Category Archives: Stocks

Trump’s Trade Adviser Peter Navarro Forecasts At Least A 13% Gain For Dow Industrials In 2020

“I’m seeing at least 32,000 on the Dow,” says Navarro

White House National Trade Council Director Peter Navarro sees the Dow a lot higher in 2020

‘I’m looking forward to a great 2020. I mean, forecast-wise, I’m seeing closer to 3% real GDP growth than 2%. I’m seeing at least 32,000 on the Dow.’

Peter Navarro

(by Mark Decambre / MarketWatch) President Donald Trump’s trade adviser Peter Navarro is calling for a roughly 13% gain by the Dow Jones Industrial Average DJIA, +0.27% in 2020, and on Monday described a long-awaited “Phase 1” trade deal as “in the bank.”

Speaking on CNBC on Tuesday, Navarro forecast another period of buoyancy for equity benchmarks and the U.S. economy, with a prediction that diminishing tensions between China and the U.S. over international trade policy will give way to another powerful uptrend for stocks. (Check out a clip of Navarro’s comments below):

Navarro’s comments made on the last trading session of 2019, came before President Donald Trump tweeted that a partial Sino-American trade resolution was set to be signed on Jan. 15. The president also said that he planned to travel to Beijing to start negotiations on the second phase of negotiations thereafter.

Softening tensions over import tariffs between Beijing and Washington have at least partly helped to lift U.S. stocks to their biggest annual gains in years. The Dow looked set to close out a banner year with a two-session skid but has advanced 21.8% this year to trade at around 28,410, picking up more than 5,000 points during the calendar year. Navarro’s forecast, atypical of a government trade negotiator, of a further 13% rise in the Dow to 32,000 in 2020 from currently levels would represent the equivalent of about a 3,600-point gain.

Broadly speaking, stock indexes have enjoyed a bumper year, notably in the past few months of 2019, with reports of an imminent detente on trade.

The S&P 500 SPX, +0.29% has climbed 28.4%, putting it on pace for its biggest gain since 2013 and the Nasdaq Composite Index COMP, +0.30% has gained about 35%, not far from its stellar 1997 return, when it jumped more than 38%.

This year’s gains followed a fall of 4.2% in the S&P 500 index on a total-return basis in 2018, though, so in aggregate there has been just a 12% compounded return over the last 2 years, Datatrek’s Nicholas Colas noted. That is not far off the average 50-year S&P return of 11.1%.

President Trump and his administration have been fixated on the performance of the stock market because they see it as a potential calling card for a second term in the White House after the 2020 elections.

Indeed, this isn’t the first time Navarro has made a forecast about the Dow.

Back in July on CNBC, Navarro said talks between Washington and Beijing were heading in a “very good direction” following a meeting between Trump and Chinese President Xi Jinping at the G-20 summit in Osaka.

At that point, about five months ago, he said that the 30,000 level for the Dow was achievable if Congress approved the U.S.-Mexico-Canada Agreement and the Federal Reserve lowered interest rates.

At its peak this year, the blue-chip index wasn’t that far off 30,000. The intraday peak for the Dow was 28,701, hit on Dec. 27, about 1,300 short of Navarro’s forecast. The Dow began trade in July, when Navarro made his earlier comments, at 26,720 and has climbed more than 6% thus far.

To be sure, investors harbor major concerns heading into next year that markets may not have room for further gains, particularly as investors worry that the China-U.S. trade pact may not yield substantive changes.

Trader’s Choice Gregory Mannarino describes how Navarro’s forecast is based upon far more debt and war in store for Americans …

***

… and boom, right on Cue …

U.S. Sends New Contingent of 4,000 Troops into Iraq on New Years eve…

First, the explanation from former CIA Director, current U.S. Secretary of State, Mike Pompeo:

Welcome to the Flaming 2020’s

“It’s About To Get Very Bad” – Repo Market Legend Predicts Dollar Funding Market Crash In Days

“No matter what the market does from now until year end, there is simply not enough cash and/or liquidity to allow the plumbing of the market to cross into 2020 without a crisis”

For the past decade, the name of Zoltan Pozsar has been among the most admired and respected on Wall Street: not only did the Hungarian lay the groundwork for our current understanding of the deposit-free shadow banking system – which has the often opaque and painfully complex short-term dollar funding and repo markets – at its core…

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… but he was also instrumental during his tenure at both the US Treasury and the New York Fed in laying the foundations of the modern repo market, orchestrating the response to the global financial crisis and the ensuing policy debate (as virtually nobody at the Fed knew more about repo at the time than Pozsar), serving as point person on market developments for Fed, Treasury and White House officials throughout the crisis (yes, Kashkari was just the figurehead); playing the key role in building the TALF to backstop the ABS market, and advising the former head of the Fed’s Markets Desk, Brian Sack, on just how the NY Fed should implement its various market interventions without disrupting and breaking the most important market of all: the multi-trillion repo market.

In short, when Pozsar speaks (or as the case may be, writes), people listen (and read).

Continue reading

First Ever Triple Bubble in Stocks, Real Estate & Bonds – With Nick Barisheff

We are living in an age of records in the financial world. The stock market is in its longest bull market in history and near all-time highs.  The world has more debt than ever before while interest rates are near record lows, and some are negative in many countries for the first time ever.  Nick Barisheff, CEO of Bullion Management Group (BMG), is seeing a dark ending for the era of financial records. Barisheff explains,

“I have been in the business for 40 years, and this is the first time we have had a simultaneous triple bubble, a bubble in real estate, stocks and bonds all at the same time.  In 1999, it was a stock bubble. In 2007, it was a real estate bubble. This time, we’ve got a triple simultaneous bubble.  So, when we have the correction, it’s going to be massive. Value calculations on equities say it’s worse than 1999, and in some cases worse than 1929. The big problem is this triple bubble is sitting on a mountain of debt like never before.”

What is going to be the reaction to this record bubble in everything crashing?  Barisheff says, “I think you are going to be getting riots in the streets.  It’s already happening in California. CalPERS is the pension fund administrator for a lot of the pension funds in California. So, already retired teachers, firefighters and policemen that are sitting in retirement getting their pension checks all got letters saying sorry, your pension checks from now on are going to be reduced by 60%.  How do you get by then?”

What happens if the meltdown picks up speed and casualties?  Barisheff says,

“I think the only option will be for the government is to print more money and postpone the problem yet a little bit longer, but that leads to massive inflation and eventually hyperinflation.  Every fiat currency that has ever existed has always ended in hyperinflation, every single one.  Since 1800, there have been 56 hyper inflations. Hyperinflation is defined as 50% inflation per month.  That’s where we are going and what other choice is there?”

So, what do you do?  Barisheff says,

“In the U.S. dollar since 2000, gold is up an average of 9.4% per year. In some countries, it’s up 14% and so on.  If you take the overall average of all the countries, the average increase is 10% a year.  Every time Warren Buffett is on CNBC, he seems to go out of his way to disparage gold, but if you look at a chart of Berkshire Hathaway and gold, gold has outperformed Berkshire Hathaway. . .  Everybody worships Warren Buffett as the best investor in the world, and gold has outperformed his fund in U.S. dollars.  I would not disparage gold if I were him. I’d keep quiet about it.”

There is a first for Barisheff, too, in this financial environment.  He says for the first time ever, he’s “100% invested in gold” as a percentage of his portfolio.  He says the bottom “is in for gold,” and “the bottom is in for silver, too.”

Barisheff contends that with the record bubbles and the record debt, both gold and silver will be setting new all-time high records as well in the not-so-distant future.

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with Nick Barisheff, CEO of BMG and the author of the popular book “$10,000 Gold.”

Goldman Sachs Has Just Issued An Ominous Warning About Stock Market Crash In October

Are we about to see the stock market crash this year?  That is what Goldman Sachs seems to think, and it certainly wouldn’t be the first time that great financial chaos has been unleashed during the month of October.  When the stock market crashed in October 1929, it started the worst economic depression that we have ever witnessed.  In October 1987, the largest single day percentage decline in U.S. stock market history rocked the entire planet.  And the nightmarish events of October 2008 set the stage for a “Great Recession” that we still haven’t fully recovered from.  So could it be possible that something similar may happen in October 2019?

The storm clouds are looming and disaster could strike at any time.  This is one of the most critical times in the history of our nation, and most Americans are completely unprepared for what is going to happen next.

Are We Hitting The Wall Here?

(Sven Henrich) Are we hitting the wall? Markets. Economy. Technicals. Valuations. All appear at a key crossroads here. Last week’s 3% pullback, while in itself not seemingly dramatic, came at a very key point. Whether it is meaningful is too early to tell, but I have some eye opening data points for you that suggests it may very well turn out to be extremely meaningful.

In last weekend’s update (End Game) I highlighted the issue of market capitalization versus the underlying size of the economy. Let me dig a little deeper.

Is there a natural wall beyond which bubbles cannot go before they revert back to a more natural state of valuation? It’s a serious question especially looking at the structural context of the last few bubbles. The biggest bubbles in our lifetimes were the 2000 tech bubble, the 2007 real estate bubble and the monstrosity we are witnessing now, the central bank, cheap money bubble.

All 3 have done something unique. They have vastly accelerated asset prices above their historic track record. In 2000 and 2007 these bubbles moved stock markets wildly above the mean and investors got punished badly.

This is the chart I showed last week:

Peaks of 147% and 137% respectively. Now this bubble has arrived in full vengeance on the heels of $20 trillion in central bank intervention, a global collapse in yields and the TINA effects.

Now look closely what just happened in the past 18 months:

We keep hitting the same wall. January 2018 nearly 150% market cap to GDP and stocks got punished with a 10% correction.

Last September/October we hit a slightly lower high around 147% and stocks got hit with a 20% correction.

Now in July we hit 145%, another slightly lower high, and stocks have begun selling off again.

Is that it? Is that the valuation wall? How far and for how long can stock markets stay this far disconnected from the underlying size of the economy? All of history says: Not for very long.

Incidentally, why these slight lower highs? Because the larger stock market is weakening underneath from new high to new high. It’s what I’ve outlined with divergences and weakening participation, but neatly captured by the value line geometric index:

But the plot thickens.

The earth is not flat, despite some adherents to that fantasy, the same valuation wall can be observed across the globe (via Wordbank):

Each time market capitalizations cross the 110% mark things get iffy don’t they? Added plot twist: The world can lead in the realignment to reality process. Note the global valuation scheme peaked in 1999. US markets famously puked some more highs out into March of 2000. Well, this time around the world peaked in 2018 and since then it’s the US again squeezing out marginal new highs in 2019. Not Europe, not Asia, no, it’s the US on its own.

The earth is not flat.

The bull case from here is based on one factor alone: The Fed. I see it in every Wall Street case for new highs. The Fed is cutting, you must buy stocks. That’s it. It’s not earnings, not growth, no, Goldman is cutting earnings and growth, but raising price targets because of the Fed.

I submit to you that, while this may indeed come to fruition, it is structurally a reckless thing to do. For 2 reasons, both of which are predicated on the same thing: History.

There is no history, none, that supports stock market capitalizations above 145% of GDP for an extended period of time. None.

There is also no history, none, that’s suggests unemployment can stay this low for an extended period of time. None.

And their certainly is no history suggests that BOTH can be maintained for an extended period to time concurrently:

None. But you are welcome to believe it if you wish.

And hence, in context, Jay Powell’s comment about a ‘mid-cycle adjustment” was either disingenuous, ignorant or an outright lie.

We are here:

Looking at the yield curve, the reaction of the 10 year off of the 30+ year trend line and the basing of the low unemployment rate, does any of this suggest anything remotely close to mid-cycle? I submit to you that they don’t.

And switching to technicals, look at the trend lines in the $SPX chart above: The 2009 trend line STILL remains broken. I submit to you they jammed stocks higher in 2019 on the Fed pivot, the flip in policy, the promises of a rate cut, and the delivery of a rate cut, aided by still massive buybacks in the system. That’s it. They haven’t changed anything substantive on the economy. It’s still slowing, we still have trade wars and earnings growth remains flat to negative and there’s no growth in CAPEX or business investment.

Previous business cycles came to a sudden end when the employment picture changed trajectory, from a period of basing at the low end to shift to higher unemployment and a sudden steepening in the yield curves:

And guess what? Everything, the yield curves, the stock market valuation to GDP ratio at 145%, the Fed pivot, it all has led to here:

The magic 2.618 fib zone on $SPX (we missed it by a few handles) and exceeded it temporarily on the $DJIA:

We’ve hit walls everywhere. Technically, economically, valuation wise. To trust the Fed and to go long stocks here is to believe that none of these walls mean anything.

It’s to believe unemployment can be maintained at a historic 50 year low for an extended period of time, it’s to believe that stock market capitalization can be accelerated above a historic unproven 145% threshold for an extended period and it’s to believe in one’s ability to time any future steepening in the yield curves.

That’s a lot of believing.

I prefer seeing. And here’s what we just saw. We saw a market enter a technical risk zone that was outlined in advance:

And we saw market cleanly rejecting from that risk zone:

That doesn’t mean immediate confirmed doom and gloom, certainly not with a mere 3% from from the highs, but it speaks to the impressive confluence of technical and valuations factors that suggest that markets may be hitting the wall.

Technicals matter. Valuations matter.

For a run down on the technicals and implications please see the video below:

Source: by Sven Henrich | Northman Trader

Hedge Fund Closures Exceed Launches For The Third Straight Quarter

Global hedge fund liquidations exceeded launches for the third straight quarter as a result of a tougher capital raising environment, according to Bloomberg.

During the first quarter of this year, about 213 funds closed compared to 136 that opened. Liquidations remained steady from the quarter prior and launches were up about 23%. 

But hedge fund startups remain under pressure due to poor performance and investors grappling with high fees. $17.8 billion was pulled from hedge funds during the first 3 months of the year, marking the fourth consecutive quarterly outflow. Additionally, the industry has seen a number of funds shut down or return capital, including Highbridge Capital Management and Duane Park Capital.

The average management fee for funds that launched in the first quarter was down 10 bps to 1.19%, while the average incentive fee increased to 18.79% from 17.9% in 2018.

Hedge funds on average were up 3% in the first quarter on an asset weighted basis, which lagged the S&P index by a stunning 10.7% with dividends reinvested over the same period. 

In May we had noted that the broader S&P 500 had trounced the average hedge fund, returning 18% YTD, and charging precisely nothing for this out performance. 

Also in late May, we documented shocking losses from Horseman Global. The fund’s losses more than doubled in April, when the fund was down a was a staggering 12%, which brought its total loss YTD to more than 25%. 

In early June, we wrote about Neil Woodford, the UK’s equivalent of David Tepper, blocking redemptions from his £3.7bn equity income fund after serial under performance led to an investor exodus, “inflicting a serious blow to the reputation of the UK’s highest-profile fund manager.”

Source: ZeroHedge

If History Still Matters, Silver Is Poised For A Huge Move

It’s been a pretty good couple of months for precious metals, but more so for gold than silver. Both are up but gold is up more, and the imbalance that this creates might be one of the major investment themes of the next few years.

The gold/silver ratio – that is, how many ounces of silver it takes to buy an ounce of gold – has bounced all over the place since the 1960s. But whenever it’s gotten extremely high – say above 80 – silver outperformed gold, sometimes dramatically.

https://www.zerohedge.com/s3/files/inline-images/bfm55B9.jpg?itok=R5jGg8Ef

As this is written, the ratio stands at almost 93x, which is not far from its record high. With precious metals finally breaking out of a five-year siesta – and the world getting dramatically scarier – it’s not a surprise that safe haven assets are catching a bid. And it would also not be a surprise if the current move has legs, as central banks resume their easing and geopolitical tensions persist.

Combine a chaotic, easy-money world with silver’s relative cheapness and the result is a nice set-up, for both the metal and the stocks of the companies that mine it. Here’s the one-month chart for First Majestic Silver (AG), a large primary silver producer. It’s up about 40%, even while silver underperforms gold. Let the metal start to outperform in the context of an overall precious metals bull run, and stocks like this will go parabolic.

https://www.zerohedge.com/s3/files/inline-images/bfm24B9.jpg?itok=AdGN9Ul2

Source: ZeroHedge