans. It was thought to work through expectations more than anything else. But the trillions of bank reserves, so-called money printing, surely would cure all financial liquidity risk.</span></p> <p><span style="color: #000000;">And yet, that is the most prominent feature of the financial landscape apart from the stock market. <strong>Everywhere you look there are expressed abnormal (for all history before 2007) liquidity preferences; from eurodollar futures to German federal paper the story is the same &ndash; persisting fear of illiquidity, &ldquo;dollars&rdquo; most of all. </strong>If Bernanke could not get even that right through four QE&rsquo;s and $2.5 trillion in reserves, the one thing closest to what everyone assumed was this central bank&rsquo;s wheelhouse, then his views on stocks are likely to be, again, contrarian.</span></p> <p><span style="color: #000000;">We need only <a href="http://www.alhambrapartners.com/2016/09/28/a-realistic-decomposition-of-rates-or-at-least-an-interpretation-of-it/">briefly revisit</a> the topic of &ldquo;term premiums&rdquo; to make this case especially after 2013.</span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="color: #000000;">The only reason it still is &ldquo;something of a puzzle&rdquo; is because he [Bernanke] like the mainstream continues (to this day) to assume that QE works and even works well. From the point of view of effective &ldquo;money printing&rdquo; the behavior of the bond market has been and remains a complete mystery. Again, to reconcile these two very different positions (QE is effective stimulus but nominal interest rates don&rsquo;t show it) requires the imposition of lower &ldquo;term premiums&rdquo; though the reason for them cannot be explained.</span></p> </blockquote> <p><span style="color: #000000;"><strong>Economists have no answer for why interest rates, or the parts of the decomposition of interest rates they find useful for running regressions, fell more <em>after</em> QE than during it. </strong>There is a world of difference between thinking QE was successful via &ldquo;term premiums&rdquo; than realizing the bond market was right to suspect QE wasn&rsquo;t much of anything. The former can lead back to normal growth and meaningful improvement; the latter will not, leaving stock investors pricing a Hail Mary.</span></p> <p><img class="aligncenter size-full wp-image-43956" src="http://www.alhambrapartners.com/wp-content/uploads/2017/04/ABOOK-April-2017-NWTGBU-5s10s-1.png" style="width: 601px; height: 357px;" /></p> <p><img class="aligncenter size-full wp-image-40762" src="http://www.alhambrapartners.com/wp-content/uploads/2016/09/ABOOK-Sept-2016-Bernanke-Rate-Decomp2.jpg" style="width: 600px; height: 506px;" /></p> <p><img class="aligncenter size-full wp-image-44167" src="http://www.alhambrapartners.com/wp-content/uploads/2017/04/SABOOK-April-2017-Contrary-EuroD-Relation-Curves.png" style="width: 601px; height: 357px;" /></p> <p><span style="color: #000000;"><strong>What we find is that Dr. Bernanke has had it backward in every case. </strong>Therefore, his assertion that earnings will &ldquo;catch up&rdquo; should terrify (perhaps a little strong) stock investors to their very core. <strong><u><em>Maybe this time he will get it right, blind squirrels and all, but who in their right mind wants to bet on that basis?</em></u></strong></span></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="580" height="355" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170426_bernanke.jpg?1493298022" /> </div> </div> </div> http://www.zerohedge.com/news/2017-04-27/bernanke-terrifies-stock-investors-again#comments Ben Bernanke Ben Bernanke Ben Bernanke Bond Bond Business Economy EuroDollar Financial markets Global Economy Helicopter money Janet Yellen Liquidity risk Macroeconomics Market liquidity Monetary policy Money Quantitative easing recovery S&P 500 Stock market US Federal Reserve Thu, 27 Apr 2017 13:31:04 +0000 Tyler Durden 594518 at http://www.zerohedge.com Still Confused About Trump's 1-Page Tax Plan? Goldman Explains It All http://www.zerohedge.com/news/2017-04-27/still-confused-about-trumps-1-page-tax-plan-goldman-explains-it-all <p>Since at its core, yesterday's 1-page "tax plan" was a Goldman creation - and was presented to the world by two former Goldman employees -&nbsp; who better to explain what Trump had in mind than Goldman Sachs itself, which it did overnight in a far lengthier note from its chief Washington analyst Alec Phillips.&nbsp; </p> <p>Here is Goldman with an elaboration of the handful of bullet points contained on the much anticipated one page, extending it by nearly 600% to some 6 pages of details. Perhaps it would be prudent to just have Alec Phillips present the next iteration of Trump's tax plan: after all he , together with Jan Hatzius, appears to be the man behind it.</p> <p><em>From Goldman</em></p> <p><span style="text-decoration: underline;"><strong>Q&amp;A on the President’s Tax Reform Plan </strong></span></p> <ul> <li>The White House announced a slightly revised set of principles for tax reform, which appear to incrementally reduce the size of the proposed tax cut compared with the President’s campaign proposal, and eliminate a few of the differences between the campaign plan and the House Republican blueprint on tax reform.</li> <li>That said, the White House proposal is still likely to reduce tax receipts by substantially more than the House proposal would. While the White House appears likely to rely on optimistic growth assumptions to offset most of the fiscal effects of the proposed tax cut, Congress will not be able to do so and must decide whether to pursue revenue-neutral tax reform or an explicit tax cut. While no decision is imminent, today’s announcement and indications of openness to a tax cut among congressional Republicans suggest that a tax cut is more likely than revenue-neutral reform.</li> <li>We expect a long road ahead for tax legislation. While we believe there is a good chance that tax legislation becomes law—in fact, market participants might be underrating the odds of tax cuts, a change from earlier this year—there may be few concrete legislative actions on tax legislation over the next couple of months for markets to react to.</li> </ul> <p><em><strong>Q: What did the White House announce? </strong></em></p> <p>Treasury Secretary Steven Mnuchin and White House National Economic Council Director Gary Cohn briefed the press today (April 26) on the direction that the President will take on tax reform this year. They provided little detail, and what detail was provided was mostly similar to President Trump’s campaign proposal. That said, there were some policy changes compared with the campaign proposal that provide clues about the direction the White House might take the debate. In addition, the Administration’s thinking on the fiscal impact of the tax cut is at least slightly clearer.</p> <p><em><strong>Q: What has changed compared with the last tax proposal? </strong></em></p> <p>The proposal appears to have changed in four areas compared with the campaign proposal:</p> <ul> <li><strong>A smaller tax cut for top income earners:</strong> The White House proposal would lower the top marginal tax rate for individuals from 39.6% to 35%, rather than the 33% proposed in the campaign.</li> <li><strong>A smaller tax cut for middle-income individuals:</strong> The proposal now calls for a standard deduction of $24k for couples rather than $30k. This is still roughly twice as much as the current standard deduction and is identical to the House Republican proposal.</li> <li><strong>Repeal of the state and local tax deduction:</strong> The Trump campaign proposal was unclear about which, if any, individual tax deductions might be eliminated, but the current White House proposal is more specific; the deduction for state and local taxes would be eliminated, while the deductions for mortgage interest, charitable contributions, and retirement savings would be maintained. </li> <li><strong>A territorial tax system for business income: </strong>The campaign proposal would have repealed the deferral of tax on income earned by foreign subsidiaries of US companies, and would have instead taxed those earnings at 15% minus foreign tax credits, amounting to what would effectively be a 15% minimum tax on foreign earnings. Instead, the revised White House plan would adopt a territorial tax system, which exempts foreign earnings from US tax.</li> </ul> <p>In addition to the explicit changes compared to the campaign proposal, today’s announcement was also noteworthy for two conspicuous omissions. </p> <ul> <li><strong>No border adjustment: </strong>The plan does not endorse the border adjusted tax (BAT) that makes up part of the destination-based cash flow tax (DBCFT) system in the House Republican blueprint. In comments earlier in the day, Treasury Secretary Mnuchin indicated that the White House did not support the BAT in its current form, though he suggested that revisions might be considered. In light of substantial opposition to the BAT in the Senate, it would have been very surprising to see the White House endorse the proposal. That said, today’s announcement did not include an outright rejection of the proposal either.</li> <li><strong>No mention of interest deductibility or capex expensing: </strong>The Trump campaign proposal would have allowed businesses the option of full expensing of capital investment in return for non-deductibility of interest expense. However, today’s outline is silent on this question. This is notable since many observers assume that the White House does not support the mandatory shift to full expensing of capex and non-deductibility of interest included in the House Republican blueprint.</li> </ul> <p><strong>Exhibit 1: The latest White House plan includes some new elements <br /><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/goldman%20explanation.png"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/goldman%20explanation_0.png" width="500" height="297" /></a></strong></p> <p><em>Source: White House, House Ways and Means Committee, Goldman Sachs Global Investment Research </em><br />&nbsp;<br /><em><strong>Q: What effect would these revisions have on the size of the proposed tax cut? </strong></em></p> <p>Overall, we figure that the changes the White House has announced would shrink the size of the proposed tax cut by more than $1 trillion over ten years compared with the prior version:</p> <ul> <li>A standard deduction of $24k for couples costs about $300bn less over ten years than the $30k standard deduction proposed in the campaign; </li> <li>A 35% instead of 33% top marginal rate for individuals probably reduces the cost of the proposal by around $400bn over 10 years;</li> <li>Repeal of the state and local tax deduction would raise around $800bn in tax revenue; and</li> <li>The shift to a territorial tax system would reduce corporate tax receipts by $200bn to $300bn more over ten years than the prior proposal.</li> </ul> <p>With these changes, we expect that the overall cost of the tax plan would decline from the roughly $6 trillion cost over ten years previously estimated by the Tax Policy Center (TPC) to just under $5 trillion.</p> <p>As noted above, it is unclear how the proposal would treat capital investment and interest expense, but if the proposal omitted any changes in this area, it would shrink the cost of the proposal over the next ten years by another $1.3 trillion to around $3.7 trillion, based on TPC estimates. </p> <p><em><strong>Q: Where does this put the proposal in comparison with the House and Senate? </strong></em></p> <p>It brings the White House proposal closer to where Congress is likely to be on most issues, but the rate cuts on corporate and business income are still greater than we think Congress will support. On the individual side, we believe that a 35% top marginal rate is more likely than the 33% rate that House Republicans have proposed, given fiscal constraints and the fact that a 35% rate would be a natural place to settle, as it was also the top rate prior to 2013.</p> <p>The White House’s proposed $24k standard deduction and elimination of the state and local deduction bring it into line with the House Republican blueprint. While we are skeptical that the state and local tax deduction will be repealed entirely, we note that the House, Senate, and White House now all appear to be focused on limiting this benefit, suggesting that at least a limitation is becoming more likely.</p> <p>On the corporate side, the inclusion of the territorial system for corporate income in the White House plan brings it in line with the House proposal as well as the position that we expect the Senate to take. However, the 15% rate that the White House proposes on corporate and pass-through business income is lower than the 20% and 25% rates, respectively, that the House proposes or that the Senate is likely to agree to. Ultimately, we expect that Congress will cut the corporate rate to perhaps 25%, and we would expect the tax rate on small business to be higher—quite possibly still aligned with the top individual tax rate. </p> <p><em><strong>Q: What have we learned about how the tax cut might be paid for? </strong></em></p> <p>Secretary Mnuchin has stated that the tax proposal would be offset through a combination of growth and various base broadening measures. We expect this to be outlined in more detail by May, when the President submits a formal budget to Congress for fiscal year 2018, including projections of revenues and deficits over the next ten years. Our preliminary expectation is that the White House will assume that the majority of the fiscal effect of the tax cut would be offset through a projection of faster GDP growth. For example, if the White House assumes a 3% growth rate over the next ten years, rather than the 1.8% average rate that CBO assumes, this would increase revenues by roughly $3.7 trillion over the ten- year period. We note that the fiscal benefits of a higher trend growth forecast are very backloaded; over half of the total revenue gain over the ten-year period would come in the final three years, so the projected deficit over the next several years would expand as a result of the tax cut, regardless of what growth assumptions one makes.</p> <p>White House growth projections would have little direct effect on the legislative process in Congress, whereas the Joint Committee on Taxation (JCT) will use growth projections provided by the CBO as a starting point for analysis and is likely to make much more conservative estimates of the effect that tax legislation is likely to have on growth. That said, optimistic White House growth assumptions might help build political support in Congress for the eventual legislation. With apparent support for an explicit tax cut from key Republicans like Senate Finance Committee Chairman Orrin Hatch (R-UT), momentum for a tax cut rather than revenue-neutral reform appears to be growing.</p> <p><em><strong>Q: Won’t Senate rules make it difficult to pass a tax cut that is not paid for? </strong></em></p> <p>Rules regarding the “reconciliation” process make it more difficult to pass a tax cut than to pass revenue-neutral tax reform, but we expect lawmakers to get around these obstacles. Republican leaders have made clear their intent to use the reconciliation process to pass tax legislation, since this allows the Republican majority to circumvent likely Democratic opposition in the Senate. However, the “Byrd Rule” in the Senate prohibits reconciliation legislation from increasing the deficit after the period covered by the budget resolution that governs the process, which traditionally lasts for ten years.</p> <p>The most obvious way that congressional Republicans might get around this constraint is simply to allow the tax cuts to expire after ten years (i.e., by 2027). This was done in 2001 when the Bush Administration passed a large individual tax cut. However, two reasonable objections to this have been raised. First, structural reforms to the tax code could do more harm than good if they were made temporary. That said, a simple tax cut (for example, dropping the corporate rate from 35% to 25%) would not be as difficult to implement on a temporary basis, particularly since we expect that there would be a widespread belief that such a tax cut would be extended or made permanent before it expires, just as the 2001 tax cuts were for the most part.</p> <p>A second, more technical, objection has also received some attention recently. The JCT has indicated that the revenue loss associated with a temporary tax cut would continue several years after it expired, because companies might postpone their use of certain tax benefits until after rates have risen and might pull forward income that would otherwise be recognized later. The JCT estimates imply that allowing a 20% corporate tax cut to expire after nine years would result roughly a $90bn revenue loss in the second decade, which would violate the Byrd Rule. However, this would become a much less important consideration if a corporate tax cut were considered as part of a larger package that also included some permanent provisions that raised revenue, considering that the House and White House proposals would already raise hundreds of billions of revenue through base broadening in the second decade, even excluding the effects of controversial proposals like border adjustment.</p> <p><em><strong>Q: Now that the White House has made its proposal, what happens next? </strong></em></p> <p><strong>There are four important milestones coming up over the next few months:</strong></p> <ul> <li><strong>The President’s Budget</strong>: The White House is expected to submit its budget proposal to Congress in mid-May. We would expect this to include some additional detail regarding tax legislation—at a minimum, it is likely to include more specifics regarding the potential effect on revenues and the deficit—as well as an a general indication of the scale of its infrastructure plan. </li> <li><strong>The final disposition of the health bill</strong>: House Republicans look likely to make another attempt at passing the American Health Care Act (AHCA), after announcing modifications intended to satisfy the conservative and centrist Republicans who signaled they would oppose the prior version. However, the announced revisions appear likely to increase support among conservative Republican lawmakers but they do not appear to have shifted the views of centrist Republicans nearly as much. As of this writing, consideration of the revised health bill within the next week or so appears possible but not likely unless it becomes clear there will be adequate support. Even if health legislation passes in the House, we do not expect a majority of the Senate to support the House version, and developing a bill that can pass the Senate is likely to take several weeks, at least. The upshot is that Republican leaders will soon need to decide whether they can pass a health bill in the House, or officially postpone consideration and move on to other issues, since the budget and tax process cannot move forward until they do. </li> <li><strong>The congressional budget resolution for FY2018</strong>: At the start of the year, Congress passed a budget resolution for FY2017, which served the sole purpose of providing instructions to the committees with jurisdiction over the Affordable Care Act (ACA) to pass health legislation using the reconciliation process. It was expected that a second resolution for FY2018 would then be passed once health legislation had been enacted, in order to provide instructions for passage of tax reform legislation. With health legislation in legislative limbo, it is unclear whether Republican leaders will pass a second budget resolution this year. However, since the instructions under the FY2017 resolution called for legislation that was roughly budget-neutral, the only way Congress can pass a meaningful tax cut would be to win bipartisan support, which seems unlikely at the moment, or to pass a new budget resolution that explicitly instructs the tax-writing committees to cut taxes. </li> <li><strong>Draft tax legislation released</strong>: It is difficult to predict when tax legislation might be made public in the House or the Senate, but our expectation is no earlier than June and possibly not until July. In the near term, we expect the tax-writing committees, particularly the House Ways and Means Committee, to hold hearings examining some of the key issues in its proposal, like the border-adjusted tax. Once the procedural groundwork for a committee vote has been laid, by passing a new budget resolution or re-using the instructions intended for the health bill, the committee is likely to release its proposal to the public and pass it quickly. In the Senate, the timing is even more fluid; we expect more detail from the Senate Finance Committee over the next couple of months regarding its likely approach for tax reform legislation, but a formal proposal appears to be a ways off.</li> </ul> <p>The extended timeline for even releasing a draft proposal suggests that while the House could vote on tax legislation in committee before August, a vote on the House floor is less certain, and Senate passage before August looks very unlikely. This suggests that tax legislation is unlikely to become law before Q4 2017. While enactment shortly before year-end is a clear possibility, we believe it is more likely to become law in Q1 2018. </p> <p>We continue to believe that tax legislation is fairly likely to become law. In fact, market sentiment regarding fiscal policy might have become too negative. This is a substantial shift from the start of the year, when sentiment among market participants took a much more positive view regarding the potential for major policy changes. However, we expect the process to continue slowly over the next couple of months, and without any clear signs of progress financial markets are apt to take a wait and see attitude toward tax reform.</p> <p><em>Source: Goldman</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="925" height="549" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/goldman%20explanation.png?1493291659" /> </div> </div> </div> http://www.zerohedge.com/news/2017-04-27/still-confused-about-trumps-1-page-tax-plan-goldman-explains-it-all#comments 112th United States Congress Bush Administration Business Congress Economy Economy of the United States goldman sachs Goldman Sachs Jan Hatzius Joint Committee on Taxation Market Sentiment Money Politics Predicted effects of the FairTax Presidency of Barack Obama Senate Senate Finance Committee Social Issues Tax Tax cut Tax Policy Center Tax Revenue Taxation in the United States United States fiscal cliff Ways and Means Committee White House White House White House National Economic Council Thu, 27 Apr 2017 13:26:26 +0000 Tyler Durden 594499 at http://www.zerohedge.com