Why This $1.6 Billion Hedge Fund Is 50% In Cash

“The whole world is wrongly positioned,” warns Norwegian hedge fund firm Sector Asset Management’s founder Peter Andersland, “the common denominator for everything is the long duration — real estate, stocks, bonds. Everything is much more rate sensitive now.”
As Bloomberg reports, Andersland’s $1.6 billion holds as much as 50 percent in cash in one of its funds, because holding cash is the best protection against bond and stock markets inflated by record monetary stimulus.
‘What can kill us now?,’ Peter Andersland, the 55-year-old founder of Sector, said in an interview on Tuesday at his office overlooking the Oslo fjord. ‘It’s the correlation between stocks and bonds that will be induced by higher rates. That’s the biggest risk in the capital markets today, not geopolitics or Trump.’

This post was published at Zero Hedge on Sep 4, 2016.

4/9/16: Some Points on Russian & European Policy Uncertainty Trends

With some positive (albeit very weak still) changes in the Russian macroeconomic news in recent months, it is worth looking at the evolution of trends in Russian policy uncertainty, as measured by the data.
Here is an updated (through August 2016) chart comparing news-based indices of policy uncertainty in Russia and the EU

Note, series above are rebased to the same starting point for the EU and Russia (to 1994 annual average) to make them compatible.
Things of note:

This post was published at True Economics on September 4, 2016.

So, How’s the Canadian Auto Industry Holding up?

It’s in for a Rough Ride.
Fiat Chrysler Canada sales, after a record first half, plunged 20% in August year-over-year. Not exactly what we wanted to hear from the company that just received C$85.8 million in funding from the province of Ontario to help offset the C$2.6 billion retooling costs at the Windsor Assembly Plant to accommodate the Chrysler Pacifica minivan.
‘It’s about time the government stepped in and provided some support,’explained Tony Faria, the co-director for the Center of Automotive and Vehicle Research at the University of Windsor. ‘I hope it’s only the first [step].’ Because corporate welfare programs are never enough.
Not everyone was getting wiped out: Ford car and light truck sales jumped 9.0%. But GM sales dropped 8.5%. Total sales for all automakers fell 2%.
In the US, the largest export market for Canadian auto assembly plants and component makers, it was similar, only worse: Vehicle sales fell 4.1% in August, year-over-year, with GM down 5.2%, Ford down 8.8%, and Fiat Chrysler down 2.4%
From the manufacturer’s point of view, demand weakness in the US has been apparent for months: In the second quarter, exports of Canadian-made cars and light trucks plunged 6.6%, part of Canada’s worst export plunge since 2009.
Will these converging headwinds lead to a repeat of 2009? At the time, the Canadian divisions of Chrysler and General Motors, after having been subsidized by provincial and federal government for years, got a bailout to the tune of C$13.7 billion.

This post was published at Wolf Street on September 4, 2016.

“Blunt Language” – Goldman Explains Why It Is So Confident The Fed Will Hike In Under 3 Weeks

After Friday’s payrolls miss, the market’s initial reaction was to aggressively fade the probability of a near-term Fed rate hike, as September odds initially tumbled, only to quickly rebound into the afternoon. What catalyzed this jump? As we reported at the time, the move was almost entirely driven by an unexpected note by Goldman’s Jan Hatzius who bucked the trend set by other sellside lemmings, and instead of punting the September hiking date to December, the Goldman strategist said that the weak jobs report was nonetheless “strong enough” to prompt him to boost his Sept. rate hike odds from 40% to 55%.
Realizing the severity of his prediction, and the collapse in credibility he would suffer is he is – again – wrong (as we have duly documented, the past two years have been absolutely abysmal for Goldman predictions and recommendations), earlier today Goldman took time away from his holiday schedule and penned a note to explain why he is confident that, contrary to every other forecaster, he expects a better than even chance of a rate hike to be announced in just over two weeks when the Fed meets on September 20-21.
As he puts it, Yellen’s Jackson Hole speech used “blunt language” for a Fed chair, “which would have been unnecessary if she was only trying to convey a general sense that rates would be moving higher over time, or to signal a potential hike that was still 3 months away. There are plenty of other opportunities to prepare markets for a move before the December meeting.”

This post was published at Zero Hedge on Sep 4, 2016.

Labor Day Summary: Wage Earners Have Taken a Beating

Gordon T. Long and I discuss the decline of wages and employment and how this dooms the status quo.
Let’s honor Labor Day by reviewing what’s happened to wage-earners in the eight years since central banks “saved the financial system” with free money for financiers: wage-earners have taken a beating and been dumped in a ditch. It’s really very simple: wage-earners have seen their real earnings (as measured by purchasing power) stagnate or decline while those chosen few with access to near-zero interest borrowed capital have seen their net income and wealth explode higher.
Do the math, people: annual wage increases once real-world inflation is factored in (roughly 7% to 10% annually for those who rent, have significant healthcare expenses or buy higher education) are either negative or are measured in the hundreds of dollars–in other words, trivial increases for all but the very top echelon of wage earners.
Increases in wealth for those with central bank-supplied free money for financiers are measured in the millions of dollars. Even small-fry with capital invested in bubble markets have experienced gains in the hundreds of thousands of dollars–entire lifetimes of earned income for those earning $25,000 to $35,000 annually.
There are forces at work that are beyond the power of central banks: the technologies of automation, robotics and software are replacing human labor not just in low-skill sectors but increasingly in sectors that provided the bulk of middle class jobs.

This post was published at Charles Hugh Smith on SEPTEMBER 04, 2016.

The Ultimate 21st Century Choice: OBOR Or War

The G20 meets in tech hub Hangzhou, China, at an extremely tense geopolitical juncture.
China has invested immense political/economic capital to prepare this summit. The debates will revolve around the main theme of seeking solutions ‘towards an innovative, invigorated, interconnected and inclusive world economy.’
G20 Trade Ministers have already agreed to lay down nine core principles for global investment. At the summit, China will keep pressing for emerging markets to have a bigger say in the Bretton Woods system.
But most of all China will seek greater G20 backing for the New Silk Roads – or One Belt, One Road (OBOR), as they are officially known – as well as the new Asian Infrastructure Investment Bank (AIIB).
So at the heart of the G20 we will have the two projects which are competing head on to geopolitically shape the young 21st century.
China has proposed OBOR; a pan-Eurasian connectivity spectacular designed to configure a hypermarket at least 10 times the size of the US market within the next two decades.

This post was published at Zero Hedge on Sep 4, 2016.

When Rich Families Hate Capitalism

On the market not hampered by the interference of external forces, the process which tends to convey control of the factors of production into the hands of the most efficient people never stops. As soon as a man or a firm begins to slacken in endeavors to meet, in the best possible way, the most urgent of the not yet properly satisfied needs of the consumers, dissipation of the wealth accumulated by previous success in such endeavors sets in. Often this dispersion of the fortune starts already in the lifetime of the businessman when his buoyancy, energy, and resourcefulness become weakened by the impact of old age, fatigue, and sickness, and his ability to adjust the conduct of his affairs to the unceasingly changing structure of the market fades away.
More frequently it is the sluggishness of his heirs that fritters away the heritage. If the dull and stolid progeny do not sink back into insignificance and in spite of their incompetence remain moneyed people, they owe their prosperity to institutions and political measures which were dictated by anticapitalistic tendencies. They withdraw from the market where there is no means of preserving acquired wealth other than acquiring it anew each day in tough competition with everybody, with the already existing firms as well as with newcomers ‘operating on a shoestring.’ In buying government bonds they flee under the wings of the government which promises to safeguard them against the dangers of the market in which losses are the penalty of inefficiency.
However, there are families in which the eminent capacities required for entrepreneurial success are propagated through several generations. One or two of the sons or grandsons or even great-grandsons equal or excel their forebear. The ancestor’s wealth is not dissipated, but grows more and more. X

This post was published at Mises Canada on SEPTEMBER 2, 2016.

Goldman Reveals ‘The Great Dilemma’ For Investors

The dominant effect of QE over the past several years has been to push global bond yields towards zero (and in some cases below zero) which has triggered a massive rise in asset prices while also driving an historic search for yield.
The prevailing argument among equity bulls has been that absolute valuations don’t matter because, with a risk free rate of close to zero, why should equities not be much more highly rated – why should P/Es not reach 30x or even higher? After all, a valuation derived from discounting future cash flows does approach infinity as discount rates get closer to 0%. Therefore, much of the reason that equities appear cheap versus bonds is simply a reflection of how much bond yields have fallen. In fact, according to a recent Goldman report by Peter Oppenheimer, the S&P 500 has enjoyed a 75% expansion of its P/E since 2011 while other markets have seen even more.
To be sure, absolute levels of P/E multiples have doubled since the start of the financial crisis. As depicted in the chart below, P/E ratios are at the very high end of their long-run ranges with average multiples being below the current level for about 90% of the time over the past 30 years. The longer central banking policies keep rates artificially low, the longer investors will attempt to rationalize ever increasing multiples.

This post was published at Zero Hedge on Sep 4, 2016.

Fitbit Goes 22 Karat Gold

Fitbit Alta is one of the second biggest selling fitness trackers in the US thanks to a tracker, with a screen. Now, it’s going gold. FitBit is going designer thanks to this new gold-plated style.
The Gold series Alta comes in 22 karat gold-plated edition with a black or pink sport band for $149.95. It comes with an optional shiny, gold-plated bangle named the Alta Luxe Metal Bangle for just an extra $129.95. Altogether – that’s just $280.
So make your gold and fitness habits into something fashionable with this beautiful, function 22 karat gold piece!

This post was published at GoldSilverBitcoin on September 2, 2016.

The Fed Fiddles While Free Markets Burn

We’ve all heard the story of how the emperor Nero fiddled as Rome burned. Today, we use it an as analogy, whenever fitting, to show the callousness of either a person or entity when they are obviously engaged in wreaking havoc or utter devastation; all while caring none-the-least.
Nobody seems to fit that bill today more than central bankers. And to show just how Nero-esque they can be, it was none other than our own Stanley Fischer, current V. C. of the Fed. who displayed in an interview with Tom Keene of Bloomberg what can only be deemed as the most infuriating lack of compassion, as well as sheer imperialist intoned advice. Here’s a few ‘gems’ from that interview. When it comes to negative rates? To wit:
While the Fed isn’t ‘planning to do anything in that direction,’ the central banks using them ‘basically think they’re quite successful,’ Fischer said Tuesday on Bloomberg Television with Tom Keene in Washington.
‘We’re in a world where they seem to work,’ Fischer said, noting that while negative rates are ‘difficult to deal with’ for savers, they typically ‘go along with quite decent equity prices.’
So what is one to infer? Easy: Fed to savers and the prudent: Screw you – buy stocks.

This post was published at Zero Hedge on Sep 4, 2016.

EXPOSED: The Elites Who Control Silver & The World — Charles Savoie

The following video was published by SGTreport.com on Sep 4, 2016
EXPOSED: The Elites Who Control Silver & The World — Charles Savoie
Writer and researcher Charles Savoie joins me to discuss his life’s work to expose the centuries long scheme to control, suppress and demonetize silver by the secret society called ‘The Pilgrims’. Charles Silver Squelchers series of articles stretches more than 3,000 pages in length and reveals incredible details about the silver suppression scheme that can found no where else. You can find Charles work at the SilverStealers.net – Thanks for joining us.

2/9/16: Remember Banks Stress Tests: Tripple Farce and Still No Joy for Ireland

Couple of older, but still relevant notes have stacked up on my virtual desktop over the last few weeks. Catching up with these, here is a post on the banking sector ‘bill of un-health’ produced this summer by the EBA.
European banks street tests conducted by EBA last month combined the usual old farce with the novel new farce. Just to make sure the punters were not too scared of the European economy’s champions.
Based on Basel III criteria – CT1 ratio of 7% post shock – all but two banks (Italy’s Banca Monte dei Paschi di SAiena Spa and Austria’s Raiffeisen Zentralbank) have managed to escape the tests with CT1 ratios post-shock within the Basel III parameters. Or in other words, everyone passed, save for two who didn’t. Systemically, therefore, EBA can assure us all that euro area banking is just fine. Nothing to see, nothing to worry about.

This post was published at True Economics on September 2, 2016.

Monetary Mountain Madness

Putting Investors Before Savers
Who Goes There?
The Mysterious Footnote 8
Learning the NIRP Ropes
Inflation: The Impossible Dream
She Blinded Me with Science
Denver, Dallas and George Gilder, Denver and Dallas
‘Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.’
– John Maynard Keynes
Scientific research says that leaving your normal environment can stoke creativity. This is one reason organizations send managers and workers to off-site retreats and conferences. ‘Getting away from it all’ seems to lubricate our brains.
You would think the effect might have been observable among the central bankers who attended the Federal Reserve’s recent Jackson Hole, Wyoming, retreat. Sadly, however, having reviewed the speeches and the interviews that came out of the gathering, I found few if any fresh ideas, or at least none that would truly be helpful. Even the calls for ‘reformed thinking’ turned out to be just variations on the same old thinking. For instance, rather than targeting inflation at 2%, why can we not think about 4% inflation? Instead of worrying about GDP, couldn’t we worry about nominal GDP? As if such minor variations on old themes would make any real difference to employment or growth.

This post was published at Mauldin Economics on SEPTEMBER 4, 2016.

Art Berman: Oil Is Heading Lower Near-Term Before “Economically-Crippling Moon-Shot”

This week’s marked sell-off in crude oil prices came as no surprise to petroleum geologist Art Berman, who has been predicting the price decline for weeks now. More to the point, Berman says it’s not over yet and lower oil prices are still to come. Berman gave an excellent long-form interview for this week’s MacroVoices podcast. The program begins with a market summary and the interview begins at 7:09, and is summarized below. After the interview, a second short interview follows with the founders of #OOTT, the Organization of Oil-Trading Tweeters, an online community of oil traders who share research and trading ideas on Twitter.
Berman begins by observing that it’s Labor Day weekend – the end of summer driving season and historically speaking, what should be the end of a period of seasonal de-stocking of crude oil inventories, which is critically important to make room for the storage demands that predictably come during fall refinery maintenance. But Berman shows that nation-wide crude oil inventories have actually INCREASED to the tune of 6.46mm barrels over the last 6 weeks, a period when inventory levels historically move in the opposite direction!
Berman then introduces his Comparative Inventory charts, which measure inventory growth relative to historical norms, effectively factoring out seasonality effects from the data. Seen in this view, the build in inventory over the last 6 weeks is actually 16mm barrels above and beyond seasonally adjusted historical norms, completely anomalous given this time of year:

This post was published at Zero Hedge on Sep 4, 2016.

THE ANTI-CINDERELLA MAN (PART ONE)

There are several movies I will watch every time they are aired on one of my generally useless 600 cable channels. They all have the same thing in common – a compelling character portrayal which keeps you riveted and mesmerized by how the protagonist deals with adversity and circumstances beyond their control. The movies I can’t resist include:The Godfather I & II, The Green Mile, Shawshank Redemption, Apocalypse Now, and Patton. Another captivating movie, which didn’t do well at the box office, is Cinderella Man. The portrayal of Depression era heavyweight boxing champion James J. Braddock by Russell Crowe is inspirational, with a rousing and improbable victory by the champion of the common man. While watching this great movie a few weeks ago I found myself equating the themes to the current presidential campaign.
The Greater Depression
Braddock was an inspiration to all downtrodden demoralized Americans during the Great Depression. The parallels between the 1930’s Great Depression and today’s Greater Depression are uncanny, despite the propaganda emitted by the establishment politicians, media and banking cabal that all is well. The corporate mainstream media faux journalists scorn and ridicule anyone who makes the case we are currently in the midst of another Great Depression. They are paid to peddle a recovery narrative to keep the masses ignorant, sedated, and distracted by latest adventures of Caitlyn Jenner and the Kardashians. An impartial assessment of the facts reveals today’s Depression to be every bit as dreadful for the average American as it was in the 1930’s.
The Obama administration has used the identical failed fiscal policies utilized by FDR. $800 billion stimulus packages, cash for clunkers, payroll tax holidays, student loans for anyone with a pulse, and hundreds of other useless Keynesian claptrap ideas have driven the national debt from $10 trillion in September 2008 to $19.4 trillion eight years later, a 94% increase. The national debt in October 1929 was $17 billion. Eight years into the Great Depression, after billions in wasteful New Deal programs the national debt stood at $36.5 billion, a 115% increase.

This post was published at The Burning Platform on September 4, 2016.

Negative Rates & The War On Cash, Part 1: “There Is Nowhere To Go But Down”

As momentum builds in the developing deflationary spiral, we are seeing increasingly desperate measures to keep the global credit ponzi scheme from its inevitable conclusion. Credit bubbles are dynamic – they must grow continually or implode – hence they require ever more money to be lent into existence. But that in turn requires a plethora of willing and able borrowers to maintain demand for new credit money, lenders who are not too risk-averse to make new loans, and (apparently effective) mechanisms for diluting risk to the point where it can (apparently safely) be ignored. As the peak of a credit bubble is reached, all these necessary factors first become problematic and then cease to be available at all. Past a certain point, there are hard limits to financial expansions, and the global economy is set to hit one imminently.
Borrowers are increasingly maxed out and afraid they will not be able to service existing loans, let alone new ones. Many families already have more than enough ‘stuff’ for their available storage capacity in any case, and are looking to downsize and simplify their cluttered lives. Many businesses are already struggling to sell goods and services, and so are unwilling to borrow in order to expand their activities. Without willingness to borrow, demand for new loans will fall substantially. As risk factors loom, lenders become far more risk-averse, often very quickly losing trust in the solvency of of their counterparties. As we saw in 2008, the transition from embracing risky prospects to avoiding them like the plague can be very rapid, changing the rules of the game very abruptly.
Mechanisms for spreading risk to the point of ‘dilution to nothingness’, such as securitization, seen as effective and reliable during monetary expansions, cease to be seen as such as expansion morphs into contraction. The securitized instruments previously created then cease to be perceived as holding value, leading to them being repriced at pennies on the dollar once price discovery occurs, and the destruction of that value is highly deflationary. The continued existence of risk becomes increasingly evident, and the realisation that that risk could be catastrophic begins to dawn.

This post was published at Zero Hedge on Sep 4, 2016.

The Rising Cost of Saying Goodbye to the US

A few weeks ago, the IRS published its quarterly ‘name and shame’ list in the Federal Register. That’s the list federal law requires the agency to maintain of individuals who give up their US citizenship. The official name is ‘Quarterly Publication of Individuals, Who Have Chosen to Expatriate.’
Whatever you call it, getting on this list makes you an enemy of the state – in an instant, you are blacklisted.
The image of former US citizens living tax-free in some tropical paradise is an irresistible populist target. Rep. Sam Gibbons (D-FL), referring to expatriates, spoke of ‘the despicable act of renouncing allegiance to the United States.’ Rep. Martin Frost (D-TX) supported an ‘exit tax,’ which is now in effect, under President Clinton on the basis of ‘basic patriotism and basic fairness.’ Congressman Neil Abercrombie (D-HI), described expatriates as, ‘Benedict Arnolds who would sell out their citizenship, sell out their country in order to maintain their wealth.’
Some of the attacks have been downright personal. When Facebook co-founder Eduardo Saverin gave up his US citizenship in 2012, Sen. Charles Schumer (D-NY) accused him of de-friending the US ‘just to avoid paying taxes.’
But the hate-mongering hasn’t slowed down the number of Americans expatriating. Since President Barack Obama took office in 2009, the number of citizens expatriating has skyrocketed from 231 in 2008 to 4,279 in 2015. That’s an increase of 1,752%!

This post was published at Lew Rockwell on September 2, 2016.