Hit by Global Turmoil, Banks in Spain Get Jittery (Again)

Big Trouble in Emerging Markets.
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
Banking stocks in Europe continue to benefit from the gravitational pull exerted by the so-called Trump effect. But the effects have not been felt universally. Monte dei Paschi di Siena, which is at the center of Italy’s banking crisis, has been reduced to a penny stock. The shares of Italy’s other large banks continue to trend downwards. And the problems in other national banking sectors have not gone away; they’ve just been consigned to the background. Such is the case in Spain, where the risks and challenges in the country’s banking system continue to bloom.
Spain’s Very Own Homegrown Monte dei Paschi.
The multiyear decline of Banco Popular, Spain’s fourth biggest bank, has been no less spectacular than Monte dei Paschi’s, having lost 98% of its stock value in the last nine years. The shares are now worth just 0.85 (compared to over 15 in 2007) and continue to shed value. Over 7% of its shares are being shorted by London and Connecticut-based hedge funds.

This post was published at Wolf Street by Don Quijones ‘ November 26, 2016.

Who Pays What Taxes In The US

Every presidential election brings with it a renewed debate on taxes: should tax rates be increased or decreased (which in turn forces economists to break out their textbooks to brush up on their Laffer curve definitions)? Traditionally, the question eventually boils down to one thing: what should the tax treatment of the “rich” be: should the wealthy pay more or less in taxes?
Why the particular focus on the rich? The answer is simple: while those American who declare $500,000 and above in income represent less than 1% of total tax returns, they account for a quarter of taxable income and – more importantly – are responsible for 37% of government revenues collected through individual income taxes.

And with approximately $1.55 trillion in individual income tax expected to be collected in 2016, this means that less than 1% of US taxpayers will be responsible for more than a third, or roughly $575 billion in government revenue, nearly double what corporate income taxes ($300 billion) are expected to bring in.

This post was published at Zero Hedge on Nov 26, 2016.

Jill Stein Getting Rich Off of Exploiting The Election

The Green Party presidential nominee Jill Stein officially handed in a petition Friday asking election officials in the battleground state of Wisconsin to perform a recount of its general election results, the state confirmed. She is trying to stop Trump before the Electoral College votes. Clinton has not joined her because there was not enough claims of voter fraud in those states so the Democrats are keeping their distance letting Stein carry the ball.
Yet Stein has raised nearly $5 million, but has cleverly made it clear there are no guarantees and she will keep the money. Her website says:
We cannot guarantee a recount will happen in any of these states we are targeting. We can only pledge we will demand recounts in those states.
If we raise more than what’s needed, the surplus will also go toward election integrity efforts and to promote voting system reform.

This post was published at Armstrong Economics on Nov 26, 2016.

MSM’s Druck’n Suck-In Continues

By Gary Tanashian
Disclosure (which I feel, given the post’s content, should be reiterated): I am not short even a single equity of any kind. I am only long selected stocks and cash at this time, but surely subject to a change of status in the future.
Why, did you know that in a note to clients Tom Lee wrote that Donald Trump’s term could usher in major bull market akin to those preceded by Ike and Reagan? He did, in a note to clients and the MSM really wants you to know about it! Now, there is a case that eventually his favored areas of Energy, Mining, Basic Materials, etc. will out perform. But that word ‘eventually’ is an important one, unless you are a died in the wool trickle downer willing to ride the big correction or bear market that is likely first.
Trump win could produce major bull market – here’s what I’m buying
‘Notably, the two longest bull markets in history 1953-1974 and 1982-1999 were preceded by a Republican ‘revolution,’’ he wrote.
Lee likened Trump to the Republican presidents in this way; Eisenhower in the early 1950s invested in infrastructure, and Reagan pursued tax cuts and deregulation, Lee wrote, much like what Trump has promised to carry out in his presidency.
Okay fine, can’t argue with history, can we? So let’s review some. There is a supposed republican revolution taking place. Fine, I get that. The people are tired of being taxed and inflated to death. Well, the first thing at least, looks to improve but much more so for the richest Americans. The little guy hoisted Trump on his tired shoulders and in time, may see that he screwed himself again… unless of course the bounty trickles down this time. Under both parties, the rich get… anyone? The poor and/or middle class get… Bueller?

This post was published at GoldSeek on Sunday, 27 November 2016.

Trump Slams Green Party Recount “Scam”, Accuses Stein Of “Filling Her Coffers With Money”

U. S. President-elect Donald Trump appears to agree with our perspective on Jill Stein’s money-raising effort, lashing out this afternoon in an official statement calling her request for a recount of votes in Wisconsin a “scam” by the Green Party.
Until now, as AP reports, Trump had been ignoring Green Party nominee Jill Stein’s fight to revisit vote totals in Wisconsin, Michigan and Pennsylvania. Wisconsin officials announced late Friday they are moving forward with the first presidential recount in state history.
“The people have spoken and the election is over,” Trump declared Saturday. He added, “We must accept this result and then look to the future.” “This recount is just a way for Jill Stein, who received less than one percent of the vote overall and wasn’t even on the ballot in many states, to fill her coffers with money, most of which she will never even spend on this ridiculous recount.”
“This is a scam by the Green Party for an election that has already been conceded, and the results of this election should be respected instead of being challenged and abused, which is exactly what (Green Party leader) Jill Stein is doing.“

This post was published at Zero Hedge on Nov 26, 2016.

Traders Say ‘No Thanks’ To Gold

By Warren Bevan
It’s always nice to have this long weekend before we make the mad dash to Christmas.
With stocks generally strong into Christmas and all the cheer of the season, it’s always a busy and fun time of year.
Stocks are setting up very well with lots of buy levels right now, BUT, we are quite overbought so a few days of rest and consolidation is needed right now before we resume the uptrend into years end.
Metals continued to show weakness, with the exception of palladium, and they are not looking greta at all.
Gold fell 2.51% this past week as the charts foretold last weekend.
We’re now at the significant support area of $1,175 on this 2 1/2 year chart.
Let’s see if we form a bottom here or not but gold has been under heavy pressure since the election and it isn’t stopping yet.
I’m not ready to throw the towel in on this new phase of a gold bull market, but I don’t have enough faith to be trading in it either yet.

This post was published at GoldSeek on Sunday, 27 November 2016.

Risk Parity Funds Suffer Worst Month Since 2015 As Breadthless, Fearless Stock Market Soars

The market moves since the US elections have been both big and surprising, and as JPMorgan notes, fund managers have been either too slow or too reluctant to jump into the Trump trade. However, algo-based Risk-Parity funds suffered the most with their biggest loss since Dec 2015 as market ‘fear’ tumbles to 9 month lows (and stocks are the most overbought in 13 years).
Risk Parity funds were hurt as their equity gains were not enough to offset the sharp selloff in bonds on which Risk Parity funds are typically exposed by four times as much as equities. Correlation between stocks and bonds has normalized thanks to this huge post-Trump divergence (but we note the last time the regime shifted like this was ahead of August 2015’s equity plunge)…

This post was published at Zero Hedge on Nov 26, 2016.

Resolving Trump’s Contradictions

This is a syndicated repost courtesy of The Daily Reckoning. To view original, click here. Reposted with permission.
Markets are holding their breath waiting for clarity from the Trump economic team. Right now there is something for everyone.
The current stock market rally is clearly attributable to the Trump mix of lower taxes, less regulation and more government spending. Post-election bond markets have indicated inflation expectations. And the drawdown in gold is clearly attributable to the expectation of higher interest rates.
Higher rates from the Fed drive the dollar higher. A low dollar price for gold is just the inverse of the strong dollar; it comes as no surprise. That much is clear.
What is not clear is how the contradictions in the Trump camp will be resolved…

This post was published at Wall Street Examiner by James Rickards ‘ November 26, 2016.

The Washington Post: Useful-Idiot Shills for a Failed, Frantic Status Quo That Has Lost Control of the Narrative

Don’t you think it fair and reasonable that anyone accusing me of being a shill for Russian propaganda ought to read my ten books in their entirety and identify the sections that support their slanderous accusation?
I was amused to find my site listed on the now-infamous list of purportedly Russian-controlled propaganda sites cited by The Washington Post. I find it amusing because I invite anyone to search my 3,600-page archive of published material over the past decade (which includes some guest posts and poems) and identify a single pro-Russia or pro-Russian foreign policy entry.
If anything, my perspective is pro-US dollar, pro-liberty, pro-open markets, pro-local control, pro-free-press, pro-innovation, and pro-opportunities to rebuild America’s abandoned, decaying localized economies: in other words, the exact opposite of Russian propaganda.
My “crime” is a simple one: challenging the ruling elite’s narrative. Labeling all dissent “enemy propaganda” is of course the classic first phase of state-sponsored propaganda and the favorite tool of well-paid illiberal apologists for an illiberal regime.

This post was published at Charles Hugh Smith on SATURDAY, NOVEMBER 26, 2016.

Q1 – Q3 2016 China Net Gold Import Hits 905 Tonnes

Withdrawals from the vaults of the Shanghai Gold Exchange, which can be used as a proxy for Chinese wholesale gold demand, reached 1,406 tonnes in the first three quarters of 2016. Supply that went through the central bourse consisted of at least 905 tonnes imported gold, roughly 335 tonnes of domestic mine output, and 166 tonnes in scrap supply and other flows recycled through the exchange.
Core Supply & Demand Data Chinese Gold Market Q1-Q3 2016
Chinese gold demand is still going strong this year, albeit less than in 2015. The most likely reason for somewhat lower demand has been the strength in the price of gold in the first three quarters of this year, to which the Chinese reacted by somewhat subduing purchases. From 1 January until 30 September 2016, the gold price went up 24 % in US dollars per troy ounce, from $1,061.5 to $1,318.1; measured in renminbi the price went up 28 % over the same period.
Now I have proven the gold on Chinese commercial bank balance sheets has little to do with physical gold ownership of these banks, but mainly reflect back-to back leases and swaps, we can be positive that data on withdrawals from the vaults of the Shanghai Gold Exchange (SGE) reflects Chinese wholesale gold demand. For now that is, as future developments can always alter our metrics.
Below is a chart showing withdrawals from the vaults of the SGE and the price of gold in yuan per gram. The most significant trends of recent years are still in effect; in the short term, when the gold price is falling Chinese wholesale gold demand increases (2013 and 2015), when the gold price is rising Chinese demand declines (2016). This trend is supported by SGE premiums that have an inverse correlation with the price of gold. When the price of gold declines, SGE premiums escalate and vice versa – I will show charts further down. Furthermore, in the long term we can observe consistent growth in Chinese gold demand due to the opening up and development of the domestic market since 2002.

This post was published at Bullion Star on 26 Nov 2016.

“We’re Players In Several Giant Games Of Chicken…”

Submitted by Ben Hunt via Salient Partners’ Epsilon Theory blog,
Sometimes when you fire up an earthquake machine, you get a real earthquake.
There are three questions I’d like to answer in this Epsilon Theory note: what did the Narrative Machine tell us about the market immediately before and immediately after the November 8 election, what am I preparing for now as an investor, and what am I preparing for now as a citizen? I’m giddy about the first, quietly confident about the second, and pretty darn depressed about the third. Could be worse, I suppose. On the first question, the Narrative Machine gave clear, actionable, and non-consensus signals prior to the U. S. election last week. For readers who aren’t familiar with what I mean by the Narrative Machine, I’ll refer you to this note by the same title. In a nutshell, I’m using a technology called Quid to take Big Data snapshots of large numbers of financial media articles. These snapshots show the connectivity and influence of each article to every other article, constructing a neural network or ‘star map’ of the narratives and meaning clusters that link the articles. By looking at measures of sentiment and connectivity associated with the network, I think that I can get a good sense of market complacency around events like a Trump victory, as well as the likely direction and magnitude of market moves if an event like that comes to pass. Bottom line: I think that the Narrative Machine gives us a good sense of what’s priced into markets.

This post was published at Zero Hedge on Nov 26, 2016.

Ayn Rand Institute on Trump

One Small Step for Dictatorship, by Onkar Ghate; posted at the Ayn Rand Institute site.
There are many points on which I agree with the author. Instead of writing these again, I will offer that my agreement can be found in this post, beginning with the section entitled ‘The Next Four Years’ and continuing through the end of the post. To summarize: I don’t really know what Trump will do on many topics; I do know he will do many things that both libertarians and objectivists will agree are harmful to liberty; I agree that the danger is in what follows Trump more than the danger of Trump himself.
At the same time, there is much that I take exception to in this opinion piece. In the interest of (reasonable) brevity, I will expand only on two points.
Myths, Misunderstandings and Outright lies about owning Gold. Are you at risk?
On November 8, 2016, the United States took its first step toward dictatorship.
Ghate offers that it is not that Trump will act the dictator; it is the reasons people voted for Trump that lead him to this statement. I suggest: whatever one believes to be the reasons people voted for Trump, it doesn’t square that his election represented the ‘first step toward dictatorship.’

This post was published at Lew Rockwell on November 26, 2016.

Doug Noland: Revisiting the Global Savings Glut Thesis

This is a syndicated repost courtesy of Credit Bubble Bulletin. To view original, click here. Reposted with permission.
‘Why is the United States, with the world’s largest economy, borrowing heavily on international capital markets – rather than lending, as would seem more natural? What implications do the U. S. current account deficit and our consequent reliance on foreign credit have for economic performance in the United States and in our trading partners? What policies, if any, should be used to address this situation? In my remarks today I will offer some tentative answers to these questions. My answers will be somewhat unconventional in that I will take issue with the common view that the recent deterioration in the U. S. current account primarily reflects economic policies and other economic developments within the United States itself. Although domestic developments have certainly played a role, I will argue that a satisfying explanation of the recent upward climb of the U. S. current account deficit requires a global perspective that more fully takes into account events outside the United States. To be more specific, I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of saving – a global saving glut – which helps to explain both the increase in the U. S. current account deficit and the relatively low level of long-term real interest rates in the world today. … As I will discuss, an important source of the global saving glut has been a remarkable reversal in the flows of credit to developing and emerging-market economies, a shift that has transformed those economies from borrowers on international capital markets to large net lenders. To be clear, in locating the principal causes of the U. S. current account deficit outside the country’s borders, I am not making a value judgment about the behavior of either U. S. or foreign residents or their governments.’ Federal Reserve governor Ben Bernanke, ‘The Global Saving Glut and the U. S. Current Account Deficit,’ April 14, 2005
I was flabbergasted back in 2005 with Dr. Bernanke’s ‘global savings glut’ thesis. At that time mortgage Credit was in the process of expanding a still all-time annual record $1.436 TN. National home prices (Case-Shiller) were up better than 14% year-over-year. The California housing Bubble was coming completely unhinged. Nationally, household mortgage Credit was expanding at double-digit rates for the fifth straight year, as a powerful inflationary psychology took hold in U. S. housing markets and throughout mortgage finance. Moreover, overall system Credit continued to expand rapidly following 2004’s 9.2% growth (strongest since 1988). At 2.75%, the Fed funds rate was ridiculously low in comparison to rapidly inflating home prices and generally rising securities and asset prices.

This post was published at Wall Street Examiner by Doug Noland ‘ November 26, 2016.

Tempering US Economic Growth Expectations

Listen, before we go through a litany of economic charts that pour some cold water on the recent bout of optimism regarding US economic growth prospects we want to stress that we don’t believe economic growth is about to fall off of a cliff. Quite the contrary, we feel that we are on the same ‘muddle-through’ growth trajectory we have been on for the entirety of this recovery. We do, however, question the sustainability of the move back in bond yields because of better ‘economic data’ and are surprised by the number of recent articles highlighting increased inflation fears since the presidential election. Much of the recent optimism seems to stem from a the belief that the new administration will be able to dramatically (and immediately) increase economic growth. The problem is that the US and global economy continue to face major structural issues that seem to be beyond the control of any politician. Increasingly, it is feeling like we are in a ‘buy the rumor, sell the news’ kind of market.
Let’s start with the punchline: US 4Q2016 GDP is forecasted to be a whopping 4 bps higher than 3Q2016 GDP on a QoQ% basis and 1Q2017 GDP is forecasted to be 5 bps lower than 3Q2016 GDP on a QoQ% basis according to now-casting.com. Simply put, we continue to be stuck in the 2%-2.5% growth trajectory of the last 7 years. Currently the data feels stronger because of the the cyclical slowdown in 2015 (which by the way also happened in 2011 and 2013) so the period over period comparisons are easier to beat.
Since 1946, US real GDP has grown at an approximate 3.2% annual growth rate. In order for the recovery that has occurred since 2009 to accelerate to just a 3% annual growth rate real, GDP would have to grow by 5% annually for the next 14 quarters! We have had only one 5% annualized quarter in this recovery (3Q2014…rounding up to 5% from 4.96%) and the last time real GDP grew by 5% on a year-over-year basis was 2Q2000. And for the last depressing statistic on the history of real GDP growth, the last time we had four consecutive quarters of 5% year-over-year real GDP growth was from 1Q1984-1Q1985. Slower growth is a structural phenomenon that will be hard for any one person or one administration to meaningfully change.

This post was published at Zero Hedge on Nov 26, 2016.

The Road to Recovery: Global Epocalypse Inevitable According to Trump’s Chief and World’s Largest Failing Bank

The financial end of the world in economic apocalypse is here. A funny thing happened on the road to recovery: Trump’s chief strategist admitted his view of the Trumpian future looks like the Great Depression. Even the world’s largest bank just said global financial default is the preferable way out and most likely way out of the Great Recession that began in 2007/2008. That’s the new optimism. You don’t get better than all of that for an exhilarating view of the imminent future. As Maya MacGuineas, the leader of the Committee for a Responsible Federal Budget, also assessed the situation,
‘President-elect Trump is going to be inheriting the worst fiscal situation of any president… other than President Truman … as judged by the debt relative to the economy.’ (The Washington Post)
Trump’s solution for that problem requires that we enormously increase that debt and hope to power through. That puts him in a no-win scenario unless he can jack the economy up faster than he jacks up the debt; but we are already seeing the likelihood of that fall apart before the plan begins, as I’ll explain. That Trump’s plan will increase the debt is not just something his critics are claiming but is also something his own chief strategist, Stephen Bannon, admits to from the outset of this journey into oblivion:

This post was published at GoldSeek on 25 November 2016.

China Unveils New Capital Controls

Back in March, when China’s various failing forms of soft capital controls had failed to stem China’s relentless capital outflows, we reported that “bizarro M&A” deals were rapidly becoming “China’s Most Innovative Capital Outflow Yet.” We pointed out several M&A deals that simply made no sense from the fiduciary perspective of a rational buyer, and had all the signs of a panicked attempt to park cash offshore in the former of mergers and acquisitions with zero regard for cost or return on investment. Among these were:
Zoomlion, a lossmaking Chinese machinery company that is partially state-owned: its total debt stands at 83 times its EBITDA. Fosun, a serial Chinese acquirer that spent $6.5bn on stakes in 18 overseas companies during a six-month period last year, had a a 55.7x total debt/EBITDA in June 2015. “Fosun has bought brand names such as Club Med and Cirque du Soleil as well as a host of other assets including the German private bank Hauck & Aufhaeser.” China Cosco Holdings acquisition of the Greek Piraeus Port Authority for 368.5m. Cosco has promised to invest 500m in the Greek port despite having total debt at 41.5x its EBITDA! Cofco Corporation, which recently reached an agreement with Noble Group under which its subsidiary, Cofco International, would acquire a stake in Noble Agri for $750m (in the process preventing the insolvency of the biggest Asian commodities trader), has total debt equivalent to 52 times its EBITDA! Bright Food, which bought the breakfast group Weetabix for $1.2bn last year, and has total debt at 24 times EBITDA!

This post was published at Zero Hedge on Nov 26, 2016.