Destination Mars

Asset Price Levitation
One of the more preposterous deeds of modern central banking involves creating digital monetary credits from nothing and then using the faux money to purchase stocks. If you’re unfamiliar with this erudite form of monetary policy this may sound rather fantastical. But, in certain economies, this is now standard operating procedure.
For example, in Japan this explicit intervention into the stock market is being performed with the composed tedium of a dairy farmer milking his cows. The activity is more art than science. Similarly, if you stop – even for a day – pain swells in certain sensitive areas.
In late April, a Bloomberg study found that the Bank of Japan (BOJ), through its purchases of ETFs, had become a top 10 shareholder in about 90 percent of companies that comprise the Nikkei 225.
At the time, based on ‘estimates gleaned from publicly available central bank records, regulatory filings by companies and ETF managers, and statistics from the Investment Trusts Association of Japan,’ Bloomberg assumed the BOJ was buying about 3 trillion yen ($27.2 billion) of ETFs every year. The rate of buying has likely accelerated since then.

This post was published at Acting-Man on July 18, 2016.

Citi Is Stunned How Quickly The “Extraordinary Political Backdrop” Is Deteriorating

Some interesting observations from Citi’s Tin Fordham on “The Tempest” and What to Make of Turkey’s Failed Coup, Nice Attacks, and the Emerging Politics of Fear and Anxiety. It appears that “nobody could have possibly predicted” what we said back in 2010 when the Fed launched QE2, namely that monetary policy will lead to global violence, conflict and war, and as a result is making it up as they go along.
Here is Citi’s turn, courtesy of Tina Fordham.

In this note we provide an overview of our thoughts on the extraordinary political backdrop that is evolving, with more detailed explanation of the economic and strategy implications from our Turkey economists and EM strategist.
Friday night’s failed military coup attempt in Turkey was a flashback to the kind of events most thought would be relegated to the “dustbin of history”, albeit one featuring a prominent role for social media, with Turkish President Erdogan commanding citizens to take to the streets to protest against the emerging coup via an appeal broadcast on Facetime. Once plagued by coups and coup attempts, the apparent plot to remove Turkey’s elected government was a reminder that, historically, it is in countries where coups and revolutions have occurred previously that they are most likely to return.

This post was published at Zero Hedge on Jul 18, 2016.

London Housing Bubble Melts Down

But don’t just blame Brexit.
In Central London – the 30 most central postal codes and one of the most ludicrously expensive housing markets in the world – eager home sellers are slashing their asking prices to unload their properties. But even that isn’t working.
In the 12 days after the Brexit vote, cuts to asking prices have soared by 163% compared to the 12 days before the vote, according to the Financial Times. Yet sales have plunged 18% from before the Brexit vote. Sales had already taken a big beating before then and are now down a mind-boggling 43% from where they’d been a year ago!
So Brexit did it?
Um, well, sort of. But it’s more than Brexit. Home prices on a -per-square-foot basis had peaked in Q2 2014, according to real-estate data provider LonRes. Since then, the market in Central London has been hissing hot air. By Q1 2016, prices for homes above 5 million had dropped 8% from their 2014 peak, and prices for homes from 2 million to 5 million had plunged 10%.
Back in December 2015, we reported that luxury housing in London was getting mauled, based on the LonRes report for the third quarter, released at the time. It pointed the finger at folks who, once ‘awash with cash, don’t have as much to spend’ [read… It Gets Ugly in the Toniest Parts of London].
Then, in its spring review, LonRes called the prime London housing market ‘challenging.’

This post was published at Wolf Street by Wolf Richter ‘ July 18, 2016.


Gold:1328.40 UP $0.10
Silver 20.05 DOWN 5 cents
In the access market 5:15 pm
Gold: 1328.50
Silver: 20.06.
And now for the July contract month
For the July gold contract month, we had a small 76 notices served upon for 7,600 ounces. The total number of notices filed so far for delivery: 5050 for 505,000 oz or 15.732 tonnes
In silver we had 49 notices served upon for 245,000 oz. The total number of notices filed so far this month for delivery: 1829 for 9,145,000 oz
It sure looks to me like the bankers are trapped in silver. The OI continues to either stay constant or rise. Today it rose despite the drubbing silver stock yesterday. Thus expect continue raids from our bankers as they desperately try and lower their record high open interest shorfall in silver. When silver last hit $49.00 the open interest in silver was 216,000. Today we have a higher OI and yet the price is 29 dollars lower.
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 305.20 tonnes for a gain of 2 tonnes over that period
In silver, the total open interest ROSE BY 288 contracts UP to 217,504, AND STILL CLOSE TO AN ALL TIME RECORD. THE OI ROSE IN CONTRAST TO THE PRICE OF SILVER WHICH FELL BY 18 CENTS IN FRIDAY’S TRADING. In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.088 BILLION TO BE EXACT or 155% of annual global silver production (ex Russia &ex China).
In silver we had 49 notices served upon for 245,000 oz.
In gold, the total comex gold ROSE BY 3653 contracts despite gold’s FALL in price FRIDAY to the tune of $3.00. The total gold OI stands at 613,005 contracts.
With respect to our two criminal funds, the GLD and the SLV:
we had a good sized deposit in gold inventory./ the deposit: 2,37 tonnes
the GLD is a massive fraud and a massive farce on investors!
Total gold inventory rest tonight at: 965.22 tonnes
we had no changes into the SILVER INVENTORY TO THE SLV
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 18, 2016.

Treasuries Will Tell You All You Need To Know

Even with the S&P 500 hovering at all time highs and currencies moving all over the place, Bloomberg’s Richard Breslow says the only asset class that is dispositive right now is bonds. The 10-year U. S. Treasury is right at support. But support at pathetically low levels.
Despite strong retail sales, industrial production and core CPI last Friday, yields remain well below where they were before the U. K. referendum. Closer to historic lows than the average for the year.

This post was published at Zero Hedge on Jul 18, 2016.

The ‘BLM’ Paradox – Black Accountability Matters

Given recent distressing killings between Blacks and police -in the past week – it is worth poring into the broad statistics that underlie homicides in this country, by race. The subject here has become far more emotional of late due to three reasons:
(A) a lack of recent official national data covering homicides by race and by the police, (B) activists have somewhat diverted our attention away from the broader statistics and instead focused us on a few edited videos of murders under the premise that this is what all Whites are about, and (C) we have an election season where both sides of the aisle want a voice on this topic as it comports with their “broader” socioeconomic policies. It is as important to get the truth out there in terms of where the threat lies, as it is to be compassionate to the many thousands of murdered innocent Americans (of all stripes) each year but that happen disproportionately by one race. It is also worth reminding that the vast majority of initial deplorable headlines, about Blacks killed by police, have never later led to convictions by a balanced jury of peers who saw more concerning evidence than the (social) media showed you. Clearly there are some false positives, though there are far many more false negatives.
Let’s start by dissecting some headlines recently by both Former Mayor Giuliani, and also blogger Nate Silver. Both have made slightly different points, though both are factual in some sense, one is generally closer aligned to the broad statistics.

This post was published at Zero Hedge on Jul 18, 2016.

Michael Lewitt: My 1990s Brush with Bernie Madoff Revealed a Deadly Secret

In 1998, my firm visited with a prominent money manager in New York City. At the time, we were trying to raise money to invest in less’than’investment’grade corporate debt. We attended the meeting and, to put it politely, we were given the brush off. That was no big deal-it happened all the time. But what that money manager said struck us as very odd. ‘Why should I give you guys money?’ he asked. ‘You can’t make me one point a month like my friend Bernie.’ We knew who Bernie was, and responded, ‘It’s not a ‘point’a’month’ world.’
Several years later, in 2005, we were sitting in front of another group that said it was interested in raising money for us. The talks proceeded to the point where we were invited to meet with the company’s founder and his top lieutenants. These gentlemen explained they were looking for another product to add to the offering of their largest existing manager (whose identity was treated like a national security secret) who was producing consistent monthly returns in the 80 to 100 basis point range. They stressed repeatedly that they could not consider a strategy that experienced losses of as much as 2% a month. We told them that it would be impossible to guarantee that there would not be monthly losses. Needless to say, the talks went nowhere.
The money manager we met in 1998 was Ezra Merkin, whose funds lost a reported $2.4 billion with Bernard Madoff. The money-management firm we met in 2005 was Fairfield Greenwich Group, whose clients reportedly lost more than $7 billion in the Madoff fraud. Madoff, of course, was the top-secret manager whose identity they refused to disclose. The firm’s now disgraced founder Walter Noel attended that meeting but let his minions do most of the talking.

This post was published at Wall Street Examiner by Michael E. Lewitt ‘ July 18, 2016.

The financial system is breaking down at an unimaginable pace –

Now it’s $13 trillion.
That’s the total amount of government bonds in the world that have negative yields, according to calculations published last week by Bank of America Merrill Lynch.
Given that there were almost zero negative-yielding bonds just two years ago, the rise to $13 trillion is incredible.
In February 2015, the total amount of negative-yielding debt in the world was ‘only’ $3.6 trillion.
A year later in February 2016 it had nearly doubled to $7 trillion.
Now, just five months later, it has nearly doubled again to $13 trillion, up from $11.7 trillion just over two weeks ago.
Think about that: the total sum of negative-yielding debt in the world has increased in the last sixteen days alone by an amount that’s larger than the entire GDP of Russia.
Just like subprime mortgage bonds from ten years ago, these bonds are also toxic securities, since many of are issued by bankrupt governments (like Japan).
Instead of paying subprime home buyers to borrow money, investors are now paying subprime governments.

This post was published at Sovereign Man on July 18, 2016.

Macquarie Asks “Can One Make Any Sense Of These Erratic Markets? Our Answer Is No”

Some observations from Macquarie on the sad state of constant confusion plaguing investors around the globe, presented without comment.
* * *
Twilight between Ignorance & Confusion
“In the middle of the journey of our life I found myself within a dark woods where the straight-way was lost” Dante Alighieri;
“There is a fifth dimension beyond which is known to man…is the middle ground between the pit of man’s fears and the summit of his knowledge”, Twilight Zone

This post was published at Zero Hedge on Jul 18, 2016.

Why Markets Could Get Even Scarier

A bloody coup attempt in Turkey… Another terrorist attack in France… Attacks on police officers in Dallas and Baton Rouge… Negative interest rates on more than $10 trillion of sovereign debt… Two distrusted and discredited U. S. presidential candidates…
All this, and yet investors push the S&P 500 to record highs.
I don’t know about you but I have never seen a more confusing and disturbing investment landscape in my 30 years in the business.
At the same time, I have been receiving a lot of feedback from readers and friends that my writing is making them uncomfortable.
I have news for everyone – my job is not to make people comfortable. My job is to keep you safe and keep you solvent.
The great English romantic poet William Blake wrote, ‘Opposition is true friendship.’ I may not be the friend with whom you want to have dinner, but I sure as hell am the guy you want in the foxhole next to you when the firefight starts.
And the firefight is raging all around us…

This post was published at Wall Street Examiner by Michael E. Lewitt ‘ July 18, 2016.

French Prime Minister Booed At Moment Of Silence In Nice

In the aftermath of last Thursday’s tragic truck attack in Nice, France which killed 84 and injured hundreds, public opinion turned even more sour on the country’s increasingly unpopular Prime Minister Manuel Valls, who said that“times have changed, and France is going to have to live with terrorism, and we must face this together and show our collective sang-froid”, a statement which many took as an admission of defeat toward the terrorist threat sweeping across France in particular, and Europe in general.
The French resentment toward its Prime Minister was on full display again today, when Valls was loudly booed at memorial service to remember the victims of the Nice terror attack. The prime minister attended the service alongside the Mayor of Nice, Philippe Pradal, the regional president Christian Estrosi and the reigning prince of nearby Monaco, Prince Albert.
Valls was booed as he went to sign the book of condolence at the memorial service on the Promenade des Anglais. ‘Resignation!’ ‘Murderers’ was shouted by the crowds before and after the ceremony. Others shouted “You’re not wanted here!” and “You are the terrorist!” ahead of the one minute of silence that thousands observed.

This post was published at Zero Hedge on Jul 18, 2016.

Largest US Pension Fund Suffers Worst Annual Return Since Financial Crisis Due To Heavy Stock Losses

While we have often documented the dramatic underperformance by the hedge fund industry over the past decade courtesy of a centrally-planned market in which it no longer pays to “hedge”, culminating with countless hedge fund closures and substantial redemptions (mostly by now redundant Fund of Funds managers), today we learn that “vanilla” asset managers were also hurt over the past year in which the S&P went nowhere, and not just in Japan where the gargantuan, $1.4 trillion GPIF recently suffered major losses, but in the US as well.
Case in point: Calpers, the largest U. S. public pension fund which as the WSJ reports posted its lowest annual gain since the last financial crisis due to heavy losses in stocks.
The California Public Employees’ Retirement System, or Calpers, said it earned 0.6% on its investments for the fiscal year ended June 30, according to a Monday news release, barely turning a profit fro the full year. The last time Calpers lost money was during fiscal 2009 when the fund’s holdings fell 24.8%.

This post was published at Zero Hedge on Jul 18, 2016.

European Central Banks Disclose Which Corporate Bonds They Own

Earlier today, alongside the ECB’s latest weekly disclosure of total corporate bond purchases under the CSPP program, which as of July 15 had risen by approximately 2 billion to 10.427 billion, suggesting a daily purchase pace of about 400 million, Europe’s various regional central banks also disclosed for the first time the CUSIP list of which specific bonds they had purchased over the past month and a half.
Of these, the most interesting report belonged to the ECB because alongside the CUSIPs, the German central banks also disclosed the names of the companies whose bonds it has subsidized.
As disclosed in the Bundesbank’s list which reveals which newly acquired holdings will be eligible for lending under with the Automated Securities Lending (ASL) program or the ASL plus program, the Bundesbank now holds bonds from at least 42 different issuers, sorted alphabetically as follows:

This post was published at Zero Hedge on Jul 18, 2016.

The Looming Shortage in Government Bonds

Ever since the 2008 financial crisis, there has been a persistent shortage of high-quality government debt. More than just a safe haven in times of financial stress – the so-called ‘flight to quality’ – the supply of high-quality sovereign debt has been steadily shrinking. This shortage became acutely apparent with the results of the Brexit referendum as investors worldwide bid up bond prices to the point where most long-term bond yields reached historic lows in the US, UK, Germany, and Japan. Brexit only exacerbated a shortage problem that bond investors have had to contend with for nearly a decade. The current squeeze in supply is just the latest manifestation of this wider issue in today’s financial markets.
Read Shilling: World Facing High Probability of Panic Deflation
To claim that there is a shortage of government debt must seem counter-intuitive to many readers. After all, there is no end of studies demonstrating that major economies have record high government debt-to-GDP ratios, signifying that there is too much debt, not too little. Many critics call for governments everywhere to issue less debt, arguing that such high levels of debt ratios contribute to sluggish growth if not outright stagnation. European governments continue to exercise spending restraints and, in general, austerity is the byword throughout the industrialized world. Governments have been very reluctant to open up their coffers by issuing more debt to fund expenditures.
However, a case can be made for more government debt. In a recent article, The World Needs More US Government Debt former FOMC member Narayana Kocherlakota argued this case, succinctly, when he wrote:

This post was published at FinancialSense on 07/18/2016.

Why Oil Prices Might Never Recover

Two years into the global oil-price collapse, it seems unlikely that prices will return to sustained levels above $70 per barrel any time soon or perhaps, ever. That is because the global economy is exhausted. The current oil-price rally is over as I predicted several months ago and prices are heading toward $40 per barrel.
Oil has been re-valued to affordable levels based on the real value of money. The market now accepts the erroneous producer claims of profitability below the cost of production and has adjusted expectations accordingly. Be careful of what you ask for.
Meanwhile, a global uprising is unfolding.
The U. K. vote to exit the European Union is part of it. So is the Trump presidential candidacy in the U. S. and the re-run of the presidential election in Austria. Radical Islam and the Arab Spring were precursors. People want to throw out the elites who led the world into such a mess while assuring them that everything was fine.
The uprising seems to be about immigration and borders but it’s really about hard times in a failing global economy. Debt and the cost of energy are the pillars that underlie that failure and the resulting discontent. Immigrants and infidels are scapegoats invented by demagogues.

This post was published at Zero Hedge on Jul 18, 2016.

New CPI Numbers Reveal Investment Window for Gold

The Bureau of Labor released its Consumer Price Index report last Friday, which showed an increase in all consumer items by 0.2 %. The CPI measures the change in price Americans pay for all goods and services. According to theWall Street Journal, the latest numbers indicate that the ‘effects of low energy prices and a strong dollar are fading.’
In short, prices are continuing to rise because of the ultra-low interest rates and quantitative easing. This is not only bad news for consumers, it’s worse news for the nation’s economy in general. That’s because the reported CPI is only a small peek into the actual effects of the Fed’s monetary policies. As Peter Schiff has said many times:
The methodology for computing the CPI has deliberately been designed to hide the effects inflation has on consumer prices.’
What’s hidden within the government-created CPI reports is the fact that most Americans are feeling the pinch. Gas price stabilization is also beginning to affect the overall increase.
Even though inflationary pressures might prompt the Fed to raise interest rates, the chances are good they still won’t. Raising rates means US debt becomes even more impossible to pay off as more and more borrowing is needed to service debt interest. The Fed has gotten itself into a quandary by keeping interest rates artificially low. Such a cycle of borrowing to pay debt will inevitably end in default and devaluation of the dollar, the world’s currency standard.

This post was published at Schiffgold on JULY 18, 2016.