Sunday, November 29, 2020

Stock Market Overview -- "Melt-Up" Phase Ending?

 

Stock Market "Melt-Up" Phase Ending?....
Market valuations are hiding how close the stock market is from experiencing another collapse, but strategies have been warning that overpriced assets are only manipulating and distorting the real situation of the unbelievably inflated market, which has been constantly fueled by the Federal Reserve throughout the economic decline to the point of a bubble burst becoming unavoidable.

There are many dangers of the next bubble bursting, and how an unprecedented stock market decline will arrive sooner, rather than later — dragging the US economy and any prospects of a decent rebound along with it.

The term “melt up“ has been used to describe how stocks just keep hitting new highs, no matter the drama going on around the world, exactly what we have witnessed in the current economic recession.

A Melt-up is built on the economic philosophy that mainly relates to the governments response to financial crises. The Federal Reserve, and governments around the world, have used extraordinary policies for years, most notably, since the financial collapse of 2008 and 2009.

The policies were enacted to ease the burden of the crises by unleashing large amounts of “easy money“ into the markets.

The bullish market response seen after a deep economic recession is just the first of a four phase pattern of the downfall, and not to be construed as the end.

The first event or phase was seen when the whole world had fallen into a major economic crisis earlier this year, forcing governments and central banks around the world to start taking massive action to end the crisis, which resulted in interest rates being lowered and held at rock bottom levels for a very prolonged period of time.

This produced an asset boom, so extreme that it could be larger than any of us will ever see again, during our lifetimes.

The unprecedented amount of “helicopter money“ has added more fuel to the current asset boom, and it’s unbelievable heights have reached groundbreaking scales never before recorded, as the government and policymakers will likely keep propping up the markets to absurd extremes, just to maintain the feeling that things are turning towards the right direction.

This has been a global health crisis with government shut downs, different than the great recession that had the mortgage crisis and housing bubble, followed by a stock market decline, then, the Federal Reserve fueled the record stock market rally.

The Federal Reserve, in March 2020, within a 10-day period, has created more free “fake money“ than it did in the previous 30 years, even before the financial crisis of 2008 and 2009. At this point, interest rates are nearly at zero, again, the same way they did just after the financial crisis, and the consequences of it can already be seen, because for every “melt-up there is a “melt-down,” even though there is more money available within the financial system.

The massive government fueled asset bubble has become so extensive that we’re moving towards the end of this “melt-up“ phase, and being pushed to the brink of a major stock market “melt-down” — the bigger the bubble, the more chaotic the pop.

The current market momentum has been called “outright fiscal insanity,“ marking a huge disconnect between economic reality and equity prices. We’re in the middle of the most deteriorating economic collapse that sparked a prolong US Depression, with market valuations at or near all time highs, posing a threatening signal.

In fact, the major tech stocks that have supported the entire market are based on speculative valuations that are far away from reality. The five largest stocks in the S&P 500 index have a combined market capitalization equivalent to the smallest 389 stocks. Four companies alone have a total market capitalization of over $6 trillion, which is larger than the Gross Domestic Product (GDP) of every country in the world, except the US and China.

Corporate earnings have been declining for over two decades, even though the S&P 500 index is trading at the highest multiple in 70 years. The recent S&P 500 index value implies a price-to-earnings (P/E) ratio multiple of 36.7 times, the highest ever seen. The forward P/E ratio is above the record high during the dot-com madness in 2000.

Markets simply can not justify the current rally, as well as suggested double-digit earnings ahead, because it is dominated by speculative excess, high valuations, the prolong economic depression, colossal unemployment rates, and reduced business and consumer spending.

The core of the US economy is built around consumption, with roughly 70% of the United States GDP being reliant on consumer spending, but tens of millions of Americans are already facing serious financial hardship that will have a negative impact on consumption, since the unemployment benefits have expired, and any further stimulus is on hold.

Therefore, the real foundation of the financial markets are in serious trouble, with the US in a “rolling depression” — as one area of the economy gets hit hard, then, followed by another one. The recovery for the different sectors will be very transient.

In summary, the stock market is being maneuvered by the Federal Reserve. The market lacks any form of fundamental valuations, as perspective P/Es are in the stratosphere, with the various stock indices, as a percentage of GDP, at or near all time record levels.

Visit our website at www.wavetechenterprises.com, view the cover page video PowerPoint presentation, click on the "Sign Up" link, and fill out the mentioned inquiry form with your own personalized password as well as answer a few questions, to gain entrance to the over 150 internal pages within the website.


Disclaimer: The information contained in this message may be privileged and confidential and thus protected from disclosure. You are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited, if the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient. Please notify us immediately by replying to the message and deleting it from your computer, if you have received this communication in error. 

The stock market information discuss has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The stock market overview was issued for informational purposes, and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This overview is based on information obtained from sources believed to be reliable, but are not guaranteed to be accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in this stock market overview. Recipients should not regard this overview as a substitute for the exercise of their own judgment. Any options or opinions expressed in this stock market overview is subject to change without any notice and Wavetech Enterprises, LLC is not under any obligation to update or keep current the information contained within. Past performance is not necessarily indicative of future  results. Wavetech Enterprises, LLC and its stock market overview accept no liability for any loss or damage of any kind arising out of the use of any or all parts of this information.

Wednesday, September 2, 2020

Stock Market Overview -- Pivotal Economic Point

 

Pivotal Economic Point....

We are going to be discussing below the latest unemployment data, and the signs of the US is diving deeper into this economic collapse. We will also break down what's to come, from the impending stock market decline, to the crisis hitting the hotel industry.

The United States is eight months into a nightmare year that has seen the national economy decimated, tens of millions of Americans forced out of work, and a dramatic change of living standards across the country. 

Do you remember the headlines that ran earlier in 2020? They promised a recovery, as early as the third quarter of this year, and a sharp climb back to normal levels of economic activity; however, the situation actually took a turn for the worst, when the third quarter began in July 2020. 

A second wave of coronavirus cases forced most states to roll back their plans for reopening. Vulnerable businesses that had already lost months of profits had to shut their doors once more, shortly after welcoming customers back for the first time. Millions of temporary job losses became permanent, as a rising number of businesses succumbed to bankruptcy or at least significant downsizing.

Weekly jobless claims temporarily dropped below 1 million for the first time since March 2020, giving the illusion of a recovery; however, they have, once again, returned back above to 1.1 million, which was significantly higher than what economists had forecast, who estimated that the figure would remain below the seven-figure threshold at 923,000.

Clearly, American workers are still being laid off in mass, as the economy continues to crumble around us. In the meantime, the US government has failed to push a second stimulus bill through Congress that would address the needs of these tens of millions of unemployed citizens.

In total, over 57 million Americans have applied for unemployment assistance in only 22 weeks, and many of these individuals are dependent on these payments in order to keep up basic living expenses, like with rent and grocery bills.

The US economy is steadily falling apart, with indicators across the board showing no signs of improvement. 

Businesses, week after week, give into financial ruin, and close their doors as more layoffs become permanent job losses, which is leading to more Americans fallIng further behind on their debt payments and bills.

Lately, this economic collapse has made its way into a worrying new phase, with the unemployment numbers remaining so high, signaling a bleak future ahead for the US economy.

Remember, prior to this year, the most unemployment benefits claimed in a single week was only 695,000, with that all time high being exceeded for the past 22 weeks in 2020.

It is evident that we are living in unprecedented times, and the dire statistics just keep on coming. The jobless claims that we saw this past week, even though towards the lowest levels of this health crisis, still double those that were recorded, during the peak of the last recession.

These numbers prove that the labor market is a long ways from being healthy. For example, Hurricane Katrina, when compared to other economic disruptions in the US, only caused half the job losses in Louisiana, than this current economic collapse.

This is the moment that we will look back in the history books as being the worst depression of modern times. It has smashed the records of other crisis in recent years, and continues to defy expectations.

One of the few reasons the damage done to the US economy and the American public hasn't been much worse is the emergency aid offered by the federal government. The nearly 60 million jobless Americans have been able to make ends meat has been because of the $600 a week in unemployment benefits paid out by the government.

Vulnerable citizens now have to rely solely on state benefits, which are often much smaller, but that assistance is no longer available.

For example, with the loss of aid comes a much higher risk of eviction. Needy Americans are being forced from their homes left and right, even as tenants gather together to protest what they may view as landlords' unfair actions.

President Trump signed an executive order that would offer up half of the original unemployment benefits at $300 a week for any eligible jobless Americans. The memorandum, which was announced earlier this month, allowed unemployment benefits to reach $400 of weekly payouts, but only if the state governments took on 25% of the expenses.

The other choice is for the states to deny their residences the additional $100, but still implement $300 in federal aid, paid for entirely by the central government.

The Federal Emergency Management Agency (FEMA), on the bright side, has already accepted nine states into the program, listed alphabetically: Arizona, Colorado, Iowa, Louisiana, Missouri, Montana, New Mexico, Oklahoma, and Utah.

There are 14 more states that are planning to apply or are waiting for acceptance, but a number of states have opted out of the program.

Furthermore, only three states, Kentucky, Montana, and West Virginia, said they would sign on to pay the additional $100 to eligible residents. The unemployed workers in those states would receive $400 a week, instead of $300, with the rest of the country seeing their benefits slashed in half at a time, when financial assistance is a critical lifeline, during these dire circumstances.

At this time, individual Americans will be suffering for the foreseeable future, with already tens of millions of them missing bill payments every month, building up a backlog of debt that will continue to haunt them, even when the crisis finally comes to an end.

Moreover, businesses are collapsing at an unbelievable pace, with the restaurant sector, for example, having seen nearly 75,000 establishments shuttered for good in the second quarter of this year. No one has been spared, with the economic devastation touching everything from tiny, family-owned caf├ęs to Michelin star dining locations, popular among the rich and famous.

These closures will have long reaching consequences, even if we can't see them yet, because when a restaurant closes, the ripples sweep along the various supply chains.

The hotel industry, now being hit, is well documented as struggling through these lock-downs and travel bands. Room occupancy rates have plunged to record lows, and even big-named chains have had to cut a large portion of their workforce.

Lately, the industry has warned that it is going up against a serious default disaster. One of every four hotels across the US is now at risk of foreclosure, because they simply can't afford to keep making their mortgage payments.

Currently, 23.5% of hotel mortgage loans are at least 30-days delinquent, the greatest peak ever recorded -- a significant spike, when compared to the hotel delinquency rate of 1.3%, during the prior 12-month period.

In total, $20.6 billion in hotel commercial mortgage-backed security loans are delinquent by 30-days or more, as of July 2020. For comparison, the highest volume of delinquent hotel loans, during the previous financial crisis, from 2007 to 2009, was only $13.5 billion.

Many of these hotels will have to close down permanently, due to the demand for travel remaining next to nothing, and the continued concerns of the coronavirus.

This means that a number of the tens of thousands of Americans, employed by hotels across the country, are likely to join the ranks of the jobless citizens no longer receiving federal benefits.

The hotel sector is requesting federal assistance in the form of a bail out, but of course, these measures are a hot commodity, and almost every industry has similar demands.

Not everyone will come out on top, when the government decides what industries receive bail outs, and there will be ones that do not, never recovering to their prior glory days.

The global economies have also taking hit after hit this year, with world trade plunging to its lowest levels, during its 13-year record, in June 2020.

Merchandise trade plunged 18.5%, in the second quarter of 2020, according to the World Trade Organization, compared to the same time frame in 2019.

It is estimated that the US stock market, as a whole, is 78% overvalued, even as the country suffers through months of the worst economic climate, since the great depression of almost a century ago.

The stock market has been entirely severed from the underlining economy, forming a strange inverse relationship -- the worse the economy gets, the better the stock market performs.

We are watching a slow and inevitable stock market bubble inflate, with the downfall being swift and sharp.

We have gotten to this point, because of the Federal Reserves excessive meddling into US economic affairs.

The stock market has been pushed to all time highs, because of their backward policies, even as various indicators suggest a more troubled economy.

We are only at the start of this economic collapse. There is a long road ahead, and far worse situations on the way, despite how dark things seem already. Of course, the Fed will make every effort to hold asset prices high, and overly inflated, but they are fighting a losing battle.

Investors will hit a point, when they finally realize that there is no light at the end of the tunnel, with the country wracked by one crisis after another, bursting investors confidence, and the giant stock market bubble.

Visit our website at www.wavetechenterprises.com, view the cover page video PowerPoint presentation, click on the "Sign Up" link, and fill out the mentioned inquiry form with your own personalized password as well as answer a few questions, to gain entrance to the over 150 internal pages within the website.


Disclaimer: The information contained in this message may be privileged and confidential and thus protected from disclosure. You are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited, if the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient. Please notify us immediately by replying to the message and deleting it from your computer, if you have received this communication in error. 

The stock market information discuss has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The stock market overview was issued for informational purposes, and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This overview is based on information obtained from sources believed to be reliable, but are not guaranteed to be accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in this stock market overview. Recipients should not regard this overview as a substitute for the exercise of their own judgment. Any options or opinions expressed in this stock market overview is subject to change without any notice and Wavetech Enterprises, LLC is not under any obligation to update or keep current the information contained within. Past performance is not necessarily indicative of future  results. Wavetech Enterprises, LLC and its stock market overview accept no liability for any loss or damage of any kind arising out of the use of any or all parts of this information.

Friday, June 19, 2020

Stock Market Overview -- Important Economic Indicators

Important Economic Indicators -- Forecasting a Further Collapse....

Lock-downs and shelter-in-place orders across the United States were supposed to be temporary measures -- put into practice long enough to slow the spread of the pandemic, without causing irreparable economic collapse. Now, however, it is becoming clear that there are much longer reaching consequences at play, as businesses shutter around the country and the globe.

More than 100,000 businesses have permanently closed in the US alone, with those closures causing millions of jobs for citizens desperately seeking an income, which have simply evaporated into thin air.

Below outlines the scale of the next great depression, and all of the important economic indicators:

A recent Gross Domestic Product (GDP) forecast, released by the Federal Reserve Bank of Atlanta estimates an unprecedented drop of 42.8% for the three months through June 2020.

US retail sales, factory output, and industrial production are all down -16.4%, -13.7%, and -11.2%, respectively. The prolong shut down has generated a sort of economic free-fall that is leaving few sectors unscathed.

Already, big names in retail that have been around for decades, like J. C. Penny, Victoria's Secret, and Pier 1 Imports, are breaking the news of their financial problems. J. C. Penney announced that it will soon be declaring bankruptcy, making it the largest retailer to do so thus far over the course of this pandemic. Meanwhile, Victoria's Secret announce the closure of 250 brick and mortar stores, across the US and Canada, and Pier 1 Imports is set to shut down entirely. Furthermore, Neiman Marcus and J. Crew have also filed for bankruptcy.

Major car rental corporation, Hertz, announced in April 2020 that the company was teetering on the edge of bankruptcy, confirming that the suffering is not limited to retailers.

These bankruptcies are just the beginning, proving that there is only so much that the Fed can do, as it attempt to support industries and minimize the destruction.

The restaurant industry is one sector suffering particularly striking losses, with one in every four American restaurants expected to close down for good, already resulting in losses of $30 billion during March and $50 billion in April 2020.

Large businesses will not be spared from this pandemic and economic contraction. For example, Ford, pushed two locations back into temporary shut down, only days after trying to reopen some of their factories, when a number employees tested positive for the coronavirus.

Shutdowns like these are clear examples on how difficult it will be for automakers and other industries to resume operations, while dealing with this pandemic. Of course, this is what they will have to do for the foreseeable future to stay afloat, as there is no vaccine or other easy solutions on the horizon.

There are three things that have to all come together, which include: healthy workforce, healthy supply chain, and healthy demand. It's not just flip-of-a-switch, and everything is as it was --  it's very complicated.

Few people are wanting to commit big sums to discretionary purchases like cars, so even if Ford is producing products, the buyers market is drying up, as Americans stay at home, and are spending on groceries, but little else.

Retail sales dropped 17.2% in April 2020, with clothing and accessory stores hurting the most, down 78.8% from March, and 89.3% year-over-year in April 2020.

Meanwhile, the commercial real estate industry is cause for serious concern. This sector will experience devastation on a scale that will make the 2008 financial crisis look like little more than a blip, with renters unable to pay, and property owners floundering from late checks. And, one striking example, the owner of the Empire State building, collected only 73% of its office rents, and 46% of its retail rents that were due in April 2020.

Evidently, the toll trickles down from businesses to individuals. The number of Americans who have filed for unemployment benefits has surpassed 40 million, making this the worst unemployment crisis since the 1929 Great Depression -- dwarfing it's catastrophe, when 15 million Americans were jobless at its worst point in 1933 -- when compared to today's economic collapse.

The Federal Reserve admits that the unemployment figure is much higher -- when factoring in those that were not actively looking for work, during the examined period, as well as those that are working at significantly reduced hours and pay -- is closer to 30.7%, even though the official numbers, produced by the Bureau of Labor Statistics (BLS), puts the unemployment rate at 13.3% for May 2020.

This economic collapse will not end, when a vaccine for the coronavirus is actually produced and administered, because 42% of the layoffs experienced by workers during this pandemic will result in permanent job losses.

It was estimated at April 2020 that 18 million of the 20.6 million people who lost work classified their situation as temporary, which will not be the case.

All States that have rushed to reopen early and get their economies back on track have experienced new cases of the virus, with over 20 states now experiencing spikes in the coronavirus cases as a result.

The World Health Organization just announced that the world only recently hit the largest number of newly confirmed cases on a single day. This means that the peak was not weeks ago, as some continue to believe, but rather that we are still in the thick of it.

Americans are paying the price, literally, with the government toeing the line, between public health and the economy.

Some experts say that the United States could see a 45% rise in its jobless population by the end of 2020. That means, when compared to last year, 250,000 additional people will find themselves on the streets.

Almost 40% of the people with household incomes lower than $40,000 suffered from a loss of employment in March 2020. Issues like homelessness as well as the tilt towards recession, existed before the pandemic rattled global economies, and don't show signs of letting up anytime soon, despite false promises from politicians that are part of the problem.

Americans are already beginning to see the effects, from foreclosure signs in their neighbors' yards to out-of-business signs posted in store windows.

There is much debate over whether or not the public health and safety measures are worth the devastating economic fallout that will un-doubtably follow.

It is estimated that the number of Americans that will die from the coronavirus will likely triple before the end of 2020, even in the case that current social distancing measures are upheld.

There are estimations that 60% to 70% of all Americans will eventually be infected. It must be noted that 1.3% of those who show symptoms die, an infection fatality rate that is 13 times higher than a bad influenza season.

The coronavirus could very well kill between 350,000 to 1.2 million Americans by the end of 2020, even when discounting the fact that most states will continue to open their economies, and relax social distancing restrictions.

A large part of the virus spread is due to sheer irresponsibility on the part of the US government -- aside from the uncontrollable factors like the high infection rate -- with foreigners traveling to the United States on non-US airlines, completely full of mask-free passengers, without so much as a health check upon arrival.

Apparently, the United States has no policies that require any sort of quarantine after entering the country.

Careless lack of policies like these are a strong indicator of the United States' handling of the pandemic, and representative of the government failure to put proper precautions in place.

The US will only plunge further into its economic and health-related woes, with a death spiral of carelessness and overcompensation.

In summary, the longer the restrictions remain on business, the further global economIes crumble, making a possible recovery more difficult. Health measures that are lifted prematurely will raise risk, resulting in otherwise preventable deaths -- a lose-lose situation for the United States and countries around the globe.

Visit our website at www.wavetechenterprises.com, view the cover page video PowerPoint presentation, click on the "Sign Up" link, and fill out the mentioned inquiry form with your own personalized password as well as answer a few questions, to gain entrance to the over 150 internal pages within the website.

Disclaimer: The information contained in this message may be privileged and confidential and thus protected from disclosure. You are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited, if the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient. Please notify us immediately by replying to the message and deleting it from your computer, if you have received this communication in error. 

The stock market information discuss has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The stock market overview was issued for informational purposes, and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This overview is based on information obtained from sources believed to be reliable, but are not guaranteed to be accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in this stock market overview. Recipients should not regard this overview as a substitute for the exercise of their own judgment. Any options or opinions expressed in this stock market overview is subject to change without any notice and Wavetech Enterprises, LLC is not under any obligation to update or keep current the information contained within. Past performance is not necessarily indicative of future  results. Wavetech Enterprises, LLC and its stock market overview accept no liability for any loss or damage of any kind arising out of the use of any or all parts of this information.

Wednesday, April 29, 2020

Stock Market Overview -- Stock Buyback "Craze"


Stock Buyback "Craze," Abruptly Ending?....

The risks to the global economies all remain to the downside, with a further deflationary shock from the ongoing coronavirus.

The US Federal Reserves next move has always been planned as an interest rate cut, in either in June or September 2020, unless the economy was going to "magically" re-accelerate, and inflation return.

The Fed has made it very clear of their frustrations, unable to waive some magic wand, and get inflation back above their 2% target level.

The coronavirus is causing a deflationary shock, and could continue to affect global supply chains, forcing the Fed to make interest-rate cuts, sooner rather than later.

The US corporate earnings declined in all four quarters of 2019, defined as a technical recession, even though the stock market rallied.

What risks will investors start to price in, even with an epic decline in corporate earnings?

The statistical relationship today, between the equity markets and the economy has never been as low, with a correlation of only 7%.

Every post World War II economic cycle has had correlations of as low as 30%, to as high as 70%, but today we are at 7%.

This proves that economists have no understanding whatsoever, regarding the current economic cycle, with such a low correlation.

This current economic cycle has been completely driven by the most powerful source of demand for equities, especially within the US, which is "share buybacks."

The share count of the US S&P 500 stocks have been driven down to the lowest level in 20 years. 

Companies have taken on a massive amount of debt, to buy back their stock, giving the allure that we have a bull market in corporate earnings per share.

The stock buybacks craze will eventually come to an end, with simple mathematics, between earnings yield and corporate bond yields.

The US consumer prevented a recession in 2019, because it represents 70% of the economy; however, the business sector is already in a recession, which symbolizes the remaining 30%.

Capital expenditures for corporations were actually negative for the last three quarters of 2019, resulting in a "mini recession," even with the stock market rally.

We are currently in the weakest economic cycle of all time, without having even one year where US Gross Domestic Product (GDP) growth was 3% -- last seen in 2005.

We have not seen sustained GDP growth of at least 3% for a period of five years in a very long time -- actually, not since the 1930s.

There's an incredible disconnect, between what the economy is actually doing, and with the stock market.

As mentioned, it's all about buying back shares, in order to reduce the share count, to the lowest level in 20 years.

The stock market today is acting like a commodity, whereby reducing the supply-side, causes prices to rally, since it has nothing to do with the economy.

In summary, the corporate debt burden and supply-side train continues, as long as companies buy back their stock, until it all abruptly ends.

Visit our website at www.wavetechenterprises.com, view the cover page video PowerPoint presentation, click on the "Sign Up" link, and fill out the mentioned inquiry form with your own personalized password as well as answer a few questions, to gain entrance to the over 150 internal pages within the website.

Disclaimer: The information contained in this message may be privileged and confidential and thus protected from disclosure. You are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited, if the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient. Please notify us immediately by replying to the message and deleting it from your computer, if you have received this communication in error. 

The stock market information discuss has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The stock market overview was issued for informational purposes, and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This overview is based on information obtained from sources believed to be reliable, but are not guaranteed to be accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in this stock market overview. Recipients should not regard this overview as a substitute for the exercise of their own judgment. Any options or opinions expressed in this stock market overview is subject to change without any notice and Wavetech Enterprises, LLC is not under any obligation to update or keep current the information contained within. Past performance is not necessarily indicative of future  results. Wavetech Enterprises, LLC and its stock market overview accept no liability for any loss or damage of any kind arising out of the use of any or all parts of this information.

Sunday, January 26, 2020

Stock Market Overview -- Global Markets Liquidity Crisis

Stock Market Liquidity Crisis....

September 16th 2019 marked the beginning of the liquidity crisis, within the re-purchasing agreement market, which is short-term borrowing for banks/dealers in government securities -- commonly referred to as the "repo market." This is the way the Federal Reserve injects liquidity into the banking system by purchasing Treasury Bills (non-QE), instead of Treasury Bonds, so that it cannot be referred to as Quantitative Easing or QE4.

The Fed has been in emergency mode, effectively "bailing out" the overnight cash repo markets, continuously. These efforts were supposed to allow banks some breathing room to build up their cash reserves, and resume normal overnight lending, once again, but, unfortunately, this has not happened.

The Fed has intervened almost every night in the repo market, since the rates first spiked out-of-control on September 16, 2019  -- with the fed funds rate jumping, from 1.75% to nearly 10%, due to lack of liquidity -- but nothing has changed since that initial event.

The daily interventions with cash injections have usually been around $75 billion, but despite all of the liquidity the Fed has been providing, it has only served as a Band-Aid, since the problem which caused the spike in the first place has not been resolved.

The rates would spike immediately, if the Fed were to withdraw the overnight cash injections.

There are a few underlying issues causing the liquidity crunch. The main one is the lack of cash reserves at banks. The major players, who usually provide the overnight lending do not have the cash to lend, and the ones that do have the cash are not willing to lend it. Banks' balance sheets are filled with collateral, which are mostly US Treasuries, instead of cash to lend.

The banks have not been able to turn their excess US treasuries into usable cash, despite the Fed increasing its own balance sheet, by essentially providing Quantitative Easing (non-QE). 

This is non-QE, because the Fed is only buying Treasury Bills in an attempt to avoid admitting they are doing QE, which would be the case, if they were buying US Treasury Bonds. 

This has put the biggest banks in a bind, because these big banks are required to buy US treasuries at auction, and now they have no one to sell them to, when they require liquidity.

There is pressure building under the surface, even though it seems the Fed has been able to keep a lid on the repo liquidity issue. Cash and the liquidity needs will increase dramatically, going into the end-of-the-year.

Most people are not aware, but last December 2018, there was a spike in repo rates as well as the year came to a close. 

The difference was that last year banks had much more in excess reserves than they do this year, and didn't have to contend with the restraints that exist this year through the Globally Systemically Important Banks (G-SIB), which is a fancy term for too-big-to-fail banks.

This designation was given to large banks, after the financial crisis, and with the designation comes certain liquidity/reserve requirements, and what banks can do with that money.

One restriction is the order in which banks can deploy any excess reserves that they have on hand. First, banks can lend in repo markets, then, they can use reserves to buy US treasuries. Finally, they can lend through FX swaps (foreign currency markets).

Banks are currently limited to operating in the repo market with only their excess cash, due to their current high G-SIB scores, elevated because of the stock market performance and the flat interest rate yield curve.

It may seem acceptable that the banks are forced to prioritize their repo lending, but the real problem is within the FX swap market, because this will force the FX swap market to be virtually dry of lending. 

The vacuum in the FX swap market will be magnified, with the repo market tapped out. Additionally, just because banks are required to prioritize excess liquidity in the repo market, to begin with, doesn't mean the banks have any liquidity.

In other words, the Fed has placed a lid firmly down on rates in the repo market, and the pressure building is going to burst into the FX swap market.

There will only be one thing that banks and institutions can do, with a massive surge in demand for cash, which would be to sell their assets - US treasuries and equities.

There is a stock market drop, when equities sell- off. The extent of the drop may be insignificant, but it all depends on when the Fed steps in to "rescue" the system, again. It is possible this triggers a larger correction in the stock market in a very short period of time. These things tend to trigger more and more selling like a self-propelling machine, with fast-moving drops.

There is a spike in yields, when US treasuries sell-off, which is disastrous for an economy standing on a foundation of debt. This is because debt service becomes more expensive, and if an economy or country can barely afford the debt as-is, it will collapse, if the debt gets more expensive.

The Fed will attempt to buy US treasuries again through QE4, and turn bank reserves in the cash, which will allow banks to operate as lenders, again. This will also put a floor underneath the sell-off that could get triggered in the year-end liquidity crunch.

The Fed will not start buying US treasuries now, since they have made it very clear that that they don't intend to change their current course until the "incoming data" demands a different course of action.

A looming cash crunch, evidenced by current reserve levels and year-end cash needs, does not count as demanding a different course of action for the Federal Reserve. They have chosen to be reactionary, not proactive, which means that it will likely take a big stock market correction or US treasury sell-off to prompt a change in course.

The big issue here is that the whole system is horribly fragile, and it is incredibly reliant on continuous, increasing debt monetization by the Fed. Every attempt by the Fed to stop, reversed, or slow down this balance sheet expansion has exposed the enormous cracks in the foundation.

The true economic realities will come to the surface, even with ever-increasing intervention/stimulus/accommodation. Printing money solves no fundamental problems, but only delay the consequences. 

The problems grow worse under the surface, with longer delayed consequences. It's simply a matter of time before this deceptive outward appearance breaks.

Visit our website at www.wavetechenterprises.com, view the cover page video PowerPoint presentation, click on the "Sign Up" link, and fill out the mentioned inquiry form with your own personalized password as well as answer a few questions, to gain entrance to the over 150 internal pages within the website.

Disclaimer: The information contained in this message may be privileged and confidential and thus protected from disclosure. You are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited, if the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient. Please notify us immediately by replying to the message and deleting it from your computer, if you have received this communication in error. 

The stock market information discuss has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The stock market overview was issued for informational purposes, and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This overview is based on information obtained from sources believed to be reliable, but are not guaranteed to be accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in this stock market overview. Recipients should not regard this overview as a substitute for the exercise of their own judgment. Any options or opinions expressed in this stock market overview is subject to change without any notice and Wavetech Enterprises, LLC is not under any obligation to update or keep current the information contained within. Past performance is not necessarily indicative of future  results. Wavetech Enterprises, LLC and its stock market overview accept no liability for any loss or damage of any kind arising out of the use of any or all parts of this information.

Sunday, October 13, 2019

Stock Market Overview -- Top 21 Signs of an Economic Collapse

Top 21 Signs of an Upcoming Economic Collapse....

The outlook for the economy has never been as dire as it is right now, since the end of the last economic collapse. Economic red flags are popping up everywhere you look, and the mainstream media is suddenly full of stories about the coming stock market crash.
Things appear to be changing dramatically for the US and global economies, after several years of relative economic stability. We are seeing things happen that have not been witnessed, since the last economic collapse, and many analysts expect our troubles to accelerate as we head into the final months of 2019.

There are hopes that things will turn around, but at this point that does not appear to be likely. Below are the top 21 signs of a global economic collapse at this key and pivotal point:
1.) The US and China trade war has just escalated to an entirely new level, with the commencement of 15% US tariffs on Chinese goods worth an estimated $110 billion, and the retaliatory action of China imposing tariffs on about $75 billion worth of US goods. 

The world has already lived through two rounds of US tariffs and subsequent retaliation, but these recent tariffs, along with the ones being delayed until mid-December 2019, are different than the ones that came before, since they will broadly affect global economic growth.

2.) US tariffs on China have already caused American households $600 per year, which will now rise to over $1,000 annually, after the September and December 2019 tariffs go into effect.

3.) Interest rate yield curve inversions have preceded every economic recession since the 1950s -- a major reason for the enhanced stock market volatility, globally.

4.) The US consumer sentiment index just posted a monthly decline in August 2019 of -8.6 points, the largest drops since December 2012 of -9.8 points. The overall consumer buying attitude towards appliances and other household durable goods fell to their lowest level in five years, with "net price" references more negative than anytime since 2008.

5.) The mortgage default rate is rising for the first time since the last financial crisis, with the national default rate increasing 3% in the second quarter of 2019, when compared to the same quarter in the prior year -- the first such rise in over a decade.

6.) Luxury real estate is having its worst year since the financial crisis, with pricey markets like New York City seeing six straight quarters of sales declines. Sales of homes priced at $1.5 million or more fell 5% in the US for the second quarter of 2019. Unsold mansions and penthouses are piling up across the United States, especially in ritzy resort towns where there is a three-year supply, like in Aspen, Colorado as well as the Hamptons in New York.

7.) The US manufacturing sector has contracted for the first time since 2009 as manufacturing companies continue to feel the slowing economic conditions, with global ramifications. The US manufacturing purchasing managers index (PMI) was 49.9 in August 2019, down from 50.4 in July 2019, and below the neutral 50.0 threshold for the first time since September 2009.

8.) The Cass Freight Index has been contracting for the past eight months, falling 6% in May, then 5.3% in June, and 5.9% in July 2019. It is subsequently predicting negative Gross Domestic Product (GDP) growth by the third or fourth quarter of 2019.

9.) Gross Private Domestic Investment tumbled 5.5%, the worst since the fourth quarter 2015, as spending on structures slumped 10.6%. This decline reduced the US second quarter 2019 GDP growth by one full percentage points, being revised downward to 2.0%. The falling inventories also caused a 0.86% drag on the economy.

10.) Crude oil processing at US refiners has fallen by the most since the financial crisis, due to slack fuel demand. US refineries slashed an average of 247,000 barrels per day, since January 2019, compared with the same period in 2018. Crude oil processing has fallen for the first time since 2011, and by the most since the 2008 and 2009 financial crisis.

11.) Retailers Sears and Kmart will be closing an additional 100 stores by the end of 2019, further confirming the reduced consumer spending abilities, which represents 70% of the US economy.

12.) Sales of US recreational vehicles (RVs) are down 20% so far in 2019, partly due to some of the imposed tariffs. Recreational vehicle shipments to domestic dealers have subsequently plummeted 20%, compared to the same period last year, after already dropping 4% in 2018. The RV industry is a great bellwether of the US economy, and right now it is screaming that a financial crisis is coming.

13.) There are actually 102 million working age Americans that do not have a job right now, but according to the Bureau of Labor Statistics (BLS), there were 6.1 million unemployed working age Americans in August 2019, which would be incredible if it was an honest number. but it does not include all working age Americans that are not currently employed. The BLS is not considering them officially unemployed, because they're not part of the labor force. 

The Federal Reserve indicated in August 2019 that there were 95.9 million not in the labor force, an all-time record high. The BLS unemployed number keeps going down, and the "not in the labor force" number keeps going up. Hence, you come up with a grand total of 102 million working age Americans that do not have a job right now, when you add 6.1 million and 95.9 million together.

14.) The S&P 500 earnings per share estimates have been declining, since the beginning of 2019 -- a clear and established trend.

15.) Global trade fell 1.4% compared to a year earlier. World trade volume, a measure of imports and exports around the globe, declined in June 2019 to the lowest level since October 2017, representing the biggest year-over-year decline, since the financial crisis -- a major reversal from the strong growth in 2017 and 2018 that topped at 6.7%.

16.) Germany stands on the edge of a recession precipice. Their government's statistics agency reported that their economy shrink by 0.1% in the second quarter 2019. Furthermore, Germany's central bank is predicting that they will post declining third-quarter growth as well, confirming the definition of a recession -- two consecutive quarters of economic contraction.

17.) The correlation between present day sentiment and that of the 2008 financial crisis is quite similar. Even the recent risk-on phase (rally) after the initial shock of the yield curve inversion, and the risk-off mood (sell-off) that struck later, neatly track patterns recorded in 2008.

18.) Corporate insiders have been selling an average of $600 million per day in August 2019, as they prepare for a financial apocalypse. This confirms the level of fear that presently exist within corporate insiders -- such selling would only exist if a stock market crash was possible.

19.) Investors are liquidating emerging funds at a never seen before pace, representing nearly $12 billion in just the past 11 weeks.

20.) The economic policy uncertainty index reached its highest level ever in June 2019, exceeding all prior peaks, since the index was established in January 1997.

21.) Americans are searching on Google the term "recession" more times today than what was realized during the financial crisis in 2008. 

The signs are clear, but, unfortunately, we live at a time when "normalcy bias" is rampant in our society. This is also referred to as "normality bias," which is defined as the belief that people hold, when considering the possibility of a disaster. It causes people to underestimate both the likelihood of a disaster and the possible effects, because people believe that things will always function the way things have normally functioned. 

This may result is situations where people fail to adequately prepare themselves for disasters, and, on a larger scale, the failure of governments to include the populace in its disaster preparations. About 70% of people reportedly display "normalcy bias" in disasters.

In summary, the financial crisis of 2008 and 2009 is a distant memory for most Americans and global investors. The vast majority of the population feel confident that brighter days are ahead, even if we must first whether an economic recession. As a result, most people are not preparing for a major economic crisis, and that makes them extremely vulnerable. 

Most Americans were completely surprised by the horrible financial crisis of 2008 and 2009 as well as the recession that followed -- it will be the same, this time around, even though the warning signs are there for everyone to see. 

Visit our website at www.wavetechenterprises.com, view the cover page video PowerPoint presentation, click on the "Sign Up" link, and fill out the mentioned inquiry form with your own personalized password as well as answer a few questions, to gain entrance to the over 150 internal pages within the website.


Disclaimer: The information contained in this message may be privileged and confidential and thus protected from disclosure. You are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited, if the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient. Please notify us immediately by replying to the message and deleting it from your computer, if you have received this communication in error. 


The stock market information discuss has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The stock market overview was issued for informational purposes, and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This overview is based on information obtained from sources believed to be reliable, but are not guaranteed to be accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in this stock market overview. Recipients should not regard this overview as a substitute for the exercise of their own judgment. Any options or opinions expressed in this stock market overview is subject to change without any notice and Wavetech Enterprises, LLC is not under any obligation to update or keep current the information contained within. Past performance is not necessarily indicative of future results. Wavetech Enterprises, LLC and its stock market overview accept no liability for any loss or damage of any kind arising out of the use of any or all parts of this information.

Tuesday, September 10, 2019

Stock Market Overview -- Financial Crisis Consequence(s)

Possible Financial Crisis Consequence(s)....

Trade Imbalance: It starts with people living beyond their means, and taking on debt. Wages become distorted, production costs escalate, and industries move offshore, resulting in trade deficits, and an unsustainable national debt.


Financial Instability: The financial system suddenly and dramatically destabilizes, when debt levels reach the tipping point. Companies and individuals can no longer borrow money, leading to bankruptcies and soaring unemployment.

Currency War: Politicians seek to cheat economic laws. Governments print money to pay debts and devalue their currency, which temporarily promotes exports and discourages imports -- those who devalue first, gain the most.

Trade War: Governments enact tariffs, taxes, and subsidies as they work to steal trade from each other. Global trade plunges, exacerbating the financial crisis, and unemployment rises. Politicians, again, devalue currencies, and enact more radical populist measures.

Hot War: First mover advantage goes to those who unexpectedly strike first, just like currency wars.

Visit our website at www.wavetechenterprises.com, view the cover page video PowerPoint presentation, click on the "Sign Up" link, and fill out the mentioned inquiry form with your own personalized password as well as answer a few questions, to gain entrance to the over 150 internal pages within the website.


Disclaimer: The information contained in this message may be privileged and confidential and thus protected from disclosure. You are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited, if the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient. Please notify us immediately by replying to the message and deleting it from your computer, if you have received this communication in error. 

The stock market information discuss has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The stock market overview was issued for informational purposes, and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This overview is based on information obtained from sources believed to be reliable, but are not guaranteed to be accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in this stock market overview. Recipients should not regard this overview as a substitute for the exercise of their own judgment. Any options or opinions expressed in this stock market overview is subject to change without any notice and Wavetech Enterprises, LLC is not under any obligation to update or keep current the information contained within. Past performance is not necessarily indicative of future results. Wavetech Enterprises, LLC and its stock market overview accept no liability for any loss or damage of any kind arising out of the use of any or all parts of this information.