We discuss the fact that Donald Trump is too incompetent to realize that he has no business picking his own cabinet, you won the lottery, now outsource the job of picking a cabinet to Paul Ryan or someone in the Republican Party who understands basic qualifications for these important positions in the United States Government. Was Pee-wee Herman unavailable for Secretary of State?
We delve into the market internals and the P/E Ratios of most stocks when taken as a whole are in never before seen valuation levels. We are not talking about just the high growth flyers but industrial companies with stagnant or declining growth like Caterpillar, Coca-Cola and Exxon Mobil in areas facing longer term structural headwinds.
In short, the Federal Reserve should have stuck to their scheduled 3 rate hikes for 2016, and now they are way behind the Rate Hiking curve, and the stock market bubble is clearly screaming that the Fed has already lost control of "Running a Hot Economy".
The Fed is going to have to play catch up in 2017 and raise the Fed Funds Rate at least 4 times and maybe more to curb some of the excessive valuations in the stock market otherwise risk a higher likelihood of an outright Market Crash Scenario.
If we look back to the 2000 Market Crash, and the 2008 Market Crash and compare the current overall Stock Market valuations to these recent time periods, it is obvious that as the cheap money punchbowl is taken away, and interest rates are raised back to more normalized levels of 3 to 5%, which an aggressive infrastructure, deregulation and tax friendly regime initiative which the market is pricing in is implemented and corresponds to.
Then inevitably the stock market which has been juiced on the back of ZIRP financing is going to crash as the Fed plays catch up in hiking the Fed Funds Rate and borrowing costs normalize across the financial spectrum. Unfortunately for Donald Trump the Federal Reserve is going to leave his administration with holding the bag on the normalization of interest rates after 8 plus years of ZIRP back to more historical norms, and the resultant market crash will be laid at his feet as well.
We discuss the massive drop in ESPN subscribers this year, and how this relates to those massive NBA Television Broadcasting Deals that were based upon much higher subscriber bases going forward, and how this filters down into larger salary caps for NBA Franchises leading to $20 Million Dollar annual player contracts guaranteed for 5 years.
The math doesn`t add up for this vertically integrated supply chain. Somebody is going to be left holding the bag here and losing a bunch of money over the next decade. These player salaries seem out of whack with the changing dynamics of the skinny bundle, streaming media habits and shrinking subscriber bases.
Many of these television deals may have to be renegotiated on the fly by necessity as the media landscape is changing dramatically underneath the feat of the NBA, Network and Cable television, the Advertising Industry, and NBA Franchises half of which are already losing money under the current NBA structured finance model.
Donatas Motiejunas contract fiasco serves as another example of how in the NBA when it comes to money nobody has a clue what they are doing from a negotiations standpoint. The NBA is one of the poorest run and managed organizations in all of sports, and as we noted before it wouldn`t surprise us if the NBA is bankrupt in 5 to 10 years.
We discuss some of the structural issues aside from the valuation issues why we think this is a good place to short equities over the next week. I like the price and setup considerations for this short play in equities!
Ukraine's central bank paused in its easing cycle by leaving its benchmark discount unchanged at 14.0 percent, saying this was "prompted by the need to mitigate inflation risks to enable the NBU to meet the inflation targets for 2017-18."
But the National Bank of Ukraine (NBU), which has cut its rate by 800 basis points this year and 1,600 points since embarking on an easing cycle in August 2015, also said that if the risks to price stability abate, "the NBU will continue easing monetary policy next year as this move will help reduce borrowing costs and support economic growth."
Today's decision by the NBU follows its guidance in October that it was going to continue to ease its policy as long as inflation continued to decelerate.
Ukraine's inflation rate eased to 12.1 percent in November from 12.4 percent in October but was up from 7.9 percent in September and a 2016-low of 6.9 percent in June, a rise the central bank had expected due to an increase in administered prices and base effects.
While the NBU said inflation was bound to reach its target of 12 percent by the end of the year and the targets for 2017 and 2018 were "within reach," it cautioned that the risks of a continued decline in inflation had risen, prompting its decision to "adopt a cautious approach to easing."
The first risk stems from the government's decision to raise the minimum wage, which in itself will only have limited impact on inflation. However, higher household income will fuel consumption and this could add an additional 1 percentage point to headline inflation, the bank said.
"Accordingly, to buffer the effects from a rise in the minimum wage, NBU has decided to pursue a more restrained monetary policy," it said.
In addition, the central bank said there was further uncertainty due to "heightened political tensions" and a slower pace of the implantation of reform measures, which means there is a high probability of further delays to international financing payments.
The NBU targets inflation of 12 percent this year and then 8 percent, plus/minus 2 percentage points in 2017, and 6.0 percent, plus/minus 2 points, for 2018.
After plunging in 2014 and 2015, Ukraine's hryvnia has been more stable since April this year, trading at 25.6 to the U.S. dollar today, down 6.1 percent this year.
Ukraine's economy grew by an annual rate of 1.8 percent in the third quarter, up from 1.4 percent in the second quarter as it continues to pull out of the recession in 2014 and 2015.
In October the central bank lowered its forecast for growth in 2017 to 2.5 percent from 3.0 percent and the 2018 forecast to 3.5 percent from 4.0 percent. The 2016 forecast was left at 1.1 percent compared with a contraction of 9.9 percent in 2015.
As part of its third review of Ukraine's economic reform program, the International Monetary Fund (IMF) on Nov. 18 said the country needed more time to implement policies, including an adoption of its 2017 budget that is consistent with targets, along with policies to safeguard financial stability and tackle corruption.
The National Bank of Ukraine issued the following statement:
Serbia's central bank left its key policy rate at 4.0 percent, saying it expects inflation to enter its tolerance range early next year due to rising domestic demand, helped by its past rate cuts, and a gradual rise in global oil prices and inflation.
However, low food prices will continue to exert disinflationary pressures, said the Bank of Serbia (NBS), which has cut its rate by 50 basis points this year.
As in the past, the NBS also underlined that "persistent uncertainties in the international financial and commodity markets also mandate caution in monetary policy conduct."
Serbia's inflation rate rose to 1.5 percent in October from 0.6 percent in September, hitting the lower limit of its 2017 target range of 3.0 percent, plus/minus 1.5 percentage points.
Last month the central bank lowered the inflation mid-point target to 3.0 percent from 4.0 percent.
Serbia's economy grew by an annual rate of 2.6 percent in the third quarter, up from 1.9 percent in the secondquarter while the unemployment rate eased to 13.8 percent from 16.6 percent.
Last month the central bank's vice-governor, Veselin Pjescic, was quoted as saying the central bank had room to lower its key rate.
The National Bank of Serbia issued the following statement:
The European Central Bank (ECB) left its key interest rates steady but tapered and extended its asset purchases by another nine months "or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim."
The ECB's current asset purchase program of 80 billion euros was set to expire at the end of March 2017 and the ECB will now lower the monthly purchases of bonds to 60 billion euros but continue with these purchases until the end of December 2017.
But the ECB, which in March cut its benchmark refinancing rate to zero, added that if the economic outlook becomes unfavorable, "the Governing Council intends to increase the programme in terms of size and/or duration."
To tackle the issue of a paucity of bonds available for purchase, the ECB broadened the maturity range of public sector bonds that it will buy by lowering the remaining maturity to one year from two years, and will buy bonds that have a yield below the ECB's deposit rate of minus 0.40 percent.
ECB President Mario Draghi also confirmed the guidance that the central bank for 19 countries expects to keep its interest rates "at present or lower levels for an extended period of time, and well past the horizon of our net purchases."
In addition to a refi rate of 0.0 percent and the deposit rate of minus 0.40 percent, the ECB's rate on its marginal lending facility was maintained at 0.25 percent.
Draghi said the extension of the asset purchases was aimed at preserving the "very substantial degree of monetary accommodation" to ensure that inflation in the euro area reaches the ECB's target of below, but close to 2.0 percent.
"This calibration reflects the moderate but firming recovery of the euro area economy and still subdued underlying inflationary pressures," Draghi said, confirming that the ECB "will act by using all the instruments available within its mandate" to achieve its inflation objective.
Inflation in the euro area rose to 0.6 percent in November from 0.5 percent in October but Draghi said this was largely due to higher energy prices and there "are no signs yet of a convincing upward trend in underlying inflation."
Inflation is expected to pick up "significantly" at the turn of the year due to the comparison with last year and then rise further in the next two years, Draghi said.
In an update to its staff forecast, the ECB forecast annual inflation rate of 0.2 percent this year, rising to 1.3 percent in 2017, 1.5 percent in 2018 and 1.7 percent in 2019.
This compares with its previous forecast from September of 0.2 recent this year, 1.2 percent in 2017 and 1.6 percent in 2018.
Draghi said he expected the economic recovery in the euro area to "proceed at a moderate but firming pace," helped by improved corporate profitability, a recovery in investment, sustained gains in employment that is supporting private consumption, and a "somewhat stronger global recovery."
"However, economic growth in the euro area is expected to be dampened by a sluggish pace of implantation of structural reforms and remaining balance sheet adjustments in a number of sectors," he added.
Gross Domestic Product in the euro area grew by an annual rate of 1.7 percent in the third quarter of this year, the same rate as in the two previous quarters, and ECB largely maintained its outlook.
For this year GDP is seen rising by 1.7 percent, unchanged from September, while the forecast for 2017 was raised to 1.7 percent from 1.6 percent. For 2018 the ECB expects unchanged growth of 1.6 percent and the same rate for 2019.
"The risks surrounding the euro area growth outlook remain tilted to the downside," Draghi said.
The euro, which fell sharply from May 2014 to March 2015, has been relatively stable since then though it has dropped in the last month and fell further in response to the ECB's decision.
The euro was trading at 1.065 to the U.S. dollar today, down from 1.08 yesterday, little changed since the start of this year.
The European Central Bank issued the following statement:
"At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.
Regarding non-standard monetary policy measures, the Governing Council decided to continue its purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017. From April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If, in the meantime, the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP.