26/5/16: European Reforms: Mostly “No Show” grades

An interesting heat map from Moody’s covering the deteriorating pace of reforms in the euro area:
The key point is that under the monetary easing created by the ECB, Euro area sovereigns are all slacking off on reforms, especially more politically difficult reforms, such as product markets reforms (9 out of 11 states are in red, none in green), pensions & healthcare reforms and fiscal reforms (5 out of 11 are in read). The best performing countries are, bizarrely, Spain and Italy. Farcically, Ireland apparently does not require reforms to improve efficiency of public administration. Presumably, Moody’s analysts never heard of tsunami of public waste unleashed by the likes of HSE and Irish Water.
Take it for what it is – a sketchy top-level view of the reforms landscape and give it a wonder: are ECB policies helping long term sustainability of European institutions or harming it?.. In 23 out of 60 point observations, the reforms have delivered so far ‘no or limited progress’ and only in 6 out of 60 point observations, the reforms have delivered ‘substantial progress’. Go figure…

This post was published at True Economics on May 27, 2016.

Physical Gold Is Money – Everything Else Is Someone Else’s Liability

When you own gold, it’s money that you own. Everything else circulating around here is currency – you don’t really own it. The cash you have in your pocket is Federal Reserve Notes [meaning you possess a liability of the Federal Reserve and your spending power is exposed to counterparty risk]. The money you have in your checking account is a liability of the bank where that money is deposited. But when you own physical gold, it’s money that you own. Your are not dependent on someone else’s ability to make good on that money when you want to spend it. – James Turk on The Daily Coin
The U. S. populace has been methodically trained over the last 100 years, since the erection of the Federal Reserve, to believe that Federal Reserve Notes – otherwise known as U. S. dollars – represents a wealth asset. But it’s just the opposite: it’s a liability of the Federal Reserve backed by the ‘promise’ of the U. S. Government. How much value do you place in that ‘promise?’
Even more insidious is the notion that ‘money’ in a checking account belongs to the person who made the deposit. In fact, your money sitting in any bank account is no longer in your ownership. You have ownership of an unsecured liability issued to you by the bank. The bank takes your money and ‘hypothecates’ it – or lends it out. If the bank loses that money and can’t honor its liability to you because enough loan counterparties defaulted and the bank is insolvent, you will never receive the full value of the bank’s debt obligation. Welcome to the new world of bail-ins.

This post was published at Investment Research Dynamics on May 25, 2016.

Puerto Rico Default Is Coming and It’s Just the Tip of the Iceberg

Good morning Puerto Rico. Default is coming.
Legislation moving in Congress would set up an oversight board to guide the US territory through what essentially amounts to bankruptcy. It would not expend federal funds to bail out Puerto Rico, but would allow the island’s government to pay back debtors at less than 100%.
This is just a taste of things to come.

This post was published at Schiffgold on MAY 26, 2016.

The Next Big Crash Of The U.S. Economy Is Coming, Here’s Why

Investors better be prepared as the next crash of the U. S. economy is coming. This is not based on hype or speculation, rather due to the disintegration of the underlying fundamentals. Matter-a-fact, the fundamentals are so completely AWFUL, that the next market crash will make 2008 look quite tame indeed.
To get the skinny on the lousy fundamental data, let’s first look at the Auto Industry. The next series of charts come from the article, More Warnings – Unsustainable Auto Sales & Stock PE Ratios:

This post was published at SRSrocco Report on May 26, 2016.

“We’re Moving To Tackle Systemic Risk” – India Cracks Down On HFT Scourge

While the corrupt and criminal US regulators are unable to do anything to stifle the market domination of algos which have totally destroyed the US equity market, and sucked up enough liquidity where neither buy nor sellsiders can generate a profit, India is already well on its way to crushing the parasitic – and perfectly legal – frontrunners of virtually ever trade. It will do so by increasing penalties on high-speed trading firms that flood exchanges with orders that don’t result into actual transactions, as part of steps aimed at strengthening its oversight of computerized trading.
According to Bloomberg, India’s regulator, the Securities & Exchange Board or SEBI, has also borrowed a page out of the IEX playbook and is considering checks on super fast strategies by using a fraction-of-a-second speed bump and minimum resting time to delay orders so that all participants see the market at the same speed, Chairman U. K. Sinha said in Mumbai on Wednesday.
In other words, what IEX wants to implement on its exchange, to unprecedented opposition from not only the HFT lobby but its muppet, the SEC, India will implement marketwide.

This post was published at Zero Hedge on 05/26/2016.

The NIRP Refugees Are Coming to America

Negative interest rate policies elsewhere hit US Treasury yields
The side effects of Negative Interest Rate Policies in Europe and Japan – what we’ve come to call the NIRP absurdity – are becoming numerous and legendary, and they’re fanning out across the globe, far beyond the NIRP countries.
No one knows what the consequences will be down the line. No one has ever gone through this before. It’s all a huge experiment in market manipulation. We have seen crazy experiments before, like creating a credit bubble and a housing bubble in order to stimulate the economy following the 2001 recession in the US, which culminated with spectacular fireworks.
Not too long ago, economists believed that nominal negative interest rates couldn’t actually exist beyond very brief periods. They figured that you’d have to increase inflation and keep interest rates low but positive to get negative ‘real’ interest rates, which might have a similar effect, that of ‘financial repression’: perverting the behavior of creditors and borrowers alike, and triggering a massive wealth transfer.
But the NIRP absurdity has proven to be possible. It can exist. It does exist. That fact is so confidence-inspiring to central banks that more and more have inflicted it on their bailiwick. The Bank of Japan was the latest, and the one with the most debt to push into the negative yield absurdity – and therefore the most consequential.

This post was published at Wolf Street by Wolf Richter ‘ May 26, 2016.

“You Are Redefining Yourself As A Comic-Book Villain” – Nick Denton’s Open Letter To Peter Thiel

Now that Peter Thiel’s vendetta against Nick Denton is in the open, and it’s safe to say that the tech billionaire will not stop before putting Gawker out of business, Denton is starting to scramble realizing that he has a borderline irrational adversary, one for whom money is no object if it means a tombstone for the gossip tabloid.
And, as the attached just issued open letter to Peter Thiel by Denton, who asks for a public debate to resolve some differences, reveals the panic is palpable. What happens next in this, ironically, soon to be made into a Hollywood movie drama, could be almost as entertaining as the US presidential election.
Here is Denton’s Open Letter to Peter Thiel.

This post was published at Zero Hedge on 05/26/2016.

Jim Grant: The Fed Missed Its Chance; It Can’t Normalize Rates Now

Although it seems to be almost a foregone conclusion in most circles at this point, not every analyst believes the Federal Reserve will hike rates in June, or if they do that it means a long-term upward trajectory.
Jim Rickards recently appeared on RT’s Boom Bust and said he thought a rate hike was unlikely, and if the Fed does act, it will spur a nasty market crash. In his most recent podcast, Peter Schiff agreed, saying even if the Fed does nudge the rate up a quarter point next month it isn’t going to matter. That will be the end of it, then the Fed will cut. [Scroll Down to listen to the podcast.] And Earlier this week, Jim Grant weighed in on Fox Business and said the Federal Reserve probably won’t raise rates because the economy is just slogging along:


This post was published at Schiffgold on MAY 26, 2016.

The New Millennial Dream: Make Over $200,000 And Retire At 90

Faced with an economy that is creating lower paying jobs, millennials are making less, piling up more debt, and more than any other time since the Great Depression, are returning home to live with their parents. In a video produced by Morningstar’s U. K. unit, millennials discussed what their career aspirations are, and what they expect from their financial future. There were certainly some interesting, if not telling, responses as to the confused state of expectations vs. reality that millennials are dealing with at the moment.
On the salary front, some responses were actually measured. An aspiring midwife thought that her realistic salary would be 35,000 (~$51,000). Other responses however, not so much. One student casually throws out a figure of 150,000 (~$220,000)…

This post was published at Zero Hedge on 05/26/2016.

The SEC’s Latest Investigative Tactic: Bar Hopping With Wall Street

The SEC is taking a new approach to uncovering nefarious dealings within the financial markets: bar hopping.
In its new strategy to root out any underhanded dealings, the SEC is making an effort to attend more Wall Street conferences. The overall plan: catch Wall Streeters with their guard down at the bar in hopes that after a few drinks everyone will begin to ramble on about just how much screwing of the general public they are doing. Of course, nobody from the SEC is drinking at these conferences, that’s against policy.
Like a skunk at a garden party, the SEC has been moving in on the fun-loving Wall Street conference circuit in hopes of getting a better handle on who’s up to no good in the world of finance. Officials scour attendee lists to spot the biggest players in advance and, properly wearing name tags, schmooze over drinks. Of course, they don’t accept any – that’s a no-no under SEC policy.
The current focus has been on bond conferences, specifically ABS East and ABS Vegas according toBloomberg. Which is telling, because that’s what helped to spark the last financial crisis.

This post was published at Zero Hedge on 05/26/2016.

Meanwhile In China, Cow-Collateralized Stock Buybacks

Over the past few years, we have written many strange stories about China’s often-ridiculous, perpetually-bubbly, always on the precipice financial system. The story about China’s literal “cash cows”, however, is by far the strangest.
As everyone knows by now, the primary reason the global equity market, taking its cues from the US, is where it is now is due to a relentless stream of debt-funded stock buybacks. Earlier this year Bloomberg stumbled on the same thing we have written since 2013, namely that “there is only one buyer keeping the bull market alive.”
And, as it turns out, even China figured it out. There is only one problem… well two:
The first is that to buyback your own stock, a company needs to generate a substantial amount of cash flow which can then be used to directly buyback your own shares (making management/shareholders who use corporate cash flows to make themselves wealthier in the process). Unfortunately most Chinese companies, many of which are stunning case studies in fraud, have a glaring problem when it comes to actual profitability and generating cash flows. The second problem is that unlike in the US, following the recent (and now largely burst) corporate bond bubble, issuing bonds to fund buybacks – and in general lending to risky companies – appears to now be rather frowned upon in China. So in the absence of these two necessary conditions, how is a Chinese company to boost its stock price by buying back its stock? The answer, as it turns out is cows, and specifically a cow sale-leaseback transaction.

This post was published at Zero Hedge on 05/26/2016.

Wells Fargo Reintroduces 3% Down Mortgages

In the wake of its recent $1.2 billion settlement with the government, whereby Wells Fargo admitted to deceiving the government into insuring thousands of risky mortgages (yet nobody went to jail), the bank has decided to break with the Federal Housing Administration and offer its own minimal down payment mortgage program.
The new program partners with Fannie Mae in order to allow borrowers with credit scores as low as 620 to make as little as a 3% down payment and use income from family members or renters to qualify. Naturally, the intent is to make more loans to low and middle-income borrowers – in the process pushing up home prices countrywide – without going through the FHA.
As a reminder, the FHA insures mortgages made to buyers who would otherwise have a hard time getting loans, but it has been shunned by banks following a wave of lawsuits by the Justice Department that alleged poor underwriting.
Wells Fargo made $6.3 billion in FHA-backed loans last year, and is a top 20 originator for the FHA according to the WSJ. It’s not just FHA however: as we have shown previously, Wells’ own mortgage origination pipeline has been slowing down in recent years, and as such the corner office of the country’s largest mortgage originator is desperate to find new and innovative ways to boost lending.

This post was published at Zero Hedge on 05/26/2016.

Furious China Slams “Irrational” US Trade War, Warns “Will Take Steps”

The main reason stocks in the steel sector are on fire today is because overnight the Commerce Department escalated its trade war with China when it implemented the latest clampdown on a glut of steel imports, when it announced that corrosion-resistant steel from China will face final U. S. anti-dumping and anti-subsidy duties of up to 450%. The final U. S. anti-dumping duties on the Chinese products replace preliminary ones of 256% issued in December 2015.
The department also issued anti-dumping duties of 3 percent to 92 percent on producers of corrosion-resistant steel in Italy, India, South Korea and Taiwan.
The duty hit producers of the flat-rolled steel, which is coated or plated with zinc, aluminum or other metals to extend its service life, with anti-subsidy duties in China, South Korea, Italy and India. Taiwan was exempted.
This follow last week’s 522% duty imposed by the US on cold-rolled steel imports from China used in automobiles and other manufacturing, which led to the latest angry rebuke from Beijing: “There’s too much trade friction and it’s not good for the market,” Liu Zhenjiang, secretary general of the China Iron and Steel Association told Reuters when asked if China will appeal U. S. anti-dumping duties at the World Trade Organization. “High taxes are unfair …. China doesn’t have a large market share in the United States,” Zhang Dianbo, deputy general manager at Baosteel Group, said recently during a Singapore conference.
Fast forward to today when China escalated the war of words.

This post was published at Zero Hedge on 05/26/2016.

Brexit Bets Surge At Bookies Despite Cable Strength

Cable has strengthened notably in the last week or so as Cameron and Osborne unleashed phase 2 of “project fear” and ‘some’ Brexit polls suggested market fears of a ‘leave’ decision were overblown. However, the broad polls still show the decision is too close to call, which is why the news from Ladbrokes – Britain’s largest bookmaker – that they have seen a sudden surge in Brexit bets in the last few days. Interestingly, sterling has started to leak lower today…
As WSJ reports, some analysts point out that political polls and betting have called British political events incorrectly before, and that sentiment in referendums can swing in the closing days of campaigning.
‘In the early months of this year, there was a big selloff in Brexit-related stocks,’ said James Ross, who manages Henderson Global Investors’ U. K. Alpha Fund. ‘But since around the turn of this month we’ve seen a rapid reversal, and complacency has reached a bit of a dangerous level.’
A few cherry-picked headline polls and Cable has surged 4 handles as confidence that Brexit will not happen lifts…

This post was published at Zero Hedge on 05/26/2016.

Obamacare Insurers Have All Ready Received Billions In Taxpayer Bailouts – Episode 981a

The following video was published by X22Report on May 26, 2016
Retail stores reporting declining sales, retail is imploding. Pending home sales surge, while the everyday American is not spending they are purchasing homes, doesn’t make sense. Durable goods pushed up by aircraft sales once again. Obamacare has issued billions in bailouts to those insurance companies that lost money due to the new healthcare law.

Does The U.S. Have A Plan For The Post-Oil Era?

The world’s largest exporter of crude oil, the Kingdom of Saudi Arabia, recently announced a plan for its post-oil future. If a country almost synonymous with the oil economy can see the need for such a plan, how can the rest of the world, particularly the United States, the world’s largest consumer of petroleum, not see the necessity of such foresight?
The kingdom’s plan includes the sale of part of Saudi Aramco, the world largest oil company and currently wholly-owned by the Saudi government. The company controls all oil development in Saudi Arabia. That the Saudis want to sell part of the most valuable company in the world means they have a different view about the future of oil than those who will be buying. Commentators often report that markets rise because investors are optimistic or fall because they are pessimistic. But this is complete nonsense because for every buyer there is always a seller. Each side of a trade believes in a different future for the investment being traded.
Certainly, there are many reasons for selling a minority stake in Saudi Aramco. But one of them can’t be that the rulers of the kingdom have an unalloyed bullishness about Saudi capabilities and oil resources.

This post was published at Zero Hedge on 05/26/2016.

MAY 26/JAPAN’S TANKEN MFG SURVEY AT DISMAL 3 YR LOWS/CHINA FURIOUS AT THE USA FOR INTRODUCING HUGE TARIFFS AGAINST CORROSION RESISTANT STEEL/SPAIN’SBANCO POPULARE PLUMMETS 20% ON A RIGHTS OFFERIN…

Good evening Ladies and Gentlemen:
Gold: $1,220.50 DOWN $3.25 (comex closing time)
Silver 16.34 UP 8 cents
In the access market 5:15 pm
Gold $1220.20
silver: 16.32
i) the May gold contract is a non active contract. Yet we started the month with 5.67 tonnes of gold standing and it has increased every single day and today sits at 6.886 tonnes of gold standing:
The amount standing for gold at the comex in May is simply outstanding at 6.886 tonnes. The previous May 2015, we had only .08 tonnes standing so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace. This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June. June is the second largest delivery month after December.
Despite the whacking of silver, it’s OI refused to decline like gold. Our bankers and the CFTC are ‘quite baffled’ by this. We are now in our 6th year of high open interest in silver with a low price. This has never happened before.
If I am a betting man, it looks to me like China is the long taking delivery in gold and they are the longs waiting patiently to strike in silver.
Let us have a look at the data for today.
At the gold comex today we had a POOR delivery day, registering 0 notices for NIL ounces for gold, and for silver we had 19 notices for 95,000 oz for the non active May delivery month.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 256.189 tonnes for a loss of 47 tonnes over that period.
In silver, the open interest FELL by 1793 contracts DOWN to 201,889 DESPITE THE FACT THAT THE PRICE OF SILVER WAS UP by 2 cents with respect to YESTERDAY’S trading.. In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.009 BILLION TO BE EXACT or 144% of annual global silver production (ex Russia &ex China)
In silver we had 19 notices served upon for 95,000 oz.
In gold, the total comex gold OI fell by a CONSIDERABLE 17,864 contracts DOWN to 525,094 as the price of gold was DOWN $5.40 with yesterday’s trading(at comex closing). They certainly got the liquidation in gold but not silver.
With respect to our two criminal funds, the GLD and the SLV:
We had no change in gold inventory at the GLD The inventory rests at 868.66 tonnes. .
We had no change in silver inventory at the SLV/Inventory rests at 335.739 million oz.
First, here is an outline of what will be discussed tonight:

This post was published at Harvey Organ Blog on May 26, 2016.

Plunging Personal Income Tax Revenues Slam State Budgets In April

This April, personal income tax revenue fell by an average of 9.88 percent compared to the same period last year in the 32 states for which Reuters has data (Puerto Rico as well). April is the most important revenue month for states because it contains the tax filing deadline and taxpayers tend to wait until the last minute to pay any taxes that may be owed from the prior year.

This post was published at Zero Hedge on 05/26/2016.