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14Nov2017 Market Close: Wall Street Staggers On Tax Turmoil As Junk Debt Dumps To New 8-Month Lows, Energy Stocks Lower Tracking Crude Prices

Written by Gary

US equities market put in a subdued performance today (SPY -0.2%), as Chinese economic data disappointed and pessimism over US tax cuts helped drag markets down from record highs reached late last week.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall Street off as energy stocks track crude lower; GE tumbles

NEW YORK (Reuters) - U.S. stock indexes fell on Tuesday as General Electric shares plunged for the second straight day and a drop in crude oil prices hit energy stocks.

GE tumbles for a second day after announcing major overhaul

(Reuters) - General Electric Co's shares slumped for a second straight day on Tuesday as investors wondered if a massive overhaul by new Chief Executive John Flannery to save billions and make the conglomerate smaller was enough to revive the 125-year-old Dow component.

Sessions refuses to say if White House asked about AT&T-Time Warner merger

WASHINGTON (Reuters) - U.S. Attorney General Jeff Sessions on Tuesday declined to answer when asked if any White House officials contacted the Justice Department to discuss the government's review of AT&T Inc's proposed $85.4 billion acquisition of Time Warner Inc .

SoftBank says considering investment in Uber but no final agreement reached

TOKYO (Reuters) - Japan's SoftBank Group Corp said on Tuesday it was considering investing in Uber Technologies Inc but there was no final agreement at this stage.

Snap's biggest investors raise stakes in third quarter

NEW YORK (Reuters) - Fidelity Investments and technology-focused hedge fund Coatue Management LLC boosted their stakes in social media company Snap Inc during the third quarter, despite Snap's disappointing results, regulatory filings showed on Tuesday.

IBM urges lawmakers to 'narrow' bill targeting Chinese investment

WASHINGTON (Reuters) - International Business Machines Corp has urged lawmakers to use a different strategy than toughening foreign investment rules because of U.S. concerns about Chinese military actions and intellectual property theft, according to a letter seen by Reuters on Tuesday.

Buffalo Wild Wings shares soar on report of takeover bid

(Reuters) - Buffalo Wild Wings' shares rose nearly 26 percent in early trading on Tuesday, a day after a report said the company received a $2.3-billion takeover bid from private-equity firm Roark Capital Group.

Fashion retailer Forever 21 reports payment card security breach

(Reuters) - Fashion retailer Forever 21 said on Tuesday there had been unauthorized access to data from payment cards used at certain of its stores.

Venezuela says debt refinancing under way, S&P calls selective default

CARACAS/NEW YORK (Reuters) - Venezuela's cash-strapped government insisted it had successfully begun efforts to refinance some $60 billion in bonds, though creditors disagreed following fruitless talks and a ratings firm declared the nation in selective default.

Venezuela's Grim Reaper: A Current Inflation Measurement - Current Annual Rate 2977%

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

The Grim Reaper has taken his scythe to the Venezuelan bolivar. The death of the bolivar is depicted in the following chart. A bolivar is worthless, and with its collapse, Venezuela is witnessing the world's worst inflation.

As the bolivar collapsed and inflation accelerated, the Banco Central de Venezuela (BCV) became an unreliable source of inflation data. Indeed, from December 2014 until January 2016, the BCV did not report inflation statistics. Then, the BCV pulled a rabbit out of its hat in January 2016 and reported a phony annual inflation rate for the third quarter of 2015. So, the last official inflation data reported by the BCV is almost two years old. To remedy this problem, the Johns Hopkins - Cato Institute Troubled Currencies Project, which I direct, began to measure Venezuela's inflation in 2013.

The most important price in an economy is the exchange rate between the local currency and the world's reserve currency — the U.S. dollar. As long as there is an active black market (read: free market) for currency and the black market data are available, changes in the black market exchange rate can be reliably transformed into accurate estimates of countrywide inflation rates. The economic principle of Purchasing Power Parity (PPP) allows for this transformation.

I compute the implied annual inflation rate on a daily basis by using PPP to translate changes in the VEF/USD exchange rate into an annual inflation rate. The chart below shows the course of that annual rate, which last peaked at 3473% (yr/yr) in late October 2017. At present, Venezuela's annual inflation rate is 2977%, the highest in the world (see the chart below).

Stocks Stagger On Tax Turmoil As Junk Debt Dumps To New 8-Month Lows

Yellen warns "valuations are at the high end of ranges" but tax cut details diss stocks.

It was all going great until I hit 310kph...

Ugly data from China overnight sent China bond and stock prices lower...

Notably Gold remains the only asset higher since the Saudi chaos...

All Cash Indices ended the day red but the dip-buyers rescued Dow, S&P, and Nasdaq green fro the month...

Futures show the crazy swings best once again... Dow (blue) almost ramped back to unch for the week...

VIX and USDJPy worked their magic to ramp stocks numerous times...

Jim Chanos Adds To Tesla Short, Sees Musk Stepping Down

The ongoing vendetta between the scourge of Enron, Jim Chanos, and Elon Musk escalated when the Kynikos Associates founder said he has been adding to his Tesla short position throughout the year even as the company's shares soared to record highs. Speaking at the Reuters Global Investment 2018 Outlook Summit, Chanos - who first disclosed his TSLA short last May - said that he expected Elon Musk to step down from his position by 2020 to focus on his private rocketship company SpaceX as competitors such as BMW and Porsche expand their lines of luxury electric vehicles.

"Obviously this is not being valued as a car company, it's being valued on Musk ... he's the reason people own the stock," Chanos said.

"Put it this way. If you wouldn't be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes."

He said the company is burning more than $1 billion in cash each quarter and will have a harder time tapping the capital markets if and when Musk leaves

Still, while Chanos may have had a large enough balance sheet to avoid a short squeeze, others have been less fortunate, and as a result Tesla shares are up 44% for the year to date, briefly rising above General Motors in market cap, as countless shorts have been margined out despite Tesla's chronic - and often shocking - cash burn, and despite increasingly louder concerns that Tesla will be unable to deliver on its aggressive Model 3 timetable. Just last week, Tesla reported its largest-ever quarterly loss, unveiled it had burned a record $16 million per day. ...

McConnell Reveals Senate Tax Bill Will Strip Obamacare Mandate

In what is emerging as the latest potential stumbling block for the passage of GOP tax reform, on Tuesday afternoon Senate Majority leader announced that the Senate tax bill will include language to repeal ObamaCare's individual mandate, a move which could make passage prolematic as it could withdraw support from moderate Republicans. According to The Hill, Conservatives led by GOP Sens. Ted Cruz, Rand Paul and Tom Cotton pushed hard to include the provision, which would eliminate the federal penalty on people who do not buy health insurance.

The move, if passed, would free up an estimated $300 billion to $400 billion over the next year that could be used to pay for lowering individual and business tax rates even further.

According to McConnell, adding the individual mandate repeal would make it easier to muster 50 votes to pass the bill, although many others disagree. "We're optimistic that inserting the individual mandate repeal would be helpful and that's obviously the view of the Senate Finance Committee Republicans as well," McConnell said.

Allaying concerns that the revision would lead to a dealbreaker, Senator John Thune, the Senate's No. 3 Republican, told reporters there has been a whip count and he is confident Republicans can pass a tax bill that includes a measure to repeal the mandate.

Thune said the Alexander-Murray bill, aimed at stabilizing markets, would be brought up separately. That bill funds key payments to insurers for two years in exchange for more flexibility for states to change ObamaCare rules.

"I'm pleased the Senate Finance Committee has accepted my proposal to repeal the Obamacare individual mandate in the tax legislation," Cotton said in ...

The Real 'War on Coal' Is in China

China's president Xi Jinping has made a commitment to a "better" - not just richer - life for Chinese citizens. That, combined with slowing industry in China, spells trouble for the dirtiest type of fuel.

Chips for Electric Cars Put Infineon in Fast Lane

How do you justify an investment in an expensive stock? By setting it against peers that look even pricier, like Tesla. Such comparisons, together with takeover rumors, could keep Infineon's stock buoyant.

With a Tweak, Earnings Look Even Better

Take away the losses that insurers suffered from hurricanes and earthquakes, and S&P 500 earnings grew at a double-digit rate in the third quarter.

To make money in oil, listen to prices more than news

Plus: My favorite ETF trading tools. By Thomas H. Kee Jr.

Bill Gates linked to $80 million deal to build 'smart city' in Arizona

Arizona-based real estate investment group Belmont Partners says the municipality will have high-speed digital networks, data centers, self-driving cars and other new technologies built into its infrastructure.

The Tell: Stock-market investors are careening 'ever closer to the sun', warns strategist

Is the stock market starting to show signs of strain, after a mostly unceasing climb into the ionosphere?

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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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