The Morning Shills Discuss Hillary’s Fake News Presser and the DEATH OF THE DEMOCRATIC PARTY

Yesterday, Hillary Clinton crawled out from her crypt to decry the dangers of ‘fake news.’ She even went as far to say that fake news was killing people and that government needed to do something to protect ‘innocent lives.’

What in the actual fuck?

This is why democrats have lost over 900 legislative seats over the past 6 years and hold just 11 governorships. They’re fucking INSANE.

The Morning Shills discuss the scourge of fake news, segueing into the apocalyptic demise and death of the democratic party.

If the democrats want to make a comeback, they need to pull a Costanza and do the exact opposite of what Hillary Clinton suggested for the American people — including dropping the race bait issues, sycophantic support of the welfare state, and quit trying to control every aspect of American’s lives.

Over the past 3 years, the dollar is higher vs a basket of major currencies by 21%. According to Factset, about 50% of sales are earned abroad by companies in the S&P 500, compared to just 20% in the Russell. Back in 2015, when the dollar rose by 7% from January through March, the strong dollar wreaked havoc on American multinationals — dinging earnings by about 11%.

Lo and behold, the dollar index is higher by more than 6% since October and markets are celebrating as if the second coming of the dot com bubble had just been announced.

As of right now, the dollar is higher by 0.75% v the euro, +0.21% v the yuan, +1% v the yen and the dollar index is ripping higher by 0.6%. At some point, American multinationals will fess up to the fact that a bubbling higher dollar is scornful for their prospects. Earnings revisions will be made, taking into account the sudden jolt in fx markets and the SPY will reflect that reality.

Until then, however, it doesn’t appear Wall Street is in the least bit interested in disrupting their spiked egg nog induced euphoric feeling, as markets wistfully drift higher on the specter of hope.

In case you haven’t noticed, The Option Addict has crushed the market this year. On Monday, he will begin a 5 day Boot Camp with one goal in mind: to help you become a better trader.

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In light of what just transpired in the market, considering that Jeff was one of the few public figures to call it right all year, invest a little into your trade and attend the final online bootcamp of 2016.

Monte Paschi is halted and limit down in Italy after the ECB rejected their request for more time to raise capital, which is leading others to believe the Italian government will have to bail them out.

Italy’s third largest lender had requested an additional 3 weeks to wrap up a $5.3b capital raise. But the ECB told them to fuck off.

Italy can’t afford to let the bank fail, especially since the rest of their banking system is in shambles as well. Look for a bailout soon.

Other banks in Italy are trading down hard in sympathy.

Banco Popolare -4.3%

Monte Paschi -7.2%

Mediobanca -4.1%

Unicredit -5.8%

The FTSE MIB is lower by 1.2%, which isn’t too bad considering their entire banking system is one bailout closer to complete collapse.

Last night I was accused of publishing fake news, after sourcing Bloomberg saying Macau had implemented a 50% cut in UnionPay card limits. I wasn’t alone, being that billions in market cap were shed from $WYNN, $MPEL and $LVS.

Lo and behold, the internet proved to be right. No idea who that random Chinese guy on Twitter was, but he was right. I think.

According to a Chinese website, Macau authorities are denying the limit changes, saying lads can still take $1,450 out — but limited to just $626 per transaction. That’s probably where the confusion started, with people jumping to conclusions, not knowing the details.

My position on China’s looming FX problems are unchanged. However, this news should be enough to provide a bounce in battered casino shares.

Over the past year, China has shed about a trillion from their FX reserves. Part of the loss is due to a slowing economy and weakening global backdrop. But the majority of the losses stems from trying to defend their currency against a precipitous drop — thanks to what many call a ‘capital flight.’

In other words, people are trying to get their money out of China and the government is doing their best to prevent it.

The evidence is laid bare in the FX reserves data — coupled with the fact that CNY is dropping on a daily basis — currently at financial crisis lows.

USDCNY

Earlier today, the Macau authorities announced yet another crackdown on the casinos there — lowering the amount of money gamblers can withdraw from ‘UnionPay’ cards to just $626 per day — or half the previous amount. It is widely believed that people were smuggling money out of China using this method.

As a result, casino stocks cratered lower — as the Chinese government, again, exhibited wanton disregard for any casino operators on the island. This has truly been a hell pit for companies like WYNN and MPEL. Nevertheless, they’re stuck there with multi-billion dollar investments.

“Assuming it’s true, we cautiously view the news as arguably ‘sending a message’ to safeguard against potential capital outflow abuses, amidst the continued decline in China’s foreign exchange reserves,” DS Kim, an analyst at JPMorgan Chase & Co. in Hong Kong, wrote in a note. “We note that this would be the first capital control measure that directly targets Macau, hence may be viewed as a meaningful signal.”

“Nearly 50 percent of Chinese customers in Macau use UnionPay ATM withdrawals as one source of cash for gaming,” Umansky wrote, citing the brokerage’s survey. Other methods include bringing cash into Macau, withdrawing cash from Hong Kong and Macau bank accounts, and through pawnshops, he wrote.

Keep your eyes on HIBOR rates for possible disruptions in the matrix.

1yr HIBOR is now at their highest levels since February of 2016.

I wouldn’t say Tuck lost this debate. However, I will admit that he lost his cool, after the congressman accused him of ‘carrying water for Putin’, saying that Tuck should move his show over to RT.

The whole gist of Rep. Adam Schiff’s argument was that Putin ordered the hacking of the DNC and Podesta’s emails, which swayed the election towards Trump. Tucker argued that neither he nor our intelligence services had actual proof that the Russians did it and it was all speculation — that the onus of the blame should be on Obama’s weak cyber-security infrastructure.

Things went downhill fast after Schiff painted Tucker red.

There isn’t anything wrong with a little paranoia — especially when someone is actually out to get you. For the past year, we’ve heard nothing but horrible things about Trump, how he was ‘literally Hitler’, an orange pussy grabbing megalomaniac who’d usher in a black age of nuclear fallout and wanton dictatorship. Assholes like Mark Cuban warned of imminent market crashes upon the miracle of him getting elected.

Guess what? Trump won and markets have risen to record highs. The dollar index is at 14 yr highs, and sovereign yields have soared — effectively raising the borrowing costs for an American economy bedraggled by $20t in government debt.

The whole premise of Trump’s candidacy was to expand the middle class by creating shovel ready jobs and punching U.S. multi-nationals in the face until they reopened their factories here.

Pardon me if I view this entire rally with some skepticism, but I was paying attention to the rhetoric coming out of Wall Street and the globalist elite regarding Trump for the past year. They do not like him, and vice versa.

Understand something, this ‘Trump Rally’ that is being celebrated will go down in the history books as Obama’s. After all, the stats will register under his term and future generations will revere him for being the single best President the stock market ever had. His advantage was that Bush fucking destroyed the damned thing into 10,000 pieces before he got it, so all he had to do was golf all day, order some drone strikes, and watch his bailouts reflate America back to its former glory.

The market is being jacked up to bubble levels before Trump gets in, making it harder for him to finance fiscal stimulus — because yields are blowing out. Am I the only one in the world seeing this? What in the fuck is going on?

There’s also a 100% chance that the strong dollar will wreak havoc on American exporters. Remember that shit, fucked face? Strong dollars aren’t good for exporters, economics 101. By my vantage point, there’s a better than average chance the rug will be pulled after his inauguration — effectively tying his hands and keeping him busy trying to plug holes — placing his anti-globalist plans on hold, indefinitely.

Now is that an irrational forecast?

If what I am saying comes to pass, then you’re now having a final cocktail on the SS Titanic — peering over the side of the vessel — enjoying the wonders of the view and all of its possibilities.

It truly is astonishing that Trump got elected on the platform of ‘this economy blows, I’ll make America great again’, while, simultaneously, US household wealth drifted, effervescently, to new record highs of $90 trillion.

Markets have gained more than $1 trillion in market cap since the election and nothing seems to be able to stop the Santa Claus Rally.

Under a globalist system of cheap labor, high production capacity, and targeted marketing, Government obligations rose by 8%, household debt by 4% — whilst household net worth rose by 1.8% in the third quarter.

Imagine a country where 75% of its citizenry have less than $1k in their bank accounts, up to their eyeballs in debt to buy the new baubles promoted by Madison Avenue. The upper crust elite, hard working and industrious, keep expanding their many millions of dollars of personal wealth, both enjoying business growth and stock market gains.

That’s America today. Good luck trying to fix that situation, Mr. Trump.

Net worth for households and non-profit groups rose by $1.59
trillion, or 1.8 percent, to a record $90.2 trillion in July through September from the previous three months, according to Fed’s financial accounts report, previously known as flow of funds survey

Value of financial assets, including stocks and pension fund holdings, rose $1.16 trillion

Household real-estate assets climbed by $499 billion; owner’s equity as a share of total real-estate holdings increased to 57.3 percent from 56.8 percent

The Details

Household debt increased at a 4 percent annual rate last quarter after a 4.3 percent pace in the second quarter

Mortgage borrowing advanced at a 2.9 percent pace; other forms of consumer credit, including auto and student loans, climbed at a 7.5 percent rate, which was the most since 2Q 2015

Total non-financial debt grew at a 5.8 percent annual pace after 4.3 percent in the previous three-month period

Federal government obligations expanded 8.2 percent, state and local government debt advanced at a 0.8 percent pace, while business borrowing increased 6 percent

Predictions are always fun. Nomura has a top 10 list of ‘gray swan’ events that can roil markets in 2017.

Not to take away from their thunder, here are a few of my own.

Rates keep soaring, disabling Trump from any significant fiscal stimulus.
Yellen resigns.
Someone attempts to assasinate Trump.
December rate hike causes FX fuckery in Asia; panic ensues.
China devalues yuan.
We go to war with Iran.
Oil plunges; petrol credit crisis resumes.
Spiking mortgage rates causes another housing collapse.
Dollar strength fucks our exporters.
Trump starts trade wars with Mexico and China.
Italy and France move to leave EU.
The new AG prosecutes Hillary Clinton.

Source: Bloomberg

1. Russia on the warpath
A staple of gray swan lists since Vladimir Putin’s annexation of Crimea two years ago, Russian military aggression in eastern Europe remains one of the big risks for 2017. While an actual military invasion is unlikely, the foundations may be laid next year through anything from changes to U.S. foreign policy to the election of populist leaders in Europe, according to Nomura. Position for risk by going long credit-default swaps of any of the Baltic nations, shorting credit and trading Poland as a negative proxy.

2. A surge in U.S. productivity
As Fed officials make the case that the president-elect’s fiscal stimulus should be targeted at increasing productivity, Nomura says a pick-up in research and development investment could already be laying the groundwork. Like the tech boom of the 1990s it would catch forecasters unaware, but could have implications ranging from a faster series of rate hikes to a sustained boost to equities if it materializes.

3. China floats the yuan
As recent outflows suggest, a balance-of-payments shock could follow hasty moves to liberalize the currency regime of the world’s second-largest economy. The probability China gets to that goal in the next 12 months is “very low,” Nomura analysts assert, but prepare for yuan weakness if it happens.

4. An exit from Brexit
U.K. Prime Minister Theresa May said she’ll trigger the process of leaving by March of next year, and her favored “Brexit means Brexit” catchphrase makes it sound like she means it. But there are two big upsets that could appease the 48 percent: the case being heard by the U.K.’s Supreme Court might trigger a general election, were it to galvanize pro-EU sections of parliament, while — in an attempt to assuage further break-up — the EU could also grant the country face-saving concessions.

5. Capital controls in emerging markets
Emerging markets may face “pronounced outflows” in 2017 if Trump’s planned stimulus spending sends U.S. yields higher and further strengthens the dollar. That could prompt policy makers to take action, and they might even coordinate in a collective rebellion against the U.S. Countries most at risk are those with volatile currencies, low currency reserves and relatively low rates.

6. Japanese inflation jumps
What if the market is wrong to price in a moderate pick-up in Japanese inflation next year? A sharp rise — potentially triggered by the collision of higher oil prices and a weaker yen — could prompt the Bank of Japan to take action by lifting its 10-year yield target of zero percent. Such a shift could have a global impact because both inflation and global core bond yields are highly correlated.

7. A clearing house crisis
The systemic risks that stem from the clearing houses that were themselves introduced to contain systemic risks aren’t new to regulators: financial stability watchdogs are already taking measures to deal with any potential fallouts. “The interplay between struggling banks, collateral squeezes, sharp market moves in an overpriced market with central counterparties at the center” could potentially lead to a crisis, in Nomura’s worst-case scenario.

8. Trump takes fight to the Fed
The Fed chair has indicated that she’ll stay her term. Yet Janet Yellen was on the receiving end of some harsh invective during the future president’s campaign, and Nomura considers a change to the bank’s mandate to be among 2017’s outlying risks. More likely is that Trump could name sympathetic board members when present appointments expire. Higher policy rates could ensue.

9. Abenomics comes unstuck
The most likely outcome of a general election in Japan is that Prime Minister Abe’s support will be solidified. That means that anything fracturing this stability will come as a big shock to the market. A weakening of Abe’s hold on power could cause Abenomics trades to be unwound, with Japenese equities bearing the brunt of the pullback.

10. The end of cash
It seems inevitable that electronic payments will replace notes and coins at some point, but Nomura picks up on one reason why it might happen sooner rather than later: negative yields. Electronic money would prevent potential savers stashing money under their mattresses to avoid sub-zero interest rates. The risk to this scenario is of course that savers get hurt and consumers start inventing new hard currencies.

Feel free to drop a few of your own in the comments.