1--Yipee! Stocks Hit New Highs, and That Could Be Just the Start -- Some traders see the makings of a ‘melt-up,’ or surge from record levels
A troika of stock indexes hit records in tandem for the first time since 1999. The question is whether the party is just getting started.
On Thursday, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all rose to highs on the same day, an alignment that hasn’t occurred since Dec. 31, 1999. The records punctuate a march that defies stocks’ sharp downdraft at the year’s start. The ratio of stocks that trade on the New York Stock Exchange and the Nasdaq hitting 52-week highs versus 52-week lows recently surged to its highest level in years.
“The last time we’ve seen levels like this consistently was in 2013, which went on to be one of the best years for stocks,” said Frank Cappelleri, executive director of institutional equities at Instinet LLC. In 2013, the S&P 500 rose 30%...
Since hitting its lowest level of the year on Feb. 11, the S&P 500 has gained roughly 20% through Thursday’s close.
3--The genius of zero rates: U.S. Stocks Notch a Record Trifecta-- Handouts disguised as "accommodative" policy and monetary stimulus
For the first time since dot-com boom was in full swing, Dow industrials, S&P 500 and Nasdaq Composite all reach highs on same day
From Chris Demasi at Roger Montgomery Investment:
According to a recent Wall Street Journal article based on data from the Organisation for Economic Co-operation and Development, Moody’s and corporate regulatory filings consumers in countries with negative rates are actually saving more now than in 1995.
And a measure of corporate cash coffers compared to revenues for Europe and neighbouring countries has been climbing over the past 5 years. At the end of 2015 the ratio was at a level not seen since 2010, representing almost 1 trillion Euros in corporate bank accounts.
While corporate bank accounts burgeon, with surplus funds only used to buyback shares, not for investment, with more than 25% of assets being cash at hand – the second biggest in the world. So cutting interest rates to stimulate business investment wouldn’t work because why borrow money at record lows when you’re sitting on a mountain of it like Scrooge McDuck
6--Postponing Armageddon? Home Equity Loans Come Back to Haunt Borrowers, Banks-- The cost of home equity lines of credit taken out before the housing bust is rising. That is leading to missed payments
More homeowners are missing payments on their home-equity lines of credit, or Helocs, a type of loan that allows borrowers to withdraw cash from their house to pay for renovations, college tuition or almost any other expense. These loans typically require interest-only payments for the first 10 years, but then principal payments kick in for the next 15 or 20 years.
The increased cost of the loan can become a strain for some borrowers. This is becoming an issue now because many borrowers signed up for Helocs in the run-up to the housing bust as home values kept rising. Roughly 840,000 Helocs taken out in 2006 are resetting this year, with principal payments on an additional nearly one million loans expected to hit in 2017.
7--Flood the financial system with money, and financial assets experience inflation: --The U.K. Is the New Engine of Bond-Market Distortion
Britain has taken over from Japan as the world’s wildest bond market, raising new questions about the distortions being caused by central banks...
One explanation for the conundrum advanced by Ben Bernanke, Mr. Greenspan’s successor, was that a global savings glut was holding down bond yields.
This time it is a glut of money printing, as the Bank of England joins the Bank of Japan 8301 -1.93 % and European Central Bank in buying bonds.
In 2006, it turned out that the refusal of the long bond yield to budge even as interest rates rose above it carried useful information: Bond buyers were correctly anticipating bad times ahead.
Investors need to decide whether something similar could be under way now.
8--Textbook Failure: Why Rate Cuts Have Stopped Working on Currencies -- In theory, loosening monetary policy should lower a currency’s value, but this year the opposite has been happening
And globally, the same phenomenon is occurring. Rate cuts in Indonesia, Russia, Hungary, South Korea and Taiwan in the past year have all done little to weaken surging currencies.
“In an environment where a big part of the global bond markets are trading with negative yields, investors are rushing to find something positive,” said James Kwok, head of currency management at Amundi Asset Management.
9---The Death of Retail? Why Shutters are Coming Down at Macy’s
Macy’s move to close 100 stores isn’t a magic bullet, but it is better than standing still
The company said Thursday that it is closing about 100 stores, or 15% of its base, with most expected to close early next year and the remainder as leases expire. It is also “examining opportunities” for four downtown flagship stores across the country and is in negotiations over the sale of its men’s store on San Francisco’s Union Square.
The moves represent a dramatic shift for the retailer, which has for years been weighing potential strategies for monetizing its real estate. They are an important defensive step as it tries to prevent itself from being further squeezed between Amazon.com AMZN -0.20 % and discounters such as TJX TJX 0.24 % Cos. Shares rose 18% Thursday afternoon. They remain down by 40% over the past year.
The urgency of the situation has become increasingly clear for Macy’s as same-store sales have fallen for six consecutive quarters. Second-quarter results reported Thursday beat analysts’ expectations, but same-store sales fell by 2.6%.
10--Investor Demand for Bond Funds Relative to Stocks Is Highest on Record-- Range of political risks suggests equities, already seen as expensive, could be in for a bumpy ride
Emboldened by central-bank stimulus and a hefty price tag on equities, investor demand for bond funds relative to stocks is the highest on record, according to J.P. Morgan Chase JPM -0.58 % & Co.’s analysis of global exchange-traded-fund and U.S. domiciled mutual-fund flows going back to 2007.
Investors have poured $202 billion into global bond funds and withdrawn $47 billion from global equity funds this year, putting stocks on track for their first yearly outflow since 2008, according to the bank.
The shift shows many investors believe global growth and inflation will remain tepid and central banks will keep monetary policy loose—enough to spur greater gains in bonds, but not quite sufficient to push the stock market past the current highs amid lackluster profits and a range of political risks.
“Credit tends to do well when the economy is growing not too hot and not too cold,” said Mark Kiesel, chief investment officer for global credit at Pacific Investment Management Co. “You’re kind of in this sweet spot,” where growth is fast enough to keep defaults low, but not fast enough to trigger inflation or higher interest rates, he said.
High valuations aren’t helping attract investment. U.S. stocks are soaring even though companies listed on the S&P 500 are on track to post their fifth consecutive quarter of declines. The trailing price-to-earnings ratio for the S&P 500 climbed to 19.5 this week, the highest since 2010. That compares with a 10-year average of about 15.9.
“The U.S. equity market is confounding everyone’s expectations by reaching new highs, but it has become quite expensive,” said Christopher Mahon, director of asset allocation research at Baring Asset Management....
A lot of developed-market government debt may also look expensive by historical standards. Around $12 trillion of global debt currently trades at a negative yield, according to Bank of America Merrill Lynch, including vast swaths of Japanese and European government bonds. ...
Central banks in Europe have also started buying high-grade corporate bonds, providing a fillip for those markets, while encouraging investors to move into higher-yielding U.S. credit for returns.
Respondents to WSJ survey cut their forecasts for 2016 GDP growth to 1.8% from 2%...
For the first time in this election cycle, most economists surveyed by The Wall Street Journal (the same economists who never saw the last bubble??) believe uncertainty from the coming election is crimping economic activity.
While every election spurs some economic uncertainty, more than 80% of respondents to the Journal’s latest survey of economists rate the current cycle as presenting an unusual muddle. A majority—57%—said the economy has suffered, at least somewhat, as a result.
“This election introduces a Mount Everest of uncertainty,” said Kevin Swift, chief economist at the American Chemistry Council.
Economists have long believed that, in general, uncertainty has the potential to restrain consumer spending and business investment, (Uhm, so do low wages and joblessness) if people and businesses have significant questions about the taxes and regulations they will face down the road...
“Investment spending clearly shows the detrimental impact of the election,” said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida.
But during her June press conference, Federal Reserve Chairwoman Janet Yellen noted the decline in investment was broader than could be explained by energy.
“Business investment outside of energy was particularly weak during the winter and appears to have remained so into the spring,” she said. (Ridiculous. All the positive investment was in oil exploration, technology, jobs and extraction. Now that's gone)
(The uncertainty myth: Investors only care about Fed policy, and they know it will continue to be accommodative)
(A deliberate misreading of recent economic history. Typical.)
13--Battle for Aleppo Carries High Stakes for Syria-- Rising prominence for al Qaeda spinoff complicates U.S. strategy in fighting extremists
The uneasy status quo around Syria’s biggest city, divided for years into the rebel-held eastern half and the regime-controlled west, collapsed in late July. That is when government forces, aided by Iran, Lebanon’s Hezbollah militia, and Russian air power, capitalized on past advances and severed Castello Road, the sole lifeline that connected east Aleppo to wider rebel areas.
With the prospect of some 275,000 people in east Aleppo forced to choose between catastrophe or surrender, rebel forces surprised the regime last week by mounting a successful counteroffensive. They pierced the blockade by seizing the Ramousseh complex of military bases and surrounding areas in the city’s southwest....
Continuing to help rebel groups involved in such a blockade would make the U.S. complicit in its toll—while acting against it would turn the U.S. and other Western nations into allies of the Assad regime, which is despised by most Syrians.
14--US military prepares new offensives in Syria and Iraq October surprise??
USA Today reported US troops are already operating extensively inside Syria, stating: “US Special Operations Forces are helping to identify and organise Syrian rebel groups into a force that can take on the Islamic State [ISIS]. The force now numbers about 30,000 and had generated some surprisingly early successes, particularly around the northern city of Manbij...
The issue is clearly being discussed in Washington circles. An article on the Politico website on August 1, entitled “Get ready for Obama’s ‘October Surprise’ in Iraq,” suggested that “the American public could be treated to a major US-led military victory in Iraq this fall, just as voters are deciding who will be the nation’s next president.”
Moscow has charged the Ukrainian government with organizing a terrorist attack aimed at striking vital infrastructure inside Crimea, a territory that Russia annexed following a plebiscite in which the peninsula’s population voted for unification with Russia. The move followed the February 2014 coup, orchestrated by Washington and Germany and spearheaded by ultra-nationalist and fascist forces, which overthrew the elected, pro-Russian government of Viktor Yanukovych and installed a rabidly anti-Russian regime. The United States backed the putsch in a bid to escalate the US-led drive to encircle and militarily subjugate Russia.
Moscow has demanded Ankara to close the Turkish-Syrian border to stop the flow of terrorists and weapons. According to Russian diplomats Turkey has no choice and it will fulfill Russia’s conditions.
Earlier, it was reported that Russia and Turkey have created a tripartite mechanism consisting of intelligence officials, military and diplomatic representatives from each side.
“Naturally, we raised the issue of closing the Syrian-Turkish border to stop the flow of terrorists and weapons. In this way, militants would lose any kind of replenishment supply from the outside,” Deputy Head of the Defense Committee of the State Duma, Victor Vodolatsky, noted.According to him, this issue is directly related to the national security of Russia.
“For our part, we could provide the Turkish side satellite images of locations through which the traffic of weapons and militants passes,” the deputy added.Izvestiya reports that the Turkish side is already considering the possibility of closing the border with Syria.
“Turkish negotiators, both diplomatic and military, have virtually no field for a maneuver. At the same time, they, apparently, are attuned to overcome the controversial issues. For this reason, they will have to fulfill our condition of closing the border with Syria,” member of the International Committee of the Federation Council, Igor Morozov, said.