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Offsetting Currents Leave Market in Flux as Bond Yields Rise

The investing landscape is about as mixed and garbled as one could imagine, with all the conflicting data showing a lot of fragmentation within several…

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3 months ago

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The investing landscape is about as mixed and garbled as one could imagine, with all the conflicting data showing a lot of fragmentation within several sectors of the economy amid tightening monetary policy, and a stock market that is demonstrating resilience against seemingly mounting odds. The bears point to an inverted yield curve, a hot shelter index within the CPI, lower oil prices, negative monthly manufacturing data, flat growth in industrial production, talk of a 50-basis-point (BPS) hike at the March 22 FOMC meeting, record household credit and a resumption of rising commodity prices.

Source: www.ycharts.com

It is widely understood that the consumer drives U.S. GDP, and though anecdotal evidence would suggest the consumer is just fine, the hard data would imply otherwise, to be sure. Consumer spending was nothing short of spectacular in January, buttressing everything from new car purchases, travel, hospitality, entertainment, furniture, home furnishings, electronics, clothing and accessories. The key takeaway from the report is that consumers were spending freely on goods in January, despite the ongoing inflation pressure. In fact, every single sales category showed a month-over-month increase, led by a 7.2% surge in sales at food-and-beverage establishments.

The narrative that has been making the rounds within investment circles to explain this “damn inflation, full spending ahead” is a strange and surreal admission by believers of LTS — i.e., life’s too short. Others in the financial world would call this whistling by the graveyard, and that all the stimulus and relief experienced during the pandemic infected millions upon millions of people with the idea that extreme debt is no big deal.

After all, the federal government has no problem running up $31.46 trillion in debt and mortgaging the future of our great-grandchildren. It’s like, “when my stuff hits the fan, I’ll just stop paying on my rent, cry foul when they come to repossess my Tesla, wait for the government to bail me out of my student loans and go tell my credit card issuers to go pound sand, because you shouldn’t have extended me that much credit in the first place. It’s not my fault I have no margin. I’m the victim! How much are Taylor Swift tickets? Sweet, I’m in. I’ll figure it out, but I’m not missing the show!”

I’m not so sure this example is that extreme. The hard data would corroborate my rant. According to the New York Fed, “mortgage balances shown on consumer credit reports increased by $254 billion during the fourth quarter of 2022 and stood at $11.92 trillion at the end of December, marking a nearly $1 trillion increase in mortgage balances during 2022. Balances on home equity lines of credit (HELOC) increased by $14 billion, the third consecutive quarterly increase and the largest increase seen in more than a decade; the outstanding HELOC balance stands at $336 billion.

“Credit card balances saw a $61 billion increase in the fourth quarter, surpassing the pre-pandemic high of $927 billion. Credit card balances now stand at $986 billion, after declining to $770 billion in 2021Q1. Auto loan balances increased by $28 billion in the fourth quarter to $1.55 trillion, continuing the upward trajectory that has been in place since 2011. Other balances, which include retail cards and other consumer loans, increased by $16 billion. Student loan balances now stand at $1.60 trillion, up by $21 billion from the previous quarter. In total, non-housing balances grew by $126 billion. The share of all current debt transitioning into delinquency increased for nearly all debt types.”

The bulls would contend that air is coming out of the housing bubble, and the spike in household debt is unfortunate for those hard-working people on fixed wages and salaries, but it is also the fault of people not living within their means. As long as the 1% of Americans that own 53% of all stocks are in good shape, then the market is in good shape. Roughly 150 million people, or 55%, of all Americans own stocks in some form or another, but the top 1% have the full attention of market forces.

So, investors shouldn’t lose focus as to why the market trades as well as it does in the face of inflationary pressure. The top 1% can handle 4-5% inflation just fine. They have the financial horsepower to cope with rising prices and the costs of doing business. Anyone over the age of 60 can easily recall the days of the mid-1980s, when many were buying their first home and mortgages dipped below 10% for the first time in a while. At the time, it was celebrated like having hit the lottery. Today’s rate of 7.4% is being treated as an OMG moment because most new home buyers have been living in a perma-stimulus, quantitative easing (QE) bubble for the past 15 years.

News flash — 4% inflation is historically normal. During the observation period from 1960 to 2021, the average inflation rate was 3.8% per year. Overall, the price increase was 829.57%. An item that cost $100 in 1960 cost $929.57 at the beginning of 2022. For January 2023, the year-over-year inflation rate was 6.4%. One could argue a lot has happened in the past 50 years during which this metric is drawn from. And the stock market has managed just fine in a 4% world. Jobs are plentiful, prices for goods produced allow for decent profits, household wealth increases, real estate appreciates and America generally prospers.

Source: www.worlddatainfo.com

The vocal and divided debate as to whether the economy, S&P earnings, the health of the consumer and the stock market’s price to earnings (PE) valuation will continue to rage on for the days and weeks ahead, because there is simply no consensus. This will continue to foster ongoing volatility until the forthcoming data begins to shed light on economic conditions and whether the eight rate hikes, and the likely two more to come, are priced in. Right now, it is a very hard task to forecast the future, but if one has good stocks, then sitting tight is probably the best plan of action. Sometimes it just pays to show patience.

Sincerely,

Bryan Perry
Editor, Cash Machine
Editor, Premium Income PRO
Editor, Quick Income Trader
Editor, Breakout Options Alert
Editor, Micro-Cap Stock Trader 

The post Offsetting Currents Leave Market in Flux as Bond Yields Rise appeared first on Stock Investor.

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“What’s More Tragic Is Capitalism”: BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

"What’s More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years…

Published

12 hours ago

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May 28, 2023

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"What's More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years ago, I wrote columns about companies pouring money into Black Lives Matter to establish their bona fides as “antiracist” corporations. The money continued to flow despite serious questions raised about BLM’s management and accounting. Democratic prosecutors like New York Attorney General Letitia James showed little interest in these allegations even as James sought to disband the National Rifle Association (NRA) over similar allegations. At the same time, Black Lives Matter co-founder Patrisse Cullors cashed in with companies like Warner Bros. eager to give her massive contracts to signal their own reformed status. It now appears that BLM is facing bankruptcy after burning through tens of millions and Warner Bros. cut ties with Cullors after the contract produced no — zero — new programming.

Some states belatedly investigated BLM as founders like Cullors seemed to scatter to the winds.

Gone are tens of millions of dollars, including millions spent on luxury mansions and windfalls for close associates of BLM leaders.

The usual suspects gathered around the activists like former Clinton campaign general counsel Marc Elias, who later removed himself from his “key role” as the scandals grew.

When questions were raised about the lack of accounting and questionable spending, BLM attacked critics as “white supremacists.”

Warner Bros. was one of the companies eager to grab its own piece of Cullors to signal its own anti-racist virtues.  It gave Cullors a lucrative contract to guide the company in the creation of both scripted and non-scripted content, focusing on reparations and other forms of social justice. It launched a publicity campaign for everyone to know that it established a “wide-ranging content partnership” with Cullors who would now help guide the massive corporation’s new programming. Calling Cullors “one of the most influential thought leaders in American public life,” Warner Bros. announced that she was going to create a wide array of new programming, including “but not limited to live-action scripted drama and comedy series; longform/event series; unscripted docuseries; animated programming for co-viewing among kids, young adults and families; and original digital content.”

Some are now wondering if Warner Bros. ever intended for this contract to produce anything other than a public relations pitch or whether Cullors took the money and ran without producing even a trailer for an actual product. Indeed, both explanations may be true.

Paying money to Cullors was likely viewed as a type of insurance to protect the company from accusations of racial insensitive. After all, the company was giving creative powers to a person who had no prior experience or demonstrated talent in the area. Yet, Cullors would be developing programming for one of the largest media and entertainment companies in the world.

One can hardly blame Cullors despite criticizism by some on the left for going on a buying spree of luxury properties.

After all, Cullors was previously open about her lack of interest in working with “capitalist” elements. Nevertheless, BLM was run like a Trotskyite study group as the media and corporations poured in support and revenue.

It was glaringly ironic to see companies like Warner Bros. falling over each other to grab their own front person as the group continued boycotts of white-owned businesses. Indeed, if you did not want to be on the wrong end of one of those boycotts, you needed to get Cullors on your payroll.

Much has now changed as companies like Bud Light have been rocked by boycotts over what some view as heavy handed virtue signaling campaigns.

It was quite a change for Cullors and her BLM co-founder, who previously proclaimed “[we] are trained Marxists. We are super versed on, sort of, ideological theories.” She denounced capitalism as worse than COVID-19. Yet, companies like Lululemon rushed to find their own “social justice warrior” while selling leggings for $120 apiece.

When some began to raise questions about Cullors buying luxury homes, Facebook and Twitter censored them.

With increasing concerns over the loss of millions, Cullors eventually stepped down as executive director of the Black Lives Matter Global Network Foundation, as others resigned.  At the same time, the New York Post was revealing that BLM Global Network transferred $6.3 million to Cullors’ spouse, Janaya Khan, and other Canadian activists to purchase a mansion in Toronto in 2021.

According to The Washington Examiner, BLM PAC and a Los Angeles-based jail reform group paid Cullors $20,000 a month. It also spent nearly $26,000 on meetings at a luxury Malibu beach resort in 2019. Reform LA Jails, chaired by Cullors, received $1.4 million, of which $205,000 went to the consulting firm owned by Cullors and her spouse, according to New York magazine.

Once again, while figures like James have spent huge amounts of money and effort to disband the NRA over such accounting and spending controversies, there has been only limited efforts directed against BLM in New York and most states.

Cullors once declared that “while the COVID-19 illness is tragic, what’s more tragic is capitalism.” These companies seem to be trying to prove her point. Yet, at least for Cullors, Warner Bros. fulfilled its slogan that this is all “The stuff that dreams are made of.”

Tyler Durden Sun, 05/28/2023 - 16:00

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Biden reaches ‘tentative’ US debt ceiling deal: Report

United States President Joe Biden has urged the United States Congress to “pass the agreement right away.“
Amid growing concerns…

Published

23 hours ago

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May 28, 2023

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United States President Joe Biden has urged the United States Congress to “pass the agreement right away.“

Amid growing concerns of a potential default by early June, United States President Joe Biden and House majority leader Representative Kevin McCarthy have reportedly reached an “agreement in principle” to raise the federal government’s multitrillion-dollar debt ceiling.

According to a May 28 report from Reuters citing two sources familiar with the negotiations, the “tentative” agreement to raise the $31.4 trillion debt ceiling was reached after a 90-minute phone call between Biden and McCarthy on May 27.

Since publication time, Biden has confirmed via Twitter the existence of an “agreement in principle," explaining that it will prevent the U.S. from facing a “catastrophic default.“

Biden noted that “over the next day,” the agreement would go to the U.S. House of Representatives and Senate. He urged both chambers to “pass the agreement right away.“

Meanwhile, McCarthy also took to Twitter to confirm the agreement in principle, alleging that Biden “wasted time and refused to negotiate for months.“

Reuters reported that while “the exact details of the deal were not immediately available,” an agreement has been made to limit the U.S. government’s spending for the next two years, excluding expenses related to national security.

“Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025,” a source familiar with the deal said.

Related: Debt ceiling crisis: Best practices to navigate this market

This comes only weeks after U.S. Treasury Secretary Janet Yellen warned of a default risk as soon as June 1 if the debt limit isn’t suspended or raised, urging Congress to “act as soon as possible.“

Additionally, The U.S. Congressional Budget Office published a report on May 12, emphasizing that if the debt limit remains unchanged, there is a significant risk “that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations.“

In recent times, several analysts have shared a similar view that raising the debt ceiling could see more capital inflow into Bitcoin (BTC).

On May 17, MacroJack, a former Wall Street trader, warned his followers in a tweet that the U.S. debt ceiling talks are “all show.“

He emphasized how important it is to own hard assets as the dollar will be “printed into oblivion,” while stating that Bitcoin is the “fastest horse in the race.“

Meanwhile, Jesse Myers, chief operating officer of investment firm Onramp, reminded his 50,100 Twitter followers of what happened during the COVID-19 pandemic, stating that “Bitcoin was the winner during the last round of stimulus.“

He proposed the idea that history might repeat itself if the debt ceiling were to be raised, as it would prompt the Federal Reserve to print more money.

Update on May 28, 2023, at 03:15: This article has been updated to include United States President Joe Biden's tweet.

Magazine: Visa stablecoin plan, debt ceiling’s effect on Bitcoin price: Hodler’s Digest, April 23-29

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Biden reaches ‘tentative’ US debt ceiling deal: Report

United States President Joe Biden has urged both the United States House and Senate to "pass the agreement right away."
Amid growing…

Published

1 day ago

on

May 28, 2023

By

United States President Joe Biden has urged both the United States House and Senate to "pass the agreement right away."

Amid growing concerns of a potential default by early June, the United States President Joe Biden and Republican Kevin McCarthy have reportedly reached an "agreement in principle" to raise the federal government's multi-trillion dollar debt ceiling.

According to a May 28 report from Reuters, citing two sources familiar with the negotiations, the "tentative" agreement to raise the $31.4 trillion debt ceiling was reached after a 90-minute phone call between Biden and McCarthy on May 27.

Following the publication of this article, Biden has since confirmed via Twitter the existence of an "agreement in principle," explaining that it will prevent the U.S. facing a "catostrophic default."

Biden noted that "over the next day," the agreement will go the U.S. House and Senate. He urged both chambers to "pass the agreement right away."

Meanwhile, McCarthy also took to Twitter to confirm the agreement in principle, alleging that Biden "wasted time and refused to negiotate for months."

Reuters reported that while "the exact details of the deal were not immediately available," an agreement has been made to limit the U.S. government's spending for the next two years, excluding expenses related to national security. 

"Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025" a source familiar with the deal said.

Related: Debt ceiling crisis: Best practices to navigate this market

This comes only weeks after U.S. Treasury Secretary Janet Yellen warned of a default risk as soon as June 1 if the debt limit isn't suspended or raised, urging Congress to "act as soon as possible."

Additionally, The U.S. Congressional Budget Office (CBO) published a report on May 12, emphasizing that if the debt limit remains unchanged, there is a significant risk "that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations."

In recent times, several analysts have shared a similiar view that raising the debt ceiling could see more capital inflow into Bitcoin (BTC)

MacroJack, a former Wall Street trader, warned his followers in a tweet on May 17 that the U.S. debt ceiling talks are "all show."

He emphasized how important it is to own hard assets as the dollar will be "printed into oblivion," while stating that Bitcoin is the "fastest horse in the race."

Meanwhile, Jesse Myers, chief operating officer of investment firm Onramp reminded his 50,100 Twitter followers of what happened during the Covid-19 Pandemic, stating that "Bitcoin was the winner during the last round of stimulus."

He proposed the idea that history might repeat itself if the debt ceiling were to be raised, as it would prompt the Federal Reserve to print more money.

Update on May 28, 2023, at 03:15: This article has been updated to include United States President Joe Biden's tweet.

Magazine: Visa stablecoin plan, debt ceiling’s effect on Bitcoin price: Hodler’s Digest, April 23-29

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