Having been described by Warren Buffett as "the best single measure of where valuations stand at any given moment," Advisor Perspectives' Doug Short is perplexed at Warren's recent note to his CNBC brethren that "markets are not too frothy." Perhaps, as the following chart will shockingly identify, it is time to listen less and study more as Buffett's "Market Cap to GDP" indicator has risen seven quarters in a row and is only trumped in its absolute bubble exuberance by the very peak in 2000. Maybe, despite all the talking heads trying to explain what he meant, Tepper is right to be concerned, that the market is "dangerous" and given his historical comments - looking at this chart - what would Warren do?
- Bank of England sees 'no housing bubble' (Independent)
- ‘If the euro falls, Europe falls’ (FT)
- India's pro-business Modi storms to historic election win (Reuters)
- Global Growth Worries Climb (WSJ)
- Bitcoin Foundation hit by resignations over new director (Reuters)
- Blackstone Goes All In After the Flop (WSJ)
- SAC's Steinberg loses bid for insider trading acquittal (Reuters)
- Beats Satan: Republicans Paint Reid as Bogeyman in 2014 Senate Races (BBG)
- Tech Firms, Small Startups Object to Paying for Internet 'Fast Lanes' (WSJ) - but they just provide liquidity
- U.S. Warns Russia of Sanctions as Ukraine Troops Advance (BBG)
- Major U.S. hedge funds sold 'momentum' Internet names in first-quarter (Reuters)
I never thought a visit to Omaha would trigger an appreciation of the role Icahn and other activist investors play in corporate America.
When obnoxiously wealthy pricks with the ability to bribe stock exchanges to place their trading computers on the floor of the exchange and financially induce the Wall Street banks to funnel trades through their dark pools in order to know what is happening a nanosecond before everyone else, and use this information to front run unknowing investors to generate risk free profits, it’s wrong. It really is black and white. I don’t care that it is supposedly “legal”. By complying with Regulation NMS the smart order routers of institutional investor firms like Vanguard, Fidelity and Schwab simply funneled naïve investors into various snares laid for them by the unscrupulous high frequency traders. The bad guys always win and the good guys always lose on Wall Street. And no one does anything because they are all on the take. Lewis puts it in terms the average person can understand.
A division of the U.S. military known as the Combating Terrorism Technical Support Office (CTTSO), which studies threats to national security (i.e., the status quo’s grip on power) has listed Bitcoin amongst a number of potential terrorist threats. Of course, as we and many others have noted repeatedly, anything which threatens the prevailing criminal status quo will be merely labeled a “terrorist threat” in order to neutralize it. Just in case you aren’t yet convinced of how insane the folks at CTTSO are, “also on the CTTSO’s list of terrorism research topics were Android, Motorola, social media and virtual reality.” What has happened to this country...
It now appears the status quo is moving to destroy any last semblance of privacy with regard to your personal brokerage accounts. Yep, in the name of “stopping fraud” and the practices of unscrupulous brokers, the Financial Industry Regulatory Authority (FINRA) wants to launch a program called Cards, or the Comprehensive Automated Risk Data System. This electronic system sounds a lot like the so-called metadata the NSA is collecting on everyone’s internet usage. This “robocop” would collect a weekly “record of activity at all of the more than 4,100 brokerage firms nationwide.” For your own good of course. Oh, and yeah, to stop terrorists or something...
"I got to ask [Bernanke] all these questions that had been on my mind for a very long period of time, right? And then on the other side, it was like sort of frightening because the answers weren’t any better than I thought that they might be." - David Einhorn
Economist John Maynard Keynes described the effects of inflation citing Vladimir Ilyich Lenin this way: “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” This is why governments love inflation so much and hate gold.
- Fed’s Fisher Says Economy Strengthening as Payrolls Rise (BBG)
- Russia Knows Europe Sanctions Ineffective With Tax Havens (BBG)
- EU Cuts Euro-Area Growth Outlook as Inflation Seen Slower (BBG)
- U.S. Firms With Irish Addresses Get Tax Breaks Derided as ‘Blarney’ (BBG)
- Portugal exits bailout without safety net of credit line (Euronews)
- Puzzled Malaysian Air Searchers Ponder What to Try Now (BBG)
- Barclays, Credit Suisse Battle Banker Exodus, Legal Woes (BBG)
- Germany says euro level not an issue for politicians (Reuters)
- Alibaba-Sized Hole Blown in Nasdaq 100 Amid New Stock (BBG)
- Obamacare to save large corporations hundreds of billions (The Hill)
We can’t say this is surprising. After all, with average peasants, we mean citizens, now priced out of the domestic housing market (Zillow recently showed 1 in 3 homes are unaffordable) due to billionaire financiers and foreign oligarchs buying up all real estate in cash purchases, American serfs now will find out where the “elites” think they belong. In trailer homes, naturally. Oh, but the story gets better, a lot better. As is generally the case in the USSA these days, crony capitalist oligarchs have perfectly positioned themselves to benefit financially from the final transition of Americans to neo-feudalism.
The bankruptcy of Energy Future Holdings, aka TXU, aka the largest LBO ever has been long in coming. As we previewed it most recently in September of last year, "if there was one deal that epitomized the last credit bubble, aside from the Blackstone IPO of course, it was the ginormous, $45 billion 2007 LBO of TXU, now Energy Future Holdings... the time to pay the piper for the last credit-fuelled binge has arrived and inevitable bankruptcy of this landmark deal is now just days away." It turned out it was more like months away, but it finally arrived, and moments ago, TXU finally succumbed to (lack of) cash flow reality, when it filed for a prepackaged Chapter 11 bankruptcy on Tuesday morning after months of negotiations with creditors aimed at speeding the restructuring of the private-equity backed utility's debt load of more than $40 billion. While it is unclear just how much total debt the company will ultimately restructure, it is likely that the final number will be greater than Enron's, making this also the largest ever non-financial bankruptcy in history.
Bad Government and Central Bank Policy Are the MAIN CAUSE of Runaway Inequality
- Ukraine forces kill up to five rebels, Putin warns of consequences (Reuters)
- Obama to Russia: More sanctions are 'teed up' (AP)
- Vienna Banks Bemoan Russia Sanctions Testing Cold War Neutrality (BBG)
- GE’s $57 Billion Cash Overseas Said to Fuel Alstom Deal (BBG)
- GM posts lower first-quarter profit after recall costs (Reuters)
- Apple Stock Split Removes Obstacle to Inclusion in Dow (BBG)
- U.S. regulators to propose new net neutrality rules in May (Reuters)
As we reported last night, whether as a result of Snowden revelations and NSA blowback by BRIC nations, or simply because the global economy is contracting far faster than rigged and manipulated markets worldwide will admit, IBM's Q1 revenues not only missed consensus earnings, but dropped to their lowest level since 2009. And yet, IBM stock is just shy off its all time highs and earnings per share have been flat if not rising during this period, leading even such acclaimed investors who never invest in tech companies as Warren Buffett to give IBM the seal of approval. How is that possible? Simple: all that investment grade companies like IBM have done in the New Normal in order to preserve the illusion of growth, is to use cash from operations, or incremental zero-cost leverage, to fund stock buybacks. In essence a balance sheet for income statement tradeoff. However, that "great stock buyback gimmick" as we call it, is finally coming to an end.
Rickards does not expressly say one should put 33% of one’s wealth in gold but suggests that an allocation of between 10% and 33% would be prudent. In this regard, he echos Dr Marc Faber who suggested a 25% allocation to precious metals last week.