09Sep2015 Market Update: Markets Up Then Markets Flat

Here is the current market situation from CNN Money

North and South American markets are higher today with shares in Brazil leading the region. The Bovespa is up 0.68% while Mexico’s IPC is up 0.26% and U.S.’s S&P 500 is up 0.11%.

U.S. Stock Rally Fades

A rally in U.S. stocks, driven by signs that China would do more to stimulate its slowing economy, faded Wednesday.

Tech Fix: Test Driving Apple’s iOS 9

The company is about to release its next mobile operating system, offering better battery life and a smarter Siri.

Wall St. Loses Steam

Netflix stock jumped after it said it would expand to four more Asian countries, while Barnes & Noble shares dropped 16 percent after a gloomy first-quarter report.

If the Bear Is Coming, These Assets Will Protect You Best

Treasury bonds, and perhaps some commodities, stand to hold up best when the stock market struggles, writes Mark Hulbert.

Wall St. trims gains as early rally fades

(Reuters) – Wall Street trimmed early gains and was little changed in late morning trading on Wednesday as the rally fueled by hopes of further stimulus measures in China faded.

Something Just Snapped At The Comex

Just over one month ago, when looking at the latest changes in registered gold held at the Comex ,we were stunned not only by the collapse in this series to a record low of just over 350k ounces or barely over 10 tons, but also by the surge in “gold coverage”, or the amount of paper gold claims on physical gold, which exploded to a record high 124 per ounce.

This is what we said on August 3:

While on its own, gold open interest – which merely represents the total potential claims on gold if exercised – is hardly exciting, as we have shown previously it has to be observed in conjunction with the physical gold that “backs” such potential delivery requests, also known as the “coverage ratio” of deliverable gold.

It is here that things get a little out of hand, because as the chart below shows, all else equal, the 43.5 million ounces of gold open interest and the record low 351,519 ounces of registered gold imply that as of Friday’s close there was a whopping 123.8 ounces in potential paper claims to every ounces of physical gold.

This is an all time record high, and surpasses the previous period record seen in January 2014 following the JPM gold vault liquidation.

Another way of stating this unprecedented ratio is that the dilution ratio between physical gold and paper gold has hit a record low 0.8%. Indicatively, the average paper-to-physical coverage ratio since January 1, 2000 is a “modest” 19.1x. As of Friday it h …

Barnes & Noble Sales Fall for Fifth Straight Quarter

Barnes & Noble Inc, the largest U.S. bookstore chain, reported a decline in sales for the fifth successive quarter as lower demand for its Nook tablets and online books compounded a protracted slump in sales at its stores.

Con Edison to pay $3.8 million to settle sexual harassment claims

(Reuters) – Consolidated Edison of New York Inc will pay up to $3.8 million to end a government investigation into claims that it failed to stop frequent sexual harassment and discrimination against female employees, the New York Attorney General’s office said on Wednesday.

Investors Make Their Case for Buying Chinese Stocks Now

Despite dour economic reports and volatility rattling Chinese markets in recent weeks, many portfolio managers are scouring for insurance, health-care, food and technology companies that they think are poised to benefit from China’s transition to a more consumer-oriented economy.

Apple to show off new iPhones, Apple TV on Wednesday

SAN FRANCISCO (Reuters) – With its highly profitable iPhone due for an upgrade, Apple is expected to unveil a pair of new handsets at an event in San Francisco on Wednesday, analysts say, in addition to showing off a larger iPad and an updated Apple TV.

Record high U.S. job openings point to skills shortage

WASHINGTON (Reuters) – U.S. job openings surged to a record high in July, but a slightly slower pace of hiring suggested employers were having trouble finding qualified workers, a trend that could eventually boost wages.

Car Crashes Are Rising and Warren Buffett Blames Texting

A 14% surge in fatal car accidents in the first half of the year has surprised big car insurers, and Warren Buffett, whose Berkshire Hathaway owns Geico, says it’s because of distracted drivers.

What to Watch at the Apple Event

The company is expected to introduce significant enhancements to Apple TV and an upgraded version of the iPhone at a much-anticipated event in San Francisco.

The End Of The Fed’s “Interest Rate Magic Show” Looms

Submitted by Aswath Damodoran via Musings On Markets,

The Fed, Interest Rates and Stock Prices: Fighting the Fear Factor If it feels like you are reading last year’s business stories in today’s paper, there is a simple reason. The Federal Reserve’s Open Markets Committee (FOMC) meeting date is approaching, and in a replay of what we have seen ahead of previous meetings, we are being told that this is the one where the Fed will lower the boom on stock markets, by raising interest rates. While this navel gazing may keep market oracles, Fed watchers and CNBC pundits occupied, I think that the Fed’s role in setting interest rates is vastly overstated, and that this fiction is maintained because it is convenient both for the Fed and for the rest of us. I think that there are multiple myths about the Fed’s powers that have taken hold of our collective consciousness, and led us into an investing netherworld. So at the risk of provoking the wrath of Fed watchers everywhere, and repeating what I have said in earlier posts, here are my top four myths about central banks.

1. The Fed sets interest rates

Myth: The Federal Reserve (or the Central Bank of whichever country you are in) sets interest rates, short term as well as long term. In my last post on this topic, I mentioned my tour of the Federal Reserve Building, with my wife and children, and how sorely tempted I was to ask t …

National Geographic and Fox Form a Commercial Media Company

The renowned National Geographic magazine will be included in the deal, though the society will retain its nonprofit status.

McDonald’s moving to ‘cage-free’ eggs in U.S., Canada over 10 years

(Reuters) – McDonald’s Corp said all eggs it uses in its 16,000 restaurants in the United States and Canada will come from chickens that are not confined to cages within 10 years.

Dow “JOLTed” 200 Points ‘Off The Highs’ As September Rate-Hike Odds Rise

If only the data – that apparently The Fed is ‘dependent’ on – would collapse. The surging JOLTS data has lifted September rate-hike odds – after a week of sliding – and dragged The Dow more than 200 points off its morning highs…

Of course – the higher stocks rise, the more likely The Fed can hike rates… reflexivity anyone?

Europe Unveils Euro 780 Million “Compulsory” Refugee Quota Plan

On Tuesday evening, we took a preliminary look at what the EU’s worsening migrant crisis might mean for the receiving countries in Western Europe. In short, Goldman has suggested that “in order to maintain current levels of retirees/working age population ratios in 2025, immigration rates in Western Europe need to be 7x-8x higher than current run rate (based on UN estimates).” That, coupled with country-specific considerations, could mean that there is indeed a silver lining to what has generally been portrayed in the media as a disastrous people flow that threatens to undermine EU solidarity and strain EMU budgets.

Regardless of how one chooses to view the situation, it’s clear that Europe desperately needs to put together some manner of coherent strategy lest an abject failure to adequately address the droves of desperate asylum seekers should go down in history as (another) black mark upon the EU’s record which is already stained by the Greek bailout debacle and, in the case of EMU nations, general concerns about the viability of the entire euro project.

On Wednesday we got a look at Europe’s latest attempt to establish a quota system, a day after German Vice Chancellor Sigmar Gabriel said his country could take at least 500,000 asylum seekers per year. Here’s WSJ with the admittedly sparse details of the ad hoc “plan”:

The European Union on Wednesday proposed redistributing 160,000 refugees across the bloc and speeding up procedures to send back those who don’t qualify for asylum, in a bid to improve a stuttering response to the …

Janet Yellen’s “Favorite” Jobs Indicator Just Shrieked A Rate Hike Is Imminent

Following the surge in overnight screams against a rate hike, which in just the past 24 hours has added those of the World Bank’s chief economist, Paul Krugman, and Larry Summers (for the second time), all eyes were focused on Janet Yellen’s favoriote Jobs indicator – the JOLTS report, and especially the total nonfarm Job Openings. And here a big problem appeared because while the Fed is now facing tremendous pressure from the outside not to hike in September, the JOLTS report not only gave a green light, but literally shrieked a rate hike in September is inevitable.

The reason: the Job Openings number soared from 5.323MM to a new record high of 5.753MM, smashing expectations of a drop to 5.3MM. In fact, the monthly increase in openings of 430,000 was the highest stretching all the way back to April 2010, and was the fourth highest monthly jump in the history of the series!

To be sure, a more than cursory scan at the components of the jump reveals that not all is well: for example the job openings were all quantity, and zero quality: the biggest increase among “job wanted” poasters was for low-paying jobs (just in case anyone is still confused why there are no wage hikes), including retail trade and leisure and hospitality.

Furthermore, the level of hiring is clearly tapering off, and 4.983MM was the lowest since last August, confirming the lagging nature of jobs data, which is now rolloing over and leading to continued decling in wages for non-supervisory workers.

United Continental analysts welcome CEO change; shares flat

(Reuters) – Analysts on Wednesday gave the thumbs up to the replacement of United Continental Holdings Inc Chief Executive Officer Jeff Smisek, who stepped down due to a federal probe of the U.S. airline, and the company’s shares were flat.

United C.E.O. Is Out Amid Inquiry at Port Authority

The airline said two other executives were also leaving in connection with an investigation into whether flights were a favor for a top agency official.

July 2015 JOLTS Job Openings at Series High

Written by Steven Hansen

The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year unadjusted private non-farm job openings are at a series high – but the growth rate is within the levels seen in 2015. This suggests a continuation of the employment growth seen in 2015.

Intel to End Sponsorship of Science Talent Search

The high school competition counts among its past competitors eight Nobel Prize winners, along with chief executives, university professors and award-winning scientists.

Tax concerns on Yahoo’s Alibaba stake spinoff prompt target cuts

(Reuters) – Wall Street analysts tempered their view on Yahoo Inc’s stock after the company’s plans for a tax-free spinoff of its stake in Alibaba Group Holdings Ltd hit a snag.

Mobility: How an Area’s Union Membership Can Predict Children’s Advancement

Children born to low-income families typically ascend to higher incomes in metro areas where union membership is higher, a study shows.

The Decline Of Oil: Head-Fake Or New Normal?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

When production does finally collapse, that will set up the “nobody saw this coming” ramp in the price of oil.

In May 2008 I proposed the Oil “Head-Fake” Scenario in which global recession pushes oil demand down as oil exporters pump their maximum production in a futile attempt to fund their vast welfare states and thus retain their precarious political power.

Oil: One Last Head-Fake? (May 9, 2008)

The terrible irony of the head-fake, of course, is that the exporters’ efforts to pump more oil exacerbates the oversupply, further depressing prices. As exporters receive fewer dollars for their production, they attempt to compensate by pumping even more oil. Perniciously, this suppresses prices even more, setting up a positive feedback loop which pushes prices to the point that exporters are no longer able to fund their welfare states and Elites.

Something has to give, and that something is the existing power structure in oil exporting nations.

Another factor deepens the eventual crisis triggered by drastically lower oil revenues. The majority of exporting nations under-invest in their oil production and exploration infrastructures, essentially guaranteeing declining production once the easy oil has been extracted.

This cycle of spending the fruits of current production while starving investment for the future is part of what is known as the resource curse: nations with an abundance of resources rely on the income generated by the sale of their resources which effectively stunts the development of a diverse economy and …

Lockheed to cut about 500 jobs in IT services unit

(Reuters) – Lockheed Martin Corp, the maker of F-35 fighter jets, said it would cut about 500 jobs in its IT services unit by mid-November.

Puerto Rico To Run Out Of Cash By Year End, Faces $13 Billion Shortfall

Remember when two months ago Schauble jokingly offered Jack Lew to “trade” Greece for Puerto Rico? Something tells us in the interim period the German finmin changed his mind because while the Greek can has been kicked again, if only for the time being until bailout #4, the full severity of the Puerto Rican insolvency was laid out for all to see moments ago when top officials and outside advisors to the commonwealth released a highly-anticipated report showing that even after implementing proposed economic reforms and budget cuts, the island’s whopping funding gap of $28 billion will at best be reduced to “only” $13 billion over the next several years.

Even worse, as the FT reports according to the report of the so-called Working Group, the Treasury’s single cash account and Government Development Bank would exhaust available liquidity before the end of the year, creating a cash shortfall in late November or early December. In other words, Puerto Rico is Greece, and unlike the German colony, Puerto Rico does not have any negotiating leverage to threaten a departure from the dollar zone, or threaten to print its own currency.

FT adds that “while the government will be able to manage around those year-end issues, the cash crunch will come to a head in June, when officials on the Working Group conceded it would be nearly impossible to tap financial markets. The plan, which will be closely scrutinised by investors who have just agreed a restructuring with Puerto Rico’s electric power authority, included proposals to consolidate the commonwealth’s education department, reorganise the Department of Economic Development and create a fiscal oversight board.”

Th …

Chanos Vs Icahn: Famous Short-Seller Goes After Icahn’s LNG Exporting Activist Play

Almost exactly one month ago, on August 6, Carl Icahn filed a 13-D revealing that he had built up a 19.4 million, or 8.2%, stake in US natural gas exporter Cheniere Energy (LNG), a position he had started buying on June 10 when the stock was trading in the $70. In the 13-D Icahn stuck to the script, demanding a board seat, capex cuts, discussions on executive compensation and, of course, financings, to wit:

The Reporting Persons acquired their positions in the Shares in the belief that the Shares were undervalued. The Reporting Persons intend to have discussions with representatives of the Issuer’s management and board of directors relating to the Issuer’s operations, capital expenditures, financings and executive compensation. The Reporting Persons may also seek shareholder board representation if appropriate. As of August 5, 2015, the Reporting Persons have not had any discussions with representatives of the Issuer’s management or board of directors.

What he really wanted was to use Cheniere as the latest buyback vehicle, which would be levered up with a few billion in debt and the proceeds would be used to cash “activists” such as Icahn out.

Since then Icahn has not exactly hit a home run, with the stock tumbling 20% from Icahn’s initial price, and closing at $56.75 yesterday: hardly good news for the outspoken billionaire. Today Icahn got some more bad news when famous short-seller Jim Chanos announced on CNBC that his latest heretofore undisclosed short is precisely Cheniere, which he described as a “looming disaster” alleging that demand for liquid natural gas isn’t growing. Which, of course, is hardly a profound charge in this time of massive excess production of virtually every commodity now that China is exporing its deflation via currency devaluation.