Rigged? Of course it is…

  • A bad sign for growth
  • Do not miss this
  • Rate rise coming…maybe
  • Norway’s big punt
  • First capitol
  • No one else trades like this

We can’t be sure, but it feels as though we noticed the US presidential election coverage more in Australia than we have in our two days in New York and Annapolis.

But regardless, the one clear thing we remember from the coverage is Donald Trump’s claim that the system is rigged…that the Hillary Clinton election machine and the mainstream press have got it in for Mr Trump.

Naturally, our response to Mr Trump is, ‘Well, d’uh, of course it’s rigged.’

Surely Mr Trump hasn’t only just realised this. Surely he realised it was rigged months ago, before he spent tens of millions of his own dollars on his haphazard campaign.

But for those who just think Mr Trump is a dope, or that he’s a sore (potential) loser, it’s worth checking out the following report from USA Today:

The nexus among private companies, Hillary Clinton’s State Department and the Clinton family foundations is closer and more complex than even Donald Trump has claimed.

Though it is widely known that some companies and foreign governments gave money to the foundations, perhaps in an effort to gain favour, one of the key parts of the puzzle hasn’t been reported: At least a dozen of those same companies lobbied the State Department, using lobbyists who doubled as major Clinton campaign fundraisers.

Those companies gave as much as $16 million to the Clinton charities.

You don’t need to be a conspiracy theorist to know a rigged system when you see one.

As for the fact that media personalities favour Hillary Clinton over Donald Trump, that’s easily explained. Clinton is the establishment. The career of a political journalist depends on the continuation of the current system and those within it.

Journalists are part of that system. They develop relationships with various insiders. They want to be first on the list to get the latest scoops and inside news.

They want the invitation to the next State dinner or cocktail party. Regardless of which establishment politician takes out the top job, journalists know they’ll either get favours today or favours in the future.

All they have to do is wait until their guy or gal gets into office.

But if Trump wins, well, it upsets the status quo. No journalist knows how Trump will favour the media — if at all. So they don’t want to take the risk.

When it comes to supporting a Washington DC insider or an outsider, the mainstream media will go for the insider every time.

So, rigged? Of course. Who could possibly think any other way?

Markets

Overnight, the Dow Jones Industrial Average closed up 75.54 points, or 0.42%.

The S&P 500 closed up 13.1 points, or 0.62%.

Meanwhile, in Europe the Euro Stoxx 50 index closed up 38.27 points, for a 1.27% gain. The FTSE 100 added 0.76%, and Germany’s DAX index gained 1.22%.

In Asian markets, Japan’s Nikkei 225 index is up 23.55 points, or 0.14%. China’s CSI 300 index is up 0.1%.

In Australia, the S&P/ASX 200 is up/down 20.75 points, or 0.38%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$50.77 per barrel. Brent crude is US$52.06 per barrel.

Gold is US$1,262.69 (AU$1,645.71) per troy ounce. Silver is US$17.62 (AU$22.97) per troy ounce.

The Aussie dollar is worth 76.73 US cents.

A bad sign for growth

Yesterday we noted USA Today’s article on US companies likely to report big losses.

In something we don’t normally associate with the mainstream press, USA Today is back at it again, ‘talking down’ US companies.

Investors all but demand that companies beat – or at least meet – profit estimates. But optimism has been dashed time and time again for several companies, a warning to investors as third-quarter earnings season heats up.

Seven companies in the Standard & Poor’s 500 have consistently missed analysts’ adjusted earnings forecasts the past four quarters, according to a USA Today analysis from S&P Global Capital Markets. These companies highlight how there are pockets of trouble in the market that are difficult to fully assess.

Shame on their lack of patriotism.

Before you say it, we’ll agree that seven companies out of 500, isn’t such a big deal.

But what is a big deal is the fact that earnings for S&P 500 companies continue to fall — even while analysts maintain their ridiculously optimistic earnings forecasts.

To emphasise our point, we revisit a chart we’ve laid before you several times over the past year. We make the same warning to you today that we’ve made each time we’ve shown you the chart ­— the current bull market in stocks won’t last.

Here’s the chart:



chart image

Source: Bloomberg
Click to enlarge


If you’re familiar with this chart, it won’t need any explaining. If you’re not familiar with it, it’s easy to understand.

The white line to the left of the green line shows actual US company earnings per share. The white line to the right of the green line shows forecast company earnings.

As you can see, earnings per share have fallen since early 2015. In other words, US company profits are in decline.

That’s not good. What makes it worse is that, despite the decline, analysts are maintaining their optimistic view of growing profits.

The difference between actual and forecast profits has continued to grow. In order for S&P 500 companies to match the forecasts, earnings per share have to rise 20% over the next year.

Such an increase hasn’t happened since the period from mid-2010 through to mid-2011. But that was a different time.

That was when stocks were still recovering from the 2008 meltdown. That was when the US Federal Reserve was openly printing billions of dollars to screw down interest rates.

But the earnings picture isn’t the only reason to be suspicious about the sustainability of current stock prices.

To explain our point, we dug a little deeper. Rather than just looking at profit numbers, we checked out revenue numbers.

We looked at the S&P 500 index, and ran a count of how many stocks in the index had shown revenue growth over the past five months.

Remember, the S&P 500 contains the US market’s biggest listed companies. Many of these companies are the biggest of their type in the world.

So, just how many S&P 500 companies have grown revenue over the past year? It’s not a healthy picture. Just 277 companies have grown revenue.

How does that compare with prior 12-month periods? The numbers below are for the 12 months leading up to 19 October each year:

  • 2015: 395 companies saw revenue growth
  • 2014: 377 companies saw revenue growth
  • 2013: 353 companies saw revenue growth
  • 2012: 417 companies saw revenue growth
  • 2011: 425 companies saw revenue growth

Remember, over the past year, only 277 US S&P 500 companies have recorded revenue growth.

Does that sound like a positive sign for the US economy? Not to us it doesn’t.

As it has for some time now, our crash alert remains on high.

Do not miss this

The vulnerability of the US and world’s stock markets is exactly the type of topic we expect our speakers to cover at next week’s Great Repression conference in Port Douglas.

Speaking of conference presentations, a number of them have begun to roll in. As we’d hoped, we like what we see.

And I’m certain you’ll like what you see too. That’s why, even if you can’t make it to Port Douglas next week, I’d like to give you the chance to watch and enjoy every minute of the conference.

It’s simple to do so. You’ll read how to do it here.

Rate rise coming…maybe

Bloomberg reports:

Stocks rallied around the world, while the dollar fell amid speculation the Federal Reserve will stick to a gradual tightening of monetary policy.

Equities jumped the most in almost four weeks as investors parsed earnings reports and energy shares rebounded. The greenback extended its retreat from a seven-month high as data showed consumer prices excluding food and fuel costs in the U.S. rose less than forecast.

According to the futures market, there is now a 62.6% chance of the US Federal Reserve raising interest rates in December.

That’s down from a 66% chance last week.

Maybe the Fed will raise rates in December, but we still aren’t buying it. We’ll stick with our belief that economic data from the past two months was only positive because, prior to that, the market had almost no expectation of a rate rise this year.

Our take is that the October and November economic data will be much weaker than the market expects, and that will be enough to prevent the Fed raising rates in December.

But heck, we’re just guessing. The Fed, and central bankers in general, have shown that they are completely unpredictable. So anything could happen.

Norway’s big punt

We can smell it in the air. It’s getting stronger. What? Need you ask? The top of the market of course.

The Financial Times informs its readers (and we in turn pass this valuable information to you):

Norway’s $880bn oil fund is being urged to invest billions of dollars more in equities and take on more risk in what would be a big shift in its asset allocation away from bonds.

The world’s largest sovereign wealth fund should invest 70 per cent of its assets in shares, up from today’s 60 per cent, at the expense of bonds, according to a government-commissioned report on Tuesday.

What…erm…wonderful advice. The fund’s advisors recommend putting $7 of every $10 into stocks. We think we can safely call that an aggressive investment allocation.

It’s much more aggressive than we would recommend. For a long time, we’ve suggested investors allocate no more than 40% of their investable wealth in stocks.

The advice to increase stock exposure is interesting…and odd.

For instance, the S&P 500 index is up around 200% since the March 2009 low.

Germany’s DAX index is up around 190% since 2009.

And Norway’s OBX All Share index is up 200% since its 2008 low.

Does that seem like a good time to increase exposure to stocks? Especially when the exposure is already relatively high?

Again, what do we know? We’re sure the Norwegians know exactly what they’re doing.

First capitol

Annapolis is a pretty little old colonial town. It was the site of the first Congress following independence.

The Capitol building is now the home of the Maryland state legislature. Apologies for the photo quality, it was the best we could manage after dinner at Harry Browne’s restaurant:



chart image


We haven’t seen much of the town since arriving here yesterday. But given a spare hour or so tomorrow, we’ll make an effort to wander down to the old part of town.

No one else trades like this

Tomorrow we’ll show you how you can get specific and actionable trade ideas based on the Grand Cycle.

Make sure you’re watching your inbox tomorrow at noon. You’ll receive your exclusive priority invitation to check out this landmark project for yourself.

Remember, if you’re interested, be quick. Next week, we’ll withdraw the opportunity to become a part of our most exciting trading project.

It could be your last opportunity of the year to check it out.

Until then, check out the latest instructional video on how you could apply Grand Cycle theory to your trading. Video here.

Cheers,
Kris