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11Oct2017 Market Close: DOW Hits New High, Risky Loans Overtake Junk Bonds, Central Bankers Face A Crisis Of Confidence, Inflation Cloud Hangs Over Federal Reserve

Written by Gary

Major stock indexes rose modestly today with the DOW and the SP 500 closing at new highs (SPY +0.2%). Dow's flirtation with 23 K is a sign of the stock market's velocity. Central bank holds course for end-of-year rate rise.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall Street ticks higher with eyes on earnings

NEW YORK (Reuters) - Major stock indexes rose slightly on Wednesday though internally the S&P 500 showed a strong move toward so-called defensive sectors, while stocks reacted mutedly to the minutes of the most recent Federal Reserve policy meeting.

Delta refuses to pay tariffs on Bombardier CSeries jets

NEW YORK (Reuters) - Delta Air Lines Inc on Wednesday said the carrier would not foot the bill of a 300 percent tariff that the U.S. Commerce Department wants to impose on Canadian-built Bombardier CSeries, leaving the future of the planemaker's jets in limbo.

Goldman creates 'brain trust' in effort to boost deals business

(Reuters) - Goldman Sachs Group Inc is betting it can get its money-making mojo back by pitching creative deals to big, complex clients, marking a return to its investment banking roots as trading revenue slows.

Loyalists unhappy as Coach becomes Tapestry Inc

(Reuters) - Iconic luxury handbag maker Coach Inc risked Wall Street and social media ire on Wednesday by announcing a change of its corporate name to Tapestry Inc, as it evolves into a multi-brand upscale retailer.

T-Mobile, Sprint deal likely opposed by Justice Dept staff: sources

WASHINGTON (Reuters) - When Sprint and T-Mobile bring their expected merger plans to the U.S. Department of Justice for antitrust review, the career staff who do the bulk of the probe into whether the deal will hurt customers will likely recommend that it be stopped, three people familiar with their thinking told Reuters.

Fed split on inflation intensified at September policy meeting: minutes

WASHINGTON (Reuters) - Federal Reserve policymakers had a prolonged debate about the prospects of a pickup in inflation and the path of future interest rate rises if it did not, according to the minutes of the U.S. central bank's last policy meeting on Sept. 19-20 released on Wednesday.

U.S. Justice, State Departments join forces to probe companies abusing visa programs

WASHINGTON (Reuters) - The U.S. Justice and State departments have agreed to share information in order to better probe companies that abuse visa programs used to hire foreign workers, the latest effort by the Trump administration to crack down on immigration abuses.

Exclusive: Despite sanctions, Russian organizations acquire Microsoft software

By Gleb Stolyarov, Anastasia Teterevleva and Anastasia Lyrchikova

Dassault CEO not yet considering alternative engine suppliers

LAS VEGAS (Reuters) - Dassault Aviation Chief Executive Eric Trappier said he wants to hear how aerospace group Safran SA will tackle engine development issues that have delayed the French planemaker's latest business jet before considering alternative suppliers.

O'Keefe Drops Part 2: NYT Editor Brags About Colluding With YouTube To Push Political Agenda

Yesterday we covered the latest James O'Keefe undercover video bombshell which featured the New York Times' Audience Strategy Editor, Nick Dudich, admitting to exploiting his position at the Times to promote content that intentionally sought to, among other things, damage President Trump's businesses as a means towards forcing his resignation (see: O'Keefe Strikes Again, Catches NYT Editors On Hidden Camera: "Targeting Trump's Businesses, His Dumb F**k Of A Son").

Today, Project Veritas is back with part 2 of their New York Times series which features Dudich bragging about his extensive contacts at YouTube that allow him to, among other things, bypass search algos and get his content promoted to the front page and/or buried, depending upon his personal preferences.

"As an editor, I'm a gatekeeper so I can choose what goes out and what doesn't go out. And let's say we wrote something about Facebook negatively... We actually just did a video about Facebook negatively, and I chose to put it in a spot that I knew wouldn't do well."

"Let's say something ends up on the YouTube front page, New York Times freaks out about it, but they don't know it's just because my friends curate the front page. So, it's like, a little bit of mystery you need in any type of job to make it look like what you do is harder than what it is."

#NYTimes video gatekeeper Nick Dudich say ...

Powell Fed Chair Odds Surge After Politico Doubles Down On "Mnuchin Support" Report

It was exactly one week ago when just as Bloomberg reported that Yellen was most likely out of consideration as next Fed chair, and as the WSJ reported that Trump was meeting with Kevin Warsh, that Politico reported, for the first time, that discussions with people close to the Fed Chair selection process "confirmed Kevin Warsh and Jerome Powell as the current front-runners with Treasury Secretary Steven Mnuchin said to be favoring Powell. That's something of a head scratcher to outside observers of the process who did not have Powell on short-lists before the process began. Warsh was always viewed as a top contender though he does not really know President Trump."

Well, since algos have short memories (and humans dont care about news at all), Politico doubled down on what it reported one week ago, and shortly after 3pm ET today, wrote that "Treasury Secretary Steven Mnuchin is strongly pushing for the White House to name Jerome Powell as the next chair of the Federal Reserve - the most powerful economic job in the U.S. government, according to three people close to the selection process."

Mnuchin has privately recommended Powell to President Donald Trump, according to one adviser close to the administration.

Why does the former hedge fund manager and Goldman employee like Power? According to Politico's sources, "Mnuchin, who knows Powell well, feels comfortable with him and feels like Powell is a safe pick over whom he can exert some measure of influence."

Repeati ...

Is Bridgewater A Fraud? Here Are The Troubling Questions Posed By Jim Grant

Jim Grant, author of Grant's Interest Rate Observer, first hinted last week that not all is well when it comes to the world's biggest hedge fund, Ray Dalio's $160 billion Bridgewater (of which one half is the world's biggest risk-parity juggernaut). Speaking to Bloomberg last week, Grant said he was "bearish" on Bridgewater because founder Dalio has become "less focused on investing, while the firm lacks transparency and has produced lackluster returns."

Grant slammed Dalio's transition from investor to marketer, and in a five-page critique of the world's largest hedge fund, said Dalio has been preoccupied with his new book, sitting for media interviews and sending Tweets.

"Such activities have one thing in common: They are not investing," Grant writes in the Oct. 6 issue of his newsletter. "Yet here he is, laying it all out to the world again, Tweeting, promoting his book, attacking the press -- necessarily doing less of his day job than he would otherwise do."

Grant continued his scathing critique, accusing Bridgewater of "lately performed no better than the typical hedge fund." Grant is right: since the start of 2012, Bridgewater's Pure Alpha II Fund has posted an annualized return of 2.5% vs its historic average of 12%, and is down 2.8% this year through July.

The underperformance may be explainable: after all the polymath billionaire has been busy opining in recent months on subjects from the rise of populism to his affinity for China, "which are distraction from making money" Grant said.

But if Grant had limited himself to merely Dalio's stylistic drift, it would be one thing: to be sure, the fund's billionaire founder may simply h ...

Trump Clarifies He Wants 'Modernization' Of Nuclear Arsenal, Rips "Disgusting" NBC

Update (2:40 pm ET): Defense Secretary James Mattis has come forward to vouche for his boss, telling the press that NBC's report is "absolutely false."

In an unusual move, he published his denial in a terse statement.

NEW: Unusual statement from SecDef Mattis, calling reports that Trump called for increase in nuclear arsenal "absolutely false" pic.twitter.com/bJupODMZaK

— Vera Bergengruen (@VeraMBergen) October 11, 2017

* * *

Update (2:30 pm ET): Echoing a statement from the White House communications released earlier Wednesday, President Donald Trump clarified during a press conference with Canadian Prime Minister Justin Trudeau that he never said anything about increasing the nuclear arsenal by "tenfold" - like NBC reported early today, citing anonymous sources that reportedly were in the room with Trump at the time.

In response to a reporter's question, Trump said he never asked to increase the number of nukes. Instead, he was merely expressing his desire to modernize the nuclear arsenal. He accused NBC of maliciously attacking him, and suggested that it's a "shame" the press can print "whatever it wants" and that "people should look into it."

"It's disgusting that the press is able to write whatever they want to write. People should look into it," Trump said. "When they said I want ten times what we have right now, it's totally unnecessary believe me.

"I want them in perfect condition, in perfect shape that's the only thing I've ever discuss ...

China's Next Five Years---Squeezing the People to Feed the State

China's twice-a-decade Communist Party reshuffle this month will hand even more power to President Xi Jinping, whose emerging grand strategy for managing the economy—and avoiding a debt crisis—will shape global asset markets for years to come.

Watch Out As Risky Loans Overtake Junk Bonds

Yield-hungry investors have made borrowing easier than ever for riskier companies. One sign: this year loans have raced ahead of bonds as the preferred form of debt. But when interest rates rise, this preference could mean trouble.

Liquor Makers Need to Sober Up to the Decline in Teenage Drinking

Move over millennials: Today's smartphone-obsessed teens, Generation Z, are the consumers of the future. Worryingly for liquor producers, they're shaping up to be an antisocial lot.

20 September 2017 FOMC Meeting Minutes: Again Much Talk About Inflation

Fed-sealSMALL-- this post authored by Steven Hansen

The 20 September 2017 meeting statement presented the actions taken. This post covers the economic discussion during this FOMC meeting between the members (minutes were released today). There was considerable discussion on inflation and the hurricanes, and an interesting quote:

... participants judged that the recent storms were unlikely to materially alter the course of the national economy over the medium term.....

Economic Report: Looking for work? U.S. job openings still near record high in August

Despite a small decline in U.S. job openings in August, the labor market is sizzling and most industries still have their "help wanted" shingles out. Credit a sturdy and steadily growing economy in its ninth year of expansion.

The Ratings Game: Wal-Mart's 'sense of urgency' triggers flood of stock price-target increases

Wal-Mart's stock rallied to a 20-month high after a large number of analysts raised their price targets following the retail giant's investor gathering.

Market Extra: Dow industrials flirtation with 23,000 is a sign of the stock market's velocity

A resurgence in the so-called Trump trade has investors once again contemplating a fresh milestone for the Dow Jones Industrial Average.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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