The Second Dumbest Kind Of Money Is Pouring Into Stocks – “With A Vengeance”

Via John Rubino of,

One of the traditional signs of market tops is individual investors finally succumbing to the lure of apparently easy money and pouring their savings into the stock market. In the past this dumb money flowed into equity mutual funds in general. But today it’s favoring exchange traded funds (ETFs) that, rather than trying to pick winners, simply offer exposure to sectors or broad market indexes.

ETFs Race to Fastest Yearly Start Ever Based on Inflows

(Wall Street Journal) – Investors poured $62.9 billion into exchange-traded funds in February, pushing the year-to-date world-wide tally to $124 billion, the fastest start of any year in the history of the ETF industry, according to data from BlackRock Inc.


U.S. ETFs accounted for $44 billion of that, pushing assets in U.S. funds to almost $2.8 trillion.


Most of the money went to cheap, index-tracking ETFs, a sign that the price war in ETFs isn’t over yet. BlackRock’s iShares ETFs were the biggest winner, and its low-cost Core series garnered the bulk of the $38 billion global haul.


“All of the money is going into the cheapest and most boring ETFs. This is the retail investor getting back into the market with a vengeance,” said Dave Nadig, chief executive of, an industry website owned by Bats Global Markets, newly a subsidiary of CBOE Holdings Inc.


The Rise of the ‘Do-Nothing’ Investor

Passive mutual funds are growing rapidly, pushing aside stock pickers and changing the investment world.


The fastest-growing ETF so far this year is the iShares Core Emerging Markets ETF, which took in $4.2 billion in the first two months of the year, 18% of its assets, according to FactSet. Three other Core ETFs that invest in U.S. stocks were also among the top gainers last month.

Why is this a sign of a market top? Because small investors tend to trade on emotion rather than logic or expertise. It takes them a long time to forget the pain of the last bear market, so they avoid the early stages of recoveries. When they finally conclude that there’s money to be made, it’s usually too late.

And why are individual investors only the second dumbest money? Because governments are even less astute and more emotional than individuals, and their plunge into equities is just beginning. Japan’s central bank is now one of its market’s biggest “investors” while the Swiss National Bank is a huge holder of blue chips like Apple and Microsoft. See We’re All Hedge Funds Now, Part 4: Central Banks Become World’s Biggest Stock Speculators.

In the next downturn – which, based on most valuation measures, seems imminent – the US Fed and European Central Bank will find that interest rates are too low for big further cuts while the supply of bonds is insufficient for big new QE programs. So they’ll join Japan and Switzerland in buying stocks. They’ll do so indiscriminately, creating their own index ETFs and throwing money at a broad range of large cap stocks, possibly pushing prices to levels that history would consider insane. In other words they’ll act like retail investors on steroids.

But that’s a story for the next cycle. This time around the fact that individuals pouring in is all we need to know.

*  *  *

As a reminder, in the recent past, these massive floods of retail panic-buying flows have stalled the rallies (and not ended well).


This massive inflow appears to confirm what JPMorgan has been seeing, that the latest “Great Rotation” is one not from bonds into stocks, but from “smart money” to retail investors who have finally joined in the market euphoria, traditionally seen as a topping sign for rallies.

Confirming what BofA observed last week, JPM writes that in contrast to retail investors, institutional investors appear to have overall reduced rather than increased their equity exposure YTD.

JPM’s punchline:  

“This apparent unwillingness by institutional investors to raise their equity exposures YTD reinforces the argument that it is retail rather than institutional investors that most likely drove this year’s strong inflows into equity ETFs and as a result this year’s equity rally.”

There are several implications from these findings.

The first is that with ETFs the dominant vehicle of expressing market sentiment at this moment – almost excluslively by retail investors – it means that certain distinct market “aberations” have become an odd fixture of the market, such as the now daily market ramp in the last 30 minutes of trading, which was on display most recently on Friday when as we discussed, a last minute burst of buying pushed the S&P not only to the green, but sent the Dow Jones to a new all time high just 7 seconds before the close of trading.

The other obvious finding is that the vast majority of professional, active investors and asset managers are taking advantage of the current market rally to sell risk and offload exposure to retail investors, who remain in the driver seat and provide ever higher prices against which to sell. 

How long this unstable equilibrium persists is unclear, and JPM refuses to make any predictions. However, with the fate of the market, now hitting record highs in the longest streak since 1987, it won’t take much to spook “mom and pop” daytraders and halt the ETF bid, resulting in the first market selloff under the Trump administration. We wonder what Trump, who has repeatedly pointed to the market’s outperformance as an indication of his successful policies, will say once the S&P prints its first correction (or bear market) under his watch.

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House Republicans Release Plan To Repeal and Replace Obamacare: Key Highlights

On Monday afternoon, House Republicans in both the Ways and Means and Energy and Commerce committees, unveiled their long-awaited legislation as part of House Republicans effort to repeal and replace Obamacare through the reconciliation process. The measure would roll back the government’s health care role and is expected to result in fewer people having insurance coverage; however, due to strong opposition among key republicans to the proposed plan, there is a high likelihood the bills will not pass in their current form.

Upon releasing the legislation, House Energy and Commerce Committee Chairman Greg Walden said: “After years of Obamacare’s broken promises, House Republicans today took an important step. We’ve spent the last eight years listening to folks across this country, and today we’re proud to put forth a plan that reflects eight years’ worth of those conversations with families, patients, and doctors. Simply put, we have a Better Way to deliver solutions that put patients – not bureaucrats – first, and we are moving forward united in our efforts to rescue the American people from the mess Obamacare has created.

“With today’s legislation, we return power back to the states – strengthening Medicaid and prioritizing our nation’s most vulnerable. We provide the American people with what they’ve asked for: greater choice, lower cost, and flexibility to choose the plan that best suits their needs. Today is just the first step in helping families across this country obtain truly affordable health care, and we’re eager to get this rescue mission started.”

The plan would dismantle the key aspects of ObamaCare, including subsidies to help people buy coverage, the law’s fines on people who don’t purchase health insurance, the expansion of Medicaid, and drop the plan to tax employer-sponsored plans. The bills can be found here and here.

A breakdown of core aspects removed from the existing law (courtesy of Axios):

  • All Obamacare taxes
  • All Obamacare subsidies, including its premium tax credit
  • Individual, employer mandate penalties
  • “Cadillac tax”
  • No longer will limit the tax break for employer-sponsored health coverage
  • No payments to insurers for cost-sharing reductions
  • Selling insurance across state lines (can’t be done in the “reconciliation” bill)
  • Medical malpractice reform (can’t be done in the “reconciliation” bill)

What is being added:

  • Pre-existing condition coverage
  • Continuous coverage — 30 percent penalty if people don’t keep themselves insured
  • Special fund to help states set up “high-risk” pools, fix their insurance markets, or help low-income patients
  • Enrollment in expanded Medicaid will be frozen
  • Current enrollees can stay until 2020, and keep getting extra federal funds, until they leave the program on their own
  • Medicaid will change to “per capita caps” (funding limits for each person) in fiscal year 2020
  • A new, refundable tax credit will be available in 2020 to help people buy health insurance
  • Covers five age groups — starts at $2,000 for people in their 20s, increases to $4,000 for people in their 60s
  • It’s not means tested, but phased out for upper-income people (starting at $75,000 for individuals, $150,000 for families)
  • Insurers can charge older customers five times as much as young adults

At its core, in place of the existing Affordable Care Act legislation, republicans will implement a system centered on a tax credit to help people buy insurance.  That tax credit would range from $2,000 to $4,000 annually  increasing with age. That system would provide less financial assistance for low-income and older people than ObamaCare, but could give more assistance to younger people and those with somewhat higher incomes.

Democrats have warned that between the phasing out of ObamaCare’s Medicaid expansion and the smaller tax credit for low income people, coverage would be put at risk for many of the 20 million people who gained it from ObamaCare. As The Hill adds, Republicans acknowledge that their plan will cover fewer people, but note that unlike ObamaCare, they are not forcing people to buy coverage through a mandate. They say their system is less intrusive and provides people a tax credit without mandates or a range of tax increases.

While some republicans such as House Ways and Means Chairman Kevin Brady are confident the bill will pass with full Republican support despite recent party infighting over the details, the measure faces a rocky path, particularly in the Senate.

Earlier on Monday, four Republican senators – Sens. Rob Portman, Shelley Moore Capito, Cory Gardner and Lisa Murkowski – objected to an earlier version of the House bill, saying that it failed to protect ObamaCare’s Medicaid expansion, saying they won’t support a bill that takes the same approach to the program as a leaked Obamacare repeal and replacement bill did. However, under the proposed bill, the repeal of the Medicaid expansion would not take effect until 2020, and Republicans would grandfather in current enrollees so that they can stay on the program. Once 2020 arrives, the federal government will no longer provide the extra federal funds that allow for expansion.

As this is unlikely to solve the senators’ problems with the bill, the proposed plan may be dead on arrival.

That plan has drawn objections from more centrist Republican senators too, who want to protect the expansion and are worried about constituents losing coverage and their states losing federal funds. 

House Republicans have also objected to the plan, with Conservatives in the House Freedom Caucus calling the bill’s tax credit is a “new entitlement.” They have enough votes to kill the bill, but it remains to be seen whether they will actually vote against it.

As previously leaked, the bill would maintain ObamaCare’s protections for people with pre-existing conditions, who could still not be denied coverage. Instead of ObamaCare’s mandate, the bill would seek to incentivize healthy people to sign up by allowing insurers to charge people 30 percent higher premiums if they have a gap in coverage. The measure also repeals ObamaCare’s taxes, such as the medical device tax and health insurance tax, starting in 2018.

Finally, The Hill also notes that the bill scraps a controversial Republican proposal in earlier drafts to start taxing some employer-sponsored health insurance. Instead, the measure would keep ObamaCare’s “Cadillac tax” on generous healthcare plans starting in 2025, in order to prevent that legislation from adding to the deficit in that decade.

House committees planned votes on the legislation Wednesday at 10:30am. That will launch perhaps the year’s defining battle in Congress, and GOP success is by no means assured because of internal divisions.

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Rights group says 107 Egyptian were killed by police forces in February

107 extrajudicial killings were committed by security forces in Egypt in February 2017, El-Nadeem Centre for Rehabilitation of Victims of Violence and Torture has revealed in its report for the month of February. The report, titled “Archive of Oppression”, has documented 110 cases of enforced disappearances during the same month, ten of which were carried out during investigations at the police stations. According to the report, February’s killings have included eight cases of prisoners’ death in custody and others in violent acts during the security raids to arrest regime opponents, and in terrorist attacks in the troubled Sinai Peninsula. Read: Amnesty: Human rights crisis in Egypt continues Nadeem’s report has showed 12 cases of individual torture and 21 cases of […]

WHO: Pollution kills 1.7m children a year

Tue, 2017-03-07

GENEVA: More than one in four deaths in children under five are linked to polluted environments, according to two new World Health Organization (WHO) reports published Monday.
Each year, environmental risks such as indoor and outdoor pollution, second-hand smoke, unsafe water and poor sanitation kill around 1.7 million children between the ages of one month and five years, the reports found.
Harmful exposure can start in the mother’s womb, increasing the risk of premature birth, which can lead to life-long health problems.
When children are exposed to air pollutants they also can face a lifelong increased risk of chronic respiratory diseases, like asthma, and of heart disease, stroke and cancer.
The findings were in line with a WHO study published last year showing that about a quarter of all deaths worldwide, across all age groups, were attributable to environmental factors like air, water and soil pollution, as well as unsafe roads and workplace stress.
But the new reports highlight the particular dangers faced by the youngest in society. “A polluted environment is a deadly one, particularly for young children,” WHO chief Margaret Chan said in a statement.
“Their developing organs and immune systems, and smaller bodies and airways, make them especially vulnerable to dirty air and water,” she said.
An estimated 570,000 children under five die each year from respiratory infections such as pneumonia, which are attributable to air pollution and second-hand smoke, the reports found.
And 361,000 others are killed by diarrhea resulting from poor access to clean water, sanitation and hygiene, the agency said.
Another 200,000 children under five die from unintentional injuries linked to unhealthy environments, including poisonings, falls and drowning, WHO said.

Main category: 
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Air pollution linked to 2.7 million premature births a year: Scientists
China, India account for half world’s pollution deaths in 2015 — study

Government Spooks Can Use Mic, Camera On Trump’s Phone (Even When He Thinks It’s Turned Off)

Via Michael Snyder of The Economic Collapse blog,
After reading this article you might not ever view your electronic devices the same way again.  Last year, Hollywood released a biographical political thriller based on the life of Edward Snowden t…

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Senator Grassley Launches Probe Into FBI Ties With British Spy Behind “Trump Dossier”

It took less than 24 hours for republicans to strike back at James Comey’s unexpected revolt against Donald Trump on Sunday afternoon, when as the NYT first reported the FBI director had demanded that the DOJ reject Trump’s accusations it was wiretapping the Trump Tower (the DOJ has still not done so, and questions are still being asked why Comey himself did not do as he requested especially since any FISA court order would have come from the FBI).

Senator Chuck Grassley, the republican Chairman of the Senate Judiciary Committee, has opened a probe into allegations the FBI worked with the British spy who authored the controversial opposition research dossier – which at various points was funded by both an unnamed democrat and republican – on President Trump during the 2016 election.  In a letter to Comey, Grassley asked for records pertaining to any agreements the agency may have had with Christopher Steele. As a reminder, the former MI6 agent wrote an explosive memo on behalf of Trump’s political enemies alleging that the Russians had compromising information on the president.

Comey briefed Trump on the existence of the memo in a private meeting in January. Shortly after, several news organizations published the unverified allegations, which the White House denied; BuzzFeed controversially posted the whole memo, for which it has since been taken to court. 

In late February, The Washington Post reported that the FBI reached an agreement with Steele whereby the British spy would continue his investigation on behalf of the bureau.

“While Trump has derided the dossier as ‘fake news’ compiled by his political opponents, the FBI’s arrangement with Steele shows that the bureau considered him credible and found his information, while unproved, to be worthy of further investigation,” the Post, which has been spoon-fed every piece of leaked wiretapped information involving the Trump administration, reported at the time.

However, today Grassley pushed back and demand the FBI provide information relevant to its relationship with and use of the British spy, whose salacious allegations – among which an infamous golden shower scene involving hookers – have infuriated Trump and his allies.

The idea that the FBI and associates of the Clinton campaign would pay Mr. Steele to investigate the Republican nominee for President in the run-up to the election raises further questions about the FBI’s independence from politics, as well as the Obama administration’s use of law enforcement and intelligence agencies for political ends,” Grassley wrote.

“It is additionally troubling that the FBI reportedly agreed to such an arrangement given that, in January of 2017, then-Director Clapper issued a statement stating that ‘the [intelligence community] has not made any judgment that the information in this document is reliable, and we did not rely upon it in any way for our conclusions.’”

In his letter, Grassley asks for all records regarding Steele’s investigation, details of the agreement between the FBI and Steele, the FBI’s policies for using outside investigators, and whether the bureau has relied on any of the information Steele has provided in seeking warrants.

Grasley also wants to know how the FBI obtained a copy of Steele’s documents, whether it has additional documents that were not published by Buzzfeed, and whether any FBI activity was influenced by the Steele memo.

Among Grassley’s  list of questions comes what could be the most devastating of his inquiries, considering President Trump’s accusation that the Obama administration wiretapped his 2016 presidential campaign:

Has the FBI relied on or otherwise referenced the memos or any information in the memos in seeking a FISA warrant, other search warrant, or any other judicial process? Did the FBI rely on or otherwise reference the memos in relation to any National Security Letters? If so, please include copies of all relevant applications and other documents.

“National Security Letters” are one of the FBI’s most secretive instruments for obtaining information. They are frequently accompanied by powerful gag orders which forbid the recipient of the letter from discussing it.

We look forward to the FBI’s response in the matter, as the law enforcement organization, and its boss, scramble to prove to both republicans and democrats that it is not – as many allege – politically tainted beyond salvage.

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King Salman’s talks in Asia embody Saudi Arabia’s deep relations

Tue, 2017-03-07

RIYADH: Crown Prince Mohammed bin Naif said the successful talks between King Salman and the leaders in Malaysia, Indonesia and Brunei have embodied appreciation, respect and the deep relations between the Kingdom and these countries.
Briefing the Cabinet session at Yamamah Palace here Monday under his chairmanship, the crown prince said that the warm reception accorded the king and accompanying delegation during his current visit to Asian countries, and the signing of a series of agreements, come within the keenness of the Kingdom and these countries to enhance relations in different areas.
The Cabinet acknowledged the following awards to the king: the Medal of Crown in Malaysia, the Medal of Star in Indonesia, the Medal of Royal Family in Brunei, and the awarding the king with an honorary Ph.D. in literature from the University of Malaya, an honorary Ph.D. in political science and an award for unique excellence achievement in the service of Islam from the International Islamic University in Malaysia. The Cabinet recognizes that he received these honors for his efforts for Islam and Muslims, an appreciation and recognition for great status enjoyed by the king in serving Islam, and the embodiment of strong relations between the Kingdom and these countries.
The Cabinet appreciated the king’s talks in these countries, which contributed to strengthening bilateral relations in many areas, in a manner that will enhance joint understanding, and serve global peace and security.
The Cabinet praised the announcement of the establishment of the King Salman Center for Global Peace in Malaysia, as well as Saudi Aramco’s joint venture with the Malaysian Petronas Company to acquire and develop a refinery project in Malaysia.
The Cabinet stressed the important comments expressed by the king during his visits to Malaysia and Indonesia. It singled out the king’s call on fighting terrorism and extremism, and promoting dialogue between religions and cultures to enhance the spirit of tolerance in a manner that will serve joint interests and global peace and security.
In addition, the Cabinet expressed thanks and appreciation to King Salman for ordering male and female students studying at their expense in Malaysia to join the educational mission within the program for foreign scholarship.
The Cabinet touched on the 34th session of the UN Council on Human Rights in Geneva. The governing body stressed the Saudi address at this session, which affirmed the Kingdom’s desire to boost efforts to protect human rights at all levels, emanating from the principles of Shariah, and the necessity to protect families from deviation, disintegration, extremism, hatred and racism.
The Cabinet also approved the following:
• The Cabinet approved a memo of understating between the Saudi Ministry of Interior and the National Police Agency in the Republic of Korea for cooperation in areas related to security and fighting of crimes.
• The Cabinet authorized the president of King Abdul Aziz City for Science and Technology (KACST) to discuss with China a memo of understanding between the KACST and the Chinese National Aerospace Agency for cooperation in the mission of Chang’e-4 lunar probe.
• The Cabinet also authorized president of King Abdul Aziz City for Science and Technology (KACST) to discuss with Japan a memo of understanding for scientific and technical cooperation between the governments of Saudi Arabia and Japan.
• The Cabinet authorized the president of General Authority for Sports to discuss with Japan a draft protocol for cooperation in sports between the Saudi General Authority for Sports and the Japanese Ministry of Education, Culture, Sports, Science and Technology.
• The Cabinet authorized the minster of environment, water and agriculture to discuss with Japan a draft memo of understanding for cooperation on water processing and desalination between the Saudi Ministry of Environment, Water and Agriculture and the Japanese Ministry of Economy, Trade and Industry.
• The Cabinet authorized the minister of transport and board chairman of the General Authority of Civil Aviation to sign draft agreements between the governments of Saudi Arabia, Uganda, Ecuador, Kazakhstan and Somalia in air transport.
• The Cabinet authorized the minister of education to discuss with Maldives a memo of understating for scientific and educational cooperation between the Saudi Ministry of Education and the Ministry of Education of the Republic of Maldives.
• The Cabinet approved an agreement between the governments of Saudi Arabia and Mexico to avoid double taxation and stopping tax evasion on income tax.
• The Cabinet authorized the minister of finance to sign a draft agreement between the governments of Saudi Arabia and Mauritania, on the avoidance of double taxation on income tax and capital, and stopping tax evasion.

Main category: 
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