BACKDOC: ALL THE QE DID WAS CREATE MORE DEFLATION BY CONTRACTING THE MONEY SUPPLY INTO THE BOND MARKET. THE CASH AND LIQUIDITY WILL BECOME A PROBLEM AS TIME CONTINUES. WHILE THE FED CONTINUES TO TALK ABOUT A 2% INFLATION TARGET THEY CONTINUE TO SHRINK THE MONEY SUPPLY IN THE PUBLIC ARENA.
WE KNOW THAT THIS IS NEEDED TO TRANSITION INTO A LESSER ROLE AS A RESERVE CURRENCY! THAT ROLE WILL LIKELY BE SHARED BY OTHER CURRENCIES IN THE SDR! I'M ANXIOUS TO SHARE MORE OF MY THOUGHTS ON THIS SOON! I NEED MORE TIME TO WRITE ABOUT THIS! I WILL TELL YOU THIS, ALL OF THE CURRENCIES OF THE SDR CURRENCIES WILL LIKELY BE SUPPORTED BY THE UNIVERSAL CURRENCY, BLACK GOLD! DOC IMO
Thunderhawk: Backdoc Alert
Corporate profit ride turning into a train wreck
If the stock market rally is going to continue the next couple of months, it will have to do so against an aggressively worsening profit backdrop.
The corporate earnings picture is ugly and getting uglier in a hurry, with S&P 500 companies expected to post an 8.3 percent decline in first-quarter profits from the same period a year ago. While history suggests that earnings season always ends up looking better at the end than it did at the beginning, if the current trend holds up it will be the worst period since the third quarter of 2009, according to FactSet.
At a time when the stock market has just recently erased its losses for the year and bounced out of correction mode, the worsening earnings picture presents a formidable headwind. After all, analysts at the beginning of 2016 actually had been projecting a modest 0.3 percent earnings increase.
That outlook has changed rapidly, triggering concern that the recent market uptick, featuring a gain in the S&P of nearly 7 percent over the past month, could fade amid renewed concerns over corporate America.
"One thing that probably slows us down in this move is certainly the realization that we don't have robust earnings growth," said Art Hogan, chief market strategist at Wunderlich Securities. "At some point we will come to an inflection point where that starts growing again. But that's not happening in this quarter."
Unlike previous quarters where the damage was confined largely to energy and, to a lesser extent, materials, the profit declines are widespread.
Just three of the S&P 500's 10 sectors are projected to show growth for the quarter, with telecommunications expected to climb 13.5 percent as the biggest gainer and discretionary next at 10.3 percent, according to FactSet. However, telecom is the smallest S&P 500 sector by market cap, making up just 2.8 percent of the index. Energy is tracking as the worst sector, with a 97 percent decline expected. The category comprises about 7 percent of the index, according to S&P Capital IQ.
ValuesS&P 500 Earnings Growth: Q1 2016Source: FactSetToday12/31Telecom ServicesConsumer Disc.Health CareUtilitiesConsumer StaplesFinancialsInfo. TechnologyS&P 500IndustrialsMaterialsEnergy-100-500-15050Highcharts.com
ValuesS&P 500 Revenue Growth: Q1 2016Source: FactSetToday12/31Telecom ServicesHealth CareConsumer Disc.FinancialsConsumer StaplesS&P
The dimming profit picture likely will cause investors to re-evaluate positions at least in the near term, Hogan said. He sees the current rally based on investors recalibrating positions that were based a recession that didn't happen. Once those positions are covered, the rally could run out of steam.
"There is a credible possibility that we'll need to consolidate gains for a period of time," he said. "We can end the year higher than we are now, but i don't think we move considerably higher in the near term."
To be sure, investors are familiar with a climate of low corporate profits, a condition that has weighed on stock market prices for more than a year. In addition to this shaping up as the worst quarter since the financial crisis, it also will mark the fourth consecutive quarter of decline, something that FactSet said hasn't happened since the fourth quarter of 2008 through the third quarter of 2009.
Consequently, investors may well have the worst of the earnings news already priced into the market, said J.J. Kinahan, chief strategist at TD Ameritrade.
"Expectations are low. There's a participation trophy expectation thing going on," Kinahan said. "For most companies, all they have to do is beat that or a little better and it could be an OK earnings season."
Financials, technology and housing stocks will be the key, he added. Bank names are in an adjustment period now that the Fed appears to be on more of a dovish course on interest rates, while housing will provide a barometer for the consumer, he said.
Tech, and in particular information technology spending, will provide a glimpse at corporate attitudes about investment, he added.
"What may be more important are the forward-looking statements," Kinahan said. "Tech is almost like infrastructure. If they're not out spending money on tech, then we do have an issue that companies don't have confidence."
BACKDOC: INFLATION WILL BEGIN TO RISE AS THE YEAR ROLLS ALONG. I THINK THE REASON WILL BE BECAUSE THE DOLLAR WILL BECOME LESS IN DEMAND AND ITS CURRENCY VELOCITY WILL SLOW!
THIS WILL PUT A HURT ON THE DOLLARS PURCHASING POWER AS WE HEAD FOR A VERY TUMULTUOUS ROAD AHEAD!
ITS NO WONDER WHY THE BIG MULTINATIONAL CORPORATIONS ARE BUYING THEIR STOCK BACK RIGHT NOW TO REDUCE DEBT WHILE THE DOLLAR HAS VERY STRONG PURCHASING POWER!
SOON THAT WILL BEGIN TO CHANGE. THIS IS GOING TO SNEAK UP ON PEOPLE AND BITE THEM RIGHT IN THE FANNY PERPENDICULAR! HEE HEE IMO DOC
Thunderhawk: Backdoc Alert
Goldman: Global Coordinated Easing Won't Last, and the Fed Will Need to Hike Rates Four Times in 2016
Most of the world needs accommodative monetary policy. The U.S. increasingly doesn't.
That's a problem for central banks looking to maintain financial stability during a time in which disinflationary forces prevail in most parts of the globe, and it's a particular pain for the Federal Reserve, whose recent decision to stand pat on interest rates, combined with dovish rhetoric and a subdued outlook, placed it firmly back in positionas the central bank for the world.
"One interpretation of the recent moves by the European Central Bank and the Federal Reserve is that they represent coordinated attempt to ease global financial conditions while avoiding upward pressure on the U.S. dollar, especially against the Chinese renminbi," write Chief Economist Jan Hatzius and Economist Sven Jari Stehn of Goldman Sachs Group Inc, giving a nod to the so-called Plaza Accord 2.0 theory.
In its statement last week, the Fed noted the resilience of the U.S. economy in the face of financial market turmoil stemming from the devaluation of China's currency in August by highlighting that that activity had been expanding at a moderate pace despite these headwinds.
But inasmuch as these widening spreads and a lofty greenback were drags that hampered U.S. activity, they won't be around too much longer, according to Goldman's economists. That's because the spate of central bank dovishness in recent weeks has substantially eased financial conditions across developed markets, a positive development for growth should these conditions persist.
Central bank coordination can only go so far, however, if the Federal Reserve remains committed to achieving its dual mandate of full employment and price stability (which monetary policymakers define as core PCE inflation running at an annual rate of 2 percent). And while Janet Yellen, who chairs the Fed, might not be convinced that core inflation is trending sustainably higher, Goldman Sachs certainly is:
Put another way, if the blowout in spreads and strength of the dollar still haven't been enough to stop the U.S. unemployment rate from declining steadily—which implies that growth has been above the trend—that alone is enough evidence to suspect much more tightening is required to rein in activity to a level at which the economy won't be running too hot.
Goldman estimates that the Fed will need to carry out four rate hikes this year to strike this balancing act and avoid a more brisk removal of monetary accommodation later that could tip the economy into recession.
In other words, the strength of the domestic economy will soon force the Fed to return to being the central bank for the U.S., rather than for the world.
"If we are right, the Fed's willingness to keep policy easier for longer in the name of global policy coordination is likely to be short-lived and the funds rate will rise significantly further than currently discounted in the bond market," conclude Hatzius and Stehn.
BACKDOC: LIKE FRANK SAID WE MAY SEE PRICES JUMP AROUND BUT WHAT THESE GUYS DON'T GET YET IS THAT THE DOLLARS' INTERNATIONAL VALUE IS GOING TO SLIDE WHICH WILL DRIVE PRICES UPWARD!
Thunderhawk: Backdoc Alert
Forget $40—it's back to $25 oil: John Kilduff
The recent march of U.S. crude prices to $40 per barrel won't last, oil expert John Kilduff said Monday, predicting another $25 environment ahead.
West Texas Intermediate crude surged 2.44 percent last week, its fifth-consecutive weekly gain, as OPEC producers announced a meeting in Qatar to discuss an output freeze.
"I think it's going to be a buy-the-rumor, sell-the-news phenomenon to the extent they even do meet next month," said Kilduff, the founding partner of Again Capital, an alternative investment manager specializing energy and metals.
"It's certainly going to disappoint the market," he told CNBC's "Worldwide Exchange," reasoning that even with a freeze the persistent glut and lack of a production cutback sets up oil prices to fall back to their February lows.
Kilduff said the April meeting isn't likely to bear fruit. He based his contention on Saudi Oil Minister Ali Al-Naimi's announcement in February that Saudi Arabia would not cut production because it did not trust other countries to do the same.
Production in Iran, meanwhile, continues to surge after sanctions were lifted in January. "They won't cooperate in the freeze deal until they get to pre-sanction levels."
Regardless of a freeze deal, Kilduff underscored the importance of OPEC members and outside producers meeting to talk about it.
"Oil prices have rallied [nearly] 50 percent off their lows in eight weeks ... mostly on this freeze deal, which struck me as ridiculous almost," Kilduff said. "Just the fact that they're willing to cooperate to this mildest of degrees, you're seeing the bulls buy this market up."
A higher rig count announced on Friday, he said, doesn't necessarily have anything to do with the recent rally in prices.
"The rig count's at a low not seen since 2009, I'm not sure how many more rigs they can take out of service at this point," Kilduff said, adding that the oil market has priced in OPEC's upcoming meeting and the freeze deal.
Kilduff is also watching China's currency and markets. The forward currency market had priced in a yuan devaluation after the Chinese New Year, which didn't happen, he pointed out.
"That's what sparked this whole rally across the board," he said. "I think it also saved the bacon for U.S. oil prices and producers."
BACKDOC: I THINK THERE'S A GOOD CHANCE OF A RATE HIKE AROUND THE MID APRIL MEETING. WE MIGHT SEE SOMETHING ELSE AROUND THAT TIMING! LOL
THE RATE HIKES WILL COME AND CONTINUE IF ALL GOES AS PLANNED! DOC IMO
Thunderhawk: Backdoc Alert
Two Fed Officials Point to Possibility of April Rate Hike
Two Federal Reserve officials said interest-rate increases may be warranted as soon as the central bank’s meeting next month, citing solid readings on the U.S. economy despite headwinds from abroad.
“There is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April,” Federal Reserve Bank of Atlanta President Dennis Lockhart said Monday in Savannah, Georgia.
The Federal Open Market Committee next meets April 26-27. It held off from raising borrowing costs last week and halved projections for how many times it would hike rates this year from four times in December, citing the potential impact from weaker global growth on the U.S. economy.
Lockhart is a policy-centrist and doesn’t vote on the FOMC this year. His moderately upbeat assessment of the U.S. economy was shared by San Francisco Fed chief John Williams.
“All else equal, assuming everything else is basically the same and the data flow continues the way I hope and expect, then April or June would definitely be potential times to have an increase in interest rates,” he told Market News International in an interview published earlier on Monday. Williams, a former head of research for Fed Chair Janet Yellen when she ran the San Francisco Fed, also doesn’t vote on policy in 2016.
Investors have reduced bets that the central bank will lift rates next month to 8 percent, compared to 27 percent a week ago, and see a roughly 43 percent probability of a hike in June, according to pricing in interest rate futures.
“Although I believe further normalization of interest rates will likely be justified by economic performance this year, and possibly relatively soon, I felt a patient approach made sense at this meeting,” said Lockhart, citing uncertainty caused by financial market turmoil and concerns over Chinese growth.
“I am reasonably confident the first quarter will represent something of a bounceback from the fourth quarter of last year,” he said. “Consumer activity has picked up sufficiently since the fourth quarter to support the view that overall domestic demand, the lead driver of the economy, is expanding at a healthy enough pace.
Thunderhawk: Iran, Iraq confer on bilateral, anti-terror ties
Tehran, March 21, IRNA - Visiting Chairman of Iran's Strategic Council on Foreign Relations (SCFR) Kamal Kharrazi and Iraqi Prime Minister Haider Al-Abadi met in Baghdad on Monday exchanging views on major bilateral and regional issues.
Quoting a statement issued by the Iraqi Prime Minister's Office, local media reports said promotion of bilateral relations and coordination in anti-terrorism cooperation were discussed in the meeting.
They also discussed how Iraq can be supported in the fight against terrorism though concerted measures.
Kharrazi visited Damascus and met Syrian President Bashar Al-Asad before visiting Baghdad for negotiations with Iraqi officials.
BACKDOC: THE U.S. MAY BECOME A BIGGER PLAYER IN THE OIL MARKET THAN FOLKS THINK DUE THE VALUE OF THE DOLLAR DROPPING! DOC IMO
Thunderhawk: Backdoc Alert
The U.S. Is Exporting Its Oil Everywhere
Three months since the U.S. lifted a 40-year ban on oil exports, American crude is flowing to virtually every corner of the market and reshaping the world’s energy map.
Overseas sales, which started on Dec. 31 with a small cargo aboard the Theo T tanker, have been picking up speed. Oil companies including Exxon Mobil Corp and China Petroleum and Chemical Corp have joined independent traders such as Vitol Group and Trafigura Pte in exporting American crude.
The "growing volumes of exports" from the U.S. are now "spooking the markets," Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London, said in a note. The "flurry of export activity" is helping to support spot oil prices in the U.S. relative to contracts for later delivery, she wrote.
With American stockpiles at unprecedented levels, oil tankers laden with U.S. crude have docked in, or are heading to, countries including France, Germany, the Netherlands, Israel, China and Panama. Oil traders said other destinations are likely, just as supplies in Europe and the Mediterranean region are also increasing.