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US Bankruptcies Jump 18% In 2023 Amid High Interest Rates

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US Bankruptcies Jump 18% In 2023 Amid High Interest Rates

Authored by Naveen Athrappully via The Epoch Times,

Overall bankruptcies in the United States jumped by almost a fifth in 2023 as both businesses and households struggled with high-interest rates and the end of pandemic stimulus.

Total U.S. bankruptcy filings rose by 18 percent to 445,186 last year, up from 378,390 filings in 2022, according to data from Epiq AACER, a provider of U.S. bankruptcy filing data. This includes both commercial and personal bankruptcy filings until the month of November. “As anticipated, we saw new filings in 2023 increase momentum over 2022 with a significant number of commercial filers leading the expected increase and normalization back to pre-pandemic bankruptcy volumes,” said Michael Hunter, vice president of Epiq AACER.

“We expect the increase in number of consumer and commercial filers seeking bankruptcy protection to continue in 2024 given the runoff of pandemic stimulus, increased cost of funds, higher interest rates, rising delinquency rates, and near historic levels of household debt.”

Overall commercial filings grew to 25,627 last year from the 21,479 registered in the previous year, an increase of 19 percent.

Commercial Chapter 11 filings rose from 3,819 to 6,569, an increase of 72 percent. Chapter 11 bankruptcy filings are made by companies to restructure debt and allow the businesses to retain assets while drafting a plan to pay back what they owe.

Personal bankruptcy filings rose 18 percent to 419,559 in 2023, with Chapter 13 filings increasing by 18 percent and Chapter 7 by 17 percent.

Chapter 13 is used by individuals to restructure their debts. A big benefit of Chapter 13 filing is that the individual’s home will not be at risk of foreclosure when the proceedings are underway. They can repay some debts in full and others in part. To qualify, the individual has to meet certain debt threshold conditions and must have regular income.

Chapter 7 allows filers to be exempt from certain debts while giving up some of their assets. Only individuals with incomes below their state’s median income can qualify.

Commenting on the higher bankruptcy filings, Amy Quackenboss, executive director of the American Bankruptcy Institute (ABI) said that “as interest rates remain elevated, increasing geopolitical tensions weigh on global supply chains and debt loads continue to grow, struggling businesses and families can turn to the proven process of bankruptcy for a financial fresh start.”

Loan interest rates for businesses and households have risen over the past two years due to the U.S. Federal Reserve’s rapid rate hikes. In late December 2021, the federal funds rate was around 0.7 percent, which has now grown to 5.33 percent.

Rising Bankruptcies

According to a report by S&P Global Market Intelligence, there were 591 corporate bankruptcy filings in 2023 until November, which is the highest for this period since 2020 and the second highest since 2010.

S&P’s bankruptcy tracker covers two types of businesses: (a) public or private firms with public debt who have assets and liabilities greater than or equal to $2 million at the time of bankruptcy, and (b) private companies with assets and liabilities greater than or equal to $10 million at the time of bankruptcy.

The consumer discretionary sector saw the most number of bankruptcy filings at 76, followed closely by industrials and health care at 75 each, financial at 34, and consumer staples at 23.

“The end of ultra-low interest rates that started in 2008, ushered in a resurgence of bankruptcy filings” but the trend could normalize going forward, Art Hogan, chief market strategist at B. Riley Wealth said in an interview with Reuters.

Amid a high-interest rate environment, companies are struggling to repay debts that are currently maturing.

“Retail will be a particularly hot sector next year [for bankruptcies]. … There are plenty of retailers that saw a boom in profit during the pandemic that have since dried up,” said Catherine Corey, global head of restructuring data at Debtwire.

In an interview with Business Insider in late November, Collin Martin, Charles Schwab director and fixed income strategist, estimated that borrowing costs for some businesses doubled or even almost tripled last year compared to the previous years. This has put financial pressure on firms.

“When corporations are managing their balance sheets and looking to issue or refinance debt, they have to issue debt with significantly higher yields than what they’ve seen over the past number of years, and that’s just a big hit to their earnings. It’s more interest they have to pay, which can affect their corporate profits in an environment where revenues are already slower,” he said.

As to personal bankruptcies, many Americans are now not in a good financial condition. According to data from the Federal Reserve Bank of New York, household debt hit a record $17.29 trillion in the third quarter of 2023.

While debt is high, the personal savings rate is at a low level. Data from the Federal Reserve Bank of St. Louis shows that the savings rate in November was 4.1 percent, lower than the pre-pandemic rate of 6.4 percent in December 2019.

It is also far lower than the very high savings rate seen during the pandemic—32 percent in April 2020 and 26.1 percent in March 2021.

Tyler Durden
Fri, 01/05/2024 – 14:45

North Korea Fires Hundreds Of Artillery Rounds Toward South’s Border Islands

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North Korea Fires Hundreds Of Artillery Rounds Toward South’s Border Islands

Tensions are once again ratcheting on the Korean peninsula, after North Korea fired over 200 artillery rounds off its West coast which landed near the South’s Yeonpyeong and Baengnyeong Islands on Friday.

Seoul condemned the “provocative act” while the North responded by saying the islands weren’t in danger due to these drills. There have been no casualties, and the shells appear to have fallen harmlessly into the sea, but there are fears of a repeat of a 2010 incident which saw North Korean artillery fire killing four people on Yeonpyeong island.

South Korea’s military responded by launching live-fire drills of its own in the same area. Drills were initiated on Yeonpyeong in particular by marines stationed there, with alerts telling civilians to stay sheltered during the exercises. South Korea’s Joint Chiefs issued a statement warning the Kim Jong Un government that it is “solely responsible for this escalating crisis” and urged his regime “to stop immediately.”

North Korea’s artillery fire is in apparent response to more joint US-South Korean drills. These fresh live-fire exercises the day prior, Thursday, were also provocatively close to the border with North Korea.

The US Army said the focus is joint combat readiness, with South Korea’s Capital Mechanized Infantry Division and the US Stryker Brigade Combat Team from the 2nd Infantry Division participating in the exercise.

It marked the allies’ first joint training of the year, and importantly, it involved more than just ground fire and maneuvers, according to Yonhap: 

The drill involved 110 weapons systems from South Korea and the U.S, including K1A2 tanks, A-19 combat aircraft, Stryker armored vehicles and artillery systems.

The exercise simulated A-10 combat aircraft’s precision-guided strike on simulated targets, K1A2 tanks’ firing and integrated tank-air defense shooting.

File image, AFP/Getty 

The presence of US tanks and combat aircraft near the border, engaged in live fire drills to boot, is especially alarming from Pyongyang’s perspective.

Given last year involved increased tit-for-tat ‘shows of force’ from both sides, especially after the US docked a nuclear submarine in a South Korean port, this trend is expected to continue in 2024.

Tyler Durden
Fri, 01/05/2024 – 14:25

Judge Shuts Down New Attempt To Remove Trump From Ballot

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Judge Shuts Down New Attempt To Remove Trump From Ballot

Authored by Jack Phillips via The Epoch Times,

A federal judge in Wyoming rejected a motion that called for former President Donald Trump to be removed from the state’s ballot – claiming that he is not eligible to become president under an interpretation of the Constitution’s 14th Amendment.

Albany County District Court Judge Misha Westby dismissed the case “without prejudice,” which means the plaintiff, Tim Newcomb, can bring it again, according to court papers that were posted by lawyer and former California GOP chairwoman Harmeet Dhillon on X, formerly Twitter, this week.

“Not again! Yes again …Wyoming federal judge threw yet another 14th amendment challenge out on its ear today. Bye!” she wrote.

The plaintiff had sought to “preclude the names” of both President Trump and Sen. Cynthia Lummis (R-Wyo.) from appearing on the state’s ballots, attempting to argue that the former president violated his oath of office for his activity around the breach of the U.S. Capitol on Jan. 6, 2021. Mr. Newcomb, in his challenge, claimed that Ms. Lummis also betrayed her oath of office for refusing to certify the 2020 election results in Pennsylvania.

A former attorney, Mr. Newcomb wrote that his complaint “grounds the two facts required by the 14th Amendment to disqualify traitors from ever again holding office,” referring to the former president and the GOP senator. He also asked the state court to ”reserve judgment until the meaningful opportunity to be heard allows [me] to demonstrate relevance and admissibility of adjudicative facts,” which cited more than 250 news articles about the former president.

Some of the articles he referenced appeared to contain claims that President Trump had colluded with the Russian government. A 2019 Department of Justice investigation headed by former special counsel Robert Mueller later found there was no evidence that the former president had colluded with the Kremlin.

According to the Cowboy State Daily, when reached for comment last month, Mr. Newcomb pointed to footnotes in a recent court filing, including a Wikipedia article that links to “stochastic terrorism,” a CNN report about threats allegedly made to the Colorado Supreme Court, and a YouTube video including an interviewer who questioned about reported threats to public officials.

It came as Wyoming Secretary of State Chuck Gray, a Republican, filed a motion to dismiss Mr. Newcomb’s lawsuit, describing it as “repugnant.”

“The attempt to remove Donald Trump and Cynthia Lummis from the ballot is outrageously wrong and repugnant to our electoral process,” Mr. Gray said in a statement.

“Today, we filed a motion to dismiss this blatant, radical attempt to interfere with Wyoming’s elections. The weaponization of the Fourteenth Amendment to remove political opponents from the ballot undermines the sanctity of the Constitution. We are committed to protecting the integrity of our elections and ensuring that the people of Wyoming can choose who to elect for themselves.”

The lawsuit was also criticized by at-large Wyoming House Rep. Harriet Hageman (R-Wyo.), who defeated former Rep. Liz Cheney (R-Wyo.) in her reelection bid during the state’s primary.

“These boneheaded attempts to keep President Trump off the ballot have sadly made their way to my state of Wyoming,” Ms. Hageman said in a statement.

“This is an attempt to use the court system to interfere with an upcoming election and deny voters the chance to support a candidate of their choosing. Nothing could be more tyrannical than that.”

Wyoming, a solidly red state, overwhelmingly went for President Trump in 2020. It means that if he were to be struck from the state’s ballots, it could be damaging to the former president’s 2024 chances.

In recent days, multiple federal judges have dismissed 14th Amendment-related challenges to prevent President Trump from appearing on various state ballots.

A judge in California this week rejected a suit “with prejudice” after a plaintiff argued they suffered “emotional injury” from watching news reports and reading media outlets’ descriptions of the Jan. 6 breach.

The California judge wrote that because the events occurred “more than two years before the plaintiff” filed the lawsuit, the challenge was outside of the two-year statute of limitations, according to Ms. Dhillon, who posted the court papers on X.

Several other federal judges have also dismissed attempts to block the former president from appearing on ballots. In a ruling issued in late December 2023, U.S. District Judge Leonie Brinkema wrote that the plaintiffs—two activists—who filed suit against President Trump in Virginia to keep him on that state’s ballot lacked standing.

But at least two of those 14th Amendment challenges have seen some success in Maine and Colorado. However, there has been widespread speculation that higher courts or even the U.S. Supreme Court will strike those decisions down.

Colorado’s Supreme Court ruled to keep the former president off the primary ballot in the state in mid-December, which was promptly appealed to the Supreme Court. And last week, Maine Secretary of State Shenna Bellows, a Democrat, unilaterally decided to keep President Trump off the ballot. Her order also has been appealed by President Trump.

Tyler Durden
Fri, 01/05/2024 – 14:05

AP Frames LGBTQ School Shooter As A Victim

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AP Frames LGBTQ School Shooter As A Victim

Authored by Steve Watson via Modernity.news,

The Associated Press published an article Thursday claiming that the latest school shooter was a victim of bullying.

Yes really.

The shooting at Perry High School in Iowa claimed the life of a sixth grader and injured several others.

It quickly emerged that the now deceased shooter, 17-year-old Dylan Butler, had a social media footprint showing he identified as trans nonbinary.

The social media footprint then started to mysteriously disappear from the internet and the reframing of the narrative began.

The AP published a piece with the headline ‘He got tired of the bullying,’ classmates say of shooter, and detailed how Butler had been “bullied relentlessly since elementary school.”

Others expressed sympathy for the child murderer:

The Advocate, a long running LGBT outlet, asserts that right wingers are “gleeful” that the shooter “may have been LGBTQ+” just because some pointed out that there is a recurring pattern and clear mental health problem here that is being encouraged by the media, government and society in general.

While other school shootings are in the media for weeks, coverage of this one has already pretty much ceased.

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews

Tyler Durden
Fri, 01/05/2024 – 12:05

What The Fed Accomplished: Distorted The Economy, Enriched The Elites, & Crushed The Middle Class

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What The Fed Accomplished: Distorted The Economy, Enriched The Elites, & Crushed The Middle Class

Authored by Charles Hugh Smith via OfTwoMinds blog,

The mainstream holds the Fed is busy planning a return to the glory days of zero interest rates, but ZIRP is on the downside of the S-Curve; it’s done, gone, history.

Let’s summarize what the Federal Reserve accomplished since embarking on its massive interventions to control volatility, risk, bond yields, interest rates, the mortgage market, bank subsidies and liquidity, all of which can be summed up as the cost of credit-capital, that is, capital that is borrowed into existence based on some form of collateral or income stream.

By artificially suppressing the cost of capital to less than inflation, the Fed succeeded in:

1. Fatally distorting the economy.

2. Greatly enriching the already-rich at the expense of the bottom 90%.

3. Crushing the middle class and reducing the bottom 90% to debt-serfs.

Let’s consider how the Fed fatally distorted the economy by suppressing the cost of capital to less than inflation. Recall that the Fed crammed ZIRP–zero interest rate policy–down the throat of the economy from 2009 to 2020, while official inflation ate up 22% of the purchasing power of the dollar. Inflation was never 0%, so the cost of capital for corporations and financiers was actually negative, i.e. less than inflation.

Reducing the cost of capital had multiple distorting effects. A useful analogy is the critical role of “keystone species” in maintaining healthy, diverse ecosystems.

Risk and competition are the vital forces enabling a diverse ecosystem. Once the keystone predators have been eliminated (starfish, wolves, et al), the species freed from risk and competition overwhelm the ecosystem and crowd out healthy diversity. These species end up destroying the ecosystem via overgrazing, destruction of forests, etc.

The same dynamic, enforced by the Fed, has gutted the US economy. Corporations and financiers with virtually unlimited access to near-zero cost capital were freed to buy up hundreds of smaller competitors, buy back trillions of dollars of their own shares to enrich the already rich managers and large shareholders and leverage their assets and cash flow into Empires of Debt which could be sold or taken public (WeWork, et al) reaping enormous profits–profits unavailable to wage earners and those who did not have the opportunity to acquire assets before ZIRP inflated the Everything Bubble.

It’s been estimated that the majority of the S&P 500 / stock market’s rise from 667 in 2009 to current levels around 4,700 was solely the result of corporate buybacks that reduced the number of shares. This artificially increased the revenues and earnings per share. (Buybacks were once illegal, for good reason.)

All these trillions in near-zero cost capital flowed into manipulation, speculation and the reduction of competition, not into boosting productivity, efficiency or innovation. The net result of the Fed’s ZIRP is an economy stripped of diversity, an economy dominated by bloated monopolies, cartels and platforms generating low-quality, addictive goods and services which reduce productivity on multiple fronts.

Lowering the cost of capital to near-zero also changed the incentives of corporate and banking leaders. The enormous profits flowed not from developing higher quality goods and services or improving customer service; they flowed from manipulating markets with near-zero cost capital, borrowing fortunes against corporate commercial real estate and distributing the gains to shareholders and managers.

Near-zero cost capital rewarded speculators and CEOs who leveraged financier plays, not those investing for the long-term in America. The Fed’s distortions are fatal because they stripped the economy of incentives that are positive for the nation, not just for corporations and the already-wealthy.

Lowering the cost of capital to zero also distorted the balance between labor and capital in favor of capital, as the already-wealthy, i.e. those who already owned collateral and cash flows, could leverage up their assets and income to borrow vast sums at near-zero interest to scoop up income-producing assets. Mere wage earners could not compete and so wealth and income flowed to the top 01%, top 1% and top 10%:

This concentration of wealth and income came at the expense of the middle class, whose share of the nation’s wealth plummeted:

Suppressing the cost of capital also incentivized over-borrowing / the runaway expansion of debt as interest payments are so cheap, why not borrow as much as possible and invest the money in higher returns and “shovel-ready” government projects?

This fueled global carry trades and the runaway expansion of both government and private-sector debt, debt loads which are increasingly crushing as interest rates slowly return to historic norms. In effect, we’ve borrowed $3.50 to eke out $1 in GDP expansion–$3.50 that will accrue interest until it is paid off, something that never happens in government debt and rarely happens in corporate / commercial real estate debt. Rather than being paid off, debt is simply rolled over into new debt.

The Fed’s cover stories were bringing demand forward and goosing the wealth effect: lowering interest rates to near-zero encouraged enterprises, agencies and households to borrow and spend money now rather than in the future, and dropping interest rates inflated asset bubbles, making the already-rich feel even richer, on the theory that this emotional response would generate more borrowing and spending.

The fatal flaws in these policies are becoming apparent. Bringing demand forward eventually soaks up all available income, over-leverages assets such as commercial real estate, and increases inflation as limitless capital chases limited goods and materials.

As for the wealth effect, only the top 10% who own 90% of all assets and reap 50% of all income felt the wealth effect. Everyone else simply dug themselves a deeper hole of debt to service, what’s known as debt serfdom.

The mainstream holds the Fed is busy planning a return to the glory days of zero interest rates, but ZIRP is on the downside of the S-Curve; it’s done, gone, history. Higher rates are built into an economy that was stripped of risk, competition and diversity by the Fed’s fatal distortions.

*  *  *

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Tyler Durden
Fri, 01/05/2024 – 11:25

Inside The Catastrophic Jobs Report: Record 1.5 Million Crash In Full-Time Jobs, Multiple Jobholders Soar To Record, Native Born Workers Plunge And Much More

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Inside The Catastrophic Jobs Report: Record 1.5 Million Crash In Full-Time Jobs, Multiple Jobholders Soar To Record, Native Born Workers Plunge And Much More

While the prevailing post-payrolls narrative has focused on the surprisingly strong headline payrolls number (at 216K, this not only came above most estimates but was the highest in 4 months, denting the Fed’s case for a March rate cut) and the far stronger than expected hourly earnings (which rose to 4.1%, but only because hours worked dropped again to 34.3, a level last seen in the pre-covid days from 34.4) and unchanged unemployment rate, which at 3.7% further makes the case for rate cuts quite challenging, a closer look at the details of today’s jobs report reveals just how ugly the reality behind the the Budget-Busting Bidenomics truly is.

Let’s start with the now monthly revisions.

Regular readers are aware that earlier this year we spotted a peculiar trend when it comes to economic data releases by the Biden admin which  – without fail – had been revised lower…

… and this month was no different. In fact, as shown in the chart below, the jobs print from 10 of the past 11 months has been revised lower! Why? So that the White House can take credit for a strong number (one which also sparks algorithmic buying in the market) only to quietly revise it lower one and two months later when nobody is looking.

But that’s just the start. Next we turn to the numbers behind the headline job prints which were rather terrible: the monthly nonfarm payrolls (from the Establishment Survey) may have been weak at 216K but the far more accurate Household Survey showed that the number of Employed workers actually collapsed by an unprecedented 683K, the biggest drop since the US economy was shutdown by covid!

Even scarier, while the monthly grind higher in the payrolls number (pulled from the far less accurate Establishment Survey) means that US jobs hit a record high every month with bizarre consistency and in December this was certainly the case, the total nonfarm employment number rose to an all time high 157.232 million, the abovementioned collapse in US Employment (per Household survey) meant that there were only 161.183 million employed people in the US, the lowest since June, with the now traditional divergence between these two surveys glaringly obvious in the chart below.

While that’s bad, unfortunately it gets much worse, because while we already know that there is something very troubling with jobs quantitatively, the Household Survey also looks at the quality of jobs gained or lost, and specifically it breaks down the jobs into full-time and part-time jobs (Source: Table A-9).

Here, one look at this month’s adjustment and it’s literally a shocker: you will not hear anyone from the Biden admin, the mainstream media, or associated economist cheerleaders mention this, but the BLS reported that in December the number of full-time jobs plunged by 1.531 million to 133.2 million, the biggest monthly drop since the record covid crash of 14.7 million jobs!

Of course, as full-time jobs crashed, something had to offset the plunge, and sure enough, it was all in the surge of part-time workers. In December, the number of part-timers soared by a whopping 762,000, the second highest monthly increase since the covid lockdowns, to 27.794 million, the highest print since March 2018!

Putting this in context, it means that since February of 2023, the US has not added a single full-time job (in fact it has lost 34,000), while adding 774 part-time jobs!

But wait, there’s more, because going back to a quantitative read of the data, we look at the number of multiple jobholders – those workers who have to work more than one job at a time to make ends meet. In December, that number surged by 222K, and at 8.565 million was the highest print on record!

Putting it all together, if one believes the headlines, in December the US added 216K payrolls (which included a record number of double-counted multiple jobholders), and yet the number of employed workers actually crashed by 683K, the biggest drop in 4 years. Furthermore, taking a closer look at the composition we find that in December, the number of well-paid, full-time workers collapsed by a near record 1.5 million, offset by a 762K surge in part-time workers. As for the balance, it was the 222K people who discovered last month that to keep up with the economic miracle that is Bidenomics, they need to work at least one more job.

In short: December was a catastrophic month for the jobs market, which is why we expect the usual theater: non-stop spin and lies from the Biden admin, and not a single relevant question from the liberal media whose job is not to educate or inform, but to carry water, spread lies and enable propaganda.

But wait there’s even more, because just as we enter the peak of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be (illegally) casting the key votes in November), what we find is that in December, the number of native-born worker

Said otherwise, not only has all job creation in the past 4 years has been exclusively for foreign-born workers, but there has been zero job-creation for native born workers since 2018!

This is a huge issue – especially at a time of an illegal alien flood at the border – and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened – i.e., the illegal immigration floodgates that were opened by the Biden admin. Which is also why the Biden admin will do everything in his power to insure there is no official recession before November… and is why after the election is over, all economic hell will finally break loose.

Tyler Durden
Fri, 01/05/2024 – 11:05

‘Sanctuary’ City New York Sues Texas Charter Bus Companies For $700 Million Over Migrant Dropoffs

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‘Sanctuary’ City New York Sues Texas Charter Bus Companies For $700 Million Over Migrant Dropoffs

New York City is suing more than a dozen charter bus and transportation companies involved in busing migrants to the self-proclaimed ‘sanctuary’ for migrants that now wants nothing to do with them.

“New York City has and will always do our part to manage this humanitarian crisis, but we cannot bear the costs of reckless political ploys from the state of Texas alone,” said NYC Mayor Eric Adams on Thursday. “Today, we are taking legal action against 17 companies that have taken part in Texas Governor Abbott’s scheme to transport tens of thousands of migrants to New York City in an attempt to overwhelm our social services system.”

According to the lawsuit, the companies have violated New York state law by failing to pay for the cost of caring for migrants, which the city says amounts to $708 million in damages for what’s already been spent caring for them. The filing cites New York law that requires anyone who brings a “needy person” from out of state for the purposes of making them the state’s problem, either take them out of the state or support them.

“Governor Abbott’s continued use of migrants as political pawns is not only chaotic and inhumane but makes clear he puts politics over people. Today’s lawsuit should serve as a warning to all those who break the law in this way,” said Adams, who’s been at war with the Texas governor for sending illegal immigrants to the sanctuary city.

Meanwhile, staggering footage from Wednesday has shown hundreds of migrants – mostly young men – lining up around a block for shelter in Manhattan.

According to Adams in a statement to Fox5, “We’re getting close to anywhere from 2,500 to peaking at 4,000 a week.”

“We were not just saying we’re out of room as a soundbite,” he continued, citing the more than 161,000 migrants who have arrived in the Big Apple since the spring of 2022.

“We’re out of room, literally” he said. “People are going to be eventually sleeping on the streets.”

Adams also recently announced an executive order which requires charter buses to provide at least 32 hours’ notice before they arrive in NYC, as well as a requirement to arrive between 8:30 a.m. and 12 p.m. between Monday and Friday – and to drop off at one specific spot, Fox News reports.

Jersey Loophole…

But buses have appeared to be dodging that requirement by dropping off migrants at train stations in neighboring New Jersey, from where they can travel on a train directly into New York City. Secaucus Mayor Michael Gonnelli on Sunday accused the migrant buses of bypassing New York City’s executive order through a “loophole.”

Adams was asked about the change in strategy on Thursday, and said that the city will continue to enforce the executive order and that he had spoken to the governors of New Jersey and Connecticut.

 Adams isn’t havin’ it…

“And we’re going to continue to reach out to our colleagues in the region to say that everyone should put in place a similar EO to send a loud message that these bus operators and bus companies should not be participating in Governor Abbott’s…fiasco of really trying to destabilize these cities,” he said, before taking another shot at Abbott over the busing.

“What he is doing is just being dogmatic about destabilizing these cities. And we must meet his challenge,” he continued.

New York Gov. Kathy Huchul also chimed in, saying that the bus companies are responsible “for their role in this ongoing crisis.”

“If they are getting paid to break the law by transporting people in need of public assistance into our state, they should be on the hook for the cost of sheltering those individuals — not just passing that expense along to hard-working New Yorkers. I’m proud to support the mayor’s lawsuit.”

Tyler Durden
Fri, 01/05/2024 – 10:45

Portfolio Return Expectations By Investors Are Too High

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Portfolio Return Expectations By Investors Are Too High

Authored by Lance Roberts via RealInvestmentAdvice.com,

A stunning post from VisualCapitalist showed a poll of 8550 investors and 2700 advisors and the gap between the two of future portfolio return expectations. The poll was global; however, I will focus on this post’s domestic portfolio return expectations.

Note the gap between investors’ and advisors’ portfolio return expectations in the U.S. is the widest of any country. However, as we will discuss, that gap is unsurprising given the outsized returns relative to long-term historical portfolio returns since the “Financial Crisis.”

However, here is the most apparent problem with which advisors are more correctly aligned. It is a true statement that over the very long term, stocks have returned roughly 6% from capital appreciation and 4% from dividends on a nominal basis. However, since inflation has averaged approximately 2.3% over the same period, real returns are closer to 8% annually.

That is shown with the red dashed line in the chart below. The chart shows the average annual inflation-adjusted total returns (dividends included) since 1928. I used the total return data from Aswath Damodaran, a Stern School of Business professor at New York University. The chart shows that from 1928 to 2023, the market returned 8.45% after inflation. However, after the financial crisis in 2008, returns jumped by nearly four percentage points for the various periods.

After over a decade, many investors have become complacent in expecting elevated portfolio returns from the financial markets. However, can those expectations continue to be met in the future?

Can Future Portfolio Returns Replicate The Past

We must understand what drove those returns to gauge whether future portfolio return rates can replicate the past.

Over the long term, there is an apparent relationship between the stock market and the economy. Such is because it is economic activity that creates corporate revenues and earnings. As such, stocks can not indefinitely grow faster than the economy over long periods. When stocks deviate from the underlying economy, the eventual resolution is lower stock prices. Over time, there is a close relationship between the economy, earnings, and asset prices. For example, the chart below compares the three from 1947 through 2023.

Since 1947, earnings per share have grown at 7.72%, while the economy has expanded by 6.39% annually. That close relationship in growth rates is logical, given the significant role that consumer spending has in the GDP equation.

The slight difference is due to periods where earnings can grow faster than the economy when coming out of recession. However, while nominal stock prices have averaged 9.16%, reversions to actual economic growth eventually occur. Such is because corporate earnings are a function of consumptive spending, corporate investments, imports, and exports. 

So, if the economic and earnings relationship is true, what explains the market disconnect from underlying economic activity over the last decade? In other words, what was the driver of portfolio returns over the last decade, if all else is equal? Two differences in the previous 13 years didn’t exist before 2008.

The first is corporate stock buybacks. While corporate share repurchases are not new, the egregious use of buybacks to boost earnings per share accelerated post-2008. As discussed previously:

“In a previous Wall Street Journal study, 93% of the respondents point to “influence on stock price” and “outside pressure” as reasons for manipulating earnings figures. Such is why stock buybacks have continued to rise in recent years. Following the “pandemic shutdown,” they skyrocketed.”

As discussed in that article, since 2008, share buybacks have accounted for nearly 40% of the market’s return/

The second is monetary and fiscal interventions, unprecedented since the financial crisis.

As discussed in “The Markets Are Frontrunning The Fed.” the psychological change is a function of more than a decade of fiscal and monetary interventions that have separated the financial markets from economic fundamentals. Since 2007, the Federal Reserve and the Government have continuously injected roughly $43 Trillion in liquidity into the financial system and the economy to support growth.

That support entered the financial system, lifting asset prices and boosting consumer confidence to support economic growth.

The high correlation between these interventions and the financial markets is evident. The only outlier was the period during the Financial Crisis as the Fed launched the first round of Quantitative Easing or Q.E. What followed was multiple Government bailouts, support for the housing and financial markets, zero interest rates, and eventually direct checks to households in 2020.

Given the repeated history of financial interventions over the last 13 years, it is unsurprising that investors now expect outsized portfolio returns in the future.

The only problem with that assumption is the ability of the Government and the Federal Reserve to repeat the massive monetary interventions seen since the Financial Crisis.

The Decade Will Likely Be Very Different Than The Last

During the last decade, those fiscal and monetary inputs fostered history’s most significant asset bubble. In 2020, the pandemic started the needed reversal of those excesses but was cut short by massive monetary and fiscal interventions. The current deviation of the market from the long-term exponential growth trend is once again pushing record levels.

Unsurprisingly, since economic and revenue growth trailed the explosion in asset prices, valuations also deviated from long-term exponential growth trends.

Over the next decade, the ability to replicate nearly $5 of interventions for each $1 of economic growth seems much less probable. Of course, one must also consider the drag on future returns from the excessive debt accumulated since the financial crisis.

That debt’s sustainability depends on low-interest rates, which can only exist in a low-growth, low-inflation environment. Low inflation and a slow-growth economy do not support excess portfolio return rates.

As Jeremy Grantham noted:

“All 2-sigma equity bubbles in developed countries have broken back to trend. But before they did, a handful went on to become superbubbles of 3-sigma or greater: in the U.S. in 1929 and 2000 and in Japan in 1989. There were also superbubbles in housing in the U.S. in 2006 and Japan in 1989. All five of these superbubbles corrected all the way back to trend with much greater and longer pain than average.

Today in the U.S. we are in the fourth superbubble of the last hundred years.”

The deviation from long-term growth trends is unsustainable. Repeated financial interventions by the Federal Reserve caused such. Therefore, unless the Federal Reverse is committed to a never-ending program of zero interest rates and quantitative easing, the eventual reversion of returns to their long-term means is inevitable.

Such will result in profit margins and earnings returning to levels that align with actual economic activity. 

It is hard to fathom how forward return rates will not be disappointing compared to the last decade. However, those excess returns were the result of a monetary illusion. The consequence of dispelling that illusion will be challenging for investors.

Will this mean investors make NO money over the decade? No. It means that returns will likely be substantially lower than investors have witnessed over the last decade.

But then again, getting average returns may be “feel” very disappointing to many.

Tyler Durden
Fri, 01/05/2024 – 10:25

Apple’s Ugly 2024 Start Plagued With Downgrades And Muted Foxconn Demand

survivalnomics
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Apple’s Ugly 2024 Start Plagued With Downgrades And Muted Foxconn Demand

Apple shares are lower in premarket trading, marking a potential fifth consecutive session of declines. This selling pressure follows two downgrades from analysts at Barclays and Piper Sandler, who warned about sliding iPhone demand. 

If two downgrades in a week weren’t enough this week, Apple’s biggest iPhone assembler, Taiwan’s Foxconn, said Friday it expects the fourth consecutive decline in quarterly sales after a 5.4% drop in the last three months of 2023, an indication consumer electronics demand remains soft. 

The world’s largest contract electronics maker offers a glimpse into the iPhone demand, especially after the iPhone 15 was released in September. So far, iPhone 15 demand in the US has spurred a wave of upgrades, but not so much in China. 

Foxconn wrote in an update that its fourth-quarter revenue in consumer electronics products, including smartphones, was “flattish” year-on-year. It noted the final report on fourth-quarter earnings will be published on March 14. 

On Tuesday, Barclays analyst Tim Long slashed Apple from “Equal-Weight” to “Underweight” with a slight downshift in price target, from $161 to $160. 

“We are still picking up a weakness on iPhone volumes and mix, as well as a lack of bounce-back in Macs, iPads, and wearables,” Long said. 

Then, on Thursday, Piper Sandler analyst Harsh Kumar downgraded Apple from “Overweight” to “Neutral” with a price target of $205, down from $220. He, like Long, was concerned about sliding demand for iPhones in the first half of 2024. 

Apple shares are down 50bps in premarket trading in New York. On the week, shares are down more than 5.5%. 

Meanwhile, the percentage of bullish analysts covering Apple has hit a three-year low. 

What a terrible start of the year for Apple. 

 

 

Tyler Durden
Fri, 01/05/2024 – 09:20

Biden Hasn’t Done Anything For Two Weeks

survivalnomics
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Biden Hasn’t Done Anything For Two Weeks

Authored by Steve Watson via Modernity.news,

White House correspondents have started to ask questions about why there has been nothing on Joe Biden’s schedule for a fortnight.

The supposed leader of the free world has not done anything for two weeks, and his Press Secretary couldn’t provide any details of any upcoming schedule Thursday.

Biden hasn’t had an event on his schedule since December 22 — 13 days ago https://t.co/aCUvcoawQO

— RNC Research (@RNCResearch) January 4, 2024

Here’s what Biden has been doing for the past two weeks:

DEC. 22: Spent 9 minutes at Children’s National Hospital

DEC. 23: Left for vacation at Camp David

DEC. 24: Vacation at Camp David

DEC. 25: Vacation at Camp David

DEC. 26: Returned from vacation at Camp David

DEC. 27: Left for vacation in the U.S. Virgin Islands

DEC. 28: Vacation in the U.S. Virgin Islands

DEC. 29: Vacation in the U.S. Virgin Islands

DEC. 30: Vacation in the U.S. Virgin Islands

DEC. 31: Vacation in the U.S. Virgin Islands

JAN. 1: Vacation in the U.S. Virgin Islands

JAN. 2: Late-night return from vacation in the U.S. Virgin Islands

JAN. 3: Nothing

JAN. 4: Nothing

RNC Research further notes that tomorrow Biden is scheduled to fly to Delaware for some reason that no one understands, then he’ll fly to Pennsylvania to give a Jan 6th anniversary speech about how half of America are extremist white supremacists, before flying back to Delaware presumably to continue doing nothing all weekend.

That’s at least 30 something short plane steps he’ll have to go up and down. Will he make it?

Perhaps he’s gearing up for the basement campaign again.

* * *

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Tyler Durden
Fri, 01/05/2024 – 08:59

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