All the news lately has been very depressing. Whether a hurricane or tsunami somewhere causing death and destruction. Then, there is a terrorist who impales himself and takes innocent lives with his misguided deed. How about the Supreme Court nominee? The litany of negative events has two more.
NAFTA
It is now called the US - Mexico - Canada Agreement or USMCA. The whole tiff was to bring more manufacturing jobs to the US. The only thing that it accomplished on that front was that the pendulum is swinging back which is good. This moment of transition exposes why the US standard of living has declined as well as its middle class. The other reason is the Fed's destruction of the dollar along with excessive military spending.
President Trump will take bows. He should extend his face to the mud. The deal says that Mexico can only produce 2.6 million cars before a tariff is imposed. They were producing 4 million and rising. Canada gets the same 2.6 million as well as the same tariff possibility. If, and that is a BIG WORD, the two countries were to meet those agreements, the resulting 5.2 million cars will still be imported.
There is also a clause about workers receiving $16 an hour after trade limits, however this won't effect Canada as their workers get that much. Mexico can claim that through currency their workers meet that standard of living. Non-factor!
Now, total car sales have eclipsed 17 million for the last two years and is poised to reach that mark again. Those lofty figures will start to come down as the average retail price of a new vehicle is $35,700. This is more than the average cost of a new home in 1970. I put that in the piece to reflect how the Fed has destroyed our dollar's value.
Anyway, if total car sales return to 15 million plus which is where I think that they will find support, the new trade deal ensures that just from Mexico and Canada, that one-third of all sales will be imported from just those two nations. Now, consider normal imports from S. Korea, Japan and Germany make up another 50% of sales, what is left for US built producers? Also, there are other exporters vying to enter the market like China and India? Keep in mind that some importers are building plants in the US. Japan does the most, but Germany adds quite a few jobs too. This is good except these importers are not forced to join the auto union. The protection of jobs is arbitrary. President Trump did a good thing and I hope that he uses his arms to break his fall before his face hits the mud. This deal will be violated on entry permits and as a result no change or support for US workers. The shame should fall on the management of car companies and Congress for not supporting US workers because our standard of living will continue to decline.
There was one little clause in the agreement which could be a blessing. It says that if any of the three start another trade deal with another nation(read China), that nation must tell the other two 30 days before any negotiation and, (this is gold) then, the other two can kick out the third partner or do another agreement.
Now, this little clause will mean so much more with the following story from Bloomberg. This story reveals the arrogance of military leaders both in China and the US.
The US risked war and that means nuclear, with Russia back in the 1950s when they flew high atmosphere jets over Russia until the Russians shot down the U-2 spy planes. The cold war almost turned hot. Thank God for letting those with cooler heads dominate the healing.
Flash forward to today.
China
Their military leaders came up with a James Bond sequel. They put hidden chips in their servers which were ordered by US firms like Apple, Amazon and Google. They camouflaged these chips mixed with fiberglass embedded with the motherboard of the server. These chips had the ability to "block" updates under security prevention. They allowed access by hackers. This is probably how N. Korean and Russian hackers sold money from accounts. It gets worse. The chips could alter encrypted code. Now, the US military also ordered these same servers. Idiots! Imagine, the worse. We are under attack and there is no response because the command was stopped by a chip along a server line. Fortunately, this was discovered, but once is enough!
Under national security, any and all aspects of the internet must be made in America. Cut off China from making anything that can effect the internet. Anyway, this will not only create high paying jobs at home, but ensures the safety of our nation. Now, get this! Apple, has put our safety behind profits. They stated the story is not true. What Same! How does Cook sleep at night? These people risk our safety for profits. Karl Marx was right when he predicted that capitalist will come to the Communist door seeking profits before their homeland. This is Cyber War!
Wednesday, October 10, 2018
Wednesday, October 3, 2018
Guess Who Is Buying & Backing Gold?
We live in crazy times. Rudy Giuliani, President Trump's lawyer claimed, "Truth isn't true!" Now, we have central banks buying gold and even endorsing the precious metal. Can this be true?
Central Banks
These institutions have long despised gold as it stands against their money of choice - fiat. Back in the day, they were the largest seller of gold which depressed gold's rise at the time. Gold rose from under $100 dollars an ounce to over $800 per ounce back in 1980. Flash forward to today. Now, they are the largest purchaser of gold. According to a report by the World Gold Council(WGC) central banks purchased 10% of all gold sales.
Total gold demand is at 1960 metric tons and central banks bought 193 metric tons in the first half of 2018. The majority was by Russia, Turkey and Kazakhstan. Back in 2007, central bankers gold sales amounted to 217 metric tons or 14% of the market. Keep in mind the recent turmoil with the Turkish Lira. The unspoken word in the gold market, will Turkey be a seller of the precious metal to stabilize its currency? Could this aspect continue the depressed price for gold? I say, maybe for the short term, but if the past suggests some knowledge, it is this. In the period of 2003-2007, central bankers dumped 2,600 metric tons on the market and gold kept rising. Today, I believe the cryptocurrencies have hurt gold. Now, since that trade is falling out of favor, I see gold making a run as the calendar turns to 2019. In addition, the global community is beginning to see inflation, serious debt and tired consumers.
Bottom line: Gold will shine as this metal never tarnishes.
2cd. Opinion?
You don't have to take my word, especially since this piece is from the Twilight Zone. I have other banks and banker analyst backing gold.
Bank of America just upgraded its outlook for gold. They cite that the concerns for the US national deficit and adding debt as well as tariff-driven trade wars will push the metal from this consolidation period to over $1350 an ounce. At the moment the strong dollar and good economy have kept gold out of the spotlight, but this won't last.
Guess who mimicked those word? Goldman Sachs. They see the dollar eventually falling and then, gold rising.
The top analyst at JP Morgan, Marko Kolanovic says, some nations are looking to weaken the dollar and the US use of it as the world's reserve currency. These forces along with other backlashes will cause the dollar to fall and gold to rise.
P.S. : There is one other indicator and it is conflicted at the moment. The gold price chart as well as the two indexes, the XAU and the HUI are in a downtrend. However, silver broke out on Friday. Another source for the interest in silver came from the US Mint. It ran out of Silver Eagle Coins for September. Could this, the poor man's gold, be the spark, the turning point for the precious metals? Only time will tell.
Central Banks
These institutions have long despised gold as it stands against their money of choice - fiat. Back in the day, they were the largest seller of gold which depressed gold's rise at the time. Gold rose from under $100 dollars an ounce to over $800 per ounce back in 1980. Flash forward to today. Now, they are the largest purchaser of gold. According to a report by the World Gold Council(WGC) central banks purchased 10% of all gold sales.
Total gold demand is at 1960 metric tons and central banks bought 193 metric tons in the first half of 2018. The majority was by Russia, Turkey and Kazakhstan. Back in 2007, central bankers gold sales amounted to 217 metric tons or 14% of the market. Keep in mind the recent turmoil with the Turkish Lira. The unspoken word in the gold market, will Turkey be a seller of the precious metal to stabilize its currency? Could this aspect continue the depressed price for gold? I say, maybe for the short term, but if the past suggests some knowledge, it is this. In the period of 2003-2007, central bankers dumped 2,600 metric tons on the market and gold kept rising. Today, I believe the cryptocurrencies have hurt gold. Now, since that trade is falling out of favor, I see gold making a run as the calendar turns to 2019. In addition, the global community is beginning to see inflation, serious debt and tired consumers.
Bottom line: Gold will shine as this metal never tarnishes.
2cd. Opinion?
You don't have to take my word, especially since this piece is from the Twilight Zone. I have other banks and banker analyst backing gold.
Bank of America just upgraded its outlook for gold. They cite that the concerns for the US national deficit and adding debt as well as tariff-driven trade wars will push the metal from this consolidation period to over $1350 an ounce. At the moment the strong dollar and good economy have kept gold out of the spotlight, but this won't last.
Guess who mimicked those word? Goldman Sachs. They see the dollar eventually falling and then, gold rising.
The top analyst at JP Morgan, Marko Kolanovic says, some nations are looking to weaken the dollar and the US use of it as the world's reserve currency. These forces along with other backlashes will cause the dollar to fall and gold to rise.
P.S. : There is one other indicator and it is conflicted at the moment. The gold price chart as well as the two indexes, the XAU and the HUI are in a downtrend. However, silver broke out on Friday. Another source for the interest in silver came from the US Mint. It ran out of Silver Eagle Coins for September. Could this, the poor man's gold, be the spark, the turning point for the precious metals? Only time will tell.
Wednesday, September 26, 2018
Rally On, But Watch For...
With the Dow making a new all-time high last week, the market confirmed that this, the longest market rally in history, will continue. The record setting Dow confirmed the original technical concept of the market. It said that the industrials(when we actually made things) and the transports both must hit new highs to continue a trend. The trend is in place. With that said, I must remind you, dear reader, that many high profile business leaders have given their warnings about this market. In last week's piece I mentioned many of them. The following is a summary of issues that could derail this market.
Four Triggers
1) The estimate of future earnings is way too high. Granted the tax stimulus has helped and employment is considered full, however a closer picture reveals internal obstacles. Housing, the most influential aspect to our economy is no longer affordable. Builders cry material costs, lack of urban land and experienced workers with some just citing a workers, period. With looming trade tensions as demonstrated by the current tariff wars, earnings could take a dive, halt or fail to meet projections.
2)The mid-term elections. This point in my view is over-emphasized. Does it really matter if a democrat wins a state? The only agenda on the plate is Trump's call for the wall and a infrastructure bill. The two will pass in one form or another, so what's the big whoop?
3)Inflation. To me this is always present, but the government never counts food, energy and shelter. Those three are needed every day. I have repeated this point so many times that I'm blue in the face. Nevertheless, inflationary costs have appeared in many sectors to the point where the Fed and the government can no longer get away with their lies about a lack of inflation or the phony 2% target. The tariffs will add to this issue.
4)Rising interest rates. The Fed's current discount rate is 2.50%. It will rise a quarter point later today as it is expected by everyone. To me these rates are extremely low and rising rates will not effect the market until they reach 3.50%. We have a ways to go before the Fed reaches that level, if they ever do.
Bottom line: I agree with two of the above aspects. Sebastian reminds me that if someone is packing or is pointing a gun at you, you have every reason to be fearful. However, there are other times or situations that will add to stress. A snake crawls before you. Is it poisonous? You are sitting under a tree and dark clouds form in the sky. Do you move to a new location(lightning)? I think you get my point. There are many other bones of contention that could end this market rally.
Geo-political
Whether it is the Middle East, the South Sea Islands, revolution in Venezuela or elsewhere, any of these outbreaks can cause contagion. All these points are so well known that they are like the children's tale of "Cry Wolf."
Bankruptcy
No one in general knew about Lehman Brothers until it hit the news. We hear about companies like Toys 'R Us and Radio Shack. Remember, those companies received funding. The funded institutions also suffered. One that we do not know about could be failing as I write this piece.
Pensions
This should no longer be a secret. Many states and companies have not funded their obligations to their workers. They are really hoping that the Guarantee Pension, a government agency will take this obligation off their books. This is corruption! I believe this is one big unreported issue.
Banking
The Fed's stress tests says that our banking institutions are in good footing. I disagree. The FDIC has roughly $25 billion and this small amount has to cover over a $trillion. Cannot be done!
Jobs and Employment
This is a strong point in our economy, but many companies are restructuring. They are taking advantage of low interest rates and new technology to increase their bottom line. The problem with this point is an important aspect to the bottom line - workers and wages. Generally, when companies seek restructuring, it means workers will lose. This week Wells Fargo, Under Armour and Starbucks announced cutting jobs with restructuring. These little stones build. They can become an avalanche.
Environment
This point relates to earnings. Insurance companies will be on the hook for massive wildfires out West. Hurricane Florence will cost billions and then, there is this related aspect. The flood waters have caused Carolina's pig farms, the largest in the nation, to mix with water, resulting in pig waste contamination. In addition, the flood waters are breaching Duke's Energy plant. A possible catastrophe could result with the waters mixing with toxic coal ash to poison Carolina's water supply. Pray that this type of negativity never happens. One Chernobyl is enough.
Less Than 200 Days
Brexit is coming and the two sides cannot be more bitter to each other. This is how Europe acts. Study every peace treaty in European history and antagonism is a common tread. One aspect that will surely be effected will be the currencies of the pound and euro. Beware the Ides of March!
Small Potatoes
The S&P 500 is rebalancing. The last time was in 1999. This usually is very smooth, but sometimes extreme volatility results.
Anyway, there are always dangers out there. The rhetoric between nations concerning trade and sanctions is bordering on alarming. My group agrees that the present rally will last until the end of the year and at which point, the issues suggested by this piece will effect this rally for the negative.
Four Triggers
1) The estimate of future earnings is way too high. Granted the tax stimulus has helped and employment is considered full, however a closer picture reveals internal obstacles. Housing, the most influential aspect to our economy is no longer affordable. Builders cry material costs, lack of urban land and experienced workers with some just citing a workers, period. With looming trade tensions as demonstrated by the current tariff wars, earnings could take a dive, halt or fail to meet projections.
2)The mid-term elections. This point in my view is over-emphasized. Does it really matter if a democrat wins a state? The only agenda on the plate is Trump's call for the wall and a infrastructure bill. The two will pass in one form or another, so what's the big whoop?
3)Inflation. To me this is always present, but the government never counts food, energy and shelter. Those three are needed every day. I have repeated this point so many times that I'm blue in the face. Nevertheless, inflationary costs have appeared in many sectors to the point where the Fed and the government can no longer get away with their lies about a lack of inflation or the phony 2% target. The tariffs will add to this issue.
4)Rising interest rates. The Fed's current discount rate is 2.50%. It will rise a quarter point later today as it is expected by everyone. To me these rates are extremely low and rising rates will not effect the market until they reach 3.50%. We have a ways to go before the Fed reaches that level, if they ever do.
Bottom line: I agree with two of the above aspects. Sebastian reminds me that if someone is packing or is pointing a gun at you, you have every reason to be fearful. However, there are other times or situations that will add to stress. A snake crawls before you. Is it poisonous? You are sitting under a tree and dark clouds form in the sky. Do you move to a new location(lightning)? I think you get my point. There are many other bones of contention that could end this market rally.
Geo-political
Whether it is the Middle East, the South Sea Islands, revolution in Venezuela or elsewhere, any of these outbreaks can cause contagion. All these points are so well known that they are like the children's tale of "Cry Wolf."
Bankruptcy
No one in general knew about Lehman Brothers until it hit the news. We hear about companies like Toys 'R Us and Radio Shack. Remember, those companies received funding. The funded institutions also suffered. One that we do not know about could be failing as I write this piece.
Pensions
This should no longer be a secret. Many states and companies have not funded their obligations to their workers. They are really hoping that the Guarantee Pension, a government agency will take this obligation off their books. This is corruption! I believe this is one big unreported issue.
Banking
The Fed's stress tests says that our banking institutions are in good footing. I disagree. The FDIC has roughly $25 billion and this small amount has to cover over a $trillion. Cannot be done!
Jobs and Employment
This is a strong point in our economy, but many companies are restructuring. They are taking advantage of low interest rates and new technology to increase their bottom line. The problem with this point is an important aspect to the bottom line - workers and wages. Generally, when companies seek restructuring, it means workers will lose. This week Wells Fargo, Under Armour and Starbucks announced cutting jobs with restructuring. These little stones build. They can become an avalanche.
Environment
This point relates to earnings. Insurance companies will be on the hook for massive wildfires out West. Hurricane Florence will cost billions and then, there is this related aspect. The flood waters have caused Carolina's pig farms, the largest in the nation, to mix with water, resulting in pig waste contamination. In addition, the flood waters are breaching Duke's Energy plant. A possible catastrophe could result with the waters mixing with toxic coal ash to poison Carolina's water supply. Pray that this type of negativity never happens. One Chernobyl is enough.
Less Than 200 Days
Brexit is coming and the two sides cannot be more bitter to each other. This is how Europe acts. Study every peace treaty in European history and antagonism is a common tread. One aspect that will surely be effected will be the currencies of the pound and euro. Beware the Ides of March!
Small Potatoes
The S&P 500 is rebalancing. The last time was in 1999. This usually is very smooth, but sometimes extreme volatility results.
Anyway, there are always dangers out there. The rhetoric between nations concerning trade and sanctions is bordering on alarming. My group agrees that the present rally will last until the end of the year and at which point, the issues suggested by this piece will effect this rally for the negative.
Wednesday, September 19, 2018
Odds and Ends, Sept. 2018
When you look at the historical odds of the stock market, there are only two consistent months that are considered dangerous to investing. Yes, they come back-to-back and we are in the first one, but the other ten favor investing. In addition, the market makes it easier to buy a stock than to short a company. Nevertheless, life happens and the bears do beat the bulls from time-to-time. With that said this month's piece centers more on the negative or cautious rather than on buying into the longest rally in the history of Wall Street.
Of course, all the news isn't negative in the market. There are many stocks hitting new highs like the trillion dollar club. It has two members in Apple and Amazon. Google would like to join, but the problem for the market is the clutter of obstacles on the horizon. There is the issue of trade deals. President Trump is trying to bring manufacturing back to the US. He sees the continual deficits by trading partners as cheating. Sebastian agrees with this point. His adding tariffs will slow global trade and US stocks. The Fed is raising interest rates. There is the geo-political concerns with N. Korea, Iran and the possible contagious ones like in Venezuela and in the EU. There is the present rotation of stocks within the market. One of the leaders in this rally has been the chip stocks. Dear reader, that is no longer the case. Although some companies like Qualcomm(QCOM) and Advanced Micro(AMD) are still rising, Micron(MU) was $64 and now, $44. It is heading to $37. Broadcom(AVGO) is doing likewise. It was $270 and now, $236. It touched $200. Ouch! The ETF for the chips(SMH) has been range bound since December 2017. Not good. Finally, the most traded, high risers, the FAANG stocks. Let's take a look.
Company Was Now Heading
*Facebook(FB) $218 $162 $149
*Apple(AAPL) $229 $223 still rising
*Amazon(AMZN) $2050 $1970 - still rising, recent stumble
*Netflix(NFLX) $423 $364 $310
*Google(GOOG) $1273 $1172 consolidating.
As the numbers on the chart reveal, the big boys are losing steam. Apple stated that the tariffs will effect their bottom line. This aspect could end its rising ability. The S&P had tech make up 26% of their index. They notice the trend and now, they have reconfigured tech down to 20%.
Then, there is the warnings from people and institutions that have a name. I use that expression because literary agents told me and Sabastian that we have some interesting ideas, but we don't have a name to which is the numero uno reason why my book has not been published. Anyway, you can read what they are saying. In many instances you will feel that you read the same comments before. You have. Right here!
Pimco: is raising a "yellow flag" due to rising prices.
JP Morgan: sees Tesla down to $195. It was $390. I said $249. Does it matter? This is lost sleep and financial pain. They see a recession beginning in 2020. Market will be down 20%, maybe more. They point to liquidity as the cause.
Jeff Gundlach: says you cannot have deficit-funded stimulus while at the same time, a hawkish monetary policy.
Gary Shilling: his warnings from 2004-2006 on housing was the inspiration for the book and movie, "Big Short." Excess leverage will always bring down a financial institution. Now, he says, there is $249B in debt in the emerging markets due next year. If it can't be rolled over, CONTAGION!
Jim Stack: said in 2005, there is a trillion dollar bubble in housing. Now, he says, housing related stocks went up parabolic. They will fall just as hard in the next 12 months. Not good for housing.
Raghuram Rajan: said in 2005 when he was an economist for the IMF at the Jackson Hole conference of central bankers, the banking industry is in danger with risk and possible systemic collapse. Now, he says, there is a danger with the rise of shadow banking that is unregulated. They have excessive leverage.
John Mauldin: foresaw a pullback in housing and consumer spending which will hurt equities in 2006. He claimed that they could fall 40%. This guy is spot on! Now, he says, there is danger in unfunded liabilities as excess debt makes everything rising unsustainable. He sees Europe starting the problem, maybe from Italy. Members will want to put all debt into ECB. This problem could cause a 50% collapse in prices.
Speaking of Europe, Hungry faces losing its membership voting rights in the EU due to its immigration policy. They stopped it. This is another angry member to which there is many.
The chairwoman of the IMF revised her global outlook, downward due to trade tensions.
And just yesterday three prominent business leaders, Roubini, Tepper and Dalio all turned bearish.
Maybe one reason is this tidbit about the US national deficit. Every month it cost the US, $32Billion just to pay interest on its debt. Imagine how this rises with the Fed raises interest rates?
Best wishes to go out to all under duress from Hurricane Florence. FEMA says that just one inch of water in someone's house cost $25,000 in damage to repair. That is scary...
Finally, this one goes under Wild and Crazy
Tilray(TLRY) a cannabis style company that had an IPO earlier this year at $17 per share is over $154 today. It has little revenue, roughly $34 million. Well, it has a market cap greater than the largest gold mining company, Barrick Gold(ABX) which has revenues of $7.6 billion. The market is indeed irrational and this one has trouble written all over it. Don't get me wrong. Under disclosure, I have shares of Aurora Cannabis. Good for those who have TLRY, but I'd take my windfall, now!
I like to add one point to the phony high ground coming out of Europe toward the US for not signing their climate accord. A German energy company, RWE, is destroying the last ancient forest in the country(Hamback Forest) to extract, COAL! Their phony high court gave them the go ahead to remove people from the forest who are tree and nature lovers, so the bull dozers can rip out the forest. At least, in the US we keep coal in regions and try to maintain our green environment at the same time. Also, if Germany needs some coal, we can sell them all they want, but I bet that they have restrictions against to many imports. An invisible tariff!
Of course, all the news isn't negative in the market. There are many stocks hitting new highs like the trillion dollar club. It has two members in Apple and Amazon. Google would like to join, but the problem for the market is the clutter of obstacles on the horizon. There is the issue of trade deals. President Trump is trying to bring manufacturing back to the US. He sees the continual deficits by trading partners as cheating. Sebastian agrees with this point. His adding tariffs will slow global trade and US stocks. The Fed is raising interest rates. There is the geo-political concerns with N. Korea, Iran and the possible contagious ones like in Venezuela and in the EU. There is the present rotation of stocks within the market. One of the leaders in this rally has been the chip stocks. Dear reader, that is no longer the case. Although some companies like Qualcomm(QCOM) and Advanced Micro(AMD) are still rising, Micron(MU) was $64 and now, $44. It is heading to $37. Broadcom(AVGO) is doing likewise. It was $270 and now, $236. It touched $200. Ouch! The ETF for the chips(SMH) has been range bound since December 2017. Not good. Finally, the most traded, high risers, the FAANG stocks. Let's take a look.
Company Was Now Heading
*Facebook(FB) $218 $162 $149
*Apple(AAPL) $229 $223 still rising
*Amazon(AMZN) $2050 $1970 - still rising, recent stumble
*Netflix(NFLX) $423 $364 $310
*Google(GOOG) $1273 $1172 consolidating.
As the numbers on the chart reveal, the big boys are losing steam. Apple stated that the tariffs will effect their bottom line. This aspect could end its rising ability. The S&P had tech make up 26% of their index. They notice the trend and now, they have reconfigured tech down to 20%.
Then, there is the warnings from people and institutions that have a name. I use that expression because literary agents told me and Sabastian that we have some interesting ideas, but we don't have a name to which is the numero uno reason why my book has not been published. Anyway, you can read what they are saying. In many instances you will feel that you read the same comments before. You have. Right here!
Pimco: is raising a "yellow flag" due to rising prices.
JP Morgan: sees Tesla down to $195. It was $390. I said $249. Does it matter? This is lost sleep and financial pain. They see a recession beginning in 2020. Market will be down 20%, maybe more. They point to liquidity as the cause.
Jeff Gundlach: says you cannot have deficit-funded stimulus while at the same time, a hawkish monetary policy.
Gary Shilling: his warnings from 2004-2006 on housing was the inspiration for the book and movie, "Big Short." Excess leverage will always bring down a financial institution. Now, he says, there is $249B in debt in the emerging markets due next year. If it can't be rolled over, CONTAGION!
Jim Stack: said in 2005, there is a trillion dollar bubble in housing. Now, he says, housing related stocks went up parabolic. They will fall just as hard in the next 12 months. Not good for housing.
Raghuram Rajan: said in 2005 when he was an economist for the IMF at the Jackson Hole conference of central bankers, the banking industry is in danger with risk and possible systemic collapse. Now, he says, there is a danger with the rise of shadow banking that is unregulated. They have excessive leverage.
John Mauldin: foresaw a pullback in housing and consumer spending which will hurt equities in 2006. He claimed that they could fall 40%. This guy is spot on! Now, he says, there is danger in unfunded liabilities as excess debt makes everything rising unsustainable. He sees Europe starting the problem, maybe from Italy. Members will want to put all debt into ECB. This problem could cause a 50% collapse in prices.
Speaking of Europe, Hungry faces losing its membership voting rights in the EU due to its immigration policy. They stopped it. This is another angry member to which there is many.
The chairwoman of the IMF revised her global outlook, downward due to trade tensions.
And just yesterday three prominent business leaders, Roubini, Tepper and Dalio all turned bearish.
Maybe one reason is this tidbit about the US national deficit. Every month it cost the US, $32Billion just to pay interest on its debt. Imagine how this rises with the Fed raises interest rates?
Best wishes to go out to all under duress from Hurricane Florence. FEMA says that just one inch of water in someone's house cost $25,000 in damage to repair. That is scary...
Finally, this one goes under Wild and Crazy
Tilray(TLRY) a cannabis style company that had an IPO earlier this year at $17 per share is over $154 today. It has little revenue, roughly $34 million. Well, it has a market cap greater than the largest gold mining company, Barrick Gold(ABX) which has revenues of $7.6 billion. The market is indeed irrational and this one has trouble written all over it. Don't get me wrong. Under disclosure, I have shares of Aurora Cannabis. Good for those who have TLRY, but I'd take my windfall, now!
I like to add one point to the phony high ground coming out of Europe toward the US for not signing their climate accord. A German energy company, RWE, is destroying the last ancient forest in the country(Hamback Forest) to extract, COAL! Their phony high court gave them the go ahead to remove people from the forest who are tree and nature lovers, so the bull dozers can rip out the forest. At least, in the US we keep coal in regions and try to maintain our green environment at the same time. Also, if Germany needs some coal, we can sell them all they want, but I bet that they have restrictions against to many imports. An invisible tariff!
Wednesday, September 12, 2018
Housing: Crisis to Present - Troubling Signs
What if I told you that there are still 54 US cities with homes that are still underwater even after the media claims housing has recovered? Who would you believe? This report comes from an agency tied to the census bureau. They collected national data from the 50 states of our union. I will list just twelve. You can call them the disciples of danger. Behind the stats is proof that our declining standard of living is effecting a national level. People have jobs, but the wages cannot keep up with inflation. State taxes rise. Medical is up in the stratosphere. The big three, food, energy and shelter are not in the matrix that the Federal Reserve uses. Consumers have excess debt that prevent them from saving for a down payment to a home. Consider, even though homes have appreciated over the last ten years, there are many locations that are stuck in limbo because as a nation we are losing social mobility. If people cannot advance, then it is a slow decay. This is evident across the nation as revealed in this list. When you view the list, keep in mind that one in five homes in those cities is still under water. In some localities it is worse.
The list will show the city, state and the percentage as to the city as a whole. It is very scary.
*Columbus, Ohio= 20%
*Milwaukee, Wisconsin= 24%
*Detroit, Michigan= 36%
*Toledo, Ohio= 22%
*Birmingham, Alabama= 20%
*Cleveland, Ohio= 31%
*Baltimore, Maryland= 22%
*Jacksonville, Florida= 39%
*Hartford, Connecticut= 43%
*Chicago, Illinois= 22%
*Newark, New Jersey= 29%
*Norfolk, Virginia= 21%
There are over another twenty in double digits, but I think that you get the drift. The danger is broad in scope.
In addition, builders have almost totally vacated the entry level, starter home. In past pieces I have shown you that with the media income of $38,000 per year, consumers cannot meet the lending standards to obtain a mortgage. The prices of homes exceed our ability to purchase them. In addition, consumers accumulated debt which also becomes an obstacle to qualify for a home loan. This is the reason why builders do not build starter homes. Also, in the earnings report by construction firms, they all mentioned rising costs, labor shortage and scarcity of land in cities or their suburbs. Then, we have the recent stats from government reports. It is revealing a dangerous, negative trend.
Pending home sales have declined from their already low levels for the seventh straight month. Home sales have declined for four of the last five months. Keep this in mind as the Fed raises interest rates which will add to the problem and to the trend.
If you think Trump is wrong on tariffs, you are sadly mistaken. He does not go far enough! No political, so-called leader in our nation dares to address this issue that effects our wages, our future and our standard of living more than those high paying manufacturing jobs. These are the type of jobs that offers social mobility. You can move to the Eastside! This is the core reason why foreign nationals address these industries with their state sponsored subsidies. The only person who I can recall who dared defy the status quo was Lee Iacocca. He would have made a great president, but prejudice and the powers-to-be put an end to that before it got off the ground. However, I must include this great piece back in time when Lee stood up for what is right.
Picture a fifth grade class. Today, a new student transfers to the school. The teacher introduces the little girl to the class. She sits in the front seat. Class, I would like you to meet a new student to our class. Her name is Toki Yashima and she is from Japan. I hear that she speaks perfect English, so do not be afraid to talk to her in recess.
Now, let us review what we have been studying for the past two weeks in American history. Who can tell me who said, "Give me liberty or give me death?" The class is silent. The teacher implores someone to answer. No one raises their hand. Finally, little Toki raises her hand. The teacher points to her. She rises and say, "Patrick Henry, 1775." The teacher gives a short clap and acknowledges that she is correct. She moves to another question. Who said, :I regret that I only have one life to give for my country?" Again, no one answers. The teacher says, "C'mon! We have been over this countless times. Anyone?" After another silent pause, Toki raises her hand. Reluctantly, the teacher points to her. Again, she rises, says, "Nathan Hale, 1776." The teacher says, "Thank you, Toki. Class, you should be very ashamed of yourselves. This little girl comes all the way from Japan and she knows more about our history than you." She turns to the blackboard. A voice in the back yells, "The hell with the Japanese!" The teacher turns, asks, :Who said that?" She runs up the aisle where the voice came. She studies the kids faces when another voice from the opposite of the room says, Lee Iacocca, 1982."
I love that.
The list will show the city, state and the percentage as to the city as a whole. It is very scary.
*Columbus, Ohio= 20%
*Milwaukee, Wisconsin= 24%
*Detroit, Michigan= 36%
*Toledo, Ohio= 22%
*Birmingham, Alabama= 20%
*Cleveland, Ohio= 31%
*Baltimore, Maryland= 22%
*Jacksonville, Florida= 39%
*Hartford, Connecticut= 43%
*Chicago, Illinois= 22%
*Newark, New Jersey= 29%
*Norfolk, Virginia= 21%
There are over another twenty in double digits, but I think that you get the drift. The danger is broad in scope.
In addition, builders have almost totally vacated the entry level, starter home. In past pieces I have shown you that with the media income of $38,000 per year, consumers cannot meet the lending standards to obtain a mortgage. The prices of homes exceed our ability to purchase them. In addition, consumers accumulated debt which also becomes an obstacle to qualify for a home loan. This is the reason why builders do not build starter homes. Also, in the earnings report by construction firms, they all mentioned rising costs, labor shortage and scarcity of land in cities or their suburbs. Then, we have the recent stats from government reports. It is revealing a dangerous, negative trend.
Pending home sales have declined from their already low levels for the seventh straight month. Home sales have declined for four of the last five months. Keep this in mind as the Fed raises interest rates which will add to the problem and to the trend.
If you think Trump is wrong on tariffs, you are sadly mistaken. He does not go far enough! No political, so-called leader in our nation dares to address this issue that effects our wages, our future and our standard of living more than those high paying manufacturing jobs. These are the type of jobs that offers social mobility. You can move to the Eastside! This is the core reason why foreign nationals address these industries with their state sponsored subsidies. The only person who I can recall who dared defy the status quo was Lee Iacocca. He would have made a great president, but prejudice and the powers-to-be put an end to that before it got off the ground. However, I must include this great piece back in time when Lee stood up for what is right.
Picture a fifth grade class. Today, a new student transfers to the school. The teacher introduces the little girl to the class. She sits in the front seat. Class, I would like you to meet a new student to our class. Her name is Toki Yashima and she is from Japan. I hear that she speaks perfect English, so do not be afraid to talk to her in recess.
Now, let us review what we have been studying for the past two weeks in American history. Who can tell me who said, "Give me liberty or give me death?" The class is silent. The teacher implores someone to answer. No one raises their hand. Finally, little Toki raises her hand. The teacher points to her. She rises and say, "Patrick Henry, 1775." The teacher gives a short clap and acknowledges that she is correct. She moves to another question. Who said, :I regret that I only have one life to give for my country?" Again, no one answers. The teacher says, "C'mon! We have been over this countless times. Anyone?" After another silent pause, Toki raises her hand. Reluctantly, the teacher points to her. Again, she rises, says, "Nathan Hale, 1776." The teacher says, "Thank you, Toki. Class, you should be very ashamed of yourselves. This little girl comes all the way from Japan and she knows more about our history than you." She turns to the blackboard. A voice in the back yells, "The hell with the Japanese!" The teacher turns, asks, :Who said that?" She runs up the aisle where the voice came. She studies the kids faces when another voice from the opposite of the room says, Lee Iacocca, 1982."
I love that.
Wednesday, September 5, 2018
U.S. Notes: Screaming Inversion...Recession
All analysts have different indicators to make their determinations on a stock on the market and on the economy. I believe one of the best indicators for an approaching recession is the spread on the U.S. 10 - 2 yield curve. At the moment the curve is turning flat.
As of the last day in August 2018, the spread on the yield between the U.S. 10 - 2 year note was 25 basis points. What this implies is if you purchase the U.S. 10 year note, you only receive a fraction higher yield for the additional three years or 36 months. C'mon! Get real!
Consider what has transpired in the last three years? Housing costs are up 30 % or more. Mortgage interest rates are a full percentage higher. Understand what that means: all costs are much more expensive and wages have not increased at the same ratio. Citizens are losing and the government, run by the bankers at the Fed, only offer you a measly 25 basis points to cover those costs. How about inflation? How about Obama care? How about auto insurance? Everything is up except the rate to invest in America.
I could argue that we are already in an inverted yield if you use logic and what history has taught us.
First, let's talk logic.
The T-Bill offers you for a one year note the rate of 2.46%. This is fabulous. Consider in Europe they take money from you because they offer negative notes. You have the safety and strength of the US backing your claim. So, at the end of the year you decide to purchase a longer term note, the two year. Currently, it offers a yield of 2.62%. Wait a minute, you say! How could I receive 2.46% yield for one year and not 4.92% for two years?
Now, you understand why people put their money into stocks because the treasury yields do not make sense. They get worse with the duration of the note. Currently, if you purchase a 10 - year T-Bill, it yields 2.88%. Don't go off on me about the difference of nine years with the one year note and the ten which is only 42 basis points higher for almost a decade. It is basically financial corruption! Anyway, the 30 year offers you a whole 3%. Wow! Hold the presses! This means for 20 additional years, you get a whole 12 more basis points. I say again, financial corruption!
It is no wonder the Fed and the Treasury play financial games. The treasury prints the bond and the Fed buys it. They purchase over 60% of offerings. Now, you see from logic all these notes have no resemblance to life and inflation. The only positive thing I can say is thank God that I'm an American and not in Venezuela, Argentina, Switzerland, Germany or anywhere in Africa.
The other aspect to bonds and notes come from history. When central banks play too many card tricks with our money, the market rises up and bites them in the ass. The only problem with that is the every day man suffers due to it. Recessions come from these financial engineering games. From an historical view whenever the U.S. 10 - 2 year yield becomes inverted, a recession follows. At the moment the yield is the flattest it has been in over a decade. It rests at 24 basis points. It has touched even lower. Whenever the yield becomes inverted a recession is eminent. This indicator has been wrong only once. In 1998 the yield inverted briefly in May. The market had a correction, but no recession. However, just two years later in February of 2000, the market displayed a pattern that it currently is duplicating. The NADAQ hit a record high of 5,000. The S & P 500 peaked at 1,527. Over the following 31 months the S & P 500 lost over 49%. It would be over a decade before NASDAQ would reach 5,000 again. That is a long time to wait to break even...
We are experiencing similar price action in the market. NASDAQ hits new records on a daily basis. The S & P 500 hit a new high as well as the transports, but the Dow's high of January 2018 has not been breached. If it does not reach a new high by January 2019, this is considered a failed market. Let me repeat that: Failed Market!
Pay attention to the U.S. 10 - 2 year yield. It is very important. Hey, on a brighter note, we got football this week, Yay!
As of the last day in August 2018, the spread on the yield between the U.S. 10 - 2 year note was 25 basis points. What this implies is if you purchase the U.S. 10 year note, you only receive a fraction higher yield for the additional three years or 36 months. C'mon! Get real!
Consider what has transpired in the last three years? Housing costs are up 30 % or more. Mortgage interest rates are a full percentage higher. Understand what that means: all costs are much more expensive and wages have not increased at the same ratio. Citizens are losing and the government, run by the bankers at the Fed, only offer you a measly 25 basis points to cover those costs. How about inflation? How about Obama care? How about auto insurance? Everything is up except the rate to invest in America.
I could argue that we are already in an inverted yield if you use logic and what history has taught us.
First, let's talk logic.
The T-Bill offers you for a one year note the rate of 2.46%. This is fabulous. Consider in Europe they take money from you because they offer negative notes. You have the safety and strength of the US backing your claim. So, at the end of the year you decide to purchase a longer term note, the two year. Currently, it offers a yield of 2.62%. Wait a minute, you say! How could I receive 2.46% yield for one year and not 4.92% for two years?
Now, you understand why people put their money into stocks because the treasury yields do not make sense. They get worse with the duration of the note. Currently, if you purchase a 10 - year T-Bill, it yields 2.88%. Don't go off on me about the difference of nine years with the one year note and the ten which is only 42 basis points higher for almost a decade. It is basically financial corruption! Anyway, the 30 year offers you a whole 3%. Wow! Hold the presses! This means for 20 additional years, you get a whole 12 more basis points. I say again, financial corruption!
It is no wonder the Fed and the Treasury play financial games. The treasury prints the bond and the Fed buys it. They purchase over 60% of offerings. Now, you see from logic all these notes have no resemblance to life and inflation. The only positive thing I can say is thank God that I'm an American and not in Venezuela, Argentina, Switzerland, Germany or anywhere in Africa.
The other aspect to bonds and notes come from history. When central banks play too many card tricks with our money, the market rises up and bites them in the ass. The only problem with that is the every day man suffers due to it. Recessions come from these financial engineering games. From an historical view whenever the U.S. 10 - 2 year yield becomes inverted, a recession follows. At the moment the yield is the flattest it has been in over a decade. It rests at 24 basis points. It has touched even lower. Whenever the yield becomes inverted a recession is eminent. This indicator has been wrong only once. In 1998 the yield inverted briefly in May. The market had a correction, but no recession. However, just two years later in February of 2000, the market displayed a pattern that it currently is duplicating. The NADAQ hit a record high of 5,000. The S & P 500 peaked at 1,527. Over the following 31 months the S & P 500 lost over 49%. It would be over a decade before NASDAQ would reach 5,000 again. That is a long time to wait to break even...
We are experiencing similar price action in the market. NASDAQ hits new records on a daily basis. The S & P 500 hit a new high as well as the transports, but the Dow's high of January 2018 has not been breached. If it does not reach a new high by January 2019, this is considered a failed market. Let me repeat that: Failed Market!
Pay attention to the U.S. 10 - 2 year yield. It is very important. Hey, on a brighter note, we got football this week, Yay!
Wednesday, August 29, 2018
Odds and Ends August 2018
In two examples that gather little following since their economies are small, Turkey and Venezuela are front and center as collapsing due to the strengthening dollar. Contagion can be contained in these small fires, but they are dominoes falling with deeper consequences behind the scenes.
Turkey
has seen its Lira fall in purchasing power. It has lost one-third of its value with the US dollar. It made the news because President Trump extended his tariffs on them in steel and aluminum. Some say this is temporary due to a political concern of an American held in prison by Turkey. The real problem is for European banks like Spain's BBVA and Germany whose banks have extensive loans to Turkey. Since the Lira now buys less in relationship to the Euro, those loans become tenuous. Turkey borrowed with a higher lira to euro ratio. Now, they must repay at a much higher lira ratio to the euro. Sebastian sees bigger problems than a pastor held in captive. Turkey by-passed a US missile company for a Russian one. They also made positive reactions to the new China Silk Road. In addition, they have not helped Europe with the Middle East migration to Europe. Erdogan tried to play one side over the other and reap the middle benefits except it has come back to bite him in the ass.
Venezuela
is a mess. Citizens are fleeing the nation. Some of their neighbors that speak Spanish like Ecuador and Peru are closing their borders to these exiting masses. This notation should be included in Trump's Wall. You would think that many South American countries that have similar language and history would have no objections to these people. They do!
Anyway, Maduro takes from one side of the nation and gives to the other side. People protested all year long. No longer. They are just leaving since Maduro devalued the currency by 95%. Can you imagine?! Prices are rising through the roof. The IMF stated that inflation will hit one million percent this year. Ouch is not strong enough to describe this. Their crazy stock exchange dropped to 1,000 earlier this year. Guess where it is now?... No! Not even close. It is worth more than all the exchanges in South America combined. Last week it hit 454,000 before a recent pullback. The nation has a huge oil deposit, but killed foreign investment in the industry with socialism. Their oil production has declined for the last four years maybe more. Records are cloudy and lawsuits are rampant. This will be a problem for all South America which connects to Central America which connects to North America.
It isn't just small nations that are feeling the squeeze in currency manifestations. The UK is getting close to leaving the EU. People and institutions are nervous. The prime minister tried to push aside these worries with a speech to which the message is, "Keep Calm Carry On." How can you keep calm when your company and or your job demands on air transport from the EU and the EU said no more? Basic contracts will be broken or cannot be renewed. The English pound and the EU euro will be revalued, and terms need to be redone. Big problem that needs to be settled by December. I guess insiders feel that the talks will be extended, indefinitely. Someone is due for a rude awakening.
Meanwhile, other emerging nations are seeking help from the World Bank or the IMF with their current loans. These countries borrowed trillions in loans in US dollars. They must be repaid in US dollars, but since their currency is worth less than when they originally borrowed the money, they are feeling a double whammy. One, repaying the loan and secondly, it cost more to repay the loan than it was first projected to cost. Double ouch!!
Thinking That I Like
In Japan recent flooding from severe weather caused extensive harm to agricultural farms and tree growing fruit. The prime minister gave funds to those affected from a section in the Japanese budget that puts money away for a rainy day. This is how government should function.
Tit for Tat
It is not just tariffs that find nations retaliating over foreign policy. Saudi Arabia cut ties to two G-7 members over incidents in their nation. Canada and Germany will no longer be on terms with the Arab nation. It may sound like small potatoes, but potatoes fill the meal.
How About These Walls?
A German sea captain is being held on trial for crimes against sea regulations. This is what is being said, but this is just another wall against immigration. Trump is not the only one as stated in a previous piece. The boat recued immigrants at sea. While docking, it was flying a German flag. The boat however was registered in Holland. Violation! A good man must suffer from politics.
In Italy a similar story. Italy is withholding its membership dues to the EU because they are not receiving enough aid in the migration of immigrants. I guess no one translated the English speech, Keep Calm Carry On?
Yes, Donald, this does happen
In Australia the political party that installed prime minister Turnbull, kicked him out of office and put someone more to their wants in Morrison. In politics down under it is not who you go to bed with, but who you turn your back too like et tu, Brute?
NAFTA'S NEW NAME..
won't be revealed until Canada gets its chance to accept the new deal between the US and Mexico. Canada's trade minister will be in Washington on Tuesday. Word out says an agreement should be concluded by Friday on accepting or declining. Keep in mind that 75% of Canada's exports go to the US.
One provision in the pact says auto workers be paid $16 per hour. All this does is give Mexican and Canadian auto workers a raise. They will rename NAFTA to cloud their deception as anger lurks below the surface in America with NAFTA. Anyone old enough in the US knows that NAFTA caused us to lose 12 million, high paying, manufacturing jobs for service sector minimum wage. The best deal was to end all deals! Place tariffs on all imports which helps reduce our national deficit and force manufacturers back into the US. The only good aspect pf this new pack is it does not undo the tariffs on steel and aluminum. Enough said!
Panda Art?
In a sign that we are in a spending bubble where we spend $, as we get $. No one puts aside for a rainy day. We have this tidbit. You give Yang Yang a treat, hand the panda a painted brush and hold a blank canvass before the cage and it will strike it. Give the panda another treat and you get another stroke to the picture. Now, you can own your own "original" for around $570.
Turkey
has seen its Lira fall in purchasing power. It has lost one-third of its value with the US dollar. It made the news because President Trump extended his tariffs on them in steel and aluminum. Some say this is temporary due to a political concern of an American held in prison by Turkey. The real problem is for European banks like Spain's BBVA and Germany whose banks have extensive loans to Turkey. Since the Lira now buys less in relationship to the Euro, those loans become tenuous. Turkey borrowed with a higher lira to euro ratio. Now, they must repay at a much higher lira ratio to the euro. Sebastian sees bigger problems than a pastor held in captive. Turkey by-passed a US missile company for a Russian one. They also made positive reactions to the new China Silk Road. In addition, they have not helped Europe with the Middle East migration to Europe. Erdogan tried to play one side over the other and reap the middle benefits except it has come back to bite him in the ass.
Venezuela
is a mess. Citizens are fleeing the nation. Some of their neighbors that speak Spanish like Ecuador and Peru are closing their borders to these exiting masses. This notation should be included in Trump's Wall. You would think that many South American countries that have similar language and history would have no objections to these people. They do!
Anyway, Maduro takes from one side of the nation and gives to the other side. People protested all year long. No longer. They are just leaving since Maduro devalued the currency by 95%. Can you imagine?! Prices are rising through the roof. The IMF stated that inflation will hit one million percent this year. Ouch is not strong enough to describe this. Their crazy stock exchange dropped to 1,000 earlier this year. Guess where it is now?... No! Not even close. It is worth more than all the exchanges in South America combined. Last week it hit 454,000 before a recent pullback. The nation has a huge oil deposit, but killed foreign investment in the industry with socialism. Their oil production has declined for the last four years maybe more. Records are cloudy and lawsuits are rampant. This will be a problem for all South America which connects to Central America which connects to North America.
It isn't just small nations that are feeling the squeeze in currency manifestations. The UK is getting close to leaving the EU. People and institutions are nervous. The prime minister tried to push aside these worries with a speech to which the message is, "Keep Calm Carry On." How can you keep calm when your company and or your job demands on air transport from the EU and the EU said no more? Basic contracts will be broken or cannot be renewed. The English pound and the EU euro will be revalued, and terms need to be redone. Big problem that needs to be settled by December. I guess insiders feel that the talks will be extended, indefinitely. Someone is due for a rude awakening.
Meanwhile, other emerging nations are seeking help from the World Bank or the IMF with their current loans. These countries borrowed trillions in loans in US dollars. They must be repaid in US dollars, but since their currency is worth less than when they originally borrowed the money, they are feeling a double whammy. One, repaying the loan and secondly, it cost more to repay the loan than it was first projected to cost. Double ouch!!
Thinking That I Like
In Japan recent flooding from severe weather caused extensive harm to agricultural farms and tree growing fruit. The prime minister gave funds to those affected from a section in the Japanese budget that puts money away for a rainy day. This is how government should function.
Tit for Tat
It is not just tariffs that find nations retaliating over foreign policy. Saudi Arabia cut ties to two G-7 members over incidents in their nation. Canada and Germany will no longer be on terms with the Arab nation. It may sound like small potatoes, but potatoes fill the meal.
How About These Walls?
A German sea captain is being held on trial for crimes against sea regulations. This is what is being said, but this is just another wall against immigration. Trump is not the only one as stated in a previous piece. The boat recued immigrants at sea. While docking, it was flying a German flag. The boat however was registered in Holland. Violation! A good man must suffer from politics.
In Italy a similar story. Italy is withholding its membership dues to the EU because they are not receiving enough aid in the migration of immigrants. I guess no one translated the English speech, Keep Calm Carry On?
Yes, Donald, this does happen
In Australia the political party that installed prime minister Turnbull, kicked him out of office and put someone more to their wants in Morrison. In politics down under it is not who you go to bed with, but who you turn your back too like et tu, Brute?
NAFTA'S NEW NAME..
won't be revealed until Canada gets its chance to accept the new deal between the US and Mexico. Canada's trade minister will be in Washington on Tuesday. Word out says an agreement should be concluded by Friday on accepting or declining. Keep in mind that 75% of Canada's exports go to the US.
One provision in the pact says auto workers be paid $16 per hour. All this does is give Mexican and Canadian auto workers a raise. They will rename NAFTA to cloud their deception as anger lurks below the surface in America with NAFTA. Anyone old enough in the US knows that NAFTA caused us to lose 12 million, high paying, manufacturing jobs for service sector minimum wage. The best deal was to end all deals! Place tariffs on all imports which helps reduce our national deficit and force manufacturers back into the US. The only good aspect pf this new pack is it does not undo the tariffs on steel and aluminum. Enough said!
Panda Art?
In a sign that we are in a spending bubble where we spend $, as we get $. No one puts aside for a rainy day. We have this tidbit. You give Yang Yang a treat, hand the panda a painted brush and hold a blank canvass before the cage and it will strike it. Give the panda another treat and you get another stroke to the picture. Now, you can own your own "original" for around $570.
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