Friday, August 19, 2016

Today's links

1--Vancouver Housing Market Implodes: Average Home Price Plunges 20% In 1 Month - "The Market Is Devastated"


2--Business investment? Mosler


Still decelerating ever since the collapse in oil capex: chart


3--Market propellant dries up: U.S. companies’ stock buyback plans hit four-year low: TrimTabs


Aug 16 (Reuters) — At $1.8 billion a day, the amount of buyback announcements from U.S. companies during the nearly completed second-quarter earnings season is tracking to the lowest since the same period of 2012, according to TrimTabs, which compared six-week periods during which companies report quarterly results. The number of companies announcing buybacks has also fallen, averaging 3.3 a day so far, well below the 6.1 per day during earnings season a year ago. According to TrimTabs, the total amount of announced buybacks through July is down 21 percent from the same period a year ago.*

4--We now live with a market dependent on a single marginal buyer: the central banking cartel.

Let's look at the stock market. For the past 5 years, stock prices have been powering higher. Good, right? Well, not so good when you look at the volume underlying these prices. Volume has been in decline over this period, and the rate of decline has accelerated since the beginning of this year. This means fewer buyers -- less competition -- pushing the marginal buyer to spend more. Which likely explains why the S&P 500 index is roughly unchanged from where it was 2 years ago...

And as for the marginal buyer, it's increasingly looking like that role is being filled today by the central banks instead of from a wide pool of institutional and retail purchasers (as a proof point: the Bank of Japan now owns over 60% of its nation's ETF market). Putting aside for a moment what an abomination this circumstance is to free and fair markets, having prices set by a central bank is a huge threat to price stability. Why? Because no one else can compete with an entity able to print an infinite amount of thin-air money at will. The gap between what a central bank is willing/able to pay vs the next marginal buyer is tremendous; so if the central bank ever pauses its buying, prices can drop precipitously.

Hmmm, why does that sound familiar? Oh, that's right...that's exactly what happened last August, and again at the beginning of 2016 when the S&P went into violent free-fall. Note how those plunges line up exactly with the two moments over the past year when the world central banks' liquidity spigot was at its lowest

5--Failed Crimean sabotage Ukraine the causes, results, items, effects

The transition to terror by our “friends and partners” says a lot. In particular, it means that other ways to achieve a desired results simply don’t work. The resumption of hostilities in the Donbass apparently seems to them futile, maps with the downed Boeing and other preparations, finally exhausted itself and the entire arsenal of forces and means, was parried by the Russian diplomacy, politics and the army, unexpectedly successful.

In addition, the positive aspect of this failed saboteur operation is the fact that these events in Crimea would give to more Russian citizens understanding as to why in 2014, LDNR were not included in the Russian Federation.


6--Could a Russian-Led Coalition Defeat Hillary’s War Plans?

Moscow is well aware that pro-Hillary forces in the State Department are rallying in favor of short-term, Libya-like regime change in Syria. But everybody knows there will be no UN fig leaf this time, as there was in 2011. Russia, (and as looks likely, China also) active in the Syrian skies will not accept a “no-fly zone” unilaterally proclaimed by the Exceptional Nation, restricting a sovereign government’s right to deploy aircraft in its own air space.

Moscow has basically carved out a coalition against regime change in Syria, united in abhorrence of ISIL and al-Nusra (now Fateh al-Sham) but pledged to the defense of the existing secular Syrian state and specifically to support for its professional, mostly Sunni and Sunni-led army. The pro-Assad forces now include the Syrian Arab Army and assorted militia, Lebanese Hizbollah fighters, Iraqi Shiite militia fighters, Russia, and Iran. India has repeatedly offered support for the government, and China has just vowed to provide aid and military training.

The Kill Assad Now Coalition on the other hand consists of the Hillary wing of the U.S. State Department, absolute monarchs of Gulf nations where Sharia is the law, and some NATO allies including Turkey. They want to prioritize the destruction of the Assad regime over the destruction of terror groups in Syria. But Turkey’s president Erdogan is reconsidering his foreign relations generally. After the recent coup attempt in which he believes the U.S. was complicit he has has met with Putin in Moscow and mended relations strained by the Turkish shooting down of a Russian fighter plane over Syria last November.

Turkey’s foreign minister has intimated that a normalization of relations with Syria is also in the cards. Especially if Turkey shifts (perhaps in return for Russian help in preventing the establishment of a Syrian Kurdistan), it might become well nigh impossible for Hillary to bomb Assad out of power.
Unless of course she wanted to show how strong she is and start World War III

7--  “Human rights” propaganda campaign paves way for military escalation in Syria


Syrian children killed by the Al Qaeda militia’s “hell cannons,” fired indiscriminately into the government-controlled neighborhoods of western Aleppo, do not have the same effect on the tear ducts of newspaper editorialists and media talking heads. Nor, for that matter, do the images coming out of Yemen of children slaughtered by Saudi airstrikes carried out with US-supplied bombs and the Pentagon’s indispensable logistical support. The horrific video of US-backed “moderate” Syrian “rebels” sawing off the head of a ten-year-old Palestinian boy likewise provoked no significant outrage...

More direct in its approach was the British daily Telegraph, which headlined an article: “For the sake of Aleppo’s children, we must try again to impose a no-fly zone in Syria...

Among the most obscene pieces was one penned, predictably, by Nicholas Kristof of the New York Times, who conflated the plight of Syria’s children with the death of his family dog. He went on to invoke a statement by Secretary of State John Kerry that ISIS is engaged in genocide as a rationale for the US to launch cruise missile attacks on the Syrian government, which is fighting ISIS. The effort to obliterate rational thought in the name of human rights is stunning.

What we are witnessing is a carefully orchestrated war propaganda campaign, designed to appeal to the humanitarian sentiments of the population in order to corral it behind a new escalation of imperialist violence in the Middle East...

More far-reaching in its implications is the development of closer collaboration between Russia, Iran, China and Turkey in relation to the five-year-old war for regime-change in Syria. Iran has over the past week allowed Russia to use Iranian bases to attack Syrian targets, while Beijing has announced an increase in military aid to Damascus. Meanwhile, in the wake of last month’s abortive US-backed military coup, Turkish Prime Minister Recep Tayyip Erdoğan has sought a rapprochement with both Moscow and Tehran.

Washington views this potential alliance with increasing disquiet, seeing it as an impediment to its military drive to assert US hegemony over the Middle East and its vast energy reserves. It cannot accept such a challenge and will, inevitably, prepare a military response. It is to this end that the “humanitarian” propaganda campaign to “save the children” of Syria—and rescue Washington’s Al Qaeda-linked proxies in the bargain—has been mounted...

“The scope of military operations continuously widened. New wars were started while the old ones continued. The cynical invocation of human rights was used to wage war against Libya and overthrow the regime of Muammar Gaddafi in 2011. The same hypocritical pretext was employed to organize a proxy war in Syria. The consequences of these crimes, in terms of human lives and suffering, are incalculable.

“The last quarter century of US-instigated wars must be studied as a chain of interconnected events. The strategic logic of the US drive for global hegemony extends beyond the neocolonial operations in the Middle East and Africa. The ongoing regional wars are component elements of the rapidly escalating confrontation of the United States with Russia and China.”
The flood of war propaganda presaging an imminent escalation of the US intervention in Syria threatens to hasten such a confrontation, and with it, the real danger of a global nuclear war.

8--Japan plans missile deployment in East China Sea; An existential threat to china?


the agenda of Japanese imperialism in Asia is not identical to that of Washington. After more than two decades of economic stagnation and facing immense internal social antagonisms, the Japan ruling class is again being propelled on the path of militarism and war in a desperate attempt to gain access to markets, resources and sources of profit. Processes are underway that could ultimately bring Tokyo once more into a direct military confrontation with its current US ally.

9--No solutions here: Green Party candidates at CNN town hall: Promoting illusions in the capitalist system


the Sanders campaign was not and the Green Party is not “revolutionary.” Stein’s identification of the impulse behind the support for Sanders with the candidate himself starkly reveals the conventional and pro-capitalist politics of the organization. Sanders’ groveling endorsement of Clinton laid bare the basic purpose of the campaign from the beginning: to channel social opposition behind the Democratic Party. Now, Stein and the Greens are seeking to tap into the same social unrest in order to contain it within the confines of bourgeois politics.

The bulk of the town hall meeting centered on questions of foreign policy, militarism and war, with Stein and Baraka presenting themselves as “peace” candidates in contrast to Clinton and the Democratic Party. They did so, however, in a wholly unprincipled manner, characterizing the “war on terror” and US wars more broadly as “catastrophic policies” driven by “incompetency,” instead of the deliberate actions of the world’s most powerful imperialist state. There was no mention of the economic impetus for imperialist war, including the drive to secure access to oil resources, nor of the broader geo-strategic interests of the American capitalist class.....

Nowhere did Stein or Baraka fundamentally challenge the legitimacy of the “war on terror,” during which over one million people have been killed in Iraq alone, along with hundreds of thousands more in Afghanistan, Libya and Syria. Instead, they merely assert that is it being waged incorrectly and at too great an expense. Elsewhere, Stein has called for reducing the military budget by half, leaving intact a whopping $300 billion if one were to go by the government’s underestimated figures.....

Stein and Baraka deliberately obscure the reality that a plurality of those killed by police in the US are white, while the President of the country and numerous politicians leading major cities are black. Fundamentally, they deny the history of class struggle in the US and the need to unite workers of all racial and ethnic backgrounds in a common struggle to overthrow capitalism....

The notion that sharing music and art is going to do anything to address the reign of police violence is laughable. It is also aimed at presenting police violence as a matter of the supposed intolerance of white people, rather than as a matter of the building up of the powers of the capitalist state against the working class and youth of all races.

The Greens’ refusal to raise the fundamental questions of capitalism demonstrates their hostility to a class analysis and the political independence of the working class. Each of their policy proposals leaves the basic underlying structure of private ownership over the means of production wholly intact. Acting as a flank of bourgeois politics, the Greens promote nothing more than protest and pressure politics within the confines of the existing economic and political system

10--German report criticizing Turkey highlights growing tensions within NATO


from the beginning that the coup has been organized to prevent a possible alliance between Russia and Turkey and possibly Iran and China that would cut across Western foreign policy in the Middle East—in particular, plans to overthrow Russia’s last remaining Arab ally, Syrian President Bashar al-Assad.
In the past days, Western officials and foreign policy strategists attacked Ankara sharply for purging pro-Western putschists in the Turkish army, and raised concerns over Ankara’s rapprochement with Moscow after Erdoğan met with Russian president Vladimir Putin in St. Petersburg last week.
“Coup-proofing doesn’t work except that it fractures and divides armed forces,” complained Aaron Stein, a Turkey expert at the Washington-based think tank Atlantic Council.....

In an interview with the Turkish Hurriyet Daily News this week, Turkish defense minister Fikri Işık indicated that Ankara is indeed considering a closer strategic and military alliance with Russia and China: “Our priority is our allies, but that cannot prevent us from cooperating with Russia or China when necessary. If our allies’ approach remains to keep Turkey at arm’s length, that will force us to develop our own capacity with other types of cooperation. We can’t shut the door to non-NATO countries like Russia or China.”...

(Germans pushed to attack Erdogan?) On Wednesday, German Interior Minister Thomas De Maizière told German regional broadcaster RBB: “There’s nothing to regret,” when asked if he regretted the release of a paper prepared by his ministry. The Interior Ministry document accuses Turkey of having been “a central platform in the Middle East” for Islamist groups since 2011 and criticizes Erdoğan for having an “ideological affinity” to Hamas in Gaza, the Muslim Brotherhood in Egypt, and armed Islamist forces in Syria.

11--Fed divided on policy amid warnings over state of global bond markets; Red alert


The minutes noted that business investment—the key driver of economic growth in the US economy—appeared to have declined further in the second quarter of 2016 “with broad-based weakness in equipment and another steep drop in drilling and mining structures.”

“Based on conversations with their contacts, participants discussed a number of factors that may have been contributing to businesses’ cautious approach to investment spending, including concern about the likelihood of an extended period of slow growth, both in the United States and abroad; narrowing profit margins; and uncertainty about prospects for government policies,” the minutes stated...

But the quantitative easing and ultra-cheap monetary policies of the Fed and other major central banks have raised concerns that bond markets are set for a collapse. Globally there are now around $13 trillion worth of government bonds trading at negative yields, meaning bond prices are so high than an investor would make a loss if they held them to maturity.

Writing in the Financial Times on Wednesday, leading global bond market trader Bill Gross likened present measures to “dirty oil” that can eventually destroy a car’s engine. In the case of central banking it was “the motor of the real economy that is at risk.”
Gross questioned whether the global store of about $13 trillion worth of negative-yielding bonds was good for the real economy. Recent data suggested it was not. “Productivity growth, perhaps the best indicator of an economy’s vitality, is abysmal in most developed countries. It has been declining in the past half-decade or so, not coincidentally tracking the advent of QE and zero lower bound interest rates,” he wrote.

Gross noted that in the US the year-on-year trend for productivity had turned negative. While most central bankers dismissed this as an aberration, Japan, where the economy was all but stagnant, indicated what could result.
In other major economies, investment, an important source of productivity growth, has never returned to the norms seen before the financial crisis of 2008.
“Corporations are using an increasing amount of cash flow to buy back shares as opposed to investing for growth,” Gross wrote. “In the US, more than $500 billion is spent annually to boost investors’ incomes rather than future profits. Money is diverted from the real economy to financial asset holders.”

12--Business Loan Delinquencies Rock Past Lehman Moment Level


...delinquencies of Commercial & Industrial loans are a doozie...

When companies see a squeeze on the horizon, they re-prioritize. To conserve cash and be able to service their debts, they cut costs and capital expenditures. Often this isn’t enough. Delinquencies become a reality. More cuts are made, which then impact sales, which begin to fall more sharply. These cuts in costs turn into lost sales for suppliers, which then have to undertake their own cuts. It spirals through the system. If enough companies do this, and if they lay off enough people, it filters down to the consumer. By that time, big trouble is appearing in other data. Hence the tight relationship between delinquencies of C&I loans and recessions


13--MOAR!  Dividends Eat Up Bigger Slice of Company Profits       --In face of low interest rates, investors clamor for higher payouts (Today's "must read")


Big companies are handing more of their profits to shareholders than at any time since the financial crisis, as record-low bond yields put a premium on dividends.
Payouts at S&P 500 companies for the past 12 months amounted to almost 38% of net income over the period, according to FactSet, the most since February 2009.

(Throwing it all away) In the second quarter, 44 S&P 500 companies paid an annual dividend that exceeded their latest 12 months of net income, the FactSet data show. That is the most in a decade and a practice some analysts deem unsustainable.

Companies have long spent large sums on dividends and share repurchases to boost their share prices. Investors now are clamoring more for dividends as a result of plunging interest rates, and companies are loath to disappoint them despite slow growth that is pressuring earnings at many firms. The dividend yield on the S&P 500, or annual payouts as a share of the current price, has been steadily above the 10-year U.S. Treasury yield for most of 2016, after only occasionally doing so for decades.

The shift has forced many investors to conclude there is no alternative to investing in stocks, a mantra that has accompanied the rise this year of the Dow Jones industrial Average and S&P 500 to records. On Thursday, the Dow rose 23.76 points to 18597.70 and the S&P rose 4.80 to 2187.02.

“This is a whole new world,” said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc., GLUSF -1.54 % a Toronto money manager. “When I started in this business back in the ’80s, you bought bonds for the coupons and stocks for the capital gains. That’s been flipped around.”   ...

The increase also underscores the intense pressure on corporate earnings. Earnings at S&P 500 companies are set to decline from a year earlier in five straight quarters, a retreat not seen since 2008-09, according to FactSet. Some analysts believe that decline may be on the verge of ending in the third quarter, thanks to a steadying in crude-oil prices, whose fall in recent years hit energy-firm profits hard.

Companies paying more than their income over the past 12 months included drug firm Pfizer Inc., PFE -0.74 % aluminum smelter Alcoa Inc., AA -1.05 % toy maker Mattel Inc. MAT 0.26 % and food companies Kellogg Co. K -0.23 % and Kraft Heinz KHC 0.41 % Co., S&P Global Market Intelligence data show.

(Destroying the company to reward shareholders?) 
Companies that pay big dividends can be loath to cut them. Construction-equipment maker Caterpillar Inc., CAT 0.72 % for example, raised its dividend 10% in June 2015, paying out recently at a $3.08 annual rate. Its earnings per share over the 12 months ended June 30 slumped to $2.18 from $3.84 a year earlier, amid a falloff in global demand for machinery. Chief Executive Doug Oberhelman said in July that the company doesn’t expect a rebound this year. The firm expects to cut more than 10,000 jobs through 2018, according to a company spokeswoman.
Despite the headwinds, the company on June 8 maintained its current dividend. It has paid higher dividends for 22 straight years, and its cash dividend has more than doubled since 2007....

Dividend-paying stocks have been among the best-performing asset classes since the financial crisis. While the S&P 500 has risen 197% since the March 2009 crisis low, the dividend aristocrats index of 50 firms that have increased dividends for at least 25 consecutive years has risen 248%....

Some analysts contend that American companies’ embrace of dividends and buybacks comes at the expense of business investment, a contributor to long-term economic growth, worker productivity and rising living standards.
Growth and productivity have advanced only slowly since the financial crisis, a period that in general has been characterized by large increases in buybacks and dividends....

Others say the gains delivered by dividends and buybacks are vulnerable to a reversal in investor sentiment unless accompanied by a turnaround in corporate earnings.
Over time, the S&P 500 is roughly 90% correlated with earnings at S&P 500 companies, said Mr. Rosenberg. That means that the index and its underlying earnings are moving nearly in lock step, a clear sign that profit growth is the most important driver of stock gains.

But this year, Mr. Rosenberg said, the correlation has turned negative, to about minus 20%, pointing to rising stocks and falling earnings. That shows a disconnect with long-term economic fundamentals, Mr. Rosenberg said.
Surging dividend payments aren’t just a U.S. phenomenon. Companies in the Stoxx 600 Europe index are paying out large sums as well


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