Coup Or No Coup: What To Watch For As The Electoral College Votes On Monday

With even Harvard’s Larry Lessig admitting that his efforts to flip the Electoral College against Trump have failed miserably (see “Harvard Professor Admits His Efforts To Turn Electoral College Against Trump Have Failed Miserably“), it’s a near certainty that Trump will, in fact, be elected President when the Electoral College casts their votes tomorrow.
That said, there could always be surprises and, as such, The Hill has published a list of five things you should keep an eye on as electors get set to cast their ballots. First, here is how the 538 electors should cast their ballots if they all strictly follow the will of the voters in their respective states.

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

Precious Metals New Bull Market or Bear Market Rally?

Buckle Up , Pour yourself your favorite beverage, and take some time. This Report will be an in depth Chartology analysis of the current situation in this ever interesting and often exasperating market we are participating in. Oh and don’t forget to open your mind. Lets begin.
I would like to start the Weekend Report by looking at a combo chart which has the US dollar on top and gold on the bottom, which shows you a better version of the positive divergence the US dollar had vs gold in 2011. First note the red arrows on the US dollar and gold back in 2008 when gold was making a high, and the US dollar was making a low, which is what you would expect. Now look at the two red arrows in 2011 whch shows the all time high for gold and a higher low for the US dollar vs the 2008 low. Gold rallied almost 1200 points to its 2011 bull market high, but the US dollar made a higher low. If they were on an equal footing the US dollar should have traded much lower when gold was making its all time high. That’s how I viewed the positive divergence for the US dollar vs gold.
The blue arrows on the US dollar chart on top shows how I was, and still am looking for reverse symmetry to the upside based on how the dollar came down when it started its bear market in 2000.
The two heavy black dashed horizontal lines on the gold chart at the bottom are still original from when I built this chart. I have adjusted the downtrend channel, and what was the falling wedge, I’m now annotating it as a bearish expanding falling wedge. During the construction of the original three year falling wedge I always labeled it as a bearish falling wedge and thought it would eventually breakout to the downside until last year at this time.

This post was published at GoldSeek on 18 December 2016.

The ‘Real’ Question: What’s Facebook’s True Valuation Without “Fake”?

There are two hot topics post the U. S. presidential election. One is ‘fake news’, the other is Facebook (FB), and its involvement in it.
The accusations and the defenses against have been all over the board. Both figuratively, as well as literally.
Management from Mark Zuckerberg on down have been professing when it came to anything ‘fake’ it wasn’t of their doing. And gee-whiz-by-golly they’re going to do whatever it takes to make sure anything ‘fake’ never sees the ‘like’ of day again.
Sounds great, in theory. But there’s a very real fact that must now be considered…
If ‘fake’ news was so wide-spread, and so devoured on FB that it had the ability to not only influence, but rather, to overturn political norms and ruin the election of what everyone in media on down believed; that this election was merely a formality on paper because, it was clear to all of them, Mrs. Clinton would win not just walking away, but running?
That would mean FB now has to alienate (i.e., by now not delivering ‘news’ these people wanted to see) millions, upon millions, upon millions of now current users. What does that imply to their now ‘real’ (ooopsy, again!) metrics going forward?

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

Chinese Interbank Lending Freezes, Forcing Massive Intervention By China’s Central Bank

China is finding itself in an increasingly more untenable situation, trapped on one hand by its sliding currency (and declining reserves), which as noted earlier it has manipulated higher by forcing overnight unsecured rates to spike, in the process punishing “speculators” and other shorts…
… and on the other, by a banking sector that finds itself desperately in need of liquidity, unable to endure the PBOC’s monetary interventions, and on the verge of a liquidity crisis comparable to what Chinese banks suffered in the summer of 2013 when overnight rates briefly shot up above 20% as China pushed aggressively with a failed deleveraging campaign.
All this came to a head late last week when as Caixin reported late on Thursday, interbank lending froze on Thursday after many commercial banks suspended interbank operations amid tight liquidity conditions. Caixin adds that major institutions such as securities firms and fund managers, suddenly found themselves in a liquidity vacuum after banks, including the big four state-owned banks, became reluctant to make loans.

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

Federal Reserve And Stronger Real Rates Cause Breakdown in Gold

Gold and gold mining stocks were setting up for a rebound until the market suddenly priced in tighter policy from the Federal Reserve. Both nominal and real yields surged and that pushed an already oversold sector below key support. Gold lost support in the mid $1100s while gold stocks (GDX) lost a critical support level. While the sector is oversold and likely to rebound as 2017 begins, the primary trend remains lower.
Our first chart plots Gold and the real yield on the 5-year TIP security. The US Treasury provides daily data and it gives us a look at day to day changes in real yields. The real 5-year tips year yield closed last week at an 11-month high. Stronger real yields hurt Gold’s desirability as an investment. This is why Gold and gold stocks have sold off.

This post was published at GoldSeek on 18 December 2016.

Markets Award Trump Nobel Prize In Economics

It took only nine days in office for President Obama to be nominated for the Nobel Peace Prize.
Less than nine months later, the Norwegian Nobel Committee followed through and awarded Obama the Nobel Prize for ‘his extraordinary efforts to strengthen international diplomacy.’ That, despite the fact Obama had no significant diplomatic accomplishments.
Likewise, the markets seem to have prematurely greeted Trumponomics as an outstanding success. US stock indices continue to make all-time highs, the dollar is charging ahead, and bond markets are being trashed.
Furthermore, the latest Fund Manager Survey by Bank of America shows growth and inflation expectations at the second-highest level since 2004.
In short, US equity markets are already factoring in Trump’s draining of the swamp, his implementation of regulatory reforms, and the rollback of poor policies that trip up the American economy, while bond markets are pricing in higher inflation.
There’s just one thing: Trump hasn’t done anything yet. We’re still weeks away from his inauguration, and details of his economic plans remain scarce.

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

Has the Fed Been Holding Down Interest Rates?

When my twin brother and I were tots, our father convinced us that he could make a traffic light change from red to green whenever he wanted it to. Raising his hand to the light as we sat at an intersection, he would say, ‘I command you to change to green … now!’ cocking his finger at the light for emphasis. Sure enough, the light would change precisely on cue, while two little boys shouted, ‘Papa, how do you do that!?’
I share this little anecdote because I’m convinced that, if more people had been fooled the way my brother and I were, fewer would be so gullible today as to believe that the Fed has been firmly in control of interest rates these past eight years and that it is only owing to that control that rates have remained low for so long.
The view that the Fed might have raised interest rates long ago, had it only wanted to, became notorious during the presidential campaign when Donald Trump publicly accused Janet Yellen’s Fed of keeping rates low for political reasons. But Trump was merely embroidering a belief common among many (mostly conservative) Fed critics. Writing for Project Syndicate this June, Carmen Reinhart observed that ‘The US Federal Reserve led the charge among central banks … by relying on a near-zero policy rate … interest rates have been low, and remain low, because policymakers have gone to great lengths to keep them there.’ In a March 2015 Wall Street Journal op-ed, David Malpass attacked ‘The Fed’s belief that near-zero rates lead to growth.’ ‘Private sector dynamism,’ he noted, ‘thrives on market pricing, not artificially low rates.’ Similar opinions were expressed by several speakers at the Cato’s recent Annual Monetary Conference.
Indeed, the myth that interest rates have been held down by the Fed’s easy monetary policies has been given credence by Fed officials themselves. Their intent, to be sure, hasn’t been to fault the Fed. They’re merely loath to admit that rates haven’t been fully, or almost fully, under its control. Hence Yellen’s bland reply to Trump, that ‘partisan politics plays no role in our decisions about the appropriate stance of monetary policy.’ That, to a Fed bureaucrat, is safer than saying, ‘Keeping rates low? Why, we only wish we could raise them!’

This post was published at Mises Canada on DECEMBER 16, 2016.

A Hawkish Fed Smashed Precious Metals

Oh no, not again! Oh, yes, once again precious metals along with mining shares got smashed on Wednesday. The latest attack came after the well-choreographed FOMC rate hike announcement. For weeks the mining shares had bucked a deteriorating gold price; silver was holding up defiantly as well. Unfortunately, the ‘bucking’ only exasperated the divergence building between gold and mining share price. Since miners are highly correlated and leveraged to precious metal price, divergences often correct violently with price leaping up or down. As I wrote in a previous article (Gold Miner’s Pent-up Energy), pent-up energy was accumulating in the mining shares and it was likely not to end well and indeed, on Wednesday, that pent-up energy was released brutally to the downside.
Upon the rate hike announcement, precious metals and mining shares alike fell hard. To make matters worse Janet Yellen’s hawkish FED -speak following the rate hike decision embolden the short sellers and instilled fear in those holding long positions. The level of hawkishness was a surprise as many concluded that the rate hike announcement would be soften by a dovish-speaking Janet Yellen. The result was a massive selling panic that handed GDX and GDXJ holders a 5.5% and 6.4% loss respectively for the day. For those holding 3X ETNs (JNUG, NUGT, etc.) the losses were amplified and they were simply decimated. Ouch!
A Rebound is Coming:
Now for some positive news for those holding long positions or looking to enter the arena, the selling in both precious metals and mining shares is exhausting and becominglong in tooth, at least in the short term (days to weeks), as seen in the RSI and Stochastics. Both are in their respective oversold areas. In fact, the RSI for GDXJ daily chart hasn’t been this low since July, 2015, which bodes well for a price rebound in the near future. Please see the chart below.

This post was published at GoldSeek on 18 December 2016.

Trump Slams Clinton Supporters’ Hypocrisy Ahead Of Electoral Vote

As the moment of truth looms ever closer (having apparently lost the effort to ‘turn’ electors against their state’s citizenry), it appears the last best hope for Democrats is to keep hammering home the illegitimacy of a Trump presidency with name-calling, Russia-bating, and general sulking.
The hypocrisy has apparently become too much for the president-elect to bear and he just unleashed a tweet so full of truthiness that not even CNN can shift the narrative…
If my many supporters acted and threatened people like those who lost the election are doing, they would be scorned & called terrible names!
— Donald J. Trump (@realDonaldTrump) December 18, 2016

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

A Bearish David Rosenberg Re-Emerges: “Fade This Rally” As “Trump Will Engineer A Return To Deflation”

While the majority of sellside analysts predict that the impact of Trump’s fiscal stimulus policies will be largely beneficial for US inflation and economic growth, if only in the short-term, with a knock on reverse effect following shortly after…
… one prominent strategist disagrees.
According to a recent report from Gluskin Sheff’s David Rosenberg, in which he lays out is “out-of-the-box” call for 2017, “Trump will accidentally engineer a return to the disinflation trade” in the coming year, well ahead of most expectations.
As a reminder, Rosenberg famously flipped his generally bearish opinion on the economy and assets several years ago, when he called for the advent of broad, wage-driven reflation, as a result urging to buy risk assets while shorting bonds. While he was right on the former, his call was offset by the relentless surge in global yields to all time lows as recently as this summer. And now, with consensus largely calling for a broad reflation, Rosenberg appears to have made a call against the prevailing consensus, and is once again shifting toward the deflationary camp.
Below he explains his reasons why (highlights ours).

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

Clinton’s National Homeownership Strategy: 1995-2016

In 1995, President Bill Clinton and the Department of Housing and Urban Development (HUD) launched the ‘National Homeownership Strategy’ between HUD, Fannie Mae, Freddie Mac and mortgage lenders. ‘The goal of this strategy is ambitious: to generate up to 8 million additional homeowners from 1995 through the year 2000. The strategy recommends a series of concerted actions to help middle-income and low-income families, racial and ethnic minorities, families with children. and young adults overcome current barriers to homeownership.’
How did streamlining mortgage underwriting and reaching out to minorties work out? Homeownership rates rose from 65% in Q3 1995 to 67.5% by Q4 2000.

This post was published at Wall Street Examiner on December 18, 2016.

Caught On Tape: China’s Currency Rigging

With the Yuan at its weakest against the Dollar since May 2008, it’s becoming harder and harder (and more and more expensive) for China to hide/defend its devaluation strategy (CNH down over 13% since the ‘one-off’ Aug 2015 devaluation).
And in its latest effort to rig the currency’s value, it currently costs more to borrow yuan overnight in Hong Kong than it does to borrow it for a year.
As The Wall Street Journal reports,
Here’s the latest sign that China’s attempt to internationalize its currency is flailing: During December, banks have had to pay around 6% on average to borrow yuan from each other overnight in Hong Kong, the biggest global market for yuan trading.

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

Fully Baked

We finally got the rate increase this past week and the Federal Reserve says there are 3 more to come in 2017.
That will only hold true if markets and stocks remain strong and so far, they are.
This rate increase has been fully baked into the cake for a very long time and markets only gave us a brief dip buying opportunity on the news before turning higher once again.
The metals were hit hard on the actual news, but as we’ve seen repeatedly after Fed news, the move is usually a counter-trend move and rarely lasts more than 3 days.

This post was published at GoldSeek on Sunday, 18 December 2016.

Monte Paschi Launches Share Sale To Avoid State Rescue As Germany Warns Against Taxpayer Bailout

In a last ditch attempt to avoid a state bailout, on Monday Italy’s Monte Paschi will begin a share sale process as it aims to complete a capital raise of 5 billion ($5.2 billion) before Christmas, Bloomberg reported overnight. The bank will canvass institutional investor interest through Thursday, while the offer for retail investors will end on Wednesday. As the lender didn’t provide terms of the offer, the price and total number of shares to be sold will be determined based on investor demand and on the outcome of the separate debt-to-equity swap which started last week.
The bank’s CEO Marco Morelli, who took over in September, is scrambling to find financial backers in his effort to clean up the bank’s balance sheet which continues to corrode under the weight of rising non-performing loans. A failure to recatpialize the bank would be a blow to Italy’s sputtering efforts to revive a banking industry that’s burdened with about 360 billion in troubled loans, dragging down the economy by limiting lending.
In the share sale, Bloomberg notes that 35% will be offered to individual investors and 65% to institutional investors, including potential anchor investors such as Qatar whose interest in a private bank bailout dwindled following the unexpected outcome of the Renzi constitutional referendum. As part of the rights offering, existing shareholders will be offered a chance to buy 30% of the offering reserved for retail investors before the sale is open to others.

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

Mexico Is Having A Yuuuge Donald Trump Victory Sale

I am writing to you from Santiago de Queretaro, Mexico, where the whole country is having a yuuuuge Donald Trump victory sale. Mexico is one of my favorite countries to visit. It combines a laid back attitude, friendly people and an outstanding culinary tradition. It also helps that it’s currently one of the cheapest places on the planet – one of many reasons that I’ve spent 5 weeks here recently (Yucatan and Central Mexico thus far).
Mexico has always been known as an affordable place with cheap beer and tacos, but the last two years have taken that dynamic to an extreme. Where else is the brand new AC Marriott $42 per night? In touristy San Miguel de Allende, we booked a 2,500 foot, 2 bedroom suite on the main square for $75 a night. Food for two with a bottle of mezcal is about $30 at the most posh of restaurants. It’s verging on silly. Between the two thirds decline in the Mexican Peso over the past two years and an over-dramatized fear of violence, the tourist economy is basically running on free. They’re just happy to see you and thankfully, my Mexican fianc can translate my pathetic gringo Spanish as we travel around.

This post was published at GoldSeek on Sunday, 18 December 2016.