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Financial Market in The U.S

The most up-to-date information on the US financial market.

Financial Market in The U.S

The most up-to-date information on the US financial market.

Financial Market in The U.S

The most up-to-date information on the US financial market.

Financial Market in The U.S

The most up-to-date information on the US financial market.

Financial Market in The U.S

The most up-to-date information on the US financial market.

Saturday, March 3, 2018

Markets shrug off US inflation worries to make fresh gains

Last week’s steep drop in equity prices is fading memory despite predictions of US interest rate hikes

 Wall Street is on course to post its fifth day of gains despite the latest in a run of official figures pointing to higher inflation. Photograph: Richard Drew/AP
New evidence of mounting US inflation has failed to derail the recovery from last week’s plunge in share prices, with global stock markets registering fresh gains.
Last week’s steep drop in equity prices was a fading memory as Wall Street shrugged off concerns that mounting cost of living pressures could force the Federal Reserve, the US central bank, into a series of interest rate rises in 2018.
Jitters about the world’s biggest economy were reflected in movements on the foreign exchanges, where the dollar slid to a 15-month low against the Japanese yen and lost ground against the pound and the euro.
The Dow Jones Industrial Average was up almost 200 points by lunchtime, while the broader-based S&P 500 also rose. Sentiment was helped by strong results from Cisco and news that Warren Buffett’s Berkshire Hathaway had made Apple its top investment.
Wall Street was on course to post its fifth day of gains despite the latest in a run of official figures pointing to higher inflation.
Andrew Hunter, US economist at Capital Economics, said the January producer prices data provided further evidence that inflationary pressures were set to build this year.
“The 0.4% month on month rebound in core producer prices left the annual rate at 2.2%, close to a six-year high,” Hunter said. That partly reflects the upward pressure on import prices from the weaker dollar, which will soon start to feed through into consumer prices, too.”
Producer prices provide an indication of inflationary pressures early in the pipeline and come after other figures released in the past two weeks showed a pick up in wage growth for some better paid workers and a pick up in underlying consumer prices.
A rate increase from the Fed at its next meeting in March is now seen as inevitable, but analysts are also revising up their forecasts for future moves.
Kathy Bostjancic, US analyst at Oxford Economics said: “We now look for the Fed to tighten interest rates four times this year, up from our prior forecast of three hikes, absent large market turbulence that could temper the amount of rate increase.”
Leo Grohowski, the chief investment officer at BNY Mellon Wealth Management in New York, said share prices were being supported by the strong earnings being reported by American companies. Around four out of five corporations were beating the forecasts made by analysts, he said. He was encouraged by the reaction to the inflation data, which has overshadowed robust earnings, with about 80% of companies beating analysts’ estimates.
“There were a lot of eyes fixating on the PPI number this morning, it came in a little hot. But much like yesterday, the market’s shaking it off,” Grohowski said.

Since you’re here …

… we have a small favour to ask. More people are reading the Guardian than ever but advertising revenues across the media are falling fast. And unlike many news organisations, we haven’t put up a paywall – we want to keep our journalism as open as we can. So you can see why we need to ask for your help. The Guardian’s independent, investigative journalism takes a lot of time, money and hard work to produce. But we do it because we believe our perspective matters – because it might well be your perspective, too.
I appreciate there not being a paywall: it is more democratic for the media to be available for all and not a commodity to be purchased by a few. I’m happy to make a contribution so others with less means still have access to information.Thomasine F-R.
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Making millions from chaos: the fund cashing in on the stock market collapse


Traders react to market volatility on the floor of Chicago Board Options Exchange. Photograph: Scott Olson/Getty Images
Stock markets gyrated wildly this week, and a lot of people lost a lot of money. But Chris Cole, a 38-year-old hedge fund manager from Texas, wasn’t one of them. He made millions from his fund’s bet on a financial apocalypse.
From his office overlooking the Colorado river in Austin, Texas, Cole runs Artemis Capital, a hedge fund that, since 2012, has been betting on a repeat of the 1987 Black Monday stock market crash.
Cole’s Artemis Vega fund, which he started with $1m and has now attracted nearly $350m of investors’ cash, is designed to “generate opportunity from chaos” – and he believes there is far more chaos coming.
His bets paid off this week as global stock markets collapsed, rallied and then fell again. Artemis is designed to benefit from such periods of turmoil and volatility. Market volatility, measured by the Chicago Board Options Exchange (CBOE) Volatility index known as Vix or the “fear index”, spiked 84% on Monday – the biggest one-day increase since the 1990s. It hit 50 on Tuesday and was around 30 on Friday, far higher than it has been for the last two years when it only poked above 15 a couple of times.
“It’s been a good week,” Cole said in a interview with the Guardian. “The explosion in the Vix and the rise in volatility is something we have been predicting, and waiting for, for a long time. We were well prepared to benefit from it.”
Cole was unable to say exactly how many millions his fund has made this week due to regulatory constraints, but he thought his investors would be “very pleased”.
He said Wall Street investors had been calling up all week to congratulate him on calling the market collapse. But Cole reckons that this week’s 1,500 point fall in the Dow Jones Industrial Average is “just the beginning”.
“The entire global financial system is an Ouroboros – a snake eating its own tail,” he said.
Cole has some dire predictions: “We are going to have a full-blown financial crisis on the same level as the last one, if not worse. I’m not saying the world is going to end in the next two weeks, but I would be surprised if it doesn’t happen in the next two years.”
Cole, who wears a watch which encourages him to live every day to the fullest by counting down his expected life expectancy, said the “blow up this week in short-volatility funds [which were betting that markets would remain tranquil] is just the canary in the coal mine.”
He said about $5bn is invested in Vix ETPs (exchange traded products) betting on stable markets, “but what people should be afraid of is a disorderly unwind of the much larger $1.5-2tn [invested] in financial engineering strategies that are leveraged to low volatility.” 
Chris Cole, Artemis fund founder.
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 Chris Cole, Artemis fund founder. Photograph: youtube
Cole said the collapse in Vix ETPs was analogous to the quant hedge fund meltdown of 2007, which preceded the 2008 financial crisis. “I do think another crisis of that magnitude will occur in the next few years.”
Cole said he has not worked out how much money he has personally made from his own money invested in Artemis, but joked: “If the market sells off the way I think it will, maybe I’ll buy a Bond-villain style base on a volcanic island in the Pacific.”

Since you’re here …

… we have a small favour to ask. More people are reading the Guardian than ever but advertising revenues across the media are falling fast. And unlike many news organisations, we haven’t put up a paywall – we want to keep our journalism as open as we can. So you can see why we need to ask for your help. The Guardian’s independent, investigative journalism takes a lot of time, money and hard work to produce. But we do it because we believe our perspective matters – because it might well be your perspective, too.
I appreciate there not being a paywall: it is more democratic for the media to be available for all and not a commodity to be purchased by a few. I’m happy to make a contribution so others with less means still have access to information.Thomasine F-R.
If everyone who reads our reporting, who likes it, helps fund it, our future would be much more secure.
theguardian.com

Thursday, January 4, 2018

Trump's tax bill has nothing to do with economics. It's brute-force politics

Donald Trump’s first legislative achievement is a monstrosity of doctrinaire conservatism that attacks education, healthcare and the lives of ordinary people
 Donald Trump holds an American flag made of wood as he speaks about tax reform alongside ‘ordinary Americans’ in the Oval Office this month. Photograph: Saul Loeb/AFP/Getty Images
The Republican party has achieved something nobody thought possible. They have taken the broken, regressive, loophole-riddled US tax code, and made it worse.
The Tax Cuts and Jobs Act of 2017 has nothing to do with economics. It is pure politics. Economists struggling to understand the unwieldy legislation are like biochemists attempting to explain contemporary ballet. Nobody seriously believes that the bill will boost growth. Everybody knows that it will massively increase the deficit; the only argument is whether it will be by $1.5tn, or just $1tn. The legislation has been drafted at breakneck pace, with few opportunities for costings or analysis: a recipe for errors. Senator Elizabeth Warren joked that she spent more time choosing her new refrigerator than the Senate managed for tax reform.
But for Republican lawmakers, the bill hits some very sweet political spots. Corporations? Check. The wealthy? Check. Obamacare haters? Check? When the deficit balloons, as it must, Republicans will then use that to justify cutting spending, especially on pensions and healthcare. Their cynicism is breathtaking. Their ruthlessness is impressive. Wait for the new Alabama senator, Doug Jones, to take his seat before voting? Are you kidding? There will be no waiting. This is brute force politics.
It is a tragedy, too. The only potential silver lining of Trump’s presidency was that he might do something to help the struggling middle class, Main Street not Wall Street. He ran on this very promise. But this bill offers the working class and middle class little or nothing – crumbs from the table at best. It provides a huge boon, however, to corporations and to the wealthy. This is not a populist tax bill. It is a plutocrat one.
For business-friendly congressional Republicans, three provisions in particular represent big wins: doubling the threshold for paying estate tax to $11m, slashing the corporate tax rate from 35% to 21%, and cutting the top rate of income tax to 37%. It is fitting that House Speaker Paul Ryan is heading for the exit. This is about as good as it will ever get for him.
Against a backdrop of rising inequality, the passage of this bill will mark an extraordinary triumph for doctrinaire conservative thinking. With control of both houses of Congress and the White House for the first time since 2005, Republicans have seized their moment.
During Trump’s ascent, congressional Republican leaders said, in effect, “He may be mad dog, but he’s our dog.” Ryan and Senate majority leader Mitch McConnell held their noses and hoped that, for all Trump’s populist rhetoric, they would be able to exploit his presidency to ram through some traditional Republican tax cuts.
For a while, it was not clear that Trump would be brought to heel. In one ear, he was being advised by Steve Bannon to raise taxes on the wealthy and give real cuts to the middle class. Into the other, multimillionaire treasury secretary Steve Mnuchin wanted surging tax cuts for the rich. Plutocrat Steve won the day; populist Steve has long since been banished. It says everything about the Trump administration that, on this single, narrow issue, it would have been a better one with Bannon still in it.
Trump describes the bill as “a great, big, beautiful Christmas present” for middle class Americans. But it’s not true. Even the handful of provisions helping ordinary families, such as an increase in the personal income deduction, will deliver modest gains. In the Senate version of the bill, on which the compromise version is largely based, families in the middle 20% of the income ladder families see a tax cut of less than $1,000 next year. Those in the top 1% will see an average $28,000 cut.
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Wealth inequality has grown even more rapidly than income inequality in the US. But Republicans seem to think that protecting massive inheritances from tax is the way to go. Already, the estate tax is only paid by the richest 0.2% of families. After the bill passes, that number will shrink to a mere handful. Most of them will find a way to dodge it by creative movement of money. As Gary Cohn, economic advisor to the president, helpfully explained, “only morons pay the estate tax”.
Worse, even the meagre initial benefits going to ordinary families are here today, gone tomorrow, because of two provisions in the bill that are not in the headlines. The income tax cuts expire in 2026 but the corporation tax cut does not. By 2026, many of the benefits for ordinary workers will have evaporated.
The bill is also likely to provoke a rush to self-employment. The dramatic cuts in rates for corporations and partnerships will create a huge incentive for workers to set themselves up as small businesses. A two wage-earner couple with an income of $250,000 a year would see little change in their tax bill; a couple with the same income generated through a small business would see an $11,000 annual cut, according to the Tax Policy Center.
To be fair, there are some elements of the bill that progressives would likely applaud in a different context. Reducing the cap on the mortgage interest deduction to $750,000 is a welcome step, hopefully the first towards gradual removal of this absurd and regressive provision. Capping state and local tax deductions at $10,000 will hit affluent taxpayers living in high-tax, mostly Democratic cities and states. It is a surgical strike on the liberal elite. But still, it is not clear why upper middle class Americans who choose to live in these places should be subsidized by those living in lower-tax, largely Republican areas.
The bill will not just impact the income and wealth of American households; it also has significant consequences for health and education. This is because the US does a huge amount of social policy through the tax code, one reason it is so complex.
The abolition of the mandate associated with Obamacare will help send healthcare markets into a death spiral, as the bill’s drafters know only too well.
Meanwhile, there is a tax boost in the bill for people sending their children to private elementary and secondary schools. Tax-exempt educational savings plans, known as 529 plans, previously restricted to spending during the college years, will be available for private K-12 education. Only affluent families benefit from these plans, of course, so it is yet another regressive element in a broadly regressive bill.
The Republican tax bill is sloppily designed and economically reckless. It is certain to lead to more tax avoidance and certain to massively increase the deficit. It provides a massive boon to the rich and little or nothing to the middle class and working class.
As such, it also represents a huge political risk. The gamble Republicans are taking is that the voters who put Trump into the White House will fail to notice that they are not among the beneficiaries of the first major piece of legislation to bear his signature. Trump is not draining the swamp. He is watering it.

Trump may celebrate his tax giveaway – but politically it could cost him dear

This bill stinks – the men behind it will benefit from it personally. But once it’s passed, the president is just that little bit less useful to Republicans
 ‘Donald Trump’s tax ‘reform’ is, in fact, a massive gift to the rich and super-rich.’ Photograph: Jim Lo Scalzo/EPA
Donald Trump is set to close this most turbulent year with his first big win. Today, barring a last-minute hitch, both houses of the US Congress will send the president a tax reform bill that he will sign with full ceremony. He’ll lavish praise on himself and say he’s making good on his promise to make America great again. Or as he put it via Twitter: “Biggest Tax Cuts and Reform EVER passed. Enjoy, and create many beautiful JOBS!”
The bill he’ll sign today is indeed the most substantial overhaul to the US tax system since Ronald Reagan’s tax cuts of 1986. Still, Trump and his fellow Republicans should pause before they knock back too much pre-Christmas champagne. This could be a victory that comes back to haunt them.
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 US House approves Republican tax legislation – video
For this bill hands the Democrats just the ammunition they need for their campaign to win back control of Congress in next November’s midterm elections. It’s unpopular – opposed by 55% of US voters, and supported by just 33% of them – and with good reason.
For this tax “reform” is, in fact, a massive gift to the rich and super-rich. By 2027, 83% of its benefits will go to the richest 1%. Sure, low-income Americans will see a modest improvement in their finances: the poor will save around $60 a year. But the big bucks go to those who already have the biggest bucks.
The mega corporations stand to gain the most, as their taxes fall from 35% to 21%. Republicans are trying to cast this as help for “America’s families and small businesses”, as if the chief beneficiaries will be the Mom and Pop who run the neighbourhood general store. But the reality is that Republicans are paying back the mighty plutocrats who have been bankrolling them for years. Admire the candour of congressman Chris Collins, who last month said of tax cuts, “My donors are basically saying, ‘Get it done or don’t ever call me again.’”
The stink coming off this bill is even more direct. The men who wrote, passed and will sign it will benefit from it personally. There are tax breaks for real estate tycoons in there, which will further enrich the likes of Senator Bob Corker and one Donald J Trump.
All Democrats need do next November is set those facts against Trump’s 2016 campaign talk, in which he promised to fight for the little guy even at his own expense. “It’s going to cost me a fortune,” he said of his tax plan back then. But it was all a trick. He took the votes of those left behind, and has used them to make himself and his pals even richer.
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And they will be the ones to feel the cost. Because you cannot reduce the amount coming into the public coffers by $1.5tn without cutting the amount coming out. There will now be even less money to spend on those who need it. Witness the health programmes for poor children cut for lack of congressional funding on the very day those same Republican congressmen and senators increased to $22m the amount a wealthy couple can leave to their children without paying a cent in inheritance tax.
Perhaps that moral shame doesn’t bother most Republicans. But the party did once pride itself on its fiscal conservatism. They can surely never make that boast again, not when they have passed a measure that will balloon the deficit by a trillion or more. They want to keep spending, including hundreds of billions on defence, even as they bring in so much less.
The right like to say that cutting taxes actually generates more revenue, because people are incentivised to work harder and earn more. But that is one hypothesis that does not need to be tested yet again. We know from the Reagan years, when the deficit mushroomed, that it’s nonsense. It gives magical thinking a bad name.
Trump will brag and crow, but there is a danger here for him too. Passing this tax cut has been the driving mission of the likes of House speaker Paul Ryan for decades. It’s why they’ve tolerated the daily outrages committed by Trump: they were ready to swallow anything for the sake of having someone at that Oval Office desk who would sign their tax bill. Once he’s done it, his usefulness diminishes. Should the Russia probe gather pace, should Trump’s poll numbers go even deeper underwater, then the passing of these tax cuts will lead some Republicans to conclude that he is no longer indispensable.
So let Trump and the Republican party have their celebration today. They may have reason to regret it tomorrow.
 Jonathan Freedland is a Guardian columnist

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