Tuesday, April 19, 2016

Today's Links

1--The slowdown in buybacks: What you need to know

Buybacks are on the retreat in 2016, hitting a 21-month low in March and not showing much pop in April either, according to market data analytics firm TrimTabs. March repurchases amounted to just $24.1 billion and are at a measly $3.2 billion in April, TrimTabs reported over the weekend.

That slowdown has come after a period since 2010 when companies bought back more than $2.7 trillion of their own shares as the market rallied more than 200 percent off its recession lows...


"If you were of the belief that (buybacks have) been a key leg of support for the market, it may be distressing news," said Art Hogan, chief market strategist at Wunderlich Securities. "If this is a pivot point for corporations to say, 'My stock is fully valued, I have found better use of capital,' that is good news."

The key determinant in buyback decisions is value. With the S&P 500 now trading at nearly 17 times earnings, which FactSet reports is well above the five-year and 10-year averages, the temptation for buybacks likely will diminish.

2--Wall Street banking revenue is in free-fall, and here's why

3--Who Needs Buybacks? One S&P 500 Variant Just Rallied to a Record

The rallying U.S. stock market just pushed one version of the Standard & Poor’s 500 Index to an all-time high and has sent another within 2 points of its highest since July -- all during earnings season, when the biggest buyer supposedly goes missing...

Breadth is improving, money is flowing into equities and even fluctuations in the price of oil are failing to put a brake on a rally that has restored $2.8 trillion since mid-February. The S&P 500 has climbed 2.6 percent since Alcoa Inc. reported results, a move good for about $400 billion in market capitalization and the second-best start to an earnings season in three years. Futures on the S&P 500 rose 0.4 percent at 8:39 a.m. in New York.
“It’s going to continue to run until there’s some doubt again in terms of the economy,” said Charlie Bilello, director of research at New York-based Pension Partners LLC. “The notion that the S&P needed buybacks to get close to new highs doesn’t seem to be playing out.”

Analysts including David Kostin, Goldman Sachs Group Inc. chief U.S. equity strategist, say most companies suspend repurchases during earnings season, putting corporate buybacks off the table for about five weeks. Two groups of buyers have emerged to pick up the slack: customers of exchange-traded funds and short sellers....

While economists have ratcheted down odds for a U.S. recession, economic reports haven’t been unilaterally positive. Sales at U.S. retailers unexpectedly fell in March, as did consumer sentiment, while weaker factory orders suggest business investment will be a drag on growth.
“Mr. Market believes that we have earnings growth or that it’s just around the corner, which we remain skeptical of,” said Joseph Betlej, vice president of St. Paul, Minnesota-based Advantus Capital Management, which oversees $18 billion. “Look at the consensus for earnings relative to what might be implied with earnings growth. When you compare that to where the market is going, it’s an interesting conundrum

4--Fed's Rosengren takes another shot at pessimistic markets

5--Brazil’s impeachment crisis and the debacle of the Workers Party

Without missing a beat, Folha de S.Paulo carried an article headlined “Business demands unpopular reforms in six months,” laying out an agenda for a post-PT government headed by Vice President Michel Temer, the head of the Brazilian Democratic Movement Party (PMDB). Among other things, it calls for the repeal of requirements that the government meet fixed funding levels for health care and education, a radical “reform” of retirement laws, a rewriting of labor laws and a new wave of privatizations, including at Petrobras, the center of the kickbacks-for-contracts scandal that has engulfed not only the PT government, but every major party. What is plainly being prepared is a frontal assault on the social rights and conditions of the Brazilian working class....

fully 60 percent in the lower house facing criminal charges, speakers railed against the corruption of Rousseff, while invoking God, their children and grandchildren, fear of sex being taught in school and the supposed heroism of the junta leaders and torturers of the dictatorship that ruled Brazil for more than 20 years after the US-backed coup of 1964....

The impeachment drive, carried out amid the country’s worst economic crisis at least since the Great Depression of the 1930s, arises fundamentally out of the determination of the ruling financial and corporate oligarchy, backed by US imperialism, to fundamentally alter class relations.
Rousseff, Lula and their supporters have charged incessantly that the move to impeach her on flimsy charges of manipulating state funding is tantamount to a “coup.” To the extent that it is a coup, carried out through a gross abuse of constitutional procedures, its chief conspirators are to be found not within the Brazilian military or the American CIA, but on the financial markets of Sao Paulo and Wall Street.

6--Ash Carter’s announcement must be taken as a warning: a massive escalation of war in the Middle East and beyond is being readied for the period after the US elections in November.

7--Golinger: Chavez Assassination Attempts 'Documented, Very Real'

8--Columbia in the Crosshairs: Paramilitary rule continues despite efforts for reconciliation

The State cannot afford to fail institutionally as it did following the previous peace processes when it proved to be incapable of recovering control over the national territory. This time it is absolutely necessary that the nationally territory is recovered and not just in the geographic sense and from the point of view of the armed conflict against the guerrillas, but in terms of the vitality of the constitutional State based on the rule of law and a firm guarantee of the civil rights and freedoms of all Colombians, underpinned by cutting off the foundations of the illegal economies with socially oriented policies and effective plans for the substitution of illicit crops. They are enormous tasks, but they are the heart and soul of the peace process. We don´t want the disarmed members of the FARC and the ELN to face the same situation that was faced by the members of the M-19 and the EPL when they disarmed in the 1980s, following which they had to leave their homes and regional areas en masse because they were being systematically hunted down and killed. That can´t occur again, members of the guerrilla groups that agree to return to civilian life must have genuine and effective guarantees of their safety and civil and political rights that include the entire community and social networks to which they belong....

In many cases the successors of the paramilitary groups have continued threatening and assassinating journalists, lawyers and human rights activists, identifying themselves as members of a group called the Black Eagles...

“The counterinsurgency strategy of the State has been founded upon para-militarism. The official version of the phenomenon places its origin in the 1980s and explains it as arising from the reaction of rural land owners and agricultural and business associations to confront guerrilla actions, in response to which the land owners and businessmen in rural areas decided to create private armies to defend themselves, from which came the name commonly used to refer to such groups, “self-defence forces”. This remains the essence of the official version today. However, the real origin of para-militarism, as proven by official documents, can be traced back to the Yarborough Mission, an official mission to Colombia by officials of the Special Warfare College of Fort Bragg (North Carolina) in February 1962. The members of the commission left a secret document, accompanied by an ultra-secret annex, containing instructions for the formation of mixed groups of civilians and military personnel, trained in secret to be utilized in the event that the national security situation were to deteriorate…”

The formation of paramilitary forces was itself preceded by the creation of private militias at the service of large landowners in the late 1940s and early 1950s that ravaged the countryside during “the Violence” (a brutal civil war that claimed over 200,000 victims and displaced millions of people from rural areas)… The prolongation of the strategy of para-militarism over time and the role that it has played in the neoliberal era, violently displacing rural communities and taking over their land for agricultural, mining, energy and infrastructure mega-projects or to extend the domains of large cattle ranches, signified the construction of a para-State exercising dominion over large swathes of the territory, population and institutions of the country.
While it may well be that the paramilitary armies no longer receive orders directly from the government, that doesn´t mean that substantial sectors within the military establishment and other State institutions don´t still consider them to be allies in the fight against the counterinsurgents and therefore continue supporting them and maintaining the relationship of subordination. Considered in these terms, para-militarism isn´t just a group of criminal gangs that has infiltrated State institutions but rather represents a continuation of the armed elements of the para-State....

Giraldo describes the essence of this doctrine as follows: “In the arsenal of the doctrine of National Security, fundamentally comprising books (in the Library of the National Army), editorials and articles appearing in the Journal of the Armed Forces and in the Journal of the Army, discourses, presentations and reports of high level military commanders and their advisors, as well as in a collection of Counter-Insurgency Manuals marked as secret or confidential, “communists” are explicitly identified as trade unionists, farmers who don´t sympathize with or who are reluctant to cooperate with military operations on their farms, students that participate in street protests, militants of non-traditional or critical political forces, defenders of human rights, proponents of liberation theology, and sectors of the population generally that are not in conformity with the status quo…”

“The continuity of para-militarism, fissures in the factions in power and peace”

By Jose Honorio Martinez, 5 April 2016

9--Stocks Soar As Corporations Are Defaulting On Their Debts Like It's 2008 All Over Again

10--Pepe Escobar: The coup in Brazil should fail

11--A Few Words from the FARC

Here's an excerpt from an Interview with FARC Commander Raul Reyes by Garry Leech that fits the bill. Readers can decide for themselves whether they hear something that "rings true" or if it is just revolutionary mumbo-jumbo:

FARC Commander Raul Reyes: "The goal of revolutionary struggle is peace"

"When we speak of the New Colombia we are speaking of a Colombia without social, economic or political inequalities; of a Colombia without corruption; with neither paramilitarism or state terrorism; of a Colombia with industrial development; of a worthy Colombia, independent and sovereign; a Colombia where resources are invested in scientific research and technological development; a Colombia where the environment is protected; a Colombia whose wealth is used for the benefit of the population; a Colombia that does not continue privatizing, that does not continue selling the businesses of the State but instead uses these businesses to benefit social programs; a Colombia with agrarian reform that includes infrastructure for the peasants and that makes it possible for their children to study; an agrarian reform in which a market and the purchase of their products is guaranteed; an agrarian reform in which they can obtain affordable credits from the State; a Colombia with employment; a Colombia with subsidies for the unemployed; a Colombia that guarantees education, healthcare, homes and all that.

That it is the Colombia that we dream of and that we call the New Colombia...
But to achieve this is a task for titans, because Colombia has a mafia class and a corrupt murderous ruler. And as long as they continue controlling the destiny of our country it is going to be very difficult for the people to become controllers of their own destinies. This is the reason that the FARC continues its revolutionary struggle.

The end of the revolutionary struggle being waged by the FARC is peace. For us, peace is the fundamental thing. We understand that peace is the solution to the problems that affect our people. We understand that peace means that in Colombia we have a true democracy. Not a democracy for the capitalists, but a democracy for the people, who can protest, who can participate, who have the right to live, who have the right to healthcare, to education, who have the right to communication, to electricity, to agrarian reforms, to fight corruption, to not have to kneel before foreign powers, but to be a country free, independent and sovereign with respectful relations with all countries on equal terms. Also, that the weapons of the army not be not used against the people, but just for the defense of our sovereignty and nothing more. To achieve that objective is why we are here in this jungle. And in search of that objective we are willing to continue for as long as is necessary."

These are comments that you won't find in the 4,253 articles on Google News, because they stimulate critical thinking and shape hearts and minds. And that's exactly what the corporate propaganda system hopes to avoid.

12--US involved in assassination of  FARC Commander Raul Reyes

In the final analysis, this episode in the “global war on terrorism,” which has brought three South American nations to the brink of armed conflict, is the product of a filthy political murder carried out to defend the strategic and profit interests of US capitalism.

It is a reminder that “Murder, Inc.”-as the CIA became known during the 1960s and 1970s, when it organized numerous assassinations and assassination attempts, along with right-wing coups and dirty wars-is still very much in business in Latin America.

The March 1 raid was carried out not to defend Colombia from terrorism, but to murder one man, Raul Reyes, considered the second- in-command of the FARC and the guerrilla movement’s principal international spokesman and diplomatic representative. He was well known in both Latin America and Europe, having served as the principal FARC negotiator in the abortive attempt under the government of President Andres Pastrana (1998-2002) to broker a peaceful settlement of the civil conflict that has wracked Colombia for more than four decades. During that same period, he met with officials of the Clinton State Department.

To carry out this political murder, air strikes were called in against the camp inside Ecuador as Reyes and some 20 of his comrades slept. Commandos were then sent into the camp to finish off most of the survivors and haul Reyes’s bloody corpse back to Colombia as a political trophy for the right-wing US-backed government of President Alvaro Uribe.

This ruthless attack was staged not to ward off some pending terrorist attack. On the contrary, it was designed as a “preemptive strike” against a negotiated release of hostages held by the FARC, among them a former presidential candidate, Ingrid Betancourt, who holds joint Colombian-French citizenship and has been held prisoner by the FARC for six years....

US role in Reyes’s assassination

Colombian officials have openly acknowledged the role of US intelligence agencies in instigating and coordinating the March 1 targeted assassination. General Oscar Naranjo, commander of the national police told reporters it was no secret that the Colombian military-police apparatus maintained “a very strong alliance with federal agencies of the US.”

The Colombian radio network, Radio Cadena Nacional (RCN), reported Wednesday that Reyes’s location was pinpointed by US intelligence as a result of monitoring a satellite phone call between the FARC leader and Venezuelan President Chavez. The February 27 call-three days before the raid-came after the FARC released to Venezuelan authorities four former Colombian legislators-Gloria Polanco, Luis Eladio Perez, Orlando Beltran and Jorge Eduardo Gechem-who had been held hostage for nearly seven years.

“Chavez was thrilled by the release of the hostages, and called Reyes to tell him that everything went well,” RCN reported. Presumably, the CIA or other US intelligence agencies were also tapping phone calls between Reyes and French officials over the proposed release of Betancourt...

Both Washington and the right-wing regime in Colombia were determined to stop any further hostage releases in order to further efforts to politically isolate the Chavez regime and to enforce the Bush administration’s proscription against negotiations with “terrorists.”

At the same time, the bombs dropped on the FARC encampment were undoubtedly also meant as a message to Sarkozy not to meddle in Yankee imperialism’s “backyard.”

13--After Vote to Remove Brazil’s President, Key Opposition Figure Holds Meetings in Washington

another coup organized in Washington?

14--The Hole at the Center of the Rally: S&P Margins in Decline

The biggest sucker rally of all time?  analysts predict income from S&P 500 firms will slump 9.5 percent in the first quarter while sales fall 1 percent.

Stocks are rising, the worst start to a year is a memory, and short sellers are getting pummeled. And yet something is going on below the surface of earnings that should give bulls pause.

It’s evident in quarterly forecasts for the Standard & Poor’s 500 Index, where profits are declining at the steepest rate since the financial crisis relative to revenue. The divergence reflects a worsening contraction in corporate profitability, with net income falling to 8 percent of sales from a record 9.7 percent in 2014.

Bears have warned for years that such a deterioration would sound the death knell for a bull market that is about two weeks away from becoming the second-longest on record even as productivity sputters and industrial output weakens. While none of it has prevented stocks from advancing in seven of the last nine weeks, rallies have seldom weathered a decline in profitability as violent as this one -- and the squeeze is often a bad sign for the economy, too.

“Analysts have seen the string pull as far as it can go, and there is no way for it to go but to reverse for the moment,” said Barry James, chief executive officer who helps oversee $6.7 billion at James Investment Research in Xenia, Ohio. “Without the Federal Reserve chipping in with quantitative easing, investors have to go back to valuations and earnings, and both of those -- one is high and the other is low -- that’s not a very good recipe for stocks.” James said his firm is raising cash amid the recent rally in stocks....

Market Cycle

A study by Barclays Plc showed that big drops in corporate profitability usually foreshadow economic reversals. Since 1973, there have been six other instances when the S&P 500’s margins narrowed by 60 basis points or more over a 12-month period. All but one coincided with a recession.

Moreover, should the Fed continue to gradually raise interest rates and the government refrain from adding stimulus, it would be the first time since 1952 that profits turned lower without a recession, Fed easing, or fiscal expansion, data compiled by Bianco Research LLC show....

U.S. stocks advanced last week, pushing the S&P 500’s gain since it bottomed on Feb. 11 to almost 14 percent. Stocks with the most short sales are up 31 percent over that stretch, according to an index compiled by Goldman Sachs Group Inc. Last week’s rally came even as readings on retail sales, industrial production and consumer sentiment fell. Stocks advanced before what will be the worst earnings season since 2009, pushing the S&P 500’s price-earnings ratio to 19, near a six-year high. The benchmark gauge climbed 0.7 percent at 4 p.m. in New York.

Even as margins slip, U.S. companies are churning out more profits than any other time in history. Analysts forecast combined S&P 500 income to exceed $1 trillion in the next 12 months, compared with $740 billion in 2007 and $490 billion in 2000. Technology innovation and lower commodity prices will help provide a floor to margins, according to Jeffrey Saut, chief investment strategist at St Petersburg, Florida-based Raymond James Financial Inc., which oversees $500 billion. 

The concern over a margin squeeze “is overblown,” Saut said. “I don’t think margins are going to do what they have done in past cycles and regress to the mean. I’m not all that worried about a big margin compression that’s going to take the wind out of the profit picture.”...

The forecasts highlight the challenge for corporate America, whose efforts to boost revenue are constrained by a sluggish economy while reining in costs is impeded by rising wages and interest rates. Also pressuring profit growth is stubbornly low productivity, or employee output per hour. Over the last five years, productivity gains averaged 0.5 percent, the weakest since 1978-1982.

Margin Leverage

Margins are the fulcrum between the top and bottom lines -- they help profits multiply on the way up and exacerbate declines on the way down. In the five years through the third quarter of 2014, when margins more than tripled to a record, S&P 500 earnings expanded at an average rate of 21 percent a quarter, versus 5 percent for sales. As margins started shrinking, the difference between the growth rates has narrowed to about 2 percentage points, with fourth-quarter income experiencing a bigger decline than revenue for the first time since 2009.

Volatility has risen in the stock market as forecasts for gross domestic product and corporate earnings kept falling. Since August, the S&P 500 has suffered two separate declines exceeding 10 percent as economists reduced projections for this year’s rate of economic expansion to 2 percent from 2.7 percent. Over the period, growth estimates for S&P 500 profits have been trimmed to 2.3 percent from 10 percent.

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