11Oct2017 Pre-Market Commentary: Wall Street To Open Lower, Analysts Becoming Increasingly Worried That Stocks Are At Their Most Idiosyncratic Since 2001, The US Dollar Remained On The Defensive, The Best Predictor Of Future Inflation Is Flashing “WARNING!”

Here is the current market situation from CNN Money

European markets are mixed. The DAX is higher by 0.02%, while the CAC 40 is leading the FTSE 100 lower. They are down 0.35% and 0.08% respectively.

Exclusive: Despite sanctions, Russian organizations acquire Microsoft software

By Gleb Stolyarov, Anastasia Teterevleva and Anastasia Lyrchikova

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.

Spain-Catalonia relief nudges world stocks to fresh high

LONDON (Reuters) – World stocks set a record high on Wednesday, as relief that Catalonia had put off any plans to break away from Spain followed a two-decade peak for Asia’s biggest share market and more upbeat predictions for the global economy.

Light trading volume seen as black spot in banks’ results

(Reuters) – Trading revenue was likely to be a black spot in U.S. banks’ third quarter earnings, as volatility remained low, and investors have little hope the fourth quarter will be much better.

Peltz’s Procter & Gamble defeat could be more humbling than harmful

(Reuters) – Nelson Peltz put his activist hedge fund credentials on the line to win a board seat at Procter & Gamble Co, only to be narrowly defeated, according to a preliminary shareholder vote count. Yet he stands to lose more face than he does money.

Asset manager BlackRock’s profit beats Wall Street view as fees rise

(Reuters) – BlackRock Inc , the world’s biggest asset manager, reported a 8.2 percent rise in quarterly profit that beat Wall Street estimates on Wednesday, helped by higher fees as investors moved more money into low-cost exchange traded funds.

Delta profit beats expectations, says third-quarter results hurt by storms

NEW YORK (Reuters) – Delta Air Lines’ third-quarter adjusted pre-tax income fell 9.5 percent to $1.7 billion compared to the year prior, hit by a $120 million negative impact from Hurricane Irma in September, the company said on Wednesday.

Major U.S. rail customers to air complaints over CSX at hearing

(Reuters) – Cargill Inc, Dow Chemical Co and other major corporate rail customers are expected to speak on Wednesday before the top U.S. rail regulator about their experiences with CSX Corp’s network, which has been dogged by service problems since the summer.

Oil rises on tighter market, but doubts swirl on sustainability

LONDON (Reuters) – Oil prices rose for a third day on Wednesday as OPEC said the market was gradually tightening after years of oversupply, but the 2018 outlook was less certain.

Trump Once Asked The Pentagon For A ‘Tenfold’ Increase In US’s Nuclear Arsenal

Apparently, possessing the largest nuclear arsenal in the world isn’t enough for President Donald Trump. To wit, NBC News is reporting that Trump had asked for a nearly tenfold increase in the US’s nuclear arsenal during a Pentagon defense briefing in July involving several of the administration’s most-senior officials.

According to the officials present at the meeting, Trump’s advisers, among them the Joint Chiefs of Staff and Secretary of State Rex Tillerson, were surprised by Trump’s request, and quickly explained the legal and practical impediments to a nuclear buildup and how the current military posture is stronger than it was at the height of the build-up. In interviews. The president reportedly relented, and no such expansion is planned.

The description of the meeting was presumably leaked to NBC by the same sources who furnished the story about Tillerson’s now-infamous “moron” comment.

NBC reported that officials who lingered behind after the contentious July 20 security review heard Tillerson call the president a moron – suggesting that Tillerson made the comment in response to Trump’s nuclear ask.

The Best Predictor of Future Inflation is Flashing “WARNING!”

The Fed is dramatically understating real inflation.

As you know, I’ve been very critical of the Fed’s inflation measures for years. The official inflation measure (Consumer Price Index or CPI) does a horrible job of measuring the actual cost of living for Americans.

I have long stated that this is intentional as the purpose of CPI is to hide the true rate of inflation so the Fed can paper over the decline in living standards that has plagued the US for the last few decades.

The Fed isn’t doing this out of ignorance, either. Back in 2002, Fed researchers actually reviewed the usefulness of its CPI metric for forecasting inflation.

The results were not pretty. In fact, the Fed discovered that its official measures of inflation (CPI and PCE) do a horrible job of predicting future inflation.

So what does predict future inflation accurately?

FOOD prices.

We see that past inflation in food prices has been a better forecaster of future inflation than has the popular core measure…Comparing the past year’s inflation in food prices to the prices of other components that comprise the PCEPI (as in Table 1), we find that the food component still ranks the best among them all…

https://research.stlouisfed.org/publications/regional/02/01/Inflation.pd…

I want you to focus on these two admissions:

1) The Fed has admitted that its official inflation measures do not accurately predict future inflation.

2) The Fed admitted that …

Frontrunning: October 11

Republicans to Trump and Corker: Please just stop (Politico)

Trump Wants to Weaken Nafta’s Influence, Power (WSJ)

Spain Warns Catalonia With Threat of Direct Control From Madrid (BBG)

U.S. warship sails near islands Beijing claims in South China Sea (Reuters)

U.S. flies bombers over Korean peninsula (Reuters)

New timeline in Vegas shooting raises questions on police response (Reuters)

More Women Accuse Harvey Weinstein of Harassment (WSJ)

Global Regulators Play Bitcoin Whack-a-Mole as Demand Explodes (BBG)

Uber Faces at Least Two More U.S. Criminal Probes (BBG)

What to Watch for as Wall Street Reports Third-Quarter Results (

OPEC Boosts Oil Demand Estimates, Admits Oil Prices Can’t Rise Above $55

In its latest OPEC Monthly Oil Market Report (October) the oil cartel has increased its oil demand estimates for 2017, 2018 on strengthening world economy, and weaker outlook for supplies from its rivals.

Specifically, OPEC forecasts that based on the current global oil supply/demand balance, demand for OPEC crude in 2017 is estimated at 32.8 mb/d, around 0.6 mb/d higher than in 2016. Similarly, OPEC crude in 2018 is projected at 33.1 mb/d, 350k b/d higher than September production, and ~200k b/d higher than the group estimated last month. Global oil demand seen rising +1.38m b/d, or 1.4% in 2018 to 98.19m b/d

Meanwhile, OPEC claims that oil inventories in developed nations continued to decline, -24.7m bbl to 2.996b bbl in August, curbing surplus relative to a 5-year average to 171m bbl.

Here are the key highlights from the report:

Crude Oil Price Movements

The OPEC Reference Basket rose to $53.44/b in September, its highest value since July 2015. Crude futures prices also saw gains, with ICE Brent averaging above the $55/b, supported by increasing evidence that the oil market is heading toward rebalancing. Geopolitical tensions and lower distillates stocks also pushed prices higher. ICE Brent averaged $55.51/b in September, a gain of $3.64, while NYMEX WTI increased $1.82 to average $49.88/b. Hedge funds raised net long position in ICE Brent and NYMEX WTI futures and options by almost 200,000 contracts. At the end of the month, the Brent crude contract curve had flipped into backwardation through December 2021. The sweet/sour spread widened significantly in Asia and Europe.

World Economy

Growth in the world economy …

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.

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.

How Nvidia Keeps Driving Higher

Richly valued chipmaker Nvidia benefits from a consolidated industry with more diverse growth opportunities ahead.

Capitol Report: Trump wanted tenfold increase in nuclear arsenal | Tax speech to tout worker benefits

President Trump reportedly wanted a tenfold increase in the U.S. nuclear arsenal; a tax speech by the president on Wednesday will tout worker benefits of cutting the corporate rate; the administration seeks a loan for Puerto Rico; and more.

Project Syndicate: Price of bitcoin will collapse, says economist Rogoff, who wrote the book on currencies

The technology of cryptocurrencies will thrive, but the price of bitcoin will collapse under pressure from the state, writes Kenneth Rogoff.

It would take a 50% hike in income tax to fund our deficit

At some point — even though Republicans are jawboning hard about cutting taxes now — we are going to have to raise taxes in order to fund Social Security and Medicare, writes John Mauldin.