09/18/18

Massive Social Security Fraud, 40 Million Americans

By: Denise Simon | Founders Code

Last week, the Immigration Reform Law Institute (IRLI) revealed massive identity fraud by illegal aliens in the United States, potentially affecting nearly 40 million Americans.

In April of this year, IRLI filed a Freedom of Information Act (FOIA) lawsuit against the Social Security Administration (SSA) seeking records related to the Obama-era decision to halt sending “no-match” letters to employers. According to the Justice Department’s website, a “no-match” letter is a “written notice issued by the SSA to an employer, usually in response to an employee wage report, advising that the name or Social Security number (SSN) reported by the employer for one or more employees does not “match” a name or SSN combination reflected in SSA’s records.” The long-held practice of sending the letters had been used to prevent fraud through the use of stolen SSN data by illegal aliens and other criminals.

Days after former President Obama implemented the Deferred Action for Childhood Arrivals (DACA) amnesty program, his administration announced the decision to stop sending “no-match” letters to employers. This decision led to a thriving SSN black market where illegal aliens are drawn to obtain an American’s information for employment. The SSN of children have proven to be especially valuable as they can be used undetected for years. However, when these children reach adulthood and begin to apply for college, car loans, credit cards, or other needs, many learn they have criminal records attached to their identities.

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09/18/18

NASDAQ Negatively Impacted By Trade

By: Kent Engelke | Capitol Securities

The NASDAQ and the S&P 500 were pulled lower by the marquee technology companies that would perhaps be most impacted by a change in trade policy. Industrial and energy stocks… aka value… supported the Dow.

Treasuries were essentially unchanged with the key 10-year bond holding nominally below the psychological 3.0% barrier yielding 2.995%. The negative real yield of the sum parts of the Treasury spectrum is now beginning to gain attention. [Note: a real yield is the interest rate minus the inflation rate].

Several times I have written about negative real yields stating historically such conditions are conducive to inflationary growth.

Will such an environment unfold or will an increase in productivity and the massive pool of available workers that do not exist in the data prevent an inflationary environment from developing?

Historically, whenever the supply side of the economy is stimulated, productivity increases as does the longevity and strength of the expansion as was in the case in the 1950’s, early 1980’s, and the late 1990’s.

What will happen today?

Last night the foreign markets were up. London was up 0.08%, Paris was up 0.17% and Frankfurt was up 0.14%. China was up 1.82%, Japan was up 1.41% and Hang Sang was up 0.56%.

The Dow should open nominally higher on “softer tariffs” than expected. The 10-year is off 2/32 to yield 2.9996%.

09/11/18

Tech Regulation, Tariffs, Net Neutrality And Indexing

By: Kent Engelke | Capitol Securities

In my view the end of net neutrality, tech regulation, and tariffs are interlinked. Technology/social media companies have become too powerful, a power that is negatively impacting society.

According to Facebook, 72% of Americans receive their news via Facebook. An issue at hand is that Facebook is not regarded as a publisher, therefore, is not liable for posted content. In my view, most posts are nothing other than rhetoric trying to incite one group against another. The content is partially delivered via Apple products, products that are manufactured in China.

And then there is net neutrality. Simplistically speaking, the large technology behemoths’ delivery channels have been subsidized by everyday Internet users. Crudely speaking, it is believed if AMZN, NFLX, etc. had to pay the appropriate tolls for their usage, cash flow for these behemoths would decline.

What does the above have to do with the markets? Everything. It appears every trade other than indexing has broken down. The much heralded AI/algorithmic trade has failed, evidenced by the ending of a hedge fund that was able to squeeze 1800 trading days into a few minutes utilizing “legions of computers.”

Bloomberg writes that almost the entire 2018 S&P 500 gain is concentrated in Amazon, Google, and Apple. Last month only 13% of large-cap core funds beat the S&P 500, the worst showing since Bank of America began compiling this data in 2009.

The technology/social media companies are under attack by powers that are greater than their sum total. Because of market dynamics that include rewarding the highest priced shares more than lower price shares, the danger for the indexing is rising. Is this the basis for Goldman’s warnings that the returns for the averages during the next 10 years will be lackluster at best?

There has been a race to the bottom regarding fees. A manner to achieve these fees is via indexing, the only trade that has not yet broken down but may give into rising political and societal pressures. It is a long time market axiom that the cheapest execution is the most expensive decision.

Should all head this warning or is it different this time?

Today is September 11. To me today is very personal as several of my friends and associates lost their lives. In many regards, the world today is more dangerous than in 2001.

Society is fractured, partially the result of social media. But we are better than this. We overcame 9/11 and will continue to overcome every other obstacle that is placed before us. Please remember all those who lost their lives 17 years ago in your thoughts and prayers.

Last night the foreign markets were down. London was down 0.59%, Paris was down 0.36% and Frankfurt was down 0.65%. China was down 0.18%, Japan was up 1.30% and Hang Sang was down 0.72%.

The Dow should open moderately lower on trade concerns.

The two-year Treasury or the instrument most sensitive to monetary policy is at a decade high of 2.75%. Seven years ago it was yielding 0.155%. One year ago it was yielding 1.32%. The 10-year is off 5/32 to yield 2.96%.

09/5/18

Was Nuclear Energy Sabotaged?

By: Joe Archer

The deep state is actively peddling the climate change narrative. But to say they are peddling is to ‘misrepresent’ the facts. The fact is they are enforcing the climate change narrative. And anytime someone enforces a narrative, it is appropriate to ask why. The end result of the climate narrative is greatly increased electricity costs, AKA Germany. With this said, I direct the reader’s attention to the topic of nuclear energy.

A conventional nuclear reactor (CNR) can only utilize 1% of the uranium mined to fuel it. Think about that for a second; 1%!!! This begs the question, was nuclear energy sabotaged, perhaps to protect the market value of fossil fuel resources? Who in their right mind would even consider building something so ridiculous, much less build an entire industry around it? It can be shown in simple terms that CNRs are one of if not the most dangerous and most expensive reactor design ever conceived and are the only reason the cost of nuclear-generated electricity is not 10 times cheaper. Currently, the world spends $4 trillion/yr on electricity. Extrapolated back to the dawn of the nuclear age, the case can be made that the sabotaging of nuclear reactor design has resulted in overcharging the public in excess of $100 trillion in today’s dollars.

To understand how this is, one need only look at what a reactor is, what the operational characteristics are for a CNR and what the characteristics of an Idealized Nuclear Reactor (INR) could be. A reactor is a volume of space where the loss of neutrons due to leakage or parasitic absorption in non-fuel atoms equals the excess production of neutrons due to the absorption of a neutron in a nuclear fuel atom. Aside from maintaining a reaction, a power reactor must also remove the heat generated in the reaction.

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09/4/18

Welcome To The Official Start Of The 2018 Midterm Elections

By: Kent Engelke | Capitol Securities

Yesterday marked the official start of the 2018 campaign season. I believe the 2018 midterms are perhaps the most significant midterms in several generations. If there is a significant change in representation, the winning party will declare it as a mandate. Moreover, the tactics that achieved this change will be replicated in the 2020 presidential election.

The above statements should not be viewed politically for such is human nature. The tactics of the winning side are mimicked under the simple guise that if it worked for them, it will work for me.

Speaking of mimicking or trend following, AMZN is up an incredible 73% YTD, increasing in value by over $400 billion in eight months. I cannot comprehend this absolute dollar increase. To put this number into perspective, the increase in AMZN shares is greater than the capitalization of 495 members of the S&P 500.

To put it another way, the increase in AMZN’s value would rank it as the thirtieth largest GDP in the world and the increase is about the same as Norway’s GDP.

The total capitalization of AMZN would rank it as the sixteenth largest country, eclipsing the GDP of countries such as the Netherlands, Turkey, Saudi Arabia and Switzerland.

Wow! To me, this is just numbing especially as its 2017 revenues were only $177 billion earning about $3.03 billion. For comparison, Wal-Mart had revenues of $485.9 billion and earned $14.7 billion. Its revenue would make Wal-Mart the twelfth largest country in the world.

What will happen this week? The economic calendar is heavy this week comprised of several manufacturing and employment statistics that will offer some clarity about economic momentum.

Last night the foreign markets were down. London was down 0.46%, Paris was down 1.35% and Frankfurt was down 1.16%. China was up 1.16%, Japan was down 0.05% and Hang Sang was up 0.94%.

The Dow should open mixed ahead of trade concerns and rising crude. The 10-year is unchanged at 2.87%.

08/31/18

Consumer Confidence At An 18 Year High… GDP At A 4 Year High…

By: Kent Engelke | Capitol Securities

Consumer confidence unexpectedly rose in August to the highest level since October 2000. Confidence was expected to decline from July’s level but instead surged, the result of jobs. The expectation’s gauge also climbed to a six-month high, also the opposite of the forecasted view.

Generally speaking, I regard sentiment surveys as a “backward-looking” indicator stating where we have been not where we are going. With this written, however, I forgot the last time I read a positive headline. Can I suggest there is a disconnect between reality and the media? Is all media just noise and job availability and rising home values trump everything?

Second quarter GDP was revised higher to 4.2%, the greatest growth in four years. The forward-looking indicators are suggesting momentum is continuing into the third quarter with consensus now suggesting growth over 4.5%. Wow!

Because of this growth, it appears inflationary pressures are accelerating over the Federal Reserve speed limit of 2.0%. All must remember the committee stated it would “tolerate” several quarters of inflation over the prescribed limit.

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08/27/18

People Hear What They Want To Hear And Disregard The Rest… People Talking Without Speaking… People Hearing Without Listening

By: Kent Engelke | Capitol Securities

Who is the biggest disruptor? Is it the social media companies whose slogan is to “move fast and break things” or is it President Trump who is upsetting the world order? As noted many times, the electorate of western democracies is demanding a change from the status quo. Is President Trump just an extension of the social media mandate of breaking things and “doing no harm?”

Some might argue the president is doing harm but as already noted, the electorate feels as though they have already been harmed and want change.

Speaking of change, 30 years ago, the mantra in the investment business community was to find a company whose fundamentals are improving and whose ownership is lacking. Lessor owned value companies had greater odds of outsized gains.

Thirty years later, the mega-sized technology companies whose ownership and capitalization defies expectations and whose motto is about breaking things and doing no harm, are the ones most believed to be the pathways to riches. [Note: The ‘do no harm’ thing is suspect given the gazillion of businesses that failed because of an unleveled playing field, the result of regulatory fiat, an environment that is perhaps changing today.]

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08/24/18

A Saudi-Iran Oil War Could Break Up OPEC

By: Irina Slav for Oilprice.com

When OPEC and Russia shook on increasing crude oil production by a million barrels daily to stop the oil price climb that had begun getting uncomfortable for consumers from Asia to the United States, there was no sign of what was to come just two months later: slowing demand in Asia, ample supply, and a brewing price war between Saudi Arabia and Iran.

Saudi Arabia, Iran’s arch-rival in the Middle East, has been a passionate supporter of President Trump’s intention to pull out of the nuclear deal with Iran and reimpose sanctions. This support is not simply on ideological or religious grounds, it also has a purely economic motive: the less Iran crude there is for sale, the more consumers will buy from Saudi Arabia.

Iran, however, is not giving up so easily. It has more to lose, after all, with the harshest sanctions yet coming into effect in the coming months. The first shots in this war were already fired: Saudi Arabia cut its selling price for oil shipped to all its clients except the United States, S&P Global Platts reports in a recent analysis of OPEC. Iran did the same and has indicated that it is prepared to do a lot more if any other producer threatens its market share. In fact, statements from senior government and military officials suggest that Iran is ready to go all the way to closing off the Strait of Hormuz.

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08/22/18

Earnings, Margins, Interest Rates And Regulations

By: Kent Engelke | Capitol Securities

Many are suggesting equity averages will decline in the immediacy, a decline anywhere from 5% to 25%. The reasons are varied including the election, the President publically criticizing the Fed, trade, peak in earnings/margins and interest rates to name a few.

Commenting about earnings according to S & P, earnings per share in the index rose by 6% q/q in Q2 with a record high 79% of firms in the index beating analysts’ estimates. Unexpectedly strong sales growth contributed and operating margins also climbed to their highest since data began, helped by tax reform.

I think margins will begin to erode but not because of a slowing economy. I think growth will continue to accelerate which will increase pricing pressures and interest rates. Many believe the economy will slow because of trade given that 44% of sales for the companies in the S & P 500 are the result of trade according to the S & P. More foreign sales are made in Asia than any other region.

Global economic growth has accelerated as the multipolar interdependent world is collapsing, the inverse of expectations. All must remember most economists thought global growth would soar via interdependency and massive fiscal/monetary stimulus. Growth sputtered and is a major reason for the economic nationalist movement that is now sweeping western democracies.

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08/20/18

Turkey Is Holding Pastor Brunson Because Of A Bank

By: Denise Simon | Founders Code

Pastor Andrew Brunson faces life in prison in Turkey for fraudulent charges of supporting a terror organization and political espionage. Brunson has lived in Turkey for 23 years. He even filed an application to renew his visa application in October of 2016. More details here.

Meanwhile, as the Turkish currency tanked due to sanctions and trade issues, the lira value held for about a week until investors got in the game due to interest and enticements by the Turkish Finance Minister and President Erdogan.

So, what is the reason for detaining and the charges on the pastor? Seems, Erdogan is using the pastor as a tool for two reasons. One includes an anti-Erdogan activist that has lived in the United States since 1999. He was/is a preacher himself and has an estimated 5 million followers. Erdogan included Gulen as one of the reasons for the attempted/alleged coup.

But the other reason is Iran. Seems Eli Lake an investigative journalist understands it better than all the rest. Why? During the Obama administration, nothing else mattered but to get an Iran nuclear deal. Those rogue governments, foreign leaders and financial institutions helping Iran evade sanctions were purposely ignored and overlooked by the Obama White House.

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