Tuesday, March 21, 2017

Today's Links

"It's not going to be called that (the Soviet Union). It's going to be called a customs union, it will be called the Eurasian Union and all of that, but let's make no mistake about it. We know what the goal is and we are trying to figure out effective ways to slow down or prevent it". Hillary Clinton Dec 2012

1--What rally? Mom-and-pop investors are getting left in the dust

The Trump rally is just the latest leg in a wild 8-year-old explosion higher, but mom-and-pop investors still aren't impressed.
By multiple measures, the retail-investing crowd has not been a significant player in the second-longest bull market on record.

Sentiment surveys show fewer than 1 in 3 believe stocks will be higher six months from now. Households were net sellers of stocks in 2016 and even exited stocks during the fourth quarter, when Donald Trump's upset presidential victory sent the market surging...

Goldman forecasts that corporations will be buying about $700 billion worth of shares this year. Net equity purchases from corporations and ETFs in 2016 totaled $584 billion and $188 billion, respectively.
That the retail crowd still isn't ready to dive into the market carries some silver lining. Usually, strong retail participation signals a bull market has expended nearly all its energy. The downside is that it also points to the disturbing historical trend of individual investors buying high and selling low

2--The CIA’s 60-Year History of Fake News: How the Deep State Corrupted Many American Writers

3--Democrats’ anti-Russia hysteria prepares the ground for war

The whole purpose of the congressional hearings—Monday’s was only the first in a series—has less to do with Trump than with the acceleration and intensification of the preparations for war with Russia. This was acknowledged in the opening remarks of the House Intelligence Committee chairman, Republican Representative Devin Nunes, who declared that whatever his disagreements with the Democrats, “one benefit” of the hearing was already clear. “It has focused wide attention on the pressing threats posed by the Russian autocrat” and set the stage “for stronger action against Russian belligerence.”...

The neo-McCarthyites of the Democratic Party have not presented a shred of credible evidence to support any of their allegations. Not a single charge can withstand critical scrutiny. But the rhetoric is utterly unrestrained, with declarations being made over and over that the alleged Russian hacking during the 2016 election was an “act of war.”

At one point during the hearing, FBI Director Comey repeated the claim made previously by US intelligence agencies that Putin had intervened in the US elections out of sheer hatred for the Democratic presidential candidate Hillary Clinton, whom he blamed for Washington’s support for anti-Putin demonstrations in Moscow in 2011, while Clinton was secretary of state. No evidence was presented to support this wild and stupid claim

4--Both Comey and National Security Agency Director Admiral Michael Rogers admit that Russia did not influence voting process in the US, shortly after Comey confirmed that there is still an active investigation.

5--Washington vultures circling Nunes for seeing no evidence of Trump-Kremlin collusion’

6--The Fed's global dollar problem       

7--Pentagon might propose sending ground troops to Syria

8--No evidence of collusion--Trump Russia

9--The Fed's mistake

there is little evidence that either wage growth or inflation is accelerating. The average hourly wage increased at just a 2.5 percent annual rate over the last quarter, slightly lower than its pace in late 2016. Broader measures of compensation, which factor in the drop in employers’ payments for health care insurance, show even weaker gains.

In addition, the inflation measures themselves show no evidence of acceleration. The core consumer price index, which excludes volatile food and energy prices, has been rising at the same 2.2 percent rate for more than a year. If rent is excluded, the rate of inflation would be just 1.3 percent.

Also, the core personal consumption deflator, the index targeted by the Fed, remains at 1.7 percent with no sign of acceleration. The Fed targets a 2.0 percent average rate for this index, meaning that it should want to see some rise above 2.0 percent to keep to its target.

These are all reasons for believing the Fed’s rate hike last week was a mistake. However it is important to keep in mind that a quarter point hike has relatively little impact. What matters far more is a sequence of rate hikes.

If the Fed makes further hikes in a context where there is little evidence of inflationary risks then it could needlessly be keeping millions of people from getting jobs. It will also be weakening the bargaining power of tens of millions of workers, to the benefit of corporations and higher paid workers.
That would be a very serious policy mistake if it happens, and one that we should not blame on robots.

10--Surprise: Good Economic News Isn’t Always Great News for Investors

Good news keeps coming for the U.S. economy. For contrarian investors, this isn’t exactly great news.
Consumers say they feel better about the economy than they have in the past 17 years. Optimism among small-business owners has surged since the election. Jobs are plentiful and wage growth is strengthening. New data coming this week, including reports on existing home sales, new home sales and durable goods orders, should contribute to the positive trend.

11--The Fed Is Stuck in the Past With Its Forecasts of the Future

for the long-term strong dollar bet, look to the Fed. The central bank is assuming the economy will experience a version of “secular stagnation”, popularized in recent years by former Treasury secretary Larry Summers. From this perspective, long-term growth will be weak, too much will be saved, and the “natural” interest rate will stay low. The dollar could still rise if the rest of the world is going to be even worse, but it’s hard to be truly bullish because the assumption of weak, long-run growth makes the Fed err on the side of lower rates.

At last week’s Fed meeting, policy makers held their long-run growth predictions for the economy at 1.6% to 2.2%, with a median forecast for long-run interest rates of 3%, equivalent to just 1% adjusted for inflation. Back in 2012, with the Lehman crash still fresh in the memory, the lowest Fed growth forecast was 2.2%, and the median expectation for long-run interest rates was above 4%.
“All these years they’ve had these bullish views and they’ve had to downgrade,” says Stephen Jen, co-founder of Eurizon SLJ Capital. “Now just as the world economy seems to be gaining traction they are moving the other way.”...

The term secular stagnation was coined by Alvin Hansen in 1938, on basically the same grounds as the idea is pushed today: weak productivity and population growth

12--Cost of Repo Safety Net Hits $74 Billion

The cost of backstopping repurchase agreements has risen from a $50 billion estimate circulated two years ago

13--Bond Rally Intensifies Inflation Debate -- Uncertainty over prospects for U.S. growth and asset prices in coming years

14--U.S. 10-Year Note Yield Hits Low for the Month--Investors unwind Trump trades, sending Treasury yield to 2.432%, as DJIA, dollar slide

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