A Narrative for Every Season

‘All is for the best in the best of all possible worlds’ – Voltaire (Candide/The Optimist)
Consider the media headlines and stories published before and after the presidential election.
Before the election:
‘The conventional wisdom is that, right off the bat, the stock market would fall precipitously. Simon Johnson, the Massachusetts Institute of Technology economist, posited that Mr. Trump’s presidency would ‘likely cause the stock market to crash and plunge the world into recession.’ He predicted that Mr. Trump’s ‘anti-trade policies would cause a sharp slowdown, much like the British are experiencing’ after their vote to exit the European Union.’ – The New York Times – ‘What Happens to the Markets if Donald Trump Wins?’ by Andrew Ross Sorkin ‘The stock market doesn’t like the idea of a Trump Presidency’- PBS Newshour ‘Economists: A Trump win would tank the market’ – Politico ‘Stock Markets will freak out if Trump wins, but you probably shouldn’t’- Boston Globe After:
Wall Street welcomes Trump with a bang’ -CNN Money Stock Market Slingshots Higher After Trump Victory Sparked Overnight Plunge’ Forbes Dow Surges to Fresh All-Time High on Trump-Fueled Momentum’ -Fox Business

This post was published at Wall Street Examiner on November 29, 2016.

CalPERS Weighs Pros/Cons Of Setting Reasonable Return Targets Vs. Maintaining Ponzi Scheme

In just a couple of months, the largest pension fund in the United States, the California Public Employees’ Retirement System (CalPERS), will have to decide whether they’ll rely on sound financial judgement and math to set their rate of return expectations going forward or whether they’ll cave to political pressure to maintain artificially high return hurdles that they’ll never meet but help to maintain their ponzi scheme a little longer. The decision faced by CALPERS is whether their long-term assumed rate of return on assets should be lowered from the current 7.5% down to a more reasonable 6%.
As pointed out by Pensions & Investments, the decision has far-reaching consequences. First, a lower rate of return will equate to higher contribution levels for municipalities throughout California, many of which are on the verge of bankruptcy already. Second, given that CALPERS is the largest pension fund in the United States, a move to lower return hurdles could set a precedent that would have to be followed by other funds around the country in even worse shape (yes, we’re looking at you Illinois).
The stakes are high as the CalPERS board debates whether to significantly decrease the nation’s largest public pension fund’s assumed rate of return, a move that could hamstring the budgets of contributing municipalities as well as prompt other public funds across the country to follow suit.
But if the retirement system doesn’t act, pushing to achieve an unrealistically high return could threaten the viability of the $299.5 billion fund itself, its top investment officer and consultants say.

This post was published at Zero Hedge on Nov 29, 2016.

OK, I Get it: Every Company Clamors for Cheap Labor

How the Fed delivers.
Despite all the frothy excitement about the stock market’s new highs, and the drooling today over the new highs reached by Housing Bubble 2, exceeding the prior crazy highs of Housing Bubble 1 even according to the Case-Shiller Index, and despite eight years of super-low interest rates, and a million other things that are hyped constantly, median household incomes, the crux of the real economy, is still a dreary affair.
Sentier Research released its median household income measure for October today. Adjusted for inflation, it edged up 0.6% from a year ago to $57,929. But it’s down 1.3% from January 2008, and it’s down 1.5% from its peak in 2002.
It has fallen 0.5% since January. That’s not a propitious trend. The report put it this way: ‘Median annual household income in 2016 has not been able to maintain the momentum that it achieved during 2015.’
This chart by Doug Short at Advisor Perspectives shows the stagnating inflation-adjusted debacle (blue line) and the nominal income (red line):

This post was published at Wolf Street on November 29, 2016.

Trump Treasury Secretary Candidate Is Anti-Fed Libertarian Who Wants To Return To The Gold Standard

While speculation swirls over Trump’s pick for the next Treasury Secretary, with eyebrows raised after the President-elect unexpectedly met with Goldman COO Gary Cohn earlier in the day, one of the more interesting names to have emerged in the running for the top economic post is that of John Allison, former CEO of the bank BB&T and of the libertarian non-profit think tank the Cato Institute.
What makes Allison’s candidacy especially notable is that he happens to be a prominent critic of the Federal Reserve, as well as an advocate of the gold standard. Allison has said his ‘long-term ambition’ for monetary policy ‘would be to get rid of the Federal Reserve and get back to a private banking system.’ He also accurately portrayed the Fed by saying that it is ‘a scary organization because there’s no control.”
In a 2014 paper authored by Allison for the Cato Journal, he said he “would get rid of the Federal Reserve because the volatility in the economy is primarily caused by the Fed.” Allison said that simply allowing the market to regulate itself would be preferable to the Fed harming the stability of the financial system.

This post was published at Zero Hedge on Nov 29, 2016.

US Home Prices Rise Above July 2006 Levels, Hit New Record High

Almost exactly ten years after the last housing bubble burst, unleashing a dramatic crash in US real estate prices – something Ben Bernanke had said in 2005 would be unprecedented, and is thus not a risk factor – today Case Shiller reported that as of September, its Index covering all nine U. S. census divisions, surpassed the peak set in July 2006 as the housing boom topped out, and in doing so the average home price has now climbed back above the record reached more than a decade ago, bringing to a close the worst period for the housing market since the Great Depression.
The average home price for September was 0.1% above the July 2006 peak in nominal terms. The National index reported a 5.5% annual gain in September, up from 5.1% last month. The 10-City Composite posted a 4.3% annual increase, up from 4.2% the previous month. The 20-City Composite reported a year-over-year gain of 5.1%, unchanged from August.

This post was published at Zero Hedge on Nov 29, 2016.

Charts at the Market Close On a Rainy Tuesday

“Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.”
Franklin D. Roosevelt
3Q came in ‘better than expected’ this morning, but that was not enough to keep the fire lit under equities after this post-election euphoria.
Gold was under a little pressure and silver less so, as November winds down and we enter the more important trading contract of December.
As you may recall, my operating theory has been that the ‘free float’ of physical gold available to fulfill physical delivery in the markets of Asia has been diminishing, to the point now that the card sharps of the West are concerned a bit about the calling in of their monumental paper leverage.
I had thought the denouement would have occurred during this Summer, but some stores of physical gold were found in the hands of some unfortunate nations, and that has served to keep the game going.
But as the last calculation of the free float showed, the winding down continues, slowly but surely. All pools and schemes and frauds, if you will, that run against reason and free choices of the markets run down and fall apart eventually, worn out by the artificiality and the energy required to sustain them.
As the old saying goes, ‘the bigger they come, the harder they fall.’
Non-Farm Payrolls later this week.

This post was published at Jesses Crossroads Cafe on 29 NOVEMBER 2016.

US Financial Stocks Are Set For Their Greatest Monthly Gain Ever

Yesterday’s short-lived correction in US bank stocks did nothing to tarnish the shocking exuberance of the month of November. With just 5 down days in the month (so far), US Financials added over $275 billion in market capitalization in November – the greatest gain in the index’ history.
Following September’s bank bloodbath, Trump’s win and the subsequent surge in interest rates sparked a buying panic unseen before in bank stocks…

This post was published at Zero Hedge on Nov 29, 2016.

Is Trumponomics Reaganomics 2.0?

While not exactly alike, Trumponomics has enough in common with Reaganomics that pundits are drawing comparisons between the two.
That has raised hopes that Trumponomics – a shorthand term for Donald Trump’s economic proposals – could bring about a 1980s-style boom that would boost the U. S. economy and create jobs.
So let’s see if this comparison has any merit.
Putting Reaganomics and Trumponomics Side by Side
President Ronald Reagan’s goal was to restore economic growth in the wake of the stagnant 1970s. Reaganomics was supposed to consist of four pillars:
Cutting taxes, both for individuals and businesses Reducing government regulation Tightening the money supply (higher Federal Reserve interest rates) Reducing the growth of government spending Reagan mostly succeeded in achieving the first three. However, Reagan ran big budget deficits throughout his two terms – more than triple those of his predecessor, Democrat Jimmy Carter. The national debt grew from $997 billion to $2.85 trillion.

This post was published at Wall Street Examiner by David Zeiler ‘ November 29, 2016.

Trump, Pence To Meet Goldman COO Cohn (After Ex-Goldman Partner Mnuchin Visits Trump Tower)

Following former Goldman Sachs’ partner Steve Mnuchin’s visit to Trump Tower this morning (as the decision over Treasury Secretary looms), the Trump transition team just announced that Donald Trump and Mike Pence will meet with Goldman Sachs COO Gary Cohn(but provided no details on whatthey would discuss).
As Bloomberg reports, Cohn joins a long line of people who are offering advice or being considered for administration positions.
Vice President-elect Mike Pence will join Trump at the meeting, transition spokesman Sean Spicer told reporters on a conference call.
He did not give details about what they would discuss or whether Cohn may be in line for a position in the Trump administration.
For now, Mnuchin sits atop the list of possibles for Treasury Secretary

This post was published at Zero Hedge on Nov 29, 2016.

This Just In: Black Friday Sales Are Bogus [Must-See Chart]

Black Friday is dead.
Gone are the days when you and thousands of your closest friends spend a freezing evening in a Walmart parking lot just to get your hands on a cheap flat screen television.
Sure, some gleeful idiots still enjoy the anarchy that goes hand in hand with bashing in a big box store’s front doors at 3 a.m. But the idea of Black Friday as a make-or-break event for retail sales is now extinct.
Don’t let the upbeat headlines fool you. While more than 150 million people braved the crowds on Black Friday last week, consumers didn’t spend as much as they did last year.
As it turns out, shoppers weren’t interested in regularly priced items. This year it was extreme discounts – or bust.
According to the National Retail Federation, 36% of shoppers said all of their buys were sale items. This exclusive purchase of deeply discounted items increased more than threefold from last year, Bloomberg notes, ‘setting an ominous tone for the rest of the holiday season – retailers’ biggest sales period of the year.’

This post was published at Wall Street Examiner by Greg Guenthner ‘ November 29, 2016.

NOV 29/OPTIONS EXPIRY ON THE LBMA GOLD AND OTC CONTRACTS AND THUS THE REASON FOR TODAY’S RAID/TOMORROW IS FIRST DAY NOTICE FOR GOLD AND SILVER AT THE THE COMEX AND IT LOOKS LIKE A HUGE AMOUNT WIL…

Gold at (1:30 am est) $1187.90 DOWN $2.90
silver at $16.66: UP 8 cents
Access market prices:
Gold: 1188.50
Silver: 16.62
Tomorrow is the last day for option’s expiry. We should see gold and silver rise once this criminal activity is over with for this month. Also the low OI for the complex will no doubt help in our precious metals rise in price. I only wish, if investors want to buy gold and silver, that they only buy physical and not paper obligations.
Tomorrow is also first day notice for both the gold and silver and both are active months.
THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON
The Shanghai fix is at 10:15 pm est last night and 2:15 am est early this morning
The fix for London is at 5:30 am est (first fix) and 10 am est (second fix)
Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.
And now the fix recordings:
TUESDAY gold fix Shanghai
Shanghai morning fix Nov 29 (10:15 pm est last night): $ 1219.88
NY ACCESS PRICE: $1191.25 (AT THE EXACT SAME TIME)/premium $28.63
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Shanghai afternoon fix: 2: 15 am est (second fix/early morning):$ 1216.15
NY ACCESS PRICE: 1190.85 (AT THE EXACT SAME TIME/2:15 am)
HUGE SPREAD 2ND FIX TODAY!!: $25.30
China rejects NY pricing of gold as a fraud
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London Fix: Nov 29: 5:30 am est: $1187.30 (NY: same time: $1187.50 5:30AM)
London Second fix Nov 29: 10 am est: $1186.55 (NY same time: $1186.50 10 AM)
It seems that Shanghai pricing is higher than the other two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.
Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.

This post was published at Harvey Organ Blog on November 29, 2016.

Stagnation and the OECD’s Solution

Summary
We are in an Age of Stagnation. The OECD proposed solutions not unlike President-elect Trump’s to revive growth. Short-term growth may increase at the expense of the deficit and higher debt The resolution of these problems is going to take years. Introduction
Last week, Financial Sense published an article that I wrote called ‘Stagnation and the Secular Bear Market’ describing my adventure to understand why the US (and the world) have been experiencing slow economic growth and how long it will continue. This update is based on ‘Using the Fiscal Levers to Escape the Low-Growth Trap’ from the Organization of Economic Co-operation and Development’s (OECD) Economic Outlook which I received just this morning. It recommends global solutions to the problems that I described in my article.
In summary, a continuation of the current low growth environment undermines fiscal sustainability. Structural reforms in entitlements – particularly healthcare, pensions, taxes and spending – should continue to be made. These reforms with low-interest rates have increased the ability of countries to increase fiscal spending. The OECD recommends a more expansionary fiscal policy than what the US is currently planning. Austria, Hungary, Iceland, Norway and Spain are planning fiscal stimulus of one percent or more for 2016. ‘The likely shift towards more expansionary fiscal policy in the United States in coming years will provide support to economic growth, although the mix between tax cuts and spending may unduly favor tax cuts.’

This post was published at FinancialSense on 11/29/2016.

An economy can’t be modeled by simple equations

A modern economy typically involves millions of individuals making decisions about consumption, production and investment based on a myriad of personal preferences. It should be obvious that such a ‘system’ could never be properly described by any mathematical equation, let alone a simple one-line equation. And yet, many economists and other commentators on economics-related matters base their analyses on simple equations.
One of the most popular of these simple equations is also one of the most misleading. I’m referring to the following GDP formula:
GDP = C I G X – Z, where C is consumer expenditure, I is investment, G is government expenditure, X is exports, and Z is imports.
This equation has numerous problems, beginning with the fact that GDP, itself, is a fatally-flawed measure of economic performance in that it treats a dollar of counter-productive spending as if it were just as good as a dollar of productive spending. In essence, it measures activity without considering whether the activity adds to or subtracts from total wealth. But rather than dealing with all of this equation’s problems, I’ll zoom in on its implication that an economy can be boosted via an increase in government spending (G). This implication is not only wrong, it’s dangerous.
Government spending involves taking (stealing or borrowing) money that would have been used by the private sector and then directing the money towards politically-motivated, as opposed to economically-motivated, uses.

This post was published at GoldSeek on 29 November 2016.

All Aboard! Trump’s Express Train to the Future

Free Money!
BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.
Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won the presidential election? That would have confounded expectations as well. Also, the S&P 500 declined for nine days in a row (even if not by much) just before the election – at the time Clinton was still widely expected to win. it remains to be seen whether and for how long the recent discounting of Nirvana will last – click to enlarge.
Just a few months later, the dot-com bubble burst and the tech-heavy Nasdaq lost 80% of its value. And the U. S. stock market, overall, lost about 50%. But investors are bullish. They believe President-elect Trump will be good for stocks.
He is supposed to arrive in Washington for his inauguration and march directly over to the Capitol to demand a tax cut. This will return over $6 trillion to the private sector over the next 10 years… not to mention a proposed $1 trillion splurge on ‘infrastructure.’

This post was published at Acting-Man on November 29, 2016.

Trump Picks Former Goldman Banker Steven Mnuchin As Treasury Secretary

While it has yet to be officially confirmed by the Trump transition team, moments ago the NYT reported that – in what had previously been leaked on several occasions on various other outlets most notably the WSJ – former Goldman banker and Soros employee, Steven Mnuchin “a financier with deep roots on Wall Street and in Hollywood but no government experience”is expected to be named Donald J. Trump’s Treasury secretary as soon as Wednesday.
The WSJ has confirmed as much, reporting that “President-elect Donald Trump will name longtime banker and former Goldman Sachs executive Steven Mnuchin as Treasury secretary, turning to a campaign loyalist and fundraiser for the incoming administration’s top economic cabinet post, a transition official said Tuesday.”
From the NYT:
Mnuchin, 53, was the national finance chairman for Mr. Trump’s campaign. He began his career at Goldman Sachs, where he became a partner, before creating his own hedge fund, moving to the West Coast and entering the first rank of movie financiers by bankrolling hits like the ‘X-Men’ franchise and ‘Avatar.’

This post was published at Zero Hedge on Nov 29, 2016.

Inside a Moneymaking Machine Like No Other

Sixty miles east of Wall Street, a spit of land shaped like a whale’s tail separates Long Island Sound and Conscience Bay. The mansions here, with their long, gated driveways and million-dollar views, are part of a hamlet called Old Field. Locals have another name for these moneyed lanes: the Renaissance Riviera.
That’s because the area’s wealthiest residents, scientists all, work for the quantitative hedge fund Renaissance Technologies, based in nearby East Setauket. They are the creators and overseers of the Medallion Fund – perhaps the world’s greatest moneymaking machine. Medallion is open only to Renaissance’s roughly 300 employees, about 90 of whom are Ph.D.s, as well as a select few individuals with deep-rooted connections to the firm.
The fabled fund, known for its intense secrecy, has produced about $55 billion in profit over the last 28 years, according to data compiled by Bloomberg, making it about $10 billion more profitable than funds run by billionaires Ray Dalio and George Soros. What’s more, it did so in a shorter time and with fewer assets under management. The fund almost never loses money. Its biggest draw-down in one five-year period was half a percent.

This post was published at bloomberg