Tuesday, July 19, 2016

Today's links

1--Nightmare on Wall Street: Republicans & Democrats Agree on Reinstating Glass-Steagall Act  No more casino gambling?????

And therein is this sentence:

We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.

It’s followed by this bit of wisdom: “Sensible regulations can be compatible with a vibrant economy….” By extension, reinstating the Glass-Steagall Act would be that “sensible regulation.”
Upon hearing about this, Wall Street executives and just about everyone else at JPMorgan, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and a slew of others, plus central bankers in the US and abroad, especially those that cut their teeth at Goldman Sachs, plus Treasury officials and revolving-door beneficiaries, they all ran to their respective johns and vomited

2--To the mattresses: Cash levels highest in nearly 15 years

Indeed, fear is running high as investors believe that global financial conditions are tightening, despite nearly $12 trillion of negative-yielding debt around the world and the U.S. central bank on hold perhaps until 2017.
In fact, fear is running so high that BofAML experts think that it's helping fuel the recent market rally....

Fund managers believe that so-called helicopter money will become a reality, with 39 percent now anticipating the move compared to 27 percent in June. The term refers to money printed by central banks that governments then distribute through the economy in hopes of creating inflation. A similar move, called quantitative easing, in which central banks print money to buy bonds, has failed to generate much in the way of global inflation other than through stock market prices.

3--Gallup:  U.S. Economic Confidence Stuck at Lower Level

One possibility is that the U.S. presidential election is creating uncertainty about the future of the economy. Another possible explanation is that Americans need to see more evidence of GDP growth, wage growth and sustained improvement in the job market before their confidence in the economy will show signs of life

4--Monsanto, Bayer, and the Push for Corporate Cannabis

As detailed in my recent article “The War on Weed is Winding Down,” the health benefits of cannabis are now well established. It is a cheap, natural alternative effective for a broad range of conditions, and the non-psychoactive form known as hemp has thousands of industrial uses. At one time, cannabis was one of the world’s most important crops. There have been no recorded deaths from cannabis overdose in the US, compared to about 30,000 deaths annually from alcohol abuse (not counting auto accidents), and 100,000 deaths annually from prescription drugs taken as directed. Yet cannabis remains a Schedule I controlled substance (“a deadly dangerous drug with no medical use and high potential for abuse”), illegal to be sold or grown in the US.

Powerful corporate interests no doubt had a hand in keeping cannabis off the market. The question now is why they have suddenly gotten on the bandwagon for its legalization. According to an April 2014 article in The Washington Times, the big money behind the recent push for legalization has come, not from a grassroots movement, but from a few very wealthy individuals with links to Big Ag and Big Pharma.

5--Low rates: Hurting, not helping, Mosler

With the govt a net payer of interest, rate cuts reduce total interest income for the economy by that amount. But some of the effects are lagged, as indicated below, and are therefore still ongoing, as lower pension returns often result in higher contributions and lower benefits, which reduces aggregate demand:

Drop in Rates Swells Pension Burdens in U.S.

By Vipal Monga
July 18 (WSJ) — Under accounting rules, the declining rates triggered an increase in pension obligations for companies with defined-benefit plans, which offer retirees a set payout. Now, those companies are pursuing a variety of tactics as they struggle to close the resulting gap in pension funding and to avoid steep increases in premium payments to the nation’s pension insurer. The combined pension deficit for S&P 1500 companies ballooned to $568 billion at the end of June, a $164 billion increase from the end of 2015, according to Mercer, a benefits consulting firm.

Calpers Reports Lowest Investment Gain Since Financial Crisis

By Timothy W. Martin
July 18 (WSJ) — The California Public Employees’ Retirement System, or Calpers, said it earned 0.6% on its investments for the fiscal year ended June 30, according to a Monday news release. It was the second straight year Calpers failed to hit its internal investment target of 7.5%. Workers or local governments often must contribute more when pension funds fail to generate expected returns. Calpers oversees retirement benefits for 1.7 million public-sector workers. The last time Calpers lost money was during fiscal 2009 when the fund’s holdings fell 24.8%.

6--Inflation? No way

Price pressures evident the last two months down the supply chain are not yet appearing in consumer prices where the CPI rose only 0.2 percent in June for a weak year-on-year rate that is not going in the right direction, at plus 1.0 percent vs 1.1 percent in the prior three months. Ex-food & gas, consumer inflation also rose 0.2 percent with this year-on-year rate moving 1 tenth higher to a respectable but still soft 2.3 percent

7--Uh oh. Bring on the helicopters---

Corporate Profits Set to Shrink for Fourth Consecutive Quarter

By Kate Linebaugh
July 17 (WSJ) — More than 90 of the biggest U.S. companies will report results this week. Based on analysts’ forecasts for companies in the S&P 500 index, Thomson Reuters predicted that adjusted earnings per share for the second quarter were down 4.7% from a year earlier. That follows a 5% drop in the first quarter and would be the fourth straight period of declines.
Revenue, meanwhile, is expected to slip 0.8%, marking the sixth straight quarter of declines, according to Thomson Reuters. For the second quarter, more than 80 S&P 500 companies have issued earnings warnings, according to Thomson Reuters

8--The Helicopter Has Already Been Tested—–And It Has Failed Spectacularly

Bloomberg, in a separate article, helpfully defines what is “helicopter money”:
Imagine waking one morning to find extra cash in your account, a gift from your country’s central bank. That might sound outlandish — even some proponents of the idea admit it’s unlikely. But the concept of so-called helicopter money is being seriously debated by economists. The trillions of dollars, euros, yen and pounds that central banks have pumped into the global financial system since the 2008 credit crisis have failed to ignite global growth. Helicopter money handed directly to consumers, the theory goes, would send us scurrying to the shops to spend our windfalls, boosting confidence in the economy

9--US and Germany livid over failure of Turkish coup

10--Republican convention opens: An obscene spectacle in Cleveland

Over the weekend, the ghostwriter of Trump’s one best-selling book, The Art of the Deal, Tony Schwartz, gave a revealing interview to the New Yorker in which he apologized for the boost he had given a political figure whose rise he now regards with horror. He made public contemporaneous notes he had taken during the period he was writing the book in 1986 and 1987, showing that even then he had found Trump “hateful” and “a one-dimensional blowhard.”

“He has no attention span,” Schwartz told the New Yorker’s Jane Mayer. “It’s impossible to keep him focused on any topic, other than his own self-aggrandizement, for more than a few minutes.” Trump has “a stunning level of superficial knowledge and plain ignorance” and probably has not “ever read a book straight through in his entire adult life.” Trump is a habitual liar who has “a complete lack of conscience about it.” If he were writing a Trump biographical sketch today, Schwartz concluded, he would title it The Sociopath

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