CHRIS GAFFNEY: China’s Shadow Banking is the One Thing It Cannot Control

By Chris Gaffney, SVP & Director of Sales for EverBank
The Fed, central banks and markets are unlike anything we’ve ever seen and our GDP is settling in solidly at around 1%. The times, they are a changin’ here in the U. S.
And just as Harry’s [Dent] been saying for years, our demographics here in the states will not provide the growing population we’ve had driving this country’s economy since the end of the Second World War. But of course, we’re not the only player in the world markets and right now, it’s India and China that have the population to drive new economic engines.
And China’s where it’s all at right now.
I should know. I’ve been watching them like a hawk since their GDP rates began skyrocketing in the early 1990s. It’s been dancing with double-digit growth rates for more than 20 years, as it shed a state-run economy and opened up to global free-markets.
As with most emerging economies, China came out of the gate manufacturing. It used a tightly controlled currency to pay a low-wage work force that filled the world with manufactured products ranging from plastic spoons to semi-conductors.

This post was published at Wall Street Examiner on July 22, 2016.

The Market For Lemons, The Market For Bullshit, And The Great Cascading Credence Crash Of 2016

The Market for Lemons, the Market for Bullshit, and the Great Cascading Credence Crash of 2016
‘The cost of dishonesty, therefore, is not only the amount by which the purchaser is cheated; the cost must also include the loss incurred from driving legitimate business out of existence.’
George Akerlof, The Market for Lemons
People have begun to worry that we’re experiencing a crisis of confidence in our traditionally most prestigious institutions – in our political parties, and central banks, and great newspapers, and universities, and even in accredited experts.
Views that would have been regarded as extreme in the past also seem much more common now. The entire political spectrum, all around the world, seems to be in the middle of collapsing into a collection of smaller, more radical groups. Some of them advocate violence.
The problem doesn’t seem to be unique to this particular historical moment. There are other times in recent history – the 1930’s, perhaps, or the 1960’s – when the public seemed equally unhappy with existing institutional points of view. Like the present, they were periods of relatively rapid change in organizational and communications technology.

This post was published at Zero Hedge on Jul 23, 2016.

July 26-27 – The Fed Will Put Us on Notice for a September 20-21 Rate Hike

The Fed was cocked and primed to deliver a 25 basis point increase in the federal funds rate on June 15. But on June 3, the BLS announced that nonfarm payrolls increased a paltry 38,000 in May. This monthly random number prompted the Fed to stand down on its interest rate increase. Then on June 23, the UK voters surprised the smart money by voting to have the UK leave the EU. Globally, the prices of risk assets swooned for a couple of days. The FOMC was thanking its lucky stars that the May nonfarm payroll report caused it to hold off on its planned rate increase for June 15.
But my bet is that in the announcement immediately following the July 26-27 FOMC meeting, the Fed will put us on notice that an interest rate hike is on the agenda for the next FOMC meeting, September 20-21. One reason for my Fed policy expectation is that the pace of U. S. economic activity has picked up in recent months. June nonfarm payrolls rebounded by 287,000. Nominal retail sales surged at an annualized rate of 5.9% in the second quarter after having contracted 0.2% annualized in the first quarter. The manufacturing Purchasing Managers Index (PMI) increased in both May and June with the June level of 53.2 being the highest reading since February 2015. Corroborating the behavior of the manufacturing PMI was the 0.4% rebound in the Fed’s measure of manufacturing production for June. At 1.160 million units, average second quarter housing starts were the highest since Q4:2007. Too be sure, the U. S. economy is not hitting on all cylinders. ‘Compression’ is low in business capital spending, in part due to the relatively low energy prices and previously weak consumer demand. Exports have weakened because of the slowdown in the pace of economic activity in developing economies. But about 80% of the economy is doing reasonably well.

This post was published at FinancialSense on 07/22/2016.

“As Long As All The Offensive Shit Is Verbatim, I’m Fine With It”

Deep inside the treasure trove of smears, collusion, and questionable fund-raising exposed by Wikileaks dump of DNC leaked emails was this little gem of ‘innocent propaganda’ by the Clinton campaign against the Trump campaign.
The email – found here- shows DNC staffers’ creating a fake craigslist job posting made for women who wish to apply to jobs at one of Trump’s organizations.
The fake position, titled a Honey Bunny, requires the prospective applicant to, among other tasks, refrain from gaining weight, be open to public humiliation and be alright with groping or kissing by her boss…
Multiple Positions (NYC area)
Seeking staff members for multiple positions in a large, New York-based corporation known for its real estate investments, fake universities, steaks, and wine. The boss has very strict standards for female employees, ranging from the women who take lunch orders (must be hot) to the women who oversee multi-million dollar construction projects (must maintain hotness demonstrated at time of hiring).

This post was published at Zero Hedge on Jul 23, 2016.

7 Signs That the Gold Market Remains Resilient

Gold and silver prices ran out of momentum during the first week of July and have been drifting lower ever since. A deeper correction seems like a realistic expectation, but precious metals are showing strong signs of resiliency. Here are seven forces that should be creating headwinds for precious metals, but are barely having any impact.
1) Increased Margin Requirements – The CME raised margin requirements in the futures market for both gold and silver during July. Raising margins makes it more expensive for paper speculators to keep their positions. This type of increase in margin requirements often results in a sharp and sudden drop in the price.
2) Futures Expiration Approaching – The expiration of the futures contract is coming up on July 27 for gold and July 26 for silver. There is a fairly strong historic pattern of gold and silver prices dropping sharply just prior to expiration. Many believe paper manipulators use leverage, false bids and employ other tactics to send prices tumbling so that they can cover and profit from their short positions.
3) Bearish Commitment of Traders Report – The COT showed that speculative gold longs decreased their positions for the first time in more than a month, while shorts increased their own positions for the third week in a row. Short positions by commercial traders are near record levels and almost 2.5 times their long positions. We will get a better picture when COT data is released on Friday, but the expectation is that this trend continued throughout the most recent period.

This post was published at GoldStockBull on July 22nd, 2016.

Goldman: The Last Two Times P/E Multiples Expanded This Much, The Result Was A Historic Crash

It’s not just former Fed economists who are getting worried. So is Goldman.
As we wrote last weekend, “With “Stock Valuations At Extremes” Goldman’s Clients Are Asking Just One Question“, namely how much longer can the rally continue. This followed another Goldman warning from two weeks ago, where as we noted before, “Goldman Warns Of A Sharp Plunge In Stocks In “Next Few Months.”
Who knows: maybe Goldman will be right and the market will plunge – it certainly isn’t trading at all time highs and 25x GAAP multiples on fundamentals. But for now those who heeded Goldman’s warning and traded ahead of a 10% “pullback” have gotten crushed.
So has Goldman’s chief equity strategist David Kostin finally thrown in the towel?
Not yet. In fact, Kostin appears to be doubling down, and as he observes (correctly) overnight, the one sole reason behind the market rally in recent years – clearly not earnings growth as we wrote earlier – namely, multiple expansion, is now substantially overdone. And not just that: as Kostin points out, there have been only two time in history when the P/E multiple has expanded as much (75%) or more as it has in the current cycle: 1984-1987 and 1994-1994. Both ended with historic crashes. To wit:

This post was published at Zero Hedge on Jul 23, 2016.

Market Report: Technicians turning bearish

The consolidation of June’s price rises for gold and silver continues.
Predictably, technical analysts are now talking prices down, expecting gold to test the 55-day moving average currently at $1280, and possibly the 200-day MA, which is at $1195. Last night (Thursday) gold closed at $1333 and silver at $19.80.
We shall see. There is no doubt that technically both metals are showing up as very overbought, and vulnerable to a significant correction. Furthermore, the Managed Money category on Comex shows record long positions, and is vulnerable to a shake-out. No wonder technical analysts have turned.
Truth to tell, they got it wrong on the way up, and only changed their minds when uptrends for gold and silver were firmly in place. They called a bottom, only after gold had risen 20% against the dollar, about 5% below current levels.

This post was published at GoldMoney on JULY 22, 2016.

Bearish on T-Bonds

Here is an excerpt from a commentary posted at TSI last week. Not much has changed in the interim, so it remains applicable.
The US Treasury Bond (T-Bond) entered a secular bullish trend in the early-1980s. As evidenced by the following chart, over the past 30 years this trend has been remarkably consistent.

This post was published at GoldSeek on 22 July 2016.

Keiser Report: Escaping America (E944)

The following video was published by RT on Jul 23, 2016
Max and Stacy talk first to Jeff Berwick of the Dollar Vigilante about Americans renouncing their citizenship as a solution to bank embargoes and double taxation. In the second half, Max and Stacy talk to Susanne Tarkowski Tempelhof, founder of BitNation – the world’s first virtual nation, a blockchain powered jurisdiction – about ending geographical apartheid in the digital and crypto age.

Sovereign Debt Downgrades Accelerate in 2016

The three main rating agencies – Fitch, Moody’s, and Standard and Poor’s – all went on a downgrading spree in the first half of 2016. So far this year, Standard and Poor’s has downgraded 16 sovereigns, Moody’s has downgraded 24, and Fitch’s has downgraded 15. All of these represent significant increases over downgrades for 2015, and with many countries on negative watch and marked as proximate downgrade risks, 2016 could well see more negative rating activity on sovereigns than 2011 did (the last high-water mark).
Most of the countries whose debt has been downgraded are commodity producers such as Brazil, Kazakhstan, Saudi Arabia, and Nigeria. Lower prices for oil and other commodities are still putting pressure on their finances. Developed markets have not escaped, however, with downgrades from various agencies going to the U. K. after its vote to leave the E. U., as well as to Austria, France, and Finland. When Fitch released its mid-year report, the company noted:

This post was published at FinancialSense on 07/22/2016.

Six Major Events That Will Change History

Investors globally have never faced risk of the magnitude that the we are now exposed to. But sadly very few are aware of the unprecedented risks the world is facing. For the ones who understand risk and take the right decisions, it will ‘lead to fortune’. Only very few will choose that route. Instead most investors will continue to live in the hope that current trends will go on forever but sadly these people will end up ‘in shallows and in miseries’.
Risk is now staring us all right in our face but very few people can actually see it.
Let’s just be clear what some of the events that will change the face of the earth are:
No Sovereign state will ever repay their debt – That is an irrefutable statement and anyone who doesn’t understand that lives in denial. Sovereign debt has increased exponentially in the last couple of decades and governments neither can nor have the intention of ever paying their creditors. They can’t even afford to pay the interest and this is why an ever increasing number of countries have negative interest rates. So not only will they not repay the capital but investors now pay bankrupt nations for the privilege of holding their worthless paper. It is incomprehensible that investors are prepared to hold nearer $100 trillion of debt with no yield or negative yield and no chance of getting their money back. No one worries about the return OF their money and now it seems that investors don’t even worry about getting a return ON their money. This is a shocking state of affairs that eventually will lead to a total collapse of all sovereign debt. No bank will ever give depositors their money back – I know that very few believe this statement. Because, if bank depositors did, they would not hold around $200 trillion of assets in the financial system plus another $1.5 quadrillion derivatives in the banking system. Bank stocks in Europe, whether it is Deutsche Bank in Germany or bank Monte Paschi in Italy are continuing to crash to new lows. As I stated in a recent article, the share price of most European banks as well as many US banks like Citigroup or Bank of America have collapsed 70-95% since 2006 and they are on their way to ZERO. Consumer borrowing is still growing exponentially. Student loans in the US is now $1.4 trillion up a MERE 3x since 2006. And the delinquency rate is increasing exponentially as most students can’t find a job.

This post was published at GoldSwitzerland on July 19th, 2016.

Leaked DNC Emails Confirm Democrats Rigged Primary, Reveal Extensive Media Collusion

There are three key findings to emerge from yesterday’s dump of leaked DNC emails released by Wikileaks:
There had been a plot designed to smear Bernie Sanders and to hand the Democratic nomination to Hillary on a silver platter There has been repeated collusion between the DNC and the media There has been questionable fundraising for both Hillary Clinton and the DNC First, a quick recap for those who missed the original report, yesterday Wikileaks released over 19,000 emails and more than 8,000 attachments from the Democratic National Committee. This is what the whistleblower organization reported:
WikiLeaks releases 19,252 emails and 8,034 attachments from the top of the US Democratic National Committee — part one of our new Hillary Leaks series. The leaks come from the accounts of seven key figures in the DNC: Communications Director Luis Miranda (10770 emails), National Finance Director Jordon Kaplan (3797 emails), Finance Chief of Staff Scott Comer (3095 emails), Finanace Director of Data & Strategic Initiatives Daniel Parrish (1472 emails), Finance Director Allen Zachary (1611 emails), Senior Advisor Andrew Wright (938 emails) and Northern California Finance Director Robert (Erik) Stowe (751 emails). The emails cover the period from January last year until 25 May this year.d
Subsequently, the Romanian hacker known as Guccifer 2.0 (who has denied he works with the Russian government), who has already released hundreds of hacked DNC emails previously, told The Hill he leaked the documents to Wikileaks.

This post was published at Zero Hedge on Jul 23, 2016.

Robert Higgs: The State is too Dangerous to Tolerate

The following video was published by misesmedia on Jul 23, 2016
Our week-long Mises University begins this Sunday night, and all keynote lectures will stream free via mises.org/live or our Facebook page. The week kicks-off with Tom Woods Sunday night, followed by Judge Andrew Napolitano Monday evening. So plan on tuning-in: the full schedule is here: mises.org/events/virtual-mises-university-2016
Dr. Robert Higgs delivered one of our most popular and most-watched Mises U speeches in 2013, a terrific exposition entitled “The State is too Dangerous to Tolerate”. It’s an intellectual tour de force from Higgs, where he demolishes many of the popular misconceptions about (and justifications for) the state in one compelling talk. This is Dr. Higgs at his most formidable, and well worth an hour of your time, this weekend. It’s the kind of content that you won’t hear anywhere else.

“Policymakers Have Been Calling A ‘Depression’ A ‘Recovery’ For Nearly A Decade”

Some people have impeccable timing. Even if by accident, there are occasions when what they say or write comes out in almost perfect sequence. At the end of August 2014, UC Berkeley economist J. Bradford DeLong wrote an article for Project Syndicate that argued in favor of proper categorization. The lack of recovery was so drastic that the economist community and indeed the world at large needed to come to terms with what was actually taking place; and that was not anything like what was being described especially at that time.
To have such a Keynesian of prominence make such an indictment like that may seem somewhat surprising, as it has been they who have most objected to classifying this economy as anything but robust. Some of it is surely political, or at least loyalty to the good standing monetarist/Keynesians (neo-Keynesian, saltwater-ists, or whatever they call themselves these days) at the Federal Reserve, where no economist shall direct any disparaging comments toward the palace. But to DeLong, the issue had never been about recession at all:
Cumulative output losses relative to the 1995-2007 trends now stand at 78% of annual GDP for the US, and at 60% for the eurozone. That is an extraordinarily large amount of foregone prosperity – and a far worse outcome than was expected. In 2007, nobody foresaw the decline in growth rates and potential output that statistical and policymaking agencies are now baking into their estimates.
By 2011, it was clear – at least to me – that the Great Recession was no longer an accurate moniker. It was time to begin calling this episode ‘the Lesser Depression.’
As I wrote above, the timing was perfect at the front edge of the ‘rising dollar.’ The economy of greater eurodollar shortage and inflexibility has served, in this context, to demonstrate the claim. Rather than sail off into the Hollywood sunset as Bernanke and then Yellen assured us, the economy instead went the other way, and not just here. Further, subsequent data revisions have shown that it was folly all along to believe that 2014 was anything other than the anomaly; and a fictional one beside.
vestment Partners, Jul 23, 2016 1:20 PM

This post was published at Zero Hedge by Jeffrey Snider via Alhambra In.

THE SUBPRIME U.S. ECONOMY: Disintegrating Due To Subprime Auto, Housing, Bond & Energy Debt

The U. S. financial system continues to disintegrate even though most Americans hardly notice. The system is being gutted from the inside out… much the same way a chronic disease weakens a patient even before any symptoms are felt. However, we are already experiencing painful symptoms as U. S. economic indicators continue to weaken.
Here are just a few of the recent headlines:
Energy Giant Schlumberger Fires Another 8,000 As ‘Market Conditions Worsen’ in Q2
The Financial System Is Breaking Down At An Unimaginable Pace
Potential Crisis Triggers Continue To Pile Up In 2016
Just In Time – – Big Wall Street Housing Investors Cashing-Out On Housing Bubble 2.0
Corporate Bond Defaults Hit Highest Rate Since Financial Crisis
These are just some of the recent headlines pointing to BIG TROUBLE AHEAD. However, the U. S. financial system is in dire shape due to the SUBPRIMING of the entire economy. Today, anyone can purchase a car for little or nothing down and finance it for 84 months. The U. S. housing market is also in the same predicament.

This post was published at SRSrocco Report on on July 21, 2016.

How Soaring Corporate Debt Could Lead to the Next Financial Crisis

This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission.
Economic bubbles always seem to stare us in the face before popping.
That’s exactly what happened 10 years ago with the boom-turned-bust U. S. housing market – and it’s what could soon happen with global corporate debt…
According to a new report from Standard & Poor’s Global Ratings, corporate debt around the world is massively on the rise and could skyrocket to $75 trillion from the $51 trillion it’s at now.
This flurry in corporate borrowing is being driven by central banks around the world. For close to a decade, they have kept interest rates near zero (or even below) to encourage companies to pile on debt. Here in the United States, for example, interest rates have been near 0% since 2008 up until December 2015, when the U. S. Federal Reserve raised rates a meager 0.25 to 0.50 basis points.

This post was published at Wall Street Examiner by Cameron Saucier ‘ July 22, 2016.

Doug Noland’s Credit Bubble Bulletin: Don’t Mess with Turkey

This is a syndicated repost courtesy of Credit Bubble Bulletin. To view original, click here. Reposted with permission.
July 20 – Financial Times (Eric Platt): ‘The Turkish lira weakened a new record low against the greenback on Wednesday after the country was cut deeper into junk territory by Standard & Poor’s, with analysts warning Ankara faced unpredictable capital flows that could constrain its levered economy following last week’s failed coup attempt… The rating agency also lowered its opinion of Turkey’s local currency debt one notch to double-B plus, sweeping its lira obligations into junk as well. ‘In the aftermath of the failed coup, we believe that the risks to Turkey’s ability to roll over its external debt have increased,’ said Trevor Cullinan, an analyst with S&P. ‘We expect that given the political uncertainty, Turkey’s policymakers will likely stray from their commitment to enact reforms intended to wean the economy away from its dependence on foreign financing.’ Mr Cullinan said he expected Turkey would have to roll over more than two-fifths of its external debt over the next 12 months, worth roughly $177bn.’
July 20 – JNiMedia: ‘Erdogan blasted Standard & Poor’s downgrading of Turkey’s rating in the wake of the failed coup. ‘Why are you even interested in Turkey? We’re not part of you… Don’t ever try to mess with us,’ he said.’

This post was published at Wall Street Examiner on July 23, 2016.