Saturday Market Prediction Show For Week of October 23 2017

A weekly Saturday night financial show that attempts to predict market direction for the week ahead by looking at a variety of technical and fundamental indicators. Included are stocks that could trend higher over the coming days and weeks driven by strong catalysts or strong fundamentals.
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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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Goldman Sachs Beats, Plans to Repurchase $8.7 Bln Worth of Stock

Goldman Sachs beat on earnings and revenue. Goldman reported $5.02 earnings per share for the quarter, beating the estimate of $4.17. Revenue also beat coming in at $8.33 billion during the quarter versus the $7.59 billion estimate.

For the first time ever, Goldman Sachs disclosed its buyback target. Chief Financial Officer R. Martin Chavez said that Goldman Sachs Group expects to spend $8.7 billion repurchasing shares from investors.

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Federal Government Tax Revenue Proves Economy In Big Trouble

Looking at Federal Government tax revenue is an excellent way to measure the health of the economy. Most investors overlook using tax receipts as a way to cut through the political propaganda in the mainstream financial media and to see the economy the way it really is.

Federal Government Tax Revenue Dropping Fast

Government tax receipts are falling fast. In fact, the Washington Post (link above) reported last week that the Trump Administration has warned that because tax receipts are coming in so slowly, the government could run out of cash sooner than expected if the debt ceiling is not raised.

Democrats and Republicans ran this country into the ground by bringing this country to the edge of bankruptcy at $20 trillion in debt. But there’s more. Democrats increased government regulations and raised taxes at the same time to pay for those regulations. This has made the economy so weak (increased government regulations shift the supply curve inward) that now Federal government tax revenue is falling. Worse, we have the Democrat-appointed Janet Yellen raising rates into the weakening economy. That’s a really bad combination. I get the argument that the Federal Reserve needs to hike rates and push up bond yields to stop pension funds from collapsing. But that’s a big gamble by the Fed that could result in a bear market.

How To Invest In The Coming Wave of VR

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Macroeconomics of Rising Interest Rates

The prospect of a Federal Reserve rate hike is driving up the US dollar. The rising US dollar has a significant impact on the US economy and thus stock market. It’s important that traders understand the implications of a rising US dollar from a macroeconomic perspective.
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Here Comes Inflation FINALLY! Traders Focus On Earnings

We have enough data to say that inflation is finally trending higher.

In case you are wondering why inflation moving higher is important, please review this.

The less volatile sticky CPI confirms the uptrend.

ObamaCare has exploded the cost of medical care higher.

Medical care commodities, which are prescription and non-prescription medications, have exploded higher.

Inflation is finally trending higher which is what the Federal Reserve has been trying to engineer for years through monetary policy. The WSJ writes

Fed Chairwoman Janet Yellen herself said last week that letting the economy run hot for a while might have some benefits… None of this is enough to take a rate increase at the Fed’s December meeting off the table. But it does mean that, even as prices pick up, further rate increases will be slow to come. Investors accustomed to inflation running below the Fed’s target may be in for some retraining.

Folks, this is another reason why we need to start getting more bullish on the stock market as we head into November and the start of the best six months of the year. Remember, a big part of the bearish scenario was a slowing US economy pressured downward by deflation as a result of Saudi Arabia destroying our shale oil industry. Lots of good jobs were lost and replaced by lower paying service sector ones as a massive wave of disinflation hit our economy. The latest inflation numbers suggest that the worst is behind us as the price of oil is in a slow fade upward, and more oil rigs are brought back online as evidenced by the upward trend on the weekly Baker Huges rig count.

All traders are watching this earnings season closely to see if the falling earnings streak is over. That’s the confirmation data point that is needed. In an inflationary environment, businesses are raising prices to keep up with the growing demand from a strengthening consumer. Traders want confirmation that the inflation we are now seeing is signaling a bottom in the earnings recession we have been in since Q1 of 2015.

The Aggregate Supply-Aggregate Demand Model

Looking at the aggregate supply (AS), aggregate demand (AD) model, we can see where the US economy is currently at in the economic cycle. It is critical that traders and investors understand where we are at in the business cycle so as to be in on the right side of the trade. Timing Bull/Bear cycles and sector rotation is a critical skill for traders.
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Terrifying US Pension Fund Charts

Pension funds in the US could be close to a collapse. There is an estimated $1.9 trillion shortfall in U.S. state and local pension funds because of low-interest rates and a sideways US stock market. Even stocks falling overseas is a problem for pension funds.

Credit Suisse published the chilling chart below on the funding gap at the largest 100 US pension funds.

Bloomberg writes

Pensions count on annual investment gains of more than 7 percent to cover much of the benefits that come due as workers retire. But public plans had a median increase of 1 percent for the year ended June 30, the smallest advance since 2009, when they lost 16.2 percent, according to the Wilshire Trust Universe Comparison Service.

Now it seems like there is a run on the Dallas Police and Fire Pension as employees try to claim benefits before the system becomes insolvent.

Pension funds are starting to drop hedge fund investments. Turn To 10 writes

Rhode Island plans to scale back its investments in hedge funds by more than $500 million over the next two years, and reallocate those funds to more traditional investments with lower fees.

Pension funds like Rhode Island are starting to be more defensive and are hunkering down. The problem though is that defensive US Treasury bonds mean way below 7 percent returns which means more shortfalls in funding are coming.

There’s no way pension funds can stay above water in an environment with low-interest rates and with equity markets at valuations that are sky high.

But wait, Democrats say everything is good, just look at consumer confidence that came out this week at 104.1.

consumer-confidence

There is massive offshoring of good paying US jobs, stagnant wages, soaring costs of health care and education, contraction in manufacturing, falling retail sales, and consumers pensions are dangerously close to collapse. Meanwhile, consumer confidence is hitting multi-year highs? Consumer confidence is starting to look like just another tool of public manipulation that’s out of touch with reality on the street.

With So Much Debt In the US Economy, Is It Even Possible To Grow Faster?

The US national debt just broke above $19.5 trillion. Both Democrats and Republicans are to blame, but it is important to note that President Obama and Democrats increased the national debt more than all President’s before combined.
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