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Is Friday triple witch ?
Consumer Credit Storms Above $4 Trillion, As Credit Card Debt Hits Record High : https://www.zerohedge.com/news/2019-03-07/consumer-credit-storms-above-4-trillion-credit-card-debt-hits-record-high
My Comment : The CC companies will really get hit in the next recession. MA and V are shorts IMO.
Excerpt:
Revolving credit increased by $2.6 billion, a rebound from December's downward revised $939 million, and rising to $1.058 trillion, a new all time high in total credit card debt outstanding.
February 21 – Reuters (Marc Jones): “Another jump in borrowing by governments will take the global mountain of sovereign debt to $50 trillion this year, ratings agency S&P Global forecast… The firm predicted sovereigns will borrow an equivalent of $7.78 trillion this year, which would be up 3.2% on 2018. ‘Some 70%, or $5.5 trillion, of sovereigns' gross borrowing will be to refinance maturing long-term debt, resulting in an estimated net borrowing requirement of about $2.3 trillion, or 2.6% of the GDP of rated sovereigns,’ said S&P Global Ratings credit analyst Karen Vartapetov.”
My comment : So, just how does the debt, both private and public, get resolved ? A recession (which the next one will be severe) will increase sovereign debt immensely. The Fed will have some very real problems stabilizing the economy. I think they will be overwhelmed.
Got Gold ? -
http://www.msn.com/en-us/money/markets/the-most-gigantic-gold-finds-of-all-time/ss-BBTQYUa?ocid=ientp_edu#image=31
My comment: I found it interesting that several of the largest nuggets came from Serra Pelada. A lot of that gold still exists there, but it's underwater. I'll bet that that gold will be recovered some day. The water certainly drowned Colossus Minerals and it hit my pocketbook.
re: golds -
I don't think inflation will be the driving force for gold. It's the debt that will send investors to gold as a safe haven. Just wait till the recession hits and the debt bubble burst and sovereign debt explodes higher sending rates higher in the process.
Gold -
My Comment: Venezuelan gold liquidation is just one of several near term factors that could impact the POG, including:
1) BrExit
2) Debt Ceiling
3) China Trade Negotiations (Could be extended another 60 days)
4) Mueller Investigation (I'm not expecting much to come of this in the end)
Of course, a positive outcome of all of the above would send stocks soaring and could set up a shorting opportunity after a brief period of time had passed.
Citi May Liquidate Over $1 Billion In Venezuela Gold Within Weeks : https://www.zerohedge.com/news/2019-02-16/citi-may-liquidate-over-1-billion-venezuela-gold-within-weeks
Excerpt:
As a result, on Friday, Guaido's advisors asked Citibank not to invoke the guarantee and not to claim the gold put up as collateral for the 2015 loan made to the government of President Nicolas Maduro if his administration does not make payments on time, Reuters reported, citing a Venezuela lawmaker. Opposition leaders have claimed that Maduro usurped power last month when he was sworn in to a second term after a disputed election widely described as a sham.
“Citibank has been asked to stand by and not invoke the guarantee until the end of the usurpation,” Alvarado said in an interview. “We don’t want to lose the gold.”
Confirming what we reported back in 2016, a finance industry source told Reuters that the gold is worth $1.1 billion.
While it is unclear whether Citi will comply with the requests, there is now a non-trivial possibility that the US bank may find itself liquidating over $1 billion in Venezuela bullion in the open market, an operation which could potentially send the price of the precious metal sharply lower.
GAAP vs non-GAAP -
•Goldcorp (NYSE:GG): Q4 Non-GAAP EPS of $0.07 beats by $0.04; GAAP EPS of -$4.58.
My comment: Non-GAAP is ridiculous. Too many companies are reporting phony non-GAAP earnings.
Higher rates in the next recession ? I think so. -
January 24 – Bloomberg (Emily Barrett and Misyrlena Egkolfopoulou): “The U.S. government shutdown risks putting a dent in both the dollar and Treasuries if it drags on. A quick resolution could do the same. A drawn-out spending battle may collide with the looming debate over America’s borrowing limit, potentially raising the odds of a U.S. credit rating downgrade, as occurred in 2011. But some observers reckon the market reaction this time around would be different: Instead of driving a haven trade into Treasuries, concerns about the U.S.’s growing debt burden could reverse that flow, pushing sovereign yields higher and the dollar lower.”
Also:
CBO Unveils Apocalyptic Long-Term Debt Picture With US Set To Borrow Over $1 Trillion For Second Year : https://www.zerohedge.com/news/2019-01-28/cbo-unveils-apocalyptic-long-term-debt-picture-us-set-borrow-over-1-trillion-second
Excerpt:
According to one specific forecast, that of Steven Zeng from Deutsche Bank, the Treasury’s total net new issuance in 2018 amounted to $1.34 trillion, more than double the 2017 level of about $550 billion. In 2019, it will be $1.4 trillion, with $1.11 trillion from more coupon-bearing debt and the rest in bills.
Lots of headwinds through March:
1) Mueller investigation results (February ?)
2) Border Wall Funding (February)
3) Debt Ceiling (March)
4) Brexit (March)
5) China trade negotiations (March)
6) Slowing global growth (China is adding only modest stimulus in order not to worsen their debt problems. Their stimulus is not sufficient to help the global economy)
I think a lot of Democrats are eager to impeach Trump and Mueller could add fuel to that fire.
Rising Credit-Card Use Shows Consumers Are Strapped : https://www.zerohedge.com/news/2019-01-19/rising-credit-card-use-shows-consumers-are-strapped
Excerpt:
Even though evidence is mounting that the U.S. economy may be soon heading into a recession, there are plenty of analysts who say that the surge in credit card borrowing is a sign of strong confidence among households. That's hardly the case. In fact, households' confidence in the future growth of their incomes has been cooling since late last summer, which means borrowers will only reach for what’s in their wallet to compensate for what their paychecks will not cover.
Add it all up and it’s likely that any rush to "charge it" will be a last gasp as income expectations continue to decline and eventually cross lines with credit card borrowing. The closer we get to recession, the more desperate a sign credit card borrowing is anything but a reflection on strengthening in household finances. Households wouldn’t be reporting that they expect their incomes to rise less if that was the case.
It's the debt -
US Consumer Credit Hits All Time High Amid Surge In Student And Auto Loans : https://www.zerohedge.com/news/2019-01-08/us-consumer-credit-hits-all-time-high-amid-surge-student-and-auto-loans
Excerpt:
moments ago the Fed reported that in November, the surge consumer credit continued, rising by $22.1 billion, above the $17.5 billion expected, after October's whopping $25 billion increase as non-revolving credit surged by the most since December 2017. The surge in borrowing in November brought the total to $3.979 trillion, new all time high, largely on the back of a newfound love with auto and student loans.
Dines predicting silver way over $100 and gold $3000-$5000 -
https://globalnews.ca/bc/program/money-talks-cknw/
Interview is near bottom of the page at Feature Interview: The Legendary Jim Dines
https://globalnews.ca/bc/program/money-talks-cknw/
The amazing Jim Dines predicts a Silver price of way way over $100 and not long ago he asserted in print in his newsletter for the record that it may very well reach 1:1 on the Gold/Silver ratio !!!
Although this may sound preposterous it would certainly not faze Keith Neumayer Chairman of First Majestic Silver and one of the world's foremost authorities on Silver who predicted in an interview this past week that he expects the Silver:Gold ratio to reach the actual present mining ratio of 9:1.
Here is the link to that interview:
Watch the Democrats.
Don't forget global markets. That's where the real vulnerability is.
It just means more consumer debt and a bigger hangover
I'm expecting the next 3 months to be very challenging for the markets because of:
1) Democratic House to be on Trump's back
2) Mueller's investigation may wrap up in February
(One article I read speculated that Trump could resign as part of an agreement with Mueller) All Hell would break loose
3) China Trade talks to end in March
4) Brexit by end of March could be a hard exit
5) Slowing Global Economy
6) Possible European Banking crisis
7) Slowing US economy - more layoffs, reduced forward guidance, bankruptcies
8) Consumer spending will slow because of the stock market decline
9) Global markets are now taking a hit (Watch Japan and China)
re: unless really bad news this weekend -
My comment: We could get a weak rally, but I wouldn't bet on it. We've got a government shutdown pending. Mattis is resigning, and the Democrats take over in January with all of the implications for Mueller's investigation and even a vote to increase the debt ceiling in March. I'm not even sure the Fed would or could do much to improve market sentiment at this juncture. They'll wait for the next financial crisis. And we have yet to get any impact from all of the debt...that will take time. One thing that will happen soon is reduced Christmas spending.
This might be the greatest classic car barn find ever : http://www.msn.com/en-us/autos/classic-cars/this-might-be-the-greatest-classic-car-barn-find-ever/ar-BBRdBeN?ocid=ientp_edu
I don't like either party. I think they both do too much harm (I did not vote for president in the last two elections). But it pales in comparison to the harm done by the Fed.
As for the markets, FedEx and Micron poor earnings after hours are sending US futures lower.
re: Trump stability -
will the stability trump has provided (obama american cities burning
and cops being murdered) in contrast to Rioting against globalist
control around the world create a flight to quality/stability into
our markets as many places over seas have much more acute
financial outlooks in terms of debt than we do given our gdp?
My comment:
I don't see Trump providing stability. The tax cuts alone will be devastating to the national debt. Schilling was recently arguing that the US Debt/GDP was strong, but he does not point out that once the economy goes into recession, the debt increases and the GDP decreases, making this a much larger number. Also, the US will be impacted by the global slowdown at a time when US asset prices have reached extremes. It all comes home to roost.
Wilbur Ross is only working on trade (he's the Commerce Secretary) and that does nothing to affect the national debt. A hard recession/depression will mean lower revenues and increased expenditures at a time when both monetary and fiscal stimulus have been used extensively, if not fully exhausted.
US Reports Biggest Ever Budget Deficit For November : https://www.zerohedge.com/news/2018-12-13/us-reports-biggest-ever-budget-deficit-november
My comment : $205 Billion in a good economy. What will it be when the recession/depression hits ? Easily $2Trillion plus per annum.
Excerpt:
The result was a November deficit of $205 billion, a 48% increase from the $139 billion shortfall a year earlier, and the biggest November deficit on record.
November outlays surged 18.4% to $411 billion last month from $347 billion a year ago, while receipts actually declined 1% to $206 billion from $208 billion in 2017, the Treasury Department said in a monthly report on Thursday. The biggest spending categories were Social Security ($84BN), Medicare ($77BN), National Defense ($62BN), Income security ($46BN) and Health ($42BN). Net interest on the US debt of nearly $22 trillion came in at a hefty $33BN. Meanwhile, Individual Income Taxes and Social Security Taxes both generated $93BN in income each.
Surging Federal Expenditures, Collapsing Tax Revenue...These Are Not Signs Of A Strong Economy : https://www.zerohedge.com/news/2018-12-08/surging-federal-expenditures-collapsing-tax-revenuethese-are-not-signs-strong
My Comment: With sovereign debt expanding in good economic times, it will explode much higher in recessionary times. And that household wealth will evaporate leaving only the residual debt accumulated.
Excerpts:
Typically in times of strong economic activity, tax revenues rise and federal government spending is flat or even declines. Times of economic weakness (usually recognized as recessions) see the opposite. The chart below shows the year over year change (quarterly basis) in Federal Government expenditures (blue line), federal tax revenue (black line), and household net worth (yellow columns), plus shaded areas are recessions. The current period of surging federal government expenditures, collapsing tax revenues, amid surging household wealth is "unique".
The 'Everything Bubble" Has Popped : https://www.zerohedge.com/news/2018-12-08/everything-bubble-has-popped
Excerpt:
Paying attention or not, here we all are; stuck together in a world awash with credit. $250 trillion in debt. 4 times that amount in unfunded liabilities. And a mind-bogglingly massive amount of tangled financial derivatives roughly the same size as both those debts and liabilities put together.
The Greed Is Now Gone
All that credit had to go somewhere. And it did.
Rare art fetched record-breaking prices. As did top-end trophy properties the world over. Rare cars and large gemstones commanded the highest prices ever seen. Stocks were bid up to ridiculous Price/Earnings multiples. And the Housing Bubble 2.0 returned to many metros around the globe -- housing has never been more unaffordable to more people than it is now.
Can you feel it? How greed is now giving way to fear?
Sure, you probably know people who are hanging onto the Wall Street marketing slogans (“Buy the dips…hang on…don’t panic…successful investors don’t sell into weakness, they buy more!”). But the party atmosphere is now over.
Just ask anyone who bought a house in Seattle in June (now down 11%). Or FAANG stocks in July (down 20%+). Or cryptocurrencies in January (down 80%+).
We've seen more downside volatility in the financial markets this year than in all of 2012-2017.
Until and unless the central banks reverse their current tightening course, everything is headed lower.
And I mean everything.
How bad will it get? Honestly, pretty damn bad. Worse than 2000 and worse than 2008.
The credit cycle is just that much larger this time.
European Threats : https://www.mauldineconomics.com/frontlinethoughts/european-threats
Excerpt:
So add all this up. We could see Europe faced with monetary tightening, hard Brexit, an Italian breakdown, popular unrest not just in France but all over, a trade war and a German/Italian bank crisis all at the same time. Again, this is not a far-off possibility. It could all be happening in the next three or four months.
If some combination of these crises develops into a perfect storm, the pain won’t stay in Europe. US, Canadian, Latin American, and Asian companies that do business with Europe will lose sales and have to lay off workers. Lenders everywhere who own Euro debt will face losses. Highly leveraged derivatives could blow up, forcing bailouts and currency interventions. We don’t know where it would lead but certainly nowhere good.
The US Market Trinity -
My comment : China, Mueller, & the Fed are all 3 having an impact on the markets. I think China can just wait for Mueller and the Democratic House to weaken Trump before getting serious about trade. And the Fed has to deal with a slowing global economy along with the impact of China and Mueller on the markets. How much longer before the Fed resorts to QE. And then there's Europe (see next post). I don't see much to slow the market's slide except some temporary technical support.
$50K-$70K car loans ? -
My Comment : Who in their right mind would take out a $50K-$70 car loan, much less even buy such a vehicle.
http://nbr.com/2018/12/06/transcript-nightly-business-report-december-6-2018/
Excerpt:
ZABRITSKI: They don`t represent a huge portion of the market. But they
are definitely the area we see the most growth. You know, these loan
amounts that are over 50 and even over $70,000. You know, again, small
part portion but definitely growing.
LEBEAU: Who is borrowing $50,000 or $60,000 to buy a new vehicle? Those
with prime or super prime credit scores, the high end of the credit market.
It`s also one of the fastest growing parts of the auto loan industry.
By comparisons, loans to those with the poorest credit scores have dropped
to an 11-year low.
US Consumer Credit Hits All Time High As Credit Card Usage Soars : https://www.zerohedge.com/news/2018-12-07/us-consumer-credit-hits-all-time-high-credit-card-usage-soars
Excerpt:
After a surprising slump in the use of revolving debt in September, when US consumers unexpectedly paid down a total of $310 million on their credit cards, moments ago, the Fed reported that in October, consumer credit posted a huge rebound, rising by $25.4 billion, above the $15.0 billion expected, the highest one month jump since last November. The surge in borrowing in October brought the total to $3.963 trillion, a 7.7% annualized increase from a year ago, and a new all time high, largely on the back of a newfound love with credit cards.
People aren't paying their credit cards and more accounts are being shut down, and it could be a sign that 'economic clouds are darkening' : https://www.businessinsider.com/people-arent-paying-their-credit-cards-and-more-are-being-shutdown-2018-12
Household Debt Registers Faster Growth in Q3 2018 : https://www.newyorkfed.org/microeconomics/hhdc
The CMD’s latest Quarterly Report on Household Debt and Credit reveals that total household debt rose by $219 billion to reach $13.51 trillion in the third quarter of 2018—an increase of 1.6 percent, up from a rise of 0.6 percent in the second quarter. Balances climbed 1.6 percent on mortgages, 2.2 percent on auto loans, 1.8 percent on credit cards, and 2.6 percent on student loans this past quarter
Record CC Debt -
My Comment: I expect MA and V to get hit hard in the next recession.
Austin Residents Saw America's Largest Credit Card Balance Jump In Past Year : https://www.zerohedge.com/news/2018-12-03/austin-residents-saw-largest-credit-card-balance-jump-us-past-year
Excerpt:
The Federal Reserve data showed that Americans’ revolving credit (credit cards) balances expanded 3.7% nationwide during the same period, hitting to a record $1.041 trillion.
Near term, it's all about Trump's tweets. Now he's saying all is well with China.
FWIW : Opinion: Elliott Wave theory suggests an unsettling event will occur in the stock market : https://www.marketwatch.com/story/elliott-wave-theory-suggests-an-unsettling-event-will-occur-in-the-stock-market-2018-12-03
My Comment: Avi Gilbert sees another depression. I don't put much stock in his writings. He vacillates too much and he never makes a prediction he will stick with. But the EW'ers may get something from this article.
Ford To Announce 25,000 Job Cuts: Morgan Stanley : https://www.zerohedge.com/news/2018-12-03/ford-could-cut-25000-jobs-during-planned-restructuring
My comment: If true, it is much more than the 14K announced by GM. Also, I don't see the G-20 trade agreement as very significant. It just kicks the can down the road and puts the dispute back at square 1 where we were when the dispute started. Nothing gained.
Meuller's investigation is the wildcard
re: National Debt -
Debt, Death, & The US Empire : https://www.zerohedge.com/news/2018-12-01/debt-death-us-empire
My Comment : So does anyone serously think any pre-emptive action will be taken to reduce the debt ? Once the global economy enters a recession (revenues decrease and expenditures increase), it will be too late.
Excerpt:
The next financial downturn will certainly dwarf the 2008 crisis, the latter of which nearly brought down the entire financial system. The next one will be far worse and will last considerably longer since nothing has been resolved from the first crisis. The only thing that has occurred has been the creation of more debt, not only in the US, but by all Western nation states.
Under current ideological conditions, a change in US foreign policy to non-intervention is unlikely. Public opinion is decidedly pro-military after years of indoctrination and propaganda by the press, government, academia, and the media.
It will take a fall in America’s economic power, specifically the loss of the dollar as the world’s reserve currency, which will ultimately bring down the empire. That is what has neocons like John Bolton concerned.
Day of Reckoning
Unfortunately, until that time, the US will continue its rampaging ways. The day of reckoning, however, appears to be fast approaching and instead of a defeat on the field of battle, the US Empire will collapse under a mountain of debt
National Debt -
I found the following interesting excerpt from Doug Noland's weekly CreditBubbleBulletin at http://creditbubblebulletin.blogspot.com/2018/12/weekly-commentary-framework-for.html
Ignoring the federal government balance sheet is a critical shortcoming of the Federal Reserve's "financial stability" framework. Fed officials would surely prefer to stay clear of fiscal politics, but the harsh reality is that monetary policy promoted unprecedented debt issuance and a tolerance for fiscal irresponsibility that has run unabated throughout a protracted economic boom. Treasury yields remain extraordinarily low in the face of a rapid deterioration in the Treasury's Credit profile. The report also didn't address potential financial stability issues associated with the scantly-capitalized government-sponsored enterprises and their almost $9.0 TN of outstanding agency (debt and MBS) securities. A spike in yields - a scenario not to be dismissed considering the risk trajectory of Treasury and agency obligations - would have a momentous impact on U.S. and global financial stability.
Bottom Of 9th, Bases Loaded, Full Count, Xi On The Mound... : https://www.zerohedge.com/news/2018-11-30/bottom-9th-bases-loaded-full-count-xi-mound
My comment: Absolutely, a market rally based on an agreement to keep talking would be an opportunity to short
Excerpt:
The game goes on, possibly to extra innings. The real-world equivalent is some promise by China to reduce the trade deficit, us putting on hold any new or increased tariffs and both sides agreeing that Intellectual Property rights are important and that both sides agree to focus on a plan to protect intellectual property rights. and when coupled with a less dogmatically hawkish Fed, we can get the year-end risk on rally, though people will be looking to fade that rally well ahead of January 1st. This is my highest probability scenario. I think if we get to the dinner, there is a decent chance some formal progress announcement is made. How strong that announcement is will determine the strength of the market reaction.
GE falling; Currently at $7.45, down $0.49 -
Here's Why GE Is Tumbling, Again : https://www.zerohedge.com/news/2018-11-30/heres-why-ge-tumbling-again
My Comment: Doug Noland refers to GE as the Canary in Credit Market
Excerpt:
And speaking of her bearish colleagues, GE's nemesis - JPM analyst Stephen Tusa - who has long been the most bearish GE voice on Wall Street, said commentary from GE’s partner Safran "supported his view that profit and cash flow growth at the aviation segment would be below consensus expectations."
Adding injury to sellside insult, also on Friday Morning, the Wall Street Journal reported that Federal investigators are questioning former employees of General Electric about details in a legacy insurance business that led to accounting problems at the conglomerate in the past year, and whether the business failed to internally acknowledge worsening results over the years. The employees also said that they were interviewed by government lawyers.
Shares fell as much as 3.7% in pre-market trading in New York, sliding deeper into 7-handle territory and approaching its financial crisis lows of $6.66.