Business

Submitted by Eric Bush via Gavekal Capital blog,

While the myth that stock market returns are highly correlated to a country’s GDP growth rate has largely been debunked, there remains a strong, and intuitive, relationship between corporate profits and GDP. GDP measures the output of an economy and corporate profits are simply the income to capital owners derived from that output (with some accounting adjustments made along the way). In the long-run, equity investors need to see growth in corporate profits in order to justify equity prices.

With a record glut of crude and gasoline, US crude production pushed to new cycle highs this week and continues to track lagged rig counts.

US crude inventories are at a new record high...

And so are Gasoline inventories...

And the rig ccount keeps rising with lagged oil prices...

• *U.S. OIL RIG COUNT UP 6 TO 597 , BAKER HUGHES SAYS      :BHI US

Highest since October 2015

The Dow Jones "Industrial" Average is suffering one of its worst intraday declines in weeks as a result of a 3.6% drop in UnitedHealth shares, which are sinking on news that the DOJ joined a whistleblower lawsuit against the insurer filed by a former executive claiming the country's largest health insurer overcharged Medicare hundreds of millions of dollars.

The company denied the allegations, with UnitedHealth spokesman Matthew Burns saying in a statement that "we reject these more than five-year-old claims and will contest them vigorously." 

Via NorthmanTrader.com,

Via Soren K. and MarketSlant

We received an interesting note from George Gero at RBC today for which we thank him. First the facts.