Tuesday, March 22, 2016

Today's Links

1--Buyback blackout??

2--Share buyback turns toxic, WS

3--Shocker: 40% of Workers Now Have 'Contingent' Jobs, Says U.S. Government, Forbes

40.4% of the U.S. workforce is now made up of contingent workers—that is, people who don’t have what we traditionally consider secure jobs....

  • Agency temps: (1.3%)

  • On-call workers (people called to work when needed): (3.5%)

  • Contract company workers (3.0%)

  • Independent contractors who provide a product or service and find their own customers (12.9%)

  • Self-employed workers such as shop and restaurant owners, etc. (3.3%)

  • Standard part-time workers (16.2%).

4---Feeling Underpaid? This Is What Wage Inflation Around The World Looks Like

 

5--Wall Street's Pile of Unwanted Treasuries Exposes Market Cracks

6--Where are all the workers?



The U.S. economy has created 11.5 million new jobs during the last 57 consecutive months of domestic labor force expansion. And there were nearly 5.4 million open jobs at the end of May – more than twice as many vacancies as there were six years ago.

And yet Americans are actually trickling out of work at an alarming rate. The country's labor force participation rate – which measures the share of Americans at least 16 years old who are either employed or actively looking for work – dipped last month to a 38-year low, clocking in at an underwhelming 62.6 percent.


7--Currencies defy central banks


Despite the Bank of Japan 8301 -1.13 % ’s efforts to push down its currency and jump-start the economy with negative interest rates, the yen is up 8% this year and is at its strongest level against the dollar since October 2014. European central bankers are having similar problems containing the strength of the euro and other currencies...


The European Central Bank has struggled with its efforts to weaken the euro, which gained 0.8% against the dollar on Thursday. Last week, the ECB cut interest rates further into negative territory, yet the currency is up 4.2% this year.....


8--Hitting the Limits of Monetary Policy

9--Buybacks continue to surge


Buybacks by corporate clients decelerated slightly last week, but were still elevated. On a four-week average basis, buyback activity is tracking at its highest levels in two years (see chart below), and year-to-date cumulative buybacks by our clients are 45% above year-ago levels."


10--U.S. existing home sales tumble in warning sign for housing market

11--Central Banks Creep Toward Uncomfortable Role: Central Planners 

 

European Central Bank and Bank of Japan are starting to break one of the tenets of the profession by funneling cash directly to what they regard as ‘good’ uses

The central bank wants financiers to create a new breed of ETFs it would like to buy. The ETFs would hold only shares of companies that are increasing capital spending, expanding spending on research and development or boosting what the Bank of Japan calls “human capital.” The latter means pay raises for staff, taking on more people or improving human resources....


Bank of Japan Gov. Haruhiko Kuroda is hardly drawing up a Soviet-style five-year plan. Only ¥300 billion ($2.7 billion) a year will be spent “with the aim of supporting firms that are proactively investing in physical and human capital.”

The worry is that the Bank of Japan has only just begun.

“It’s a massive politicization of credit: Here are the legitimate things for lending, and here are the illegitimate things,” said Russell Napier, an independent strategist and author of “Anatomy of the Bear,” a study of 70,000 Wall Street Journal articles during major bear markets. “It’s capitalism with Chinese characteristics.”


Consider the ECB. It plans to pay banks to borrow from it for up to four years so long as they use the money to help the “real” economy, meaning that they don’t simply pump up the housing markets by offering more mortgage finance. It has carried out targeted longer-term refinancing operations before, but in the past charged the banks the same rate as for standard weekly loans. This time it will cut the interest rate to as low as minus 0.4%—the ECB paying the banks—if the banks lend more to the real economy than a benchmark amount linked to their recent loans....

“The market would much rather companies take the ECB’s cheap money and use it to buy each other,” said Robert Buckland, an equity strategist at Citigroup Inc.


For the past seven years, the correct bet has been that the central banks will fail to stimulate the economy...

The more speculators, consumers and corporate executives try to minimize the impact of central-bank policies, the more policy makers will channel money directly to the uses they want. We aren’t turning into the U.S.S.R., but central banks are less committed than they used to be to the free-market capitalism that has prevailed since the 1980s. Investors betting that central banks will fail should beware.


12---Companies haven’t fudged their numbers this much since the financial crisis


the gap between GAAP and non-GAAP numbers is widening. Specifically, this “GAAP gap” is widening in such a way that more and more costs and expenses are being removed to make underlying profits look higher.



13--New study says entire regions of US will remain in slump until the 2020s

The new study is one of many showing that the fall of the official unemployment rate, touted by the Obama administration and the news media as proof of a robust economic recovery, if not a return to “full employment,” is largely based on the fact that millions of workers fell out of the labor force in the years preceding and following the 2008 financial crash.

The labor-force participation rate fell to a 38-year low of 62.4 percent last fall, and only climbed up to 62.9 percent in February. According to the Economic Policy Institute, February’s official jobless rate of 4.9 percent—the lowest since the pre-recession level of 4.7 percent in November 2007—would really be 6.3 percent if the country’s “missing workers” were included. These include 2.4 million workers who have given up actively looking for work

Millions of workers have abandoned hope of finding a job.

The lack of decent job opportunities in large swathes of the country has created a reserve army of unemployed and underemployed workers who are competing for a shrinking number of jobs in areas that are more or less permanently distressed. Last month’s Labor Department employment report noted that the average annual unemployment rate in 36 states, plus Washington, D.C. was higher in 2015 than the average unemployment rate for those states in 2007.



14--Obama in Cuba


No one would suspect that this great humanitarian is the same president responsible for the deaths of hundreds of thousands in US-orchestrated wars for regime-change in Libya and Syria—a man who has personally directed a drone assassination program that has murdered thousands of innocent civilians, who directs a covert spying operation against the people of the planet, and who pursues US interests by supporting bloodstained clients and allies ranging from the semi-feudal monarchy in Saudi Arabia to the death-squad regime in Honduras....

the financial press was fairly blunt about what brought Obama to Cuba. “As the Obama administration works to expand economic relations with Cuba, it is competing for influence with a familiar rival: China,” the Wall Street Journal stated. While China’s trade with the island nation grew by 57 percent in just the first three quarters of 2015, Washington is betting that it can use “cultural attachment and proximity” to defeat Beijing “not only in economic influence, but also in the battle for the country’s political future,” the newspaper wrote....


Ironically, the Cuban government appears to desire nothing so much as to emulate China in terms of its state forms, its economic setup and its relations with imperialism. It has already created a “special economic zone” for foreign capitalist investors at the new port facility of Mariel, offering itself as a labor contractor guaranteeing a cheap and state-disciplined workforce. The inevitable outcome will be the enrichment of a thin layer of bureaucrats and “entrepreneurs,” together with soaring social inequality and an explosive growth of class struggle.


15--Yellen should resign


At today’s close, the S&P 500 was valued at nearly 24X the reported GAAP profits for the year just ended. That is crazy under any circumstances, but especially so in a context were corporate profits are literally cliff-diving.

That’s right. S&P 500 profits peaked 18 months ago during the LTM period ending in September 2014. Reported GAAP profits clocked in at $106 per share compared to just $86.44 per share in the most recent LTM period.


Yes, profits are down 18.5% from the cycle peak, and heading lower this quarter and for as far as the eye can see, yet at 24X the casino is trading in the nosebleed section of history.

After a prospective 96 months of ZIRP what else could be expected? Simple Janet strapped on an explosive belt long ago....

In fact, corporate earnings have been dropping for five quarters, notwithstanding record stock buybacks and continued shrinkage of the float. As we learned in 2007-2009, denial can persist only so long; it’s only a matter of time before the bubble blows.

sp500earnings

chart

Worse still, it is also only a matter of time before the next recession sends profits plummeting. The economy, in fact, is already rolling over. Total business sales are down 5.1% from their mid-2014 peak and the inventory-to-sales ratio has retraced to the recessionary levels of June 2009.....


Simple Janet should have the decency to resign. The Fed’s craven decision last week to punt on interest rate normalization is not merely a reminder that she is clueless and gutless; we already knew that much.

Given the overwhelming facts on the ground—–4.9% unemployment, 2.3% core CPI and a 23.7X PE multiple on the S&P 500—-her decision to “pause” after 87 months of ZIRP actually proves she is a blindfolded monetary arsonist—-armed, dangerous and lost.


16--Oil troubles hit auto loans

Auto Loan Delinquencies Soar—–In North Dakota, Oklahoma And Texas!


17--More on corporate profit trainwreck


18--Lenders destabilize housing with failed bubble-era loan products


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