Business Insider: The backbone of the stock market over the past 10 years is starting to fade [feedly]

If Marx were still alive, this would be a great piece to illustrate parasitism in capitalism: A tax cut intended for investment by billionaire interests in new growth. Instead they put it in their pockets through the stock buyback transactions. This results in lots of stock market transactions that LOOK like growth, but are NOT. The billionaires put the tax cut in their knapsack, having no profitable or secure alternative in the midst of volatility induced caution. The volatility is largely generated by Trump.

The backbone of the stock market over the past 10 years is starting to fade
https://markets.businessinsider.com/news/stocks/stock-buybacks-declining-bad-news-for-the-bull-market-2019-10-1028573892?utm_source=feedly&utm_medium=webfeeds

• Share buybacks of S&P 500 index stocks fell 20% in the second quarter of 2019, according to Sean Darby of Jefferies. 
• Buybacks have slowed since hitting a record $1.1 trillion in 2018 — a surge that was fueled by tax cuts.
• The more than 10-year bull market has been largely supported by share buybacks as companies have boostesd share prices by buying back their own stocks. 
• Read more on Markets Insider. 

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One of the biggest forces supporting the 10-year bull market is beginning to slow down. 

In the second quarter of the year, share buybacks of S&P 500 index stocks declined to $160 million, down 20% on the quarter, and 19% lower than the previous year, according to Jefferies. 

That's a departure from 2018, when corporate buybacks hit a record $1.1 trillion, fueled in part by the Trump administration's tax reform.

The bull market has been largely supported by companies buying back their own shares. During periods devoid of other positive catalysts — such as the five-quarter S&P 500 earnings contraction in 2015 and 2016 — repurchases have been the market's ace in the hole.

When a company repurchases its own stock, it boosts the share price and earnings per share number by reducing the total number of shares outstanding. The slower pace of buybacks could mean the stock market has less support to keep gaining, according to Darby. 

Total S&P buybacks "seem to have peaked," since the great financial crisis, Sean Darby, global equity strategist at Jefferies wrote Wednesday. The largest declines in buybacks were seen in utilities and healthcare, he said, while buybacks in real estate and energy increased.

Read more: America's No. 1-ranked millennial wealth adviser reveals his 5 definitive tips for young investors

The slowed buyback numbers come as markets are grappling with the effects of the trade war between the US and China, the threat of further tariffs, and signs of weakening in the US and global economies. On Wednesday, the Dow plunged more than 500 points after weak economic data sparked recession fears in the US. 

Corporate buybacks have come under pressure recently from politicians, including a few presidential candidates who say the practice makes inequality worse by returning cash to shareholders instead of paying workers more. Sens. Elizabeth Warren, Bernie Sanders, and Marco Rubio are the top critics of buybacks, and each has a plan to curb them. 

Because the companies with the largest share of buybacks have outperformed the market since 2009, Jefferies also highlighted stocks likely to maintain buying momentum through the end  of the year. Macy's, Halliburton, and Newell Brandstopped the list. 

In addition, there is evidence that some companies are stepping up their buyback programs — Bank of America Merrill Lynch said in a note that buybacks neared record highs last week. 

At the stock level, Apple, Bank of America, and JPMorgan Chase had the largest amount of buybacks, according to Jefferies. 

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Worst month for US manufacturers since 2009: ISM [feedly]

More details on the mfg slump

Worst month for US manufacturers since 2009: ISM
https://www.asiatimes.com/2019/10/article/worst-month-for-us-manufacturers-since-2009-ism/

The US manufacturing sector slowed again in September, falling to its lowest level since 2009, amid trade war worries, according to an industry survey released Tuesday.

It was the second month in a row manufacturing has contracted, continuing a slowing trend underway since March, according to data from the Institute for Supply Management (ISM).

ISM's monthly manufacturing index fell to 47.8%, a sharp drop from 49.1% in August. Any reading below 50 indicates contraction.

"Global trade remains the most significant issue," said Timothy Fiore, chair of ISM's manufacturing survey. "Overall, sentiment this month remains cautious regarding near-term growth."

The decline was a surprise to economists who forecast a slight uptick last month following the decline in August.

However, "Comments from the panel reflect a continuing decrease in business confidence," Fiore said in a statement.

Many of the comments from survey participants cite President Donald Trump's trade war with China, noting that the retaliatory tariffs are hurting business and undermining confidence, despite comments from officials claiming Americans have not been impacted by the dispute.

Fiore noted the contraction in new export orders that began in July, and the survey showed many components declined including production and employment, although prices increased.

One respondent from the electrical equipment sector summed it up: "Economy seems to be softening. The tariffs have caused much confusion in the industry."

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Robots to Cut 200,000 U.S. Bank Jobs in Next Decade, Study Says [feedly]

Robots to Cut 200,000 U.S. Bank Jobs in Next Decade, Study Says
https://www.bloomberg.com/news/articles/2019-10-02/robots-to-cut-200-000-u-s-bank-jobs-in-next-decade-study-says

Technological efficiencies will result in the biggest reduction in headcount across the U.S. banking industry in its history, with an estimated 200,000 job cuts over the next decade, Wells Fargo & Co. said in a report.

The $150 billion annually that the country's finance firms are spending on tech -- more than any other industry -- will lead to lower costs, with employee compensation accounting for half of all bank expenses, said Mike Mayo, a senior analyst at Wells Fargo Securities LLC. Back office, bank branch, call center and corporate employees are being cut by about a fifth to a third, with jobs related to tech, sales, advising and consulting less affected, according to the study.

"It will be a dramatic change in contact centers, and these are both internal and external," Michael Tang, a Deloitte partner who leads the consulting firm's global financial-services innovation practice, said in an interview in the Wells Fargo report. "We're already seeing signs of it with chatbots, and some people don't even know that they're chatting with an A.I. engine because they're just answering questions."

Wells Fargo's Mayo joins bank executives, consulting firms and others in predicting huge cuts to the banking workforce amid the push toward automation. McKinsey & Co. said in May that it expects the headcount for front-office workers -- the bankers and traders historically seen as among finance firms' most valuable assets -- to drop by almost a third with the rise of robots.

Front-office headcount for investment banking and trading fell for a fifth year in 2018, according to Coalition Development Ltd. data. R. Martin Chavez, an architect of Goldman Sachs Group Inc.'s effort to transform itself with tech, said last month that all traders will soon need coding skills to succeed on Wall Street.

— With assistance by Lananh Nguyen
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World Economy Sends Up Flares as Manufacturing Slump Hits U.S. [feedly]

World Economy Sends Up Flares as Manufacturing Slump Hits U.S.
https://www.bloomberg.com/news/articles/2019-10-01/asia-factory-sentiment-remains-brittle-ahead-of-u-s-china-talks

text only content:

The global economy flashed clearer warning signs on Tuesday as a wave of data showed manufacturing stuck in a slump, exports falling and sentiment sliding.

In the U.S., a closely watched factory index unexpectedly dropped to the lowest since 2009 -- driving down stocks as well as yields on Treasuries. Meanwhile the specter of deflation resurfaced as South Korea, a bellwether for international trade, reported a drop in consumer prices and the Reserve Bank of Australia cut its interest rate to a record low.  With a trade war between the U.S. and China still raging, industry executives from Germany to Japan and Russia complained of contracting business, and the World Trade Organization cut its forecast for commerce to the lowest in a decade.

Fresh Warning

The World Trade Organization cuts the outlook for global commerce

Source: WTO

Although a measure of Chinese manufacturing improved and consumer spending globally has largely held strong, the overall tone sounded of the world economy failing to rebound amid mounting trade tensions and rising Brexit risks.

That leaves the U.S. and China and also the U.K. and European Union under pressure to resolve their differences, with central bankers and governments also having to find ways to support demand.

"There can be few precedents since the 1930s of global growth prospects being affected so significantly by trade policy disruptions," Fitch Ratings Ltd. Chief Economist Brian Coulton said.

Bloomberg Economics: Market Indicators Flash Recession Risk Warning

UBS Group AG economists reckon global growth is tracking just 2.3% at the moment, almost a percentage point less than at the start of the third quarter. Those at Danske Bank are warning there is a 30% chance of a global recession in the next two years. A global manufacturing gauge improved slightly in September, but employment fell for a fifth month.

While trade tensions are part of the story, there are also industry-specific issues -- autos in Germany, semiconductors in South Korea -- adding to the hurdles.

German car-parts giant Continental AG last month laid out a sweeping restructuring plan that could affect as many as 20,000 jobs worldwide. Japan's Kawasaki Heavy Industries cut its forecasts, citing sales to chipmakers.

Central banks around the world are fighting the slowdown with new interest-rate cuts and monetary stimulus. But they are also ramping up calls on governments to jump in with fiscal measures, saying they can't do all the heavy lifting.

In the meantime, global bond investors are betting against a meaningful inflation pickup. Even with sovereign yields below zero, they are still piling into government debt, and so-called deflation trades are on the rise.


The latest purchasing managers indexes may reinforce those views. German manufacturers cut prices in September by the most in more than three years. In Japan, where manufacturing sentiment is declining, factories lowered selling prices for a fourth straight month. British companies warned of "Brexit uncertainty and clients routing supply chains away from the U.K."

Such an environment is worrying for central bankers in a world where inflation is already low and well short of targets. Consumer-price growth in the euro area slipped below 1% in September for the first time since 2016, falling further from the European Central Bank's goal.

Parts of the global economy still show resilience, and services are still growing. U.S.-China trade negotiations remain critical for the outlook, with a Chinese delegation set to visit Washington for talks this month aimed at hammering out a deal.

The decline in U.S. manufacturing is an "amber light on the dashboard," John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, said on Bloomberg Television. "The Fed is very likely to cut again at the end of October as a result of this and so long as the trade-war situation remains as an overhang."
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Warren Versus the Petty Plutocrats [feedly]

PK on politics has a less sterling accuracy than on economics, but he always sharp.

Warren Versus the Petty Plutocrats
https://www.nytimes.com/2019/09/30/opinion/elizabeth-warren-wealth-tax.html

text only version  if blocked by paywall

Remember when pundits used to argue that Elizabeth Warren wasn't likable enough to be president? It was always a lazy take, with a strong element of sexism. And it looks ridiculous now, watching Warren on the campaign trail. Never mind whether she's someone you'd like to have a beer with, she's definitely someone thousands of people want to take selfies with.

But there are some people who really, really dislike Warren: the ultrawealthy, especially on Wall Street. They dislike her so much that some longtime Democratic donors are reportedly considering throwing their backing behind Donald Trump, corruption, collusion and all, if Warren is the Democratic presidential nominee.

And Warren's success is a serious possibility, because Warren's steady rise has made her a real contender, maybe even the front-runner: While she still trails Joe Biden a bit in the polls, betting markets currently give her a roughly 50 percent chance of securing the nomination.

But why does Warren inspire a level of hatred and fear among the very wealthy that I don't think we've seen directed at a presidential candidate since the days of Franklin Delano Roosevelt?


On the surface, the answer may seem obvious. She is proposing policies, notably a tax on fortunes exceeding $50 million, that would make the extremely wealthy a bit less so. But delve into the question a bit more deeply, and Warren hatred becomes considerably more puzzling.

For the only people who would be directly affected by her tax proposals are those who more or less literally have more money than they know what to do with. Having a million or two less wouldn't crimp their lifestyles; most of them would barely notice the change.

At the same time, even the very wealthy should be very afraid of the prospect of a Trump re-election. Any doubts you might have had about his authoritarian instincts should have been put to rest by his reaction to the possibility of impeachment: implicit death threats against whistle-blowers, warnings of civil war and claims that members of Congress investigating him are guilty of treason.

And anyone imagining that great wealth would make them safe from an autocrat's wrath should look at the list of Russian oligarchs who crossed Vladimir Putin — and are now ruined or dead.

So what would make the very wealthy — even some Jewish billionaires, who should have a very good idea of the likely consequences of right-wing dominance — support Trump over someone like Warren?


There is, I'd argue, an important clue in the "Obama rage" that swept Wall Street circa 2010. Objectively, the Obama administration was very good to the financial industry, even though that industry had just led us into the worst economic crisis since the 1930s. Major financial players were bailed out on lenient terms, and while bankers were subjected to a long-overdue increase in regulation, the new regulations have proved fairly easy for reputable firms to deal with.

Yet financial tycoons were furious with President Barack Obama because they felt disrespected. In truth, Obama's rhetoric was very mild; all he ever did was suggest that some bankers had behaved badly, which no reasonable person could deny. But with great wealth comes great pettiness; Obama's gentle rebukes provoked fury — and a huge swing in financial industry political contributions toward Republicans.

The point is that many of the superrich aren't satisfied with living like kings, which they will continue to do no matter who wins next year's election. They also expect to be treated like kings, lionized as job creators and heroes of prosperity, and consider any criticism an unforgivable act of lèse-majesté.

And for such people, the prospect of a Warren presidency is a nightmarish threat — not to their wallets, but to their egos. They can try to brush off someone like Bernie Sanders as a rabble-rouser. But when Warren criticizes malefactors of great wealth and proposes reining in their excesses, her evident policy sophistication — has any previous candidate managed to turn wonkiness into a form of charisma? — makes her critique much harder to dismiss.

If Warren is the nominee, then, a significant number of tycoons will indeed go for Trump; better to put democracy at risk than to countenance a challenge to their imperial self-esteem. But will it matter?

Maybe not. These days American presidential elections are so awash in money that both sides can count on having enough resources to saturate the airwaves.

Indeed, over-the-top attacks from the wealthy can sometimes be a political plus. That was certainly the case for F.D.R., who reveled in his plutocratic opposition: "They are unanimous in their hate for me — and I welcome their hatred."

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So far Warren seems to be following the same playbook, tweeting out articles about Wall Street's hostility as if they were endorsements, which in a sense they are. It's good to have the right enemies.

I do worry, however, how Wall Streeters will take it if they go all out to defeat Warren and she wins anyway. Washington can bail out their balance sheets, but who can bail out their damaged psyches?

The Times is committed to publishing a diversity of letters to the editor. We'd like to hear what you think about this or any of our articles. Here are some tips. And here's our email: letters@nytimes.com.

Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman

A version of this article appears in print on Oct. 1, 2019, Section A, Page 23 of the New York edition with the headline: Warren vs. The Petty Plutocrats. Order Reprints | Today's Paper | Subscribe

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The WTO slashed its global trade forecast in half — citing Trump's trade war, Brexit, and shifting monetary policy [feedly]

Even though trade may only be 15% of GDP in the US, volatility is having a serious impact on forecasts, which impacts investment.

The WTO slashed its global trade forecast in half — citing Trump's trade war, Brexit, and shifting monetary policy
http://markets.businessinsider.com/news/stocks/the-wto-slashed-its-global-trade-forecast-in-half-citing-trump-s-trade-war-brexit-and-shifting-monetary-policy-1028567667?utm_source=feedly&utm_medium=webfeed

• The World Trade Organization (WTO) just cut its global trade forecasts on Tuesday, saying that "escalating trade tensions and a slowing global economy," led to its economists downgrading their forecasts for 2019. 
• The WTO said that the volume of merchandise trade will only increase by 1.2% this year down from the 2.6% prediction from earlier this year.
• It also said that trade volumes will increase by 2.7% next year, down from 3% in April. 
• The WTO specifically cited trade tensions, Brexit, and Fed rate cuts as reasons for its bearish outlook. 
• View Markets Insider's homepage for more stories. 

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The World Trade Organization (WTO) has just cut its global trade forecasts, blaming political uncertainty around the US-China trade war, Brexit and shifting monetary policy. 

The WTO cut its forecast for global trade to increase by just 1.2% this year, dropping from the April forecast of 2.6%. It also cut next year's forecast from 3% to 2.7%. 

The statement released Tuesday morning was a scathing report on the damages to global trade because of political uncertainty, with the director-general pushing for more cooperation between trading partners. 

"Beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity enhancing investments that are essential to raising living standards," said WTO Director-General Roberto Azevêdo in a press release.

"The darkening outlook for trade is discouraging but not unexpected. Beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity enhancing investments that are essential to raising living standards," Azevêdo said. "Job creation may also be hampered as firms employ fewer workers to produce goods and services for export."

WTO

The WTO highlighted in the report that world trade was slowed dramatically in 2019, and that "monthly economic indicators provide some worrying clues about the current and future trajectory of world trade," such as PMI. 

Earlier on Tuesday, Europe's PMI manufacturing dropped to its lowest level since the eurozone crash in 2012. 

The statement from the WTO also specifically mentioned trade conflicts, though he did not name the US-China conflict, US-EU or the Japan-Korea trade wars that are ongoing, as well as citing Brexit and changing monetary policy. 

"Further rounds of tariffs and retaliation could produce a destructive cycle of recrimination. Shifting monetary and fiscal policies could destabilize volatile financial markets," it said in the report.

"A sharper slowing of the global economy could produce an even bigger downturn in trade. Finally, a disorderly Brexit could have a significant regional impact, mostly confined to Europe" the WTO added.

Recently major central banks have been cutting rates, with the Federal Reserve and the European Central bank cutting interest rates to try and stimulate the economy. 

The statement ended by saying "the balance of risk remains on the downside, with trade disputes, financial volatility and geopolitical tensions providing potential triggers for a steeper downturn."

WTO

NOW WATCH: Animated map shows where American accents came from

See Also:

• Costco workers reveal 33 things they'd love to tell shoppers, but can't
• McDonald's employees share the 4 menu items they'd never eat
• The impeachment inquiry into Trump has rattled global markets and poses 'a serious setback' to resolving the trade war

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chart of the weekMobile Money Spreads to Asia [feedly]

Interesting post on the spreading phenomenon of "mobile money"

chart of the weekMobile Money Spreads to Asia
https://blogs.imf.org/2019/09/30/mobile-money-spreads-to-asia/

By Esha Chhabra and Bidisha Das

Thanks to mobile money, any person with a basic phone can now make cash transfers, pay bills, and send money to family members abroad without having a bank account. This is a game-changing innovation, particularly for the world's poor as it is easy and cheap.

Our chart of the week from the IMF's Financial Access Survey shows the growth in mobile money accounts across regions. While mobile money continues to grow in its epicenter in Africa, it's also taking off in Asia. Mobile money is just one aspect of the survey, which also provides a wealth of information on the access to and use of basic financial services, including breakdowns by gender.

Asia's mobile money uptake

Over the past five years, mobile money has gained traction in South Asia, which is experiencing an average annual growth rate of 46 percent in mobile money accounts—the highest across all regions. Bangladesh, Indonesia, and Pakistan are a few examples of countries experiencing high mobile money growth in Asia.

Over the past five years, mobile money has gained traction in South Asia.

Mobile money services grew early on in sub-Saharan Africa because some countries lacked deep banking penetration. The launch of M-PESA in Kenya in 2007 completely transformed the way the unbanked access financial services.

After a rapid expansion in Kenya, Tanzania, and Uganda, mobile money has spread to other parts of the region. In fact, sub-Saharan Africa still leads in the number of mobile money accounts and in some countries, mobile money accounts now surpass bank accounts.

Mobile money also continues to grow in some fragile states.

Factors behind rapid uptake in new frontiers

In Afghanistan, for example, where only 200 out of 1,000 adults have bank accounts but more than 80 percent of the population has access to a cellular phone, mobile money is picking up. The value of mobile money transactions grew by a factor of four in the past five years—to 1.2 percent of GDP in 2018.

The ability of mobile money services to reach remote customers has contributed to this growth. Mobile network operators employ agents—typically small, local retail stores—to offer services even in remote areas where banks have limited reach.

In Afghanistan, there are, on average, three mobile money agents compared to one or less automated teller machine or commercial bank branch every 1,000 square kilometres. This expansion in mobile money services has helped meet a significant pent-up demand for financial services.

With mobile money becoming more pervasive, governments will need to create regulations to protect new customers against fraud and liquidity risks—the inability of service providers to return funds on demand.

Related Links:
2019 Financial Access Survey Results
2019 Financial Access Survey Trends and Developments

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