Trump’s Doomsday Gamble In China Trade War

Authored by Finian Cunningham via The Strategic Culture Foundation,

President Trump dramatically resumed a trade war footing this week with Beijing, threatening to impose tariffs on virtually all imported Chinese goods to the US.

After earlier nego…

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Visualizing The Population Pulse Of A Manhattan Workday

In cities around the world, the offices and storefronts of the downtown core fill up with people during the workday to keep the wheels of commerce turning.

But, as Visual Capitalist’s Nick Routley shows below, nowhere is this phenomenon as pronounced …

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Gold prices up B50 to B19,850

The Gold Traders Association this morning announced the buying prices at 19,389.64 baht per baht-weight for gold ornaments and 19,750.00 baht per baht-weight for gold bars.

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The World Transformed And No One In America Noticed

Authored by Martin Sieff via The Strategic Culture Foundation,

The world transformed and nobody in the West noticed.

India and Pakistan have joined the Shanghai Cooperation Organization. The 17 year-old body since its founding on June 15, 2001 has q…

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Visualizing The Global Export Economy In One Map

President Trump has loudly complained for quite some time about U.S. trade deficits with the world, most recently following the latest G7 summit in Canada. Trump’s rhetoric implies that other countries are enjoying massive surpluses at the expense of A…

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Above Ground review: Looks good – but what does it all mean?

Legs on the Wall had a great start more than 30 years ago as a physical theatre group exploring ideas they expressed in movement rather than words. Their success wasn’t only in their difference, but the depth of complexity they managed to reveal in see…

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FBM KLCI up 12.87 pts before paring gains

KUALA LUMPUR (June 25): The FBM KLCI opened 12.87 points or 0.8% higher before paring gains as investors evaluated the impact of global crude oil producers’ planned less-than-expected output rise and as Asian shares fell with US equity futures.
Langu…

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Dreamworld staff on stand at inquest

An engineer said he “couldn’t recall” ever testing the emergency stop button at the unload area of the Thunder River Rapids Ride, on which four people died.

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Aquawalk targets to list in two years

KUALA LUMPUR: The owner and operator of Aquaria KLCC in Kuala Lumpur, Aquawalk Sdn Bhd, is in the midst of expanding into Thailand ahead of an initial public offering (IPO) in 2020. The company, which is also in talks to expand into Vietnam and India, …

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And Just Like That… The Mueller Investigation Was Over

Authored by Kurt Nimmo via Another Day In The Empire blog,

The corporate media is reporting intrepid crusader Robert Mueller is preparing to do a Pontius Pilate on his special council investigation of Russia and the Trump campaign. 

According to WaPo…

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Treasury Department eyes accelerated construction

The Treasury Department looks set to amend a condition in its lease concession contracts to start charging rent from the date a contract is signed, aiming to compel concessionaires to speed up investment.

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Defending Our Own

Guest Post by The Zman For the longest time, the argument against the Progressive project, which in America means multiculturalism as a civic religion, is that the various tribes in the coalition of the ascendant would turn on one another. The laws used to punish white people for being competent society builders would be used … Continue reading “Defending Our Own”

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Antifa Calls NYU Prof “A Hero” For Doxxing ICE Employees

Authored by Grace Gottschling via Campus Reform,

Antifa members are praising a New York University faculty member for creating a database of more than 1,500 ICE employees, which multiple online platforms have since removed for violating “doxxing” poli…

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Mahathir revives Singapore water dispute, takes swipe at Trump

KUALA LUMPUR (June 25): Malaysian Prime Minister Mahathir Mohamad has revived the muscular foreign policy that characterized his first stint in power, seeking to renegotiate a longstanding water supply agreement with Singapore and taking shots at both …

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“Hispanics are natural conservatives” — The Dangerous Myth

Guest post by R. Houck via Occidental Observer The left has their evil platitudes — “diversity is our greatest strength” and “we are a nation of immigrants,” among others. Those in the so-called conservative movement have their own goofy and fictitious one-liners as well — “Israel is our greatest ally” and “Hispanics are natural conservatives.” … Continue reading ““Hispanics are natural conservatives” — The Dangerous Myth”

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Asian stocks set for mixed start; Lira climbs

SYDNEY (June 25): Asian stocks looked poised for a muted start as investors assessed a loosening of policy in China amid ongoing trade tensions. Turkey’s lira climbed after Recep Tayyip Erdogan claimed victory in the weekend’s election.
Language
Un…

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Uber battles to keep London licence in court appeal

LONDON (June 25): Uber goes to court on Monday to overturn a decision stripping it of its licence in London after being ruled unfit to run a taxi service in its most important European market.
Regulator Transport for London (TfL) shocked the Silicon Va…

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BofA’s “Charts Of Darkness”

With just 42 days trading days left until the S&P500 bull market becomes the longer of all time, Morgan Stanley’s chief cross-asset strategist, Andrew Sheets, writes that investors are now more sanguine about how much time they have until the next recession than at any point since 2010. “We’re 8 ½ years into an expansion, and many investors finally are finally confident that there is plenty of time left on the clock.” Sheets also notes that in client conversations, China is rarely mentioned as a growth concern (after causing angst for much of this period). All this is taking place against a backdrop in which key market elements are vastly different from a year ago (as we discussed earlier).

Morgan Stanley is not the only bank to urge clients to turn more skeptical, if not outright bearish.

As Bank of America Chief Investment Officer Michael Hartnett writes in his latest Thundering Word report titled suggestively enough “Charts of Darkness fo Apocalypse Dow”…

… “relative to consensus we remain bearish on financial assets” and notes the following:

we believe peak asset Prices in 2018 are consistent with peak investor Positioning, peak corporate Profit expectations, and peak Policy stimulus. We believe the peaking of the 3Ps is occurring in a late-cycle macro & market backdrop (in 42 trading days the S&P500 bull market becomes the longest of all time). We forecast low & volatile single digit gains for stocks, low single-digit losses for bonds, and relatively strong 2018 for cash, commodities and the US dollar.

And whereas Morgan Stanley’s Sheet laid out a qualitative explanation for his skepticism, Hartnett takes us through a visual landscape of his “charts of darkness”, which lay out the primary reasons for his bearishness, including:

  • Quantitative Tightening takes liquidity growth negative in 6-8 months,
  • trade war takes US tariffs to highest since mid-1970s,
  • lead EPS indicators continue to weaken,
  • EU doomed until German fiscal capitulation,
  • US yield curve inversion just 36bps away

These are the “five profit and policy reasons” he remains bearish.

Presenting, Bank of America’s Charts of Darkness

1. Quantitative Tightening: YTD G3 central bank asset purchases of $125bn well below $1.5tn run rate of 2017; we estimate liquidity growth turns negative in 6-8 months; Fed tightening always triggers an event (Chart 2).

2. Trade War: new US tariffs set to boost US protectionism to highest level since mid- 1970s; further action on China ($200bn), autos ($350bn), NAFTA ($690bn) would raise tariff revenue as % total imports to levels not seen since 1946 (Chart 3); our own view is 2018 “trade war” really just 1st stage of new arms race between US & China to reach national superiority in technology, and protectionism inevitably on rise to address inequality.

3. Peak Profits: 2018 global EPS forecast robust (15.5%) but 2019 slipping (9.4% down from 10.4% in April); lead indicators continue to weaken (e.g. soft June South Korea exports, Chart 4).

4. German fiscal stimulus: we believe ECB tightening is doomed to fail as has been case in Japan past 30 years (implying 8bp ECB policy rate in 2030 – Chart 5); until Italy, migration, trade wars force Germany to capitulate on fiscal austerity (note German current account surplus staggering 8% of GDP while sharing a border with Italy – youth unemployment rates >33% – Chart 6) a case cannot be made for European banks.

5. Yield Curve: flattest US Treasury yield curve since Sept’07, just 36bps from 1st inversion since 2007; curve inversions have preceded 7/7 prior recessions since 1970 by 4 to 5 quarters (Chart 7).

* * *

So with all that in mind, one would assume that the BofA CIO would recommend bearish traders. Yes… and no.

The reason for Hartnett’s ambivalence is that much of the potential downside appears to already be priced in, and as a result, investor positioning close to triggering contrarian “buy signals” for risk assets in coming months.

  • The BofAML Bull & Bear Indicator has dropped from 8.6 in January to 2.9, a two-year low, close to first buy signal since 2016 (Chart 8).
  • The BofAML Bull & Bear Indicator has given 15 “buy signals” since 2002 (link); the median return for MSCI ACWI is +6.1% in 3 months following

And, in light of the approaching “extreme bear” sentiment print, Hartnett reminds his readers that “as always the best asset to buy is “humiliation”, which occurs when extreme bearishness combines with a financial event and/or recession risk, e.g. Feb’16 when BofAML Bull & Bear Indicator @ 0.0 coincided with China hard landing, US recession fears, HY credit events as oil dropped below

We’ve argued for an SPX 2550 to 2850 range this year; a move to the bottom of this range could elicit a buy signal and nice trading rally for distressed markets (e.g. EU equities, EM debt).

Just like earlier in the year, ahead of the February VIXtermination and during the market blow-off top phase when he urged client to buy stocks if the S&P slides to 2,550, which turned out to be the precise market floor so far, Hartnett writes that a “big, exciting entry point at levels below 2550 first requires extreme bearishness to coincide with 2019 recession fears (weak US labor market data) and further credit contagion (global debt = 3.5X GDP or $240tn) causing Fed to pause hiking cycle in H2.”

He concludes: “we’re not there yet.”

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