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The Relentless Push Towards War

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By LeilaSchmidt from PixabayThe Relentless Push Towards War


Korean and US Flags

This time with North Korea. Why?

The only real constant to be found in both European and US politics is war. A steady feature of both regions for the past 20+ years has been small, lucrative conflicts waged against countries unable to effectively defend themselves.

It doesn’t seem to matter who’s in office in the US — Republican/Democrat, conservative/liberal — there’s a war machine constantly running. My concern is that there’s a building risk that one day that war machine is going to bust apart. And when it does, the long relative peace that the US and Europe have enjoyed (even as they’ve visited a lot of death and destruction elsewhere) will be shattered.

As I’ve written extensively in the past, as was the case with Russia last fall, this push to war includes a series of carefully-crafted talking points being endlessly repeated over the print and airwaves. It’s an ever-present condition of living in our manufactured reality, where what we are told to care about is beamed at us around the clock in a rather tediously but emotionally-manipulative way on the “news.”

For a short historical review, recall that it wasn’t that long ago that we were asked to be in a near state of panic about:

  • Ebola
  • Iran’s nuclear capabilities
  • Libya’s terrible strongman (who turned out to be way better than the thugs who replaced him)
  • Terrorists
  • Russia

How many of those are now ‘front and center’ in your concerns? Probably none. Today’s big ‘bogeyman’ is North Korea. Have you wondered why?

The news about North Korea is at a fever pitch. Again, we have to ask, why now?

Trump says ‘major, major’ conflict with North Korea possible, but seeks diplomacy

Apr 28, 2017

The Trump administration on Wednesday declared North Korea “an urgent national security threat and top foreign policy priority.” It said it was focusing on economic and diplomatic pressure, including Chinese cooperation in containing its defiant neighbor and ally, and remained open to negotiations.

U.S. President Donald Trump said on Thursday a major conflict with North Korea is possible in the standoff over its nuclear and missile programs, but he would prefer a diplomatic outcome to the dispute.

“There is a chance that we could end up having a major, major conflict with North Korea. Absolutely,” Trump told Reuters in an Oval Office interview ahead of his 100th day in office on Saturday.

Nonetheless, Trump said he wanted to peacefully resolve a crisis that has bedeviled multiple U.S. presidents, a path that he and his administration are emphasizing by preparing a variety of new economic sanctions while not taking the military option off the table.

“We’d love to solve things diplomatically but it’s very difficult,” he said.

In other highlights of the 42-minute interview, Trump was cool to speaking again with Taiwan’s president after an earlier telephone call with her angered China.

He also said he wants South Korea to pay the cost of the U.S. THAAD anti-missile defense system, which he estimated at $1 billion, and intends to renegotiate or terminate a U.S. free trade pact with South Korea because of a deep trade deficit with Seoul.

U.S. officials said military strikes remained an option but played down the prospect, though the administration has sent an aircraft carrier and a nuclear-powered submarine to the region in a show of force.

Any direct U.S. military action would run the risk of massive North Korean retaliation and huge casualties in Japan and South Korea and among U.S. forces in both countries.

(Source)

Okay, let’s parse all that out:

  • There are no direct negotiations between the US and North Korea
  • Trump is talking tough
  • Kim Jong Un is insane
  • Trump wants South Korea to pay for a $1 billion US piece of hardware
  • Trump wants to renegotiate or terminate the trade pact with South Korea
  • If things ‘go hot’, a lot of casualties are expected
  • Both China and North Korea are very alarmed by the THAAD anti-missile system the US has installed in South Korea
  • The US is maneuvering military assets into the region, including an aircraft carrier and sub, among other displays of suggested force

Let’s see here…what could possibly go wrong?

How about everything?

Here’s some more on the THAAD anti-missile defense system, which wasn’t well received by the locals in South Korea who, for some reason, have no interest in being dragged into a war with their immediate and heavily-militarized neighbors by a careless US administration:

US sets up missile defense in S. Korea as North shows power

Apr 26, 2017

SEOUL, South Korea (AP) — In a defiant bit of timing, South Korea announced Wednesday that key parts of a contentious U.S. missile defense system had been installed a day after rival North Korea showed off its military power.

The South’s trumpeting of progress on setting up the Terminal High-Altitude Area Defense system, or THAAD, comes as high-powered U.S. military assets converge on the Korean Peninsula and as a combative North Korea signals possible nuclear and missile testing.

About 8,000 police officers were mobilized, and the main road leading up to the site in the country’s southeast was blocked earlier Wednesday, Yonhap reported. About 200 residents and protesters rallied against THAAD in front of a local community center, some hurling plastic water bottles.

North Korea conducted live-fire artillery drills on Tuesday, the 85th anniversary of the founding of its million-person strong Korean People’s Army. On the same day, a U.S. guided-missile submarine docked in South Korea. And the USS Carl Vinson aircraft carrier is also headed toward the peninsula for a joint exercise with South Korea.

The moves to set up THAAD within this year have angered not only North Korea, but also China, the country that the Trump administration hopes to work with to rid the North of nuclear weapons. China, which has grown increasingly frustrated with its ally Pyongyang, and Russia see the system’s powerful radars as a security threat.

(Source)

I consider having to deploy 8,000 police officers to deter possible protestors as a strong sign of just how unpopular a move it is for the THAAD system to be installed. North Korea is rattling its sabers, the US is moving assets in, China is both alarmed and trying to be helpful at the same time, probably preferring to let a sleeping dog lie.

This is an incredibly volatile moment, especially considering that Kim Jong Un has been anything but rational his entire life. So, again, we have to ask: Why now? Why has beating North Korea into submission become such a sudden national priority?

Before address that, it bears repeating that most of what passes for “news” in the West is actually well-crafted talking points put out by self-interested people who have discovered a fantastic way to remain in power and accumulate wealth. Read more about this in our prior report: We Are Being Played.

Well, that’s true at least as long as we consent to follow along and dutifully remain ignorant of these tricks of persuasion by propaganda. There’s really no good excuse for being fooled, except mental laziness. The tricks of this trade are neither subtle nor difficult to spot.

Meanwhile, the actual things that are deteriorating alarmingly are not even talked about — ever — in the main news outfits. Alarming species extinction rates, the loss of phytoplankton in the oceans, the loss of terrestrial soil fertility into oceanic dead zones, and the largest wealth gap in all of history created on purpose by central banks — very real crises like this are nearly completely ignored.

These are all very dangerous to our future, but they aren’t talked about because doing so won’t sell more weapons. Nor will it advance any political careers, or goose banking profits next quarter.

So for a system that demands continuous conflict in order to function, to manufacture a new war you need a good sales agent, and none are so closely tied to that racket than the New York Times. Here they are recently using the same dumb tricks that worked the last time, and the time before that…and so on:

NYT’s ‘Impossible to Verify’ North Korea Nuke Claim Spreads Unchecked by Media

Apr 26, 2017

Buoyed by a total of 18 speculative verb forms — five “mays,” eight “woulds” and five “coulds” — New York Times reporters David E. Sanger and William J. Broad (4/24/17) painted a dire picture of a Trump administration forced to react to the growing and impending doom of North Korea nuclear weapons.

“As North Korea Speeds Its Nuclear Program, US Fears Time Will Run Out” opens by breathlessly establishing the stakes and the limited time for the US to “deal with” the North Korean nuclear “crisis”:

Behind the Trump administration’s sudden urgency in dealing with the North Korean nuclear crisis lies a stark calculus: A growing body of expert studies and classified intelligence reports that conclude the country is capable of producing a nuclear bomb every six or seven weeks.

That acceleration in pace — impossible to verify until experts get beyond the limited access to North Korean facilities that ended years ago — explains why President Trump and his aides fear they are running out of time.

The front-page summary was even more harrowing, with the editors asserting there’s “dwindling time” for “US action” to stop North Korea from assembling hundreds of nukes:

North Korea News Headline

From the beginning, the Times frames any potential bombing by Trump as the product of a “stark calculus” coldly and objectively arrived at by a “growing body of expert[s].” The idea that elements within the US intelligence community may actually desire a war — or at least limited airstrikes — and thus may have an interest in presenting conflict as inevitable, is never addressed, much less accounted for.

The most spectacular claim — that North Korea is, at present, “capable of producing a nuclear bomb every six or seven weeks” — is backed up entirely by an anonymous blob of “expert studies and classified intelligence reports.” To add another red flag, Sanger and Broad qualify it in the very next sentence as a figure that is “impossible to verify.” Which is another way of saying it’s an unverified claim.

(Source)

Unverifiable “evidence,” anonymous sources, and the broad appeal of “many experts.” Sound familiar? It should, it’s the exact same playbook used by the war machine to bomb and invade Iraq, Afghanistan, Syria, and, someday soon, Iran and Russia.

It brings to mind this quote by Arundhati Roy:

Wars are manufactured to sell weapons

What I’m saying is that it’s the exact same trick used over and over again. Either the New York Times is the stupidest crew of reporters and editors ever with completely flat learning curves, or they are in on the racket.  More likely the latter than the former, I’m convinced. The New York Times hasn’t seen a war it couldn’t support (especially in the oil-rich Middle East).

Why Now?

So the big question is ‘why now?’ Why is North Korea suddenly such a concern?  They’ve been peskily doing what they do for a very long time; developing crude nuclear devices and lobbing test missiles into the sea.

If you happen to be the ocean around North Korea, you have to absorb a wayward rocket now and then. But there’s not much of a threat beyond that at the moment.

None of the articles I’ve read have given any credible insight into why North Korea is considered a clear and present danger to US interests at the moment. More than that, no analysis has been proffered to explain how any potential military action doesn’t just end in a bloodbath for the poor people of South and North Korea.

The conventional military capabilities of North Korea are pretty staggering if you live in Seoul South Korea, at least:

When it comes to soldiers based on the North Korean border, the US only has about 20,000 troops permanently stationed in South Korea, as well as about 8000 air force personnel and other special forces. There were also about 50,000 military personnel based in Japan.

Compare this to North Korea, which has 700,000 active soldiers, but a whopping 4.5 million reserves.

Prof Blaxland said North Korea had also massed about 20,000 rockets and missiles on the border with South Korea, and when you are playing a numbers game, technology doesn’t always win.

“There’s a saying ‘quantity has a quality all of its own’,” he said.

“North Korea has massed artillery and missile capability adjacent to the demilitarised zone, close to Seoul, which puts it in range of a population about the size of Australia — it’s pretty scary.”

(Source news.com.au)

As a reminder, Trump campaigned on a peace platform. So this sudden belligerence has to be coming form some heavy internal pressure; or he’s simply flip-flopped (or wasn’t honest) on a very important matter.

He’s done so much flip-flopping that this tweet struck me as funny:

Tweet

Continuing with the mystery of Why now?, we note that the potential consequences of a kinectic conflict for South Korea are staggering. The simple fact is that, no matter how many jets and cruise missiles a carrier group launches, or what countermeasures South Korea and embedded US military bring to bear, there’s little chance of them wiping out anything but a very small percentage of North Korea’s conventional artillery and rocket capabilities.

Think of 500,000 rounds of artillery landing in a major, packed capitol city that has the population of Australia and you can begin to appreciate the scale of the catastrophe that could ensue:

Trump, who clearly and unequivocally campaigned on a peace platform, is now sending a “very powerful armada” to the coast of the DPRK. Powerful as this armada might be, it can do absolutely nothing to prevent the DPRK artillery from smashing Seoul into smithereens. You think that I am exaggerating? Business Insider estimated in 2010 that it would take the DPRK 2 hours to completely obliterate Seoul. Why? Because the DPRK has enough artillery pieces to fire 500,000 rounds of artillery on Seoul in the first hour of a conflict, that’s why. Here we are talking about old fashioned, conventional, artillery pieces. Wikipedia says that the DPRK has 8,600 artillery pieces and 4,800 multiple rocket launcher systems. Two days ago a Russian expert said that the real figure was just under 20,000 artillery pieces. Whatever the exact figure, suffice to say that it is “a lot”.

The DPRK also has some more modern but equally dangerous capabilities. Of special importance here are the roughly 200’000 North Korean special forces. Oh sure, these 200,000 are not US Green Beret or Russian Spetsnaz, but they are adequate for their task: to operate deep behind enemy lies and create chaos and destroy key objectives. You tell me – what can the USS Carl Vinson carrier strike group deploy against these well hidden and dispersed 10’000+ artillery pieces and 200,000 special forces? Exactly, nothing at all.

(Source)

Clearly that’s a very unsettling prospect for South Korea. Just imagine a favorite major city of yours with a completely unstable leader within artillery range just to its immediate north. It’s a frightening prospect.

Again, I cannot find a single credible reason for Why now?. And so, we have to simply speculate.

Possible reasons range from an itchy military industrial complex that is disappointed that it cannot seem to goad the US into war with Russia and North Korea just happened to be next on the list, to the idea that Trump is really seeking trade deal concessions from South Korea and is using the North Korean situation as leverage.

The latter is not out of the realm of the possible, with Trump having said he wants South Korea to pay for the THAAD system being installed and that he wants to renegotiate our balance of trade with them, too.

Who says stuff like that at a time when war might break out? Someone who doesn’t really appreciate the gravity of the situation, I’d suggest. I mean, if it’s a negotiating tactic, it’s one that could end up with a lot of people losing their lives and a ruined economy. If it’s a negotiating tactic stapled to a crisis, it’s still an odd thing.

Conclusion

Tensions with North Korea are about as tight as can be right now. And the wild card is the apparent instability of Kin Jong Un. Who knows what he might do?

Any equally-perplexing mystery, which for now I’ll have to file under “central banks control the markets” is why the KOSPI (South Korea’s stock index) is up so much on the outbreak of these very serious tensions?

South Korea Seoul Composite Daily Chart

Either the central banks are propping it up here to keep the masses calm, or the central banks are to blame for pouring so much liquidity into world markets that even the risk of obliteration is insufficient cause for a stock market to go down. So take your pick: either it’s a controlled market or it’s a sign of just how outrageous the bubble mentality across the world has become.

One feature of bubbles is the inability to entertain the idea of an asset ever going down in price. So they go up; news and data be damned.

I just find it extremely strange that the South Korean stock index is powering higher through all of these tensions. It’s very, very strange. Stocks are not supposed to like uncertainty. The post-French election stock buying spree was explained on that very basis: the French elections removed uncertainty and therefore stocks went up.

But now we’re being forced to accept how stocks are going up as uncertainty increases.

Since it really makes no sense, other ‘reasons’ are being given. But it’s just too strange for the rational mind to believe them. It’s just not normal; and therefore we don’t live in a normal world anymore.

If a full shooting war breaks out with North Korea, there will be massive casualties on all sides. To think that peace depends on Trump negotiating with Kim Jong Un is a particularly comic-book-worthy plot line. It seems absurd. But here we are.

If you live in Seoul, you should consider getting out for a while. Take a vacation, or work remotely, and bring your family. Just for a while — maybe a couple of weeks.

If you can’t do that, then be sure all of your loved ones know the rally points and basement shelters that apply. Review your basic contingency plans and then hope that they won’t be required.

Remember, any outbreak of war is going to be a very bad thing for the globe at this particular moment in history. Debt levels are stretched to the limit, GDP is weak, and it won’t take much to upset the economic and financial market apple carts.

For everyone else, read our report How To Prepare For War that was prepared for the possibility of a war with Russia.

It’s not a pleasant topic, nor one I like to keep raising. But there’s a crew in charge in DC that is intent on starting wars, and they are not about to stop now. I believe they span administrations and they are very influential.

I also happen to believe that they will eventually pick a fight we all regret very much.

So be prepared.


Chris Martenson

Chris Martenson
Peak Prosperity

Chris Martenson

Executive summary: Father of three young children; author; obsessive financial
observer; trained as a scientist; experienced in business; has made profound
changes in his lifestyle because of what he sees coming.

I think it’s important that you understand who I am, how I have arrived at
my conclusions and opinions, and why I’ve dedicated my life to communicating
them to you.

First of all, I am not an economist. I am trained as a scientist, having completed
both a PhD and a post-doctoral program at Duke University, where I specialized
in neurotoxicology. I tell you this because my extensive training as a scientist
informs and guides how I think. I gather data, I develop hypotheses, and I
continually seek to accept or reject my hypotheses based on the evidence at
hand. I let the data tell me the story.

It is also important for you to know that I entered the profession of science
with the intention of teaching at the college level. I love teaching, and
I especially enjoy the challenge of explaining difficult or complicated subjects
to people with limited or no background in those subjects. Over the years
I’ve gotten pretty good at it.

Once I figured out that most of the (so-called) better colleges place “effective
teacher” pretty much near the bottom of their list of characteristics that
factor into tenure review, I switched gears, obtained an MBA from Cornell
(in Finance), and spent the next ten years working my way through positions
in both corporate finance and strategic consulting. From these experiences
I gather my comfort with numbers and finance.

So much for the credentials.

The most important thing for you to know is the impact that the information
that I’ve now placed on this site had on me. Let’s do this as a Before and
After.

Before: I am a 40-year-old professional who has worked his way up to
Vice President of a large, international Fortune 300 company and is living
in a waterfront, 5 bathroom house in Mystic, CT, which is mostly paid off.
My three young children are either in or about to enter public school, and
my portfolio of investments is being managed by a broker at a large institution.
I do not really know any of my neighbors, and many of my local connections
are superficial at best.

After: I am a 45-year-old who has willingly terminated his former high-paying,
high-status position because it seemed like an unnecessary diversion from
the real tasks at hand. My children are now homeschooled, and the big house
in Mystic was sold in July of 2003 in preference for a 1.5 bathroom rental
in rural western Massachusetts. In 2002, I discovered that my broker was unable
to navigate a bear market, and I’ve been managing our investments ever since.
Since that time, my portfolio has gained 166%, which works out to a compounded
yearly gain of 27.8% for five years running (whereas my broker, by keeping
me in the usual assortment of stocks, would have scored me a 38% return, or
8.39%/yr). I grow a garden every year; preserve food, know how to brew beer & wine,
and raise chickens. I’ve carefully examined each support system (food, energy,
security, etc), and for each of them I’ve figured out either a means of being
more self-sufficient or a way to do without. But, most importantly, I now
know that the most important descriptor of wealth is not my dollar holdings,
but the depth and richness of my community.

I hope you find what I have to offer here useful.

Copyright © 2013-2017 Chris Martenson

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Published at Sun, 30 Apr 2017 08:40:43 +0000

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The Relentless Push Towards War

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By WikimediaImages from PixabayThe Relentless Push Towards War


Korean and US Flags

This time with North Korea. Why?

The only real constant to be found in both European and US politics is war. A steady feature of both regions for the past 20+ years has been small, lucrative conflicts waged against countries unable to effectively defend themselves.

It doesn’t seem to matter who’s in office in the US — Republican/Democrat, conservative/liberal — there’s a war machine constantly running. My concern is that there’s a building risk that one day that war machine is going to bust apart. And when it does, the long relative peace that the US and Europe have enjoyed (even as they’ve visited a lot of death and destruction elsewhere) will be shattered.

As I’ve written extensively in the past, as was the case with Russia last fall, this push to war includes a series of carefully-crafted talking points being endlessly repeated over the print and airwaves. It’s an ever-present condition of living in our manufactured reality, where what we are told to care about is beamed at us around the clock in a rather tediously but emotionally-manipulative way on the “news.”

For a short historical review, recall that it wasn’t that long ago that we were asked to be in a near state of panic about:

  • Ebola
  • Iran’s nuclear capabilities
  • Libya’s terrible strongman (who turned out to be way better than the thugs who replaced him)
  • Terrorists
  • Russia

How many of those are now ‘front and center’ in your concerns? Probably none. Today’s big ‘bogeyman’ is North Korea. Have you wondered why?

The news about North Korea is at a fever pitch. Again, we have to ask, why now?

Trump says ‘major, major’ conflict with North Korea possible, but seeks diplomacy

Apr 28, 2017

The Trump administration on Wednesday declared North Korea “an urgent national security threat and top foreign policy priority.” It said it was focusing on economic and diplomatic pressure, including Chinese cooperation in containing its defiant neighbor and ally, and remained open to negotiations.

U.S. President Donald Trump said on Thursday a major conflict with North Korea is possible in the standoff over its nuclear and missile programs, but he would prefer a diplomatic outcome to the dispute.

“There is a chance that we could end up having a major, major conflict with North Korea. Absolutely,” Trump told Reuters in an Oval Office interview ahead of his 100th day in office on Saturday.

Nonetheless, Trump said he wanted to peacefully resolve a crisis that has bedeviled multiple U.S. presidents, a path that he and his administration are emphasizing by preparing a variety of new economic sanctions while not taking the military option off the table.

“We’d love to solve things diplomatically but it’s very difficult,” he said.

In other highlights of the 42-minute interview, Trump was cool to speaking again with Taiwan’s president after an earlier telephone call with her angered China.

He also said he wants South Korea to pay the cost of the U.S. THAAD anti-missile defense system, which he estimated at $1 billion, and intends to renegotiate or terminate a U.S. free trade pact with South Korea because of a deep trade deficit with Seoul.

U.S. officials said military strikes remained an option but played down the prospect, though the administration has sent an aircraft carrier and a nuclear-powered submarine to the region in a show of force.

Any direct U.S. military action would run the risk of massive North Korean retaliation and huge casualties in Japan and South Korea and among U.S. forces in both countries.

(Source)

Okay, let’s parse all that out:

  • There are no direct negotiations between the US and North Korea
  • Trump is talking tough
  • Kim Jong Un is insane
  • Trump wants South Korea to pay for a $1 billion US piece of hardware
  • Trump wants to renegotiate or terminate the trade pact with South Korea
  • If things ‘go hot’, a lot of casualties are expected
  • Both China and North Korea are very alarmed by the THAAD anti-missile system the US has installed in South Korea
  • The US is maneuvering military assets into the region, including an aircraft carrier and sub, among other displays of suggested force

Let’s see here…what could possibly go wrong?

How about everything?

Here’s some more on the THAAD anti-missile defense system, which wasn’t well received by the locals in South Korea who, for some reason, have no interest in being dragged into a war with their immediate and heavily-militarized neighbors by a careless US administration:

US sets up missile defense in S. Korea as North shows power

Apr 26, 2017

SEOUL, South Korea (AP) — In a defiant bit of timing, South Korea announced Wednesday that key parts of a contentious U.S. missile defense system had been installed a day after rival North Korea showed off its military power.

The South’s trumpeting of progress on setting up the Terminal High-Altitude Area Defense system, or THAAD, comes as high-powered U.S. military assets converge on the Korean Peninsula and as a combative North Korea signals possible nuclear and missile testing.

About 8,000 police officers were mobilized, and the main road leading up to the site in the country’s southeast was blocked earlier Wednesday, Yonhap reported. About 200 residents and protesters rallied against THAAD in front of a local community center, some hurling plastic water bottles.

North Korea conducted live-fire artillery drills on Tuesday, the 85th anniversary of the founding of its million-person strong Korean People’s Army. On the same day, a U.S. guided-missile submarine docked in South Korea. And the USS Carl Vinson aircraft carrier is also headed toward the peninsula for a joint exercise with South Korea.

The moves to set up THAAD within this year have angered not only North Korea, but also China, the country that the Trump administration hopes to work with to rid the North of nuclear weapons. China, which has grown increasingly frustrated with its ally Pyongyang, and Russia see the system’s powerful radars as a security threat.

(Source)

I consider having to deploy 8,000 police officers to deter possible protestors as a strong sign of just how unpopular a move it is for the THAAD system to be installed. North Korea is rattling its sabers, the US is moving assets in, China is both alarmed and trying to be helpful at the same time, probably preferring to let a sleeping dog lie.

This is an incredibly volatile moment, especially considering that Kim Jong Un has been anything but rational his entire life. So, again, we have to ask: Why now? Why has beating North Korea into submission become such a sudden national priority?

Before address that, it bears repeating that most of what passes for “news” in the West is actually well-crafted talking points put out by self-interested people who have discovered a fantastic way to remain in power and accumulate wealth. Read more about this in our prior report: We Are Being Played.

Well, that’s true at least as long as we consent to follow along and dutifully remain ignorant of these tricks of persuasion by propaganda. There’s really no good excuse for being fooled, except mental laziness. The tricks of this trade are neither subtle nor difficult to spot.

Meanwhile, the actual things that are deteriorating alarmingly are not even talked about — ever — in the main news outfits. Alarming species extinction rates, the loss of phytoplankton in the oceans, the loss of terrestrial soil fertility into oceanic dead zones, and the largest wealth gap in all of history created on purpose by central banks — very real crises like this are nearly completely ignored.

These are all very dangerous to our future, but they aren’t talked about because doing so won’t sell more weapons. Nor will it advance any political careers, or goose banking profits next quarter.

So for a system that demands continuous conflict in order to function, to manufacture a new war you need a good sales agent, and none are so closely tied to that racket than the New York Times. Here they are recently using the same dumb tricks that worked the last time, and the time before that…and so on:

NYT’s ‘Impossible to Verify’ North Korea Nuke Claim Spreads Unchecked by Media

Apr 26, 2017

Buoyed by a total of 18 speculative verb forms — five “mays,” eight “woulds” and five “coulds” — New York Times reporters David E. Sanger and William J. Broad (4/24/17) painted a dire picture of a Trump administration forced to react to the growing and impending doom of North Korea nuclear weapons.

“As North Korea Speeds Its Nuclear Program, US Fears Time Will Run Out” opens by breathlessly establishing the stakes and the limited time for the US to “deal with” the North Korean nuclear “crisis”:

Behind the Trump administration’s sudden urgency in dealing with the North Korean nuclear crisis lies a stark calculus: A growing body of expert studies and classified intelligence reports that conclude the country is capable of producing a nuclear bomb every six or seven weeks.

That acceleration in pace — impossible to verify until experts get beyond the limited access to North Korean facilities that ended years ago — explains why President Trump and his aides fear they are running out of time.

The front-page summary was even more harrowing, with the editors asserting there’s “dwindling time” for “US action” to stop North Korea from assembling hundreds of nukes:

North Korea News Headline

From the beginning, the Times frames any potential bombing by Trump as the product of a “stark calculus” coldly and objectively arrived at by a “growing body of expert[s].” The idea that elements within the US intelligence community may actually desire a war — or at least limited airstrikes — and thus may have an interest in presenting conflict as inevitable, is never addressed, much less accounted for.

The most spectacular claim — that North Korea is, at present, “capable of producing a nuclear bomb every six or seven weeks” — is backed up entirely by an anonymous blob of “expert studies and classified intelligence reports.” To add another red flag, Sanger and Broad qualify it in the very next sentence as a figure that is “impossible to verify.” Which is another way of saying it’s an unverified claim.

(Source)

Unverifiable “evidence,” anonymous sources, and the broad appeal of “many experts.” Sound familiar? It should, it’s the exact same playbook used by the war machine to bomb and invade Iraq, Afghanistan, Syria, and, someday soon, Iran and Russia.

It brings to mind this quote by Arundhati Roy:

Wars are manufactured to sell weapons

What I’m saying is that it’s the exact same trick used over and over again. Either the New York Times is the stupidest crew of reporters and editors ever with completely flat learning curves, or they are in on the racket.  More likely the latter than the former, I’m convinced. The New York Times hasn’t seen a war it couldn’t support (especially in the oil-rich Middle East).

Why Now?

So the big question is ‘why now?’ Why is North Korea suddenly such a concern?  They’ve been peskily doing what they do for a very long time; developing crude nuclear devices and lobbing test missiles into the sea.

If you happen to be the ocean around North Korea, you have to absorb a wayward rocket now and then. But there’s not much of a threat beyond that at the moment.

None of the articles I’ve read have given any credible insight into why North Korea is considered a clear and present danger to US interests at the moment. More than that, no analysis has been proffered to explain how any potential military action doesn’t just end in a bloodbath for the poor people of South and North Korea.

The conventional military capabilities of North Korea are pretty staggering if you live in Seoul South Korea, at least:

When it comes to soldiers based on the North Korean border, the US only has about 20,000 troops permanently stationed in South Korea, as well as about 8000 air force personnel and other special forces. There were also about 50,000 military personnel based in Japan.

Compare this to North Korea, which has 700,000 active soldiers, but a whopping 4.5 million reserves.

Prof Blaxland said North Korea had also massed about 20,000 rockets and missiles on the border with South Korea, and when you are playing a numbers game, technology doesn’t always win.

“There’s a saying ‘quantity has a quality all of its own’,” he said.

“North Korea has massed artillery and missile capability adjacent to the demilitarised zone, close to Seoul, which puts it in range of a population about the size of Australia — it’s pretty scary.”

(Source news.com.au)

As a reminder, Trump campaigned on a peace platform. So this sudden belligerence has to be coming form some heavy internal pressure; or he’s simply flip-flopped (or wasn’t honest) on a very important matter.

He’s done so much flip-flopping that this tweet struck me as funny:

Tweet

Continuing with the mystery of Why now?, we note that the potential consequences of a kinectic conflict for South Korea are staggering. The simple fact is that, no matter how many jets and cruise missiles a carrier group launches, or what countermeasures South Korea and embedded US military bring to bear, there’s little chance of them wiping out anything but a very small percentage of North Korea’s conventional artillery and rocket capabilities.

Think of 500,000 rounds of artillery landing in a major, packed capitol city that has the population of Australia and you can begin to appreciate the scale of the catastrophe that could ensue:

Trump, who clearly and unequivocally campaigned on a peace platform, is now sending a “very powerful armada” to the coast of the DPRK. Powerful as this armada might be, it can do absolutely nothing to prevent the DPRK artillery from smashing Seoul into smithereens. You think that I am exaggerating? Business Insider estimated in 2010 that it would take the DPRK 2 hours to completely obliterate Seoul. Why? Because the DPRK has enough artillery pieces to fire 500,000 rounds of artillery on Seoul in the first hour of a conflict, that’s why. Here we are talking about old fashioned, conventional, artillery pieces. Wikipedia says that the DPRK has 8,600 artillery pieces and 4,800 multiple rocket launcher systems. Two days ago a Russian expert said that the real figure was just under 20,000 artillery pieces. Whatever the exact figure, suffice to say that it is “a lot”.

The DPRK also has some more modern but equally dangerous capabilities. Of special importance here are the roughly 200’000 North Korean special forces. Oh sure, these 200,000 are not US Green Beret or Russian Spetsnaz, but they are adequate for their task: to operate deep behind enemy lies and create chaos and destroy key objectives. You tell me – what can the USS Carl Vinson carrier strike group deploy against these well hidden and dispersed 10’000+ artillery pieces and 200,000 special forces? Exactly, nothing at all.

(Source)

Clearly that’s a very unsettling prospect for South Korea. Just imagine a favorite major city of yours with a completely unstable leader within artillery range just to its immediate north. It’s a frightening prospect.

Again, I cannot find a single credible reason for Why now?. And so, we have to simply speculate.

Possible reasons range from an itchy military industrial complex that is disappointed that it cannot seem to goad the US into war with Russia and North Korea just happened to be next on the list, to the idea that Trump is really seeking trade deal concessions from South Korea and is using the North Korean situation as leverage.

The latter is not out of the realm of the possible, with Trump having said he wants South Korea to pay for the THAAD system being installed and that he wants to renegotiate our balance of trade with them, too.

Who says stuff like that at a time when war might break out? Someone who doesn’t really appreciate the gravity of the situation, I’d suggest. I mean, if it’s a negotiating tactic, it’s one that could end up with a lot of people losing their lives and a ruined economy. If it’s a negotiating tactic stapled to a crisis, it’s still an odd thing.

Conclusion

Tensions with North Korea are about as tight as can be right now. And the wild card is the apparent instability of Kin Jong Un. Who knows what he might do?

Any equally-perplexing mystery, which for now I’ll have to file under “central banks control the markets” is why the KOSPI (South Korea’s stock index) is up so much on the outbreak of these very serious tensions?

South Korea Seoul Composite Daily Chart

Either the central banks are propping it up here to keep the masses calm, or the central banks are to blame for pouring so much liquidity into world markets that even the risk of obliteration is insufficient cause for a stock market to go down. So take your pick: either it’s a controlled market or it’s a sign of just how outrageous the bubble mentality across the world has become.

One feature of bubbles is the inability to entertain the idea of an asset ever going down in price. So they go up; news and data be damned.

I just find it extremely strange that the South Korean stock index is powering higher through all of these tensions. It’s very, very strange. Stocks are not supposed to like uncertainty. The post-French election stock buying spree was explained on that very basis: the French elections removed uncertainty and therefore stocks went up.

But now we’re being forced to accept how stocks are going up as uncertainty increases.

Since it really makes no sense, other ‘reasons’ are being given. But it’s just too strange for the rational mind to believe them. It’s just not normal; and therefore we don’t live in a normal world anymore.

If a full shooting war breaks out with North Korea, there will be massive casualties on all sides. To think that peace depends on Trump negotiating with Kim Jong Un is a particularly comic-book-worthy plot line. It seems absurd. But here we are.

If you live in Seoul, you should consider getting out for a while. Take a vacation, or work remotely, and bring your family. Just for a while — maybe a couple of weeks.

If you can’t do that, then be sure all of your loved ones know the rally points and basement shelters that apply. Review your basic contingency plans and then hope that they won’t be required.

Remember, any outbreak of war is going to be a very bad thing for the globe at this particular moment in history. Debt levels are stretched to the limit, GDP is weak, and it won’t take much to upset the economic and financial market apple carts.

For everyone else, read our report How To Prepare For War that was prepared for the possibility of a war with Russia.

It’s not a pleasant topic, nor one I like to keep raising. But there’s a crew in charge in DC that is intent on starting wars, and they are not about to stop now. I believe they span administrations and they are very influential.

I also happen to believe that they will eventually pick a fight we all regret very much.

So be prepared.


Chris Martenson

Chris Martenson
Peak Prosperity

Chris Martenson

Executive summary: Father of three young children; author; obsessive financial
observer; trained as a scientist; experienced in business; has made profound
changes in his lifestyle because of what he sees coming.

I think it’s important that you understand who I am, how I have arrived at
my conclusions and opinions, and why I’ve dedicated my life to communicating
them to you.

First of all, I am not an economist. I am trained as a scientist, having completed
both a PhD and a post-doctoral program at Duke University, where I specialized
in neurotoxicology. I tell you this because my extensive training as a scientist
informs and guides how I think. I gather data, I develop hypotheses, and I
continually seek to accept or reject my hypotheses based on the evidence at
hand. I let the data tell me the story.

It is also important for you to know that I entered the profession of science
with the intention of teaching at the college level. I love teaching, and
I especially enjoy the challenge of explaining difficult or complicated subjects
to people with limited or no background in those subjects. Over the years
I’ve gotten pretty good at it.

Once I figured out that most of the (so-called) better colleges place “effective
teacher” pretty much near the bottom of their list of characteristics that
factor into tenure review, I switched gears, obtained an MBA from Cornell
(in Finance), and spent the next ten years working my way through positions
in both corporate finance and strategic consulting. From these experiences
I gather my comfort with numbers and finance.

So much for the credentials.

The most important thing for you to know is the impact that the information
that I’ve now placed on this site had on me. Let’s do this as a Before and
After.

Before: I am a 40-year-old professional who has worked his way up to
Vice President of a large, international Fortune 300 company and is living
in a waterfront, 5 bathroom house in Mystic, CT, which is mostly paid off.
My three young children are either in or about to enter public school, and
my portfolio of investments is being managed by a broker at a large institution.
I do not really know any of my neighbors, and many of my local connections
are superficial at best.

After: I am a 45-year-old who has willingly terminated his former high-paying,
high-status position because it seemed like an unnecessary diversion from
the real tasks at hand. My children are now homeschooled, and the big house
in Mystic was sold in July of 2003 in preference for a 1.5 bathroom rental
in rural western Massachusetts. In 2002, I discovered that my broker was unable
to navigate a bear market, and I’ve been managing our investments ever since.
Since that time, my portfolio has gained 166%, which works out to a compounded
yearly gain of 27.8% for five years running (whereas my broker, by keeping
me in the usual assortment of stocks, would have scored me a 38% return, or
8.39%/yr). I grow a garden every year; preserve food, know how to brew beer & wine,
and raise chickens. I’ve carefully examined each support system (food, energy,
security, etc), and for each of them I’ve figured out either a means of being
more self-sufficient or a way to do without. But, most importantly, I now
know that the most important descriptor of wealth is not my dollar holdings,
but the depth and richness of my community.

I hope you find what I have to offer here useful.

Copyright © 2013-2017 Chris Martenson

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

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Published at Sun, 30 Apr 2017 08:40:43 +0000

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UPS air maintenance workers threaten strike ahead of shareholders meeting

Photo
tags
By JerzyGorecki from PixabayUPS air maintenance workers threaten strike ahead of shareholders meeting

By Luciana Lopez

A union representing 1,200 U.S. air maintenance workers at United Parcel Service Inc (UPS.N) turned up pressure on the company on Sunday to settle a three-year contract dispute, saying it would seek clearance to strike.

The union is taking its grievances directly to UPS shareholders, running as an advertisement an open letter to David Abney, the company’s chief executive, ahead of a Thursday shareholders meeting.

The letter, which has been delivered to board members, was signed by nearly 78 percent of members of Local 2727 of the Teamsters union, asking the company to maintain air mechanics’ current health plan and not demand other concessions.

“We’re not willing to back off of this and we will strike over it,” said Tim Boyle, the local president.

The company said that it continues to negotiate in good faith with the union.

“Talks continue under the control of the National Mediation Board, which has scheduled sessions several months out,” said Mike Mangeot, a spokesman for UPS Airlines, in a statement.

“The union’s talk about a job action is simply posturing and a common union tactic designed to pressure talks. Our mechanics are good people who do a good job of keeping our aircraft flying safely and reliably, and UPS continues to negotiate in good faith for an agreement that’s good for them, the company and our stakeholders.”

Union members will also protest at the UPS shareholders’ meeting on Thursday in Wilmington, Delaware, with protests outside the meeting and, for union members who are also shareholders, questions to company officials inside.

The local plans additional protests on Tuesday in Atlanta, where the company is headquartered.

The union already voted in November to strike, but saw that request denied by federal authorities. The air maintenance workers are governed by the U.S. Railway Labor Act, which only allows strikes after it finds negotiations and mediation have failed. [nL1N1DF0WN]

But if the company does not agree to keep members’ health plans intact at the next bargaining session, on May 11 and May 12, Boyle said the union would ask again for permission to strike.

Even if the board grants permission, though, a strike would take at least another 30 days because of other procedural hurdles.

A strike could ground the package delivery company’s airplanes and disrupt packages sent by air, even as UPS and its rivals grapple with higher costs for surging e-commerce business. [nL1N1HZ0M7]

(Reporting by Luciana Lopez in New York; Editing by Lisa Shumaker and Nick Zieminski)

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Published at Sun, 30 Apr 2017 15:47:59 +0000

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Stocks Move Higher Despite Poor GDP Reading (SPY, DIA)

Photo
tags
By Myriams-Fotos from PixabayStocks Move Higher Despite Poor GDP Reading (SPY, DIA)

The major U.S. indexes moved higher this week despite gross domestic product growth of 0.7% last quarter. According to FactSet’s Earnings Insights, more than three-quarters of S&P 500 companies have surpassed their earnings estimates, and nearly 60% beat their top-line revenue estimates. The downside is that more companies have issued negative EPS guidance and valuations remain at 17.4x forward earnings, which is significantly higher than the 15.1x 5-year average and 14x 10-year average.

International markets were mixed over the past week. Japan’s Nikkei 225 rose 3.08%; Germany’s DAX 30 rose 3.23%; and, Britain’s FTSE 100 fell 1.43%. In Europe, reduced political risk from France’s election led investors to rush back into European stocks across the board. In Asia, stocks remain on edge amid rising concerns over North Korea with Japan and the United States holding drills off the country’s coast. President Trump has also given conflicting signals about his stance on global trade agreements that have complicated matters.

The S&P 500 SPDR (ARCA: SPY) rose 1.49% higher over the past week. After breaking out from its upper trend line resistance and pivot point at $235.54, the index rallied to its R1 resistance at $239.48 before moving sideways. Traders should watch for a breakout from these levels to R2 resistance at $243.21 or a retracement back to its trend line support before a move higher. Looking at technical indicators, the RSI is a bit lofty at 60.81, while the MACD recently experienced a bullish crossover higher.

The Dow Jones Industrial Average SPDR (ARCA: DIA) rose 1.87% over the past week. After breaking out from trend line resistance at the pivot point at $206.93, the index moved to its R1 resistance at $210.22 before moving sideways. Traders should watch for a breakout to R2 resistance at $214.29 or a move lower to its 50-day moving average at $207.09. Looking at technical indicators, the RSI appears lofty at 61.01, but the MACD experienced a bullish crossover that could be a positive sign of things to come.

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 2.60% over the past week, making it the best performing major index. After breaking out from its upper trend line and R2 resistance at $134.85, the index moved to new highs this week. Traders should look for an ongoing move higher to $140.00 levels or a retracement back to its R2 resistance to consolidate before a further move higher. Looking at technical indicators, the RSI appears heavily overbought at 75.81 while the MACD remains in a bullish uptrend.

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 1.35% over the past week, making it the worst-performing major index. After breaking out from its trend line resistance, the index briefly moved to its R1 resistance at $141.16 before taking a downturn. Traders should watch for a rebound from trend line support to retest R1 resistance or a breakdown lower to its 50-day moving average at around $136.91. Looking at technical indicators, the RSI appears neutral at 57.57 while the MACD remains in a bullish pattern.

The Bottom Line

The major U.S. indexes moved higher over the past week as several moved into overbought territory, although MACD readings remained largely bullish. Next week, traders will be watching several key economic indicators including the FOMC meeting announcement on May 3, jobless claims on May 4, and employment data on May 5. Of course, traders will also be closely watching the ongoing geopolitical conflict between the United States and North Korea.

Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.

(Why?)

Published at Fri, 28 Apr 2017 21:32:00 +0000

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Three Ways to Move Forward as a Trader

 

Three Ways to Move Forward as a Trader

I found an excellent way to assess experienced traders.  Simply ask them to show you what, specifically, they are now working on in their trading.  The best traders–including the ones experiencing current success–can show you concrete improvements that they are making to their research, their trading, their risk management, and/or their trading business.  Not intentions to make changes, not journal entries about changing, but actual, concrete, documented change efforts.


Here are a few things traders I’ve been working with have been doing to get to that next level of performance:

1)  Teaming up with other traders to create unique opportunities – The successful traders seek out others different from themselves and skilled/knowledgeable/experienced in different areas to create mutual learning and synergies.  A talented discretionary trader might team up with a talented quantitative researcher; someone expert in trading one region of the world will team up with someone with extensive background in a different region; etc.  In romance as in business, when the right people pair up one plus one becomes three:  everyone makes everyone else better.

2)  Becoming granular and working to improve specific trading processes – One trader I know is looking to high frequency market information to improve his entry execution, measuring results by tracking the adverse and favorable excursions of each trade.  Another trader is building specific time into his schedule to implement creativity exercises and generate more unique and promising trading ideas.  Yet another trader is implementing a system for sizing trades up and taking greater advantage of the trades found, through his research, to have the best hit rate and profitability.  The more detailed and sustained the improvement process, the more likely it is to result in meaningful change.

3)  Learning new tricks – I recently spoke with a trader who has created a unique correlation measure to assess when money is flowing into multiple macro assets at the same time as a way of tracking the activity of large money managers.  A creative trader is experimenting with generating sound patterns from the activity on charts, so that he can track more markets by simultaneously watching and hearing different markets.  When one market demonstrates the right patterns, he moves to trading it, so that he is always trading where there is opportunity for what he does.  Still another trader has added mean-reversion setups to his momentum ones so that he has different ways of trading slow versus busy markets.  These traders make money in different market conditions and in different markets, while others remain one-trick ponies.

Every successful company has an active research and development pipeline.  They are creating tomorrow’s products and services and testing them out, because they know that is where tomorrow’s profits will come from.  The auto manufacturer is working on driverless vehicles; the software company is building new virtual reality applications; the publishing company is electronically archiving chapters from all their books so that readers can, on the fly, select chapters from different books and create their own electronic texts.  

What is your R&D pipeline?  How full is it?  How much time do you spend in developing tomorrow’s trading?  How, specifically, are you going to be better by the end of this year?  Those are some of the strategic questions that help guide the career success of traders.

Further Reading:  Three Varieties of Market Idiot

Published at Sat, 29 Apr 2017 10:40:00 +0000

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Technical Market Report for April 29, 2017

The Wall Street bull is seen in the financial district in New York, U.S., March 7, 2017. REUTERS/Brendan McDermid

Technical Market Report for April 29, 2017

By: Mike Burk | Sat, Apr 29, 2017


The good news is:
• The NASDAQ composite (OTC) and the Russell 2000 (R2K) both hit all time highs last week.

The market had another good week.

New highs increased, new lows remained insignificant, while the secondaries outperformed the blue chips and volume picked up.

The Negatives

The market is over bought. The major indices are up 2.5% – 4.5% in the past 2 weeks.

The first chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH moved sharply upward last week, but was far from confirming the new index high.

OTC and OTC NH

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated with NYSE data.

The pattern is similar to the chart above.

SPX and NY NH

The Positives

The secondaries outperformed the blue chips and new lows remained at non threatening levels.

The next chart covers the past 6 months showing the OTC in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio), in red. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

OTC HL Ratio rose finishing the week at a very strong 81%.

OTC and OTC HL Ratio

The next chart is similar to the one above one except it shows the SPX in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio rose to finish the week at a very strong 89%.

SPX and NY HL Ratio

Seasonality

Next week includes the first 5 trading days of May during the 1st year of the Presidential Cycle. The tables below show the daily change, on a percentage basis for that period.

OTC data covers the period from 1963 to 2016 while SPX data runs from 1928 to 2016. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

Average returns for the coming week have been much stronger during the 1st year of the Presidential Cycle than average of all years.

The OTC has not had a down year for this period since 1981 and the SPX since 1989.

Report for the first 5 days of May.
The number following the year represents its position in the Presidential Cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.

OTC Presidential Year 1
Day1 Day2 Day3 Day4 Day5 Totals
1965-1 0.27% 1 -0.04% 2 0.31% 3 0.04% 4 0.13% 5 0.72%
1969-1 0.26% 4 0.12% 5 0.34% 1 0.19% 2 -0.38% 3 0.53%
1973-1 0.10% 2 1.01% 3 0.70% 4 0.98% 5 -0.37% 1 2.42%
1977-1 0.37% 1 0.40% 2 0.44% 3 0.27% 4 0.01% 5 1.48%
1981-1 -0.03% 5 -1.55% 1 -0.83% 2 0.20% 3 0.79% 4 -1.41%
1985-1 -0.33% 3 -0.22% 4 0.47% 5 -0.16% 1 0.37% 2 0.12%
1989-1 -0.02% 1 0.13% 2 0.19% 3 0.09% 4 0.35% 5 0.74%
1993-1 0.80% 1 1.72% 2 0.75% 3 -0.47% 4 0.21% 5 3.00%
Avg 0.16% 0.09% 0.20% -0.01% 0.35% 0.79%
1997-1 0.77% 4 2.74% 5 2.60% 1 -0.81% 2 -0.41% 3 4.89%
2001-1 2.46% 2 2.42% 3 -3.35% 4 2.11% 5 -0.82% 1 2.82%
2005-1 0.36% 1 0.23% 2 1.51% 3 -0.02% 4 0.28% 5 2.36%
2009-1 0.11% 5 2.58% 1 -0.54% 2 0.28% 3 -2.44% 4 0.00%
2013-1 -0.89% 3 1.26% 4 1.14% 5 0.42% 1 0.11% 2 2.04%
Avg 0.56% 1.84% 0.27% 0.40% -0.65% 2.42%
OTC summary for Presidential Year 1 1965 – 2013
Averages 0.33% 0.83% 0.29% 0.24% -0.17% 1.52%
% Winners 69% 77% 77% 69% 62% 92%
MDD 5/3/2001 3.35% — 5/7/2009 2.68% — 5/5/1981 2.39%
OTC summary for all years 1963 – 2016
Averages 0.33% 0.16% 0.02% -0.08% -0.08% 0.35%
% Winners 64% 69% 58% 54% 56% 61%
MDD 5/7/2010 9.33% — 5/7/2002 6.78% — 5/3/2000 6.34%
SPX Presidential Year 1
Day1 Day2 Day3 Day4 Day5 Totals
1929-1 0.19% 3 0.46% 4 1.00% 5 0.42% 6 -0.60% 1 1.46%
1933-1 1.32% 1 0.36% 2 -0.59% 3 2.85% 4 1.04% 5 4.98%
1937-1 0.00% 6 0.24% 1 1.58% 2 -0.84% 3 0.72% 4 1.71%
1941-1 -0.11% 4 0.32% 5 0.21% 6 -0.11% 1 1.71% 2 2.04%
1945-1 -0.34% 2 -0.14% 3 0.68% 4 0.34% 5 0.20% 6 0.74%
1949-1 0.27% 1 0.47% 2 1.14% 3 -0.07% 4 -0.60% 5 1.22%
1953-1 0.45% 5 1.09% 1 0.12% 2 -0.12% 3 -0.40% 4 1.14%
Avg 0.05% 0.40% 0.75% -0.16% 0.33% 1.37%
1957-1 0.61% 3 0.80% 4 -0.11% 5 -0.15% 1 -0.30% 2 0.85%
1961-1 -0.21% 1 0.72% 2 0.82% 3 0.39% 4 0.12% 5 1.84%
1965-1 0.13% 1 0.31% 2 0.22% 3 0.23% 4 -0.08% 5 0.83%
1969-1 -0.17% 4 0.47% 5 0.36% 1 0.47% 2 -0.18% 3 0.94%
1973-1 0.12% 2 1.24% 3 1.65% 4 0.71% 5 -0.42% 1 3.30%
Avg 0.10% 0.71% 0.59% 0.33% -0.17% 1.55%
1977-1 0.50% 1 0.51% 2 0.53% 3 0.15% 4 -0.62% 5 1.07%
1981-1 -0.07% 5 -1.54% 1 -0.27% 2 0.35% 3 0.68% 4 -0.85%
1985-1 -0.81% 3 0.36% 4 0.60% 5 -0.05% 1 0.43% 2 0.52%
1989-1 -0.17% 1 -0.32% 2 0.01% 3 -0.13% 4 -0.05% 5 -0.66%
1993-1 0.52% 1 0.36% 2 0.11% 3 -0.28% 4 -0.21% 5 0.48%
Avg -0.01% -0.13% 0.20% 0.01% 0.04% 0.11%
1997-1 -0.35% 4 1.81% 5 2.13% 1 -0.31% 2 -1.47% 3 1.82%
2001-1 1.36% 2 0.08% 3 -1.49% 4 1.44% 5 -0.24% 1 1.15%
2005-1 0.46% 1 -0.09% 2 1.25% 3 -0.26% 4 -0.11% 5 1.25%
2009-1 0.54% 5 3.39% 1 -0.38% 2 1.74% 3 -1.32% 4 3.97%
2013-1 -0.93% 3 0.94% 4 1.05% 5 0.19% 1 0.52% 2 1.78%
Avg 0.21% 1.23% 0.51% 0.56% -0.52% 1.99%
SPX summary for Presidential Year 1 1929 – 2013
Averages 0.15% 0.54% 0.48% 0.32% -0.05% 1.44%
% Winners 55% 82% 77% 55% 36% 91%
MDD 5/5/1981 1.87% — 5/7/1997 1.77% — 5/3/2001 1.49%
SPX summary for all years 1928 – 2016
Averages 0.12% 0.16% 0.19% -0.06% 0.14% 0.55%
% Winners 55% 68% 63% 44% 49% 66%
MDD 5/3/1930 8.27% — 5/7/2010 7.60% — 5/4/2000 4.01%

May

Since 1963, over all years, the OTC in May has been up 61% of the time with an average gain of 0.6%. During the 1st year of the Presidential Cycle the OTC in May has been up 77% of the time with an average gain of 2.7% (helped considerably by a 11.1% gain in 1997). The best May ever for the OTC was 1997 (+11.1%), the worst 1970 (-13.0%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average daily performance of the OTC in May over all years since 1963, while the green line shows the average during the 1st year of the Presidential Cycle over the same period.

OTC May, All, Year 1 1963-2017

Since 1928 the SPX has been up 57% of the time in May with an average loss of 0.1%. During the 1st year of the Presidential Cycle the SPX has been up 59% of the time with an average gain of 1.6%. The best May ever for the SPX was 1933 (+15.9%) the worst 1940 (-24.0%).

The chart below is similar to the one above except it shows the average daily performance over all years since 1928 for the SPX in May in red and the average daily performance during the 1st year of the Presidential Cycle, over the same period, in green.

SPX May, All, Year 1 1928-2017

Since 1979 the Russell 2000 (R2K) has been up 66% of the time in May with an average gain of 1.4%. During the 1st year of the Presidential Cycle the R2K has been up 100% of the time with an average gain of 4.6%. The best May ever for the R2K 1997 (+11.0%), the worst 2010 (-7.7%)

The chart below is similar to those above except it shows the average daily performance of the R2K over all years since 1979 in magenta and the average daily performance during the 1st year of the Presidential Cycle in green.

Russell 2000 May, All, Year 1 1979-2017

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 52% of the time in May with an average loss of -0.1%. During the 1st year of the Presidential Cycle the DJIA has been up 58% of the time in May with an average gain of 0.9%. The best May ever for the DJIA 1898 (+14.7%), the worst 1940 (-21.7%)

The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in May in grey and the average performance during the 1st year of the Presidential Cycle in green.

Dow Industrials May, All, Year 1 1885-2017

Conclusion

The market continued its rally last week and seasonally next week is strong.

I expect the major averages to be higher on Friday May 5 than they were on Friday April 28.

These reports are archived at: http://www.safehaven.com/

Good Luck,
YTD W 6 / L 7 / T 4


Mike Burk

Mike Burk independently publishes a weekly newsletter on the stock market from a technical perspective.

Charts and figures presented
herein are believed to be reliable but we cannot attest to their accuracy.
Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack
(fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com).
Historical data is from Barron’s and ISI price books. The views expressed are
provided for information purposes only and should not be construed in any way
as investment advice. Furthermore, the opinions expressed may change without
notice.

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Published at Sat, 29 Apr 2017 09:21:46 +0000

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Hey, Bill Gates! Jeff Bezos is almost richer than you

by ckgodman from Pixabay

Hey, Bill Gates! Jeff Bezos is almost richer than you

  @lamonicabuzz

Move over, Bill Gates. You might lose the title of world’s wealthiest person.

The net worth of Amazon(AMZN, Tech30) CEO Jeff Bezos rose nearly $2 billion to about $80.5 billion on Friday after Amazon reported strong earnings and sales and its stock gained 2%.

Bezos is now slightly behind Spanish retail magnate Amancio Ortega, whose Inditex firm owns the Zara clothing stores. Ortega is worth $81 billion. Bezos has at least moved ahead of Berkshire Hathaway(BRKB) CEO — and Oracle of Omaha — Warren Buffett.

And Bezos is a “mere” $7 billion behind Gates for the title of earth’s richest carbon-based life form. The rankings are based on figures from both Forbes and Bloomberg.

Don’t shed any tears for Gates. Microsoft(MSFT, Tech30) stock was up a bit Friday following that company’s solid earnings report. Gates is now worth $87.2 billion.

The tech industry continues to dominate the market. Google parent company Alphabet(GOOGL, Tech30) reported solid results on Thursday, and that helped lift the net worth of co-founders Larry Page and Sergey Brin by about $1.7 billion apiecein the process.

Two other tech titans, Apple(AAPL, Tech30) and Facebook(FB, Tech30), will report their earnings next week.

The surge in Facebook’s stock this year has pushed CEO Mark Zuckerberg’s net worth up to $62.6 billion, putting him in a tie for fifth-wealthiest person with Mexican telecom mogul Carlos Slim Helu.

And while Apple CEO Tim Cook isn’t as wealthy as many of his fellow tech CEOs — he’s not a company founder — he still is in charge of the world’s most valuable company. Apple is worth three-quarters of a trillion dollars. And it has $246 billion in cash.

Much of that is held in overseas bank accounts. Ditto for other tech giants like Microsoft, Google, Oracle(ORCL, Tech30) and Cisco(CSCO, Tech30).

And that cash pile is steadily growing. Both Microsoft and Alphabet reported an increase in their cash levels in earnings reports Thursday. Microsoft now has $126 billion, and Alphabet has $92.4 billion.

Tech companies will soon have an incentive to bring a chunk of that cash back to the United States if President Trump succeeds in getting tax laws changed. He’s offering a one-time tax break for companies that repatriate cash parked overseas.

Hopes for tax reform are one reason tech stocks continue to lead the market higher. Silicon Valley doesn’t exactly see eye-to-eye with Trump on a lot of things. But investors are excited about repatriation.

The strong earnings don’t hurt either, of course.

“Tech us pushing the market higher. And it’s about more than Trump,” said Kate Warne, an investment strategist with Edward Jones. “But Trump’s policies should have positive impact when they get implemented.”

But should investors be worried about how much influence the tech sector has on the overall market?

Apple, Alphabet, Microsoft, Amazon and Facebook are collectively worth $2.8 trillion. These companies will have to continue to innovate to maintain strong earnings and sales growth. Investors won’t tolerate missteps.

Just look at what happened to Intel(INTC, Tech30), another tech giant that reported its latest earnings Thursday. Results were disappointing, and the semiconductor company’s stock fell 4%.

But it seems that many investors have faith in the tech sector’s Big Five and those company’s respective leaders.

Bezos, Zuckerberg, Cook and Page have earned Wall Street’s respect. So has Satya Nadella at Microsoft, who has pushed the company further into the cloud computing market as well as social networking with its purchase of LinkedIn.

“Higher quality tech companies continue to get bigger,” said Mike Bailey, director of research at FBB Capital Partners. “The probability of any of these companies having a hiccup from our perspective seems small.”

Bailey’s firm owns stakes in Facebook and Alphabet. And he notes that, unlike in 2000, when tech stocks were trading at insane valuations, nearly all the big tech companies are reasonably valued.

Amazon is the main exception. But it’s been trading at a high valuation for almost two decades. Any investors skeptical of Amazon have either missed the rally — or lost lots of money betting against it.

James Wang, an analyst for ARK Invest, thinks tech will continue to dominate. His firm runs the ARK Web X.0 ETF(ARKW), which has big stakes in Amazon and Facebook, as well as tech leaders Netflix(NFLX, Tech30) and China’s Alibaba(BABA, Tech30).

“Tech is an area that should be more immune from regulation and politics than many others. And it is benefiting from genuine shifts in the economy,” Wang said.

So it looks like Bezos will keep getting richer. But he’ll have some company. Gates, Zuckerberg, Page and Brin may also see their bank accounts swell as the tech sector continues to surge.

Published at Fri, 28 Apr 2017 16:53:07 +0000

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Exxon profits surge 122%, ending two-year slump

by drpepperscott from Pixabay

Exxon profits surge 122%, ending two-year slump

  @mattmegan5

After more than two years, ExxonMobil’s bottom line has finally stopped shrinking.

Exxon(XOM), the world’s largest public oil company, revealed on Friday that profits more than doubled to $4 billion during the first three months of 2017.

That breaks a painful slump for Exxon, whose profits have tumbled 20% or more for nine consecutive quarters. The losing streak began at the end of 2014 when oil prices embarked on an epic crash that rocked even the world’s most powerful energy producers.

But things are looking up for Big Oil. Crude prices have nearly doubled since bottoming at $26 a barrel in February 2016. Chevron(CVX), America’s No. 2 oil company, also posted a first-quarter profit of $2.7 billion on Friday, rebounding from a big loss last year.

Exxon credited the “increase in commodity prices” with bringing about stability in its long-hurting finances.

Stronger oil prices allowed Exxon to book $2.3 billion in profits in the division that pumps oil and gas out of the ground. That’s a vast improvement from a loss of $76 million a year ago.

Of course, none of this means Exxon is completely back on track.

Exxon was dealt a blow last Friday when the Trump administration rejected the company’s request to bypass sanctions on Russia to drill for oil in the Arctic.

Exxon’s joint venture with Russian-owned Rosneft — a potentially-transformative project — has been stalled by sanctions since 2014. The project was launched by longtime CEO Rex Tillerson, who has since left to become President Trump’s secretary of state.

More broadly, Exxon remains in a defensive posture, as evidenced by a 19% plunge in capital spending during the first quarter. Drilling for oil and gas is an extremely capital intensive business and steep spending cuts cannot last forever.

Exxon continues to grow it coveted dividend — a major reason why shareholders own the stock — but only at a tepid pace of 2.7% from last year. Exxon has also stopped buying back its own stock, other than to offset dilution linked to its benefit plan and other programs.

Those problems help explain why Exxon has largely missed out on the Trump rally in the stock market. Exxon shares are down 5% since Trump’s victory, compared with a strong 12% gain for the S&P 500.
Published at Fri, 28 Apr 2017 13:57:20 +0000

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Avoid These Tech Behemoths Despite Strong Earnings

 

Avoid These Tech Behemoths Despite Strong Earnings

By Alan Farley | April 28, 2017 — 12:12 PM EDT

Big tech behemoths and Nasdaq-100 components Alphabet, Inc. (GOOGL) and Amazon.com, Inc. (AMZN) blew away high expectations in their quarterly confessionals on Thursday evening, yielding sharply higher prices in Friday’s U.S. session. Their undisputed success highlights the Internet’s steady transformation from 1990s Wild West capitalism into 2010s corporate monopolies.

But neither stock is setting off buy signals after the news, despite posting bull market and all-time highs, because they’re technically overbought after long-term rallies that have carved few pullbacks. In turn, this price action raises odds for corrections that last a minimum of six to nine months while giving up at least 20% of current values. So, while it often makes sense to buy high in anticipation of selling higher, position risk in these market leaders has risen to unacceptable levels.

GOOGL Weekly Chart (2012–2017)

GOOGL

The stock returned to the 2007 high at $374 in the second-half of 2012 and broke out into 2013, entering a powerful trend advance that continued into the 2014 high above just $600. It then dropped into a shallow correction that tested support near $500 twice into a 2015 recovery wave and second half breakout. Price stair-stepped above $800 in early 2016 and spent the year pressing against resistance, ahead of a January 2017 buying spurt that’s now added more than 100-points.

Price action eased into a rising wedge at the end of 2015, with that pattern still in play nearly 18-months later. This signals a mixed blessing because upper and lower trendlines are now converging, pointing to a low volatility technical condition that’s unsustainable. In fact, many violent trend reversals occur when wedge support finally breaks because, while shareholders are getting paid, the relatively shallow price rate of change generates a good deal of anxiety and frustration.

Other technical measurements continue to support the powerful uptrend, with On Balance Volume (OBV) holding near an all-time high while the monthly and weekly Stochastics oscillators remain glued to overbought levels These readings are common in strong uptrends, but it will take little selling pressure at this point to trigger bearish crossovers, dumping the stock into a multi-month correction.

AMZN Weekly Chart (2012–2017)

AMZN

Amazon topped out just above $100 at the turn of the millennium and fell into single digits during the Dot.com bear market. It returned to that resistance level in 2007 and built a 2-year handle into a 2010 cup and handle breakout that generated a strong uptrend. The stock posted higher highs into the start of 2014 and topped out at $400, ahead of a rounded correction that found support near $280.

It returned to resistance in April 2015 and broke out into mid-year, adding points at a rapid pace. A steep decline into 2016 found aggressive buying interest, triggering a V-shaped recovery wave that yielded a fresh breakout to new highs in the second half of the year. That bullish impulse has continued into April 2017, with this week’s earnings report lifting the e-commerce giant to an all-time high above $940.

Price action has also congested into a rising wedge pattern that denotes contracting volatility. Also, the rally has carved an Elliott 5-Wave pattern that’s reached within a few points of Fibonacci extension targets while approaching significant psychological resistance at $1000. Both technical factors raise odds for a correction that could drop the stock under $800 before the end of 2017.

The Bottom Line

Alphabet and Amazon hit home runs in the first quarter, handily beating analyst expectations, but overbought technical extremes, declining volatility, and completed price targets raise odds for pullbacks that could be measured in hundreds of points.
Published at Fri, 28 Apr 2017 16:12:00 +0000

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5 Ways to Lose Your Retirement Nest Egg

 

5 Ways to Lose Your Retirement Nest Egg

By Denise Appleby | Updated April 28, 2017 — 11:43 AM EDT

There are two surefire ways for you to help your retirement accounts grow: maximizing your contributions as often as you can and properly managing the investments in your accounts. But there are also ways to significantly decrease the size of your retirement nest egg. Here’s a look at five actions that could lead to the loss of your retirement savings. Once you know what they are, it should be easier to avoid these mistakes.

1. Making Ineligible Rollovers to Your IRAs

Rolling over funds you receive as distributions from your retirement account helps you to defer including these distributions in your income, and to ensure that any earnings on such amounts accrue on a tax-deferred (or tax free, for Roth IRAs) basis.

However, this is the case only if the amount is rollover eligible. Ineligible rollovers can result in your owing severe penalties to the IRS, and any taxable portion of the amount rolled over to your IRA must be included in your income for the year the distribution occurred. To ensure that this doesn’t happen to you, you need to know which assets are not rollover eligible. They include the following:

  • Required minimum distributions (RMDs) – A common mistake people make when they roll over RMD amounts is to assume that the RMD amount can be taken after the rollover is made. This is not the case because the first amount withdrawn during a year for which an RMD is due includes the RMD amount. Here is an example:
An Example of RMD Rollovers and WithdrawalsJohn reached age 70½ in 2016. Because of this, John’s RMD from his 401(k) plan for the 2016 plan year, which was $10,000, had to be distributed from the account by April 1, 2017. In June 2016, John rolled over $30,000 from his 401(k) account to his traditional IRA. John believed the transaction was acceptable, as his first RMD did not have to be withdrawn until the following April. However, while John could have deferred withdrawing his RMD until April 1, 2017, any withdrawals made from his 401(k) during his first RMD year are considered to include his RMD for the year. As such, $10,000 of the $30,000 was not rollover eligible and created an excess contribution of $10,000 in his traditional IRA for the 2016 tax year. If John failed to remove the amount from his IRA in time, he would owe a 6% penalty ($600) on the amount for every year it remains in the IRA. Furthermore, John would need to have included the $10,000 in his income for the 2016 tax year.
  • Hardship withdrawals from qualified plans and 403(b) accounts
  • Excess contributions that are withdrawn or returned from your retirement account
  • Loans that are distributed because they are in default or do not satisfy other regulatory requirements
  • Distributions that are part of a series of substantially equal periodic pension or annuity payments made at least once per year for at least 10 years, and amounts that are calculated using your life expectancy or the joint life expectancy of you and your beneficiary
  • Distributions for the cost of life insurance coverage
  • Distributions made to you from a qualified plan, 403(b) account or IRA that represent distributions to you as a beneficiary after the death of the retirement account owner, unless you are the spouse beneficiary of the deceased. (For further reading, see Moving Retirement Plan Assets: How to Avoid Mistakes and Exceptions to the 60-Day Retirement Account Rollover Rule.)

2. Making Excess Contributions to Your IRA

IRA contributions are limited to the lesser of 100% of eligible compensation or the contribution limit for the year. Should you contribute more than the allowable limit to your IRA, you must remove this excess amount from your IRA by the applicable deadline. Similar to ineligible rollovers, failure to remove the excess amount by the deadline will result in your owing the IRS a penalty of 6% of the amount for each year it remains in your IRA. (To learn more, see An Introduction to Correcting Ineligible IRA Contributions, Tax Treatment of Ineligible IRA Rollovers and How to Correct Ineligible (Excess) IRA Contributions.)

3. Making Ineligible Roth Conversions

A Roth IRA conversion is viewed by many as a good financial-planning move because earnings accrue on a tax-deferred basis, while distributions are tax-free if qualified. If you make an ineligible Roth conversion, it can be corrected as a recharacterization. Should you fail to recharacterize an ineligible conversion on a timely basis, the amount will be treated as ordinary income from your traditional IRA and an excess contribution to your Roth IRA. Therefore, not only would you lose the tax-deferred status of your IRA assets, but you would also owe a 6% penalty for each year the excess contribution remains in the Roth IRA. (For further reading, see Did Your Roth IRA Conversion Pass or Fail? and Recharacterizing Your IRA Contribution or Roth Conversion.)

“There are many reasons why a Roth conversion may be ineligible, such as a premature reconversion after recharacterization or accidentally converting a required minimum distribution (including beneficiaries). In order to remedy the situation, individuals must recharacterize the conversion and any earnings by their tax-filing date,” says Mark Hebner, founder and president, Index Fund Advisors, Inc., Irvine, Calif., and author of “Index Funds: The 12-Step Recovery Program for Active Investors.”

4. Failing to Distribute Your RMD

You must begin taking RMDs from your traditional, SEP and SIMPLE IRAs, qualified plan, and 403(b) accounts by April 1 after the year you reach age 70½, and must continue for each subsequent year. Exceptions apply to qualified plan accounts and 403(b) accounts if you are still employed and your employer allows you to defer beginning RMDs from such accounts until after you retire. (This applies only to that employer’s account, not other accounts you might still have from previous employers – see 401(k): Pressure’s On to Leave It at Your Old Job).

Failure to take your RMD by the applicable deadline will result in you owing the IRS an excess accumulation penalty of 50% of the RMD shortfall. While it is not required that this penalty be withdrawn from your retirement assets, you may have no choice but to use your retirement assets to pay it if you have no other financial resources. You may apply for a waiver of the penalty, but you are generally required to pay the penalty first and request the waiver thereafter. (For more information, see 3 Steps to Take If You Missed Your RMD Deadline.)

5. Engaging in Prohibited Transactions

You are prohibited from using your IRAs in certain transactions, such as security for a debt or to invest in collectibles. Engaging in these transactions could result in loss of tax-deferred status for the assets involved in the transaction and, in some cases, loss of tax-deferred status for the entire IRA. The following are a few examples:

  • If your IRA is pledged as security for a loan, the extent of the consequences is determined by whether the account is an individual retirement account or an individual retirement annuity. For an IRA, the amount pledged as security for the loan is treated as a distribution to the IRA owner. For an individual retirement annuity, the entire balance, as of January 1 of the year the pledge occurs, will be treated as a distribution to the IRA owner, regardless of the amount that is pledged as security for a loan. The distribution will be treated as ordinary income and be subject to a 10% early-distribution penalty, unless an exception applies.
  • If your IRA assets are invested in collectibles, such as artworks, rugs, antiques, precious metals, gems, stamps, coins and alcoholic beverages, the value of the investment is treated as a distribution to the IRA owner. The distribution will be treated as ordinary income and subject to a 10% early-distribution penalty, unless an exception applies. (See 5 Investments You Can’t Hold in an IRA/Qualified Plan.)

The Bottom Line

Most taxpayers now find it natural to consult with investment advisors, tax professionals and attorneys; however, the same cannot be said for those who need assistance managing their retirement accounts. Few people seek assistance from a retirement planning professional for issues such as moving IRA assets and making IRA contributions, but they should. The number of individuals losing the tax-deferred status of their IRA assets and paying large penalties because they’ve misunderstood the portability rules and eligibility requirements for certain transactions is increasing at an alarming pace.

“Making ineligible contributions to your IRA, not taking RMDs, and making excess contributions or prohibited transactions can absolutely decimate your retirement savings. But all can be rectified fairly easy if you take certain steps and hit the problem head-on. Waiting or avoiding is a behavior that could be your death knell,” says Dan Stewart, CFA®, president and chief investment officer, Revere Asset Management, Inc., Dallas, Texas.

Unless you are absolutely sure of the effect that a certain transaction will have on your IRA assets, you should consult with a financial professional who is well-versed in the rules and regulations of retirement plans. This is key to protecting and building your retirement nest egg.
Published at Fri, 28 Apr 2017 15:43:00 +0000

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Goldman hopes high rates will lure consumers to online bank

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Goldman hopes high rates will lure consumers to online bank

By Olivia Oran

Goldman Sachs Group Inc (GS.N) plans to promote its high-interest bearing deposit products in a marketing push to consumers later this year as it looks to grow its online bank, Chief Strategy Officer Stephen Scherr said in an interview on Thursday.

Historically known as an adviser to the world’s richest people and corporations, Goldman Sachs has been trying to do more business with ordinary consumers to diversify its business and have a more stable source of funding.

A little over a year ago, the Wall Street bank acquired $16 billion worth of online deposits from General Electric Co (GE.N), about half of which came from individuals. Goldman has since increased those deposits by $4 billion, or 50 percent, and wants to grow more, Scherr said.

“It carries … great strategic potential,” he said. “The ambition we have is for the retail deposit platform to grow so that it becomes a real, sizable channel.”

By acquiring GE’s deposits, Goldman began a process that may help it better weather future disasters. Deposits are less likely to disappear during times of stress than other funding sources because they are federally insured. Regulators have been pushing big Wall Street banks to rely more on deposits since the 2008 financial crisis.

Goldman’s online deposits from individuals now total $12 billion. Although they have grown quickly, they are still a small fraction of the $124 billion in overall deposits on Goldman’s balance sheet and an even tinier fraction of deposits at banks with sprawling branch networks. JPMorgan Chase & Co (JPM.N), for instance, holds $1.4 trillion in deposits.

Goldman has been offering a competitive interest rate of 1.05 percent for digital savings accounts to attract new customers. The average national rate for savings accounts is currently 0.06 percent, according to the U.S. Federal Deposit Insurance Corporation.

The bank offers even higher rates for depositors who agree to lock their money up for a set period of time, through products like certificates of deposit.

Deposits will help Goldman boost profits if it can find ways to lend them profitably. The bank is looking to move further into traditional lending broadly across wealth management to investment banking, as businesses like trading struggle to generate the type of returns they once did.

Last year, the bank launched Marcus, its first major foray into consumer lending which is led by former Discover Financial Services (DFS.N) executive Harit Talwar. It also acquired Honest Dollar, an online retirement savings platform for small businesses and startups.

(Reporting by Olivia Oran in New York; editing by Lauren Tara LaCapra and Chizu Nomiyama)
Published at Thu, 27 Apr 2017 19:30:12 +0000

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Wall Street little changed with eyes on earnings

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Wall Street little changed with eyes on earnings

By Yashaswini Swamynathan

U.S. stocks were little changed on Thursday amid a flood of quarterly earnings reports, while investors assessed President Donald Trump’s tax reform plan.

The one-page plan, unveiled on Wednesday, proposed deep tax cuts for many businesses, but offered no detail on how it would be paid for without increasing the deficit.

U.S. stocks snapped a two-day rally to end lower on Wednesday after the plan was unveiled. The prospects of hefty tax cuts have been a major driver of the post-election rally since November.

“Yesterday, you saw some selling but it didn’t develop into an outright heavy pressure day,” said Robert Pavlik, chief market strategist at Boston Private Wealth.

At 9:38 a.m. ET (1338 GMT), the Dow Jones Industrial Average .DJI was up 11.43 points, or 0.05 percent, at 20,986.52, the S&P 500 .SPX was up 0.14 points, or 0.01 percent, at 2,387.59 and the Nasdaq Composite .IXIC was up 6.55 points, or 0.11 percent, at 6,031.78.

Six of the 11 major S&P 500 sectors were higher, lead by a 0.35 percent gain in the technology index .SPLRCT. PayPal (PYPL.O) jumped to an all-time high of $47.50 after the company raised its full-year earnings forecast.

However, a more than 2 percent drop in oil prices weighed on the energy sector .SPNY, which fell 0.8 percent.

Investors are keeping a close watch on the first-quarter earnings season to gauge fundamental performance in the face of lofty valuations.

Of the 181 S&P 500 companies that have released results so far, nearly 77 percent have reported earnings above analysts’ expectations. In a typical quarter, about 64 percent of the companies top earnings estimates, according to Thomson Reuters I/B/E/S.

Comcast (CMCSA.O) was the top stock on the S&P, with a 3 percent increase after the company’s profit beat analysts’ estimates on strong subscriber growth.

Under Armour (UAA.N) jumped 7.7 percent after the sportswear maker posted a smaller-than-expected quarterly loss.

Bristol-Myers (BMY.N) was up 2.4 percent after the drugmaker reported better-than-expected first-quarter earnings and a jump in revenue.

American Airlines (AAL.O) tumbled 8.1 percent after the company said it had deferred the delivery of several Boeing and Airbus jets, in the latest sign of oversupply in the market for long-distance airliners. The news dragged down shares of other U.S. carriers, including Delta (DAL.N) and United Continental (UAL.N).

Microsoft (MSFT.O), Amazon.com (AMZN.O) and Google parent Alphabet (GOOGL.O) are scheduled to report results after the bell.

Declining issues outnumbered advancers on the NYSE by 1,274 to 1,236. On the Nasdaq, 1,207 issues rose and 1,009 fell.

The S&P 500 index showed 39 52-week highs and no lows, while the Nasdaq recorded 72 highs and 11 lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva)
Published at Thu, 27 Apr 2017 13:54:33 +0000

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CalSTRS pares down U.S. equity exposure in market’s record run

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CalSTRS pares down U.S. equity exposure in market’s record run

By Daniel Bases and Robin Respaut| NEW YORK

Record high U.S. stock prices are providing the California State Teachers’ Retirement System with profit-taking opportunities as it cuts exposure to U.S. equities and moves money off shore, the plan’s chief investment officer told Reuters on Wednesday.

Christopher Ailman, the chief investment officer of CalSTRS, as the system is known, said he did not see the U.S. economy as growing much beyond a 1-2 percent range, although he hopes it can average 3 percent in the years ahead.

“We have enjoyed obviously the benefits of this equity rally in the USA, but we still don’t think the US economy is that strong,” Ailman said in an interview while visiting investors in New York.

“We have been shaving off profits in the U.S. equity market every time we hit new highs like this and rebalancing into Europe and Asia,” said Ailman, who oversees $200 billion in assets.

Earlier on Wednesday the benchmark S&P 500 stock index .SPX traded above its record closing high, but tipped down by the close after the Trump Administration unveiled the basic outline of its proposed tax reforms that calls for a slashing of business tax rates.

“We are going to stay at about 50 to 55 percent global equity exposure. We had a home country bias to the USA for the last, almost, decade. We were 65 percent US. We are reducing that down to where eventually it will be about 55 percent US, 45 percent non-US.”

 

LONG-TERM ALLOCATIONS

CalSTRS has looked to real estate and infrastructure for opportunities to deliver returns closer to 8 percent. Ailman said real estate was “almost priced to perfection,” and the fund had become a net seller of that asset.

Infrastructure has been trickier but nonetheless important to the pension fund, which has about $3 billion worth in the portfolio, Ailman said.

CalSTRS, like most U.S. public pension funds and other large institutional investors, prioritize infrastructure deals that generate long-term, stable cash flows. But those deals are scarce and often overpriced. The majority of transactions are in Canada, Australia and the United Kingdom, despite the critical need for more infrastructure investment in the United States.

“We’re hopeful. I’ve never seen such an enormous capital need and so much capital trying to go to work,” said Ailman. “There’s an appetite, just not a lot of transactions.”

U.S. public pension funds are under increasing pressure to return investment around 7 percent without taking on too much risk. Mature funds like CalSTRS pay out more in benefits to retirees than collect in contributions from current workers. Because of this negative cashflow, CalSTRS must be more attentive to short-term, downside risks, said Ailman.

In response to these risks, CalSTRS created a risk mitigation strategy to be more resilient to market downturns.

The strategy, which focuses on being less correlated to global stocks and economic downturns, uses 30-year government bonds, commodity trading advisors (CTA) and global macroeconomics focused hedge funds.

Ailman hopes the strategy will reach a target allocation of 9 percent by June 2018 from its current 4 percent level.

(Reporting By Daniel Bases in New York and Robin Respaut in San Francisco; Editing by Chris Reese)
Published at Wed, 26 Apr 2017 22:39:58 +0000

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1st Quarter GDP Estimates: ZeroHedge, Mish, GDPNow, Nowcast, ISM, Markit

1st Quarter GDP Estimates: ZeroHedge, Mish, GDPNow, Nowcast, ISM, Markit

By: Mike Shedlock | Tue, Apr 25, 2017


On Friday, April 28, the BEA will release its preliminary estimate for first
quarter GDP.

Prior to that release, here is a compilation of six estimates from ZeroHedge,
GDPNow, Nowcast, ISM, Markit, and me.

GDPNow Forecast: 0.5 Percent — April 18, 2017

GDPNow

FRBNY Nowcast: 2.8 Percent — April 21, 2017

FRBNY Nowcast

Model Flaws

  1. Nowcast uses no hard auto data: This is a serious error. Autos account
    for 20% of retail sales and fleet sales are also very important.
  2. Nowcast has an incorrect reliance on unemployment rate: People dropping
    out of the labor force and actual employment rising can both move the number
    in the same direction. Both things cannot mean the same thing.
  3. ISM vs PMI: Both reports measure the same thing, yet those reports signal
    very different things. At least one of them is wrong. GDPNow and Nowcast
    both rely on ISM even though the PMI reports have been more accurate, at
    least recently.
  4. The GDPNow and Nowcast models both suffer from an inability to think. The
    weather provides a nice example. In December, the weather was unusually cold,
    causing Industrial Production numbers to soar (heat and electric production),
    for the entire upcoming quarter. I estimated in advance, January would take
    away those numbers. My assertion played out, at least for GDPNow. I still
    cannot account for Nowcast.

ISM vs PMI

I discussed the difference between ISM and Markit’s PMI estimates recently,
for both manufacturing and non-manufacturing (services).

On April 3, the ISM made this statement: “The past relationship between
the PMI® and the overall economy indicates that the average PMI® for
January through March (57 percent) corresponds to a 4.3 percent increase
in real gross domestic product on an annualized basis.”

On March 24, Chris Williamson, Markit Chief Business Economist, stated
The survey readings are consistent with annualized GDP growth of
1.7% in the first quarter, down from 1.9% in the final quarter of last year
.”

On April 5, Williamson reiterated “The surveys of manufacturing and services
are running at levels consistent with GDP expanding by 1.7% in the first quarter.”

On April 21, Williamson stated “The PMI data suggest the US economy lost further
momentum at the start of the second quarter. The surveys are signaling a GDP
growth rate of 1.1% after 1.7% in the first quarter.”

For discussion, please see ISM-PMI
Divergence Widens: Markit Estimates 2nd Quarter GDP at 1.1%, Says Profit
Squeeze Underway
.

ZeroHedge April 25 Estimate

On April 25, ZeroHedge replied to my request for a number with “Ok sure,
put me down for 0.8%.”

He provided no further explanation, but I did not ask for any.

Mish Estimate History

  • On Monday, April 3, on Coast-to-Coast, live syndicated talk radio,
    I told George Noory I expected GDP would be 0.6%.
  • I lowered that to 0.4% following retail sales reports on April 14, as noted
    in GDP
    Forecasts Dip Again
  • Following the existing and new home sales reports this week, I up my forecast
    to 0.7%.

GDP Predictions

  1. GDPNow April 18: 0.5%
  2. Mish April 25: 0.7%
  3. ZeroHedge April 25: 0.8%
  4. Markit April 21: 1.7%
  5. FRBNY Nowcast April 21: 2.7%
  6. ISM April 3: 4.3%

The “advance” GDP number for the first quarter comes out on April 28.

What About Rate Hikes?

Whether this is yet another “transitory” period remains to be seen,
but one of these downturns will stick.

Three hikes may not sound like much, but there is over a trillion dollars
worth of debt that needs to roll over soon, at increasing rates, at a time
when consumers are gasping and minimum wages hikes are in play.

The market expects another hike in June and still more hikes later in the
year. I sure don’t.

For a look at how the weather impacted factory utilization and thus GDP estimates,
please consider Formulas
Don’t Think: Investigating Weather-Related GDP
.

In that article, I commented on cold weather in December followed by warmer
than usual weather in January.

For reasons I do not understand, GDPNow followed my model of unwinding the
weather-related effects, but Nowcast didn’t.

Meanwhile, Don’t
Worry Weakness is Transitory: Fed Expects a Second Quarter Rebound, Higher
Equity Prices
.

Final Comments

The GDPNow estimate is subject to change on Thursday, April 27 following Durable
Goods and International Trade data. I may tweak my estimate at that time and
will let ZeroHedge do the same, but I expect no more than a 0.2 percentage
point move.

For the first time all quarter, I have a higher estimate than GDPNow. Housing
data caused me to up my estimate up by 0.3 percentage points since mid-April.

If the Fed can convince the market it will hike, the Fed will hike in June.
That may be a tough act if first-quarter GDP is under 1%.


Mike Shedlock

Mike Shedlock / Mish
Mish Talk

Mike Shedlock

Michael “Mish” Shedlock is a registered investment advisor
representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com/ to
learn more about wealth management for investors seeking strong performance
with low volatility.

Copyright © 2005-2017 Mike Shedlock

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Published at Tue, 25 Apr 2017 16:49:26 +0000

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Quantutorial – Garbage In Garbage Out

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Quantutorial – Garbage In Garbage Out

by THE MOLE APRIL 26, 2017

One of my readers, let’s call him Francis, sent me an interesting email yesterday. Apparently he had been inspired by Scott’s original post on the use of scatter charts for what I call raw edge discovery (RED), for lack of a sexier term. So he proceeded to spend a significant amount of time on slinging spreadsheets in Excel, which can get quite involved and in my opinion is rather error prone as each extra condition requires the addition of at least one more column. His primary focus thus far had been mean reversion and he is now attempting to apply a similar approach to trending or momentum systems.

His main concern apparently is the right comparison periods. Should he compare post condition results with a longer previous timeframe, which then tries to isolate the intermediate term market drift and hope for a somewhat positive correlation? Bear in mind that trending systems have a pretty low win rate (i.e. 50% or less). So should winners in momentum or trending systems have a slope greater than 1 with an intercept toward zero (i.e. being steeper) to offset a low win rate, i.e, an acceleration above market drift?

Now before you read on please make sure that you’re caught up with my recent post on linear regression first. It’s rather short and to the point (especially given the topic) and I promise you that you will be able to fully grasp the concept of linear regression after reading it.

Back To The Basics

Anyway, these are great questions but pondering on all this actually made me circle back to some of the basic assumptions we seem to be making during system development as well as for RED. So let’s take a step back and ask ourselves WHAT are you actually trying to figure out and why. In essence we are attempting to find a best fit curve for a set of features. Each respective x feature consists of an x and and y value, e.g. 25, 40 as shown below.

2017-04-25_1356

If you remember my previous post on linear regression you understand that all we are doing here are three things in order to solve for y = mx + b as well as r squared:

  1. We figure out m (the best fit slope) and b (the intercept).
  2. Then we produce ys of the best fit line by plugging m and b into each x value (y = mx + b). We now have a regression line.
  3. We then calculate our r or coefficient of determination. Basically this involves comparing the squared error of the mean of all the original ys to the squared error of all the ys of our regression line. That value then tells us how good our fit is.

But wait a minute. What exactly are we plotting here? Well, Scott’s post talked about mean reversion which involves defining some sort of market condition and then comparing the price delta prior and after said market condition, which effectively gives us xs and ys to be plotted in our scatter chart. But aren’t we making some very crucial assumptions? After all this is supposed to be ‘raw edge discovery’ but how raw can it really get?

2017-04-26_x_y

Here’s a chart of which I know nothing but that it’s a list of OHLC vectors which we visualize via candle bars. We want to perform RED for mean reversion, so what do we do? Francis’ approach thus far has been to somehow pick an entry condition (we get to that somehow further below) and then count back a certain amount of candles and measure the price delta. That gives him X. Now he counts forward a certain amount of candles and also records the price delta which now yields him Y.

So far so good. But being of discerning minds there are several crucial questions that should immediately occur to us. Let’s say we counted back three candles and counted forward three candles in order to arrive at X and Y:

  1. Why are we counting back three candles and then forward three? Why not back three and forward four or five? Or the opposite – count back four and forward two perhaps?
  2. Are we really measuring mean reversion here? Or is it simply the ability for price to revert back to its origin within x amount of candles?
  3. Why are we using candle intervals in the first place? In mean reversion are we given a timer for it to occur? (actually yes – which we can mathematically define by its half-life but you won’t like it what you get)

I’m sure you can think of several more questions but it all boils down to the fact that we are artificially defining an arbitrary range in hopes of discovering a market condition we can exploit. But if you look at the chart above then it becomes clear that by simply moving the measured window forward or backward will not produce the expected results. For one we would most likely wind up drowning in an ocean of noise which at best would obfuscate the much smaller number of positives that we are looking for.

We Need More Context

2017-04-26_x_y_sma

And there it is right there – we need more context. Because the vast majority of price series are not strictly mean reverting but follow a geometric random walk. It is the returns, not the prices, which are the ones that are usually randomly distributed around a mean of zero, but we can’t trade returns. Of course as traders we do not require a price series to be purely mean reverting in a mathematical sense, in that the change of the price series is proportional to the difference between the mean price and the current price. That just doesn’t happen in financial markets. But it suffices if price would be ‘somewhat’ mean reverting at times. Which is the very reason why we resort to using indicators, oscillators, or various statistical measures to increase our odds.

Is More More Or Less?

Interestingly the SMA on the chart above was added after I had picked the trigger and the x,y pair. So it seems my own personal perception of price series is subconsciously looking for price patterns I have observed in the past. Now that trigger candle just so happens to be a) a hammer and b) sits on top of that SMA. So we could conceivably introduce this as an additional condition in order to extract our x,y vectors/pairs/tuples. It would make a lot of sense but that in itself brings about a series of new questions:

  1. Why did I pick an SMA(14) [it was the default] and not an SMA(21) or SMA(50)?
  2. Why use an SMA in the first place and not an EMA or something completely different?
  3. For mean reversion, don’t we want to revert to the mean? So shouldn’t x and y be near that SMA and the trigger away from it?
  4. Do we really need to have a static count of candles for defining x and y or should we parse for a certain condition within a price window?

In particular 3. is a very interesting question as based on what I’m seeing on the chart I would probably be tempted to switch the trigger to the X mark and Y to where the trigger is. But why? Just because I’m looking at an SMA now? This goes to show how very random and subjective our own perception is. Right before I added that moving average the current arrangement seemed like a pretty good example of mean reversion to me. Now that I added more context I’m suddenly starting to see things differently.

Also 4 is something very well considering. In that particular case a supposed long campaign would have worked out fine but we would have been more profitable four candles later. We could for example define a window of let’s say eight candles and then record whether or not our target price was hit during that period. In addition let’s not forget that price continues to move and thus may change our target. What do you really define as mean reversion? The most purest form would be a reversal to the mean. But remember financial price series follow a random walk so that mean will continue moving as well. Which in turn can be approximated by a moving average.

Live With It

And all this and more are exactly the issues we continue to face even during the most ‘purest’ RED process I can envision. At some point we need to draw the line between RED and system development. On one hand we seek a pure evidence of a market inefficiency we may be able to exploit. On the other hand we are dealing with highly noisy data which requires at minimum filtering and additional price derivatives or correlations in order to separate the wheat from the chaff. Every single thing we do needs to be questioned and considered in the context of purity. In essence what we are looking for is a linear trading strategy which is truly ‘parameterless’. But such a thing cannot exist without compromise.

Garbage In Garbage Out (GIGA)

Now given all the above let’s one more time consider Francis’ questions about how to adapt RED to break out or trending systems. Well, it all depends on his xs and ys now, doesn’t it? When he was testing for mean reversion, was he really testing mean reversion or something else? Actually having seen his spreadsheets I know that he was using additional measures but I still felt that focusing on static candle ranges for x and in particular for y was somewhat unconvincing. Because at least in my mind (without yet having proven this however) I suspect that there is probably a high standard deviation within MR time windows. In other words it may take one or two candles to revert (if and when it does) or it may take seven or more. That in part also depends on the instrument traded as many futures contracts for example exhibit clear (realized) volatility patterns. Then there are roll overs and seasonality, etc. It just may be better to give yourself a window instead. Or not – we don’t know until we test for it.

Choose Your Input Carefully

The GIGA problem by the way is not just limited to mean reversion and scatter plots, which primarily deals with x/y values (you can have multiple dimensions but it gets ugly). It’s a significant and much under reported problem I see all across machine learning these days. Some of the most smartest people you ever run into seem to think for some reason that you can simply scratch together a set of arbitrary features (e.g. price, moving average, P/E ratio, volume, etc.) and throw those at a Neural Net, Support Vector Machine, Bayesian Network, etc. Which I can assure you from very personal experience will wind up failing quite spectacularly.

It doesn’t matter really what exactly you put in and what your specific belief system or market lens is, may this be purely technical, fundamental, statistical, or purely mathematical. What does matter is that you take extra care in defining your input and to think very carefully about why exactly you believe it offers value to your analysis. And then go about proving it.
Published at Wed, 26 Apr 2017 13:18:12 +0000

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How Does PepsiCo Make Money?

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How Does PepsiCo Make Money?

By Shobhit Seth | Updated April 26, 2017 — 9:07 AM EDT

PepsiCo Inc. (PEP), a global giant in the snack and beverage business, reported its first quarterly earnings report in 2017, and growth was largely due to demand of its healthier snack options. How does the global behemoth operate, and which are its key products and markets across the globe in terms of sales? Let’s takes a look. (See also: PepsiCo Profit Beats on Demand for Healthier Snacks, Drinks)

Global Divisions

With its beverages, snacks and food products sold around the globe, PepsiCo operates through its six global divisions. Depending on the product portfolio and regional market, these various divisions work independently. Many also offer licensed products from other brands and operate with third parties as required in different regional markets.

North American Beverages (NAB): NAB is the largest revenue earner of the PepsiCo empire and it constitutes all beverages business across the U.S. and Canada. As per Q1 2017 results, it contributed $4.46 billion to total revenues of $12 billion of PepsiCo. According to the company: “NAB offers 11 billion-dollar brands that span carbonated soft drinks, juices and juice drinks, ready-to-drink teas and coffees, sports drinks, and bottled waters.” This division includes world famous proprietary brands like Pepsi-Cola, Gatorade, Mountain Dew, Naked and Tropicana. It also includes partnership brands like tea variants from Pepsi-Lipton, and coffee variants from Pepsi Starbucks partnerships. Additionally, NAB also markets licensed products from Dr. Pepper Snapple Group, Inc. (DPS), like Dr. Pepper, Crush and Schweppes, Dole Food Company, Inc. and from Ocean Spray Cranberries, Inc.

Frito-Lay North America (FLNA): FLNA makes up the second largest revenue generating business. It accounts for $3.5 billion of total revenues. Focused on the North American markets of the U.S. and Canada, this division includes potato chips brands like Lay’s and Ruffles, tortilla chips brand like Doritos, Santitas and Tostitos, and snacks brands like Stacy’s, Cheetos, Sun Chips and Fritos. FLNA also operates a joint venture with Strauss Group for manufacturing, marketing, sales and distribution of Sabra brand refrigerated dips and spreads.

Quaker Foods North America: The leading brand in oatmeal breakfast and cereals, it also includes products spanning across hot and cold cereals, healthy snack bars, rice based snacks, Real Medleys cereals and popped crisps. Though Quaker constitutes only about 5% of total revenues, it complements the NAB and FLNA divisions in keeping a good market share for PepsiCo in the North American markets.

Europe Sub-Saharan Africa (ESSA): ESSA operates a full range of beverages, food and snack products in Europe and in the Sub-Saharan regions of Africa. Established brands in this market include Lay’s, QuakerDoritos, Cheetos, Ruffles, Wimm-Bill-Dann, Walkers and Marbo. This market contributed $1.4 billion of total revenues in Q1 2017.

Asia, Middle East & North Africa (AMENA): Spread across two large continents, this market contains snack brands like Lay’s, Kurkure, Chipsy, Doritos, Cheetos and Smith’s, and beverages brands like Pepsi, Mirinda, 7UP, Mountain Dew, Aquafina and Tropicana. It also has partnership brands like Lipton iced tea products with Unilever (UL). This market contributed $970 million of revenues in Q1 2016.

Latin America (LA): The LA division operates an entire product range in the Latin American markets and includes beverages, food and snack products. It constituted around 8.9% of total revenues in Q1 of 2017. Leading brands include Toddynho in Brazil, Sabritas and Gamesa in Mexico, Natuchips in Venezuela, Colombia and Ecuador, Tortrix in Guatemala and Toddy Cookies in Argentina.

The Bottom Line

The PepsiCo portfolio contains 22 brands spread across beverages, food and snacks, diversification offers sufficient room for offsetting declines in one product line with growth in others. This product and regional diversification combined with dynamic business strategies enables it to be a regular dividend payer and a leader in the cola market.
Published at Wed, 26 Apr 2017 13:07:00 +0000

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Active Traders Are Turning Bullish on Industrial Metals

Active Traders Are Turning Bullish on Industrial Metals

By Casey Murphy | Updated April 24, 2017 — 8:43 AM EDT

When it comes to trading commodities, many products are trading within clearly defined downtrends for a variety of reasons ranging from oversupply to poor weather. One group of commodities that has been able to move counter to the rest is industrial metals. While continued discussion about increased spending on American infrastructure has acted as a strong catalyst to price moves, it seems that nearby support levels could be the next item to propel prices higher. In the article below we’ll take a look at the charts and try to determine the best plan for trading the strength in industrial metals. (For more, see: Can Industrial Metals Make a Comeback?)

iPath Bloomberg Industrial Metals Subindex Total Return ETN

Investors looking to gain exposure to metals such as copper, zinc, and aluminum have traditionally had to rely on the futures market. However, given the rapid rise in popularity of exchange-traded notes, retail investors can now purchase assets such as the iPath Bloomberg Industrial Metals Subindex Total Return ETN (JJM). For those not familiar, this fund is comprised of futures contracts on three of the aforementioned industrial metals as well as nickel. Taking a look at the chart, you can see that the ETN is trading within a strong uptrend and the recent move toward the combined support of the 200-day moving average and dotted trendline could just be what the bulls have been waiting for. This chart is a good example of how the bulls look to time their entry as close to the long-term averages so that they can make the most of the risk/reward. Purchases near the trendline at any time over the past year have shown to be an excellent strategy. (For more, see: Shift Your Attention From Precious Metals to Industrial Metals).

iPath Bloomberg Copper Subindex Total Return

Of the industrial metals, the one that looks poised for the strongest rally is copper. Taking a look at the chart of the iPath Bloomberg Copper Subindex Total Return ETN (JJC), you can see that the price has been trading within a period of consolidation since its strong run higher after the results from the U.S. Presidential election in November. The approaching support of the 200-day moving average could be just what is needed to entice the bulls to look for their entry points. The nearby support levels combined with the recent pullback has created some of the best risk/reward readings so far in 2017. Based on the charts, we’d expect traders to place buy orders as close to the trendline as possible and then protect them by placing stop-loss orders below $27.72. (For more, see: Investing In The Metals Markets).

iPath Bloomberg Aluminum Subindex Total Return ETN

One of the most overlooked commodities can be aluminum, but the chart of the iPath Bloomberg Aluminum Subindex Total Return ETN (JJU) is suggesting that it is worth paying attention to. This chart is a clear example of the shifting trend that is taking place in the industrial metals complex. Active traders may choose to remain patient and look for an entry closer to the 200-day moving average like the case that is playing out in copper. (For more, check out: 3 Commodity Charts to Watch in 2017).

The Bottom Line

In recent days industrial metals such as aluminum, copper, and zinc along with the associated miners have renewed the interest of many active traders. More specifically, the pronounced shift in the trend combined with nearby support is creating some of the best risk/reward setups anywhere in commodities. (For more, see: These Commodities Are Trading Near Major Levels of Support).

At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.
Published at Mon, 24 Apr 2017 12:43:00 +0000

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Euro jumps, shares firm on French election relief

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Euro jumps, shares firm on French election relief

By Marc Jones| LONDON

European shares opened sharply higher and the euro briefly vaulted to five-month peaks on Monday after the market’s favored candidate won the first round of the French election, reducing the risk of another Brexit-like shock.

The victory for pro-EU centrist Emmanuel Macron, who is now expected to beat right-wing rival Marine Le Pen in a deciding vote next month, sent the pan-European STOXX 50 index .STOXX50E up 3 percent, France’s CAC40 .FCHI almost 4 percent and bank stocks .SX7E more than 6 percent. [.EU]

Traders top-sliced some of the euro’s overnight gains, but it was still up more than 1 percent on the dollar EUR=EBS, more than 2 percent against the yen EURJPY= and 1.3 percent on the pound EURGBP= as the early flurry of deals subsided. [FRX/]

“It (the first round result) has come out in line with the market’s expectations so you have something of a risk rally as there was a bit of a risk-premium built into all markets,” said James Binny, head of currency at State Street Global Advisors.

There was also an unwinding of safe-haven trades.

Shorter-term German bonds DE2YT=TWEB saw their biggest sell-off since the end of 2015 as investors piled back into French FR10YT=TWEB as well as Italian, Spanish, Portuguese and Greek debt [GVD/EUR].

The Japanese yen’s fall was widespread JPY=EBS, the market’s so-called fear-guage, the VIX volatility index .VIX, plunged the most since November and gold XAU= saw its biggest tumble in more than a month. [GOL/]

E-mini futures for Wall Street’s S&P 500 ESc1 climbed 0.9 percent in early trade, while yields on 10-year U.S. Treasury notes US10YT=RR rose almost 8 basis points to 2.31 percent.

 

RISK RALLY

Asia also saw a risk rally. Japan’s Nikkei .N225 jumped 1.5 percent as the yen retreated, while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.3 percent.

Shanghai shares .SSEC fell 1.7 percent after state media signaled Beijing would tolerate more market volatility as regulators clamp down on riskier financing.

But Macron’s success set the tone.

The euro jumped in relief, and was last up 1.1 percent at $1.0840 EUR=, having been as far as $1.0940, the highest since early November.

The safe-haven yen slipped across the board with the euro surging as much 2.4 percent to 119.77 yen EURJPY= while the U.S. dollar gained 1 percent to 110.20 yen JPY=.

“The rise of the euro and risk appetite rebounding is understandable and this should also see yields in Europe fall, spreads to Bunds tighten and stocks rally,” said Tim Riddell, an analyst at Westpac.

“However, such gains are likely to be contained when markets reflect upon the marked shift away from the ‘establishment’ and just how effective the new president may be,” he added.

 

SKEPTICAL ON TAX

Wall Street on Friday had only a modest lift from news President Donald Trump would announce the broad outline of his proposed tax package on Wednesday.

“Markets are skeptical that the real details will be forthcoming,” said analysts at ANZ in a note.

“There is also plenty of conjecture about whether any tax cuts will be able to be revenue neutral, and that could affect their ease of passage through Congress.”

The Dow .DJI ended Friday down a minor 0.15 percent, while the S&P 500 .SPX lost 0.30 percent and the Nasdaq .IXIC fell 0.11 percent.

Investors were also keeping a wary eye on tensions in the Korean peninsula.

North Korea said on Sunday it was ready to sink a U.S. aircraft carrier to demonstrate its military might, in the latest sign of rising tension as Trump called the leaders of China and Japan to discuss the situation.

South Korea responded by asking Washington about holding joint drills with the USS Carl Vinson aircraft carrier strike group as it approaches waters off the Korean peninsula.

Oil prices recouped just a little of last week’s hefty losses, still weighed by signs U.S. production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut.

Brent futures LCOc1 were up 16 cents at $52.12 a barrel, while U.S. crude futures CLc1 added 17 cents to $49.79.

 

(Additional reporting by Wayne Cole in Sydney; Editing by Andrew Heavens)
Published at Mon, 24 Apr 2017 06:07:26 +0000

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Aligning Your Ideas and Your Trades

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By pereslavl from Pixabay

Aligning Your Ideas and Your Trades

There are two components to good decision making in markets:  our ideas and our trades.  Good things happen when these line up.

When I refer to our ideas, I mean the bigger picture of the trade:  the factors that lead us to believe that the market will make a particular directional move.  For shorter time frame traders, those ideas may be based upon data releases or earnings events or other such events.  For longer time frame traders, ideas may be grounded in fundamental factors, such as an acceleration of growth in the U.S. economy.  Our ideas express what we believe will be moving the market.  Sound ideas have some basis in reason–they make sense–and typically have some basis in backtesting.

The second component of our decision making is our trading of the idea.  This is how we implement the idea to achieve a favorable reward relative to risk.  Our criteria for trading an idea are separate from the idea itself.  For example, I may want to buy stocks on a surprise economic number that is bullish, but I might wait for the first pullback after the release to enter the trade.  I want to see how sellers behave after the first pop higher in price to tell me if the catalyst truly is altering capital flows.  If I see selling drying up at a price higher than when the news was reported, I’ll enter the trade for at least another leg to the upside.  The news catalyst framed my idea, but the dynamics of the price and volume action framed my execution of the trade.

We see the same thing in sports.  A coach will call a play on the basketball court.  The focus then turns to executing that play well.  A good play exploits the weaknesses of an opponent.  But the good play doesn’t lead to a score unless it is executed well, with good ball and player movement and players getting to the right spots on the court.  You can’t score if you don’t run good plays, but good plays cannot lead to scores unless they are executed well.

Above we can see a snippet from Friday’s trading session in the ES futures.  The screen grab captures four things I look at in executing a trade idea.  The basic idea for my trading comes from an assessment of market cycle:  specifically the relationships of event time spent in rising/falling in past cycles as those relate to the dynamics of a current, evolving cycle.  (See the post on Cyclically Adaptive Trading for more background.)  My basic idea was that a short-term cycle had peaked on Thursday and that we should see lower lows and lower highs over time on Friday.  

In executing the idea, the four elements I keep track of are time (and event time denominated in volume bars); price (red and green bars); volume (bottom of chart); and upticks/downticks among all NYSE stocks moment to moment (blue line).  Note that we sold down around 12:15 PM with downticks greatly exceeding upticks and volume expanding on the decline.  Sellers had taken control.  

When the buyers take their turn, we can see upticks handily outnumber downticks at several peaks between 12:30 and 13:00.  Note, however, that volume dries up during those bounces and price can only retrace a fraction of the prior decline.  The buyers just can’t get it done.  When I look at time, I’m looking for a rough correspondence between the amount of time spent declining and the amount of time spent in the subsequent bounce.  (If we draw volume bars, the time equivalence is about equal in this example).  Waiting for that time relationship to play out and selling on the final bounce in the NYSE TICK nicely executes the trade idea for a move down to 2341 a little after 13:00–a fresh low for the day on expanded volume.

You may very well trade different ideas on different time frames and implement those trades in very different ways.  The important point is that you trade well-researched, sound ideas and implement those in a way that aligns market flows with your bigger picture.  It is not enough to have good ideas in markets; we have to be able to translate those ideas into good trades.  Similarly, it is not enough to focus on chart patterns and short-term price relationships when larger market forces can run you over.  The greatness of a painter is that he or she sees a big picture–an inspiring vision–and then executes that brushstroke by brushstroke.  It takes a similar combination of vision and execution to make for great trading.

Further Reading:  Time and Trading Psychology

Published at Sun, 23 Apr 2017 10:47:00 +0000

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Hard Times Ahead for the Oil Services Sector

by lalabell68 from Pixabay

 

Hard Times Ahead for the Oil Services Sector

By Alan Farley | April 21, 2017 — 10:32 AM EDT

The WTI crude oil contract has run in place in recent months, glued to the 50 level despite growing geopolitical risk and President Trump’s insistence that deregulation will trigger a profit renaissance in the oil and gas fields. Neither catalyst has helped the oil services sector, which continues to slump near 6-month lows, threatening to break support and head into a major rout.

Schlumberger, Ltd. (SLB) earnings on Friday morning are unlikely to staunch the bleeding, with the $107-billion company reporting inline EPS at $.25/share while missing quarterly revenues by nearly 10%. The limp results triggered a 3.5% decline at the start of the U.S. session and could attract even greater selling pressure in coming weeks.

OIH

Vaneck Vector Oil Services ETF (OIH) tested the 2011 high in the mid-50s in 2014 and rolled over in a decline that continued into the 2016 low at $20.46 when the fund bounced at the 2008 bear market low. Bulls proclaimed victory, generating months of higher prices, but the long-term charts tell us the secular downtrend may still be intact. For starters, the recovery wave stalled in December at the .386 Fibonacci selloff retracement and 200-week EMA, giving way to a steady downtick that’s persisted into the second quarter of 2017.

The fund broke a yearlong rising trendline (blue line) in March when it sold off through support between $30 and $31 and has failed to remount that technical barrier in the last six weeks. It posted a 5-month low earlier this week, with this morning’s sector earnings unlikely to provide the positive catalyst needed for a sizeable recovery effort. It’s now given up nearly half of the 2016 advance.

The weekly Stochastics oscillator bounced off the oversold level in March but has failed to capitalize on the cyclical tailwind, reversing at 50-week EMA resistance and continuing to post weekly lows into April. This price action signals a bearish divergence because the crossover predicts higher prices and that hasn’t happened, at least so far. More ominously, On Balance Volume (OBV) has plunged to a multiyear low, telling us that funds and institutions are abandoning positions at a rapid pace.

SLB

Schlumberger holds the highest capitalization in the sector, comprising more than 20% of the fund’s weighting. It topped out at $115 in 2007 and tested that level in 2014, with sellers taking control in a vicious downtrend that cut the stock price in half into the January 2016 low at $59.60. A rally through mid-year stalled at the .386 Fibonacci retracement and 200-week EMA while a breakout into January 2017 topped out near $88.

The stock failed the breakout just two weeks later, entering a decline that just hit an 11-month low. That selloff also broke support at the 200-day EMA in March, with technicals in several time frames predicting even lower prices in coming months. Even so, oversold relative strength readings raise odds for a final recovery wave that tests new resistance now centered around $80.

OBV failed to recover after the 2014 into 2016 downtrend, hovering mid-range through the middle of 2016 and then resuming its southern trajectory in a fresh distribution wave that’s still in progress. The indicator is currently testing the early 2016 low, with a breakdown likely to coincide with a trend advance that exposes a painful trip into the upper 50s, where deep support may generate a longer lasting bottom.

The Bottom Line

Schlumberger and the oil services sector are lagging the broad market and energy complex, losing ground in a decline that raises significant doubts about the president’s sweeping energy initiatives. Investors and market timers haven’t been moved by the Oval Office happy talk, selling the sector aggressively for the last seven months
Published at Fri, 21 Apr 2017 14:32:00 +0000

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