Friday, June 24, 2016

Today's Links

1--Here’s What Fueled the Rally in Stocks since February

A huge force that’s going to fizzle.

We have another post-Financial Crisis record on our hands!
Share buybacks by S&P 500 companies during the three-month period of February through April soared 15.1% from a year ago, to $166.3 billion, according to FactSet, the highest since Q3 2007, which had set an absolute record of $178.5 billion, just as the Financial Crisis was cracking the glossy veneer of the banks....

The tech sector, whose revenues have been getting hammered by reality, was the biggest spender at $34.4 billion.
The healthcare sector was second. When insurers and Big Pharma aren’t busy buying each other in the ongoing mega-merger oligopoly or monopoly boom, they’re buying their own shares. Buybacks over the 3-month period soared to $33.2 billion, an all-time record for the sector, blowing away its prior record of $24.5 billion...

This table shows the top 10 buyback-spenders in the February-through-April period, along with the year-over-year reduction in shares outstanding, and the 1-year total return (including dividends) of the shares. Note the losers (red):

These 10 companies blew $51.6 billion in three months to prop up their own shares, much of it with borrowed money, rather than investing it in productive activities, preferably in the US, to move the economy forward. But no....

For the trailing 12 months, buybacks rose 8.7% to $602.8 billion!
Alas, earnings of S&P 500 companies have been falling on a trailing 12-months basis since Q4 2014, six quarters in a row! The result of soaring buybacks and slumping earnings? 72.9% of earnings were plowed into buybacks!....

At this rate of slumping earnings and soaring buybacks, companies will soon spend more on buybacks than their income.
But wait… that’s already happening: 146 companies spent more on buybacks during the trailing 12 months than they booked in earnings. Among these heroes: Target, Starbucks, McDonald’s, Microsoft, Oracle, Salesforce….....

Companies can borrow at ludicrously low rates (and even Apple has issued bonds to fund buybacks) to spend this money on their own shares. Those billions spent don’t show up as an expense. They just increase indebtedness and eat up equity. Buybacks hollow out balance sheets

2--Brexit: The Crisis Begins

Brexit is a crippling blow to the neoliberal order of unfettered trade and capital flows, and citizens being reduced to being consumers who have to fend for themselves in markets, and worse, increasingly isolated worker who are at the mercy of capitalists who are ever more determined to reduce labor costs and hoard the benefits of productivity gains for themselves. Whether they recognize it or not, and we’ll find out over the coming months and years how well different Leave voters saw the choice they made, they have chosen a lower standard of living as a price worth paying for a hope of more control over their destinies. Sadly, these voters are likely to realize the first part of that equation rather than the second.

What happens next is very much in play. In a radical departure from a failed prime minister stepping down immediately, Cameron plans to remain for 90 days to sort out party leadership. That sounds like a misguided set of priorities, and could possibly serve as cover for a rearguard effort to extract some concessions from the EU and try to schedule another referendum. Even if that is part of the plan, it seems unlikely to succeed, given that Cameron got almost nothing from his pre-referendum negotiations to extract waivers, and the German insistence that the British must be made to suffer as much as possible for this vote pour decourager les autres...

The British government is likely to lose its AAA rating, which also means higher funding costs for its banks, since their borrowing rates are at a premium to the local currency risk-free rate. A recession is almost certain, since the UK exports services and imports goods and many of its imports don’t have ready substitutes, while the US and European banks will be doing everything they can to poach both British bankers and their clients, denting the UK balance of trade even more. Richard Smith also points out that a Brexit could imperil Ireland’s ability to operate as a tax haven. And that raises the issue that both Scotland and Ireland supported Remain. Is a UK breakup in the offing?

3--This was the day the British people defied their jailers

...the circumstances of the referendum were not ripe for victory. David Cameron only called it to hold his own party together; and once it was called, he decided to turn the British and global establishment against it. Out came the Treasury, the IMF, even the President of the United States to argue that Britain had to stay. This was textbook politics, how things used to be done – and it worked back in 1975 when the UK voted overwhelmingly on good advice to stay in the Common Market...

What happens now? We drink. We be happy. We sing a song. Then we piece back the country and get on with the great project of building the British century. We voted the right way because we’re a nation with a sense of destiny. The world is ours now. Go get it.

4-- Is the US Pursuing a Rogue Policy by Waging Undeclared War Against Russia?

5--Finally…….Trumps Puts The Wood To Hillary, Appeals To Sanders Supporters, Too

Together, she and Bill made $153 million giving speeches to lobbyists, CEOs, and foreign governments in the years since 2001,” Trump said. “They totally own her, and that will never change including if she ever became president, God help us.”
Clinton does not have the temperament, “or, as Bernie Sanders said, the judgment, to be president. She believes she is entitled to the office,” Trump said.
“Her campaign slogan is ‘I’m with her.’ You know what my response to that is? I’m with you: the American people,” Trump said to applause. “She thinks it’s all about her. I know it’s all about you — I know it’s all about making America Great Again for All Americans.”...

“Her server was easily hacked by foreign governments — perhaps even by her financial backers in Communist China, I’m sure they have it — putting all of America in danger,” Trump continued. “Then there are the 33,000 emails she deleted. While we may not know what is in those deleted emails, our enemies probably do. So they probably now have a blackmail file over someone who wants to be president of the United States. This fact alone disqualifies her from the presidency. We can’t hand over our government to someone whose deepest, darkest secrets may be in the hands of our enemies....

Finally, courtesy of The Hill, here is his appeal to Sanders supporters.
“We will never be able to fix a rigged system by counting on the same people who rigged it in the first place. The insiders wrote the rules of the game to keep themselves in power and in the money,” Trump said during a campaign speech  in New York.”That’s why we’re asking Bernie Sanders’ voters to join our movement: so together we can fix the system for all Americans. Importantly, this includes fixing all of our many disastrous trade deals. Because it’s not just the political system that’s rigged. It’s the whole economy.”
So can he actually convince Sanders supporters to go his way?
While presumptive Democratic nominee Hillary Clinton and other Democrats are confident that Sanders supporters will unite under the party’s roof, a new Bloomberg poll found that almost half of his supporters would not vote for Clinton, with 22 percent breaking for Trump.
This 22% number is downright shocking. I thought it would be something like 10% or less. If that figure is anywhere near accurate, Hillary is in real trouble.

6--The next recession is already here—and there isn't much the Fed can do

7--House Republicans Think the Fed Is In Conspiracy With the Rich: Are They Right?

8--Why Brexit Is Such a Threat to the New World Order

9--A few observations on the vote withdraw the UK from the EU:
  • IMO this election result was driven by elitist/Borg visions of a Europe and eventually a world re-organized; without countries that are more than  a sentimental memory, a fully globalized economy governed by the principle of comparative advantage accompanied by the inevitable poverty of those dispossessed of prosperity by capitalist magnates who revel in their opportunism,  a world in which the ancient ethnic nations of Europe are expected to accept inundations of people alien to their cultures who would inevitably and irreversibly make, for example, France into a different country.
  • Resistance to this set of ideas is variously described as "traditional xenophobia,"  and the "ideas of the ignorant, elderly and unsophisticated."  These are characterizations heard today in American Borgist media.  Christopher Dickey referred on the air today from Paris to the French as "the present residents of France."

  • This must be a great blow to Obama, the prophet and organizing force in his imagined coming world utopia.  For Hillary Clinton, not so much, she will "go with the flow,"  but Obama's vision of a world increasingly globalized under American hegemony (leadership) is badly damaged in its prospects by the English decision to leave the EU. 

1 comment:

  1. eToro is the most recommended forex trading platform for newbie and advanced traders.