Net issuance of equities last year totaled minus $229.7 billion, with nonfinancial corporate (NFC) issues at -$565.7 billion and financial issues at $269.7 billion. The increase in financials was led by a $283.9 billion increase in equity ETFs, the biggest annual increase on record. The decline in NFC issues reflected the impact of stock buybacks and M&A activity more than offsetting IPOs and secondary issues………..The bottom line is that the current bull market has been driven largely by corporations buying back their shares, as I have been observing for many years. More recently, we have been seeing individual investors increasingly moving out of equity mutual funds and into equity ETFs. Both kinds of buyers tend to be much less concerned about historically high valuation multiples than more traditional buyers are.
…….With industry expiring, or moving elsewhere (also temporarily), we inflated finance to nearly 40 percent of the economy. The new financialization was, in effect, setting a matrix of rackets in motion. What had worked as capital management before was allowed to mutate into various forms of swindling and fraud — such as the bundling of dishonestly acquired mortgages into giant bonds and then selling them to pension funds desperate for “yield,” or the orgy of merger and acquisition in health care that turned hospitals into cash registers, or the revenue streams on derivative “plays” that amounted to bets with no possibility of ever being paid off, or the three-card-monte games of interest rate arbitrage played by central banks and their “primary dealer” concubines.
The Fed tightens on Wednesday and bonds rally. What the hay? GaveKal, Jeff Gundlach, and Jim Bianco nailed it in that every spec and their mother are/were short 10-year Treasuries. But this is only a small part of the story: The global bond markets are broken. There are no signals, there is no noise. Trying to infer any sense of economic or financial information from bond yields is futile.
….according to Wells Fargo’s Ike Boruchow, it’s “increasingly clear that retail is under significant pressure” adding that store traffic remains weak (likely to get softer this week due to Easter shift), while markdown rates are not only elevated on an annual basis, but also getting sequentially worse. He concludes that “retailers are running out of time” to reach elevated Q1 numbers as consumption is failing to rebound. In a separate note, Cowen’s retail team conducted channel checks and found that March week 3 traffic declined 13.3% vs -2.4% y/y, “slightly worse” than Cowen’s estimate down 11%-13%, vs last week’s -10.6%, citing national traffic devices.
Americans are ruled by a lawyereaucracy. Most of our “citizen legislature” (i.e. Congress) is comprised of lawyers; executive branch agencies are crawling with them; and the federal judiciary is dominated by left-wing politicians posing as objective “judges.” This last point was demonstrated once again when, after President Trump issued his revised “travel ban” executive order an old law school pal of Obama’s from Hawaii, who is now an Obama-nominated federal judge, issued another one of those lawyerly Decrees From Upon High declaring the executive order null and void everywhere – not just in Hawaii.
According to the NADA Used Car Guide, wholesale prices on used vehicles are getting crushed. Let’s take a look at the details….In a reversal of what typically occurs in February, wholesale prices of used vehicles up to eight years old fell substantially last month, dropping 1.6% compared to January. The drop was counter to the 1% increase expected for the month and marked just the second time in the past 20 years prices fell in February (last years’ scant 0.2% being the other instance).
It was into this crazy house that the new, jet-lagged US Secretary of State Rex Tillerson was transported from turbulent Washington. After a quick look at the DMZ, Tillerson announced `no more Mr. Nice Guy.’ The US had run out of `strategic patience’ with North Korea and will go to war to end North Korea’s ‘threat’ to the US, he warned. Tillerson, formerly CEO of EXXON, is well-versed in world affairs but the Korean peninsula’s complexities could be too much for him to quickly absorb. Immediately threatening war is no way to begin a diplomatic mission. But Tillerson was obviously reading from a script written by his boss, Donald Trump, whose knowledge of North Asian affairs makes Tillerson look like a Confucian scholar. Welcome to Trump’s credo: tweet loudly and walk with a big stick.What would war between the US and North Korea mean? A very grim scenario if it occurs.
The Kagan family, America’s neoconservative aristocracy, has reemerged having recovered from the letdown over not gaining its expected influence from the election of Hillary Clinton and from its loss of official power at the start of the Trump presidency.Back pontificating on prominent op-ed pages, the Family Kagan now is pushing for an expanded U.S. military invasion of Syria and baiting Republicans for not joining more enthusiastically in the anti-Russian witch hunt over Moscow’s alleged help in electing Donald Trump. In a Washington Post op-ed on March 7, Robert Kagan, a co-founder of the Project for the New American Century and a key architect of the Iraq War, jabbed at Republicans for serving as “Russia’s accomplices after the fact” by not investigating more aggressively.
The stock market has soared since the election, counting on this $1 trillion in new federal spending and “pricing it in.” Infrastructure stocks were hot. But by the looks of it, some folks are going to end up holding the bag… …Because there is not a trace of this huge spending plan in the 2018 budget blueprint released by the White House on Thursday. Instead, the blueprint slashed the budget of the Department of Transportation by 13% and cut out some existing plans for infrastructure spending.
The Federal Reserve might be doing the right thing for the U.S. economy by moving to bring interest rates back up to normal. But for foreign companies and governments that have borrowed trillions of U.S. dollars, the adjustment could be painful.Thanks in large part to a prolonged period of extremely low U.S. interest rates, borrowers around the world have gone on a dollar binge over much of the past decade — making them more vulnerable to the Fed’s policy decisions than ever before. As of September, non-bank companies and governments outside the U.S. had some $10.5 trillion in dollar-denominated debt outstanding, according to the Bank for International Settlements. That’s more than triple the level of September 2004, the last time the Fed was about this far into a cycle of rate increases.