04Jan2016 Market Update: Averages Take A Two Percent Plunge Along With European Markets

Here is the current market situation from CNN Money

North and South American markets are sharply lower today with shares in U.S. off the most. The S&P 500 is down 2.05% while Mexico’s IPC is off 1.98% and Brazil’s Bovespa is lower by 1.93%.

U.S. files civil suit against Volkswagen for environment violations

WASHINGTON (Reuters) – The U.S. Justice Department on Monday filed a civil suit against Volkswagen AG for allegedly violating the Clean Air Act by installing illegal devices to impair emission control systems in 600,000 vehicles.

Wall Street reels under China shock

(Reuters) – The Dow Jones industrial average was set for its worst start to a year since 1932 as stock markets tanked after weak Chinese economic data reignited fears of a global slowdown.

L’Oreal to buy Raylon assets to expand in U.S. hair salons ‹

PARIS (Reuters) – French cosmetics group L’Oreal said on Monday it had agreed to buy assets from U.S. company Raylon Corporation, which is owned by the Hafetz family and supplies American hair salons with professional beauty products. ‹

Oil down; China, Wall Street tumble erase early rally on Middle East

NEW YORK (Reuters) – Oil prices slid on Monday in volatile trade that saw an early rally of more than 4 percent on tensions in the Middle East until those gains were erased on worries about a slowing global economic growth and sliding stock markets.

U.S. manufacturing activity slumps, construction spending falls

NEW YORK (Reuters) – The U.S. manufacturing sector contracted further in December, as the impact of a stronger U.S. dollar undermined export profitability, while U.S. construction spending fell for the first time in nearly 1-1/2 years in November, suggesting only moderate economic growth in the fourth quarter of 2015.

China stocks rout on first market day of 2016 trips national trading halt

SHANGHAI (Reuters) – China’s major stock exchanges tanked on the first trading day of the year, triggering a “circuit-breaker” that suspended equities trade nationwide for the first time and putting at risk months of regulatory work to restore market stability.

Fed’s Williams, unfazed by China, sees 3-5 rate hikes this year

SAN FRANCISCO (Reuters) – San Francisco Federal Reserve President John Williams said Monday he is unfazed by the weak economic data out of China that has spooked Wall Street, and sees three to five U.S. interest rate hikes this year as reasonable given the strength of the U.S. economy.

Fidelity drops credit card partners American Express, Bank of America

BOSTON (Reuters) – Fidelity Investments said on Monday it is dropping long-time credit card partners American Express Co and Bank of America Corp, ending a 12-year partnership that has generated billions of dollars in fees.

China, euro zone and U.S. manufacturing suggest global economy still fragile

BENGALURU/NEW YORK (Reuters) – The global economy finished last year on a fragile footing, with factory activity in China shrinking for the 10th month running in December, while euro zone manufacturing picked up but U.S. activity slowed.

2016 Theme #1: The Loss Of Great Power Leverage

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

This week I am addressing themes I see playing out in 2016.

A number of systemic, structural forces are intersecting in 2016. One is the decline of Great Power leverage.

Once a nation’s civil society–broadly speaking, the institutions of social cohesion–has been shredded so that power rests in the hands of the few, the nations becomes exquisitely vulnerable to coups and regime change.

As the seminal book Coup d’État: A Practical Handbook (1968) explained, coups are a function of the concentration of power: if political power (and by extension of that leverage, economic/financial power) has been concentrated into the hands of a few, changing governments (and indeed, entire systems of control) is greatly simplified: kill, imprison or exile this handful of insiders, and the pyramid below will be yours.

This vulnerability makes any nation run by a small clique a very tempting target to Great Powers and neighboring nations seeking to become regional powers.

Nations with diverse civil societies–by definition, societies with a tolerance for dissent and multiple circles of civil, political, religious and economic power–cannot easily be captured by coups, as power is too diversified to be consolidated in a few hours by a tiny clique or the agents of a foreign power.

So by stripping their social orders of dissent and diverse circles of power, dictators and monarchs create a vulnerability to external meddling that would not otherwise existed.

Those nations with oil wealth have reaped the sorry harvests of The Oil Curse

Byron Wien’s Reveals Top 10 Predictions: Expects Stocks To Decline After Predicting 15% Rise In 2015

Each year for the past three decades Blackstone’s Vice Chairman of Multi-Asset Investing Byron R. Wien presents his top 10 “surprises” for the upcoming 12 months.

What constitutes a “surprise”, you ask? A surprise is “an event that the average investor would only assign a one out of three chance of taking place but which Byron believes is ‘probable,’ having a better than 50% likelihood of happening.” Last year’s list included a few predictions that didn’t exactly pan out including:

The year-end 2014 rally in United States equities continues as the market rises for a strong performance in 2015

The year-end 2014 meltdown in the high yield market, as a result of the collapse in the price of oil, creates a huge buying opportunity.

Brazil provides an emerging market favorable surprise.

Hillary Clinton decides not to run for President

Byron’s Ten Surprises for 2016 are as follows:

1. Riding on the coattails of Hillary Clinton, the winner of the presidential race against Ted Cruz, the Democrats gain control of the Senate in November. The extreme positions of the Republican presidential candidate on key issues are cited as factors contributing to this outcome. Turnout is below expectations for both political parties.

2. The United States equity market has a down year. Stocks suffer from weak earnings, margin pressure (higher wages and no pricing power) and a price- earnings ratio contraction. Investors keeping large cash balances because of global in …

Here Are The Key Findings From The SEC’s ETFlash Crash Data Dump

Via FactSet’s Director of ETFs, Dave Nadig,

This week, the SEC gave us a belated Christmas present. But what does it actually portend?

The present in question is an 88-page “Research Note” from the SEC’s Division of Trading and Markets titled “Equity Market Volatility on August 24, 2015.” It’s an innocuous-enough title, but for us market-structure wonks, it’s kind of a big deal.

The conclusions of the piece are purely factual, and include dozens of pages of juicy charts and tables (be still my nerdy heart!). There’s little or no conjecture, and there’s absolutely no policy recommendations.

It outlines the facts of that fateful trading day, discussing what went wrong, and which classes of securities were affected. It’s a gold mine for folks who want to dig in and understand what happens when things break, and, for any investor, it’s worth reading at least the first six pages.

Key Findings

Here are the most interesting findings—not just because they’re objectively interesting—but because they give you some insight into where the SEC may direct future policy:

The SEC goes out of its way to point out that large and small equities—and large and small exchange-traded products—were almost equally affected. It hammers this point home repeatedly. To me, this signals that it is countering an internal (or external) argument that there’s a “small-cap problem” when it comes to market structure, or tha …

Atlanta Fed Just Slashed Q4 GDP Forecast To Barely Positive 0.7%, Down 1.2% In Ten Days

Just before the aborted Santa Rally took off in earnest, on December 23 the famous US economic growth prognosticators at the Atlanta Fed (famous because unlike Wall Street they actually are right) slashed its Q4 GDP forecast from 1.9% to 1.3% citing weakness in real consumer spending and poor existing-home sales.

Moments ago, in its latest Q4 GDP revision, the Atlanta Fed just pulled the rug from under the economy (and the market now that bad news for the economy is bad news for stocks), and slashed its latest quarterly forecast by another 50%, from 1.3% to a barely positive 0.7%, a print which matches the “abysmal” Q1 2015 GDP, which as a reminder had to be double seasonally adjusted higher to compensate for the “harsh winter.”

Does that mean that when “triple seasonally adjusting” for warm weather that the real Q4 GDP was negative?

This is what the Atlanta Fed said:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 0.7 percent on January 4, down from 1.3 percent on December 23. The forecast for the contribution of net exports to fourth-quarter real GDP growth fell 0.1 percentage points to -0.4 percentage points on December 29 after the U.S. Census Bureau’s advance report on international trade in goods. The nowcast for real GDP growth fell 0.5 percentage points this morning following the Census Bureau’s release on construction spending and the Institute for Supply Management’s Manufacturing ISM Report On Business.

Sa …

Dow Plunges After Rout in Chinese Market

Global stocks started 2016 with a sharp selloff after fresh signs of economic slowdown in China and a falling yuan triggered a 7% fall in mainland Chinese stocks that led authorities to halt trading there before the end of the session.

China Market Drop Leads to Worries of Further Turmoil

China’s economic troubles pounded markets on the first trading day of the year, leaving investors worried about a continuation of last year’s market turmoil.

Oil Prices Slide, as Persistent Oversupply Trumps Other Concerns

Oil prices slid Monday, erasing early gains, as fresh signs of an oversupplied crude market trumped concerns about increased tensions in the Middle East.

November 2015 Construction Spending Growth Rate Declined.

Written by Steven Hansen

The headlines say construction spending declined. The backward revisions make this series very wacky – and this month all the data was revised since January 2005.

2016 predictions: 17 game-changers that could happen this year

2015 may have been the year of emojis and hoverboards, but 2016 is going to bring a lot more.

The Margin: The 12 best cities to live in when you’re single

Single? You should live here.

The Fed: Fed Vice Chairman Fischer’s hawkish tone may have added to market angst

Fed Vice Chairman Stanley Fischer’s hawkish tone on Sunday could be adding to market angst