• Pension Party! ‘Zero’ Interest Rate Policies Lead To Massive Debt Gorging (CalPERS Massive Pension Underfunding)

    The Federal Reserve’s zero interest rate policies (ZIRP) have an unwelcomed effect: both the Federal Government and Private Pensions gorged themselves on low-cost debt.
    The Federal Reserve lowered their Fed Funds target rate starting in 2007, then started their asset purchases in late 2008, culminating in a dramatic decline in interest rates.
    Then, since the end of Q4 2008, both the Federal government AND private pension funds gorged on debt: Federal devt rose by 77% though the end of 2015 and private pension debt rose by 66%.

    This post was published at Wall Street Examiner on January 16, 2017.

  • From “Promise” To “Payback” – Here Are The Five Stages of The “Trump Trade”

    As Deutsche Bank’s Alan Ruskin puts it, without getting too cute about it, “there are probably five defining stages for the ‘Trump trade': Trading i) ‘the promise'; ii) the deal-making; iii) the enactment; iv) the economic impact, and, v) the payback.“
    Here are the details as market pscyhology shifts from phase 1 to stage 2, which DB says took place during last week’s Trump press conference, and what markets can expect going forward.
    The five stages of the Trump trade
    Trump’s press conference last Wednesday has probably drawn the line between ‘the promise’ phase, and, the stage where deliverables will become progressively more important. The ‘promise’ stage was never seen extending beyond Trump’s inauguration, since it was always expected that the market would start responding to actual President/Congress initiatives in what is likely to be a very active first 100-day agenda.
    To get to the enactment stage it is usually important for the President to use political capital wisely, not least because 9 of the last 12 Presidents saw their popularity near peak and leak within months of their inauguration, making it progressively more difficult to get things done. However, in current circumstances, much of the impetus and detail on fiscal reforms, including ‘market hot buttons’ like the border tax adjustment, already have considerable Congressional impetus, not least from the Ryan – Brady tax plan.

    This post was published at Zero Hedge on Jan 16, 2017.

  • Food-Stamp Recipients Can Now Order From Amazon, Other Online Retailers

    Via Judicial Watch,
    Food-stamp recipients can use their taxpayer-funded benefit to order online from retailers like Amazon under a new Obama administration initiative that aims to facilitate the shopping experience for rural and urban residents. It marks the latest of many costly experiments by the administration to expand the fraud-infested program, which has seen a record-high number of beneficiaries under President Obama. To eliminate the welfare stigma, the administration renamed food stamps Supplemental Nutrition Assistance Program (SNAP) and the rolls swelled to an astounding 46.5 million in 2016. This cost American taxpayers and eye-popping $70 billion, according to government figures.

    This post was published at Zero Hedge on Jan 16, 2017.

  • Gold and Silver Market Morning: Jan 16 2017 – Gold and Silver correcting, U.S. buying!

    Gold Today – New York closed at $1,198.30 on the 13th January after closing at $1,195.40 on the 12th January. London opened at $1,202.25today.
    Overall the dollar is stronger against global currencies today. Before London’s opening:
    – The $: was stronger at $1.0593: 1 from $1.0633: 1 Friday.
    – The Dollar index was slightly stronger at 101.70 from 101.33Friday.
    – The Yen was stronger at 114.11: $1 from Friday’s 114.70 against the dollar.
    – The Yuan was weaker at 6.9082: $1, from 6.8873: $1, Friday.
    – The Pound Sterling was weaker at $1.2056: 1 from Friday’s $1.2168: 1.
    Yuan Gold Fix
    Shanghai gold prices, having corrected on Friday, are, again, moving higher in Shanghai touching 270.1 Yuan or $1,211.1 in today’s trading [using the same quality of gold]. It is always tempting to make prices simple to understand even if it means attributing any moves in the gold price to any handy piece of news locally. But that would be misleading. Chinese prices are rising because of Chinese market conditions, not because of Trump’s latest tweet.
    New York closed $11.34 lower than Shanghai on Friday. London opened at $3.85 lower than Shanghai was trading today.
    LBMA price setting: The LBMA gold price setting was at $1,202.75this morning against Friday’s $1,196.35.

    This post was published at GoldSeek on 16 January 2017.

  • Five Dead, 15 Wounded After Gunman Opens Fire At Mexican Nightclub

    A lone shooter fired on a crowd at a nightclub in Playa del Carmen, site of the BPM electronic music festival in Mexico early Monday, leaving at least five people dead and at least a dozen more injured, according to a statement released by festival organizers. Local news reports suggest that the shooting came after a ‘disagreement’ and is connected to ongoing drug cartel wars in the area.
    The rampage occurred inside the Blue Parrot nighclub in Playa del Carmen at about 2:30 a.m. local time, according to a statement by the attorney general of the Mexican state of Quintana Roo.
    Playa del Carmen is a popular tourist destination not far from Cancun. Among the dead are four men and a woman. Two of those who died were part of a security team, the statement said. According to preliminary reports, three of the dead are foreigners.

    This post was published at Zero Hedge on Jan 16, 2017.

  • The Biggest, Most Destructive Lie the Government Tells (and Why They Keep Telling It)

    ‘Radical truth-tellers’ have been demonized and shunned by the establishment for centuries – much longer, in fact. Those of us who have always refused to settle for insincerity, falsehood, and duplicity in our personal, business, and civic relationships are usually considered ‘difficult.’
    And I am decidedly difficult.
    For all of the 29 years I’ve spent trading and investing, I’ve watched governments and central bankers attempt to thwart the free market to serve their own ends – almost always at the grievous expense of regular investors – and then protest, often loudly on 500 channels, that they’re doing nothing of the sort, that they’re safeguarding or shepherding the markets somehow.
    And through it all, one question has always persisted in my mind: ‘Are these people wrong because they’re stupid? Or because they’re lying.’
    I’ve come to conclude those two possibilities aren’t mutually exclusive.
    And that’s meant suffering and economic misery for millions of Americans.
    I’m not going to hold my breath for it to change with the Trump administration; I’m going to attack the lie head on…

    This post was published at Wall Street Examiner on January 16, 2017.

  • Why Fractional-Reserve Banking Would Be Limited in an Unhampered Market

    The so-called multiplier arises as a result of the fact that banks are legally permitted to use money that is placed in demand deposits. Banks treat this type of money as if it was loaned to them, thus loaning it out while simultaneously allowing depositors to spend that money.
    RELATED: “Austrians, Fractional Reserves, and the Money Multiplier” by Robert Batemarco
    For example, if John places $100 in demand deposit at Bank One he doesn’t relinquish his claim over the deposited $100. He has unlimited claim against his $100.
    However, let us also say that Bank One lends $50 to Mike. By lending Mike $50, the bank creates a deposit for $50 that Mike can now use. Remember that John still has a claim against $100 while Mike has now a claim against $50.
    This type of lending is what fractional-reserve banking is all about. The bank has $100 in cash against claims, or deposits of $150. The bank therefore holds 66.7 percent reserves against demand deposits. The bank has created $50 out of ‘thin air’ since these $50 are not supported by any genuine money.
    Now Mike uses that $50 to buy goods from Tom and pays Tom by check. Tom places the check with his bank, Bank B. After clearing the check, Bank B will have an increase in cash of $50, which it may take advantage of, and lends say $25 to Bob.

    This post was published at Ludwig von Mises Institute on Jan 15, 2017.

  • IMF Downplays Trump Stimulus Effect; Slashes Saudi, Mexico Growth In Latest World Economic Outlook

    As the world’s elite gather in Davos to decide for the minions what the world should look like, The IMF has taken a far dimmer view of global (and by that we mean Trumpian) economic growth than markets appear to be. In addition to slashing Brazilian, Mexican, and Saudi Arabian economic growth forecasts, Lagarde’s lackeys are taking a cautious stance toward the policies of U. S. President-elect Donald Trump, who takes office this week, assuming only a modest boost to the U. S. economy from his promise of fiscal stimulus.
    As Bloomberg reports, The IMF maintained its forecast for global growth in 2017 of 3.4 percent, the Washington-based organization said Monday in a quarterly update to its World Economic Outlook. Expansion for 2018 is forecast at 3.6 percent, also unchanged from the fund’s previous forecast in October.
    After a lackluster outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies. However, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming U. S. administration and its global ramifications. The assumptions underpinning the forecast should be more specific by the time of the April 2017 World Economic Outlook, as more clarity emerges on U. S. policies and their implications for the global economy.

    This post was published at Zero Hedge on Jan 16, 2017.

  • A Hint of Gold Backwardation

    Last month, we noted that there could be a trend change in progress. Not only are the prices of the metals rising (which is just a mirror-image of the dollar falling, from 27.6 milligrams of gold just before Christmas to currently under 26mg). But the scarcity of gold as we measure it, using the spread between the price of gold in the spot and futures markets, has been rising.
    What could cause this? One thing is for sure. It is not about the quantity of dollars. This theory is as popular as ever, despite the absolute lack of a rising gold price from September 2011-2016. The quantity of dollars has risen steadily since then.
    We write much about the frequent cases when traders place big bets on something which is wrong. But the fact of their big bets drives up the price. Suppose speculators were betting on a big increase in the quantity of dollars under Trump. Then we would see a rising price alright, but we would see a rising basis – our measure of abundance of gold to the market. This cannot explain the current market either.
    So what can? Recall Keith Weiner’s gold backwardation thesis. In times of stress or crisis, it is always the bid, and never the offer, which is withdrawn. Suppose the US Geological Survey were to make a dire announcement – THEY ARE NOT SAYING THIS, SO DO NOT MISCONSTRUE!! Suppose they said that there will be an earthquake in LA, an 11 on the Richter Scale. Nothing taller than a dollhouse will be left standing.

    This post was published at GoldSeek on Monday, 16 January 2017.

  • Turkey Faces Double-Digit Inflation Due To Crashing Lira, As Budget Deficit Hits Record

    Turkey’s biggest headache, its crashing currency which the central banks appears unable to contain due to an Erdogan order not to hike rates, could soon translate into another major problem. According to two senior economy officials, Turkish inflation could reach double digits in the first quarter for the first time in almost five years as a result of the lira’s falls, putting more pressure on the central bank to hike interest rates.
    The lira has dropped as much as 10 percent since the start of 2017, battered by concern over Turkey’s political and economic outlook and doubts about whether the authorities will take decisive steps to arrest the slide. Earlier in the day, Turkey’s deputy prime minister, Numan Kurtulmus in an interview with AHaber TV, reiterated the party line that the lira weakening is the result of political manipulation. He also said that ‘an intelligence organization’ might be behind the new year’s eve attack in a nightclub in Istanbul, the latest terrorist attack on Turkish soil, which has added to concerns about local geopolitical instability, further destabilizing the tourism-heavy economy.
    According to Reuters, President Tayyip Erdogan, a vocal opponent of higher interest rates, will meet with economy officials including the central bank governor later on Monday to discuss developments including the lira, government sources said. Earlier on Monday, the central bank effectively shut off two of its lira funding taps, bankers said, in an attempt to push lenders to borrow at a higher rate and defend the currency without an outright rate hike. The lira was trading at 3.80 to the dollar, at the day’s lows, off a recent record low of 3.9417 hit last Wednesday.

    This post was published at Zero Hedge on Jan 16, 2017.

  • Physical Gold Will ‘Trump’ Paper Gold

    John Hathaway of Tocqueville Funds says the physical gold market will defeat the paper gold market leading to a much higher price for the monetary metal in the coming months and years in his Tocqueville Gold Strategy Investor Letter (Fourth Quarter 2016 Investor Letter):
    Gold rose 8.5% for the year while gold-mining stocks (XAU – Philadelphia Gold and Silver Index stocks) rose 75%. On an annual basis, results were highly satisfactory. However, there was considerable drama beneath the surface that left precious metals investors in a state of anxiety by year-end. Precious metals and mining shares rose sharply through August, and then spent the rest of the year giving back much of the first-half gains. The second half downtrend accelerated into early December, following the unexpected victory by Trump and a hawkish statement after the December Federal Open Market Committee (FOMC) meeting.

    This post was published at Gold Core on January 16, 2017.

  • China Warns Trump “It Will Take Off The Gloves” If He Continues To Provoke Beijing

    In the latest indication that China is becoming increasingly unsettled by Trump’s relentless attacks on legacy diplomacy with China, and especially the “One China” policy, two leading state-run newspapers warned on Monday that Beijing will “take off the gloves” and take strong action if Trump continues to provoke Beijing over Taiwan once he assumes office.
    The reaction was provoke by Trump’s latest US interview, in which he told the WSJ that the “One China” policy was up for negotiation. China‘s foreign ministry, in response, said “One China” was the foundation of China-U. S. ties and was non-negotiable.
    “If Trump is determined to use this gambit in taking office, a period of fierce, damaging interactions will be unavoidable, as Beijing will have no choice but to take off the gloves,” the otherwise calm English-language China Daily said. It added that Beijing’s relatively measured response to Trump’s comments in the Wall Street Journal “can only come from a genuine, sincere wish that the less-than-desirable, yet by-and-large manageable, big picture of China-U. S. relations will not be derailed before Trump even enters office”.
    But China should not count on the assumption that Trump’s Taiwan moves are “a pre-inauguration bluff, and instead be prepared for him to continue backing his bet”. “It may be costly. But it will prove a worthy price to pay to make the next U. S. president aware of the special sensitivity, and serious consequences of his Taiwan game,” said the national daily.
    The far more fiery state-run nationalist tabloid, The Global Times, echoed the China Daily, saying Beijing would take “strong countermeasures” against Trump’s attempt to “impair” the “One China” principle.

    This post was published at Zero Hedge on Jan 16, 2017.

  • Oil Slides After Saudis Suggest Early End To OPEC Deal

    Following a brief spike overnight (as China intervened in its equity market), crude prices slipped lower, testing towards a $51 handle after Saudi Arabia says OPEC is on track to wrap up its production curbs by the middle of the year, potentially leaving its aim of clearing a global oil glut unfinished.
    As Bloomberg reports, OPEC and Russia won’t need to prolong output cuts beyond June because the agreed reductions will have already ended the oversupply in world crude markets, Saudi Minister of Energy and Industry Khalid Al-Falih said in Abu Dhabi on Monday. However, ending the deal by mid-year and restoring production would mean the surplus just starts building again, thwarting OPEC’s ambition of whittling down bloated oil inventories.
    The Organization of Petroleum Exporting Countries said that draining off a stockpile ‘overhang’ of more than 300 million barrels — enough to supply China for almost a month — was the main aim of supply curbs agreed with Russia and other producers. Twenty-four nations signed up to a joint cutback of 1.8 million barrels a day on Dec. 10.

    This post was published at Zero Hedge on Jan 16, 2017.

  • Key Events In The Coming Week: Trump Inauguration, Davos, Theresa May, ECB, China GDP

    The week ahead promises to be a full one, with a plethora of events coming up. The Word Economic Forum in Davos could generate some headlines, with particular focus on Chinese President Xi Jinping, who will be the first Chinese president to attend. Tuesday brings Theresa May’s long-awaited Brexit speech, while of course Friday marks the inauguration of Donald Trump as the 45th US president. We will also be keeping a weather eye out for the Supreme Court ruling on Article 50, although there is no set date for its announcement.
    Central Banks: ECB and BOC
    No policy change is expected from either the ECB or the BoC, but both press conferences will draw attention, particularly that of President Draghi. The market is convinced that Draghi will do his best to be boring. China Economic Update
    There is a barrage of Chinese data out on Friday, where the most closely followed number will be China’s Real GDP for 4Q will be released in China, as well as IP, retail sales, FAI and December property prices. On Monday, Xi Jinping said China’s 2016 GDP is expected to be 6.7%.

    This post was published at Zero Hedge on Jan 16, 2017.

  • Gold and the Bull Trap

    In recent days I have seen an increase of gold-positive articles finding their way onto my computer screen. Writers from Motley Fools to Bloomberg are all touting gold’s inevitable rise. I have read these articles and noted all of the same, familiar tone…this time it’s different and gold will continue to rise from here so buy quickly or you will miss out…to the moon I suppose. Yes, I believe gold will one day take out $2000.00 mark but not today, not tomorrow, and not this year. Before the gold bugs start crying and demand an old fashion lynching please here me out.
    A Dose of Skepticism
    From the start of this current rally I’ve been a little skeptical. Note the daily chart was forming a falling right triangle, a bearish formation, before moving higher. This same formation occurred in October before moving higher and that ultimately reversed after the presidential election. (By the way gold was going to sell off regardless who was elected. The price action on November 9th clear demonstrates the huge selling/shorting was well planned. If someone thinks it was a knee-jerk reactions to the election outcome they’re naive. No one sells short billions of dollars on a whim when gold was moving so violently higher in aftermarket trading.) To believe the current price action is a meaningful move higher I would have preferred to see a longer consolidation in the $1120 – $1140 area. Ideally, a move to the mid-$1170s, reversing, and retesting the lows around $1125 before moving higher would have been a much stronger signal the low was in. At this point I’m convinced we will have a reversal but it’s more likely the Shorts will be done covering and proverbial rug will be pulled from underneath the few remaining gold bulls and price will fall through $1120. A break of $1120 will signal the short-term support is broken and the Shorts will pile in and drive the price to the $1080 area before taking a break and consolidating.

    This post was published at GoldSeek on Monday, 16 January 2017.

  • At Least 20 Killed (6 Children) After Turkish Airlines 747 Crashes Into Kyrgyzstan Residences

    Turkish Airlines Flight 6491, a cargo plane, has crashed into a residential area near the Kyrgyzstan capital of Bishkek, killing at least 20 people and injuring others, according to local authorities say.
    The Boeing 747 was flying from Hong Kong to Manas International Airport, which is located just northwest of the Kyrgyz capital Bishkek.

    This post was published at Zero Hedge on Jan 15, 2017.

  • Tumbling Pound Rattles Global Markets; Chinese Stock Slide Forces Government Intervention

    While US markets take the day off for MLK holiday, the rest of the trading world has been busy, perhaps nowhere more so than the sterling which continued its volatile session in advance of May’s pre-hard Brexit speech, falling below $1.20 for the first time since October after the Sunday Times said May is ready to withdraw from tariff-free trade with the region in return for the ability to curb immigration and strike commercial deals with other countries. As a result, overnight pound-dollar volatility surged the most since the summer, and breached just twice previously: ahead of the Brexit vote, and before the Bank of England’s July and August meetings.
    The dollar rose, in an apparent bid for safety, rebounding after suffering its worst week since November when it was hit by a lack of clarity over the policies of U. S. President-elect Donald Trump, whose inauguration is on Friday.
    “(The movement) shows that people are looking ahead this week with Trump’s inauguration and discussions on Brexit. There is a lot of uncertainty moving forward,” Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central, told Reuters.
    Yields on low-risk German government bonds fell but those on Italian equivalents edged up after rating agency DBRS cut Italy’s credit rating after markets closed on Friday in a move that could raise borrowing costs for the country’s banks. Italy’s downgrade will mean Italian banks will have to pay more to borrow money from the European Central Bank when they use the country’s sovereign bonds as collateral. It may also make Italian debt less attractive for foreign buyers. German 10-year bond yields fell 2 basis points to 0.32 percent. Italian 10-year yields rose marginally to 1.90%.

    This post was published at Zero Hedge on Jan 16, 2017.

  • These ‘8 Men’ Own as Much as Poorest Half of the World, Oxfam Reports as Global Elite Hobnobs in Davos

    Even in ‘rich countries,’ more and more people ‘are no longer willing to tolerate the status quo.’ As the global elite descend upon Davos for the World Economic Forum to rub elbows, Oxfam released a report today which it introduced in this way:
    It details how big business and the super-rich are fueling the inequality crisis by dodging taxes, driving down wages and using their power to influence politics. It calls for a fundamental change in the way we manage our economies so that they work for all people, and not just a fortunate few.
    Last year in its report, if figured that 62 people owned the same wealth as ‘the poorest half of the planet,’ but this year more data became available. Had this data been available last year, it would have shown that 9 men owned as much as the poorest half of the planet. Now it’s down to just 8:
    Bill Gates Amancio Ortega Warren Buffett Carlos Slim Jeff Bezos Mark Zuckerberg Larry Ellison Michael Bloomberg.

    This post was published at Wolf Street on Jan 16, 2017.