• Hoisington Management Quarterly Review and Outlook, 3Q 2016

    By now, you are probably aware that the US budget deficit jumped to $590 billion for fiscal 2016. What you might not be aware of is that US government debt rose by $1.4 trillion last fiscal year. That difference between the deficit and debt increases is an enormous number, and I bet you’re just as curious as I was to know what in the heck we spent that additional $800 billion on.
    In this week’s Outside the Box, my friends Dr. Lacy Hunt and Van Hoisington actually tell us the answer to that one, while noting that the increase in debt has exceeded deficit growth in 27 of the last 30 years, and the trend is now for larger ‘off-budget,’ debt-swelling items each year.
    Cutting to the chase, using current CBO projections and the trend in off-budget debt, Lacy and Van estimate that US government debt could grow by an additional $13 trillion in the next 10 years (by 2025). That would put total debt at $33 trillion and pushing 150% debt-to-GDP.

    This post was published at Mauldin Economics on OCTOBER 26, 2016.

  • Deutsche Bank Reports Unexpected Q3 Profit, But Wall Street Yawns Asking For More

    After serving much drama to its shareholders – and global markets – over the past couple of months, when its stock tumbled to all time lows following the news of the bank’s $14 billion DOJ settlement ask, Deutsche Bank provided some relief when earlier this morning it reported a modest, unexpected profit of 256 million for the third quarter on lower litigation and restructuring costs, beating consensus estimates of a 394 million loss, and a far better number than the 6 billion loss reported one year ago. Revenues were also a modest improvement to consensus expectations of 7.19BN, coming in at 7.49BN as a result of a 14% jump in fixed income trading revenues.
    The bank’s closely watched core tier one capital ratio rose from 10.8% at the end of June to 11.1% at the end of September, as Deutsche cut its risk-weighted assets by 18bn to 385bn. CFO Marcus Schenck said that the ratio would get a further boost of 40 to 50 basis points once the sale of its stake in Chinese lender Hua Xia was completed.
    CEO John Cryan repeated that Deutsche was making ‘good progress’ on its restructuring, but admitted that results had been ‘overshadowed’ by its negotiations with the DOJ. ‘This had an unsettling effect. The bank is working hard on achieving a resolution of this issue as soon as possible.”
    The failure to provide some additional guidance on the bank’s settlement process as well as on its recapitalization status is why the shares have undone the entire 3% gap higher, and were trading fractionally in the red. Raising a red flag, Deutsche Bank also said that it saw 9BN in outflows from its new business for private, wealth and commercial clients in the third quarter.

    This post was published at Zero Hedge on Oct 27, 2016.

  • US Futures Rebound, Global Stocks Dip As Bond Yields Rise, Dollar Hits 9 Month High

    European, Asian stocks fell while S&P futures rebounded as investors assessed a mixed batch of earnings reports while the dollar strengthened to 9 month highs versus most peers on rising confidence that the Fed will raise rates this year, pushing global bond yields higher.
    Top overnight news included the surprising profit by Deutsche Bank as well as the 35% jump in Barclays earnings on rising bond trading revenue; in macro the biggest overnight event was the UK Q3 GDP report which rose 0.5% handily beating expectations of 0.3% rise in the first quarter of Brexit. Yields on Britain’s gilts jumped to the highest since the Brexit vote. 2Y gilts rose four basis points to 0.31% in early trading and touched 0.33 percent, the highest since June 23. Germany’s 10-year bund yield climbed seven basis points to 0.15 percent, a fifth-straight increase, and Treasury 10-year note yields added three basis points to 1.82% as a December rate hike looking increasingly likely.

    This post was published at Zero Hedge on Oct 27, 2016.

  • Ying and Yang

    No, this is not a post about some new Chinese law firm. Instead, it’s just an update on the metals markets which, while refusing to go further down, aren’t making much progress to the upside, either.
    Today’s message: A few more slightly positive US economic datapoints and these are likely enough to make a December FF rate hike a fait accompli.
    Again, though…and I can’t stress this enough…we have traced out a pattern that is remarkably similar to last October and November in the run up to the most recent FF rate hike. And what happened beginning the very next day? Well, by now you know the story.
    The week of the October 2o15 FOMC produced a high trade in the Dec15 contract of $1183. As the Fedlines were digested later that week, it became clear that the Fed was going to raise the FF rate at the December 2015 meeting come hell or high water. And they did. However, take a close look at how gold traded in the days and weeks between the Oct15 FOMC and the December rate hike.
    Price fell from $1180 to $1050 in about five weeks but note that it bottomed well in advance of the actual “news” of the FF rate hike. This 10 % drop was fueled by a near panic level liquidation of the Specs at the Comex. How bad was it? From the CoT survey of 10/27/15, just one day before that fateful FOMC and Fedlines, the Large Specs in gold were NET long more than 157,000 contracts while the Commercials were NET short nearly 166,000. Just five weeks later, the NET position of the Large Specs was down to only 10,000 contracts with the Commercial position reaching an alltime low of just 2,911 contracts NET short. We even speculated at the time that there were some days, intraweek, where the Gold Commercials were actually and historically NET LONG.

    This post was published at TF Metals Report on October 26, 2016.

  • Indian, Chinese love affairs with gold turn financial

    For Surender Kumar Jindal, one of the biggest sellers of gold and silver bars in India, this year has not been good for business.
    Gold may have rallied 20 per cent in U.S. dollar terms, putting it on course for its first annual rise in four years. For the Indian market, though, that has contributed to a fall in demand for the physical metal. …
    Lacklustre demand in India marks a fundamental change for the physical gold market. After prices dropped in 2013, hefty buying from India and China saw hundreds of tonnes of metal flow eastward from vaults in London.
    However, analysts say this does not mean the world’s two largest consumers of the metal have lost their love for bullion, rather that the way people buy gold there is changing.
    In China, gold is becoming an increasingly popular investment product through platforms run by the country’s state-owned banks that allow investments on the Shanghai Gold Exchange via smartphones and online. New financial investment products such as gold exchange traded funds have also started to see inflows.

    This post was published at Financial Times

  • Russia may have to sell gold to boost current account — Lawrie Williams

    A report in Pravda suggests that the lower oil prices and the implementation of Western sanctions in particular have been having a particularly adverse impact on Russia’s current account and it may now become necessary to sell some of its gold reserves and diamond stocks to counteract a growing deficit.
    Regarding gold, Russia is vying with Australia to be the world’s second largest producer of the yellow metal – indeed some projections suggest it could become the world’s largest gold miner within the next ten to fifteen years. The Russian Central Bank has also been the world’s largest official gold buyer in recent months. It is also the world’s no. 1 producer of diamonds mining around 25% of the global total.
    Now whether this reported necessity to sell gold and diamonds is going to affect the country’s foreign reserves is not certain from the report. We seem to recall a similar statement a couple of years ago, but since then Russia has continued to buy gold for its reserves – indeed it is reported to have taken 15 additional tonnes into its Central Bank holdings in September, bringing the total to around 1,540 tonnes, worth around US$63 billion at current gold prices. This is the world’s sixth largest national official gold holding.
    We will need probably to wait another 3 weeks or so for any official confirmation that Russia may be starting to dip into its official gold reserves to help reduce debt, or perhaps cutting the level of its central bank’s gold buying, or finding the gold from other stockpiled sources. Russia currently mines around 22.5 tonnes of gold a month.

    This post was published at Sharps Pixley

  • Hugo Salinas Price: How I Became a Gold-Bug

    My father was Hugo Salinas Rocha -“Salinas” was his father’s surname, and “Rocha” was his mother’s surname; the custom of using both parents’ surnames is universal in Latin America. Father was a successful merchant in Mexico City, and in the 1930’s he ran a store in downtown Mexico City. The store belonged to a company founded by his father, Benjamin Salinas Westrup and to the partner he took into the business, his brother-in-law, Joel Rocha Barocio; the company name used their initials: “SyR” (the “y” means “and” in Spanish).
    I was born in 1932. As a little boy, I loved to play in my father’s store after school hours, and one afternoon when I was perhaps eight years’ old, one of the salesmen took two gold coins out of his vest pockets (men wore vests in those days). They were the large, 1.2 ounce gold “Centenarios” that had been minted to celebrate the 100th Anniversary of Mexican Independence from Spain in 1810. The salesman balanced the two coins on his forefingers, and placing them near my ear, he gently touched one against the other. The sound was the delightfully pure ringing of gold!

    This post was published at Plata.com.mx

  • Global renewable power capacity overtakes coal as 500,000 solar panels installed every day

    Global renewable electricity capacity has overtaken coal to become the world’s largest installed power source for the first time, after a record-breaking year in which half a million solar panels were installed every day.
    Some 153 gigawatts (GW) of renewable power capacity – more than the total generation capacity of Canada – was installed during the course of 2015, making it the fastest-growing electricity source, the International Energy Agency said.
    As a result, worldwide renewable capacity hit 1,985 GW, or about 31pc of global power capacity, just pipping coal-fired power, which stands at 1,951 GW, the IEA said.

    This post was published at The Telegraph

  • China Money Rate Rises to 18-Month High as Yuan Depreciation Spurs Outflows

    China’s overnight money rate climbed to the highest level in 18 months, fueled by capital outflows as the yuan weakened to a six-year low.
    The one-day repurchase rate, a gauge of interbank funding availability, jumped 17 basis points, the most since February, to 2.41 percent, weighted average prices show. That’s the highest since April 2015. The rates rose after the People’s Bank of China weakened its daily reference rate for the yuan for the third day in a row.
    ‘Yuan depreciation-fueled outflows are causing a shortfall in base money supply and tightening liquidity,’ said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen. ‘This will add pressure to institutions which are highly leveraged in bond investments, if the tightness continues.’
    Liquidity in China’s interbank market has been hard hit by the currency’s accelerated decline. A net $44.7 billion worth of yuan payments left the nation last month, according to data released by the State Administration of Foreign Exchange. That’s the most since the government started publishing the figures in 2010, and compares with August’s outflow of $27.7 billion. Goldman Sachs Group Inc. warned Friday that China’s currency outflows have risen to $500 billion this year.

    This post was published at bloomberg

  • A hedge fund manager who retired at 36 says you should stay away from the industry

    A hedge fund manager who ran money for one the world’s biggest funds has a warning for those considering following his path: don’t bother.
    “It’s a pretty miserable industry,” said Raoul Pal, who previously co-managed the GLG Global Macro Fund in London for GLG Partners and retired at 36 in 2004. “People are fed up.”
    Pal made the comments in an interview with Business Insider‘s Matt Turner on Monday.
    Pal said he gets e-mails “all the time” asking how to get into the industry. His answer: “Don’t bother.”

    This post was published at Business Insider

  • Ratings Inflation Is Back, Subprime Style

    A decade after the triple-A failures of the subprime era, grade inflation is back on Wall Street.
    This time, Moody’s Investors Service and S&P Global Ratings Inc. are cutting companies slack on mergers and acquisitions, an analysis of credit-ratings data by Bloomberg News found.
    Over the past year and a half, both have bumped up their ratings by two, three or even six levels on a majority of the biggest deals, the analysis found.
    Moody’s and S&P don’t dispute those findings, which are based on ratings guidelines posted on their websites. But the firms say a by-the-numbers approach overlooks one of their most valuable assets: human judgment. Both make clear that their analysts have leeway to nudge ratings up or down, based on a company’s track record and their confidence in management’s commitment to reduce indebtedness.
    ‘We want our analysts and committees to get behind the story and make their judgments about what they think the organization will look like in the next couple of years,’ says Mark Puccia, a chief credit officer at S&P. Says Stephanie Leavitt, a spokeswoman for Moody’s: ‘The evaluation of financial metrics alone provides an incomplete view of credit risk to investors.’

    This post was published at bloomberg

  • Is ‘The Donald’ Finished?

    Too Late for Trump? BALTIMORE – We checked. We checked again. Nothing. Despite our recent open letter to him, the person not sending us an email was Donald J. Trump. But let’s check with the markets before we return to politics.
    While the world’s attention is fixed on Mr. Trump, Mr. Market is playing it cool. U. S. stocks have barely budged for months. Yet the ground beneath the stock market’s feet is giving way. Corporate earnings are down 15% over the last two years.
    And China – which economists told us was the ‘engine of growth’ for the global economy – continues to dig itself into a debt hole as its order book goes blank. Meanwhile, U. S. home buyers are mortgaging themselves up again – just like they did in 2007. And the average ratio of rent to income is also back at pre-crash levels.

    This post was published at Acting-Man on October 27, 2016.

  • Herd Behavior: Why Lack Of Patience Could Spark Argentina’s Next Crisis

    Time, that fickle mistress, is persistently stalking Macri’s administration and is not on his side.
    It’s been almost one year since President Mauricio Macri shocked the world by winning Argentina’s presidential elections, and the country is in a state of flux – hovering in an uncertainty characterized by hope, anxiety, fear and just a few whiffs of the dreaded stench of failure.
    Besides displaying a shocking lack of political PR and taking on a few petty wastes of time, this government is doing most things within its power correctly to right the course of a vessel that seemed destined to crash.
    Despite these positive steps, one sinister question looms: Has the Macri government managed to avert the looming economic crisis entirely, or is it merely kicking the can down the road? It’s scary, but Argentina is in uncharted territory. Rather than boom, the economy is in a prolonged recession that could be heading for an all too familiar outcome – bust.
    Yet this time, the question really isn’t about economic fundamentals. The real variable threatening Macri isn’t economic at all – it is time. Time, that fickle mistress, is persistently stalking Macri’s administration and is not on his side. And Argentines aren’t exactly famous for patience.

    This post was published at Wolf Street on October 26, 2016.

  • Why Do You Allow Yourself to Be Manipulated?

    After recently hitting our 5th anniversary at Elliottwavetrader, and now exceeding 3000 members, I have learned quite a lot about market participants. For example, the one thing that hurts investors the most is when they lie to themselves or allow others to lie to them.
    The problem is that there are so many fallacies accepted as gospel in the financial world that it causes investors to continually be looking the wrong way. And, worse yet, ‘analysts’ without any analytical depth (or ethics) fall back upon these fallacies, which allows them to be inappropriately propagated even further throughout the market.
    When I was in 5rd grade, my teacher had a sign hanging at the front of the room which said ‘put brain in gear before engaging mouth.’ I would like to slightly modify this sound advice to fit our purposes in the financial markets: ‘put brain in gear before engaging pocketbook.’
    Unfortunately, too many investors today do not pay heed to this wise advice. You see, it is just easier to blindly accept what you hear or read in the market rather than actually engage in independent thought. I mean, how many of you actually question the internal logical consistency or even back-test the propositions presented in analysis you read? I will tell you – very few of you. As I said, it is just so much easier to blindly accept what you hear or read if it ‘sounds’ good, especially if it supports your own bias. Yet, what ‘sounds’ good is all too often such superficial analysis that it is rarely accurate and often causes losses.

    This post was published at GoldSeek on 26 October 2016.

  • Global Equity Markets See Pressure From Downbeat U.S. Earnings Data, Lower Oil Prices

    (Kitco News) – World stock markets were mostly lower Wednesday, following some downbeat U. S. corporate earnings news, including from Apple, and as crude oil prices are slumping this week. There were also some weak consumer confidence reports coming out of the European Union Wednesday.
    U. S. stock indexes are also pointed toward lower openings when the New York day session begins.
    Gold prices are under mild selling pressure in early U. S. dealings.

    This post was published at Wall Street Examiner by Jim Wyckoff ‘ October 26, 2016.

  • Texas County Enacts “Emergency Paper Ballots” After “Software Glitch” In Voting Machines

    Just yesterday we noted several social media complaints from Texas voters who alleged that when they voted a straight republican ticket that voting machines were switching their presidential selection to Clinton/Kaine. While most undoubtedly dismissed these reports as conspiracy theories, new official reports from Chambers County, Texas suggest that there might be some truth to the voting machine “irregularities”. According to an NBC affiliate, polling stations in Chambers County had to enact emergency protocols yesterday and revert back to paper ballots
    after a “glitch” was discovered in the county’s voting
    The issue was actually discovered on Monday morning when Chambers County Clerk Heather Hawthorne was casting her own ballot and the voter next to her noticed that one of her votes was not filled in when she reviewed her electronic ballot Hawthorne told 12News on Tuesday.
    An error in the voting machine programming by Election Systems & Software (ES&S) caused votes for one statewide court of appeals race not to be entered when a voter tried to vote straight ticket in either party according to a release from Chambers County.

    This post was published at Zero Hedge on Oct 26, 2016.