“It’s Still September” Ignore Fed Rate-Hike Warnings At Your Own Peril

Hold onto your bootstraps. Markets are setting themselves up for a surprise as the Fed is still likely to hike rates in September. Today’s ‘risk-on’ move is a function of those expecting delay. Rising levels of market volatility are here to stay and will be magnified by this ‘surprise’. Those ignoring the warnings of a rate hike by Fed officials do so at their own peril.
Many FOMC members have said that they expect ‘bumpiness’ when they raise rates for the first time in nine years. They probably believe recent market volatility is partially explained by the fact that the September FOMC meeting is approaching and some investors were preparing themselves.
The Fed has adequately prepared the market for a hike. Delaying the hike once again would cause harm to financial markets. It would not be healthy to price out a hike completely, only to have to price it in again at a later date. Confidence would be damaged.
Moreover, I do not believe the Fed will opt to wait until the December meeting, because it would cause year-end balance sheet and liquidity issues that it would prefer to avoid. Waiting until 2016, also has its draw-backs, due to over $200 billion in Treasury securities set to mature. ‘One and done’ is more of a possibility to me than a delay.
The Chinese slowdown and troubles in emerging market countries is unlikely to prevent a hikebecause those countries are taking their own set of actions to confront their respective challenges. As the owner of the world’s reserve currency, the Fed must show leadership and be the first major central bank to move.
Unfortunately, this morning’s euphoria in US markets was partially due to the combination of many economists pushing out their expectations of the first rate hike until 2016 (some believe 2017), and partially due to China cutting rates. If they are correct, then financial conditions must deteriorate materially.

This post was published at Zero Hedge on 08/25/2015.

Gallup Survey Shows No Public Consensus on Boosting Recovery

I’m a strong believer the American people’s ability to understand policy clearly enough to govern themselves wisely, and an equally strong believer in viewing opinion polls skeptically. But some new Gallup findings on economic issues are so contradictory and confusing that it’s enough to make the most dedicated populist think twice.
You can see the full results here. (And Gallup says it will expand upon this exercise throughout the rest of this presidential cycle.) But here are some that are especially head-scratching:
> Of the 47 policy ideas presented to voters, only nine were judged likely to be ‘very effective’ at improving the economy by half or more of respondents, and of these, four were so rated by 50 percent even. That’s no doubt in part a function of the large number of proposals (which would tend to fragment preferences – as we seem to be seeing for the Republican presidential field). But the diversity of popular responses strongly points to less comforting explanations.
> The only two proposals cracking the 60 percent ‘very effective’ mark were ‘Ensuring that women receive equal pay for equal work’ and ‘Improving job training for veterans.’ Trailing close behind, at 58 percent, was ‘Giving small businesses easier access to loans to start or expand their businesses.’ Nothing else exceeded 55 percent.
> The 50 percent neighborhood is where the fun really starts. Principally, budget deficit hawks will be heartened by roughly this level of enthusiasm for ‘Reducing federal government spending’; ‘Requiring a balanced budget’; and, arguably, ‘Reforming Social Security to ensure it remains solvent.’

This post was published at Wall Street Examiner by Alan Tonelson ‘ August 25, 2015.

The August 2015 Flash Crash Through The Eyes Of Retail Investors

With professionals proclaiming yesterday’s meltdown “historic,” and generously telling investors “don’t try to overthink what you’re seeing,” it is clear that the real impact of the carnage wrought by a combination of Fed-indiced crowded trades and HFT illiquidity-providers is yet to be fully appreciated. As one retail investor exclaimed, yesterday’s open “was a life-changing 20 minutes.”

This post was published at Zero Hedge on 08/25/2015.

Americans’ Economic Outlook Plunges

Rosy scenario gets tangled up in reality.
The rout in Chinese stocks, the deteriorating Chinese economy, the subsequent rout in US stocks, and nagging questions about the US economy – they all got blamed for the unceremonious collapse of the confidence Americans have in our rosy scenario.
It’s sinking in. Even NPR has been talking about it. Whatever you do, ‘don’t sell,’ was their admonition today. Those kind of shows first thing in the morning don’t fit into our rosy scenario.
That scenario looked a lot rosier in early January, when after a long hard climb the economic confidence of Americans reached the highest level in the Index since Gallup started collecting the data on a weekly basis in 2008. At the time, Gallup credited lower gas prices for the miracle.
At 5 in January, the index wasn’t exactly wallowing in exuberance, given its theoretical range of 100 to -100 (it hit -65 during the Financial Crisis). But these folks don’t live in the Wall-Street economy. They struggle with their daily challenges in the real economy. And it’s tough out there.
Yet, even at that level in January, lousy as it was, it was practically exuberant compared to what it is today.
In February, the economic confidence began to zigzag south. At first, it looked like statistical noise, the normal volatility of weekly data. But month after month it got worse. And for the week ending August 23, which Gallup released today, the index dropped to -14. The culprit, according to Gallup:

This post was published at Wolf Street by Wolf Richter ‘ August 25, 2015.

Dollar Depeg Du Jour: 32-Year Old Hong Kong FX Regime In The Crosshairs

On Monday, we brought you two charts which vividly demonstrated market expectations for the abandonment of more currency pegs in the wake of Kazakhstan’s decision to float the tenge and China’s “unexpected” move to devalue the yuan.
As you can see from the following, the market seems to be convinced that Saudi Arabia and UAE, under pressure from falling crude revenue, will ultimately be either unwilling or unable to maintain their dollar pegs (incidentally, the Saudis did succeed in jawboning USDSAR forwards down 125bps on Tuesday):

This post was published at Zero Hedge on 08/25/2015.

AUGUST 25.2015: A HUGE REVERSAL IN THE DOW NOT SEEN SINCE LEHMAN/DOW CLOSES DOWN 212 POINTS AFTER BEING UP GREATER THAN 400 POINTS/GOLD AND SILVER FALL AS OPTIONS EXPIRY ON THE COMEX ENDS TOMORRO…

Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1138.20 down $15.20 (comex closing time)
Silver $14.61 down 15 cents.
In the access market 5:15 pm
Gold $1140.00
Silver: $14.70
Here is the schedule for options expiry:
Comex: options expire tomorrow night
LBMA: options expire Monday, August 31.2015:
OTC contracts: Monday August 31.2015:
needless to say, the bankers will try and contain silver and gold until Sept 1.2015:
First, here is an outline of what will be discussed tonight:
At the gold comex today, we had a good delivery day, registering 59 notice for 5900 ounces Silver saw 24 notices for 120,000 oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 226.94 tonnes for a loss of 76 tonnes over that period.
In silver, the open interest fell by 1537 contracts as silver was down in price by 54 cents yesterday. Something, again really spooked our shorts as they ran to the hills to cover. The total silver OI now rests at 169,111 contracts In ounces, the OI is still represented by .845 billion oz or 120% of annual global silver production (ex Russia ex China).
In silver we had 24 notices served upon for 124,000 oz.
In gold, the total comex gold OI rests tonight at 438,785. We had 59 notice filed for 5900 oz today.
We had another huge addition of 3.27 tonnes to the GLD today / thus the inventory rests tonight at 681.10 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. It sure looks like 670 tonnes will be the rock bottom inventory in GLD gold. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold will be the FRBNY and the comex. In silver, we had no changes in silver inventory at the SLV tune of / Inventory rests at 324.968 million oz.
We have a few important stories to bring to your attention today…

This post was published at Harvey Organ Blog on August 25, 2015.

Cutting Through The HFT Lies: What Really Happened During The Flash Crash Of August 24, 2015

One of the fallacies being propagated about yesterday’s flash crash, is that somehow HFTs came riding in as noble white knights and rescued the market from a collapse instead of actually causing it. This particular lie is worth a few quick observations and explanations of what really happened.
What did not happen, is what Doug Cifu, the CEO of HFT titan Virtu, the firm which as we have profiled repeatedly in the past has lost money on 1 day in 6 years…

This post was published at Zero Hedge on 08/25/2015.

The Market Crash Is A Small Glimpse Of The Economic Disaster Heading Our Way – Episode 750a

The following video was published by X22Report on Aug 25, 2015
UBS trims the Euro zone growth, expects hard times ahead. US Gov sponsored consumer confidence high, non sponsored consumer confidence declining rapidly. Manufacturing declining rapidly. The stock market pumped up but fell to 200 points there is no recovery. The market crash is small glimpse of the economic disaster heading our way. Home prices miss in June, Case-Shiller warn more than one rate hike by The Fed (or a stock market plunge) will stymie housing considerably.

WTI Crude Jumps After ‘Another Huge Surprise’ API Inventory Draw

In a deja-vu-all-over-again echo of last week, API reported a huge 7.3 million barrel drawdown in oil inventories this week (against expectations of a build) and sparked a headline-driven jerk higher in crude prices. Last week the same happened and the next day DOE reported a huge build (consensus for tomorrow is a 345k draw), crushing oil prices… Trade Accordingly…
Biggest inventory draw sicne July 2014…

This post was published at Zero Hedge on 08/25/2015.

During Every Market Crash There Are Big Ups, Big Downs And Giant Waves Of Momentum

This is exactly the type of market behavior that we would expect to see during the early stages of a major financial crisis. In every major market downturn throughout history there were big ups, big downs and giant waves of momentum, and this time around will not be any different. As I have explained repeatedly, markets tend to go up when things are calm, and they tend to go down when things get really choppy. During a market meltdown, we fully expect to see days when the stock market absolutely soars. Waves of panic selling are often followed by waves of panic buying. As you will see below, six of the ten best single day gains for the Dow Jones Industrial Average happened during the financial crisis of 2008 and 2009. So don’t be fooled for a moment by a very positive day for stocks like we are seeing on Tuesday. It is all part of the dance.
At one point on Tuesday, the Dow was up over 400 points, and many of the talking heads on television were proclaiming that the stock market had ‘recovered’. This is something that I predicted would happen yesterday…
And if stocks go up tomorrow (which they probably should), all of those same ‘experts’ will be proclaiming that the ‘correction’ is over and that everything is now fine.
No, everything is not ‘fine’ now. The extreme volatility that we are witnessing just tells us that more trouble is coming. Early on Tuesday the market was ‘burning up energy’ as short-term investors sought to ‘buy the dip’. But now that wave of panic buying is subsiding and the Dow is only up 240 points as I write this.
Overall, the Dow is still down more than 2,200 points from the peak of the market. Even though I specifically warned that a market crash was coming, I didn’t expect the Dow to be down this far in late August. Even after the ‘rally’ we witnessed today, we are still way ahead of schedule.
The truth is that what we have seen so far is just the warm up act.
The main event will unfold during the months of September through December, and right now most people could not even conceive of the things that we are going to see in 2016.

This post was published at The Economic Collapse Blog on August 25th, 2015.

First the Miners, now the Banks, then Property? Going to be a Hard Landing for… Australia

A housing market set for the mother of all corrections.
‘I think it’s important that people don’t hyperventilate about these type of things.’ With these words, Australian Prime Minister Tony Abbott tried to soothe the world’s rattled nerves today about the ongoing crash in China. Australia is heavily exposed to China, the biggest consumer of its commodity exports.
‘It is not unusual to seeSTOCK MARKET corrections,’ he said about the relentlessly brutal three-month crash that has taken the Shanghai Composite down 43% so far.
‘It is not unusual to see bubbles burst in particular markets and for there to be some flow-on effect in otherSTOCK MARKETS, but the fundamentals are sound,’ he said, speaking of the Chinese fundamentals, and by extension, of the Australian fundamentals that depend so much on Chinese fundamentals.
And he said this though factory activity in China shrank at the fastest rate since the Financial Crisis, other indicators are heading south, cars sales are suddenly plunging, and the People’s Bank of China started devaluating the yuan to mitigate the problem, thus further hurting Australian exports to China.
So here’s Lindsay David, founder of LF Economics in Australia, weighing in on the ‘sound’ fundamentals in Australia.

This post was published at Wolf Street by Wolf Richter ‘ August 25, 2015.

This Could Be Very Bad News Ahead Of China’s Open Tonight

Earlier today we explained why far from supporting the stock market, all the Chinese RRR cut did wasoffset already used funds to support currency intervention following the August 11 devaluation: the one sentence from SocGen that put it in perspective was tthe following: “In perspective, the PBoC may have sold more official FX reserves than this amount since the currency regime change on 11 August.”
Hence, the RRR cut was a retroactive move, not at all proactive as the market’s initial euphoria indicated.
Which, ahead of China’s close tonight, could be very bad news for those hoping for a rebound in China’s Shanghai Composite which as a reminder closed below 3000 for the first time since its bubble runup which started last July.
Here, according to Bloomberg, is the reason why:

This post was published at Zero Hedge on 08/25/2015.

Gold Daily and Silver Weekly Charts – Option Expiration Tomorrow – How To Manipulate a Market

There will be an option expiration tomorrow for precious metals on the Comex.
Gold and silver were hit in the classic contract dump early on in the New York Trade.
Surprisingly the US dollar also fell. Stocks tried to stage a rally but faded badly and fell into the close.
I wanted to take a moment to give the reader a little better view of the paper precious metals landscape into year end.
In the fourth chart below you can see the Comex gold contracts listed, with their volumes. As you can see the most active contracts this year are October and especially December.
The fifth chart shows the silver contracts. There the most active contracts are September and December.
So, if tomorrow is the option expiration for the September contracts, we would expect to see the action become more pivotal for silver, since silver is going to be an active month for that contract.
Gold, not so much as the active month fades. But that does not mean that gold will become quiet, except perhaps at The Bucket Shop. There is clearly a huge market for gold, and the exchanges in the East will keep buying and delivering large amounts of bullion.
Lastly I show the small amount of ‘delivery’ at the Comex in gold yesterday in which Goldman was most notable taking 4400 ounces worth of contracts for their ‘house account.’
Let’s see what happens as we work our way through the option expiration tomorrow, and also see how the equity and bonds markets keep digesting this disruption in their long climb to bubbledom.

This post was published at Jesses Crossroads Cafe on 25 AUGUST 2015.

Technically Speaking: Is The Correction Over?

As I discussed yesterday, the now “official correction” was not a surprise. It was something that I have been discussing repeatedly over the last several months. The only surprise was the magnitude of the opening drop.
The question on everyone’s mind now is simply whether the correction is over, or is there more to come?
The honest answer is that no one really knows. The bulls are “hoping” that the worst is over and that the current bull market will resume its upward trend. However, there is ample evidence suggesting that something else may be afoot from slowing domestic and international growth, collapsing commodities and falling inflationary pressures.
Furthermore, from a fundamental standpoint, earnings growth is deteriorating, and valuation expansion has ceased. As I addressed in “Shiller’s CAPE – Is There A Better Measure:”
“The need to smooth earnings volatility is necessary to get a better understanding of what the underlying trend of valuations actually is. For investor’s periods of ‘valuation expansion’ are where the bulk of the gains in the financial markets have been made over the last 114 years. History shows, that during periods of ‘valuation compression’ returns are much more muted and volatile.
Therefore, in order to compensate for the potential ‘duration mismatch‘ of a faster moving market environment, I recalculated the CAPE ratio using a 5-year averageas shown in the chart below.”

This post was published at StreetTalkLive on 25 August 2015.

The Market Is Broken – Today Was A Disaster For The Bulls

We all woke this morning to the money honeys on financial propaganda television, all of whom couldn’t hide their ear-to-ear toothy grin over the Dow futures being up over 600 points. But after a big 350 point opening gap up, and after trending largely sideways for most of the trading day, the markets plunged to close well below yesterday’s closing levels:

This post was published at Investment Research Dynamics on August 25, 2015.

Pumping Air Into A Flat Tire? China Lowers Rates, Shanghai Composite Drops 7.63 Percent

China’s Central Bank, The Peoples’ Bank of China, is trying to fight the dramatic drop in their stock market but lowering rates.
The one-year lending rate will drop by 25 basis points to 4.6 percent effective Wednesday, the Beijing-based People’s Bank of China said on its website Tuesday, while the one-year deposit rate will fall a quarter of a percentage point to 1.75 percent. The required reserve ratio will be lowered by 50 basis points for all banks to cover funding gaps, it said.

This post was published at Wall Street Examiner by Anthony B. Sanders, Courtesy of Confounded Interest – Online Course Notes For Financial Markets ‘ August 25, 2015.

Half Of Emerging Market Stocks Are Now In Bear Territory: The Map

We have, over the past two weeks, spent quite a bit of time documenting the veritable collapse of EM stocks, bonds, and FX in the wake of China’s move to devalue the yuan.
The yuan deval effectively telegraphed Beijing’s concerns about the economy, confirming fears that the situation was worse than the NBR is willing to admit and putting further pressure on commodity prices which are now sitting at their lowest levels of the 21st century.
Now, with EM in turmoil from Brazil to Malaysia, Bloomberg is out with the following map which sums up the carnage by showing just how many EM equity markets are in or closing in on bear market territory.

This post was published at Zero Hedge on 08/25/2015.

The Republican Party Must Be DESTROYED

No, I will not vote for a party folks.
No, you must not vote for a “party.”
Nor can you support any party that does something like this.
Party leaders in Virginia and North Carolina told Politico.com that they are considering a push to require candidates entering their respective Republican primaries to pledge their support for the eventual nominee and not run a third-party candidacy – a pledge Trump, the current frontrunner, would not make when asked to during the Fox News debate earlier this month in Cleveland.
‘Anybody who wants to seek the Republican nomination should have to commit to supporting the ultimate Republican nominee,’ Virginia’s former Attorney General Ken Cuccinelli told Politico. ‘I don’t see anything wrong with that.’

This post was published at Market-Ticker on Aug 25, 2015.

Mapping China Contagion: The Flowchart

We know, we know, it’s all about September and “liftoff” and that “diminutive” Atlas-like superwoman Janet Yellen, who holds the fate of the EM world in her media dissent-suppressing hands.
Be that as it may, if the last two weeks have taught us anything at all (other than that a Reg FD violationis called a “scoop” when it involves Jim Cramer and Tim Cook), it’s that China quite clearly matters – and it matters quite a lot.

This post was published at Zero Hedge on 08/25/2015.

SP 500 and NDX Futures Daily Charts – Whiplash

US equities came in roaring this morning, with punters buying the dip with abandon.
Alas, it was not to be.
The rally faded badly into the afternoon, and the equity futures ended up in a classic whiplash reversal of an attempted ‘dead cat bounce.’
So what next.
One thing is that the Fed is probably, if they are wise, taking any idea of a September rate increase off the table.
Not that a 25 basis point increase would make much difference. The Fed has distorted the real economy badly, and created a formidable asset bubble in paper, and a systemically dangerous financial sector through policy errors and malign regulation .
No they won’t do it if the markets are still wobbly because they do not want to do anything visible that could be pointed at later when the search for a scapegoat begins, like the last time, with furious words and much fake anger by the wise men of Capitol Hill.
Today’s action was not encouraging since almost everything went lower. We might have to spend a little time at these levels, allowing things to consolidate, before the bulls and their pals in the banking sector begin to attempt to reinflate this pig.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

This post was published at Jesses Crossroads Cafe on 25 AUGUST 2015.