Who benefits from Trump’s 401(k) question?

President Trump asked American workers Tuesday “How’s your 401(k) doing?”

With the backdrop of the “tax cut” that really isn’t for many middle class Americans, the president was trying to put a band-aid on the plan by saying you have a windfall with profits from the stock market. Continue reading

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Fill it up, Joe, cause I can't retire.

There are a few reasons why crude oil having a $20 handle is not beneficial to equity market and US investors. So while saving $2.00 on a fill up to pay for a cup of coffee seems Ok, the $2,000 you lost in your 401(k) is not.

Look at why gas is so cheap. The price of oil is being used as a weapon and the war has many fronts.

  • Saudi Arabia is keeping the price low to cripple US fracking operators.
  • The world’s global economy is in a recession, so usage falls as does the price.
  • The strong dollar is beating up the price of crude.

In the US, this price war is having a disastrous effect on drillers, frackers and the whole infrastructure in the Midwest and Texas. The industry has lived off of junk bond funding, with large banks such as Wells Fargo along with smaller regional banks being on the hook for these now non-performing loans.

The chase for yield has many other big players in the oil patch purchasing this dubious paper. Reports say that the Dallas Fed is trying to stem this contagion by asking note holders not to force bankruptcies, but to look to consolidate the industry.

So what happens, when hedge funds, private equity funds and others see loses and the need to provide more collateral to their loans due to losses? They short equities through futures as a hedge. When that becomes to crowded a trade they sell what they can, not what they want.

The Dallas Fed has also reportedly suspended mark-to-market on the toxic paper in order to window dress the troubled firms balance sheets and help the troubled banks not have to take write downs or hold further capital against the bad paper.

This is a big part of the 11% cratering in the Nasdaq over the last two weeks as the FANGs — Facebook, Amazon, Netflix and Google — have been put on auction by the same players who ran them up.

So sip your free coffee and newspaper and look at the sports pages to see who won yesterday, but remember that free java is causing agita to your retirement fund.


 

If you are Lloyd Blankfein, what does it say about your firm, Goldman Sachs, that the Democratic candidates vilified — especially Bernie Sanders — you and the company directly more times than Republican presidential candidate Donald Trump?

The last thing any Goldman banker expected to hear when tuning in to the debate was the firm being put on the grill.

Also let’s clear up some history that Sanders mentioned. Bill Clinton had Robert Rubin as Treasury Secretary who was Co-Chairman and Co-Senior Partner before leaving for Washington. Rubin was instrumental in repealing in 1999 the  Glass–Steagall Act and the regulations on derivatives through the CFTC.

Both these acts have a direct line to the cause of the bank crisis of 2007-2008. Upon leaving Washington, Rubin would take a leadership position with Citigroup, which benefited greatly from the repeal of Glass–Steagall.

George H.W. Bush had Hank Paulson as his Treasury Secretary. Paulson was Chairmen and CEO of Goldman prior to leaving for Washington. Paulson’s legacy is still being formed, but his three-page budget requesting $800B+ scratched out on legal pad, should be noted by financial historians.

 

What is the GDP impact from California drought?

Generally speaking a 270 point rise in the Dow Jones industrial average — like that on Friday — is a good thing for investors and 401(k)s, generally.

Friday soaring stock averages was not based on a good thing however.

Equities rose on a tepid jobs number for April (223k) and a huge revision downward in March to 75k to celebrate the fact that easy money is in the offering for at least 6 more months. Readers here know I have said all along that there will be no rate rise this year.

So Main Street investors did jump in on this news, no this money came from institutions and overseas. It’s not based on fundamentals, it’s based on return.

The whole rise from the day was in by 10am and churned sideways until the close.

So for all you newly hired bartenders and waitresses, here’s to you. If you had a 401(k) then you could raise a glass with us. But there are no bennies with that job.


I recently put out a question on Twitter, which I will pose here as well.

What are the expectations of GDP, when you figure in the California drought?

Sixth largest economy in the world if it stood on its own, what effect will it have on Q2 and Q3 US GDP?

I’ll venture a guess this will be the newest reason that equities soar when we go negative growth for three quarters this year.