Goldman FX Head: “No Central Bank Conspiracy” To Crush The Dollar, “We Are Right, The Market Is Wrong”

Anyone having listened, and traded according to the recommendations of Goldman chief FX strategist Robin Brooks in the past 4 months, is most likely broke. First it was his call to go very short the EURUSD ahead of the December ECB meeting, which however led to the biggest EURUSD surge since the announcement of QE1. Then, two weeks ago, ahead of the ECB meeting he “doubled down” on calls to short the EUR ahead of the ECB, the result again was a EUR super surge, the biggest since December. And then, as wepreviously reported, ahead of the FOMC’s uber-dovish meeting, Brooks released a note titled the “The Dollar Rally Is Far From Over” in which he said the following: “today brings the latest FOMC meeting. We expect the Fed to signal that it wants to continue normalizing policy, which means three hikes this year and four in 2017, with the statement referring to the risks as ‘nearly balanced,’ reverting to phraseology used in October, just before December lift-off. Overall, our sense is that the outcome will be more hawkish than market pricing, in particular given that the FOMC may leave open the option of tightening at the April meeting.”

This post was published at Zero Hedge on 03/20/2016.

NIRP Hail Mary

Hail Mary
Over the past 30 years, many central banks have tried to re-order the natural drivers of economies. As opposed to savings and investment driving production and consumption, they moved consumption to the front of the line, meaning it came at the expense of savings and investment. These efforts disrupt the natural order of activities in a healthy economy and encourages an economic cycle fueled by debt. Central banks’ model, as shown below, illustrates how ever-lower interest rates are used to encourage additional borrowing to drive consumption and lift asset prices; all in the hope of ultimately achieving economic growth.

This post was published at Zero Hedge on 03/20/2016.

JPM: The Short Squeeze Is Largely Over

Two weeks ago, before first the ECB first and then, the Fed, unleashed two massive dovish surprises, we warned – citing JPMorgan – that the most painful part of the short squeeze “may be yet to come.”
As a reminder, this is what JPM said on March 5:
The covering of short equity positions continued over the past week. The short interest in US equity futures declined over the past week. But its level remains very negative suggesting there is room for further short covering. The short interest on SPY, the biggest equity ETF, at 4.75% stands below its recent peak of 5.43% but it remains elevated vs. its level of 3.54% at the start of the year. Equity ETFs have not yet seen any significant inflows, suggesting that ETF investors have done little in actively reversing the almost $30bn of equity ETFs sold over the previous two months. CTAs, which have been partly responsible for this year’s selloff, are still short equities and they have only covered a third of the short position they opened in January. In contrast, Discretionary Macro hedge funds, Equity L/S, risk parity funds and balanced mutual funds, appear to be modestly long equities, so they are currently benefitting from the equity rally. Actually, if one uses the latest Goldman Sachs data, this is not at all true because those long positions which benefited from the market surge were more than offset by pair-trade shorts which soared even more and wiped out all gains.

This post was published at Zero Hedge on 03/20/2016.

Fed Set to shock Markets in 2016; expect a strong rally

A chicken doesn’t stop scratching just because worms are scarce.
Grandma Axiom
Central bankers have conned the masses (even the hard money experts) over and over again. The theme has always been that the Fed will screw up one day and then all hell will break loose. Let’s stop right there. One day when, today, tomorrow, 20 years, 50 years, etc.; will you even be alive when and if this day does finally arrive. Many of those who thought Gold would continue soaring to the moon in the 80’s were stunned when Gold peaked and embarked on a spectacular crash. The point to remember is that Wall Street is full of Tomb Stones of individuals that were right but could not stay solvent long enough to benefit from their convictions. Hence, follow the trend, for everything else is your foe.
Central bankers have purposely orchestrated a few moves that appearstupid in nature to give the hard money fools some respite so that they can feel vindicated after all these decades of being slammed into the concrete head first. Then suddenly they come out with a left hook from nowhere that stuns the masses and viola, mission impossible becomemission possible. They have no problem in milking the Cow to death or killing the Golden Goose, because when it comes to the masses, there are many cows to milk and many Geese to lay eggs. Hence, what does a few dozen, hundreds of even thousand cows matter? Do we agree with this stance? That is irrelevant as we have long indicated. It’s not what we agree or disagree with that matters; it’s what is going to happen next that takes precedence. The trend quite clearly illustrates that misery lovescompany and until misery hates company the masses will always lose. The Fed’s are masters of mass psychology, and mass psychology trumps all other analysis, for it reveals up to what limit you can push the masses. Emotions are the main driving force for 99% of the populace; hence, if you understand mass psychology, you understand the main driving force behind the mass mindset. This is why the Fed can and will push the envelope to the outer limits.

This post was published at GoldSeek on 16 March 2016.

All The Latest Chinese News In Just 7 Bullets

As Evercore ISI (correctly) puts it, “no one can remember more than 7 bullets on anything.” So for those eager to catch up on all the latest news out of China, here are just 7 bullet points:
Incoming Jan-Feb data still choppy. Our view; no immediate hard landing, but no economic takeoff either. Data review below. Our Synthetic Growth Index (SGI) likely down for Jan and Feb, after up Sep-Dec. Looking overseas and in China, we see more downside risk than upside surprise. As China slows, no problem is too small for a new policy fix. Here, four key items the NPC addressed. Sadly, Beijing’s actions all look like patches, not like fixes. Housing: too many vacant units, in the wrong places, wrong size and wrong price. Some cities big speculation, others still dead. SOEs buying doesn’t help. SOEs: excess capacity, old, inefficient in most key China industries. How to fix? Who would hire a 30-year veteran steel worker? Equities: recent rally welcome but markets still broken just when more equity financing is needed. Beijing focus – just avoiding a new price collapse. NPLs: from past bad decisions, rising sharply. NPLs converted into ABS won’t help much. NPLs converted into equities, even less. No winners here. Curious for more: here are the details:
Overview. The last two weeks of NPC announcements and positive talk just don’t fit with what we see. Jan and Fed data are not sparkling. We still pick up mostly negative anecdotes. Our Jan and Feb SGI likely will be lower.

This post was published at Zero Hedge on 03/20/2016.

“Don’t Take The Public For Fools!”: China Hides Millions Of Layoffs, Jails Miners Protesting Unpaid Wages

When you look out across markets and across the increasingly fraught geopolitical landscape, there are plenty of black swans waiting in the wings (no pun intended). And quite a few of them are Chinese.
China has, among other problems: a massive debt overhang that, all told, amounts to more than 250% of GDP; a decelerating economy that Beijing swears will be able to pull off a miracle and move away from the smokestack and away from export-led growth without slipping into recession; a currency crisis; a new property bubble in Tier-1 cities; and a burgeoning NPL problem in the banking sector.
All of those issues are of course inextricably bound up with one another. They are set like dominoes and once the first one tips, the rest will too as sure as night follows day.
And while twin crises (financial and economic) in China would wreak havoc on markets in both EM and DM – between which China exists in a sort of limbo – the real question is this: what would the consequences be for societal stability in China? That is, if it all falls down, will social upheaval ensue leading to a revolt against the Politburo?
That’s not some attempt to use hyperbole on the way to positing some anarchic future for the world’s engine of global growth and trade. In fact, the possibility for widespread unrest is so real that Chinese officials have begun to address it frequently in discussions of how they plan to deal with the mass layoffs that are bound to result from Beijing’s efforts to restructure the country’s collection of elephantine SOEs and stamp out excess capacity.

This post was published at Zero Hedge on 03/20/2016 –.

Empty Buildings and Wasted Debt: The Chinese Economic ‘Miracle’

This is a syndicated repost courtesy of Economy and Markets. To view original, click here. Reposted with permission.
There’s no doubt that the Chinese economic miracle is real. When you move 500 million people from rural to urban settings, taking them from small farms and putting them in a specialized labor force, the economic dividend is massive. That’s how you keep GDP growing more than 7% for 25 years. But along the way, they wanted more.
Beyond building factories and housing for new arrivals, local politicians started building massive, wasteful projects.
Political meeting halls…
Unused apartment buildings…

This post was published at Wall Street Examiner by Rodney Johnson ‘ March 18, 2016.

T-Bill Dumping by Foreign Nations

Foreign central banks are selling off U. S. Treasury debt. There have been no negative effects for the U. S. government. The dollar remains high, despite the increase in the supply of dollar-denominated debt in world currency markets. Second, long-term T-bond rates have not risen, i.e., the prices of Treasury debt certificates have not fallen.
For years, it looked as though China could get its way in negotiations with U. S. government trade officials. “Cross us, and we will sell our T-bills and T-bonds.” Well, they have been selling T-debt, but nothing bad has happened to the U. S. government. The tremendous demand for dollars, coupled with the tremendous demand for T-bonds, have combined to neutralize the dumping of T-debt by foreign central banks.
A recession will strengthen the dollar and hold down T-bond rates — the quest for safety and yield.
China’s bluff has been called . . . by China.

This post was published at Gary North on March 19, 2016.

BOJ’s negative rate move proving a gold mine for bullion retailers

The nation’s negative interest rates are boosting demand for gold, according to its biggest bullion retailer.
International prices have rallied 18 percent this year as investors seek a haven from financial market turmoil. For individual investors, the Bank of Japan’s surprise move in January is adding to gold’s allure, according to Takahiro Ito, chief manager at Tanaka Kikinzoku Kogyo K. K.’s store in Tokyo’s Ginza shopping district. That’s helped lift retail prices to their highest since July.
‘Many customers are wagering that it’s better to turn their savings to gold as a safe asset rather than deposit money at banks that offer low interest rates,’ he said in a phone interview last week.
The price of gold bars climbed to 5,027 a gram on March 11, the highest since July 7, according to the Tokyo-based company. ‘Many customers usually sell gold, but we get the feeling that more customers are buying gold even at prices exceeding 5,000,’ Ito said.

This post was published at TruthinGold on March 15, 2016.

“Data Dependent” Fed Ignores Data But Valuations Matter

‘Data Dependent Fed’ Ignores Data I wrote on Tuesday of this week:
‘The Fed currently finds itself in a tough spot from a ‘data dependent’ standpoint. Last December, when the Fed Funds rate was increased, the Fed discussed the potential for further rate hikes in 2016 as inflation and employment data strengthened. With that data improving, along with the strong rebound in the financial markets, the Fed runs the risk of losing credibility if they DO NOT hike rates again on Wednesday OR give a very strong indication they will do so at the next meeting.’

This post was published at Zero Hedge on 03/17/2016.

China Hard Landing Hits Electricity Consumption

Chairman of large power company slips, apparently. OK, we’ve heard the official story. China is transitioning from a manufacturing economy to a consumption-based economy. Consumers are king. They’re going to buy stuff. And that’s going to heat up the economy.
Imports and exports have been plunging for months, but no big deal, Chinese consumers – and there are a lot of them – are going to pull the economy forward. That’s the official story.
So now we stumble on a report on the Facebook page of the People’s Daily, the official newspaper of the Chinese Communist Party. The report was helpfully in English. And it was a peculiar venue for a report on China: Facebook is still blocked in China.
So the fact the Communist Party rag published it in English and on a venue that is blocked in China makes it seem like this piece of information is not for the Chinese. Maybe it was slipped in by some underling over the weekend while supervisors weren’t paying attention.

This post was published at Wolf Street on March 19, 2016.

Valeant CDS Hits Record High As Company Scrambles To Avoid Default

While everyone knows about failed rollup Valeant’s equity troubles, which have sent its stock crashing to 5 year lows after the biggest one day drop in history earlier this week, a just as interesting development is taking place with its debt, which incidentally at $31 billion (and accumulated during the company’s relentless acquisition spree over the past few years) is nearly three times greater than the company’s equity capitalization, and is the locus of the biggest problem facing the company currently.
Recall that recently Valeant announced it would be unable to file its 10-K on time, which put the company in violation of its covenants since Wednesday, and also meant it is now in danger of defaulting on its $30 billion debt load. As a result, Reuters reports that the company’s lenders are “beginning to demand new terms that could further pressure the drugmaker’s business model, according to three people familiar with the matter.”
As Reuters adds, “the risk of default has offered creditors an opportunity to attempt to renegotiate core elements of their agreements with Valeant, potentially saddling the company with higher costs of debt and more restrictions on how it deploys capital, according to people familiar with the matter.”
Suddenly, what was until incomprehensible – a Valeant default – appears all too likely: under its loan agreements, Valeant has until March 30 to file audited financial reports. If it fails to do so, it then has 30 days before lenders can demand accelerated repayment. Needless to say, Valeant would be unable to fund such a loan acceleration without rapidly selling off key assets in a liquidation firesale, although there even exist limits on just how many assets Valeant can sell.
Reuters adds that Valeant said it would meet with banks next week and ask them for an extension on the deadline. On Tuesday, Chief Executive Michael Pearson said that his best estimate for filing the annual report was April, but that he could not guarantee it.
In anticipation of those meetings, owners of Valeant’s senior bank loans are reaching out to investment banks, including Barclays, who will help mediate the negotiations, the sources said. Barclays did not immediately respond for comment.

This post was published at Zero Hedge on 03/17/2016.

Silver Soars 4%, Gold Consolidates On Dovish Fed

Silver rose 2% yesterday and has surged 4% this week to over $16 per ounce as the Federal Reserve flip flopped regarding interest rates and lowered its expectations for rate rises this year from four back to two or just one rate rise due to ‘global risks.’
Gold is flat for the week but has consolidated on the 19% gains year to date and looks well supported especially given the real risk of renewed global and economic financial turmoil. The factors which led to this turmoil remain intact and continue to bubble under the surface, largely unnoticed as similar factors did prior to the financial crisis in 2007/2008.
Increasing questions about the policies of, the credibility of and indeed the wisdom of major central banks such as the BOJ, ECB and the Federal Reserve is supportive of the precious metals.
The Fed signals and ECB actions were even more dovish than expected and confirmed, if any confirmation was necessary, that ultra loose monetary policies are here to stay and may actually deepen.

This post was published at Gold Core on March 18, 2016.

SGE Gold Trading Volume 2015 Up 84 % Y/Y

In two parts I will present an overview of the Chinese gold market for calendar year 2015. In this part we’ll focus on Shanghai Gold Exchange trading volumes. In the next post we’ll focus on physical supply and demand flows in Chinese gold market in 2015.
First, let us quickly assess the core volume data of the largest precious metals exchanges in China and the US. Physical and derivative gold trading at the Shanghai Gold Exchange (SGE) in 2015 reached 17,033 tonnes, up by 84 % from9,243 tonnes in 2014. Gold futures trading at the Shanghai Futures Exchange (SHFE) in 2015 accounted for 25,421 tonnes, up 7 % from 23,750 tonnes in 2014. Consequently, total wholesale trading volume in China (SGE SHFE) was 42,454 in 2015, up 29 % year on year. In the New York at the COMEX total futures gold trading volume reached 128,844 tonnes for the year 2015, up 3 % from a year earlier. COMEX trading volume was three times as large as the total volume in China.

This post was published at Bullion Star on 20 Mar 2016.

On Pi Day Hungary PM Says Europe is Dying

This came precisely on our target. This past week was the tipping point for Europe. The start of the real decline in the euro where mainstream capital begins to question when negative rates can really reverse or stimulate the economy unfolds after 2016.202. This comes into play March 13/14, 2016. This is not my personal opinion. This is just the modeling. From this target onward, we will begin to see a crisis in confidence. Part of this will no doubt be the BREXIT vote in June. It is curious that the Prime Minister of Hungary Viktor Orbn chose our precise target to effective thrown the gauntlet down against Brussels. He states bluntly, that there is no freedom in Europe if we cann speak the truth that this is not a refugee crisis, but a migration crisis.
Armstrong Economics

This post was published at Armstrong Economics on Mar 19, 2016.