Day: July 13, 2016

The Stock Market Is A Weapon Of Massive Wealth Destruction

Jon

The discussion about p/e ratios and other valuation ratios derived from Company-issued GAAP accounting financials is idiotic. The GAAP accounting allowances have been liberalized beyond a Bernie Sanders wet dream over the last 20 years. The p/e ratio at the peak of the tech bubble is completely different from the p/e ratio at the top of the 2007 stock bubble which is completely different then the p/e ratio now.
If 1999’s or 2007 GAAP standards were applied to today’s earnings, the P/E ratio on the S&P 500 would be at least as high as 65 p/e ratio registered in 2007. By several other metrics, most notably market cap/sales ratio, the current stock market is by far the most overvalued in history.
And that does analysis does not incorporate any adjustments for the fraud component of contemporary corporate accounting.
The S&P 500 and Dow are hitting all-time highs this week. This was triggered by the Ben Bernanke influenced Bank of Japan decision to engage in ‘helicopter money’ activity in an attempt to stimulate economic activity. Notwithstanding the fact that Bernanke is likely the most destructive Central Banker in history, Japan’s decision will end in destruction of its currency. Maybe that’s what the NWO’ers are working toward achieving anyway.
Interestingly, the U. S. stock market reacted counter-intuitively to Japan’s move. The yen and other Asian currencies plunged vs. the dollar, making U. S. manufactured exports to Japan/Asia more expensive and making Asian imports into the U. S. cheaper. This in turn will further depress U. S. corporate revenues and earnings, which have dropped 5 quarters in a row – likely a 6th quarter when we get to see Q2 earnings reports. To label this response by the U. S. stock markets ‘idiotic’ is an insult to the word ‘idiotic.’

This post was published at Investment Research Dynamics on July 13, 2016.

Talk Of Oil “Death Spiral” Emerges

Jon

One week ago, we looked at an epic build up of gasoline inventories on the East Coast, also known as PADD1, which had slammed the crack spread to record lows for this time of the year, and asked if “This What Finally Drags Crude Oil Lower.” We were referring to the collapsing Crack Spreads, which show that something disturbing is taking place for US refingers who are no longer able to “internalize” the massive crude glut.
U. S. gasoline crack spread a proxy for refiner margins, has dropped 34 percent in two weeks. On Wednesday, it hit a five-year low for this time of year below $13 a barrel. That is less than half the crack spread of $28 a barrel at this time last year.

This post was published at Zero Hedge on Jul 13, 2016.

‘Soon’ And ‘Really, Really Crazy’: Starting Up The Helicopters

Jon

As the abject failures of the past few years’ monetary experiments became apparent, it was clear that something else would have to be tried. The only questions were when this would happen and how crazy the next iteration would be. Both answers are now coming into focus, and they’re looking like ‘soon’ and ‘really, really crazy.’
Beginning with the most enthusiastic experimenter, Japan just reelected Shinzo Abe, of ‘Abenomics’ fame, by a landslide, setting him free to turbo-charge his policy of massive government deficits fueled by unprecedented currency creation:
Abe orders drafting of new stimulus package to breathe life into Japan’s economy
(Japan Times) – Prime Minister Shinzo Abe ordered economic revitalization minister Nobuteru Ishihara on Tuesday to draft a range of economic measures to bust deflation and raise Japan’s growth potential, including with a supplementary budget for fiscal 2016. The government will submit the budget draft for fiscal 2016 to an extraordinary Diet session this fall, Ishihara told a news conference later in the day.
Ishihara declined to comment on the size of the economic measures, saying that will be decided at the end of the month using a ‘bottom-up approach.’
On Tuesday, the Nikkei financial newspaper reported the projects are likely to be worth about 10 trillion, including the supplementary budget and government-backed loans to businesses.
Ishihara said the budgets will likely benefit workers at nurseries and day care services for the elderly, but he declined to give any further details.
‘The aim of the economic measures is to make investments for the future,’ Ishihara said.

This post was published at DollarCollapse on JULY 13, 2016.

Will The Bank Of England Become The 55th Central Bank To Cut Rates Since 2014?

Jon

Malayisa’s surprise rate-cut overnight made it the 54th central bank to ease policy since the beginning of last year. Will Carney make The Bank of England the 55th tomorrow?
As Reuters reports, interest rates have never been lower, monetary policy has never been looser.
A total of 54 central banks around the world have eased policy since the beginning of 2015 to boost growth, ward off deflation, or both.

This post was published at Zero Hedge on Jul 13, 2016.

The ‘Mass Psychosis’ in Bonds Takes a New Twist

Jon

A propitious day in our era of negative-yield pandemic.
For the first time ever, Germany sold 10-year bonds with a zero-percent coupon today. It sold these ‘Bunds’ at a price that was above face value. So not only do investors not get a coupon payment, however minuscule, they’re also not getting all their capital back when the bonds are redeemed in 10 years at face value.
So on this propitious day in our era of negative-yield pandemic, these Bunds in the 4.038 billion issuance produced a negative yield of -0.05% and no coupon payments.
The only way buyers can make money on these things is if the yield drops deeper into the negative, and if they sell the bonds at this lower yield and thus at a higher price well before the maturity date – because on the maturity date, these bonds are worth their face value, not a cent more, no matter what the interest rate may be.
Buyers that hang on to these bonds until maturity, which is what many buyers have to do to meet their needs – such as pension funds, insurance companies, etc. – are guaranteed a capital loss plus zero interest income, topped off by the loss of purchasing power due to 10 years’ worth of inflation.
If rates rise, traders will lose a ton of money, and those holding the bonds to maturity will also lose money. So this is a royal rip-off.

This post was published at Wolf Street by Wolf Richter ‘ July 13, 2016.

Fed’s Beige Book Repeats “Modest Improvement”, No Rate Hike Odds Reaction

Jon

The Beige Book offered its ubiquitous modest, moderate, mummified growth outlook with little insight into whether the Fed is considering any rate hike in the immediate future, with the following summary of the Fed’s two non-market mandates: “Labor market conditions remained stable as employment continued to grow modestly since the previous report and wage pressures remained modest to moderate. Price pressures remained slight.”
The one hint that the Fed is not preparing further tightening any time soon perhaps came the Fed’s take on the state of the US consumer: “Consumer spending was generally positive but with some signs of softening.”
Some other highlights:

This post was published at Zero Hedge on Jul 13, 2016.

In Europe, Workers Use Minimum Wage Laws to Exclude their Competition

Jon

Economists often warn about the perverse effects of the minimum wage. It is acknowledged this measure does not increase the salary of less productive workers. It reduces their employability, their ability to increase their skills and experience and thus constitute a powerful barrier to social mobility. But an effect is ‘perverse’ only if consequences are unintended. The recent behavior of the French and German governments, however, leads one to believe that some recent effects of minimum wage laws are very much intended.
Labor unions and local businesses from Western Europe have complained for many years about the ‘unfair competition’ of workers from Eastern Europe. Even when they are cheaper than French workers, Eastern European workers can still make three times more than what they would at home for the same work. Unfortunately, political and unions leaders do not understand the concept of comparative advantage. These political activists claim free movement of labor can only be fair if social conditions are the same everywhere. However, as economic theory shows us, inequalities and differences are precisely why the division of labor is beneficial.
This protectionist feeling reached its climax in 2005 and 2006 during the European debate about the Services in the Internal Market Directive, also called the ‘Bolkestein Directive.’ Its main goal was to lower trade barriers between national labor markets in order to make labor mobility easier within the European Union. Western Europe protectionists started a campaign against ‘the Polish plumber’ who has become the symbol of European deregulation allowing low-cost workers to ‘steal’ French jobs.

This post was published at Ludwig von Mises Institute on JULY 13, 2016.

Race to Displace ‘City of London’ Turns into Feeding Frenzy

Jon

As global banks begin scouting for a new European base in the wake of last month’s Brexit vote, it appears that the City of London’s glory days as the world’s most important financial center may be numbered. City-based banks and hedge funds are worried about losing their passporting rights, which grant them full access to the EU’s financial markets. They’re also concerned that the UK might lose its special authorization to clear transactions in euros.
‘In theory, extending third-country AIFMD passporting to the U. K. after Brexit should be straight-forward,’ Matt Huggett, a partner at law firm Allen & Overy in London, told Bloomberg. ‘In practice, it will be a political decision with an uncertain outcome. Many managers would like to safeguard themselves beforehand and set up offices in places like Luxembourg and Dublin.’
In true beggar-thy-neighbor fashion, many of Europe’s most prominent capitals are bending over backwards to provide global banks with the perfect enticements to lure them away from The City. As the New York Times puts it, ‘The race is on to be the new London.’
Spain’s capital, Madrid, has spent the last couple of weeks frantically ruffling its feathers in an attempt to attract the attention of not only banks but also the European Banking Authority, one of the EU’s most important (but currently London-based) financial regulatory bodies.
It’s not as absurd as it may sound. Madrid already boasts the cheapest corporate tax regime in Spain and will no doubt be prepared to drop rates even further to accommodate some of the world’s biggest banks. As JP Morgan banking analyst Kian Abouhossein notes, office space in Madrid is also more readily available and cheaper (27/sqm/month) than in the other prime locations competing to displace London as Europe’s financial capital: Paris (67/sqm/month), Dublin (52), Frankfurt (40) and Amsterdam (29).
But the price of commercial real estate is just one of many factors global banks are likely to take into consideration. The others, as New York Times points out, include:

This post was published at Wolf Street by Don Quijones ‘ July 13, 2016.

French Intel Chief’s Stunning Warning: Europe Is “On Brink Of Civil War” Due To Migrant Sex Attacks

Jon

In a shockingly non-politically-correct outburst, Patrick Calvar, chief of the Directorate General of Internal Security, told members of the French parliamentary commission that thanks to the increasing frequency of sexual assaults by islamic migrants, “Extremism is growing everywhere… We are on the brink of civil war.”
As The Express reports, Calver said he feared an inevitable confrontation between the far right and Muslims poses more of a threat than terrorism.

This post was published at Zero Hedge on Jul 13, 2016.

Americans favour Coffee over Financial Freedom

Jon

A little and a little, collected together, becomes a great deal; the heap in the barn consists of single grains, and drop and drop make the inundation.
Saadi
Towards the end of last year, we published an article titled Americans favour coffee to stock market investing where we demonstrated that an overwhelming majority drink coffee as opposed to investing in the stock market’ 61% of Americans drink coffee on a daily basis as opposed to the 48% that invest in the market. On an annual basis, Americans spend about $1200 on coffee. If they put this money into the market and allowed compound interest to do its magic, it could grow into a nice tidy sum over a period of 20 years.
The latest data provides even more attention-grabbing data. Starbucks is one of the most popular places to get a cup of Java from, even though (in our opinion) it does not come close to ranking as the best place to have a cup of coffee. The picture below illustrates just how much people love their daily coffee.

This post was published at GoldSeek on 13 July 2016.

EU Sends Obsolete Industries Mission to China

Jon

‘Tough Negotiations’
The European press informs us that a delegation of EU Commission minions, including Mr. JC Juncker (who according to a euphemistically worded description by one of his critics at the Commission ‘seems often befuddled and tired, not really quite present’) and European Council president Donald Tusk, has made landfall in Beijing. Their mission was to berate prime minister Li Keqiang over alleged ‘steel dumping’ by China and get him to cease and desist.
The left-leaning Guardian writes – in a somewhat strident-sounding tone – that ‘Jean-Claude Juncker threatens China over steel dumping in Europe’.
‘The president of the European commission has warned China must stop dumping cheap steel in Europe or it could fail to gain market economy status with the World Trade Organization, which Beijing is desperate to secure. Jean-Claude Juncker said that Beijing and the EU had agreed to establish a working group to discuss the crisis in the steel industry and monitor steel shipments from China.
‘The EU will defend its steel industry. We are not defenceless, and we will use all the means at our disposal,’ Juncker said in Beijing after talks with the Chinese government.
(emphasis added)
We mention the strident tone mainly because steel workers are a kind of symbol/ hobby horse of the left – a nostalgic remnant, as the historic roots of socialism and unionism are often associated with smokestack industries. So they can’t help praising this apparently testosterone-laden version of Juncker, striding upon the international stage to fight for the rights of the steel worker! Yeah, baby! Time to play hardball with these yellow perils! Friendship, comrade!

This post was published at Acting-Man on July 13, 2016.

Steller 30Y Auction Sees Highest Foreign Central Bank Buying On Record, Helped By Short Squeeze

Jon

Heading into today’s 30Y auction, Stone McCarthy said that “specials galore”, noting that “though pressure might have eased up on the 3-year and 10-year, it has tightened on the 5-year and 2-year notes. Both issues are trading special at zero basis points this morning. Most off the run issues are still trading near GC, though the old 30-year bond is a bit tight at 25 basis points.”

This post was published at Zero Hedge on Jul 13, 2016.

JULY 13/A MASSIVE ‘PAPER’ DEPOSIT OF SILVER INTO SLV/A HUGE 15.98 TONNES OF PAPER WITHDRAWAL IN GOLD/GOLD AND SILVER RISE/OPEN INTEREST IN SILVER IS CAUSING HEADACHES TO OUR BANKERS/HUGE CONFLICT…

Jon

Gold:1342.10 UP $8.30
Silver 20.37 UP 23 cents
In the access market 5:15 pm
Gold: 1343.20
Silver: 20.36
And now for the July contract month
For the July gold contract month, we had a monstrous 612 notices served upon for 61,200 ounces. The total number of notices filed so far for delivery: 4,677 for 467,700 oz or 14.547 tonnes
In silver we had 57 notices served upon for 285,000 oz. The total number of notices filed so far this month for delivery: 1383 for 6,915,000 oz
Yesterday I stated the following:
‘The crooks will now do anything to orchestrate a sell off in our precious metals. They are very concerned about silver as they lean on gold hoping to generate a waterfall in price. The bankers are massively short comex paper and need lower prices so as to cover and ameliorate those losses.’
Everyday that statement seems to be true. Central bankers do not have any above ground supplies of silver like they do with respect to gold. This is their Achilles heal and it will bring them down!
Let us have a look at the data for today.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 301.41 tonnes for a loss of 1 1/2 tonnes over that period
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In silver, the total open interest ROSE BY 1471 contracts UP to 214,617, AND STILL CLOSE TO AN ALL TIME RECORD. THE OI ROSE IN CONTRAST TO THE PRICE OF SILVER WHICH FELL BY 14 CENTS IN YESTERDAY’S TRADING. In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.074 BILLION TO BE EXACT or 154% of annual global silver production (ex Russia &ex China).
In silver we had 57 notices served upon for 285,000 oz.
In gold, the total comex gold FELL BY A HUMONGOUS 24,756 contracts as gold’s FALL in price YESTERDAY to the tune of $20.90. did its job. The total gold OI stands at 633,020 contracts. The bankers are to be congratulated for doing another fine criminal job in fleecing unsuspecting longs.
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With respect to our two criminal funds, the GLD and the SLV:
GLD
Surprisingly, we had a huge change in gold inventory./
a massive ‘paper withdrawal’ of 15.98 tonnes.
the GLD is a massive fraud and a massive farce on investors!
Total gold inventory rest tonight at: 965.22 tonnes
SLV
Surprisingly we had a huge addition, a deposit of 5.187 million oz into the SILVER INVENTORY TO THE SLV (it was a paper addition)
Inventory rests at 348.580 million oz.
First, here is an outline of what will be discussed tonight:

This post was published at Harvey Organ Blog on July 13, 2016.

The Four Things That Keep Citi Clients Up At Night

Jon

Earlier today, we reported the three-part bullish narrative that according to JPM, is propping up the recent equity rally. Now, it’s time to show the three (plus one) things that Citi says is most concering to its own clients.
As Citi’s Tobias Lekvkovich writes overnight, the investment community remains in a quandary as the S&P 500 hits new highs alongside fund managers struggling with portfolio performance. Three questions tend to be uppermost in their minds – 1) can ‘defensives’ keep rallying, 2) how can investors be ‘bearish’ if the S&P 500 touches record levels and 3) what if Trump wins? An added concern – or perhaps hope – is whether there a possibility of even higher P/E ratios if US bond yields are suppressed by negative yields elsewhere?
Here are the details – and answers – from Citi:
The big three worries we hear most from clients reflect the new environment of low Treasury yields and its implications. As we noted in our last Monday Morning Musings: Credit vs Equities, the best performers year-to-date in the US stock market have been the highest dividend yield sectors for the most part…

This post was published at Zero Hedge on Jul 13, 2016.