Weapons of Financial Mass Destructions——What An Onslaught Of ETF Selling Would Mean
One of the recurring themes on this website over the past two years has been the growing threat posed by the flood of capital out of active investing and into passive, and far cheaper and better performing (under central planning) vehicles such as ETF. Now there is an even more vocal warning. According to Arik Ahitov and Dennis Bryan, who run the $789 million fund FPA Capital, and who have taken a page right out of the Warren Buffett warning books, Exchange-traded funds are “weapons of mass destruction” that have distorted stock prices and created the potential for a market selloff.
House Bubble 2.0 Update: The Demand Pull Forward Pig Has Exited The Python
Looking backward, which most all housing reports and analysis do, the past few months of “stronger” housing data was about NOV RATE-SURGE motivated and panic-buyers incrementally piling on in the dead of winter — when seasonal adjustment are the heaviest – producing ridiculous, exaggerated headlines. In fact, the “621k March New Home Sales” will be the high mark of the year and far higher than the 2017 builder sales total when all is said and done. For months, this is what I have been referring to as the “PIG IN THE PYTHON” effect. Well, it’s looks like the pig may have exited the python, which will create an extreme demand “hangover” in Q2-3 at least.
Earnings Wizardry—That Is Different This Time
……This should not come as a major surprise as it is a rather “open secret.” Companies manipulate bottom line earnings by utilizing “cookie-jar” reserves, heavy use of accruals, and other accounting instruments to either flatter, or depress, earnings.
America’s Very Scary CIA Director—-Pompeo Declares War On The Constitution
Mike Pompeo, in his first speech as director of the CIA, chose to declare war on free speech rather than on the United States’ actual adversaries. He went after WikiLeaks, where I serve as editor, as a “non-state hostile intelligence service.” In Pompeo’s worldview, telling the truth about the administration can be a crime — as Attorney General Jeff Sessions quickly underscored when he described my arrest as a “priority.” News organizations reported that federal prosecutors are weighing whether to bring charges against members of WikiLeaks, possibly including conspiracy, theft of government property and violating the Espionage Act.
No, North Korea Isn’t “Super-Mighty”
In the case of our super-mighty preemptive strike being launched,” the isolated regime’s state-run media warned Thursday, it will hit the “U.S. mainland and reduce them to ashes.” The phrasing is classic Pyongyang, the bizarre mix of childish bluster and lethal armament that throws normal foreign policy strategy out the window. This same announcement from any other nuclear power would mean the start of World War III, but from North Korea, it’s mostly business as usual……
The Bait-and-Switch ‘War on Terror’
New York Times columnist Thomas Friedman outraged many readers when he wrote an opinion piece on April 12 calling on President Trump to ”back off fighting territorial ISIS in Syria.” The reason he gave for that recommendation was not that U.S. wars in the Middle East are inevitably self-defeating and endless, but that it would reduce the “pressure on Assad, Iran, Russia and Hezbollah.”That suggestion that the U.S. sell out its interest in counter-terrorism in the Middle East to gain some advantage in power competition with its adversaries was rightly attacked as cynical. But, in fact, the national security bureaucracies of the U.S. – which many have come to call the “Deep State” – have been selling out their interests in counter-terrorism in order to pursue various adventures in the region ever since George W Bush declared a “Global War on Terrorism” in late 2001.
Bringing Profits Back To America First—-What Happened In 2004
Current estimates put the total stockpile that U.S firms are holding abroad so as to avoid U.S. taxes at somewhere in the $2.5 trillion range. Back in 2004, Congress approved a plan to “repatriate” such overseas funds that companies could bring back home at a reduced rate……Contrary to the intent, the benefits skewed toward a select few companies in a select few industries. Rather than use the money for hiring and capital purchases, companies plowed the cash into share buybacks and dividends, and many of the biggest beneficiaries actually cut American jobs in the years after the repatriation……Five companies — Pfizer, Merck, Hewlett-Packard, Johnson & Johnson and IBM — accounted for 28 percent, or more than a quarter, of total repatriations. The top 15 tax holiday beneficiaries accounted for 52 percent of the total benefit.
The Shoe Drops At Under Armour—-From 64% to 2% Growth In A Single Year
Under Armour posted its first ever quarterly loss as a public company, as demand cooled for the company’s sneakers and athletic apparel. Footwear sales at the Baltimore-based company rose just 2% to $269.7 million in the quarter, compared with a 64% surge a year ago that was fueled by strong basketball sales and liquidations….During the first quarter, sales in North America, which make up some 80% of the business, fell 1% as new distribution was offset by the absence of business lost to bankruptcies in 2016, while sales in the much smaller—and lower-margin—international business surged 52%.
The Student Loan Implosion—-An Update
The Consumer Federation of America recently put out a press release that reports that they’ve found that 1.1 million student loan borrowers in the United States have gone 270 or more days without making payments on their Federal Direct Student Loans, with more than $137 billion worth of the loans issued by the U.S. government now qualifying as being in default by that standard.
The Giant Housing Bubble Up North—-Canada’s Largest Mortgage Lender Crashes
Today, all those warnings came true, when the stock of Home Capital Group cratered by over 60%, its biggest drop on record, after the company disclosed that it struck an emergency liquidity arrangement for a C$2 billion ($1.5 billion) credit line to counter evaporating deposits at terms that will leave the alternative mortgage lender unable to meet financial targets, and worse, may leave it insolvent in very short notice. As part of this inevitable outcome, one which presages the company’s eventual disintegration and likely liquidation, Bloomberg reports that the non-binding rescue loan with an unnamed counterparty will be secured by a portfolio of mortgage loans originated by Home Trust, the Toronto-based firm said in a statement Wednesday. Home Capital shares dropped by 61% in Toronto to the lowest since 2003, dragging down other home lenders. Equitable Group Inc. fell 17 percent, Street Capital Group Inc. fell 13 percent, while First National Financial Corp. declined 7.6 percent. In short, the Canadian mortgage bubble has finally burst.
