Saturday, 3 June 2017

Weekend Update 03/06/2017 Trumpmania Rules.

“Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.”  

Warren Buffett

Like him or loathe him, Donald Trump has been the best President ever for US stock markets. President Trump has unleashed stock market “animal spirits” like no other President before. Hillary Clinton would have been a big loser compared to the rise of super showman President Trump. Wall Street owes a big debt of gratitude to President Putin, former FBI director Comey, the NY Times and Washington Post, plus the dysfunctional, creepy Clinton campaign, who all according to Hillary Clinton, did their part in getting Donald Trump elected President of the USA.

Below, Trumpmania rules, OK. What could possibly go wrong? Keep drinking the Kool-Aid.

“The essence of a speculative bubble is a sort of feedback, from price increases, to increased investor enthusiasm, to increased demand, and hence further price increases.” 

Robert Shiller

Stock market closes at records as tech leads gains

Published: June 2, 2017 4:29 p.m. ET
U.S. stock-market indexes closed at records Friday, led by gains for technology shares as investors looked past a weaker-than-expected May jobs report.

The S&P 500 index SPX, +0.37%  closed up 9.01 points, or 0.4%, at a record 2,349.07, after touching an intraday record at 2,440.23. Tech, with a 1% rise, was the top performing sector. Energy shares finished down 1.2%, largely following oil prices. Financials stocks were another area of weakness on Wall Street, with the sector trading 0.4% lower.

The Dow Jones Industrial Average DJIA, +0.29%  rose 62.11 points, or 0.3%, to finish at a record 21,206.29, led higher by shares of Boeing Co. BA, +1.55%  and Microsoft Corp. MSFT, +2.37%  Earlier, the average touched a record intraday high of 21,225.04.

The Nasdaq Composite Index COMP, +0.94%  climbed 58.97 points, or 0.9%, to close at a record 6,305.80, after touching an intraday high of 6,308.76.

Along with all three main indexes closing at records, the Dow industrials finished the week up 0.6%, the S&P 500 advanced 1%, and the Nasdaq gained 1.5%.

The May nonfarm payrolls data showed the economy added 138,000 jobs last month, coming in below Wall Street economists’ forecasts.

The details of the jobs report were also weaker than expected. The number of job gains for April and March were revised lower. The unemployment rate slipped to 4.3% but the decline was largely due to shrinking labor force. Average wages rose 0.2% to $26.22 an hour, in line with expectations.

“This is undoubtedly a weak jobs report, especially with downward revisions. But it’s just one data point that will not change the Fed’s course, which is to raise rates at its June meeting,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

Stock market and bonds rallied at the same time, and it’s befuddling investors

Published: June 2, 2017 4:23 p.m. ET
The stock market clambered to records on Friday, while government bonds remained in rally mode, pushing the benchmark 10-year Treasury note yield to a seven-month low, marking a puzzling dynamic on Wall Street.

A simultaneous run-up in stocks and government paper seemingly shouldn’t happen.

Why? Because Treasury prices, which move inversely to yields, tend to climb when investors are at their most cautious, fretting about growth and mounting risks. Equities, on the other hand, usually rally when optimistic investors are in a mood to embrace risk.

----There are some theories in the wake of a nonfarm-payrolls report that showed a disappointing 138,000 jobs were created in May, compared with economists’ expectations for 185,000 new jobs (one bright spot, unemployment fell to 4.3%—a 16-year low). That came a day after Automatic Data Processing Inc.’s ADP, -2.29% private-sector report implied to some strategists that job creation was set to rebound at a rip-roaring pace.

Phil Orlando, equity strategist at Federated Investors, told MarketWatch that equity investors and bond investors may be making different assumptions following the lackluster labor market data.

“Bonds are rallying because today’s jobs report was a disaster. Every other major metric we look at was poor [in the employment report],” Orlando said.

Orlando said the Treasury market is reading the jobs report as supporting the view that the U.S. economy is losing steam, encouraging investors to bet that the Federal Reserve, which has been eager to lift interest rates to more normal levels since the 2008-’09 financial crisis, will either opt not to raise rates at its next policy-setting meeting mid-June, or slow the pace of coming rate increases. Wall Street is pricing in two additional increases to benchmark interest rates in 2017.

The prospect of lower rates staying relatively low for longer may encourage investors to hold on to Treasurys, particularly if they assume a sluggish economic pace ahead.

Meanwhile, Orlando said investors, who drove stocks to a string of records in the wake of Donald Trump’s presidential election victory in November on promises of deregulation, tax cuts and an increase to infrastructure spending, had tempered policy expectations.

----Orlando said now the market may be betting that weakness in employment will force Trump & Co. to scramble to figure out a way to push his agenda through.

“This enhances the Republicans to say, ‘We have to get our act together’,” Orlando said.

But frustration is building among investors.

Loto-Quebec cancels betting on future of U.S. President Donald Trump’s presidency

In the end, Donald Trump’s presidency has lasted longer than Loto-Quebec’s plan to accept bets on its outcome.

Just one day after inviting players to make wagers on whether Trump would still be U.S. president after May 1, 2018 on its Mise-o-jeu platform, the provincial Crown corporation cancelled the bet on Thursday.

The Couillard government says it asked the provincial Crown corporation to rescind the bet.
Audrey Cloutier, a spokeswoman for Quebec Finance Minister Carlo Leitao, says the lottery corporation understood its position that the subject was a sensitive topic.

Anyone who placed bets would be reimbursed, she added.

The wager was supposed to be the latest foray into political betting for the Loto-Quebec, which also accepted bets on the outcome of last year’s U.S. presidential election.

A spokesman said the U.S. election betting set a record for the corporation as its most popular non-sporting bet of all time.

What is Hillary Clinton thinking?

By MJ Lee, CNN National Politics Reporter
(CNN)Hillary Clinton had no plan to make news -- let alone go after the Democratic National Committee.
But then she found herself face to face with veteran tech journalists Kara Swisher and Walt Mossberg at the Recode conference in California. Anxiety about social media and the spread of "fake news" was in the air. When Mossberg lamented that Democrats had fallen "way behind" Republicans on the technology front, Clinton let loose.

"I get the nomination. So I'm now the nominee of the Democratic Party. I inherit nothing from the Democratic Party," Clinton said Wednesday. "I mean, it was bankrupt, it was on the verge of insolvency, its data was mediocre to poor, nonexistent, wrong. I had to inject money into it."

Since reemerging in public after her defeat in November, Clinton has leveled sharp criticism at a host of targets she blames for President Donald Trump's victory, including Russia, former FBI Director James Comey and major news organizations like the New York Times.


Angry Democrats tired of Hillary Clinton’s blame game

Furious Democrats are slamming Hillary Clinton for blaming everyone but herself for her surprise loss in the November election, according to a report Friday.

Supporters of the Democratic National Committee were especially incensed by her criticism of the party organization, Politico said.Andrew Therriault, who served as the DNC’s director of data science until last June, called Clinton’s claims “f–king bulls–t” in tweets that were later deleted.

Elsewhere, trouble continues to build, When this Trumpmania super volcano blows, think Mount Toba rather than Mount St Helens.

S&P, Moody's Downgrade Illinois to Near Junk, Lowest Ever for a U.S. State

by Elizabeth Campbell
1 June 2017, 15:41 GMT+1 1 June 2017, 20:23 GMT+1
Illinois had its bond rating downgraded to one step above junk by Moody’s Investors Service and S&P Global Ratings, the lowest ranking on record for a U.S. state, as the long-running political stalemate over the budget shows no signs of ending.

S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40 percent of its operating budget.

“Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance,” Ted Hampton, Moody’s analyst, said in a statement. “During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached.”

Illinois hasn’t had a full year budget in place for the past two years amid a clash between the Democrat-run legislature and Republican Governor Bruce Rauner. That’s left the fifth most-populous state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois’s standing in the bond market, where investors have demanded higher premiums for the risk of owning its debt. Moody’s called Illinois “an outlier among states” after suffering eight downgrades in as many years.

---- The downgrades, which also dropped some debt backed by legislative appropriations into junk, came a day after Illinois’s legislature blew the deadline for approving a compromise budget by a simple majority. Now, it takes a higher threshold -- three fifths majority vote in each legislative chamber -- to pass anything. On Wednesday, Rauner, who is up for re-election in 2018, and Democratic House Speaker Michael Madigan, who controls much of the legislative agenda, faulted each other for the unprecedented gridlock.

Toba super-volcano catastrophe idea 'dismissed'

30 April 2013
The idea that humans nearly became extinct 75,000 ago because of a super-volcano eruption is not supported by new data from Africa, scientists say.

In the past, it has been proposed that the so-called Toba event plunged the world into a volcanic winter, killing animal and plant life and squeezing our species to a few thousand individuals.

An Oxford University-led team examined ancient sediments in Lake Malawi for traces of this climate catastrophe.

It could find none.

We close for the weekend with China. How much is China’s “dirty money” fuelling the growth of the Trumpmania bubble?

Revealed: the sneaky ways Chinese are moving money across the border

Foreign currency regulator SAFE sheds light on exodus of cash
PUBLISHED : Monday, 29 May, 2017, 7:01am UPDATED : Monday, 29 May, 2017, 1:39pm
China’s foreign currency regulator has shed light on the mass underground exodus of cash from the country, coming up with a list of 10 top cases of individuals and firms moving money covertly over the border.

Analysts said that despite tighter scrutiny, the outflows were likely to remain strong for years to come, with companies and individuals looking for better investment opportunities while safeguarding their money against a weakening Chinese economy and a falling yuan currency.

In its list, the State Administration of Foreign Exchange (SAFE) named and shamed five companies, accusing them of forging contracts or invoices to remit a combined US$226 million offshore since 2015.

Among the alleged offenders was Ningbo Big Fortune International Trade, which “colluded with several overseas companies”, “forged trade contracts”, “inflated prices to five to 20 times market prices”, and moved a total of US$119 million overseas ­between August and September 2015, the administration said.

The company was fined 22.8 million yuan (US$3.3 million) for “seriously disturbing foreign exchange market order”, the regulator said.

Fake invoices, false trade records and invalid customs forms were among the most common ways for money to be moved illegally.

The regulator said four companies, Shanghai Daxinhua Logistic, information technology firm Hangzhou Zhiyu, Harbin Goldenway Wooden Products and Daming Electron, used combinations of these methods to transfer a total of US$107 million overseas illegally in between 2015 and 2016.

Individuals also used creative methods to get their money overseas, the regulator said, with five people being fined for moving money through various means to foreign accounts.

In one case, a Guangdong resident used the US$50,000 annual foreign exchange purchase quotas of 84 people to remit US$4.35 million to his own accounts in Australia and Hong Kong from December 2015 to January this year. The person was fined 1 million yuan, SAFE said.

An individual from Shandong province siphoned US$2 million out of China between February and December 2015 by putting money into 41 bank accounts of his workers and ordering them to transfer the money overseas through online banking.

Another two people, like the others identified by the regulator only by their family names, used multiple accounts at underground banks from which they made a series of transfers overseas, each one below the official cap. In one further case an individual used as many as 31 separate bank accounts to move money to Hong Kong.

All the cases show how people are defying official efforts to stop the depletion of the country’s foreign exchange reserves.

Beijing has stepped up measures to stem capital outflows since the yuan skidded to eight-year lows and foreign reserves slumped to around US$3 trillion last year. Regulators have discouraged companies from non-core outbound investment and tightened checks on citizens exchanging foreign currency.

From July 1, it will also tighten rules for banks to report cross-border customer transactions to curb money laundering and funding of terrorism.

But Li Youhuan, from the Guangdong Academy of Social Sciences, said capital outflow was undeterred by stricter scrutiny “given the robust business I’ve seen by underground banks”.

“Measures to hold back company transactions definitely cannot work,” Li said.

“The bubble involves the purchase of an asset, usually real estate or a security, not because of the rate of return on the investment but in anticipation that the asset or security can be sold to someone else at an even higher price; the term the ‘greater fool’ has been used to suggest the last buyer was always counting on finding someone else to whom the stock or the condo apartment or the baseball cards could be sold.” 

Charles Kindleberger. Manias. Panics, and Crashes.

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