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30 октября, 18:36

The Other Reason Buffett Is the World’s Third-Richest Man

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Warren Buffett’s investing acumen is only part of the reason he’s one of the world’s richest men. The other reason may surprise you.

30 октября, 15:09

Сезон публикации квартальных отчетов в США. Основные отчеты текущей недели

31 октября До начала торгов: MasterCard (MA). Средний прогноз: EPS $1.23, выручка $3280.72 млн. Pfizer (PFE). Средний прогноз: EPS $0.65, выручка $13174.88 млн. 1 ноября После окончания торгов: Facebook (FB). Средний прогноз: EPS $1.28, выручка $9843.66 млн. Tesla (TSLA). Средний прогноз: EPS -$2.28, выручка $2922.46 млн. 2 ноября До начала торгов: DowDuPont (DWDP). Средний прогноз: EPS $0.45, выручка $18243.16 млн. После окончания торгов: American Intl (AIG). Средний прогноз: EPS -$0.79, выручка $12050.00 млн. Apple (AAPL). Средний прогноз: EPS $1.87, выручка $50757.54 млн. Starbucks (SBUX). Consensus EPS $0.55, выручка $5807.92 млн. 3 ноября После окончания торгов: Berkshire Hathaway (BRK.B). Средний прогноз: EPS $2402.47, выручка $60428.65 млн.Источник: FxTeam

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30 октября, 11:41

BYD ожидает 20%-ного снижения годовой прибыли

Китайский автопроизводитель BYD, частично принадлежащий американской инвестиционной компании Berkshire Hathaway, сообщил о том, что ожидает снижения прибыли в текущем году на фоне возросшей конкуренции в сфере производства гибридных авто и электромобилей. Так, по оценкам компании, чистая прибыль в 2017 году может уменьшиться на 15,1-20% и составить 4,04 млрд юаней ($607,54 млн) - 4,29 млрд юаней. Между тем, компания заявила, что чистая прибыль в январе-сентябре сократилась на 23,8% г/г и составила 2,79 млрд юаней, а чистая прибыль в третьем квартале понизилась на 23,9% г/г до 1,07 млрд юаней.

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30 октября, 11:26

BYD ожидает 20%-ного снижения годовой прибыли

Китайский автопроизводитель BYD, частично принадлежащий американской инвестиционной компании Berkshire Hathaway, сообщил о том, что ожидает снижения прибыли в текущем году на фоне возросшей конкуренции в сфере производства гибридных авто и электромобилей. Так, по оценкам компании, чистая прибыль в 2017 году может уменьшиться на 15,1-20% и составить 4,04 млрд юаней ($607,54 млн) - 4,29 млрд юаней. Между тем, компания заявила, что чистая прибыль в январе-сентябре сократилась на 23,8% г/г и составила 2,79 млрд юаней, а чистая прибыль в третьем квартале понизилась на 23,9% г/г до 1,07 млрд юаней.

27 октября, 19:37

Federal Prosecutors Are Investigating Wells Fargo's FX Business

Last week, WSJ stoked fears that the Feds might be ramping up another probe into abuse and manipulation in the foreign exchange market when it reported that Wells Fargo had abruptly terminated four bankers from its FX business and transferred another. Now, Wall Street’s paper of record is reporting that Federal prosecutors are investigating Wells for abuses in its FX shop - but the scope of the investigated is limited to one disputed trade. According to WSJ, prosecutors have subpoenaed information from Wells and from the recently fired bankers as they investigate a trade and ensuing dispute between Wells and one of its clients, Restaurant Brands International Inc. RBI owns several fast-food franchises, including Burger King, Tim Hortons and Popeyes Louisiana Kitchen. In an amusing twist, both companies count Warren Buffett’s Berkshire Hathaway as one of their largest shareholders. In a statement, Wells Fargo said it “learned of an issue associated with a foreign exchange transaction for a single client. The matter was reviewed, the client was promptly notified regarding the issue, and Wells Fargo leadership took steps to hold accountable the individuals who were involved. Wells Fargo remains committed to our foreign exchange business, meeting our clients’ financial needs in an ethical way, and ensuring ongoing review of this and all business operations.” The foreign-exchange issue revolves around a trade made within the past three years that included positions running into the billions of dollars, the people said. The trade resulted in a loss to Restaurant Brands, the people added, which led to a dispute between it and the bank. WSJ pointed out that the investigation into Wells Fargo’s foreign-exchange business, which is housed within its investment bank, are separate from sales-practices issues that rocked the bank more than a year ago. Wells Fargo is planning to refund Restaurant Brands hundreds of thousands of dollars related to the trading loss, WSJ's sources said.  The Federal Reserve is also looking into the issue. Specifically, Federal prosecutors are looking into the sequencing of the trade in question and whether it could have involved so-called front-running, some of the people familiar with the matter said. That should send a chill down the spine of the fired bankers, as earlier this week a US jury found a former HSBC currency trader guilty of fraud related to front-running a large trade that netted the bank some $8 million in profits. The US is also in the process of extraditing another UK-based FX trader to face front-running related charges in the US. Last year, a wide-ranging investigation into abuse and front-running in the global foreign-exchange market led to a rash of settlements worth billions of dollars involving Barclays and a handful of other global banks.  While probes like this are never convenient, the investigation comes at a particularly trying time for the bank and its management. Earlier this month, WFC CEO Tim Sloan received a widely publicized tounge lashing from Massachusetts Senator Elizabeth Warren during Congressional testimony (Sloan became the second straight Wells CEO whom Warren said should resign during a public hearing). He has also participated in a handful of media interviews lately as he tries to burnish the bank's once-wholesome reputation and bolster its lagging share price, which has never quite recovered from last year's cross-selling scandal. However, as WSJ explains, front-running is often difficult to gauge given the ambiguity around pre-hedging strategies in currency trading. Typically a bank must purchase currency as part of a trade and price it differently than it would price a stock. Wells Fargo’s investment-banking, securities and markets division, known as Wells Fargo Securities, is a fraction of the size of its U.S. big-bank peers, as is its foreign-exchange business. The bank doesn’t break out financial results or metrics for that group or its foreign-exchange business. And while the investigation is the latest embarassment for the bank, which over the summer disclosed that it had overcharged mortgage and auto-loan borrowers, there is, at least, one mitigating factor: Unlike the retail banking scandal, which stoked widespread public outrage, few Americans understand how the foreign-exchange market works - indeed, many don't even realize that such a market exists. This means that even in the worst-case scenario, Wells's brand should remain untarnished from this latest scandal. The US Attorney’s Office for the Northern District of California is leading the investigation.

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26 октября, 06:00

The United States Of Toxins

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Via Priceonomics.com, Every year, the U.S. Environmental Protection Agency (EPA) requires most large industrial facilities to report the volume of toxic chemicals they release into the environment.  The EPA takes this data and consolidates it into the Toxic Releases Inventory (TRI), which is then used to set environmental policies in place. We analyzed this data along with Priceonomics customer, Ode, a company that creates environmentally-conscious cleaning products. So, we got interested in the information buried in these massive, hard to understand reports. What are the most commonly released toxins? In which states and cities are the most chemicals emitted? Which industries contribute the most to this pollution? Summary of findings: As a state, Alaska produces the most toxins (834 million pounds) Zinc and lead compounds (common products of the mining industry) are the most common toxins Metal mining accounts for 1.5 billion pounds of toxins, while chemicals (515 million) ranks second On a county level, the Northwest Arctic of Alaska leads the list, but multiple Nevada counties round out the top 5 Kotzebue, AK produces the most toxins as a city (756 million pounds), and Indianapolis, IN (10.9 million) produces the most out of the top 100 most populous cities A note on methodology For this analysis, we looked at the EPA’s most recent TRI report, looking at data from 2016. This includes data reported from more than 18,000 facilities across the U.S., spanning major industries like manufacturing, mining, chemicals, and utilities. It includes total releases (in pounds) of roughly 650 different toxins which are determined to have a significant adverse effect of humans and/or the environment. And in this report, “release” means that a chemical was “emitted to the air or water, or placed in some type of land disposal.” More information about the report and the methodology used by the EPA can be founds here. The United States of Toxins We began by tallying total toxin releases by state. This includes all toxins across all industries. In the map below, darker colors indicate a higher total volume of toxins (in pounds). Original source: Ode On the mainland, we can see that Nevada and Utah facilities are especially detrimental to the environment -- but a strip of states in the Rust Belt (Illinois, Indiana, and Ohio), along with Texas and Louisiana, are also major players. Alaska, though, handily outranks every other state by nearly 3x. Original source: Ode A closer look, at a county level, reveals that 91% of Alaska’s toxin releases come from one county: Northwest Arctic, AK: Original source: Ode In fact, taking this one step further, we see that nearly all of these toxins originate from one city: Kotzebue, AK -- a tiny town that is home to 7,500 people. Original source: Ode Why? Just 90 miles from Kotzebue is Red Dog Mine, the largest source of zinc in the world, and a significant source of America’s lead. In operation since 1987, the mine is estimated to contain 77.5 million tons of zinc, lead, and silver -- and each year, its activities release 756 million pounds of toxins into the environment. But these county and city lists have other stories to tell. Three of the top 5 cities -- Humboldt, Lander, and Eureka -- are in Nevada. All are known to contain multiple, active gold mines that collectively release hundreds of millions of pounds of toxins. The 50 most populous cities It’s likely you haven’t heard of a lot of the cities on these lists -- and that’s because most of the major industrial facilities in the U.S. are set up outside the limits of most major cities, far from large populations. So, let’s take a look just at the 100 most populous cities in the U.S. (according the Census data). The list below is sorted by population size. Original source: Ode Interestingly, you’ll see that two of the largest cities in the U.S. -- New York and San Francisco -- have no data listed. Only certain “qualifying” facilities are required to submit data (those that release over a certain threshold of particular toxins), so we hypothesize that this is either because: A) These cities don't have qualifying facilities within city limits, since real estate is so valuable there, or B) The facilities that exist there just don't meet the minimum emissions required to report data. In any case, of the 50 most populous cities, Indianapolis, IN leads the pack with 10.9 million pounds. The city has long been cited for its poor air quality, a result of steel mills, auto plants, and numerous coal-powered power plants that spew out arsenic, lead, and mercury at alarming rates. But some of these cities are bigger than others, so it makes sense that they’d produce more toxins. Sticking with the 100 most populous cities, let’s look at toxins per square mile. Original source: Ode Baton Rouge, Louisiana tops the list here, partly thanks to Exxon Mobile’s massive oil refinery there -- the second largest in the country, and one of dozens of plants that skirt the outer limits of the city. Henderson, Nevada, which ranks second here, was once a wastewater dump that took 18 years and more than 500,000 environmental tests to get building approval for. Per capita, we see the same cities top the list, with a few extra additions (Cleveland, Wichita). Original source: Ode The biggest aggressors Looking over the lists above, you’ll notice that most of the top cities and counties are in areas known for mining. It comes as no surprise then, that mining is the industry responsible for the highest percentage of toxins released in the United States. Original source: Ode At 1.52 billion pounds, metal mining produces triple the next category, the broadly-defined “chemicals,” which includes such toxins as sulfuric acid, propylene, and sodium carbonate. (The EPA exhaustively lists its industry classifications here). Electric utilities (368 million pounds), paper (170 million), and hazardous waste (146 million) also contribute large amounts of toxins industry-wide. But how does this break down on a more specific scale? Original source: Ode Zinc compounds (739 million pounds), and lead compounds (650 million) -- both products of mining -- dominate the list of top individual toxins released. Nitrate compounds, which are a common byproduct of fertilizers and human excrement, rank in at 193 million pounds, and another water pollutant, Ammonia (163 million), also ranks high. Certain companies, we find, are also largely to blame for mass percentages of the toxins released in the United States. Original source: Ode Metal mining corporations dominate this list, but we also see a number of larger holding corps here (Koch Industries, Berkshire Hathaway), as well as government operations (U.S. Department of Defense, U.S. Tennessee Valley Authority). *  *  * Collectively, industries in the United States released more than 3.54 billion pounds of toxins into the environment in 2016. That’s the equivalent weight of about 25.3 million American adults -- or roughly 8% of the entire U.S. population. Nearly half of all Americans live in a county with unhealthy levels of air pollution, and 46% of America's lakes are too polluted to fish or swim in.

23 октября, 14:56

General Electric (GE) Stock Will Not Get a Spark Any Time Soon

General Electric Company (NYSE:GE) may be going nowhere fast. Berkshire Hathaway Inc.’s (NYSE:BRK.A,NYSE:BRK.B) Warren Buffett has famously said that he likes to hold onto stocks forever. Note that this has come after a long decline in GE stock. After all, GE stock does look like a classic value play.

18 октября, 23:37

American Express CEO Ken Chenault Is Retiring

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Despite credit card giant American Express reporting another round of solid quarterly earnings, with revenue of $8.40bn beating expectations of $8.19bn, and generating EPS of $1.50, also above the $1.48 expected, and boosting its profit guidance for good measure, now projecting full year EPS of $5.80 to $5.90, up from $5.60 to $5.80 (above the consensus estimate of $5.75), AXP stock initially spiked, then immediately slumped back to  unchanged, following news that the company's CEO since 2001, Ken Chenault, is retiring effective February 1, 2018. The unexpected departure prompted Warren Buffett, the company's largest shareholder, to share the following parting words “Ken’s been the gold standard for corporate leadership and the benchmark that I measure others against. He led the company through 9/11, the financial crisis and the challenges of the last couple of years. American Express always came out stronger. Ken never went for easy, short-term answers, never let day-to-day challenges distract him from what was right for the moderate to long term. No one does a better job when it really counts and he’s always done it with the highest degree of integrity.” Chenault will be replaced by Stephen Squeri, who has been Vice Chairman since 2015 and prior to that was Group President of the Company’s Global Corporate Services Group. Full press release below: American Express Announces Stephen J. Squeri to Succeed Kenneth I. Chenault as Chairman and Chief Executive Officer   American Express Company (AXP) said today that its Board of Directors has appointed Stephen J. Squeri Chief Executive Officer and elected him Chairman of the Board, each effective February 1, 2018. Mr. Squeri, 58, will succeed Kenneth I. Chenault, 66, who will retire after a distinguished 37-year career with the Company.   Mr. Squeri has been Vice Chairman since 2015 and prior to that was Group President of the Company’s Global Corporate Services Group.   Mr. Chenault has served as Chairman and Chief Executive Officer since 2001.   “We are completing a two-year turnaround ahead of plan with strong revenue and earnings growth across all of our business segments,” said Mr. Chenault. “We’ve added new products and benefits, acquired record numbers of new customers, expanded our merchant network and lowered operating costs. We’ve dealt effectively with competitive challenges and redesigned our marketing, customer service and risk management capabilities for the digital age.”   “We’re starting a new chapter from a position of strength and this is the right time to make the leadership transition to someone who’s played a central role in all that we’ve accomplished,” Mr. Chenault continued. “Steve knows the industry. He knows the business and the brand. He knows the marketplace and how important the relationships we build with customers are to our success. He’s an excellent strategist and a strong leader.”   Robert D. Walter, Lead Director of American Express’ Board of Directors said, “Clear vision, sound judgment and the courage to make tough decisions are what define a leader. For 16 years we’ve had a great one in Ken Chenault. He’s met every challenge head on. He’s rallied the organization at times of crisis and he’s delivered for shareholders by making a great company even better.”   “Ken has also groomed an outstanding successor,” Mr. Walter continued. “Steve built commercial payments into one of our fastest growing businesses. He strengthened a world-class customer service network and transformed our technologies infrastructure. He’s led a reengineering program that lowered operating expenses and reallocated funding to the initiatives that are now driving growth across the business.”   “We’ve had a very thorough succession process underway for five-plus years that involved every member of the board and we are unanimous in our decision that Steve’s the best person to build on the progress under way at American Express,” added Mr. Walter.   Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. said, “Ken’s been the gold standard for corporate leadership and the benchmark that I measure others against. He led the company through 9/11, the financial crisis and the challenges of the last couple of years. American Express always came out stronger. Ken never went for easy, short-term answers, never let day-to-day challenges distract him from what was right for the moderate to long term. No one does a better job when it really counts and he’s always done it with the highest degree of integrity.”   “American Express is a very special company, one in which I first invested 53 years ago,” Mr. Buffett added. “Ken built on its storied history – not by abandoning traditional strengths, but by building on them and adding new ones. He’s been a great CEO and Berkshire Hathaway shareholders owe him a huge thank you.”   “I’ve spoken with Steve and have been hearing about him from Ken,” continued Mr. Buffett. “From everything I’ve heard, he’s absolutely the right person for the job. He knows the business, has a great track record and appreciates what makes American Express special. Ken and the board have picked someone who is going to build on a great legacy of service and success.”   Berkshire Hathaway is American Express’ largest shareholder.   “It’s a privilege to lead one of the world’s most admired companies and I appreciate the expressions of confidence from the Board and our largest shareholder,” said Mr. Squeri. “Ken has been a terrific mentor. He leads by example and taught me, along with the rest of the organization, the importance of the personal connection millions of people around the world have with American Express."   “I feel very good about what we’ve accomplished and, while it’s a fast-moving competitive marketplace, I believe we’re in a strong position for the years ahead,” Mr. Squeri continued. “American Express is a unique brand and a franchise that’s unmatched by any one competitor. We have an impressive range of growth opportunities ahead of us. I’m going to be focused on innovating, building the brand around the strength of our customer service and partnering with merchants and businesses to take full advantage of the digital convergence that’s underway in the world of payments and commerce.”

13 октября, 18:17

On Prosperity, Free Markets... and Single-Malt Whisky

The Oxford Club’s recent tour of London and Scotland got Alex thinking about the populist threat to free-market economics in today’s U.K.

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13 октября, 04:45

3 Stocks to Buy, Hold for the Next 75 Years

Buy and hold on to Berkshire Hathaway, McDonald's, and Clorox for decades to come.

11 октября, 15:29

The Zacks Analyst Blog Highlights: Comcast, Wal-Mart Stores, Berkshire Hathaway, Bank of America and Twenty-First Century Fox

The Zacks Analyst Blog Highlights: Comcast, Wal-Mart Stores, Berkshire Hathaway, Bank of America and Twenty-First Century Fox

11 октября, 12:14

New Constructs: Big Banks Will Win the Fintech Revolution

A recent report from Accenture asks “Fintech – Did Someone Cancel the Revolution?” The report notes that the promise of Fintech startups to change market structure, radically improve products, and

11 октября, 00:11

Top Stock Reports for Comcast, Wal-Mart & Berkshire Hathaway

Top Stock Reports for Comcast, Wal-Mart & Berkshire Hathaway

10 октября, 17:29

Tap Q3 Growth with Revenue-Weighted ETFs

Revenue-weighted funds have outperformed the earnings counterparts from both the short and long-term periods, proving the credibility of the superior-weighting methodology.

10 октября, 08:00

ГК Телетрейд: отзывы о международной компании подтверждают ее надежность

Каждое столетие знаменательно теми или иными событиями, открытиями. Время, в котором мы живем, предопределяет популярные виды человеческой деятельности.

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10 октября, 00:35

Ralph Nader: How CEO Stock Buybacks Parasitize The Economy

Authored by Ralph Nader via Evonomics.com, The monster of economic waste - over $7 trillion of dictated stock buybacks since 2003 by the self-enriching CEOs of large corporations - started with a little noticed change in 1982 by the Securities and Exchange Commission (SEC) under President Ronald Reagan. That was when SEC Chairman John Shad, a former Wall Street CEO, redefined unlawful ‘stock manipulation’ to exclude stock buybacks. Then after Clinton pushed through congress a $1 million cap on CEO pay that could be deductible, CEO compensation consultants wanted much of CEO pay to reflect the price of the company’s stock. The stock buyback mania was unleashed. Its core was not to benefit shareholders (other than perhaps hedge fund speculators) by improving the earnings per share ratio. Its real motivation was to increase CEO pay no matter how badly such burning out of shareholder dollars hurt the company, its workers and the overall pace of economic growth. In a massive conflict of interest between greedy top corporate executives and their own company, CEO-driven stock buybacks extract capital from corporations instead of contributing capital for corporate needs, as the capitalist theory would dictate. Yes, due to the malicious, toady SEC “business judgement” rule, CEOs can take trillions of dollars away from productive pursuits without even having to ask the companies’ owners—the shareholders—for approval. What could competent management have done with this treasure trove of shareholder money which came originally from consumer purchases? They could have invested more in research and development, in productive plant and equipment, in raising worker pay (and thereby consumer demand), in shoring up shaky pension fund reserves, or increasing dividends to shareholders. The leading expert on this subject—economics professor William Lazonick of the University of Massachusetts—wrote a widely read article in 2013 in the Harvard Business Review titled “Profits Without Prosperity” documenting the intricate ways CEOs use buybacks to escalate their pay up to  300 to 500 times (averaging over $10,000 an hour plus lavish benefits) the average pay of their workers. This compared to only 30 times the average pay gap in 1978. This has led to increasing inequality and stagnant middle class wages. To make matters worse, companies with excessive stock buybacks experience a declining market value. A study by Professor Robert Ayres and Executive Fellow Michael Olenick at INSEAD (September 2017) provided data about IBM, which since 2005 has spent $125 billion on buybacks while laying off large numbers of workers and investing only $69.9 billion in R&D. IBM is widely viewed as a declining company that has lost out to more nimble competitors in Silicon Valley. The authors also cite General Electric, which in the same period spent $114.6 billion on its own stock only to see its stock price steadily decline in a bull market. In a review of 64 companies, including major retailers such as JC Penny and Macy’s, these firms spent more dollars in stock buybacks “than their businesses are currently worth in market value”! On the other hand, Ayes and Olenick analyzed 269 companies that “repurchased stock valued at 2 percent or less of their current market value (including Facebook, Xcel Energy, Berkshire Hathaway and Amazon). They were strong market performers. The scholars concluded that “Buybacks are a way of disinvesting – we call it ‘committing corporate suicide’—in a way that rewards the “activists” (e.g. Hedge Funds) and executives, but hurts employees and pensioners.” Presently, hordes of corporate lobbyists are descending on Washington to demand deregulation and tax cuts. Why, you ask them? In order to conserve corporate money for investing in economic growth, they assert. Really?! Why, then, are they turning around and wasting far more money on stock buybacks, which produce no tangible value? The answer is clear: uncontrolled executive greed! By now you may be asking, why don’t the corporate bosses simply give more dividends to shareholders instead of buybacks, since a steady high dividend yield usually protects the price of the shares? Because these executives have far more of their compensation package in manipulated stock options and incentive payments than they own in stock. Walmart in recent years has bought back over $50 billion of its shares – a move benefitting the Walton family’s wealth – while saying it could not afford to increase the meagre pay for over one million of their workers in the US. Last year the company bought back $8.3 billion of their stock which could have given their hard-pressed employees, many of whom are on welfare, a several thousand dollar raise. The corporate giants are also demanding that Congress allow the repatriation of about $2.5 trillion stashed abroad without paying more than 5% tax. They say the money would be used to grow the economy and create jobs. Last time CEOs promised this result in 2004, Congress approved, and then was double-crossed. The companies spent the bulk on stock buybacks, their own pay raises and some dividend increases. There are more shenanigans. With low interest rates that are deductible, companies actually borrow money to finance their stock buybacks. If the stock market tanks, these companies will have a self-created debt load to handle. A former Citigroup executive, Richard Parsons, has expressed worry about a “massively manipulated” stock market which “scares the crap” out of him. Banks that pay you near zero interest on your savings announced on June 28, 2017 the biggest single buyback in history – a $92.8 billion extraction. Drug companies who say their sky-high drug prices are needed to fund R&D. But between 2006 and 2017, 18 drug company CEOs spent a combined staggering $516 billion on buybacks and dividends – more than their inflated claims of spending for R&D. Mr. Olenick says “When managers can’t create value in the business other than buying their own stock, it seems like it’s time for a management change.” Who’s going to do that? Shareholders stripped of inside power to control the company they own? No way. It will take Congressional hearings, a robust media focus, and the political clout of large pension and mutual funds to get the reforms under way. When I asked Robert Monks, an author and longtime expert on corporate governance, about his reaction to CEOs heavy with stock buybacks, he replied that the management was either unimaginative, incompetent or avaricious – or all of these. Essentially burning trillions of dollars for the hyper enrichment of a handful of radical corporate state supremacists wasn’t what classical capitalism was supposed to be about.

09 октября, 03:30

Flatliners - Dead Market Walking

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Authored by Sven Henrich via NorthmanTrader.com, In the movie Flatliners aspiring medical doctors tried to unlock the mysteries of death by, well, killing themselves. It was meant to be a controlled death of course, to flat line on the heart rate monitor for a few minutes to find out what wonders where to be found “on the other side” only to then return safe & sound thanks to medical intervention. Well, they soon found out the other side wasn’t everything it was cracked up to be and the main character soon got regular beatings as the sins of his past came back to haunt him. In my view markets find themselves in a very similar script. The promise of investor nirvana where the pains of real life no longer matter. If you only pay attention to the record highs headlines it all looks rather fantastical these days. Prices only go up no matter what time frame you look at. Annually: Quarterly: Monthly: And still central bankers can’t find any evidence of inflation. Funny. Indeed all risk has been flat-lined in this grand central bank experiment as the following chart of the $VIX shows: Oh I’m kidding of course, but any trader staring at the tape knows that we find ourselves in the most compressed price environment in history. This is not normal, there’s no heartbeat: As I’m writing this I’m fully aware I may be viewed as the bear who cried wolf. After all I’ve been outlining structural risk factors for a while and markets have moved past my technical risk zones of 2450-2500 and most recently 2530. That’s what bubbles do. They blow past anyone’s expectations, they make believers of the unbelievers, make bears look like idiots and the most reckless look like geniuses. But an extreme market that only becomes more extreme is not any less extreme, it is just more extreme. As no risk is apparent these extremes are then dismissed as the new normal. Yet momentum driven price appreciation has absolutely zero predictive value of future price appreciation, it only appears as such at the time. Here’s the $NDX leading up to the 2000 top: It looked fantastic. It meant absolutely nothing: For traders of course the key is how to trade set-ups (I’ll post more on this in the near future, but I’ve talked a bit about it in The Relevance of Technical Charts) and for investors it is a matter of how to take advantage while at the same time know when things change. At this time I want to document a bit of what I see here in markets and the structural world as I don’t want anyone to be surprised when the flat risk line we currently see brings about those nasty consequences. Let’s be clear. We find ourselves in a very unique point in history and in a world dominated by false narratives. It is a challenge to keep an analytical grip on reality, but I’ll try to tie a few threads together here to put everything in a macro context. Firstly the underlying base reality: Free money, easy money, whatever you want to call it, permeates everything we see in financial markets. Indeed I would argue price appreciation has been paid for with unprecedented and, in my view, unsustainable volatility compression. A couple of charts really highlight this. Most clearly perhaps is the precise trend line tagging we can observe in the correlated picture of price appreciation and volatility compression since the February 2016 lows: The $VIX’s corollary, the inverse $XIV, embarked on an explosive near one way journey since the US election coinciding with over $2 trillion central bank intervention in just the first 9 months of 2017: And it has continued to this day and just made another all time high this past week on a massive negative divergence. It is the magnitude of this volatility compression that explains the current trading environment we find ourselves in. Aside from the obvious artificial liquidity avalanche we’ve had speculated about the driver of all this and the answer may simply be the promise of even more free money, specifically tax cuts. As some of you may recall from my analysis over the past year  I’ve been very clear that math ultimately will bring out truth in any narrative. In this case that notion that tax cuts pay for themselves is a fantasy. It always has been. Can it result in a short term bump in spending or even growth? Yes it is possible, especially if structured right. But any historical analysis will show you that tax cuts, especially already coming from a relatively low base, will just add to debt via larger deficits. Recently the White House budget director finally acknowledged this very reality: “a tax plan that doesn’t add to the deficit won’t spur growth” My criticism has been that all this marketing talk is simply a lie and will structurally put the country further at risk of trillion dollar deficits and a massive debt explosion that is already baked in even without tax cuts. Indeed the further one digs through the details the bigger the expense of these tax cuts become: “We have a lot of businesses… I don’t think any of them are non-competitive in the world because of the corporate tax rate,” Buffett, the chairman and CEO of Berkshire Hathaway Inc told CNBC.   Fink said a corporate rate as high as 27 percent could satisfy U.S. businesses’ need for tax relief, while avoiding an increase in the federal deficit.   “What is being proposed is a pretty large expansion of our deficits,” Fink told Bloomberg TV. The plan contains up to $6 trillion in tax cuts, according to independent analysts.” I bet you if you ran these tax cuts through a budget that accounts for a recession case somewhere in the future this entire budget would be an utter disaster and they could never sell it. And this is why you won’t see a stress tested scenario, all you will see is happy steady 2.9% growth projections in perpetuity. Nonsensical. Unrealistic. And frankly intellectually insulting to anyone that insists on any base line of intellectual veracity to any budget process. Running the numbers it’s clear who actually benefits: So I ask, how will any of this change this trend? The answer is it won’t despite public narratives to the contrary. People will choose to believe what they want, but math is independent of beliefs and the math is very clear on this. Put this proposal in context of standing trends: Real disposable personable income growth remains meager at best: Debt expansion at low rates continues to sustain the illusion of real prosperity for the 90%: A meager set of rate hikes is already putting pressure on revolving credit obligations and personal interest payments: Why does all this matter for us here? Look no further than to the earlier quoted Warren Buffett who may have explained much of the reason we see no sellers in these markets currently: “Buffett also said he would wait to see how the tax push played out before doing any significant selling of Berkshire Hathaway stock to avoid paying unnecessary taxes on his gains.   “I would feel kind of silly if I realized $1 billion worth of gains and paid $350 million in tax on it if I just waited a few months and would have paid $250 million,” Buffett said.” I get it, why sell anything if you can save on taxes and while central banks keep pushing markets higher with record liquidity? Steady as she goes after all. And we have to acknowledge that the combined effect may be here to stay until clarity has emerged. If current legislative efficiency is any indicator then this may drag on for months with perhaps nothing accomplished. Health care? Still nothing has happened. And let’s be clear: Not a single health care proposal (and there have been multiple efforts) have had anything to do with health care. They have been proposals that would have knocked millions off health care coverage and financially benefitted the 1% in form of tax reversions. That’s the analytical reality. I don’t know why anyone still believes this administration will implement anything substantive to help the middle class. Previous administrations (both Democrat & Republican) have failed miserably on the wealth inequality front. And this administration looks no different and perhaps only worse. Every proposal looks to disproportionally benefit the top 1% and this latest tax cut proposal is no exception. Every analysis I have seen shows disproportionate benefit going to the wealthy. And how will that stimulate growth for the middle class? Or the bottom 50%? And don’t think I’m alone bemoaning wealth inequality & associated inbred dynastic economic structure as an increasing drag on society and its future prospects. Here’s Buffett himself again: Ironically it is those 400 that would benefit the most by getting rid of the estate tax that is currently proposed as part of the tax cut package. Bottom-line, it’s all tied together in a package that promises more and more debt. Central banks do whatever it takes to keep reality at bay: And hence I’ve called this entire central bank talk of “normalization” a fantasy. They can’t do it, they’re trapped and even the quants at JPM are out in force warning of it: As central banks begin shrinking their balance sheets, they risk triggering another financial crisis, something that may be sharpened by the shift away from active investing, JPMorgan’s top quant strategist has warned.   “Such outflows (or lack of new inflows) could lead to asset declines and liquidity disruptions, and potentially cause a financial crisis,” said Mr Kolanovic (who, it is worth noting, has issued such warnings before). “The timing will largely be determined by the pace of central bank normalisation, business cycle dynamics and various idiosyncratic events, and hence cannot be known accurately.” Mr Kolanovic pointed out that “this is similar to the 2008 [Great Financial Crisis], when those that accurately predicted the nature of the GFC started doing so around 2006.”   “The shift from active to passive assets, and specifically the decline of active value investors, reduces the ability of the market to prevent and recover from large drawdowns,” Mr Kolanovic said. He added that the move towards passive and momentum strategies, where traders chase market cues as opposed to company fundamentals, has “eliminated a large pool of assets that would be standing ready to buy cheap public securities and backstop a market disruption.” And this is precisely why we won’t see any real normalization ever again. Or perhaps only after a massive reset in the financial system. This new administration wants massive tax cuts. This year the military budget was already increased by $80B to $700B. The costs of the recent hurricanes are providing the perfect excuse for running larger deficits and you can already see the narrative creeping in: “I hate to tell you Puerto Rico, but you’ve thrown our budget a little out of whack,” said Trump as he introduced his budget director Mick Mulvaney. Not the $80B increase in military spending of course. Look, I can read between lines with the best of them and the message is clear. Low rates are here to stay and the administration needs low rates to keep it all going and justify tax cuts. The writing is on the wall, no, actually it is coming to you courtesy Jeffrey Gundlach: “Bond King” Jeffrey Gundlach has an unusual pick for who President Donald Trump will choose to be the next Federal Reserve chief.   “I actually have a very non-consensus point of view. I think it’s going to be Neel Kashkari,” the the CEO of DoubleLine Capital told the Vanity Fair New Establishment Summit on Tuesday in Los Angeles. “He happens to be the most easy money guy that’s in the Federal Reserve system today and that’s why he may win.”   Kashkari is the president of the Minneapolis Fed and happened to say Monday that the central bank is making a mistake by continuing to raise rates, comments Gundlach referenced as helping him possibly get the job.   “I think there is no chance that she wants to be chairwoman, nor do I think the president wants her to be,” said the manager of $109 billion.   Gundlach said that Trump needs someone who will keep rates low in order to keep his populist reputation and help his base voters and that’s why he’ll pick Kashkari. “A stronger dollar is not good for achieving that agenda,” he said. And there you have it. We need an easy money guy. Now I don’t know if Kashkari will be it, but it’s pretty clear Yellen is toast and some version of an easy money guy is coming and the Fed’s balance sheet reduction plan may be out the window shortly after February. But that’s the combined message, massively more debt is coming, normalization is at best a marketing ploy, and easy money will continue to be part of the equation with perhaps more coming in form of tax cuts. So yes, I get and receive comments about how it’s different this time, how price discovery as we know it may be a thing of the past. An asset price inflation world, without core inflation, where valuations don’t matter and debt flows continue unabated and consequence free… …and market caps rise in asymptotic fashion every quarter, month and week: The end result: The $SPX is now 18.8% above its annual 5 EMA: As far as I can tell this is the largest, or one of the largest disconnects ever. And I’ve shown the chart of $MSFT as an individual stock example of how historically extreme the current disconnect is: $MSFT is now 35% above its annual 5 EMA. There’s been only 1 year prior to 2017 when it did not touch its 5 EMA: 1999. Did it have any predictive value of future price appreciation? Nope. Speaking of 1999: Greed is back with a vengeance. It is all around us: Central bankers have flat lined risk and investors have crossed to the other side expecting nirvana & free money forever. So far so good it seems. Just remember in Flatliners the allure of nirvana turned into a running nightmare: What would be signs of nirvana turning into a nightmare? Keep an eye on this thin red line: It will get tested again. Currently the trend line is barely 2% below current prices and it is rising steeply. When price breaks below this line it’s time to return to real life. After all you do want a heart beat: Don’t you? I know I do.

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06 октября, 18:56

Кэш "Berkshire Hatway" достиг 100 млрд$

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Компания Баффета достигла 100 млрд. $. Боится инвестировать и ждет краха?

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