First Bancshares Upgraded by Zacks Investment Research

First Bancshares has 3 insider buys in recent days after announcing the purchase of Alabama Bank. Zacks upgraded the stock to a Buy rating today.

First Bancshares stock was upgraded by analysts at Zacks Investment Research from a Hold rating to a Buy rating. They now have a $35 price target on the stock which represents 9.7% upside from the previous close of $31.90.

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KeyCorp Stock Bullish Flag Flush On Analyst Buy Rating

KeyCorp stock flushed today forming a bullish hammer, inside a Bullish Flag pattern. KeyCorp had its Buy rating reaffirmed by Keefe, Bruyette & Woods. Keefe has a price target of $21 on the stock which represents 13% upside from the previous close of $18.58.

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Lloyds Banking Group Pocket Pivot Cluster On Credit Suisse Upgrade

Lloyds Banking Group chart shows a pocket pivot cluster right before today's Credit Suisse upgrade of the stock to Outperform.

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Credit Suisse Stock Sees Heavy Buying Last Week

Heavy buying is taking place in Credit Suisse stock. Over the last 2 weeks there have been 7 bullish pocket pivot signals and the large players volume and Twiggs Money Flow is rising too.

Credit Suisse Group is a financial services company. The Company's divisions include Swiss Universal Bank, International Wealth Management, Asia Pacific, Global Markets, Investment Banking & Capital Markets, Strategic Resolution Unit and Corporate Center. It offers a range of private banking and wealth management solutions.

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Best Swing Trading Strategy Is In Financial Stocks Right Now

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Janet Yellen Testimony Economy Strong Enough For Rate Hikes

The US economy is healthy enough to absorb gradual rate increases and the reduction of the Federal Reserve's balance sheet, Fed Chair Janet Yellen testimony before Congress on July 12, 2017.

Federal Reserve Chair Janet Yellen told Congress on Wednesday that the bank hopes to keep raising a key interest rate and also intends to begin this year, the reduction of its bond holdings.

Yellen took note of several factors, such as household wealth and job gains that she said should fuel growth.

In what could be one of her last appearances on Capitol Hill, Yellen portrayed a market that, while growing gradually, continued to add jobs, gained from continuous household consumption and a recent leap in business investment, and was currently being supported too by stronger economic conditions overseas.

She blamed the economic slowdown in the first half of 2017 on inflation. She said Fed officials are watching developments closely to be certain price gains go back toward the 2 percent inflation target of the Fed.

Janet Yellen Testimony Freak Out Over Inflation

Janet Yellen seemed a little freaked out over the big drop in inflation over the last few months.

I take Yellen's comments on inflation to mean that the economy should not have the CPI plunging in this part of the economic cycle. In fact, just the opposite should be occurring. But she added that it was considered by officials as an anomaly; inflation is predicted by the Fed next year.

Many economists believe the Fed, which has raised rates three times, will increase rates yet another time this year.

The Fed continues to anticipate that the development of the market economy will justify gradual increases in the federal funds rate over time while reductions in the Fed's holdings of more than $4 trillion in securities will probably start “this year”.

In her prepared testimony before the House Financial Services Committee, Janet Yellen testimony repeated the message she's been sending: the market has improved enough that it no longer requires the support the central bank began providing in 2008 in the aftermath of a serious financial crisis and the deepest recession since the 1930s.

In light of the continuing expansion, the Fed plans to keep raising its benchmark rate of interest and to lower its investment holdings, Ms. Yellen said in prepared testimony. She did not offer details concerning the time of the next actions of the Fed. Analysts expect the Fed to begin shaving its bond portfolio before the end of 2017.

The economy began the year with a slow growth rate of just 1.4 percent, it has regained momentum in recent months, aided by strong job gains, a revival of business investment and a strengthening of international markets.

Bottom line: the market is at full employment and the Fed is moving rates. As the Fed reinvests some of the bond holdings which mature monthly, they will decrease that reinvestment to reduce their balance sheet which will mark the beginning of QT (quantitative tightening). Many believe that QT began this year when the Fed did a series of rate hikes.

The Fed needs to keep policy accommodative to keep on supporting the recovery, but may hit a “neutral” rate quicker than anticipated. Estimates are that inflation has been dropping so fast that we could be near zero right now. Yellen has said the Fed expects estimates of the inflation rate to grow over time.

Yellen said in her testimony that as it stands rates “might not need to rise all that much farther” to reach neutral.

Yellen said growth remains moderate with business investment and consumer spending picking up, and the US economy is benefiting from growth in other countries too.

A strengthening in economic development abroad has provided significant support for U.S. manufacturing production and exports, Yellen said.

The Fed slashed its key policy rate to near zero to fight the worst economic recession since the 1930s, and kept it there for seven years before nudging it higher in December 2015. It left the rate unchanged before increasing it again in December 2016, March 2017, and June 2017 of this year.

At its June meeting, the Fed indicated that it expected to start decreasing its $4.5 trillion balance sheet after this year, a measure that could put slow upward pressure on longer-term prices for such things as home mortgages.

Yellen said, the market seemed to be in a virtuous loop of hiring, investment and spending which should increase resource usage somewhat further, thereby fostering a quicker rate of wage growth and price increases.

The Janet Yellen testimony was fairly uneventful except for her comments on falling inflation which seemed to baffle the Fed as to why this was happening at this point during the economic cycle.

Best Bank Stocks To Buy Now That Fed Has Given Green Light For Dividends

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Central Bank Balance Sheet Reduction Could Crash the Market

The central bank balance sheet reduction could crash the market according to David Quintieri (link above). The Fed is engaging in its most dangerous policy move in the last 10 years with its simultaneous moves to raise rates and to unwind its $4.5 trillion balance sheet.

One of the things I don't understand about this unwinding move from the Fed is who will buy all that toxic debt? If memory serves me correctly, most of the Fed's balance sheet is garbage toxic debt (mortgage-related securities) that no one wanted to buy and to divert a complete crash of the US economy almost 10 years ago, the Fed swooped in and bought this radioactive toxic debt. Who would want to buy this debt?

Central Bank Balance Sheet Reduction

My own economic ignorance aside as to who would be willing to buy this toxic debt from the Fed, the Fed has never before had to find buyers to shrink its balance sheet. The unwinding of the Fed's balance sheet is going to be a big challenge IMO.

Current US law states that the Federal Reserve has to be reimbursed by the US Treasury once it realizes the losses by selling the bonds. Interest rates are going up so central bank balance sheet reduction must take place. If the Fed sells a bond at a loss, that loss must be reimbursed to the Fed by the US Treasury. Congress has to send the Fed the money it lost. Congress needs to raise the debt ceiling to a high enough level to reimburse the Fed for its losses on the toxic mortgage backed securities it sells. In other words, central bank balance sheet reduction adds to the national debt.

China Debt Backed By Ghost Collateral

Lots of China debt is not backed by anythingLots of China debt is not backed by collateral even though accounting records and bank records show the debt is backed by collateral according to a new report by Reuters (link above).

When a Chinese bank makes a loan, auditors will go to a site to make sure that the collateral is there. The problem is that the collateral is often moved so that it simply vanishes when a bank goes to seize collateral after a bank loan goes bad.

The collateral is moved around to secure loans from multiple lenders. Reuters reports that a lawyer discovered that the same pile of steel was used to secure loans from 10 different lenders.

China Debt Secured By Missing Collateral

US investors and traders have known about China's ghost collateral problems since 2014. The fact that much of China's debt is unsecured is one of the reasons why I stay away from investing in Chinese companies via ADR listings in US markets.

Folks, much of China's incredible loan origination growth has been built on nothing but hot-air. Hundreds of billions of dollars (maybe trillions) worth of loans are fraudulent as the collateral underwriting that China debt has been rehypothecated (like the Fed's gold scheme) between many different debtors. If the Chinese economy suffers a hard-landing, banks will not be able to recover much of the pledged collateral. This will cause the hard-landing to spread outward like a tsunami through the financial banking system and China will be faced with a crisis like the 2008 global financial crisis.

The 2008 global financial crisis was the result of lax lending standards and overvalued collateral (i.e. houses). When the value of houses fell in the U.S., there wasn't enough collateral to back the highly leveraged lending in subprime mortgages and the entire financial system collapsed. China is now facing its own collateral crisis with Moody's downgrading China for the first time in 28 years. I wonder what debt rating agencies are going to rate China debt now that everybody knows that much of that debt lacks genuine collateral?

Just like our financial crisis in 2008 pulled down the rest of the world, so too will China if their financial system collapses.

EPAM Systems Lands Giant UBS Multi-year Agreement Valued At Over $300 Million

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