A mixed day with the Dow Jones down 1 point (-0.00%) and the Nasdaq up 44 points (+0.57%)

Not much new to report from the stock market, but red ink as far as the eye can see when it comes to budget deficits.

Over the last few years I have argued that Trump’s economic and tax policies will be disastrous for the long-term health of our Nation. Thus far, Mr. Trump has done the exact opposite of what he should have done.

So much so that Mr. Trump’s policies can be summarized in the following fashion. A drug addict going though slight withdrawal symptoms decides to go for it one more time with one giant infusion of pure heroin (tax cuts). And while that might feel wonderful for a moment or two, his impeding flat line is just around the corner.

So is the case with President Trump’s economic policy. He is not making America great again. He is bankrupting the nation at a pace that would make Ponzi operators Greenspan, Bernanke, Obama,  Bush Jr. and Yellen blush.

And we are beginning to see the fruits of his labor show up in official numbers.

US Budget Deficit Hits $530 Billion In 8 Months, As Spending On Interest Explodes

And here a problem emerges, because while Goldman claims that “the deficit path is known to markets, but academic research suggests these effects might not be fully priced immediately… the balance sheet normalization plan is known too, but portfolio balance effect models imply that its impact should be gradual” the bank also admits that “the precise timing of these effects is uncertain.”

What this means is that it is quite likely that Treasurys fail to slide until well after they should only to plunge orders of magnitude more than they are expected to, in the process launching the biggest VaR shock in world history, because as a reminder, as of mid-2016, a 1% increase in rates would result in a $2.1 trillion loss to government bond P&L.

In other words, things will get very ugly soon enough. If you would like to find out exactly when the stock market tanks, based on our mathematical and timing work, please Click Here

This stock market didn’t do very much today as it appears “the most important week for the market” might not live up to all of its hype.

Here is how the scam works. A corporation announces a multi-billion stock buyback at an all time bubble high valuation levels, followed by a pop in the stock price, followed by a barrage of insider selling to unsuspecting retail fools. A nice gig if you can get it.

We had a number of interesting views on the subject matter. Let’s take a look…..

SEC Frets about Share Buybacks, “Torrent of Corporate Trading Dominating the Market,” and “Short-Term Financial Engineering”

He reminded us that “in the years leading up to the financial crisis, top executives at Bear Stearns and Lehman Brothers personally cashed out $2.4 billion in stock before the firms collapsed.”

Tying executive pay to the growth of the company, he said, “only works when executives are required to hold the stock over the long term.”

Part of the problem is that the SEC has not yet turned the provisions in the Dodd-Frank Act that were “designed to give investors more information about whether and how managers cash out” into actual rules. Thus investors are still kept “in the dark about executives’ incentives.”

“But it’s not just that the regulations haven’t been finalized. It’s that the problem itself keeps getting worse,” he said. The new tax law “has unleashed an unprecedented wave of buybacks, and I worry that lax SEC rules and corporate oversight are giving executives yet another chance to cash out at investor expense.”

SEC Says Executives Dumping Shares on Buyback Announcements: No Skin in the Game

• In 385 buybacks over the last fifteen months, a buyback announcement lead to a big jump in stock price.

• In half of the buybacks, at least one executive sold shares in the month following the buyback announcement.

• Twice as many companies have insiders selling in the eight days after a buyback announcement as sell on an ordinary day. So right after the company tells the market that the stock is cheap, executives overwhelmingly decide to sell.

• On average, in the days before a buyback announcement, executives trade in relatively small amounts—less than $100,000 worth. But during the eight days following a buyback announcement, executives on average sell more than $500,000 worth of stock each day—a fivefold increase.

In simple terms, this is yet another red flat for our bubblicious stock market. 

I have argued in the past,with corporate buybacks being at record highs, that corporation are acting in foolish, but predictable way of buying their own stocks at record highs. The flip side of that view is corporate officers unloading their own shares to unsuspecting investors.

Criminal, unethical or above the board? None of that really matters. This is just another indicator that we are either at or approaching a bubble top. If you would like to find out what happens next and/or when the market will crater, please Click Here. 

The question above should be legitimately ridiculed as betting against anything Mr.Buffett has done over the last 70+ years hasn’t been a very good idea.

And if you listen to what Warren Buffett has to say right now you would be jumping in the market and buying stocks hand over fist.

Warren Buffett on Strong Economy: ‘If We’re in the Sixth Inning, We Have Our Sluggers Coming to Bat’

“Right now, there’s no question: It’s feeling strong. I mean, if we’re in the sixth inning, we have our sluggers coming to bat right now,” Buffett told CNBC Thursday.

Buffett, known as the “Oracle of Omaha” for his prowess in picking successful investments, forecasted that America’s economy would flourish in the coming years based on current trends.

“I’m no good at predicting out two or three or five years from now, although I will say this: There’s no question in my mind that America’s going to be far ahead of where we are now 10, 20 and 30 years from now,” Buffett added. “But right now, business is good. There’s no question about it.”

At the same time, Warren Buffett’s favorite valuation metric is screaming “Bloody Overvaluation”

What to believe? 

As I often tell investors, Warren Buffett is playing an entirely different game from eveyone else. Particularly individual investors. And while the latter tend to speculate in the stock market, Warren Buffett is the stock market.

More importantly, Warren Buffett has failed to warn investors of the impeding 2000 and 2007 crashes. Sure, if your time horizon is 10-30 years, Mr. Buffett is absolutely correct. Assuming you don’t mind losing 50%+ when the next crash comes.

If you would like to find out exactly when that crash comes, based on our mathematical and timing work, please Click Here

Have you ever wondered what in the world is keeping this incredibly overpriced and highly speculative market at today’s levels?

Here is one possible explanation…..

Huge New Prop under the Stock Market is a One-Time Affair

That $173.6 billion in share repurchase plans includes the record-breaking mega-announcement from Apple that it would buy back $100 billion of its own shares. Here are the top five that account for $134.3 billion, or 77% of the total:

• Apple: $100 billion
• Micron: $10 billion
• Qualcomm: $8.8 billion
• Adobe: $8.0 billion
• T-Mobile: $7.5 billion

To put that May total of $173.6 billion – these are just announcements of planned repurchases sometime in the future that may never fully transpire – into perspective: In Q1, total actual share buybacks reported by the S&P 500 companies amounted to $178 billion, an all-time record. That averages out to “only” $59.3 billion a month on average, compared to the announcements in May of $173.6 billion.

The author goes on…..

The note TrimTabs provided as to why these share buybacks are suddenly blowing off the charts is key: The corporate tax law has changed concerning the “repatriation” of “overseas cash” that represents many years of untaxed profits invested mostly in US Treasuries and corporate bonds. This “repatriation” is a one-time affair. Once this limited “overseas cash” has been “repatriated” and spent on share buybacks, dividends, and executive bonuses, it’s gone. And then what?

These immensely overvalued shares will then have to find real buyers.

But for now, companies are selling their Treasuries and corporate bonds, which have taken a beating recently, and are using the proceeds, while they last, to buy back their own shares at historically overvalued prices. This gives the market, that has been struggling since January 26, some crash insurance, but with an expiration date.

And there you go boys and girls.

As I have said so many times before, history teaches us that corporates always behave as retail investors do. That is, they buy at the top and sell at the bottom. In that regard their present stupidity makes perfect sense.

I will bet you my left kidney that their decision to purchase own stocks at today’s valuation levels will look very foolish when the stock market finally cracks and drops 50%+. If you would like to find out exactly when that will happen, please Click Here