This one from bezos made me chuckle he got trolled hard for it as he should
https://mobile.twitter.com/JeffBezos/status/679116636310360067
https://mobile.twitter.com/JeffBezos/status/679116636310360067
[h=1]U.S. small business confidence hits new two-year low[/h]WASHINGTON (Reuters) - U.S. small business confidence fell to a fresh two-year low in March amid persistent worries about sales and profits, the latest indication that economic growth braked sharply in the first quarter.
The National Federation of Independent Business (NFIB) said on Tuesday its small business optimism index dipped 0.3 point to a reading of 92.6 last month, the lowest since February 2014.
It has declined from a reading of 100 in December 2014 and has pushed further off its 42-year average of 98.
"A 'chartist' looking at the data historically might conclude that the index has clearly hit a top and is flashing a recession signal. The April survey will decide whether or not the alarm should be rung," the NFIB said in statement.
The soft reading fits in with recent economic data on consumer and business spending as well as wholesale inventory investment that have suggested economic growth slowed sharply from the fourth quarter's 1.4 percent annualized rate.
Gross domestic product growth estimates for the first
quarter are currently well below a 1 percent rate.
Four components of the NFIB index rose last month, with the remaining six declining.
While small business owners were fairly upbeat about business conditions in the next six months and their attitudes toward capital spending improved a bit, they was some softening in their views of the labor market.
Still, labor market indicators remained strong, with a hefty increase in the share of owners planing to raise compensation. At the same time, small business owners are more inclined to cut prices than raise them to boost sluggish sales and weak profits.
"Inflationary pressures remain dormant on Main Street. A recovery in spending is the only way to create inflation," the NFIB said.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
The National Federation of Independent Business (NFIB) said on Tuesday its small business optimism index dipped 0.3 point to a reading of 92.6 last month, the lowest since February 2014.
It has declined from a reading of 100 in December 2014 and has pushed further off its 42-year average of 98.
"A 'chartist' looking at the data historically might conclude that the index has clearly hit a top and is flashing a recession signal. The April survey will decide whether or not the alarm should be rung," the NFIB said in statement.
The soft reading fits in with recent economic data on consumer and business spending as well as wholesale inventory investment that have suggested economic growth slowed sharply from the fourth quarter's 1.4 percent annualized rate.
Gross domestic product growth estimates for the first
quarter are currently well below a 1 percent rate.
Four components of the NFIB index rose last month, with the remaining six declining.
While small business owners were fairly upbeat about business conditions in the next six months and their attitudes toward capital spending improved a bit, they was some softening in their views of the labor market.
Still, labor market indicators remained strong, with a hefty increase in the share of owners planing to raise compensation. At the same time, small business owners are more inclined to cut prices than raise them to boost sluggish sales and weak profits.
"Inflationary pressures remain dormant on Main Street. A recovery in spending is the only way to create inflation," the NFIB said.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
[h=1]Negative rates may be nearing a political limit[/h]In less than two years, negative interest rates have moved from the abstract realms of economic theory into the mainstream of monetary policymaking. The experiment under way in the eurozone, Japan and some smaller European economies has shown that the practical obstacles to taking rates below zero are not as large as once imagined.
Proponents say the policy — intended to encourage consumers to spend and banks to lend more to the real economy — has saved the eurozone from sinking into disastrous deflation.
But the evidence for this remains tentative. Meanwhile, negative rates are undeniably unpopular, and the longer they remain in place the greater the risk of unintended consequences.
The latest attack on the policy comes from Larry Fink, head of the asset manager BlackRock, who warns of the toll that low, and now negative, rates are taking on savers. People who want a certain income at retirement must now invest far more to achieve it and cut spending accordingly, he argues — making the policy counterproductive.
This could be said of any cut in interest rates, which will always shift income from savers to borrowers. The burden on savers need not outweigh the boost to borrowers simply because interest rates have crossed a psychological threshold at zero.
Nonetheless, José Viñals, a senior IMF official, has warned that negative rates could become more damaging for society the longer they persist, undermining the viability of life insurers, pensions and savings vehicles.
Savers’ anger is already a very real political constraint on cutting rates further. In Japan, the central bank has attempted to shield retail deposits from the full effect of negative rates, but some banks are now set to impose charges on cash they hold for pension funds. In Germany, the issue of pensioner poverty is so explosive that Wolfgang Schäuble has blamed the rise of populist political parties on European Central Bank policies.
A bigger concern for eurozone policymakers has been the effect of negative interest rates on an already fragile banking sector. Institutions that are unable to increase lending or to pass the costs of negative rates on to their depositors face a squeeze on profits. For all banks, there is an incentive to rely more on cheaper, but more volatile, wholesale funding.
Despite these concerns, many central bankers contend that the overall effect of negative rates has been positive. Wholesale interest rates have fallen, and credit growth in the eurozone has picked up since their introduction. For smaller economies, the policy has also helped to limit capital inflows and stem currency appreciation — despite the notable and counterintuitive rise in the euro and yen.
Ben Bernanke, the former Federal Reserve chair, judges that anxiety has been overdone and that the policy has “modest benefits and manageable costs”. It could be a useful tool for the Fed if US policymakers want to ease without “rolling out the big QE gun”.
Yet there are clear practical limits to cutting rates indefinitely; and in the eurozone at least, the policy may be close to its political limits. The question now is what should take its place. Mr Fink is right to say that the current anomalies in markets are the result of central banks being asked to solve economic problems in the absence of coherent fiscal policies.
The underlying challenge is how to strengthen stimulus policies and make them more effective. “Nein zu Allem” — as Mario Draghi caricatured Germany’s position — is not an acceptable answer. Opponents of negative rates need to spell out the alternatives.
Proponents say the policy — intended to encourage consumers to spend and banks to lend more to the real economy — has saved the eurozone from sinking into disastrous deflation.
But the evidence for this remains tentative. Meanwhile, negative rates are undeniably unpopular, and the longer they remain in place the greater the risk of unintended consequences.
The latest attack on the policy comes from Larry Fink, head of the asset manager BlackRock, who warns of the toll that low, and now negative, rates are taking on savers. People who want a certain income at retirement must now invest far more to achieve it and cut spending accordingly, he argues — making the policy counterproductive.
This could be said of any cut in interest rates, which will always shift income from savers to borrowers. The burden on savers need not outweigh the boost to borrowers simply because interest rates have crossed a psychological threshold at zero.
Nonetheless, José Viñals, a senior IMF official, has warned that negative rates could become more damaging for society the longer they persist, undermining the viability of life insurers, pensions and savings vehicles.
Savers’ anger is already a very real political constraint on cutting rates further. In Japan, the central bank has attempted to shield retail deposits from the full effect of negative rates, but some banks are now set to impose charges on cash they hold for pension funds. In Germany, the issue of pensioner poverty is so explosive that Wolfgang Schäuble has blamed the rise of populist political parties on European Central Bank policies.
A bigger concern for eurozone policymakers has been the effect of negative interest rates on an already fragile banking sector. Institutions that are unable to increase lending or to pass the costs of negative rates on to their depositors face a squeeze on profits. For all banks, there is an incentive to rely more on cheaper, but more volatile, wholesale funding.
Despite these concerns, many central bankers contend that the overall effect of negative rates has been positive. Wholesale interest rates have fallen, and credit growth in the eurozone has picked up since their introduction. For smaller economies, the policy has also helped to limit capital inflows and stem currency appreciation — despite the notable and counterintuitive rise in the euro and yen.
Ben Bernanke, the former Federal Reserve chair, judges that anxiety has been overdone and that the policy has “modest benefits and manageable costs”. It could be a useful tool for the Fed if US policymakers want to ease without “rolling out the big QE gun”.
Yet there are clear practical limits to cutting rates indefinitely; and in the eurozone at least, the policy may be close to its political limits. The question now is what should take its place. Mr Fink is right to say that the current anomalies in markets are the result of central banks being asked to solve economic problems in the absence of coherent fiscal policies.
The underlying challenge is how to strengthen stimulus policies and make them more effective. “Nein zu Allem” — as Mario Draghi caricatured Germany’s position — is not an acceptable answer. Opponents of negative rates need to spell out the alternatives.
[h=1]Is QE really fueling the rise of the right?[/h]Monetary policy was back in the firing line this week with analysts digesting comments from Germany's Minister of Finance Wolfgang Schaeuble who has claimed that the European Central Bank (ECB) is fueling a rise in right-wing politics.
Schaeuble, a member of the ruling Christian Democratic Union, has held a hard line against the quantitative easing employed in the euro zone. He has also been critical of the country's anti-immigrant Alternative for Germany (AfD) party, which saw a dramatic rise in support in regional elections this year, and gone so far as to claim its popularity has partly been fueled by loose monetary policy.
In a speech in Frankfurt, Schaueble laid part of the blame for the party's rise on the central bank and its president, Mario Draghi.
"I said to Mario Draghi…be very proud: you can attribute 50 percent of the results of a party that seems to be new and successful in Germany to the design of this [monetary] policy," he said, according to a report by the Wall Street Journal. The German Finance Ministry did not immediately respond to a request for comment when contacted by CNBC.
[h=4]'Direct attack'[/h]The German government has been reluctant to relax strict reform measures put in place since the euro zone debt crisis of 2011. German taxpayers have also been the major guarantors behind rescue loans given to distressed euro nations. Additionally, many policymakers within the country have rallied against further stimulus measures that they believe could cause debtor nations to become complacent.
Nonetheless, ING economist, Carsten Brzeski, called Schaeuble's "direct attack" of the ECB "unprecedented." He said that his comments conflicted with article 130 of the European Treaty which says member states should respect central bank independence and not seek to influence the decision-making body. He also called it "counterproductive" as it wouldn't change the ECB's monetary policy.
"(The argument is based on the belief) that low interest rates are hurting German savers (and banks and insurers) and prevent rather than stimulate structural reforms in the euro zone periphery," he said in a research note on Thursday morning.
"What this argument, however, often fails to admit is that German savers would be worse off had the ECB stayed at the sidelines, that it is the euro zone governments (including the German government) which fail to accelerate further reforms."
Steen Jakobsen, chief economist at Danish investment bank Saxo Bank, meanwhile believes that Schaueble is in his "full right" to criticize the ECB and central bank polices - whether from the Federal Reserve or the Bank of England - were always going to increase inequality with the rich getting richer and poor getting poorer.
"Clearly Schaeuble's point is merely there is a time for easy money, but there should also be a time to stop – Any economy can't be in 24/7/365 state of emergency just because it fits the narrative of central bankers and their outlook on the world," he told CNBC via email.
[h=4]'Unrestricted demagoguery'[/h]The AfD - which claimed 24.3 percent of the vote in Saxony-Anhalt elections in March amid the current migrant crisis - delivered its own response to the finance minister, claiming that it was the fear of losing power that was the main driver behind such comments.
Party member Alice Weidel said in statement Monday that ECB policy was impossible to change and iterated that citizens were losing money due to low interest rates. Schaeuble has been scathing about the right-wing party on several occasions and once said that it was guilty of "unrestricted demagoguery," according to a report by German publication Der Tagesspiegel in 2014.
Meanwhile, the ECB has found a friend in Bundesbank President Jens Weidmann who is also a governing council member at the Frankfurt-based institution. In an interview with the Financial Times last Thursday - before Schaeuble's comments - he said that the ECB was independent and agreed that an "expansionary monetary policy stance is appropriate at this juncture."
In March, the ECB announced a greater-than-expected range of stimulus measures aimed at boosting a fragile recovery in the region. It announced it had cut its main refinancing rate to 0.0 percent and its deposit rate to minus-0.4 percent.
Schaeuble, a member of the ruling Christian Democratic Union, has held a hard line against the quantitative easing employed in the euro zone. He has also been critical of the country's anti-immigrant Alternative for Germany (AfD) party, which saw a dramatic rise in support in regional elections this year, and gone so far as to claim its popularity has partly been fueled by loose monetary policy.
In a speech in Frankfurt, Schaueble laid part of the blame for the party's rise on the central bank and its president, Mario Draghi.
"I said to Mario Draghi…be very proud: you can attribute 50 percent of the results of a party that seems to be new and successful in Germany to the design of this [monetary] policy," he said, according to a report by the Wall Street Journal. The German Finance Ministry did not immediately respond to a request for comment when contacted by CNBC.
[h=4]'Direct attack'[/h]The German government has been reluctant to relax strict reform measures put in place since the euro zone debt crisis of 2011. German taxpayers have also been the major guarantors behind rescue loans given to distressed euro nations. Additionally, many policymakers within the country have rallied against further stimulus measures that they believe could cause debtor nations to become complacent.
Nonetheless, ING economist, Carsten Brzeski, called Schaeuble's "direct attack" of the ECB "unprecedented." He said that his comments conflicted with article 130 of the European Treaty which says member states should respect central bank independence and not seek to influence the decision-making body. He also called it "counterproductive" as it wouldn't change the ECB's monetary policy.
"(The argument is based on the belief) that low interest rates are hurting German savers (and banks and insurers) and prevent rather than stimulate structural reforms in the euro zone periphery," he said in a research note on Thursday morning.
"What this argument, however, often fails to admit is that German savers would be worse off had the ECB stayed at the sidelines, that it is the euro zone governments (including the German government) which fail to accelerate further reforms."
Steen Jakobsen, chief economist at Danish investment bank Saxo Bank, meanwhile believes that Schaueble is in his "full right" to criticize the ECB and central bank polices - whether from the Federal Reserve or the Bank of England - were always going to increase inequality with the rich getting richer and poor getting poorer.
"Clearly Schaeuble's point is merely there is a time for easy money, but there should also be a time to stop – Any economy can't be in 24/7/365 state of emergency just because it fits the narrative of central bankers and their outlook on the world," he told CNBC via email.
[h=4]'Unrestricted demagoguery'[/h]The AfD - which claimed 24.3 percent of the vote in Saxony-Anhalt elections in March amid the current migrant crisis - delivered its own response to the finance minister, claiming that it was the fear of losing power that was the main driver behind such comments.
Party member Alice Weidel said in statement Monday that ECB policy was impossible to change and iterated that citizens were losing money due to low interest rates. Schaeuble has been scathing about the right-wing party on several occasions and once said that it was guilty of "unrestricted demagoguery," according to a report by German publication Der Tagesspiegel in 2014.
Meanwhile, the ECB has found a friend in Bundesbank President Jens Weidmann who is also a governing council member at the Frankfurt-based institution. In an interview with the Financial Times last Thursday - before Schaeuble's comments - he said that the ECB was independent and agreed that an "expansionary monetary policy stance is appropriate at this juncture."
In March, the ECB announced a greater-than-expected range of stimulus measures aimed at boosting a fragile recovery in the region. It announced it had cut its main refinancing rate to 0.0 percent and its deposit rate to minus-0.4 percent.
Thinks we approaching a near term climax in everything but gold.. before the rug pull.. Who knows anymore rigged as hell... Either way gold and gold stocks highly likely will continue to be winners from here regardless if they prop the bubble longer with negative rates or we tank now...
add another reason to my long list of reason not to have a kid Ha
-------------------
'Scarier than we initially thought': CDC sounds warning on Zika virus
WASHINGTON — Public health officials used their strongest language to date in warning about a Zika outbreak in the United States, as the Obama administration lobbied Congress for $1.9 billion to combat the mosquito-borne virus.
"Most of what we've learned is not reassuring," said Dr. Anne Schuchat, the principal deputy director of the Centers for Disease Control and Prevention. "Everything we look at with this virus seems to be a bit scarier than we initially thought."
Saul Loeb, AFP/Getty Images
Dr. Anne Schuchat, principal deputy director of the Centers for Disease Control more
As summer approaches, officials are warning that mosquito eradication efforts, lab tests and vaccine research may not be able to catch up. There are 346 cases of Zika confirmed in the continental United States — all in people who had recently traveled to Zika-prone countries, according to the most recent CDC report. Of those, 32 were in pregnant women, and seven were sexually transmitted.
But in Puerto Rico, the Virgin Islands and American Samoa, the virus is now being transmitted locally. Of the 354 cases in the territories, only three are travel-related, and 37 involved pregnant women.
Schuchat said the virus has been linked to a broader array of birth defects throughout a longer period of pregnancy, including premature birth and blindness in addition to the smaller brain size caused by microcephaly. The potential geographic range of the mosquitoes transmitting the virus also reaches farther northward, with the Aedes aegypti species present in all or part of 30 states, not just 12. And it can be spread sexually, causing the CDC to update its guidance to couples.
And researchers still don't know how many babies of women infected with Zika will end up with birth defects, or what drugs and vaccines may be effective.
"This is a very unusual virus that we can't pretend to know everything about it that we need to know," said Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases. "I'm not an alarmist and most of you who know me know that I am not, but the more we learn about the neurological aspects, the more we look around and say this is very serious."
That assessment, delivered to reporters at the White House on Monday, comes the week after the White House informed Congress it was moving more than $510 million previously earmarked to combat Ebola in Africa with Zika prevention efforts closer to home.
"What I've done is take money from other areas of non-Zika research to start. We couldn't just stop and wait for the money," Fauci said. "When the president asked for $1.9 billion, we needed $1.9 billion."
White House press secretary Josh Earnest said the newest warning "hopefully serves as motivation for members of Congress to pay attention to this important topic."
But congressional Republicans accused the White House of trying to "politicize" Zika. "We’re glad the administration has agreed to our request to use existing Ebola funds to address the Zika epidemic," said Doug Andres, a spokesman for House Speaker Paul Ryan, R-Wis. "If additional Zika resources are needed those funds could and should be addressed through the regular appropriations process."
But Democrats said the potential human toll of the virus can't wait on the budget cycle.
“Down the road we'll find a vaccine. Down the road we will be able to manage this problem," said Sen. Bill Nelson, D-Fla., on the floor of the Senate Monday. "But in the meantime there's a great deal of trauma (and) some extraordinary heartbreak to some families.”
Zika has been known to exist since 1947, but was long considered to be a minor disease that causes only mild illness.
Late last year, Zika became linked to a dramatic increase in Brazil of microcephaly, a birth defect in which babies are born with abnormally small heads. If Zika’s role in causing birth defects is confirmed, it would be the first mosquito-borne illness to cause microcephaly, and the first infectious cause of microcephaly to be identified in more than 50 years, according to the CDC.
Doctors have known for years that Zika virus is associated with Guillain-Barre syndrome, in which the body attacks its own nerves, causing paralysis.
But a study released Monday also links Zika to a second autoimmune disorder called acute disseminated encephalomyelitis. It resembles multiple sclerosis and involves a swelling of the brain and spinal cord. New studies also show that the Zika virus appears to hone in on brain cells and kill them.
The Centers for Disease Control announced Monday it was providing $3.9 million in emergency Zika funding to Puerto Rico. saying the number of cases there is doubling every week and could reach into the hundreds of thousands. The money will go to increased laboratory capacity.
"We are quite concerned about Puerto Rico, where the virus is spreading throughout the island," Schuchat said. "We think there could be hundreds of thousands of cases of Zika virus in Puerto Rico and perhaps hundreds of affected babies."
add another reason to my long list of reason not to have a kid Ha
-------------------
'Scarier than we initially thought': CDC sounds warning on Zika virus
WASHINGTON — Public health officials used their strongest language to date in warning about a Zika outbreak in the United States, as the Obama administration lobbied Congress for $1.9 billion to combat the mosquito-borne virus.
"Most of what we've learned is not reassuring," said Dr. Anne Schuchat, the principal deputy director of the Centers for Disease Control and Prevention. "Everything we look at with this virus seems to be a bit scarier than we initially thought."
Dr. Anne Schuchat, principal deputy director of the Centers for Disease Control more
As summer approaches, officials are warning that mosquito eradication efforts, lab tests and vaccine research may not be able to catch up. There are 346 cases of Zika confirmed in the continental United States — all in people who had recently traveled to Zika-prone countries, according to the most recent CDC report. Of those, 32 were in pregnant women, and seven were sexually transmitted.
But in Puerto Rico, the Virgin Islands and American Samoa, the virus is now being transmitted locally. Of the 354 cases in the territories, only three are travel-related, and 37 involved pregnant women.
Schuchat said the virus has been linked to a broader array of birth defects throughout a longer period of pregnancy, including premature birth and blindness in addition to the smaller brain size caused by microcephaly. The potential geographic range of the mosquitoes transmitting the virus also reaches farther northward, with the Aedes aegypti species present in all or part of 30 states, not just 12. And it can be spread sexually, causing the CDC to update its guidance to couples.
And researchers still don't know how many babies of women infected with Zika will end up with birth defects, or what drugs and vaccines may be effective.
"This is a very unusual virus that we can't pretend to know everything about it that we need to know," said Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases. "I'm not an alarmist and most of you who know me know that I am not, but the more we learn about the neurological aspects, the more we look around and say this is very serious."
That assessment, delivered to reporters at the White House on Monday, comes the week after the White House informed Congress it was moving more than $510 million previously earmarked to combat Ebola in Africa with Zika prevention efforts closer to home.
"What I've done is take money from other areas of non-Zika research to start. We couldn't just stop and wait for the money," Fauci said. "When the president asked for $1.9 billion, we needed $1.9 billion."
White House press secretary Josh Earnest said the newest warning "hopefully serves as motivation for members of Congress to pay attention to this important topic."
But congressional Republicans accused the White House of trying to "politicize" Zika. "We’re glad the administration has agreed to our request to use existing Ebola funds to address the Zika epidemic," said Doug Andres, a spokesman for House Speaker Paul Ryan, R-Wis. "If additional Zika resources are needed those funds could and should be addressed through the regular appropriations process."
But Democrats said the potential human toll of the virus can't wait on the budget cycle.
“Down the road we'll find a vaccine. Down the road we will be able to manage this problem," said Sen. Bill Nelson, D-Fla., on the floor of the Senate Monday. "But in the meantime there's a great deal of trauma (and) some extraordinary heartbreak to some families.”
Zika has been known to exist since 1947, but was long considered to be a minor disease that causes only mild illness.
Late last year, Zika became linked to a dramatic increase in Brazil of microcephaly, a birth defect in which babies are born with abnormally small heads. If Zika’s role in causing birth defects is confirmed, it would be the first mosquito-borne illness to cause microcephaly, and the first infectious cause of microcephaly to be identified in more than 50 years, according to the CDC.
Doctors have known for years that Zika virus is associated with Guillain-Barre syndrome, in which the body attacks its own nerves, causing paralysis.
But a study released Monday also links Zika to a second autoimmune disorder called acute disseminated encephalomyelitis. It resembles multiple sclerosis and involves a swelling of the brain and spinal cord. New studies also show that the Zika virus appears to hone in on brain cells and kill them.
The Centers for Disease Control announced Monday it was providing $3.9 million in emergency Zika funding to Puerto Rico. saying the number of cases there is doubling every week and could reach into the hundreds of thousands. The money will go to increased laboratory capacity.
"We are quite concerned about Puerto Rico, where the virus is spreading throughout the island," Schuchat said. "We think there could be hundreds of thousands of cases of Zika virus in Puerto Rico and perhaps hundreds of affected babies."
Here's the latest from hussman not backing down one bit
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[h=1]Hussman Funds - Weekly Market Comment: Rounding the Bubble's Edge - April 11, 2016[/h]
April 11, 2016Rounding the Bubble's Edge
John P. Hussman, Ph.D.
All rights reserved and actively enforced.
Reprint Policy
The single most important quality that investors can have, at present, is the ability to maintain a historically-informed perspective amid countless voices chanting “this time is different” and arguing that long-term investment returns have no relationship to the price that one pays.
From a long-term, historically-informed investment perspective, the S&P 500 remains obscenely overvalued on valuation measures most closely correlated with actual subsequent market returns (and that have remained tightly correlated with actual market returns even in recent cycles). We estimate that S&P 500 nominal annual total returns will average only about 0-2% on a 10-12 year horizon, with negative expected real returns after inflation. From a cyclical perspective, we continue to expect the S&P 500 to retreat by about 40-55% over the completion of the current market cycle; an outcome that we would view as run-of-the-mill and that would in no way represent a worst-case scenario. Every market cycle in history has drawn valuations toward or below levels consistent with expectations of 10% nominal annual returns over a 10-12 year horizon. This includes cycles prior to the 1960’s when interest rates regularly visited levels similar to the present.
Those two perspectives, in combination, mean that we expect the market to go nowhere for more than a decade, but to go nowhere in a distressing way that includes steep interim losses. This is really no different than the expectations I expressed at the 2000 and 2007 market peaks, based on similar valuation arithmetic. Of course, in order to get to zero 10-12 year returns, steep interim losses must also be followed by substantial gains. In my view, the best way for investors to achieve strong returns in the S&P 500 over the coming 10-12 years is to wait for the rain, and torrential rain at that.
In post-war data, we find 10-12 year S&P 500 total returns best correlated with the ratio of market capitalization to corporate gross value added. However, we complement this with numerous other measures, including conventional ones (precisely because they are followed by others, though we do take account of their respective shortfalls). For a very long-term perspective, the ratio of market capitalization to GDP is useful because of the ability to impute estimated pre-war values using related economic data. The chart below is sufficient to summarize the long-term relationship between valuations and expected subsequent market returns. The completion of every market cycle has been associated with a plunge in valuations and a spike in prospective long-term returns. The present situation offers long-term investors very little for the risk they assume. That will change.
From an intermediate-term perspective, the U.S. equity market continues to trace out an arc that we view as the rounded top-formation of the third speculative bubble in 16 years. The S&P 500 is presently at the same level it set in November 2014, and the broad NYSE composite is at the same level it set in November 2013. I’ve frequently emphasized that, with a few exceptions such as 1987, most market peaks are a process, not an event. While we have to be alert for the potential for steep, vertical losses, a historically-informed understanding of this process demands that investors be patient, and refrain from placing too much faith in what I’ve often called the “fast, furious, prone-to-failure” advances that occasionally clear oversold conditions.
Visualizing this process of top-formation from a historical standpoint provides a useful reminder that even the worst bear market retreats across history were generally preceded by quite an extended period of choppy sideways market action. The following chart was suggested by Bill Hester based on a commentary by Owen Williams. It shows daily S&P 500 data from 1972-1974, 2000-2002, 2007-2009, and the period since late-2014. The version below differs a bit in that it sets the origin to capture the whole top formation, rather than starting from the exact top itself. The chart isn’t intended as a forecast of any sort, but is instead a reminder that the kind of market action we’ve observed over the past year is consistent with what has regularly been observed in other contexts where valuations were extreme and tepid market internals suggested growing risk-aversion among investors. Each instance included a long period of choppy top-formation over which the market was essentially unchanged.
If one thing in the advancing half-cycle since 2009 has been legitimately “different,” it’s this: in the face of zero-interest policy, even extreme “overvalued, overbought, overbullish” conditions, which were reliably negative for stocks in prior cycles across history, weren’t sufficient to stop investors from speculating in recent years. Before adopting a hard-negative market outlook, one had to wait for explicit deterioration in market internals across a broad range of individual stocks, industries, sectors, and security types, including debt securities of varying creditworthiness. We view market internals as the central consideration in distinguishing overvalued markets that tend to continue higher from overvalued markets that collapse, and we introduced adaptations to our own approach in mid-2014 to better reflect that importance (see the Box in The Next Big Short for the full narrative).
Even if “this time is different,” we don’t expect it will be different enough to sustain valuations at current obscene levels in the absence of favorable market internals. We can’t rule out a fresh shift back to the kind of speculative yield-seeking that dominated investor behavior earlier in this cycle, but we’ll take that cue directly from market internals. In any event, we doubt that fresh speculation would be sustained for long, so any constructive view on that basis would demand a tight safety net. For investors optimistic enough to reject the idea that the market is doomed to suffer extreme valuations and dismal expected returns forever, the completion of this cycle is likely to offer numerous opportunities to act on that optimism, at far higher prospective returns than are currently available.
With respect to the near-term, my views aren’t very pointed here, though as I noted last week, I do believe "tail risk" is increasing. In recent weeks, I’ve maintained a neutral near-term market outlook because of improvement in various trend-following measures, though broad internals still don’t support the view that investors have shifted to the kind of persistent risk-seeking behavior that we observed prior to mid-2014. Last week, there was enough deterioration in momentum measures to chip away at the technical picture, throwing near-term conditions to a somewhat negative outlook, overall. That negative outlook would harden substantially on a break below about 1975 on the S&P 500. Purely as something to monitor, my impression is that any sustained break below the widely-followed 200-day moving average (presently about 2014 simple and 2008 exponential) could contribute to exit attempts by trend-followers. Even here, 56% of individual stocks remain below their own respective 200-day averages.
Regardless of near-term technical factors, however, the most important consideration here is that extreme valuations continue to be joined by relatively poor market internals, which introduces negative skew and a fat left tail into the likely distribution of returns. Put differently, even if short-term market behavior appears relatively stable, one should be prepared for steep losses that may emerge, if history is any guide, seemingly out-of-the-blue.The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse. Please see periodic remarks on the Fund Notes and Commentary page for discussion relating specifically to the Hussman Funds and the investment positions of the Funds.
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Prospectuses for the Hussman Strategic Growth Fund, the Hussman Strategic Total Return Fund, the Hussman Strategic International Fund, and the Hussman Strategic Dividend Value Fund, as well as Fund reports and other information, are available by clicking "The Funds" menu button from any page of this website.
Estimates of prospective return and risk for equities, bonds, and other financial markets are forward-looking statements based the analysis and reasonable beliefs of Hussman Strategic Advisors. They are not a guarantee of future performance, and are not indicative of the prospective returns of any of the Hussman Funds. Actual returns may differ substantially from the estimates provided. Estimates of prospective long-term returns for the S&P 500 reflect our standard valuation methodology, focusing on the relationship between current market prices and earnings, dividends and other fundamentals, adjusted for variability over the economic cycle (see for example Investment, Speculation, Valuation, and Tinker Bell, The Likely Range of Market Returns in the Coming Decade and Valuing the S&P 500 Using Forward Operating Earnings ).
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[h=1]Hussman Funds - Weekly Market Comment: Rounding the Bubble's Edge - April 11, 2016[/h]
April 11, 2016Rounding the Bubble's Edge
John P. Hussman, Ph.D.
All rights reserved and actively enforced.
Reprint Policy
The single most important quality that investors can have, at present, is the ability to maintain a historically-informed perspective amid countless voices chanting “this time is different” and arguing that long-term investment returns have no relationship to the price that one pays.
From a long-term, historically-informed investment perspective, the S&P 500 remains obscenely overvalued on valuation measures most closely correlated with actual subsequent market returns (and that have remained tightly correlated with actual market returns even in recent cycles). We estimate that S&P 500 nominal annual total returns will average only about 0-2% on a 10-12 year horizon, with negative expected real returns after inflation. From a cyclical perspective, we continue to expect the S&P 500 to retreat by about 40-55% over the completion of the current market cycle; an outcome that we would view as run-of-the-mill and that would in no way represent a worst-case scenario. Every market cycle in history has drawn valuations toward or below levels consistent with expectations of 10% nominal annual returns over a 10-12 year horizon. This includes cycles prior to the 1960’s when interest rates regularly visited levels similar to the present.
Those two perspectives, in combination, mean that we expect the market to go nowhere for more than a decade, but to go nowhere in a distressing way that includes steep interim losses. This is really no different than the expectations I expressed at the 2000 and 2007 market peaks, based on similar valuation arithmetic. Of course, in order to get to zero 10-12 year returns, steep interim losses must also be followed by substantial gains. In my view, the best way for investors to achieve strong returns in the S&P 500 over the coming 10-12 years is to wait for the rain, and torrential rain at that.
In post-war data, we find 10-12 year S&P 500 total returns best correlated with the ratio of market capitalization to corporate gross value added. However, we complement this with numerous other measures, including conventional ones (precisely because they are followed by others, though we do take account of their respective shortfalls). For a very long-term perspective, the ratio of market capitalization to GDP is useful because of the ability to impute estimated pre-war values using related economic data. The chart below is sufficient to summarize the long-term relationship between valuations and expected subsequent market returns. The completion of every market cycle has been associated with a plunge in valuations and a spike in prospective long-term returns. The present situation offers long-term investors very little for the risk they assume. That will change.
From an intermediate-term perspective, the U.S. equity market continues to trace out an arc that we view as the rounded top-formation of the third speculative bubble in 16 years. The S&P 500 is presently at the same level it set in November 2014, and the broad NYSE composite is at the same level it set in November 2013. I’ve frequently emphasized that, with a few exceptions such as 1987, most market peaks are a process, not an event. While we have to be alert for the potential for steep, vertical losses, a historically-informed understanding of this process demands that investors be patient, and refrain from placing too much faith in what I’ve often called the “fast, furious, prone-to-failure” advances that occasionally clear oversold conditions.
Visualizing this process of top-formation from a historical standpoint provides a useful reminder that even the worst bear market retreats across history were generally preceded by quite an extended period of choppy sideways market action. The following chart was suggested by Bill Hester based on a commentary by Owen Williams. It shows daily S&P 500 data from 1972-1974, 2000-2002, 2007-2009, and the period since late-2014. The version below differs a bit in that it sets the origin to capture the whole top formation, rather than starting from the exact top itself. The chart isn’t intended as a forecast of any sort, but is instead a reminder that the kind of market action we’ve observed over the past year is consistent with what has regularly been observed in other contexts where valuations were extreme and tepid market internals suggested growing risk-aversion among investors. Each instance included a long period of choppy top-formation over which the market was essentially unchanged.
If one thing in the advancing half-cycle since 2009 has been legitimately “different,” it’s this: in the face of zero-interest policy, even extreme “overvalued, overbought, overbullish” conditions, which were reliably negative for stocks in prior cycles across history, weren’t sufficient to stop investors from speculating in recent years. Before adopting a hard-negative market outlook, one had to wait for explicit deterioration in market internals across a broad range of individual stocks, industries, sectors, and security types, including debt securities of varying creditworthiness. We view market internals as the central consideration in distinguishing overvalued markets that tend to continue higher from overvalued markets that collapse, and we introduced adaptations to our own approach in mid-2014 to better reflect that importance (see the Box in The Next Big Short for the full narrative).
Even if “this time is different,” we don’t expect it will be different enough to sustain valuations at current obscene levels in the absence of favorable market internals. We can’t rule out a fresh shift back to the kind of speculative yield-seeking that dominated investor behavior earlier in this cycle, but we’ll take that cue directly from market internals. In any event, we doubt that fresh speculation would be sustained for long, so any constructive view on that basis would demand a tight safety net. For investors optimistic enough to reject the idea that the market is doomed to suffer extreme valuations and dismal expected returns forever, the completion of this cycle is likely to offer numerous opportunities to act on that optimism, at far higher prospective returns than are currently available.
With respect to the near-term, my views aren’t very pointed here, though as I noted last week, I do believe "tail risk" is increasing. In recent weeks, I’ve maintained a neutral near-term market outlook because of improvement in various trend-following measures, though broad internals still don’t support the view that investors have shifted to the kind of persistent risk-seeking behavior that we observed prior to mid-2014. Last week, there was enough deterioration in momentum measures to chip away at the technical picture, throwing near-term conditions to a somewhat negative outlook, overall. That negative outlook would harden substantially on a break below about 1975 on the S&P 500. Purely as something to monitor, my impression is that any sustained break below the widely-followed 200-day moving average (presently about 2014 simple and 2008 exponential) could contribute to exit attempts by trend-followers. Even here, 56% of individual stocks remain below their own respective 200-day averages.
Regardless of near-term technical factors, however, the most important consideration here is that extreme valuations continue to be joined by relatively poor market internals, which introduces negative skew and a fat left tail into the likely distribution of returns. Put differently, even if short-term market behavior appears relatively stable, one should be prepared for steep losses that may emerge, if history is any guide, seemingly out-of-the-blue.The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse. Please see periodic remarks on the Fund Notes and Commentary page for discussion relating specifically to the Hussman Funds and the investment positions of the Funds.
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Prospectuses for the Hussman Strategic Growth Fund, the Hussman Strategic Total Return Fund, the Hussman Strategic International Fund, and the Hussman Strategic Dividend Value Fund, as well as Fund reports and other information, are available by clicking "The Funds" menu button from any page of this website.
Estimates of prospective return and risk for equities, bonds, and other financial markets are forward-looking statements based the analysis and reasonable beliefs of Hussman Strategic Advisors. They are not a guarantee of future performance, and are not indicative of the prospective returns of any of the Hussman Funds. Actual returns may differ substantially from the estimates provided. Estimates of prospective long-term returns for the S&P 500 reflect our standard valuation methodology, focusing on the relationship between current market prices and earnings, dividends and other fundamentals, adjusted for variability over the economic cycle (see for example Investment, Speculation, Valuation, and Tinker Bell, The Likely Range of Market Returns in the Coming Decade and Valuing the S&P 500 Using Forward Operating Earnings ).
Oil now back to 200 dma taking a look.. Lots of hopes for potential "deal" at Doha this weekend.. In the end oils fate near term will be tied to global economy.. The bust phase as far as the industry itself likely over/in progress.. but for a sustained bounce (hold 40+ oil) the global economy can't roll over here... That's the big ? I have no idea the answer... Will central bankers recent moves push the day of recogning out further or will it begin now..
http://www.theverge.com/2016/4/8/11393278/tesla-model-3-vs-apple-iphone-sales-compared
Really good piece on why Tesla is overrated. An opinion I obviously agree with...
Really good piece on why Tesla is overrated. An opinion I obviously agree with...
As far as early model quality/recall issues this will always be an issue no matter who makes cars just the nature of the car business nobody immune to that.. It's more about how quickly you handle it and tesla smart in that all early model 3s will be sold in Cali so they can have quick turnarounds with inevitable problems.. They know this...
anyway I hate the stock at current valuation.. Just think it will be a good buy on a big dip to hold for the long haul... As they will be the ones leading the electric charge.. Obviously will be a bumpy ride...the easy part building hype and demand.. The challenge making them and not losing your ass doing it.. My guess is the top talent musk attracts will win out in the end..
anyway I hate the stock at current valuation.. Just think it will be a good buy on a big dip to hold for the long haul... As they will be the ones leading the electric charge.. Obviously will be a bumpy ride...the easy part building hype and demand.. The challenge making them and not losing your ass doing it.. My guess is the top talent musk attracts will win out in the end..
Tesla has something that EVERY successful company has to have . Demand for the product being sold.
Most companies fail because there is no demand for what they are selling .
So they at least have a fighting chance if they can execute.
The big auto companies are going to be running into some of the same hurdles tesla has. Only difference is they are more diversified then tesla.
But if you are a big believer in this tech and lusk as a leader it's probably a good longterm hold.
Most companies fail because there is no demand for what they are selling .
So they at least have a fighting chance if they can execute.
The big auto companies are going to be running into some of the same hurdles tesla has. Only difference is they are more diversified then tesla.
But if you are a big believer in this tech and lusk as a leader it's probably a good longterm hold.
Bad news still good news? Futures still green for now.. And these numbers now getting a bump from rising gas prices.. Seems like the new auto bubble has halted.. With hoards of people taking on cheap loans for ridiculously expensive cars... Saw a chart where used car inventory projected to soar next 2-3 years...
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[h=1]Retail Sales Unexpectedly Fall as U.S. Spending Loses Momentum[/h]Sales at U.S. retailers unexpectedly fell in March, raising concern consumer spending is losing momentum.
The 0.3 percent drop in purchases followed little change the prior month, Commerce Department figures showed Wednesday in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 0.1 percent gain.
The decrease was led by the biggest drop in demand for autos in a year, and cutbacks at clothing stores, internet merchants and restaurants. Sustained gains in consumer spending, the biggest part of the economy, are needed at a time exports are still depressed by cooling global markets and U.S. manufacturing is barely emerging from a slump.
“I don’t think the consumer will spend beyond his or her means,” Gregory Daco, head of U.S. macroeconomics at Oxford Economics Ltd. in New York, said before the report. “A sustained acceleration in wages is still the missing piece.”
Estimates in the Bloomberg survey for total retail sales ranged from declines of 0.8 percent to a gain of 0.4 percent. The February tally was previously reported as a 0.1 percent drop.
While nine of 13 major categories showed gains last month, those increases weren’t large enough to offset the drop in autos, clothing and restaurants.
Automobile dealers’ sales dropped 2.1 percent in March, the biggest decrease since February 2015. That was in line with industry data earlier this month that showed the torrid pace of car demand was leveling off. Purchases of cars and light trucks grew at a 16.5 million annualized rate in March, the slowest in more than a year, according to Ward’s Automotive Group.
[h=2]Excluding Autos[/h]Excluding autos, purchases rose 0.2 percent last month after being little changed in February, Wednesday’s report showed. The increase was paced by a 0.9 percent jump in receipts at service stations that probably reflected the recent pickup in gasoline prices.
The Commerce Department’s retail sales data aren’t adjusted for prices, so higher fuel costs boost filling-station receipts.
Regular gasoline at the pump climbed last month to an average $1.94 a gallon, or up 21 cents from the February average of $1.73, according to AAA, the biggest U.S. auto group. Fuel costs, however, remain a tailwind for consumers as the February level was the lowest since 2009.
Retail sales excluding automobiles and service stations increased 0.1 percent, less than the projected gain of 0.3 percent in the Bloomberg survey.
[h=2]Saving More[/h]That suggests Americans are boosting savings even as the job market continues to improve.
The figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, showed a 0.1 percent advance, matching the prior month’s increase in the so-called retail control group.
The retail report showed sales decreased 0.9 percent at clothing chains, the biggest retreat since October, and a 0.8 percent drop at restaurants and bars.
Some economists may further trim estimates for consumer spending following the retail sales results. The median forecast in a Bloomberg survey shows household purchases rose at a 1.9 percent annualized rate in the first quarter, the weakest in a year and following a 2.4 percent pace in the prior three months.
The labor market continues to remain robust, however. The March payrolls report showed employers added 215,000 workers to payrolls after a 245,000 February advance, while the jobless rate edged up to 5 percent as more people entered the labor force.
A separate report from the Labor Department Wednesday showed wholesale prices in the U.S. unexpectedly fell in March for a second month, showing inflation is still well-contained as Federal Reserve officials weigh whether further increases in the benchmark interest rate are warranted.
The 0.1 percent drop in the producer-price index followed a
0.2 percent decrease in February. Over the past 12 months, wholesale prices fell 0.1 percent.
Before it's here, it's on the Bloomberg Terminal.
-----------
[h=1]Retail Sales Unexpectedly Fall as U.S. Spending Loses Momentum[/h]Sales at U.S. retailers unexpectedly fell in March, raising concern consumer spending is losing momentum.
The 0.3 percent drop in purchases followed little change the prior month, Commerce Department figures showed Wednesday in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 0.1 percent gain.
The decrease was led by the biggest drop in demand for autos in a year, and cutbacks at clothing stores, internet merchants and restaurants. Sustained gains in consumer spending, the biggest part of the economy, are needed at a time exports are still depressed by cooling global markets and U.S. manufacturing is barely emerging from a slump.
“I don’t think the consumer will spend beyond his or her means,” Gregory Daco, head of U.S. macroeconomics at Oxford Economics Ltd. in New York, said before the report. “A sustained acceleration in wages is still the missing piece.”
Estimates in the Bloomberg survey for total retail sales ranged from declines of 0.8 percent to a gain of 0.4 percent. The February tally was previously reported as a 0.1 percent drop.
While nine of 13 major categories showed gains last month, those increases weren’t large enough to offset the drop in autos, clothing and restaurants.
Automobile dealers’ sales dropped 2.1 percent in March, the biggest decrease since February 2015. That was in line with industry data earlier this month that showed the torrid pace of car demand was leveling off. Purchases of cars and light trucks grew at a 16.5 million annualized rate in March, the slowest in more than a year, according to Ward’s Automotive Group.
[h=2]Excluding Autos[/h]Excluding autos, purchases rose 0.2 percent last month after being little changed in February, Wednesday’s report showed. The increase was paced by a 0.9 percent jump in receipts at service stations that probably reflected the recent pickup in gasoline prices.
The Commerce Department’s retail sales data aren’t adjusted for prices, so higher fuel costs boost filling-station receipts.
Regular gasoline at the pump climbed last month to an average $1.94 a gallon, or up 21 cents from the February average of $1.73, according to AAA, the biggest U.S. auto group. Fuel costs, however, remain a tailwind for consumers as the February level was the lowest since 2009.
Retail sales excluding automobiles and service stations increased 0.1 percent, less than the projected gain of 0.3 percent in the Bloomberg survey.
[h=2]Saving More[/h]That suggests Americans are boosting savings even as the job market continues to improve.
The figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, showed a 0.1 percent advance, matching the prior month’s increase in the so-called retail control group.
The retail report showed sales decreased 0.9 percent at clothing chains, the biggest retreat since October, and a 0.8 percent drop at restaurants and bars.
Some economists may further trim estimates for consumer spending following the retail sales results. The median forecast in a Bloomberg survey shows household purchases rose at a 1.9 percent annualized rate in the first quarter, the weakest in a year and following a 2.4 percent pace in the prior three months.
The labor market continues to remain robust, however. The March payrolls report showed employers added 215,000 workers to payrolls after a 245,000 February advance, while the jobless rate edged up to 5 percent as more people entered the labor force.
A separate report from the Labor Department Wednesday showed wholesale prices in the U.S. unexpectedly fell in March for a second month, showing inflation is still well-contained as Federal Reserve officials weigh whether further increases in the benchmark interest rate are warranted.
The 0.1 percent drop in the producer-price index followed a
0.2 percent decrease in February. Over the past 12 months, wholesale prices fell 0.1 percent.
Before it's here, it's on the Bloomberg Terminal.
https://finance.yahoo.com/news/tesla-other-tech-giants-scramble-224732356.html
Good piece on Lithium. Nevada has all the lithium currently mined in NA but the Argentina triangle is where the bulk of it is. I thought Congo had a lot, but that is actually cobalt, not lithium. Also needed for the batteries but not as in demand.
Good piece on Lithium. Nevada has all the lithium currently mined in NA but the Argentina triangle is where the bulk of it is. I thought Congo had a lot, but that is actually cobalt, not lithium. Also needed for the batteries but not as in demand.
