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04Dec2017 Market Close: Wall Street Ended Mixed Today After Climbing To New Historic Highs, VIX Options Volume Hitting Record High As Equity Correlation Flashes Red, Stock Investors, Enjoy Your Gains But Start Protecting Your Portfolios

Written by Gary

SP 500 and the Nasdaq ended lower as Wall Street sells the tax news (SPOY -0.1%). Banks and retailers surging and technology companies tanking as investors adjusted their portfolios in hopes of benefiting from expected corporate tax cuts.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

CVS, Aetna executives defend $69 billion deal to skeptical Wall Street

NEW YORK (Reuters) - CVS Health Corp and Aetna Inc on Monday said their $69 billion deal to combine the pharmacy and drug benefit manager and the No. 3 U.S. health insurer would transform healthcare and deliver cost savings, but investors took a pessimistic view of the combination in the short term.

S&P, Nasdaq end lower as Wall Street sells the tax news

NEW YORK (Reuters) - Wall Street ended mixed on Monday, with banks and retailers surging and technology companies tanking as investors adjusted their portfolios in hopes of benefiting from expected corporate tax cuts.

Broadcom launches 11-nominee slate for Qualcomm board

(Reuters) - Chipmaker Broadcom Ltd made its first formal move toward a hostile bid to take over Qualcomm Inc on Monday, laying out a slate of 11 nominees it wants to put on the board of the U.S. semiconductor firm.

Shares of big U.S. banks jump as Senate approves tax overhaul

(Reuters) - Shares of the biggest U.S. banks rose on Monday, after the Senate approved a tax overhaul bill on Saturday, raising investor hopes that their earnings would get a boost from a significantly lower tax bill.

Bitcoin dips below $11,000 after setting another record high

LONDON (Reuters) - Bitcoin dipped back under $11,000 on Monday, coming off a record high just shy of $11,800 it hit on Sunday after a surge from less than $1,000 at the start of the year.

Amid rising discounts, Nissan seeks 'fair share' of pie in U.S.: executive

DETROIT (Reuters) - Facing a glut of late-model 2017 vehicles and rising consumer discounts by competitors, Nissan Motor Co Ltd will continue to target a "fair share of the pie" with big discounts of its own, the automaker's U.S. sales chief said on Monday.

Discovery raises stake in Oprah Winfrey Network

(Reuters) - Discovery Communications Inc said on Monday it had raised its stake in its joint venture with TV mogul Oprah Winfrey to more than 70 percent.

Ireland expects Apple back tax in escrow account in first quarter, 2018: minister

BRUSSELS (Reuters) - Ireland expects iPhone maker Apple to start paying up to 13 billion euros ($15.4 billion) in back taxes into an escrow account in the first quarter of 2018, the finance minister said on Monday.

Amazon Australia goes live in time to ruin rivals' Christmas

SYDNEY (Reuters) - Amazon.com Inc's Australian arm said it would start taking orders on Tuesday, ending speculation about the timing of its launch in the world's No. 12 economy and likely dashing hopes of a holiday boost for struggling brick-and-mortar rivals.

Buying Yen... A Truly Contrarian Call

Authord by Kevin Muir via The Macro Tourist,

I am aware of all the doomsday Yen hyper-inflationary predictions due to their soaring debt-to-GDP ratio. And these Japanese bears very well might prove correct... In the long run.

But as Mr. Keynes taught us, the long-run is an awfully long time. In the meantime, I think there is a terrific opportunity in Japanese assets, and that also includes the currency.

This flies in the face of most market pundits' forecasts. You will often hear recommendations to buy Japanese equities, but they will often be couched with warnings that it needs to be done on a "currency hedged basis." And it's easy to see why.

BoJ Balance Sheet Expansion

Over the past half-dozen years, the BoJ has gone fully bat-shit crazy with balance sheet expansion. It's unprecedented in modern economic times. Yet many believe this to be the final stage in what has been two decades of insane monetary policy.

Contrary to most conventional wisdom, the BoJ's quantitative easing programs in the late 1990's and 2000's was not nearly as dramatic as many pundits remember. It seemed frightening at the time, but that was because Japan was the only country stuck at the zero bound and forced to expand their balance sheet.

"For The First Time In Modern History" US Government Debt Will Surpass Household Debt

Last week, rating agency DBRS raised a red flag when it calculated that in the past decade average US wages have risen by only 5.7%, while consumer debt over the same period rose 60% more, or 9.3%. However, while the US household's reliance on debt to fill in the income gaps is hardly news, on Monday JPMorgan found another, even more concerning debt inflection point: household debt, fast as it may be rising, is about to be eclipsed for the first time ever by the even faster rising federal government debt.

As JPM writes in its weekly market recap, prior to the Financial Crisis, household debt relative to federal government debt hit a high of 3 to 1 times. Since then, a combination of bank credit tightness and consumer prudence has sharply limited the growth in household debt, with liabilities increasing just 4% since 3Q 2008. However, JPM adds, "the same cannot be said of the federal government, with liabilities increasing almost 150% over the same period and nearly reaching household debt levels for the first time in modern history."

JPM continues:

On top of that, the CBO projects that, even excluding the impact of tax cuts, government debt levels will continue to march upward over the course of the next 10 years, ultimately hitting $25.5 trillion by the end of 2027.

< ...

Chuck Grassley Sparks Outrage With "Booze, Women Or Movies" Comment

"Did he really say that" was the rallying cry across social media after Republican Senator Chuck Grassley placed his foot directly in his mouth over the weekend as he commented on tax reform impacts on Americans...

While defending the GOP's plan to scrap so-called 'death taxes' on individual estates, Grassley promulgated his most elitist, 'them-and-us'-bias-reinforcing attitude yet when he seems to take a shot at the 'deplorables' who backed his party's leader into The White House by suggesting that the tax plan won't affect those busy "spending every darn penny .., on booze or women."

Grassley made his comments during an interview with the Des Moines Register at the weekend, in which he praised those who are investing as opposed to those (read working class people) who aren't.

"I think not having the estate tax recognizes the people that are investing - as opposed to those that are just spending every darn penny they have, whether it's on booze or women or movies," Grassley told the publication.

Grassley's comments were derided on social media, where many perceived the seven-term senator's remarks to be an attack on the 'deplorable' working class...

You forgot those that a ...

VIX Options Volume Hits Record High As Equity Correlation Flashes Red

Traders bought and sold an all-time record high 3.15 million VIX options on Friday (as 'elephants' and '50cent' re-emerged) amid the Ross Rout and North Korean shenanigans.

But as that volume explodes through the derivaties market, risk and the underlying have notably decoupled...

Several explanations are plausible:

1) a cautious, pessimstic one - demand for downside protection picking up as stocks go parabolically higher;

or 2) an optimistic balls-to-the-wall scenario where demand for calls surges as what's better than being long stocks... being long stocks levered!

In fact, this regime shift is now extremely notable, the usual negative correlation regime of VIX and Stocks has been abolished in the last two months. The correlation between S&P and VIX is now +0.25 - the highest since 1998...

CVS-Aetna Is More Tortoise Than Hare

Investor reaction was lukewarm Monday to CVS's agreement to buy Aetna for $69 billion, but investors shouldn't lose sight of the deal's rationale.

Broadcom Plays the Long Game With Qualcomm

There are two things that Broadcom made very clear Monday morning: It is still very interested in buying Qualcomm, but it is in no particular hurry to do so.

Why Central Banks Continue to Put Asset Prices Out of Whack

Even as the world's central banks edge away from the extraordinary policies of the past decade, huge market distortions remain. The unwinding of years of easy money will continue to puzzle investors.

2018 Sundance Film Festival special events include new Spike Lee film and starry Elvis doc

Indie movie festival creates new category to reflect rise of TV.

Stock investors, enjoy your gains but start protecting your portfolios

U.S. stocks are sky high in this bull market, but they could fade fast, says Nigam Arora.

Market Extra: Three S&P 500 sectors just hit all-time highs on tax-cut optimism

A trio of S&P 500 sectors advanced to all-time highs on Monday, helping lift the broader market to an intraday record of its own on widespread optimism over the weekend passage of the Senate version of a sweeping overhaul of the U.S. tax code.

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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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