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Monthly Archives: February 2018

BlackRock Bullish: Tax Cuts To “Supercharge” Corporate Profits

In a diametrically opposed forecast to Morgan Stanley, BlackRock’s best and brightest have turned increasingly bullish on stocks, raising them to overweight due to changes in tax laws and corporate spending plans which will end up “supercharging U.S. earnings growth expectations.”

BlackRock chief equity strategist, Kate Moore, says that “the fundamental story is the best it’s been, which is surprising given how far we are into this cycle.” 

Investors are failing to appreciate the impact of the tax law changes and upcoming corporate spending changes, while earnings growth and dividends will fuel returns amid already-high valuations.

“We remain very constructive on equities in general,” said Moore. “The U.S. just got an injection of stimulus that no place else in the world did.” As such, BlackRock reduced their rating on European equities to neutral.

“We were encouraged by the strong top line numbers going into the fourth quarter, but now they’re supercharged by the tax cut and fiscal stimulus,” said Moore. Fourth quarter earnings growth for the S&P 500 topped 15%, and sales growth was the highest in six years. Meanwhile, sixty percent of S&P 500 companies provided guidance that exceeded expectations. 

“What happened to the U.S. on the back of tax cuts and fiscal stimulus is something we’ve never observed. All regions are showing improvements in positive earnings revisions but nothing like the U.S.”-Kate Moore, BlackRock

Moreover, given rosy projections issued during earnings season, Moore says analysts have been ratcheting up their earnings forecasts – with earnings growth possibly hitting 19%.
BlackRock monitors earnings revisions, which can be a key indicator for the market, and the percent of positive revisions is at a record pace. They are now running at a rate of two upgrades for every downgrade, or a ratio of 2. That ratio has averaged 0.8 based in the data which goes back to 1988, Moore said.

“What happened to the U.S. on the back of tax cuts and fiscal stimulus is something we’ve never observed,” added Moore. All regions are showing improvements in positive earnings revisions but nothing like the U.S. Europe also has solid earnings momentum but it lags the U.S., and higher revisions in Japan are “noisy.” –CNBC

This is a very different cycle, at a time when fundamentals are already solid,” said Moore. “We will have to be very vigilant and try to stay focused not just on what happens to earnings but as to what happens with inflation pressures, and the impact that could have on margins. The big risk is inflationary pressure eroding margins.”

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Goldman Warns: Federal Deficit Spending In “Uncharted Territory”, May Not End Well

The fortune tellers at Goldman Sachs have looked into their crystal balls following the Trump administration’s controversial budget and an ambitious new infrastructure plan, and concluded that things might not end so well for the U.S. economy.

The firm said on Sunday that federal deficit spending has pushed the economy toward “uncharted territory,” and that Trump and Congressional Republicans may not be able to count on the economic boost from their tax reform for much longer.

Goldman Sachs said in a note to clients that the federal deficit would reach 5.2 percent of U.S. growth by 2019, and would “continue climbing gradually from there.” –CNBC

The GOP has been counting on tax reforms delivering heavy economic stimulus – with corporate bonuses lining consumers’ pockets while investing in new areas of growth. Goldman, however, warns of diminishing returns after 2018. “The fiscal expansion should boost growth by around 0.7pp in 2018 and 0.6pp in 2019, but will likely come to an end after that” – a statement Goldman capped off with a laundry list of reasons why spending and debt would undermine the world’s largest economy.

Goldman also noted that “projected increases in mandatory spending – this includes Social Security, Medicare, Medicaid, and income support programs – are primarily responsible” for what they believe will be an unsustainable level of spending over the long term.

The Congressional Budget Office estimates that the U.S. debt/GDP ratio is currently at 77%. In three years, Goldman expects this to hit 85% of GDP if current imbalances are sustained. Last year the CBO estimated that debt/GDP might skyrocket to 150% by 2047 – and that was before the GOP reforms.

Goldman’s analysts wrote that the “growth effect comes from the change in the deficit, not the level, and further expansion would put the U.S. onto an even less sustainable long-term trend. Second, some of the recent deficit expansion relates to changes unlikely to be repeated, such as the temporarily large effect of certain tax provisions.

Goldman also sees the GOP losing its grip on Congress after this year’s midterm election, which will at least make it “more difficult to further expand the deficit.”

The Treasury recently projected a massive increase in red government ink, announcing it would need to borrow $1 trillion this year, and more in years to come. Goldman noted that said borrowing was being conducted at “record low rates,” but this wouldn’t be the case indefinitely.

The Treasury’s need for more debt is inauspicious, given the recent surge in U.S. yields and a Federal Reserve that’s expected to begin a campaign to hike borrowing costs and withdraw liquidity. –CNBC

“We expect rising interest rates and a rising debt level to lead to a meaningful increase in interest expense,” Goldman said. “On our current projections, federal interest expense will rise to 2.3 percent of GDP by 2021,” and could hit 3.5 percent by 2027.

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Meet 39-Year-Old “PepeCashMillionaire” Who Dicks Around On A Yacht All Day

For the past several months, 39-year-old crypto entrepreneur Marty M – known online as “PepeCashMillionaire,”  and MartyMcFly has been living on a yacht at the Bowden Island Marina off Vancouver be bought by selling “Rare Pepes” – digital assets integrated into the blockchain like Bitcoin.

Rare Pepes can be exchanged or sold for Pepe Cash, a cryptocurrency used by fans of Pepe the frog – a character made popular by 4chan and labeled a “hate symbol” by the Anti-Defamation League (ADL) during the 2016 election. At present there are around 1500 Rare Pepe cards, with a little over 600 listed in the Rare Pepe Directory.

Motherboard caught up with PepeCashMillionaire for an exclusive interview, republished below:

Motherboard: Hi PepeCashMillionnaire. You can introduce yourself ?

Marty M.: I think I’m 39, I do not count too much. I was born in Poland, I lived under communism for about ten years. I came to Canada with my parents when I was 10 years old. I was a geek when I was young, I went to a school for gifted. But I also liked to smoke weed. So, I did not finish my computer studies. After four years, I sent everything shit and took off for the sunniest place possible, California. I stayed there illegally for seven years and I came back to Canada in 2009, when the economy was planted. I finished my studies, I found a job in which I managed a small team of developers for seven years. And the second year, one of the guys in the group told me about Bitcoin.

That’s how it all started?

Yes. He was mining on his work computer. At the time, Bitcoin was worth six dollars. I thought it was cool and I put $ 10,000. I bought at the wrong time, sold at the wrong time, did absolutely anything and did not win anything for three years but stayed in the community. I had a good job, I could afford to be a player. When the price began to rise, I knew that the crypto delirium was not going to stop. I started doing sleepless nights to ride Ethereum miners , I ran 18 graphics cards in my apartment, I got to work exhausted. I fell asleep on my desk and my boss woke me up.

How long have you been doing this?

In August 2016, I resigned the hard way. My life was great but I felt it was the end of the world. All I had to do was go to work. I dropped everything for cryptos. I think I did not win a penny with Bitcoin for six months. Once I lost seven of them. A nightmare. And then, in 2017, the value of the Pepe I bought for nothing in 2016 was multiplied by 20. When I saw that, I threw myself into it. What I had lost in Bitcoin was offset by the rise of Pepe Cash in recent months. Market movements were crazy, a good manager could make 20% margins. That’s how I earned my money.

I am intrigued by your nickname. You are a millionaire in Pepe Cash or dollars?

 A bit of both. (Laughs.) I have cards worth $ 350,000, $ 400,000, $ 5 million. These are fun numbers, not for real. But last month, I sold less than one percent of my shares for half of my annual salary when I was in development. The problem is that there are not enough buyers to allow me to sell everything I have at this price. My plan is to minimize my daily expenses and stay involved in the community because one day, like every time, it will explode. And at that time, I will have to fight to sell everything I have at a high enough price.

Good. How much do you earn, day to day?

I must say that returns are sporadic. All in all, Bitcoin trading has not been very lucrative because of the vagaries of the market. Bitcoin trading, big deals, all of that make the big majority of people lose a lot of money. I made the majority of my money in August and December last with Rare Pepe. I think the next push will be for March. It’s an income, but not a stable income. You can earn thousands of dollars in three days and struggle to make a few hundred dollars in the following weeks. If you have a child, a wife and a credit, it can be difficult.

What does PepeCashMillionaire’s life look like?

 I go to bed about three or four in the morning. When I wake up, I check that the sun is still there. If this is the case, I make coffee, I eat blueberries, I cut myself a piece of cheesecake for breakfast. Then I consult the courses to avoid surprises. If there is no problem, I do what I want with my day. I welcome couch surfers, I prepare the boat, I will visit a micro-brewery with my father … A Tuesday at 14h. I feel obliged to maintain my wealth, to grow it, and at the same time I can disconnect. I have money safe.

How long do you hope to live like this? What is your objective ?

In five years, I would like to have a yacht on every continent. I want friends I met through the couch surfing who take care of these boats, so that I can fly to any place in the world and navigate with them as I see fit. In ten years time, I would like to be rich humanly. I want to grow our community. Of course, if I have enough to pay for boats all around the world, I am very happy. But above all I would like to have a community of hundreds of thousands of members who express their political dissensions without risk of being transferred or banned.

How does Pepe Cash relate to political dissension? You know that Pepe has a rather heavy liability in the sector.

 Many people say Pepe are racist and Nazi memes. My grandmother fought against the Nazis during the Warsaw uprising, she received shrapnel in her legs. My family has largely proven that it is not racist. I am not racist, I like blacks. That said, I do not need to be a socialist, a liberal, a zinzin of the redistribution of wealth. I saw the logical conclusion of all that.

Most Pepe cards are completely innocent but some are a little taboo. There is one called Killary Pepe (in reference to a conspiracy theory that says the Clinton couple had political opponents assassinated, ed) . You could send mail to have it removed from a magazine. But you can not remove it from the blockchain. That’s what interests me.

Thanks to the blockchain, we now have a permanent graffiti wall. People will be able to consult it to enter the ethos at the popular level, without intermediary to limit this expression. It’s exactly like hieroglyphs. In hundreds of years, people will analyze the Pepe, they will look for their political meaning, their meaning … There will be so much detailed research about them that it will become a new field of study, a kind of meme archeology. You will be able to trace the origin of social modes and constructions through memes.

I understand that the system Rare Pepe also had an interest for artists and art dealers?

Representatives of Sotheby’s came to the Rare Pepe auction held in Manhattan last month … Leonardo da Vinci’s Salvator Mundi was sold for $ 450 million. Now, imagine that an artist reproduces it perfectly. If you find yourself in the same room as the original and copy, good luck to differentiate them without tools.

 

With blockchain and verified transactions you can be the world’s greatest mathematician, artist or cryptography genius, you will never be able to duplicate a blockchain-based work. If you do digital art, of course, you can do a jpeg or a gif, but it will be stolen art. You will not be able to prove that you have the private key. The guy who bought the Homer Pepe for $ 38,500 at the Manhattan auction is his only real owner.

Why did you open the Museum of Modern Pepe ?

Last summer, one of our community members tried to book a site at Comic Con to present the Rare Pepe. I do not know if it’s because she’s transgender, but those fucking liberals at shit comics refused. We wondered what we could do to be present in spite of everything.

I thought that Andy Warhol’s canned soup was widely perceived as nil when it came out. They ended up in museums or sold for millions. That’s when I clicked. When I was in San Francisco, I went to the Museum of Modern Art and watched digital artworks. And I told myself that the Pepe were entitled to their own museum online, a Museum of Modern Pepe.

Two months after I launched the site, a virtual reality box, PrimeVR, contacted me accusing me of cybersquatting . It had been about two years since they were working on their own Museum of Modern Pepe in virtual reality. You can walk it, there are thousands of Rare Pepe on the walls, you can see the prices by clicking on it … The works are virtual, the museum is virtual. Only the price is real.

 

It’s cool, but what interest?

Everyone is connected to the Internet. Therefore, why would one need to go to a museum? Why go to an art auction? Why go anywhere, apart from the back of your boat with your laptop, and participate in virtual auctions to buy virtual artwork, which you will come back for more money later?

All this stuff going somewhere to make money in the Internet age seems to me insane. I want to move to have a social life, not to work. (Laughs.) I want the money to come to me to finance my life. It’s selfish, but why not?

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Did The Bigot Who “Painted” Obama’s Portrait Stick A Giant Sperm On His Forehead?

President Obama’s official portrait is, ah, quite something…

Upon closer inspection, the portrait which was “Painted” by bigoted homosexual black power advocate, Kehinde Wiley – who has a history of featuring sperm in his various works, it appears that President Obama’s forehead was the latest recipient of Wiley’s handiwork – as the former President bears what appears to be a giant sperm on his head.

For those who can’t quite make it out:

Indeed, proof of Wiley’s penchant for inserting sperm can be seen by nearly a decade of tweets referencing the lil’ swimmers:

In addition to all the sperm, Wiley apparently loves depicting violence against whites – and is on record saying the below “art” is “sort of a play on the “kill whitey” thing”:

Can you imagine if President Trump did the inverse?

To top it off, as the Gateway Pundits Lucian Wintrich notes – in addition to being bigoted, Wiley uses Chinese labor to Photoshop his paintings:

As Wintrich of TGP reports:

The fawning New York Magazine piece makes this clear after the writer attempts to snap a few pictures of the studio space. Wiley immediately grows uncomfortable and begins skirting around the truth:

There’s nothing new about artists using assistants—everyone from Michelangelo to Jeff Koons has employed teams of helpers, with varying degrees of irony and pride—but Wiley gets uncomfortable discussing the subject. “I’m sensitive to it,” he says. When I first arrived at his Beijing studio, the assistants had left, and he made me delete the iPhone snapshots I’d taken of the empty space. […] “I don’t want you to know every aspect of where my hand starts and ends” […]

Producing work in China cuts costs, but not as much as it used to, Wiley says. These days in Beijing he employs anywhere from four to ten workers, depending on the urgency, plus a studio manager, the American artist Ain Cocke. 

Perhaps Obama would like to simply fade away after this latest debacle…

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Chipotle Shares Spike After Hours As Taco Bell Chief Named As CEO

Shares of Chipotle ($CMG) jumped more than 12% after hours on heavy volume Tuesday after the company announced the addition of Taco Bell Chief Executive Brian Niccol as its new CEO.

Niccol will replace founder Steve Ellis, who announced last November that he would be stepping out of the CEO role to become executive chairman.

At Chipotle’s core is delicious food, which I will look to pair up with consistently great customer experiences,” Niccol said in Tuesday’s announcement. “I will also focus on dialing up Chipotle’s cultural relevance through innovation in menu and digital communications.”

Niccol had been with Taco Bell parent company Yum Brands ($YUM) for seven years, and was an executive with Pizza Hut, Inc. prior to that.

Chipotle’s changing of the guard comes as the company struggles to rebound from several e.coli scares, along with a hack of their Point-of-Sale (POS) system after the company refused to upgrade to new chip reading payment technology. The belagured burrito vendor’s stock has gone down over 39% in the last year, while the S&P 500 gained 14.1%.

Last July, a selloff which began after the May announcement of a system-wide hack accelerated after the company had to close a Sterling, VA location following multiple reports of customers falling ill.

Customers reported symptoms such as vomiting, diarrhea, severe stomach pain, dehydration, and nausea to the website iwaspoisoned.com, which first alerted Business Insider to the issues at the Sterling restaurant. One person reported two hospitalizations as a result of the illnesses.

In total, eight reports were made to the website, indicating that at least 13 customers fell sick after eating there from July 14-15. –Business Insider

The fast food chain which notably refuses to use ingredients containing Monsanto GMOs was also hit with a massive hacking attack last March after refusing to upgrade to chipped card readers, which Chipotle reported in May.

No chip readers? No security.

Last May, Chipotle announced that Hackers used malware to infiltrate Chipotle Mexigan Grill Inc’s ($CMG) payment system over a three week period beginning in late March – stealing sensitive customer banking information, including account numbers and internal verification codes that could be used to drain debit-card linked bank accounts.

The announcement was made following an investigation into an incident first reported on April 25th of “unauthorized activity” detected in some of their Canadian restaurants.

The malware searched for track data (which sometimes has cardholder name in addition to card number, expiration date, and internal verification code) read from the magnetic stripe of a payment card as it was being routed through the POS device.

Chipotle refused to upgrade to chip readers in 2015

The malware used in the attack steals data found within the magnetic stripe of payment cards. Although it is not clear if EMV (chipped) payment cards would have been susceptible to the hack, Chipotle notably declined to use them in 2015 – citing inefficiencies caused by delays in the authentication process in a fast paced food service environment.

The breach could mean big trouble for shares of Chipotle, which have only partially recovered from an E.coli outbreak in late 2015. According to Reuters, security analysts say Chipotle will likely face a fine based on the size of the breach and number of records compromised.

“If your data was stolen through a data breach that means you were somewhere out of compliance” with payment industry data security standards, Julie Conroy, research director at Aite Group, a research and advisory firm.

“In this case, the card companies will fine Chipotle and also hold them liable for any fraud that results directly from their breach,” said Avivah Litan, a vice president at Gartner Inc (IT.N) specializing in security and privacy.

Let’s see if Niccol can turn this sinking ship around and bring it into the 21st century – perhaps without having to resort to the use of GMOs. Then again, rumor has it Monsanto doesn’t like companies who don’t embrace the science.

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Ray Dalio: Everything Changed In The Last 10 Days

Two weeks after Bridgewater founder Ray Dalio mocked bears, telling the crowd at Davos that people holding cash will “feel pretty stupid,” the salty 68-year-old Billionaire has changed his tune.

Dalio then:

“We are in this Goldilocks period right now. Inflation isn’t a problem. Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws. If you’re holding cash, you’re going to feel pretty stupid.”

Dalio now: 

About 10 days ago, that’s where I thought we wereHowever, recent spurts in stimulations, growth, and wage numbers signaled that the cycle is a bit ahead of where I thought it was.”

Amazing what a technical correction can do to one’s long-term outlook in the near-term, no?

In a Monday LinkedIn post – since that’s where Ray Dalio spits game apparently, the Bridgewater founder explained “what’s happening within the context of the classic short-term debt/business cycle.”

Via ZeroHedge:

Dalio begins, as he usually does, by providing the following idealized snapshot of the business cycle:

In the “late-cycle” phase of the short-term debt/business cycle, when a) an economy’s demand is increasing at a rate that is faster than the capacity for it to produce is increasing and b) the capacity to produce is near its limits, prices of those items that are constrained (like workers and constrained capital goods) go up. At that time, profits also rise for those who own the capacities to produce those items that are in short supply. Then the acceleration of demand into capacity constraints and rise in prices and profits causes interest rates to rise and central banks to tighten monetary policy, which causes stock and other asset prices to fall because all assets are priced as the present value of their future cash flows and interest rates are the discount rate used to calculate present values. That is why it is not unusual to see strong economies accompanied by falling stock and other asset prices, which is curious to people who wonder why stocks go down when the economy is strong and don’t understand how this dynamic works. If the prices for stocks and other assets that do well when growth is strong continue to decline (which is typical), that and the credit market tightening leads demand to fall until demand is significantly less than the capacity to produce, which leads interest rates to fall and central banks to ease as their concerns about economic weakness supersede their concerns about inflation; that causes stock and other asset prices to rise. Such is the nature of the “short-term market and business cycle.” That is why it is classically best to buy stocks when the economy is very weak, there is a lot of excess capacity in the economy, and interest rates are falling (and to sell stocks when the reverse is the case).

Where are we now? While Dalio admits it is unclear “precisely where we are”, it is “clear that we are past the top in the bond market.”

We know that we are in the “late-cycle” part of the short-term debt/business cycle with the conditions I described at the beginning now existing, but we don’t know precisely where we are—i.e., we don’t know exactly how far we are from the top in the stock market and then the economy, though it is clear that we are past the top in the bond market. While squinting and doing calculations to try to figure that out, we know that we won’t get it precisely right, but we hope to get it as by-and-large right as we have in past times.

What are the key corporate considerations in a late cycle economy? For one, whether profits are rising faster than rates:

As for the calculations we are doing, classically, if the spurt in growth in profits (which is good for equities) is faster than the rise in interest rates (which is bad for asset prices) that will be marginally bullish, and if there is a lot of cash still on the sidelines (which there is) that causes one last spurt in equities prices, which is also bad for bonds (raising interest rates) and leads to Fed tightening, which makes the classic top. For the most part, that will be the most important determinant of the exact timing of the top in stocks.    

And here, a surprising mea culpa from the billionaire founder of the world’s biggest hedge fund:

About 10 days ago, that’s where I thought we wereHowever, recent spurts in stimulations, growth, and wage numbers signaled that the cycle is a bit ahead of where I thought it was.”

Dalio is of course referring to the February 2 payrolls report, and specifically the jump in hourly earnings, which rose the most since 2009. That was just the beginning as he explains next:

These reports understandably led to the reactions in bonds, which affected stocks as they did. Then on Friday, we heard the announced budget deal that will produce both more fiscal stimulation and more T-bond selling by the Treasury, which is more bearish for bonds. And soon ahead, we will hear about a big (and needed) infrastructure plan and the larger deficits and more Treasury bond selling that will be needed to fund them. In other words, there is a whole lot of hitting the gas into capacity constraints that will lead to nominal rate rises driven by the markets. The Fed’s reactions to them and the amount of real (inflation-adjusted) rate rises that will result will be very important, so we will be monitoring this closely.

The Fed’s reaction will also be to the market, which took one look at these rapidly changing events and suffered a historic move, entering a correction from all time highs in the short period on record.

But wait, there’s more: in this case a recession scheduled to hit some time in 2019/2020:

What we do know is that we are in the part of the cycle in which the central banks’ getting monetary policy right is difficult and that this time around the balancing act will be especially difficult (given all the stimulation into capacity constraints and given the long durations of assets and a number of other factors) so that the risks of a recession in the next 18-24 months are rising. While most market players are focusing on the strong 2018, we are focusing more on 2019 and 2020 (which is the next presidential election year). Frankly, it seems to be inappropriate oversight to not be talking about the chances of a recession and what that recession might look like prior to the next election.

Finally, here is what according to Dalio is different in this business cycle, and why he is especially nervous this time round. As the billionaire writes,”there are two important differences that concern him:

  1. there is such a big gap between the haves and the have-nots (which creates social and political sensitivities) and
  2. the powers of central banks to reverse contractions are more limited than they have ever been (because interest rates are so low and QE is less effective).

And due to the above, Dalio concludes, “I worry about what the next economic downturn will be like, though it is unlikely to come soon.

That said – Bridgewater just got done building out it’s largest short position ever – piling on $13 billion in European corporate short positions. And just this morning, Bloomberg noted that Bridgewater will be adding to the basket of shorts with a bet against Europe’s largest manufacturer – Siemens.

And there you have it, the world’s biggest hedge fund just turned a little more bearish – despite when Ray Dalio thinks the downturn is coming.

 

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Treasury Yields Jump After OMB Director Warns Of Larger Deficit, “Spike” In Interest Rates

President Trump’s Budget Director, Mick Mulvaney, appeared on Fox News Sunday – one day before the White House is expected to release 2019 spending proposals – where he warned that the U.S. will post a larger budget deficit this year, which could cause interest rates to “spike” (his words) as a result.

That said – the spike seems to have support, as the 10Y went from 2.60% to 2.90% since Friday’s payrolls (along with the inflationary assumptions from the jump in hourly wages).

This is not a fiscal stimulus; it’s not a sugar high,” Mulvaney said on of the president’s economic program, including the $1.5 trillion tax cut passed in late 2017. “If we can keep the economy humming and generate more money for you and me and for everybody else, then government takes in more money and that’s how we hope to be able to keep the debt under control,” Mulvaney said. –ZeroHedge

Watch:

In a second interview on Face the Nation, Trump’s tough talking bureaucrat said that rising budget deficits are “a very dangerous idea, but that’s the world we live in.”

Echoing this sentiment, President Trump shot off a Feb 9 tweet suggesting that were there only more GOP in congress, spending would be under control:

What may spook rates even higher will be Monday’s budget release from Mulvaney’s OMB – which will include concessions hammered out in the two-year budget deal that Trump signed into law on Friday morning, avoiding a government shutdown (Technically there was a shutdown for a little over 90 minutes). The deal will boost government spending by roughly $400 billion – funded directly with more debt.

Mulvaney said that as a fiscially-conservative congressman from South Caroline, he would “probably not” have voted for the bill.

The additional spending could increase the deficit to about $1.2 trillion in 2019, and there’s a risk that interest rates “will spike” as a result, Mulvaney said.”ZH

The Washington Post has perhaps the most dire outlook on the Trump budget – suggesting that tomorrow’s release won’t project a balance for ten years, abandoning the GOP’s long-held goal of eliminating a budget deficit, even over the next decade.

Let’s see if tomorrow brings higher yields and lower equity prices. As ZeroHedge notes, it’s already begun…

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Buckle Up: Top Invesco Strategist Says Market Whiplash Could Last “Weeks” – Then Get Worse

Invesco’s Chief Global Market strategist, Kristina Hooper, says the recent market turmoil may have weeks to go – after which “another jolt could be right behind it,” reports CNBC.

I would expect whiplash to continue,” said Hooper. “The negative animal spirits that are in the market today don’t look like they’re abating … We could see this kind of tumultuous environment continue for days and perhaps weeks.”

 

Hooper points to alarm bells going off over rising inflation which drove 10-year Treasury yields to 2.85%.

[It] really opened up a Pandora’s box of other concerns,” she said. “We’re looking through a very different prism at the same data, the same market events and extrapolating something far more negative.

Also of concern are potentially adverse consequences of the newly signed tax reform and government budget – which might require the Treasury to issue much more debt next year. “That’s I think what is really gripping the markets with concern right now,” said Hooper.

That said, Hooper still thinks stocks could end up 10 percent on the year, however getting there will be “lumpy and bumpy.”

IMF Welcomes the carnage

Following last week’s roller-coaster ride, Christine Lagarde – Managing Director of the International Monetary Fund, says that the market slide is a “welcome correction.”

“There has been quite a bit of market volatility from one day to the other, particularly led by the U.S.,” she said. “But if you compare market valuations from a week ago, there’s been a market correction of anywhere between 6 to 9 percent. Which frankly, given where asset prices were — very high — it’s in our view a welcome correction.”

The Dow and S&P 500 officially fell into correction territory on Thursday – falling over 10% from January highs. The recent volatility corresponded with a massive selloff in cryptocurrencies – which, according to Wells Fargo head of equity strategy, Christopher Harvey, are correlated.

Meanwhile, people who have been in cash for the last two weeks:

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Cryptocurrency Lender DavorCoin Defrauds Investors Out Of Millions

After promising big returns, Scottsdale, AZ-based cryptocurrency lender DavorCoin left investors with virtually zeroed out accounts – following a similar wipeout of BitConnect.

The scheme was simple; investors would lend the cryptocurrency operators real money, for which they would receive interest on their loans in the form of proprietary “DavorCoins” (DAV), which promised an interest rate as high as 48%. The site’s “Lending and profit calculator” suggested at the end of January that an investor lending $30,000 in davorcoin who agrees to lock funds up for 120 days may earn $513 per day, $3,591 per week, $15,390 per month, and $104,217 upon “capital release day” on August 23, 2018.

The company was also offering a “WELCOME TO THE ‘BE A MILLIONAIRE’ LENDING LOTTERY!!!” in a Medium.com post, adding “We will offer an amazing $1,000,000 to someone from the Davor community and many more prizes!”

Sounds legit, right?

Things were going swimmingly until cryptocurrency prices began to crash in January. After BitConnect was shut down for “illegally and fraudulently offering investments in a cryptocurrency lending program” subject to the Securities act, DavorCoin responded, saying “This does not change anything for us,” adding that DavorCoin is now “the number one lending platform in the world !!”

Shortly thereafter the price of DAV went from $177 to under a penny in less than three weeks – amid receiving a Cease and Desist from the state of Texas, alleging a variety of fraud offences in connection to DavorCoin’s offerings – as well as “misleading and deceptive statements.”

And then people had issues selling their DAV coins:

Investors on Facebook and Twitter bemoaned their losses. One investor who had loaned the company $4,000 said they were left with just $9. Another said that their $20,000 loan dissolved into $23.50 upon cashout.

On February 7, DavorCoin issued a statement ending their lending program, stating “There will be certainly winners and losers in this project, as in many high-risk investments. This is also true for the whole cryptocurrency market.”

According to a December survey, over 18% of respondents said they bought bitcoin on credit. Of those, 22% said that they had not paid off the debt despite virtual currencies reaching all time highs. And of those who hadn’t paid back the money borrowed to purchase crypto, 70% said they believed that owning Bitcoin is worth the interest expense.

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Whiplash: Dow Travels Over 22,000 Points In Five Days Of Insane Trading

Following its worst week in two years, CNBC reports that the Dow has moved a cumulative 22,000 points over the last five trading days, when you add up each day’s trading range.

Stocks have plunged in the last week as traders worried about rising interest rates and inflation, bringing an end to more than a year of historically low volatility. On Monday, the S&P 500 broke its longest ever streak without a 5 percent drop from a recent high, according to Ryan Detrick, senior market strategist at LPL Financial.

The Dow suffered its worst daily point drop on record Monday, and briefly fell nearly 1,600 points intraday. The index recovered about half of Monday’s losses in a volatile Tuesday session, but has closed lower in each of the two days since. –CNBC

On Friday the Dow closed up 330 points higher, after initially jumping 349 points in the morning, falling 500 points in the afternoon, and then recovering. Meanwhile, the Cboe Volatility Index jumped above 50 Tuesday for the first time since August 2015 – trading near 29 late Tuesday afternoon.

Insane!

 

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