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S&P 500, Nasdaq post best week in more than a year

S&P 500, Nasdaq post best week in more than a year

NEW YORK (Reuters) – The S&P 500 and Nasdaq notched their best weekly gains in more than a year on Friday as technology stocks helped lift major indexes to records.

With the New Year’s Day holiday falling on a Monday this year, it was the strongest first four trading days to a year in more than a decade for all three major indices, according to Reuters data. For the Dow, it was the strongest start since 2003 and for the Nasdaq and S&P 500 it was the strongest since 2006.

A U.S. tax overhaul last month that includes hefty corporate tax cuts helped to fuel late-year gains and was the first major legislative victory in President Donald Trump’s pro-growth agenda since he took office a year ago.

U.S. stocks this week have been adding to momentum from 2017, driven by a series of strong economic reports from across the globe and expectations for strong fourth-quarter earnings, with all three major indexes hitting milestones in the last few days.

The Dow broke above 25,000 for the first time on Thursday, while the S&P closed above 2,700 on Wednesday and the Nasdaq settled above 7,000 earlier in the week.

“We’re up over 2 percent for the first four days of 2018, so that’s pretty good. Markets are still working to figure out the implications of tax cuts, and that’s provided some of the lift along with already good economic forecasts,” said Mike Baele, managing director at U.S. Bank Private Client Wealth Management in Portland, Oregon.

Weaker-than-expected December U.S. jobs data also could help the Federal Reserve stick to its policy of gradual interest rate hikes in 2018, which would be good for stocks, Baele said.

U.S. job growth slowed more than expected in December amid a decline in retail employment, but a pickup in monthly wages pointed to labor market strength. Non-farm payrolls increased by 148,000 jobs last month, the Labor Department said. Economists polled by Reuters had expected a rise of 190,000.

The Dow Jones Industrial Average .DJI rose 220.74 points, or 0.88 percent, to 25,295.87, the S&P 500 .SPX gained 19.16 points, or 0.70 percent, to 2,743.15 and the Nasdaq Composite .IXIC added 58.64 points, or 0.83 percent, to 7,136.56.

The S&P technology index’s .SPLRCT 1.2-percent gain led the advancers among the 11 major S&P sectors, with gains in Microsoft (MSFT.O), Apple (AAPL.O) and Google-parent Alphabet (GOOGL.O) boosting the index.

The year’s strong start follows a surprisingly sharp rally in 2017 that ended with the S&P 500 up 19.4 percent on the year.

For the week, the Dow rose 2.3 percent, the S&P 500 gained 2.6 percent and the Nasdaq climbed 3.4 percent. Those were the biggest weekly gains for the S&P and Nasdaq since December of 2016.

Among declining stocks, Francesca’s Holdings (FRAN.O) tanked 20.7 percent. The women’s apparel and accessories maker said it expected up to 17 percent decline in current-quarter same-store sales.

Advancing issues outnumbered declining ones on the NYSE by a 1.52-to-1 ratio; on Nasdaq, a 1.47-to-1 ratio favored advancers.

About 6.3 billion shares changed hands on U.S. exchanges, the same as the 6.3 billion daily average for the past 20 trading days, according to Thomson Reuters data.

(This story has been refiled to correct second paragraph to reflect it is the strongest first four trading days to a year since 2003 for the Dow and 2006 for the S&P and Nasdaq.)

Additional reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila and Nick Zieminski

Published at Fri, 05 Jan 2018 22:34:27 +0000

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American workers in 2018: Show me the money


Republicans reveal final tax plan details
Republicans reveal final tax plan details

American workers in 2018: Show me the money


America’s red hot job market is missing one ingredient: Strong wage growth.

It’s a big reason many Americans still feel left out of the recovery from the Great Recession.

Usually, when unemployment is this low — 4.1%, the lowest since 2000 — wages go up significantly. Companies have a hard time finding workers, and they have to pay more to recruit and retain them.

Not so in this job market. As of November, wages were only up 2.5% compared with a year ago. And since October 2010, the economy has added jobs every month, but wage growth has averaged a paltry 2.2%.

The final jobs report for 2017 comes out Friday, and it could offer hints about whether wage growth is finally starting to pick up.

In some corners of America, there are signs that it’s already happening. Small and medium-sized businesses are really feeling the pressure to find workers and raise wages.

The share of employers who found few or no qualified job applicants in December was at an all-time high, 54%, according to a report published Thursday by the National Federation of Independent Business, which polls firms with 500 employees or less.

About 23% of employers told NFIB that they plan to pay employees more in the next three to six months. That matches a level last seen in March 2000, and the only time it was higher was December 1989. NFIB has conducted its survey for 40 years.

Mike Olsen is in that boat. When he founded the education tech firm Proctorio in 2013, he says it wasn’t hard to find a qualified engineer in Scottsdale, Arizona. But now it’s become his biggest employment problem.

“We used to have the advantage, and now I feel like we don’t,” says Olsen, 29. “As unemployment decreases, these employees have the upper hand.”

To keep the workers he has, Olsen says he’s raised wages 15% in the past year. An entry-level engineer at Proctorio earns $75,000 to $80,000 a year.

Proctorio, which has 28 employees, designs camera technology that monitors students during exams to prevent them from cheating. Its technology monitors facial expressions, eye twitches and mouth movement. About 500 universities use Proctorio.

“We’re doing about 3 million exams a year. We have a lot of people trying to cheat,” Olsen says.

But he’s struggling to find qualified engineers and customer service advocates. He’s also looking for a “professional cheater” to poke holes in the software they’re developing.

Olsen is confident he’ll find a qualified cheater, but for his typical job postings, he can’t hire just anybody: Only one in 10 applicants is worth a phone call. Of the people who get phone calls, he figures one in 20 makes it to an interview. And out of that group, one in 10 gets a job offer.

Proctorio is also in a particularly hot job market. In Phoenix, small businesses raised wages in December more than any other metro area — 5.25% from a year ago, according to a report by Paychex, a payment processor, and IHS Markit, an analytics firm.

That makes sense: Unemployment in Phoenix is 3.7%, below the national average. Arizona did raise its minimum wage this week to $10.50 an hour, but for many employers like Olsen, that’s not the biggest problem.

He’s competing for engineers against Amazon(AMZN), which has an office in nearby Tempe, Arizona. Olsen says some of his engineers came to him last year saying they had offers for more money elsewhere. Knowing how hard it would be to replace them, Olsen has had no choice.

“We had to match it,” he says.

He adds that Proctorio is a business that only succeeds with speed: Schools need to know immediately if a student has cheated. Having engineers work together well as a team to make that fast judgment call is critical for the company.

Olsen has also decided to match competing offers because battling with Amazon is only his second-biggest problem. His first: A lack of skilled workers in the Phoenix area.

Olsen says many engineers educated in Arizona prefer to move to tech hubs like Austin or the Bay Area. That means Olsen has to pay up to persuade more to stay.

“I think we’re going to have to keep increasing” wages, Olsen says. “But it’s probably not sustainable.”

Published at Thu, 04 Jan 2018 15:26:53 +0000

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2018 First Impressions

2018 First Impressions


Welcome back! I hope some of you enjoyed a quiet and relaxing time away from charts and the never ending drama of our financial markets. I wish I was that lucky but as almost every year I somehow find myself stuck catching up on a myriad of chores, reading assignments, and various project related tasks. That’s right, the action (and the screaming) never stops down here at the evil lair. Now I was actually planning on ripping the lid off a major new initiative I have planned for you guys but I’m running a bit behind so let’s just take a gander at some of our key markets.

Which actually can be summed up by this chart – the U.S. Dollar (shown here are the futures), and it’s heading for a world of hurt. That formation on the monthly panel is looking extremely troubling and unless we are seeing buying interest here and that soon we will most likely see a drop to the 90 mark. Should that psychologically important support zone fail then it’ll launch a sell off of biblical proportion.

In some ways this is already happening actually, and the ongoing goldrush into crypto currencies is just one symptom of the overall disease (i.e. a systematic destruction of the greenback largely fueled by a decade of quantitative easing). Without doubt 2017 will be remembered as the year in which crypto currencies transitioned from the early adopter phase to early mainstream. And I have little doubt that 2018 is going to be the year in which consolidation in the number of markets, standardization on the exchange and trading front, and yes regulations by governments and international bodies will establish crypto as a force to be reckoned with. Currency markets will never be the same and despite all the growing pains it will most definitely for the better. More on that in the near future.

Over in the dinosaur forex pit the EUR/USD is looking bullish as heck right now and if I had any common sense I would double my subscription fees post haste. It’s in a clear break out pattern right now and a target of 1.26 by Eastern is in the cards.

One more freebie but there’s quite a bit more looming below the fold (so sign up now). The USD/JPY is still hemming and hawing, but a if it can hold its 25-day SMA I think we’re off to the races here. I would love to get a more thorough retest as to justify a long term long for a ride into 118.


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Published at Tue, 02 Jan 2018 14:39:31 +0000

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FOMC Minutes: New Tax Law “would likely provide a modest boost to capital spending”

FOMC Minutes: New Tax Law “would likely provide a modest boost to capital spending”

by Bill McBride on 1/03/2018 02:08:00 PM

A couple of excerpts, the first on the economic impact of the new tax law, and the second on the yield curve.

From the Fed: Minutes of the Federal Open Market Committee, December 12-13, 2017:

Many participants judged that the proposed changes in business taxes, if enacted, would likely provide a modest boost to capital spending, al­though the magnitude of the effects was uncertain. The resulting increase in the capital stock could contribute to positive supply-side effects, including an expansion of potential output over the next few years. However, some business contacts and respondents to business surveys suggested that firms were cautious about expanding capital spending in response to the proposed tax changes or noted that the increase in cash flow that would result from corporate tax cuts was more likely to be used for mergers and acquisitions or for debt reduction and stock buybacks.

Meeting participants also discussed the recent narrowing of the gap between the yields on long- and short-maturity nominal Treasury securities, which had resulted in a flatter profile of the term structure of interest rates. Among the factors contributing to the flattening, participants pointed to recent increases in the target range for the federal funds rate, reductions in investors’ estimates of the longer-run neutral real interest rate, lower longer-term inflation expectations, and lower term premiums. They generally agreed that the current degree of flatness of the yield curve was not unusual by historical standards. However, several participants thought that it would be important to continue to monitor the slope of the yield curve. Some expressed concern that a possible future inversion of the yield curve, with short-term yields rising above those on longer-term Treasury securities, could portend an economic slowdown, noting that inversions have preceded recessions over the past several decades, or that a protracted yield curve inversion could adversely affect the financial condition of banks and other financial institutions and pose risks to financial stability. A couple of other participants viewed the flattening of the yield curve as an expected consequence of increases in the Committee’s target range for the federal funds rate, and judged that a yield curve inversion under such circumstances would not necessarily foreshadow or cause an economic downturn. It was also noted that contacts in the financial sector generally did not express concern about the recent flattening of the term structure.

Published at Wed, 03 Jan 2018 19:08:00 +0000

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Construction Spending increased in November

by 889520 from Pixabay

Construction Spending increased in November

by Bill McBride on 1/03/2018 11:59:00 AM

Earlier today, the Census Bureau reported that overall construction spending increased in November:

Construction spending during November 2017 was estimated at a seasonally adjusted annual rate of $1,257.0 billion, 0.8 percent above the revised October estimate of $1,247.1 billion. The November figure is 2.4 percent above the November 2016 estimate of $1,227.0 billion.

Both private and public spending increased in November:

Spending on private construction was at a seasonally adjusted annual rate of $964.3 billion, 1.0 percent above the revised October estimate of $955.1 billion. …

In November, the estimated seasonally adjusted annual rate of public construction spending was $292.7 billion, 0.2 percent above the revised October estimate of $292.0 billion.
emphasis added

Construction Spending

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending has been increasing, but is still 22% below the bubble peak.

Non-residential spending has been declining over the last year, but is 5% above the previous peak in January 2008 (nominal dollars).

Public construction spending is now 10% below the peak in March 2009, and 11% above the austerity low in February 2014.

Year-over-year Construction Spending

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 8%. Non-residential spending is down 3% year-over-year. Public spending is up 2% year-over-year.

This was above the consensus forecast of a 0.6% increase for November.

Published at Wed, 03 Jan 2018 16:59:00 +0000

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Oil Sees Strongest Start Of Year Since 2014

Oil Sees Strongest Start Of Year Since 2014

Brent crude and West Texas Intermediate started trading in 2018 above US$60 a barrel both for the first time since January 2014, before prices collapsed. WTI hit a high of US$60.68 a barrel in midmorning Asian trading before retreating somewhat to US$60.64, while Brent crude booked a high of US$67.23 a barrel before slipping to US$67.20.

Analysts saw strong demand and tightening supply behind the price rise. In fact, fundamentals and the market’s expectations about fundamental developments this year were strong enough to offset the early restart of the Forties oil pipeline on December 30. The Forties was shut down in early December to repair hairline cracks, which sent Brent soaring as the pipeline supplies some 450,000 bpd of crude oil to the UK.

The fundamental indicators also offset the resumption of production in Libya, after a pipeline blast took off somewhere between 70,000 and 100,000 bpd from daily production. According to a report by Reuters, the pipeline was repaired by December 31 and the oil flow was being gradually resumed.

The last week of 2017 also saw news about higher crude oil import quotas for independent Chinese refineries, signaling a further rise in oil demand in the world’s second-largest consumer. Beijing issued quotas for a total 121.32 million tons (2.43 million bpd) of crude oil imports for 44 companies, and this is just the first quota batch for the year.

To add to the bullish sentiment, U.S. crude oil inventories continued to fall, booking a cumulative fall of as much as 20 percent since March 2017, when they hit a record-high. Although not everyone agrees that EIA’s inventory data is an accurate indicator of supply and demand in the world’s top consumer, the authority’s weekly reports still have market-swinging power.

On the flip side, U.S. oil production continues to grow and will soon break the 10-million bpd barrier, analysts believe. At the end of the year, the daily production rate stood at 9.75 million barrels and higher prices will likely motivate a faster increase this year.

By Irina Slav for

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Published at Tue, 02 Jan 2018 15:39:21 +0000

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Schedule for Week of December 31st

Schedule for Week of December 31st

by Bill McBride on 12/30/2017 08:09:00 AM

Happy New Year!

The key report this week is the December employment report on Friday.

Other key indicators include the December ISM manufacturing and non-manufacturing indexes, the November trade deficit, and December auto sales.

Also the Q4 quarterly Reis surveys for office and malls will be released this week.

—– Monday, Jan 1st —–

All US markets will be closed in observance of the New Year’s Day Holiday.

—– Tuesday, Jan 2nd —–

10:00 AM: Corelogic House Price index for November.

—– Wednesday, Jan 3rd —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

Early: Reis Q4 2017 Office Survey of rents and vacancy rates.


10:00 AM: ISM Manufacturing Index for December. The consensus is for the ISM to be at 58.0, down from 58.2 in November.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion in October. The PMI was at 58.2% in November, the employment index was at 59.7%, and the new orders index was at 64.0%.

10:00 AM: Construction Spending for November. The consensus is for a 0.6% increase in construction spending.

Vehicle Sales

All day: Light vehicle sales for December. The consensus is for light vehicle sales to be 17.5 million SAAR in December, up from 17.4 million in November (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the November sales rate.

2:00 PM: FOMC Minutes, Meeting of December 12 – 13, 2017

—– Thursday, Jan 4th —–

8:15 AM: The ADP Employment Report for December. This report is for private payrolls only (no government). The consensus is for 185,000 payroll jobs added in December, down from 190,000 added in November.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 240 thousand initial claims, down from 245 thousand the previous week.

Early: Reis Q4 2017 Mall Survey of rents and vacancy rates.

—– Friday, Jan 5th —–

8:30 AM: Employment Report for December. The consensus is for an increase of 190,000 non-farm payroll jobs added in December, down from the 228,000 non-farm payroll jobs added in November.

Year-over-year change employment

The consensus is for the unemployment rate to be unchanged at 4.1%.

This graph shows the year-over-year change in total non-farm employment since 1968.

In November the year-over-year change was 2.07 million jobs.

A key will be the change in wages.

U.S. Trade Deficit

8:30 AM: Trade Balance report for November from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through October. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $48.3 billion in November from $48.7 billion in October.

10:00 AM: the ISM non-Manufacturing Index for December. The consensus is for index to increase to 57.6 from 57.4 in November.

Published at Sat, 30 Dec 2017 13:09:00 +0000

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Biggest withdrawal in four months hits U.S. domestic stock funds: ICI


Biggest withdrawal in four months hits U.S. domestic stock funds: ICI

NEW YORK (Reuters) – U.S. fund investors walloped domestic equities with the most selling in four months, using the proceeds to buy cheaper stocks abroad that could thrive in a global economic expansion, Investment Company Institute (ICI) data showed on Wednesday.

Nearly $9.6 billion tumbled out of funds focused on U.S. stocks during the week ended Dec. 20, the most in any week since August, while their counterparts focused outside the country took in $8 billion in their best showing since June, the trade group said.

U.S. President Donald Trump on Friday signed into law the largest tax overhaul since the 1980s, which slashes the corporate rate from 35 percent to 21 percent.

That benefit for corporations has stimulated further gains for domestic stocks, but investors have been buying abroad instead, searching for a potentially better value, especially if growth accelerates in Japan, Europe or emerging markets, too.

“I‘m more optimistic than I have been in several months,” said Tom Stringfellow, chief investment officer at Frost Investment Advisors.

“The emerging markets are not as risky as we anticipated, Europe is getting traction.”

Money is also typically shifted in the final weeks of the year in an effort to minimize taxes. Some investors, for instance, sell securities at a loss to decrease their tax liabilities.

“As we shift into a lower-tax regime in 2018, especially for corporations, we have been observing clients engaging in more aggressive tax-loss selling before lower tax rates kick in next year, because tax losses are more valuable in a higher tax environment,” said Scott Minerd, global chief investment officer at asset manager Guggenheim Partners LLC, in a note distributed to clients.

Bond funds pulled in $1.6 billion, the least amount of cash in five weeks, but still enough to record a 52nd straight week of inflows and nearly a full year without a single week of withdrawals, according to ICI. Funds that invest in commodities, such as gold or oil, posted $434 million in outflows, the most since July.

Overall, domestic equity funds are on pace to post outflows for the third straight year in 2017, according to Thomson Reuters’ Lipper unit, while debt and non-domestic stock funds are strongly positive on the year.

Much of the year-end reallocation is benefiting exchange-traded funds (ETFs), which typically track segments of the market relatively cheaply. ICI said ETFs took in nearly $11 billion during the week, compared to outflows of nearly $14 billion for mutual funds, which typically charge a higher fee and attempt to beat the market.

Reporting by Trevor Hunnicutt; Editing by Tom Brown

Published at Wed, 27 Dec 2017 19:48:50 +0000

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U.S. stock funds attract most cash since 2014: Lipper

U.S. stock funds attract most cash since 2014: Lipper

NEW YORK (Reuters) – Investors poured $24.1 billion into U.S.-based stock funds in the week to Dec. 27, Lipper said on Thursday, sending a gift to equity markets already on pace to record a year of double-digit percentage gains.

This marks the largest week of inflows for mutual funds and exchange-traded funds (ETFs) collectively since December 2014, according to the Thomson Reuters research service, and comes after U.S. lawmakers finalized a massive corporate tax cut that markets admired.

Cash is also shuffling around during a typically active period for funds, despite holidays, as investors plan for taxes and report end-of-year performance statistics. Equity fund outflows totaled $22.2 billion the week prior.

The flow result counters the dominant trend in U.S.-based funds this year – a reticence to buy stocks at home despite an S&P 500 index poised to deliver a 2017 return of more than 20 percent.

Domestic stock funds posted an estimated $23.4 billion in outflows for the year, according to Lipper, compared to $165 billion inflows for their counterparts invested abroad and $283 billion inflows for funds for taxable bonds.

“You see people attracted to equities, but they’re not backing up the truck to buy equities at 20-times earnings,” said David Lafferty, chief market strategist at Natixis Investment Managers, referring to the seemingly rich price-to-earnings ratio of the S&P 500. “I don’t see any euphoria.”

This week, though, domestic equity funds pulled in nearly $18 billion, compared to $6.4 billion to their internationally oriented peers, according to Lipper.

Healthcare stock funds, however, posted their seventh straight week of outflows. The U.S. tax bill repealed a requirement that most Americans have insurance or face penalties.

Taxable bond funds were hit with a rare week of withdrawals. High-yield bonds, invested in more speculative corporate debt, recorded $240 million in outflows during the week, Lipper said, while lower-risk Treasury funds pulled in $567 million. Money-market funds, where investors park cash, took in $19.3 billion.

Funds based in the United States but focused on Chinese stocks took in $408 million during the week, the largest inflows since June 2015, during a week in which strong demand for copper seemed to presage growth in the emerging market and around the world. [MKTS/GLOB]

Reporting by Trevor Hunnicutt; Editing by Richard Chang and James Dalgleish

Published at Thu, 28 Dec 2017 23:25:59 +0000

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Ten Economic Questions for 2018

by Gellinger from Pixabay

Ten Economic Questions for 2018

by Bill McBride on 12/27/2017 05:21:00 PM

Here is a review of the Ten Economic Questions for 2017.

Here are my ten questions for 2018. I’ll follow up with some thoughts on each of these questions.

The purpose of these questions is to provide a framework to think about how the U.S. economy will perform in 2018, and – when there are surprises – to adjust my thinking.

1) Economic growth: Heading into 2018, most analysts are pretty sanguine and expecting some pickup in growth due to the recent tax cuts.  From Goldman Sachs:

“We are adjusting our forecasts to reflect the final details of the tax bill, as well as the incremental easing in financial conditions and continued strong economic momentum to end the year. We are increasing our GDP forecasts for 2018 and 2019 by 0.3pp and 0.2pp, respectively, on a Q4/Q4 basis (to 2.6% and 1.7%).”

How much will the economy grow in 2018?

2) Employment: Through November, the economy has added just over 1,900,000 jobs this year, or 174,000 per month. As expected, this was down from the 187 thousand per month in 2016.  Will job creation in 2018 be as strong as in 2017?  Or will job creation be even stronger, like in 2014 or 2015?  Or will job creation slow further in 2018?

3) Unemployment Rate: The unemployment rate was at 4.1% in November, down 0.5 percentage points year-over-year.  Currently the FOMC is forecasting the unemployment rate will be in the 3.7% to 4.0% range in Q4 2018.  What will the unemployment rate be in December 2018?

4) Inflation: The inflation rate has increased a little recently, and some key measures are now close to the the Fed’s 2% target. Will core inflation rate rise in 2018? Will too much inflation be a concern in 2018?

5) Monetary Policy:  The Fed raised rates three times in 2017 and started to reduce their balance sheet. The Fed is forecasting three more rate hikes in 2018.  Some analysts think there will be more, from Goldman Sachs:

“We expect the next rate hike to come in March with subjective odds of 75%, and we continue to expect a total of four hikes in 2018.”

Will the Fed raise rates in 2018, and if so, by how much?

6) Real Wage Growth: Wage growth picked up in 2016 (up 2.9%), but slowed in 2017 (up 2.5% year-over-year in November).  How much will wages increase in 2018?

7) Residential Investment: Residential investment (RI) was sluggish in 2017, although new home sales were up solidly.  Note: RI is mostly investment in new single family structures, multifamily structures, home improvement and commissions on existing home sales.  How much will RI increase in 2017?  How about housing starts and new home sales in 2017?

8) House Prices: It appears house prices – as measured by the national repeat sales index (Case-ShillerCoreLogic) – will be up over 6% in 2017.   What will happen with house prices in 2018?

9) Housing Inventory: Housing inventory declined in 2015, 2016 and 2017.  Will inventory increase or decrease in 2018?

10) Housing and Taxes A key change in the new tax law is limiting the deductibility of State and Local Taxes (SALT) and property taxes to $10,000. Many analysts think this will hit certain segments of the housing market in states like New York, New Jersey and California. The NAR noted their forecast today:

“Heading into 2018, existing-home sales and price growth are forecast to slow, primarily because of the altered tax benefits of homeownership affecting some high-cost areas.”

Relative to the overall market, will sales slow, inventory increase, and price growth slow in these states?

There are other important questions, but these are the ones I’m focused on right now.  I’ll write on each of these questions over the next couple of weeks.
Published at Wed, 27 Dec 2017 22:21:00 +0000

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The Bitcoin Effect, Gold and Silver Report 27 Dec 2017


The Bitcoin Effect, Gold and Silver Report 27 Dec 2017

By: | Wed, Dec 27, 2017

Merry Christmas to our American friends. Happy Christmas to the rest of the Anglosphere. Felicem natalem Christi to our Latin-speaking audience, and góðr jól to those who are reviving Old Norse as a great language!

Let’s address two themes about the gold price trend that are increasingly in popularity the past few months—as the price of gold has been falling. Blame bitcoin. And blame rising interest rates.

There is no direct mechanism—no arbitrage—that pushes up bitcoin and down gold. As there is, for example, with changes in relative palladium or platinum demand if diesel engines gain or lose market share from gasoline engines.

Nor do we give truck to the idea that the dollar has been pushed from ?1.00 to ?0.000053 (we don’t think even the bitcoin bugs who say it, really believe it). What are you going to believe: a B.S. theory, or your own lying eyes?

There is arguably an indirect bitcoin-gold price connection mechanism. Those who own gold for the price appreciation may be attracted to bitcoin. While gold does not seem to be going up, bitcoin obviously is. If someone wants to make dollars quick, bitcoin sure seems to be a better vehicle to ride than gold.

However, we think bitcoin’s effect on the gold price is likely, if anything, to be in the other direction. For everyone selling gold to buy bitcoin, there are surely two who made big bucks in bitcoin and want to diversify into gold. With the price up so much, many people are sitting on 20X gains (or more). In order for new people to buy, SOMEone has to be selling. We think it is likely the diversification trade. It certainly is not anyone saying to himself, “well now that bitcoin has hit my price target, it is fully valued and I am out.”

Gold would be the logical diversification asset, for those seeking anti-Fed money. Once someone becomes aware of the problem with the dollar, which most bitcoin owners are, he will not become unaware. He will be looking for other alternatives. Gold is not only not a dollar, but it is not the wild ride of bitcoin either. For that portion someone wants to take off the table, gold’s stability is a feature, not a bug. The more that bitcoin rises, the more people have more capital to take off the table.

One could call this a kind of reflexivity, where bitcoin’s rising price tends to drive a rising price of gold. And this is likely a ratchet; a bitcoin crash does not seem likely to cause selling of gold to buy bitcoin.

It is a fact that the gold price has been in a downtrend since September (though the price picked up the last week and a half). If not bitcoin, what is the driver?

We have written a number of pieces on the topic of interest rates and the gold price (bottom line: there is no clear correlation). Let’s not forget that the gold price was rising in the 1970’s while the rate was rising, and again in the 2000’s while it was falling. Here is a graph of the Fed Funds Rate and the gold price from 1970.

There looks like a correlation while the Fed Funds Rate was rising in the 1970’s. But it is hard to argue that they’re correlated during the big run up in price from 2000 through 2011. This could mean that rising rates causes a rising price, while falling rates do not cause a falling price. Or it could mean something else.

At this point, many would say it’s not the nominal but the real rate. If you add apples, oranges, rent, fuel, etc. you get a hypothetical measure of consumer prices. No one agrees on what should go in to the basket, or the weights given to each item (some people eat more apples than others). But change in consumer prices gives us inflation. So we use hypothetical inflation to adjust the actual rate at which lending occurs. The adjusted number, is called the real rate, apparently without intending any irony.

Perhaps people buy gold when the real rate is rising or falling or too high or too low?

We think that real rate is the wrong concept. The inflation number is rather arbitrary, and it’s invalid to subtract consumer prices from interest. It’s wrong to ignore the rate at which actual lending occurs in favor of a rate at which lending does not occur. And finally, it’s wrong to try to measure money (or even irredeemable currency) in consumer prices. Do feel free to try this at home. How many rubber bands long is your child’s plastic yard stick?

However, there’s a grain of truth in that, which should be identified explicitly. Time preference is that grain of truth. Central banks can manipulate the market interest rate. For proof, just look at a long-term historical chart of the interest rate on the 10-year Treasury bond. There is an obvious difference between pre- and post-Fed.

However, central banks cannot manipulate the time preference of the people.

In a normal world, interest must be greater than or equal to time preference. Central banks turn normalcy upside down, literally. They can invert the time preference – interest spread.

Time preference, by the way, can change too. Not by central planners’ diktats, but in response to changes in the market. For example, people who have little debt in a market of skyrocketing consumer prices will increase their time preference. Whereas people who are loaded up with debt in a lethargic or falling market decrease their time preference.

The upshot of this is that interest at 10% might, at one time, be totally insufficient. And another time, interest of 2% might be more than enough. One would be hard-pressed to plot a graph showing time preference against interest. It’s certainly much easier to plot interest – inflation.

We would suggest that people are impelled to buy gold much more when their time preference is violated by too-low interest rates. And less inclined (or even induced to sell) when interest is above time preference.

Well, today, we have rising rates (at least short-term rates, the long bond is a different story). And yet debt saturation is not changing any time soon. It could be that the Fed is now giving people an inducement to give up their gold: restoring some interest to paper, even if only a small amount.

If so, then we are obliged to mention that we offer A yield on gold, paid in gold.

The prices of the metals moved up $29 and $0.34 respectively. As typically occurs, the price of silver moved more in proportion.

Let’s look at the only true picture of the supply and demand fundamentals of both gold and silver. But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio dropped.

In this graph, we show both bid and offer prices for the gold-silver ratio. If you were to sell gold on the bid and buy silver at the ask, that is the lower bid price. Conversely, if you sold silver on the bid and bought gold at the offer, that is the higher offer price.

For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph showing gold basis and gold price on Friday, as there was some interesting price action.

What a nice correlation between price and basis (until late in the day). We hold our breaths, waiting for conspiracy theorists to argue that this is manipulation. Whether it is, or isn’t, it is buying of futures and it pushed up the price of gold.

Despite the rise in market price, our Monetary Metals Gold Fundamental Price fell $35 this week, to $1239.

Now let’s look at silver.

We see the same thing. A beautiful correlation between price and basis. Yessiree, it’s the naked longs buying silver futures on leverage, planning to make dollars when the price rises.

The Monetary Metals Silver Fundamental Price dropped 25 cents from last week, to $16.12.

By Keith Weiner

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Published at Wed, 27 Dec 2017 10:41:27 +0000

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Stocks: 5 things to know before the bell


U.S. trading will resume on Tuesday after the Christmas break.

1. And we’re back: Investors are returning from the holiday break to a full day of trading in the United States.

U.S. stock futures were flat, and trading volumes are expected to be thin.

A smattering of Asia markets were back in business, but trading was muted. Most European markets will reopen on Wednesday.

Investors and traders may still be in holiday mode, but shoppers will be out in force on Tuesday.

U.S. retailers are offering steep discounts in after-Christmas sales — both in store and online. Meanwhile, Boxing Day discounts are taking center stage in Europe and Canada too.

Elsewhere in markets: Natural gas prices rallied by 3% in New York after taking a sharp fall over the past month. And bitcoin has popped back above $15,000 as the digital currency continues its recovery.

2. Friday market recap: The Dow Jones industrial average, S&P 500 and Nasdaq all dipped by 0.1% on Friday, edging away from record highs set earlier in the month.

Still, it’s been a merry year in the markets, with the Dow up an impressive 25%. The S&P 500 has zoomed up 20% this year and the Nasdaq has left both behind, with a surge of nearly 30%.

3. Debt troubles: China’s government is demanding a tech tycoon come home and face the music.

The country’s markets watchdog on Monday night ordered LeEco founder Jia Yueting to return to the country before the end of the year in order to fix his flailing business empire’s financial woes.

Once dubbed the Netflix(NFLX) of China, LeEco expanded into a head-spinning array of industries, ranging from movies to smartphones and transportation before unchecked debt grounded its ambitions.

4. Economics:The S&P Case-Shiller Home Price Index for October will be released at 9 a.m. ET. This monthly data gives traders a sense about how the U.S. housing market is performing.

5. Coming this week:

Tuesday — Boxing Day
Wednesday — Conference Board releases U.S. consumer confidence report for December
Thursday — Weekly U.S. crude inventories report out at 11 a.m. ET
Friday — Russia reports latest quarterly GDP

Published at Tue, 26 Dec 2017 10:07:16 +0000

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Top Energy Fund Breaks 9-Month Resistance


Top Energy Fund Breaks 9-Month Resistance

By Alan Farley | December 22, 2017 — 12:15 PM EST

The broad-based SPDR Energy Select Sector ETF (XLE) has rallied above March resistance this week, reclaiming broken support at $70, and it could add substantially to gains in the coming weeks. More importantly, the fund and sector are now well positioned to attract strong 2018 buying interest that could trigger the next phase of the uptrend that began after commodities bottomed out in early 2016.

In turn, that would set the stage for the fund to break out above the 2017 high at $78.45 and head into a critical test at the 2014 bull market high just above $100. The timing could be fortuitous because the prior year’s laggards often become the New Year’s leaders when market players sell their winners and rotate capital into less overvalued equities. That perfectly describes the energy sector and this popular fund, which has lost more than 4% in 2017. (See also: Why Energy Stocks Are Suddenly Hot.)

XLE Long-Term Chart (1998 – 2017)

The fund came public in the mid-$20s in December 1998 and sold off quickly to $21.09. The subsequent uptick continued through the first year of the post-millennial bear market, topping out at $34.90 in May 2001, while the subsequent decline accelerated following the Sept. 11 attacks, dropping into the 1998 opening print. That support level got tested into January 2002, yielding an oversold bounce, followed by a breakdown to an all-time low at $19.38 in July 2002.

A steady uptick completed a round trip into the 2001 high in the fourth quarter of 2004, yielding a breakout and strong trend advance that lifted the sector into a leadership role during the mid-decade bull market. The uptrend peaked in the low $90s in May 2008, rolling over in a steady decline that accelerated during the economic collapse, dumping the fund to a four-year low at $37.40 in March 2009.

It took nearly five years for the subsequent bounce to reach the 2008 high, triggering an April 2014 breakout that hit an all-time high at $101.52 two months later. It failed the breakout in October, triggering major sell signals, ahead of a nasty decline that continued into a five-year low in the first quarter of 2016. Price action since that time has carved a rally that stalled at the 50% sell-off retracement in December 2016, followed by a pullback that found support in August. (For more, see: XLE: Energy Select Sector SPDR ETF.)

XLE Short-Term Chart (2014 – 2017)

A Fibonacci grid stretched across the 2016 rally organizes 2017 price action, with the decline finding support at the .786 retracement level in August. The bounce into the fourth quarter mounted the .382 retracement, while the trading range between October and December held support at that level, ahead of a week-long rally that has lifted the fund into the .786 retracement level at $72. It could easily consolidate at or near this price zone into early 2018.

The fund ended a long string of lower highs in December 2016 when it rallied above the November 2015 high at $71.93. However, it will take a rally through the 2017 high at $78.45 to end the equally long string of lower lows because that price action will complete a 100% retracement, confirming that the decline into August 2017 marked a higher low. In turn, that would signal the next stage in the two-year uptrend.

On-balance volume (OBV) topped out in the last decade and posted a lower 2011 high, ahead of a steep distribution wave that carved lower lows in 2012, 2016 and August 2017. This bearish positioning signaled abandonment by institutions in favor of stronger sectors while pointing to a long-term capitulation that may finally be nearing its end. However, it will take months for volume to overcome this persistent exodus, telling market players to act cautiously while they build new long positions. (To learn more, see: Uncover Market Sentiment With On-Balance Volume.)

The Bottom Line

The SPDR Energy Select Sector Fund has rallied to the highest high since March and could eventually break out above the 2017 high at $78.45. More importantly, the energy sector may be entering a leadership phase, set to outperform broad benchmarks in 2018. (For additional reading, check out: Big Oil Set for 2018 Bull Market.)

Published at Fri, 22 Dec 2017 17:15:00 +0000

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Tax plan optimism propels Wall Street to record highs


Tax plan optimism propels Wall Street to record highs

NEW YORK (Reuters) – Wall Street hit record closing highs on Monday as optimism increased about the likelihood of lower corporate tax rates as the Republican tax bill moved closer to passage.

The Nasdaq surpassed the 7,000-point mark during the session but closed below that level.

The Republican-controlled U.S. Congress is expected to begin voting on sweeping tax legislation on Tuesday, aiming to get the bill to President Donald Trump to sign into law by the end of the week. Republican U.S. Senator Susan Collins said she would vote for the sweeping overhaul, all but ensuring its passage.

“This Congress has shown an inability to pass anything over the past five years,” said Michael O‘Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “If a major piece of legislation is passed, you’d expect the markets to be happy.”

U.S. stocks have enjoyed a near year-long rally, with the benchmark S&P 500 .SPX and the blue-chip Dow Jones Industrial Average .DJI set for their best year since 2013.

The bill would cut corporate tax rates to 21 percent from 35 percent, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.

Another expected outcome of lower taxes is cash repatriation, which market analysts say could boost mergers and acquisitions.

“A lot of the things in the tax proposal are better for stocks than anything else,” said Rob Stein, chief executive officer of Astor Investment Management in Chicago.

The Dow Jones Industrial Average .DJI rose 140.46 points, or 0.57 percent, to 24,792.2, the S&P 500 .SPX gained 14.36 points, or 0.54 percent, to 2,690.17 and the Nasdaq Composite .IXIC added 58.18 points, or 0.84 percent, to 6,994.76.

Besides the three indexes, the Nasdaq 100 .NDX and the S&P 100 .OEXA also hit record highs. The small-cap Russell 2000 rose 1.2 percent to a record closing high.

The materials index .SPLRCM gained 1.5 percent, the most among the major 11 S&P sectors. The utilities index .SPLRCU had the largest decline, with a drop of 1.2 percent.

Utilities suffer from higher interest rates, which the Federal Reserve announced last week, and they are expected to see less upside from tax cuts than other sectors, Stein said.

On Monday, investors were treated to a flood of deals.

Shares of Amplify Snack (BETR.N) soared 71.6 percent to $12.01 after Hershey (HSY.N) said it would buy the SkinnyPop popcorn maker in a $1.6 billion deal. Hershey rose 0.1 percent.

Snyder‘s-Lance (LNCE.O) rose 6.9 percent after Campbell Soup (CPB.N) said it would buy the Pretzels and Cape Cod chips maker for $4.87 billion.

Casino operator Penn National Gaming (PENN.O) said it would buy Pinnacle Entertainment (PNK.O) in a $2.8 billion deal. Penn National dipped 2.2 percent, while Pinnacle’s shares were up 0.7 percent.

Twitter (TWTR.N) jumped 11 percent after JPMorgan said it expects the company to post double-digit daily average user growth in 2018.

Advancing issues outnumbered declining ones on the NYSE by a 2.43-to-1 ratio; on Nasdaq, a 2.13-to-1 ratio favored advancers.

About 7.1 billion shares changed hands on U.S. exchanges. That compares with the 6.8 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Additional reporting by Sruthi Shankar in Bengaluru; Editing by Chizu Nomiyama and Nick Zieminski

Published at Mon, 18 Dec 2017 21:41:06 +0000

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No bears here! Market on the verge of making history


Why rising stocks don't benefit everyone
Why rising stocks don’t benefit everyone

 No bears here! Market on the verge of making history


The U.S. stock market is up ever so slightly this month. And if the benchmark S&P 500 is able to eke out a gain for December, it will make history. This would be the first time ever that the blue-chip index had a gain for all 12 months of a calendar year.

Ryan Detrick, senior market strategist with LPL Research, noted in a report this week that the market has had 12-month winning streaks before. But they have never been for an entire calendar year.

Detrick said that 1958, 1995, and 2006 were “close but no cigar” years. The S&P 500 had a positive total return (which includes gains in dividends in addition to stock price increases) in 11 months.

He added that even though some investors may be nervous that this bull run is starting to get a little long in the tooth, history suggests that stocks should keep climbing.

Detrick pointed out that the S&P 500 had an average return of 10.8% in 1959, 1996 and 2007 — the year after the market enjoyed gains in 11 of the previous 12 months.

A double-digit percentage gain next year would be impressive given that the S&P 500 is up nearly 20% so far this year.

Stocks surged Friday on growing hopes about the Republican tax plan.

The Dow was up more than 160 points, moving closer to the 25,000 level, and has now gained more than 25% in 2017. The Nasdaq was up more than 1%. It has surged nearly 30% this year and is approaching the 7,000 mark.

But will the market remain this calm in 2018 or will it finally start to show some choppiness again?

It’s been eerily serene this year. The market’s favorite gauge of volatility, the CBOE’s VIX(VIX) index, is down nearly 30% and below 10 — not far from its all-time low.

CNNMoney’s Fear & Greed Index, which looks at the VIX and six other measures of market sentiment, is showing signs of Greed and is approaching Extreme Greed levels.

So even if stocks continue to climb higher, many experts warn that volatility will make a comeback.

“Despite my bullish expectations, I don’t expect it to be a smooth ride and think we may be in store for some turbulence along the way,” said Chris Zaccarelli, chief investment officer of Independent Advisor Alliance, in a report.

Zaccarelli suggested that the market may be due for a pullback after this relentless grind higher. He noted that the S&P 500 has had a least 5% dip from recent highs at least once every two years since 1980. The last such drop was February 2016.

What could spark a return of volatility? Zaccarelli said the transition at the Federal Reserve, with Jerome Powell set to take over from Janet Yellen, is a possible wild card.

So could lingering concerns about North Korea, tension in the Middle East, trade disputes in the wake of NAFTA negotiations and the mid-term elections.

But the biggest worry might be the return of inflation. There is little evidence of it in the market right now as pricing pressures remain mild. That could change though if oil prices, currently hovering just under $60 a barrel, climb further.

A further spike in crude could lift gas prices as well, making it more expensive for consumers to fill up their gas tanks.

That could mitigate any savings Americans might get from the tax cuts that President Trump and Republicans hope to approve before the end of the year.

“The key for inflation is watching where oil prices go,” said Dave Harden, president and chief investment officer of Summit Global Investments. “If they get above $75 and into the $80-$90 range, it will suck out any benefit to consumers from lower taxes.”

Published at Fri, 15 Dec 2017 15:38:05 +0000

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Blockchain, IoT, and a $3.6 trillion Infrastructure Crisis

Trading Photo

Blockchain, IoT, and a $3.6 trillion Infrastructure Crisis

By: Michael Kern | Fri, Dec 8, 2017

There is a crisis unfolding in the United States. Infrastructure has become dated, decayed, and vulnerable to attack. A problem which the American Society of Civil Engineers estimates says will cost the country up to $3.6 trillion to address. So where does technology fit in to the United States’ next great undertaking?

The Internet of Things (IoT) is set to completely change every aspect of infrastructure as we know it. From transportation to energy production, there is an application for IoT technology. The world is more connected than it has ever been, and harnessing the technology at the core of this connection will present unique opportunities to usher in a new era of efficiency and security.

The Internet of Transportation

The U.S. highway system was arguably one of the most beneficial projects for the country’s economy that has ever been constructed. Built in what is known as “The Greatest Decade,” 1956-1966, America’s interstate highway system gave way to new opportunities for trade and the distribution of goods. But not only is it falling behind its competitors, it’s falling apart.

As the United States looks to rebuild its infrastructure, its highway system is a top priority, and in this massive operation, the U.S. has a chance to once again emerge as a leader in new infrastructure development.

The Internet of Things will have an essential role in the new highway system. With the development and rollout of self-driving cars, interconnected micro-sensors will provide connectivity between smart vehicles, creating a virtual highway on top of the physical highway. The development of this web of connection will be vital to navigation and safety of tomorrow’s self-driving fleet of cargo trucks and personal cars.

Additionally, the internet of transportation will provide a new opportunity to harness and distribute energy. Using piezoelectric crystals layered on the country’s new highways, energy could be generated from cars’ vibrations and with the addition of the expansive distribution of micro-sensors, energy can be connected to existing power grids, monitored, and secured, creating an entirely new source of power for U.S. cities.

While outfitting the country’s vast highway system with piezoelectric crystals and censors will certainly prove to be a massive project, U.S. cities are also looking to benefit from IoT tech. A number of cities have already begun integrating the IoT with basic infrastructure. These smart transportation initiatives include more intelligent traffic lights, data collection, and new routes for public transit outfitted with tech designed to reduce costs, increase safety, and alleviate congestion.

Transportation is only one aspect of the United States’ infrastructure challenges, but perhaps the most pressing is the country’s energy infrastructure, which has come under fire due to high profile pipeline leaks and its shocking susceptibility to malicious cyber-attack.

The Internet of Energy

It’s no secret that fossil fuels will reign as the go-to source of energy around the world for years to come, but distribution and management is currently a huge issue which stands to benefit from a tech overhaul.

The United States loses billions every year due to inadequate, old, or mismanaged energy infrastructure. Just a few weeks ago, there was a leak from the controversial Keystone pipeline, spilling up to 200,000 gallons of crude oil in South Dakota. Not only is this a costly problem for taxpayers, it is extremely detrimental to the environment. The Internet of Things looks not only to address some of these issues, but create even greater efficiency than previously thought possible.

Using smart sensor networks and artificial intelligence, oil and gas pipelines, nuclear plants, or even hydro-electric dams can be monitored and shut down the second there is an issue, giving way to a new era of safety.

In addition to the safety concerns which can be addressed by the IoT, the tech can completely transform the entire supply chain. In a system where getting from point A to point B is riddled with middle-men, unnecessary delays, and lost supplies, smarter monitoring of the chain will give way to cheaper energy and a more streamlined delivery of the end-product.

Renewables stand to benefit, as well. With a greater focus on smaller, smarter, and more independent grids, powered by renewable energy, the Internet of Things may very well be the answer the industry has been looking for. Producers and consumers will be connected in a new way, with the flow of energy carefully monitored and distributed in the most efficient manner possible.

With all of these interconnected censors spread throughout tomorrow’s energy infrastructure, there is also a tremendous amount of data being collected. Using this data, it is fair to suggest that the industry as a whole will be able to be analyzed and improved over time. But building and maintaining this huge collection of data and connecting the country’s most critical infrastructure on such a level also gives way to a new challenge – protecting it against malicious cyber-threats.

The Internet of Blockchain

There have already been several high-profile attacks on critical infrastructure around the world, with the most notable being Ukraine’s wide spread power outages in 2015 and 2016, which highlights a pressing need for new solutions to secure our grids. While it’s not entirely clear exactly how vulnerable America’s infrastructure is to malicious attack, the Federal Energy Regulatory Commission (FERC) has expressed its concerns.

John Wellinghoff, former chair of the FERC, noted: “We never anticipated that our critical infrastructure control systems would be facing advanced levels of malware.”

Enter blockchain tech. The decentralized nature of the technology creates a system which requires no approval from a single authority, and a ledger in which the blocks and transactions within the blocks created are viewable by anyone, while the content of the transactions remain private.

Sending and storing the vast amounts of information created by the IoT becomes seamless and secure. Because the information sent is unable to be changed or redirected, potential threats to the infrastructure are decreased drastically.

Though security risks are greatly reduced with new technology, it is not entirely free from potential attacks. Social engineering is already a huge piece of the hacking puzzle. Pretexting, phishing, and even tailgating have all been used to gain entry to some of the most secure places on the planet. While technology has the potential to create a safer world, it Is still up to the people in vulnerable positions to remain vigilant.

By Michael Kern via Crypto Insider

Editor at, Writer at

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Published at Fri, 08 Dec 2017 15:45:15 +0000

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Schedule for Week of Dec 10, 2017

Schedule for Week of Dec 10, 2017

by Bill McBride on 12/09/2017 08:09:00 AM

The key economic reports this week are November retail sales and the Consumer Price Index (CPI).

For manufacturing, November industrial production, and the December New York Fed manufacturing survey will be released this week.

The FOMC meets this week and is expected to announce a 25bps increase in the Fed Funds rate.

—– Monday, Dec 11th —–

Job Openings and Labor Turnover Survey10:00 AM ET: Job Openings and Labor Turnover Survey for October from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased slightly in September to 6.093 million from 6.090 in August.

The number of job openings (yellow) were up 7.5% year-over-year, and Quits were up 3.5% year-over-year.

—– Tuesday, Dec 12th —–

6:00 AM ET: NFIB Small Business Optimism Index for November.

8:30 AM: The Producer Price Index for November from the BLS. The consensus is a 0.3% increase in PPI, and a 0.2% increase in core PPI.

—– Wednesday, Dec 13th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: The Consumer Price Index for November from the BLS. The consensus is for a 0.4% increase in CPI, and a 0.2% increase in core CPI.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to increase the Fed Funds rate 25 bps at this meeting.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants’ projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Janet Yellen holds a press briefing following the FOMC announcement.

—– Thursday, Dec 14th —–

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 239 thousand initial claims, up from 236 thousand the previous week.

Retail Sales8:30 AM ET: Retail sales for November be released.  The consensus is for a 0.3% increase in retail sales.

This graph shows retail sales since 1992 through October 2017.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for October.  The consensus is for a 0.1% decrease in inventories.

—– Friday, Dec 15th —–

8:30 AM: The New York Fed Empire State manufacturing survey for December. The consensus is for a reading of 18.0, down from 19.4.

Industrial Production9:15 AM: The Fed will release Industrial Production and Capacity Utilization for November.

This graph shows industrial production since 1967.

The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 77.2%.

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Premarket: 6 things to know before the bell


Premarket: 6 things to know before the bell


premarket friday
Click image for more in-depth data.

1. Brexit breakthrough: Britain and the European Union reached a Brexit milestone on Friday, breaking a deadlock that allows talks to move onto a crucial second phase.

Negotiations will now turn to trade and the terms of a transition that would allow businesses in the U.K. to adapt to life outside the bloc.

The pound posted a mild reaction to the deal, gaining 0.2% against the dollar.

Investor enthusiasm may be limited because trade talks promise to be difficult.

“Let’s remember that the most difficult challenge still ahead,” said European Council President Donald Tusk. “Breaking up is hard. But breaking up and building a new relationship is much harder.”

2. Jobs report: The U.S. Bureau of Labor Statistics will release November’s jobs report at 8:30 a.m. ET.

The economy has added roughly 1.7 million jobs so far in 2017. In October, 261,000 jobs were created — making it the best month for job growth since President Trump took office.

But wages continue to disappoint. Last month, they grew by just 2.4% compared to the same period last year, even lower than September’s growth rate.

3. Shutdown averted, for now: The dollar edged higher against other major currencies after lawmakers voted for a short-term spending bill that will keep the federal government running for another two weeks.

The major obstacle is what comes after December 22, when the government runs out of money once again.

All eyes will be on the White House, as Trump and top congressional leaders try to resolve policy differences so Congress can pass a long-term spending bill before Christmas.

4. Global overview: Stocks markets are closing out the week with a bang.

U.S. stock futures were higher. Major European and Asian markets were in positive territory.

U.S. crude oil futures gained 0.7% to trade just above $57 per barrel.

The one big loser of the day was bitcoin, which continued its wild ride. It plunged more than $2,500 after hitting new record on Thursday.

The Dow Jones industrial average and the S&P 500 both gained 0.3% on Thursday, while the Nasdaq added 0.5%.

5. Companies and economics: Shares in Japan Display shot up 9% in Tokyo on a report that Apple(AAPL) might start using LCD screens in future smartphones.

A preliminary reading of the University of Michigan’s Consumer Sentiment Index for December will be released at 10 a.m.

Chinese exports and imports data came out stronger than expected, pointing to healthy global trade.

“We expect exports to continue to perform well in the coming months on the back of strong global demand,” said Julian Evans-Pritchard, China Economist at Capital Economics.

6. Coming this week:

Friday — Jobs report

Published at Fri, 08 Dec 2017 10:08:08 +0000

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Is Tax “Reform” Good for the US Dollar?


Is Tax “Reform” Good for the US Dollar?

By: Mike Shedlock | Wed, Dec 6, 2017

Let’s investigate what happened after the last 3 major tax reforms. Another “reform” is on deck.

I picked up this idea from Holger Zschaepitz, @Schuldensuehner, who made the following Tweet, posting a chart from Bloomberg.

In the following chart, I add a key piece of legislation that someone inadvertently overlooked.

Tax Reform vs US Dollar 1986-Present

US Dollar Synopsis

  • Following the 1986 legislation, the dollar fell about 22% over the next six years.
  • Following the 2001 legislation and continuing with the 2003 legislation, the dollar fell about 37% over the next seven years.

What’s Next?

The Senate version of the bill is likely to add over $1 trillion to the deficit, while not even cutting taxes beyond 2027.

A bill that adds so much to the deficit is not US dollar supportive, to say the least.

However, one cannot view these things in isolation. How the dollar reacts also depends on events in the Eurozone, China, and Japan, as well as Fed interest rate policy.

Global Currency Debasement

Global currency debasement is underway.

Things may be even crazier elsewhere, so a decline in the dollar is not guaranteed.

A Driver for Gold

Sooner or later, competitive currency debasement will matter.

Gold is likely to be the primary beneficiary.

I wish I could tell you when this matters in a major way.

Gold vs. Faith in Central Banks

Amazing Non-Reform Act of 2017

I have a suggestion for the name of the pending legislation: The Amazing Non-Reform Tax Act of 2017.

By Mike Shedlock

Mike Shedlock

Mike Shedlock / Mish
Mish Talk

Mike Shedlock

Michael “Mish” Shedlock is a registered investment advisor
representative for SitkaPacific Capital Management. Visit 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 Wed, 06 Dec 2017 15:37:45 +0000

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Big Oil Set for 2018 Bull Market


Big Oil Set for 2018 Bull Market

By Alan Farley | December 1, 2017 — 8:50 AM EST

Dow components Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX) have underperformed throughout 2017 but could lift into market leadership in 2018, underpinned by a resilient crude oil market and strong U.S. economy, supercharged by tax cuts and deregulation. However, buying these stocks too early could be hazardous to your bottom line because end-of-year tax selling may inhibit buying power until the calendar flips in January.

The WTI crude oil contract has lifted to a two-year high and could soon test resistance in the lower $60s. Meanwhile, OPEC and Russia have just agreed to extend oil output curbs through the end of 2018, allowing U.S. energy companies to benefit from higher commodity prices as well as ramped-up production levels because our government has not agreed to similar cuts. Taken together, energy stocks at all capitalization levels could finally enter bull market advances. (See also: A Guide to Investing in Oil Markets.)

Exxon Mobil shares broke out above the 2008 high at $95.64 in December 2013 and hit an all-time high at $104.76 in July 2014. A steep downturn accelerated in the second quarter of 2015, finally coming to rest at a five-year low in the mid-$60s in August. The subsequent recovery posted two broad rally impulses, lifting the stock into the closely-aligned 786 Fibonacci sell-off retracement and failed breakout levels in July 2016.

A shallow but persistent correction off that resistance level finally ended in the mid-$70s in August, giving way to a bounce that mounted the 200-day exponential moving average (EMA) in October. The stock has been crisscrossing the moving average for the past two months, trying to build support, while price action since February 2017 has carved a potential inverse head and shoulders pattern. This potent combination predicts that a breakout above the neckline at $84 will generate a test at long-term resistance in the mid-$90s.

On-balance volume (OBV) bottomed out in August 2015 and lifted into a 52-week high in July 2016. A sideways chop into the second half of 2017 signaled a delicate balance between bulls and bears, ahead of a strong buying impulse that reached a two-year high in October. This renewed buying interest could mark a tradable low ahead of superior 2018 performance. Even so, it is likely that positions taken in the mid-$80s following an inverse head and shoulders breakout will require a relatively long-term holding period to build sizable profits. (For more, see: Exxon, Chevron and Oil Are Breaking Out.)

Chevron stock has carved a stronger price pattern than its Dow rival, but significant technical challenges remain. It broke out above the 2008 high at $104.63 in 2011 and entered a rising wedge pattern that persisted into the July 2014 all-time high at $135.10. The subsequent downturn broke wedge support in October and failed the multi-year breakout in June 2015, triggering a decline that continued into August, when it bottomed out at a five-year low near $70.

A healthy uptick through 2016 unfolded through three rally waves that stalled near $120 in December. Loyal shareholders suffered through a persistent decline in the first half of 2017, with strong support at $102 finally taking hold in July. The stock rallied back to the 2016 high in October and dropped into a narrow trading range that may now complete the handle in a cup and handle pattern.

A breakout should bring the 2014 high into play, with that level marking the final barrier ahead of a bull market advance that could add many points in the coming years. Meanwhile, OBV has just lifted above the December 2016 recovery high and reached a three-year high, predicting that price will play catch-up in coming months. Even so, the stock has gained less than two points to far in 2017, increasing the odds that tax selling pressure will inhibit buying power into early 2018. (See also: The Top 3 Chevron Shareholders.)

The Bottom Line

Big oil price action has improved greatly in the second half of 2017, lifting major players into price levels that could support healthy 2018 upside. Chevron looks like a better bet than Exxon Mobil in this bullish scenario, set to test this decade’s bull market high after it mounts resistance at $119. (For additional reading, check out: Why Energy Stocks Are Suddenly Hot.)

Published at Fri, 01 Dec 2017 13:50:00 +0000

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