Have a look at the Merrill Lynch MOVE Index. Think about this as the bond VIX. Since the index’s introduction in 1992, we have never closed at a lower level than yesterday. Yet contrast that to the situation ahead of us. We are in the midst of the Federal Reserve interest rate tightening cycle, the debt ceiling issue looms over us, and an upcoming, never-before-attempted-Central-Bank-balance-sheet-unwind is waiting in the wings. Yeah, bond volatility at 25 year lows makes complete sense. And it’s not just bond vol that’s sucking wind, forex volatility is also struggling. Not as bad as bond vol, but it’s cheap nonetheless.
For all his blunders and stumbles in his first half-year as President (cough cough), Donald Trump seems to have more lives than Schrödinger’s Cat. Or maybe it just seems that way. Or maybe he isn’t really there at all (like the news these days). Maybe Trump only represents one comic probability in an infinite number of universes of probability, both comic and tragic. I begin to understand why the folks in Hollywood are having a whack attack over the chief executive: you can’t storyboard this bitch; it’s like leaving The Three Stooges on their own in a sound stage to re-make Gone With the Wind.
So now we have the Atlanta Fed slicing its Q2 real GDP growth estimate down to a 2.4% annual rate. Macroeconomic Advisers, usually quite a bulled-up bunch, is down to 2.3%. The New York Fed is at 1.9% for Q2 and 1.8% for Q3. It should probably be mentioned that ten weeks ago, the Atlanta Fed was sitting pretty at a 4.1% Q2 growth forecast.Okay, so there is no recession. But growth is weak and there is no sign of improvement. Maybe this is why growth stocks have done so well — since growth in the economy is scarce, you look for it wherever you can, and that would seem to reside in technology and health care
At the core of market concerns is the diminished outlook for economic and corporate profit growth. On the later point (profits), the bullish meme remains that earnings-per-share (EPS) growth is healthy and will be like a “hockey stick” in the out quarters. We hear this every day on Bloomberg, CNBC and Fox Business Network. The problem is that the statement is simply inaccurate, at least over the next quarter and maybe further out.
of last week, the valuation measures that we find most strongly correlated with actual subsequent 10-12 year S&P 500 total returns in market cycles across history now range between 140-170% above their pre-bubble norms. While valuations at those pre-bubble norms are closely associated with prospective S&P 500 total returns in the range of 10% annually, valuations at current levels are associated with expected returns of about -2.5% annually on a 10-year horizon, and roughly zero on a 12-year horizon. Nearly every market cycle in history has brought these valuation measures back toward their historical norms, and no cycle (even those associated with quite low interest rates) has failed to bring them within about 25% of those norms. Assuming that valuations do not breach historical norms (as they did even in the most recent market cycle), the associated downside expectation for the S&P 500 over the completion of the current market cycle now runs between -48% and -63%.
GM is getting whacked harder than any of the major automakers by the industry-wide plunge in car sales, as Americans switch in ever larger numbers from cars to “trucks,” which include pickups, van, SUVs and crossovers. In the first half of 2017, GM’s car sales in the US plunged 19%, and in June 38%.GM is losing ground in the bitter industry-wide reality of dropping car sales. Inventory is piling up on GM dealer lots. At the end of June, some car models exceeded a catastrophic 180 days’ supply. GM has already cut production. There have been layoffs. Plants have been temporarily shut down, and entire shifts have been eliminated. But it hasn’t been enough.
When he was 17, five years ago, Mujtaba al-Sweikat committed the “crime” of participating in a pro-democracy rally in Saudi Arabia. Instead of attending Western Michigan University, as he had planned to do that fall, he was put in prison. Reports are now leaking out of Saudi Arabia that al-Sweikat will soon be beheaded for his transgression. It’s just the latest reminder that Saudi Arabia is America’s worst best friend.
Who is she? The leader of the National Council of Resistance of Iran, or Mujahedeen-e-Khalq, which opposed the Shah, broke with the old Ayatollah, collaborated with Saddam Hussein, and, until 2012, was designated a terrorist organization by the U.S. Department of State. At the NCRI conference in Paris in July where Gingrich spoke, and the speaking fees were reportedly excellent, John Bolton and Rudy Giuliani were also on hand. Calling Iran’s twice-elected President Hassan Rouhani, “a violent, vicious murderer,” Giuliani said, “the time has come for regime change.” Bolton followed suit. “Tehran is not merely a nuclear weapons threat, it is not merely a terrorist threat, it is a conventional threat to everybody in the region,” he said. Hence, “the declared policy of the United States of America should be the overthrow of the mullahs’ regime in Tehran.”
People who rely on their company pension plans to fund their retirement may be in for a shock: Of the 200 biggest defined-benefit plans in the S&P 500 based on assets, 186 aren’t fully funded. Simply put, they don’t have enough money to fund current and future retirees. The situation worsened for more than half of these funds from fiscal 2015 to 2016. A big part of the reason is the poor returns they got from their assets in the superlow interest-rate environment that followed the financial crisis. It’s left a hole of $382 billion for the top 200 plans.
In these summer dog days of the Trump presidency, good news is hard to come by, but in late June it was reported that the successor institution to William Kristol’s Project for a New American Century, the Foreign Policy Initiative (FPI), was shutting its doors for good.