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“It’s Not Sustainable” – Sacramento Lashes Out At Calpers After Raising Pension Payments

October 31, 2017 Tyler Durden 0

In the latest sign that America’s looming pension crisis is inching closer to an all-our collapse that will inevitably end in a series of bailouts – or worse, the failure to pay out retiree’s coveted benefits – a handful of California…

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QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate

October 31, 2017 Tyler Durden 0

Authord by Daniel Nevins via FFWiley.com,
We’ve produced some research over the years that we’d love to see the powers-that-be react to, but none more so than our look at financial flows during the QE programs.
By netting all lending by ban…

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“You Get Nothing” – World’s Largest Insurer Warns US Stocks Offer “No Returns” For The Next Decade

October 31, 2017 Tyler Durden 0

There will be “almost no prospective returns” from U.S. stocks over the next decade because the market is fully valued following years of gains, according to the global strategist at Allianz Global Investors, which manages $569 billion.

As Bloomberg reports, low interest rates and bond purchases by central banks have left cash and many other asset classes “significantly mispriced,” Neil Dwane said Monday as part of a panel discussion on long-term investing at the Toronto Global Forum.

“The U.S. is fully valued,” said Dwane, whose firm is owned by Munich-based insurance giant Allianz SE.

 

“There’s almost no prospective returns for the next 10 years from the U.S. equity market, and therefore investors have to look into Asia or Europe where valuations are significantly lower.”

 

With interest rates close to zero around the world and bond markets “manipulated by central banks,” it’s difficult to assess risk and return, he added.

 

Many investors have turned to high-yield bonds or emerging markets for income, which raises risks.

Dwane is not alone of course in this ominous view, as Bloomberg notes, Jim Keohane, chief executive officer of the Healthcare of Ontario Pension Plan, agreed that it’s not a good time to be buying assets of nearly any stripe.

“Right now assets are very expensive,” said Keohane, whose firm manages more than C$70 billion ($54 billion).

 

“We need to be patient, to wait for better opportunities. Whenever the next crisis comes, assets are going to be on sale. You can buy them a lot cheaper than you can buy them today, but you have to have patience to be able to do that.”

And finally, John Hussman, of Hussman Funds, warned that a century of reliable valuation evidence indicates that the S&P 500 is likely to experience an outright loss, including dividends, over the coming 10-12 year horizon, and we presently estimate likely interim losses on the order of -60% or more.

A rate of return of even 1% in cash is a much more desirable option than investors may imagine.

For a while, Bernie Madoff’s investors felt great about their impressive “returns.” For a while, investors in dot-com stocks felt the same. For a while, investors in mortgage bonds felt the same. But when investors focus on returns rather than the very long-term structure, stability, and even existence of the underlying cash flows, terrible things can happen.

All that’s required to get the snowball rolling is the creeping recognition that there’s no “there” there.

In response to the delusion that low interest rates “justify” virtually any level of market valuation, regardless of the growth rate of the underlying cash flows, the speculation of recent years has created a situation where there is effectively no way out for investors in aggregate. Every security that is issued must be held by someone until it is retired.

When one investor sells a share, it simply means that another investor buys it. The only question is who will hold the bag.

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Huge Crude Draw Pushes Oil Prices Even Higher

October 31, 2017 Julianne Geiger 0

The American Petroleum Institute (API) reported a huge draw of 5.087 million barrels in United States crude oil inventories, largely in line with an S&P Platts’ survey of analysts that expected inventories would draw down by 1.4 million barrels for the week ending October 27—continuing the extended drawdown in recent weeks. Gasoline inventories, according to the API, saw a major draw of 7.697 million barrels for the week ending October 27, against an expectation of a much more modest draw of 1.7 million barrels.  Other analysts,…

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Stocks Advance For 7th Straight Month As Yield Curve Crashes To 10 Year Lows

October 31, 2017 Tyler Durden 0

Well that was easy…

When does this mouth snap shut?

 

Japan wins October… with only two down days all month (the first -0.4% and the 2nd last night -0.003%!)…NKY’s best month since Oct 2015

S&P, Dow, and Nasdaq’s best month since February, Trannies were the only major index red with Small Caps bouncing back green today…

 

This is the 7th straight monthly advance for the S&P 500 (and Dow) (Last 7 mth, May 2013. Last 8 mth, Jan 2007. Last 9, Mar 1983).. and 11th of the last 12 months up…

h/t @JohnKicklighter

Tech, Utes, and Financials outperformed in October… Retailers lagged…

 

FANG Stocks surged almost 8% in October – 2nd best month ever…

TSLA ended the month -3%… AMZN up 15%

 

Another ugly day for Under Armour… to the lowest since April 2013…

 

It was a big month for other assets too…

  • Dollar Index rose 1.7% in October – best month since Nov 2016
  • Bitcoin surged 52% in October to a new record high
  • 2Y Treasury yield rose 11bps in Oct, 2nd monthly rise in a row to highest monthly close since Sept 2008
  • TSY 5s30s curve flattened for 3rd month in a row to flattest monthly close since Oct 2007
  • WTI Crude’s highest monthly close since June 2015 (up 2 months in a row)
  • Gold’s first consecutive monthly drop since Dec 2016

Stocks bounced back from yesterday’s dip with Small Caps outperforming today and Nasdaq since Friday

 

VIX hit a 9 handle early on… bounced… then was pushed back down a 9 handle in the last hour…before rising once again…

 

Treasury yields were mixed today (long-end outperforming), echoing the month of October (2Y +11bps, 30Y +1bps)

 

With the yield curve starting to re-accelerate flatter…

 

The Dollar Index surge in October but has fallen the last 3 days…

 

Driven by slump in CAD (offset by strength in CNY)…

 

Bitcoin hit a new record high today after news of a Bitcoin Futures contract broke…

 

Copper and Crude ended October up 5.3% – oddly the same – with silver and gold stuck at the flatline…

 

Just one last thing… While US equity markets had a big October run… all the major US equity indices implied vols rose on the month… led by Small Caps…

 

And remember – October was all about China…

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There Are No Cheap Stocks Anymore… Literally

October 31, 2017 Tyler Durden 0

The S&P is substantially overvalued on 18 of 20 valuation metrics, with the only exceptions being free cash flow (helped again by depressed capex), and relative to small caps/bonds – the Fed’s favorite indicator –  where yields remain depressed thanks to the Fed’s failure to stimulate wage inflation for nearly 9 years.

 

But as the relative collapse of the equal-weight S&P relative to the market-cap-weighted S&P, all the gains have gone to the biggest names…

 

And longer-term, share prices have drifted – some might say ‘inflated’ – to the point that there are no cheap stocks anymore… literally.

 

Perhaps this chart will highlight the ‘inflation’ better

It now takes the average American worker almost 95 hours to earn enoough to buy one S&P 500 index ‘unit’…30% higher than at the peak in 2007 and almost triple its cost at the lows in 2009…

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How The Shale Boom Is Boosting U.S. Exports

October 31, 2017 Robert Rapier 0

Most people are at least somewhat aware that the U.S. shale oil boom has resulted in lower fuel prices at the pump. But they are probably less familiar with the economic impacts of the shale gas boom. I have covered some of the impacts of the cheap shale gas bounty in the past. They include a surge of natural gas exports to Mexico and displacement of coal in electric power production. Today I want to talk about the impact on the chemical manufacturing industry. Natural gas is used in chemical manufacture both as a…

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2 Dead After Truck Plows Into Crowd In Lower Manhattan; Suspect In Custody

October 31, 2017 Tyler Durden 0

In an attack that bears some of the hallmarks of terror attacks that have unfolded in the UK, Spain and France, a box truck veered into the West Side Highway bike lane Tuesday afternoon and mowed down cyclists and pedestrians, leaving two dead and at least eight injured. The scene is near Hudson Street and Chambers Street. The as-yet-unidentified suspect has reportedly been taken into custody, according to the New York Post.

It was unclear if this was an act of terrorism. NBC is reporting that shots were fired at the scene, but it’s unclear if those shots were fired by police responding to the incident, the attack, or, as one twitter user reported, a cab driver.

Grisly video taken at the scene shows the aftermath of the attack:

 

Police shut down the FDR to rush victims to Bellevue Hospital. The West Side Highway has been closed from 20th street down.

“I saw a truck – a white pick-up truck – going down the bicycle lane and running people over,” one witness told CBS.

Hi, I work on chambers street. Shots came from Chambers and West Street. Someone who was eyewitness said cab driver fired shots

— Mike (@el_dorado91) October 31, 2017

NYPD has confirmed that the suspect is in custody.

Currently there is one person in custody. No others outstanding. All information is preliminary as the investigation is ongoing. pic.twitter.com/nsaUgZ8MJH

— NYPD NEWS (@NYPDnews) October 31, 2017

Video from NBC shows the blocked-off West Side Highway. Mayor Bill DeBlasio is on his way to the scene.

Video shows blocked off West Side Highway in New York City after incident in lower Manhattan pic.twitter.com/BxuiKtlx4N

— NBC News (@NBCNews) October 31, 2017

 

 

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