"There are two times in a man's life when he should not
speculate: when he can't afford it and when he can."
Mark Twain.
This
weekend, why work for a living, when there’s tons of easy money to be made in
stocks and bitcoins. Forget about the
Fed raising interest rates, President Trump and the Republicans are going to
make everyone filthy rich. Now’s the
perfect time to fight the Fed. And just wait until Sunday when the Chicago
Mercantile Exchange’s Tulip Futures arrive. Order your limo now!
We
open with stocks moving on from Bubble to One Way Street mania. When this mania
ends, likely next year, will the central banksters still have everyone’s back
covered?
"If you bet on a horse that's gambling. If you bet you can
make three spades, that's entertainment. If you bet cotton will go up three points,
that's business. See the difference."
Blackie Sherrord, gambler.
Stock market logs another round of records on tax-cut optimism
Published: Dec 15, 2017 4:45 p.m. ET
Rally in technology shares send Nasdaq to all-time high
All three main U.S. stock-market benchmarks closed at records on Friday and booked weekly gains, as investor expectations grew for passage of Republican-backed tax-cut legislation.What are stock indexes are doing?
The S&P 500 index SPX, +0.90% gained 23.80 points, or 0.9%, to close at 2,675.81, with 10 of the 11 main sectors ending in positive territory. Technology, consumer staples and health-care stocks led gains, up more than 1%. The energy sector ended flat.
For the week, the benchmark index gained 0.9%.
The Dow Jones Industrial Average DJIA, +0.58% advanced 143.08 points, or 0.6%, to finish at 24,651.74, with 26 of its 30 components finishing higher. Over the week, the blue-chip index is up 1.3%.
Both the S&P 500 and Dow booked weekly gain for the past four consecutive weeks.
The Nasdaq Composite Index COMP, +1.17% rose 80.06 points, or 1.2%, to end at 6,936.58, and gained 1.4% over the week.
---- What’s driving the markets?
Politics surrounding the tax bill continued to influence markets. A last-minute expansion of the child tax credit persuaded Sen. Marco Rubio, a Florida Republican, to back the measure. Rubio on Thursday threatened to vote against the tax bill unless it included an expansion of the child tax credit.
See: Here’s what’s in the Republican tax deal
More
America’s Inequality Machine Is Sending the Dow
Soaring
By Craig Torres and Jordan Yadoo
Updated on 15 December 2017, 17:55 GMT
The Great Recession is a speck in the rear-view mirror for America’s financial markets. They’ve advanced far beyond pre-crisis levels. In fact, Goldman Sachs says you can go back a century before 2008, and still not find a “bull market in everything” like today’s.
If the real economy had roared back the same way, Donald Trump might not be president. Instead, it’s been a grind. While unemployment is near a two-decade low, wages have grown slowly by past standards. They’re nowhere near keeping pace with the asset-price surge.
Elected on a promise of better jobs and pay, Trump is about to pull the most powerful lever any government has for firing up the economy: fiscal policy. By slashing taxes on corporate profits, its authors say, the Republican plan will unleash the animal spirits of American business -- and everyone will benefit.
A rising tide does lift all boats -- but nowadays, in
the U.S., not equally. Under both parties, recoveries have become increasingly
lopsided. The current one has helped millions of people find work; it’s also
benefited asset-owners far more than people who trade their labor for a
paycheck. Income distribution, already the most unequal in the developed world,
is getting worse. And that’s starting to influence everything from America’s
spending habits to its elections.
“The story of our time is polarization -- by party, by class and by income,” said Mark Spindel, founder and chief investment officer at Potomac River Capital in Washington, and co-author of a 2017 book about the Federal Reserve. “I don’t see anything in the tax bill to make that any better.’’
The Fed’s post-2008 toolkit included massive purchases of financial assets, which supported a liftoff on the markets but took time to trickle through to the real economy. Trump’s tax critics say his plan will have a similar effect, because companies will spend the windfall on share buybacks or dividends, instead of job-creating investments. Plenty of executives say that’s exactly what they’ll do.
More
Next, yet another exchange enters into Tulip Futures. But who will be brave or mad enough to short into a cash settled, gambling contract mania? Coming next Unicorn Futures? You know it makes sense.
Here come CME bitcoin futures: What you need to know
Published: Dec 15, 2017 6:56 p.m. ET
After a week of slow but steady trading on Cboe Global Markets, a new player
is set to enter the bitcoin futures market on Monday.CME Group Inc. CME, +0.43% the world’s largest futures exchange, is set to introduce its bitcoin contract, trading under the symbol “BTC.” Cboe January bitcoin futures XBTF8, +7.68% settled at $18,105 on Friday, a daily gain of 8% and a rise of around 21% from the contract’s opening trade at $15,000 on Sunday evening. Cboe CBOE, +0.25% said 1,515 January contracts changed hands Friday.
Cryptocurrency enthusiasts contend the introduction of futures trading will attract institutional and professional traders, lending legitimacy to a volatile market, which has attracted the spotlight with soaring prices BTCUSD, +0.84% that have spurred numerous warnings of a potential bubble.
Here are some basics that traders and investors need to know about bitcoin futures:
Futures basics
A futures contract allows a trader to place a leveraged bet on whether the price of the underlying asset will move higher or lower before the contract expires. A trader who thinks the price will rise can go “long,” while a trader who expects the price to fall can go “short.” In futures, there is a short bet for every long and vice versa.Cboe and CME bitcoin futures are cash settled, meaning no bitcoins will actually change hands when a contract expires. Winning traders effectively collect their gains from the losers. As with most contracts, traders will likely have closed out positions, collecting gains or ceding losses, before expiration.
There are some differences between the CME and Cboe contracts.
The CME contract, for one, is bigger, consisting of five bitcoin to one for the Cboe contract
Shorting
The ability to place a short bet without having to first borrow the underlying security is one of the appeals of the futures market. Investors hope it will make for more efficient price discovery, helping to tame the extreme volatility that regularly whipsaws the bitcoin market.It’s also seen as a boon for bitcoin bears, who have been frustrated by the technical difficulty inherent in shorting bitcoin.
Read: Forget missing out on bitcoin mania, and be glad you didn’t short it
Modest volume, however, may reflect a reluctance by potential shorts to enter the market, said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, a financial analytics firm, in a note earlier this week.
“Thin trading volumes would hinder short exit strategies; short sellers rarely ‘fight the tape’ and prefer not to try and accumulate short exposure in rallies; several brokers were only facilitating long futures buying and not short futures selling; some brokers are waiting several trading days before transacting and settling any bitcoin futures trades; and the cash settlement of the contract hindered arbitrage trading,” he said.
More
"But surely you overstate
the case." you say. "Are they really gambling ?" Let me give
just two examples, starting with the Bankers Trust vs Proctor & Gamble
derivatives "contract."
Though it was, as usual, a secret customised derivative contract between the notorious Bankers Trust on one side, the bank that although it did not admit guilt, out of the goodness of its heart paid a fine of $14 million to the government to settle alleged fraud in the Gibson Greetings Case, and the aptly named Proctor & Gamble on the other side, it has been reliably reported as follows
Bankers Trust would pay to Proctor & Gamble the commercial paper rate on $200 million, and Proctor & Gamble would pay to Bankers Trust that same rate less 75 basis points plus a quantity of basis points calculated by taking the market price of the Treasury's August 2023 bond and subtracting it from a number that was 1/100 of 17.04 times the market interest rate on the current five year Treasury Note. Got it.
Though it was, as usual, a secret customised derivative contract between the notorious Bankers Trust on one side, the bank that although it did not admit guilt, out of the goodness of its heart paid a fine of $14 million to the government to settle alleged fraud in the Gibson Greetings Case, and the aptly named Proctor & Gamble on the other side, it has been reliably reported as follows
Bankers Trust would pay to Proctor & Gamble the commercial paper rate on $200 million, and Proctor & Gamble would pay to Bankers Trust that same rate less 75 basis points plus a quantity of basis points calculated by taking the market price of the Treasury's August 2023 bond and subtracting it from a number that was 1/100 of 17.04 times the market interest rate on the current five year Treasury Note. Got it.
It doesn't sound much like the
kind of banking that the Federal Reserve should be insuring, but then it
doesn't sound much like banking to me. Either way, tax dollars encourage it.
Next try "knock-out options," the darling of the inter-bank currency
markets.
Here the bookie banks and others bet against governments and each other on the movements of paper currencies. They have a slight edge, however, because though very often betting against their own U.S. government, the government will bail them out via the FED if they go broke. That's why we have taxpayers, right ?
Unsound at Any Price.
Finally,
more on the London Grenfell Tower disaster.
After Grenfell Tower fire, U.S.-based group develops tool aimed at making buildings safer
The new Risk Evaluation Matrix can help assess fire risks based on materials used, a building’s occupancy and other criteria, the group said.
By Jeff Martin The Associated Press Wed., Dec. 13, 2017
ATLANTA—Six months after flames engulfed a London highrise and sparked
concerns about similarly-clad buildings around the world, a U.S.-based fire
prevention group has developed a tool aimed at making buildings safer.
The National Association of State Fire Marshals’ research foundation
says its free risk evaluation tool will be available on its website after Jan.
1.
Combustible exterior panelling fuelled the flames that enveloped
Grenfell Tower on June 14, killing 71 people, authorities said. An Associated
Press review found the same panels on several U.S. buildings, and some of the
owners were unaware of the potential danger.
The fire marshals group says the new Risk Evaluation Matrix
can help assess fire risks based on materials used, a building’s occupancy and
other criteria.
The goal is to enable fire marshals, building owners and others to make
their structures safer through a rational and scientific approach, said Nick
Dembsey, professor of fire protection engineering at Worcester Polytechnic
Institute in Massachusetts, which contributed research that went into developing
the assessment tool.
The researchers found evidence of a troubling trend: An over-reliance on
sprinkler systems. Sprinklers are effective in many fires, but they should not
justify cutting corners on other fire prevention measures, fire officials say.
“More data is needed, but the early conclusions indicate an overreliance
on sprinklers at the expense of passive fire safety systems, which endangers
both the public and the fire service alike,” said Louisiana State Fire Marshal
H. Butch Browning, who is president of the National Association of State
Marshals.
The U.S. has for decades required sprinkler systems to be installed in
new highrise buildings, as well as multiple ways for people to exit in the case
of a fire. Grenfell Tower had none of those safeguards.
“We believe that sprinklers should be in every building. But we also
have a concern that we not get all our safety eggs in one basket,” said Jon
Narva, an association spokesperson. “There’s more to fire safety than just
sprinklers.”
Since sprinklers are so effective in many interior fires, some building
codes have introduced “trade-offs” — a relaxation in regulations if sprinklers
are present. But indoor sprinklers can’t stop a fire that ignites on a
building’s exterior and spreads across the material encasing the structure.
These types of fires are of particular concern today, since many buildings are
covered with synthetic materials which can burn fast and hot.
More
Once again another year draws
to a close. If you are one of the regular reader of this six days a week update
that helps support my efforts with the occasional donation via the Paypal
button, once again I sincerely thank you. If you are a regular reader who finds
the LIR informative, interesting, occasionally amusing or entertaining, please
consider making a small donation via the Paypal button on the LIR website. For
obvious reasons in our new age of almost rampant fake news, I want to keep the
LIR advertising free. But in any event thank you for reading and sending in
helpful suggestions.
Richard Wittington, an honest dreamer, travels to London “where
the streets are paved with gold”. Fairy Bow Bells realises his destiny, and
supplies him with an introduction to the leading London bitcoin gambler, Bernie
Buymore, a 22 year old dropout from the London School of Economics, who’s
fighting extradition to America over an unintended flash crash in shady Chicago.
A Panto for modern times. With apologies to
Richard Gauntlett author of pantomime scripts.
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