Day: December 20, 2016

New Proposal Makes It Clear Retirement Age in the U.S. Will Keep Climbing

Jon

Waiting until 65 to retire is long enough.
Now Washington has proposed an even later retirement age in the U. S. – and it could mean you’re working much longer than you had planned…
The new plan could mean you have to work until you’re 69 years old.
You see, Social Security benefits are being depleted. By 2034, the Social Security Board of Trustees warns workers could face a 21% cut to their benefits if Congress doesn’t reform the program.
So in order to fix that, this Congressman has a bold plan…
New Proposed Retirement Age Means Working Longer Than Ever Before
On Dec. 5, Congressman Sam Johnson (R-TX) proposed new plans for Social Security. He said his proposal would increase benefits for lower-income workers and improve retirement security.

This post was published at Wall Street Examiner on December 20, 2016.

IPOs Worst Year since 2003 Reveals Sick Stock Market

Jon

There’s no underlying strength.
Stock indices are frolicking in record territory. The S&P 500 is up almost 11% this year, though the gains came after the election. The Dow has been titillating the entire world, day after day, with the prospect of finally, finally hitting 20,000 after being just a hair shy of it for two weeks. So it would seem that the IPO market would be hot. But for IPOs, 2016 has turned out to be a fabulously terrible year.
That makes two years in a row. Last year at this time, I wrote that the IPO market in 2015 had been the worst since the Financial Crisis. I quoted Sam Kendall, UBS global head of equity capital markets:
‘We all thought that we might finally get a year where we would be able to put four quarters together,’ he said at the time. ‘If you looked at the pipeline and how people were thinking about the world, it just felt good. And then the wheels came off.’
Last year, the number of US-listed IPOs had plunged 38% to 170, according to Renaissance Capital. In terms of dollars, only $28.7 billion was raised, down 48% from 2014. By that measure, according to Thomson Reuters, it was the ‘worst year since 2009.’
But that’s like so 2015.

This post was published at Wolf Street on Dec 20, 2016.

Our Bold 2017 Gold Price Prediction

Jon

Money Morning Resource Specialist Peter Krauth has an ambitious yet attainable 2017 gold price prediction.
Krauth, a 20-year veteran of the resource market, believes the price of gold could break out from its current lows, surging as much as 22% to $1,400 per ounce by the second half of 2017.
‘The odds are strong that we’ve seen the bottom for the correction,’ Krauth said.
Krauth said he sees three catalysts carrying gold prices to new highs.
But before we talk about his gold price prediction, let’s first look at a few reasons why gold prices have been struggling recently. Before we can analyze the long-term outlook for gold, it’s important to analyze what has been moving prices in the near term.
We’ll also share with investors why some of the headwinds currently affecting gold prices are only temporary issues…
Why Gold Prices Have Falling Since July
When the U. S. Federal Reserve raised its federal funds rate by 0.25% on Dec. 14, the price of gold took an immediate hit. Nearly two hours after the Fed’s decision, the price of gold fell $19 from $1,161 an ounce to $1,142, according to Krauth.

This post was published at Wall Street Examiner on December 20, 2016.

DEC 20/ITALY CLOSE TO A BANKING FAILURE/HUGE SPREAD IN GOLD BETWEEN SHANGHAI GOLD FIX AND NY PRICING/LOOKS LIKE ANOTHER CHINESE BOND FAILURE/

Jon

Gold at (1:30 am est) $1131.50 down $9.00
silver at $16.06: up 3 cents
Access market prices:
Gold: $1132.40
Silver: $16.08
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 Dec 20 (10:15 pm est last night): $ 1170.51
NY ACCESS PRICE: $1138.80 (AT THE EXACT SAME TIME)/premium $31.71
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Shanghai afternoon fix: 2: 15 am est (second fix/early morning):$ 1170.51
NY ACCESS PRICE: $1134.50 (AT THE EXACT SAME TIME/2:15 am)
HUGE SPREAD 2ND FIX TODAY!!: $36.01
China rejects NY pricing of gold as a fraud/arbitrage will now commence fully
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London Fix: Dec 20: 5:30 am est: $1132.75 (NY: same time: $1132.90 5:30AM)
London Second fix Dec 20: 10 am est: $1125.70 (NY same time: $1126.50 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.

This post was published at Harvey Organ Blog on December 20, 2016.

Is The U.S. Stock Market About To ‘Super Nova?’

Jon

ETF flows tend to be a good contrary indicator when they become extreme, so the buying frenzy doesn’t bode well for U. S. equities. – David Santschi, CEO of TrimTabs
If the Federal Reserve were a private corporation and did not have a money tree, it would be technically insolvent – i.e. bankrupt. As of its latest balance sheet the Fed was reporting a book value (net worth) of $40.4 billion. But the Fed does not have to mark to market its assets. Given the recent 100 basis point move in the 10-yr Treasury, if the Fed were forced to mark to market its $3.8 trillion Treasuries and mortgages, it would be forced to reduce the holding value by close to $400 billion, taking the Fed’s net worth to negative $360 billion.
This is the most conservative valuation scenario. The Fed has other holdings, on and off balance sheet, that would likely take the Fed’s book value well past negative $400 billion if mark to market accounting were applied.
Think about this for a moment: the U. S. dollar is backed by a Government and Central Bank, both of which are technically bankrupt. The only difference between what happened to Greece and the U. S. is the U. S.’ ability to print money unfettered.
Just like water, markets eventually find their own level of balance. At this point the U. S. stock market, is the most unbalanced financial market in the world. A Trim-tabs report out yesterday revealed that the public threw $98 billion into U. S. stock ETFs between November 8th and December 5th. Compare this to the $61.5 billion that went into stock ETFs over the entire year in 2015. Currently the rate of cash flooding into stock ETFs for December is even higher than November.

This post was published at Investment Research Dynamics on December 20, 2016.

Dow (Almost) 20,000

Jon

They’re giving it all they’ve got!! Bob Pisani said that Dow 20,000 was “inevitable.. we’ll do it at tomorrow’s open”…
They did their best – breaking the market and slamming VIX three times – but just couldn’t make it… Record Highs though still (13 points shy of 20k)
Futures broke out of their range overnight and led the charge…
Once again the “Most Shorted” stocks were ramped in the first hour of the day…

This post was published at Zero Hedge on Dec 20, 2016.

What the Heck’s Happening to Our Share Buyback Boom?

Jon

Going down the drain, putting this wondrous stock market at risk?
Companies in the S&P 500 spent about $3 trillion since 2011 to buy back their own shares, often with borrowed money. It’s part of a noble magic called financial engineering, the simplest way to goose the all-important metric of earnings per share (by lowering the number of shares outstanding). And it creates buying pressure in the stock market that drives up share prices.
With buybacks, you don’t need to sell one extra iPhone to boost your earnings per share. So the amounts have grown and grown. With ultra-cheap money available to borrow endlessly, companies take on debt and hollow out shareholder equity. It has worked like a charm. Stock prices have soared. Declining revenues and earnings, no problem. But something is happening that hasn’t happened since the Financial Crisis.
Share buybacks in the third quarter plunged 28% year-over-year, to $115.6 billion, the biggest year-over-year dive since Q3 2009, according to FactSet. It was the second quarter in a row of declines, from the glorious Q1 this year, when buybacks had reached $168 billion, behind only Q3 2007 before it all came apart.
From that great Q1 2016 to Q3, buybacks plunged 31%, or by $52 billion.

This post was published at Wolf Street on Dec 20, 2016.

Keiser Report: Putin, Hacking & Conspiracy (E1008)

Jon

The following video was published by RT on Dec 20, 2016
In this episode of the Keiser Report from Pensacola, Florida, Max and Stacy discuss the ‘birthering’ of the Democrats as Keith Olbermann turns xenophobe, and conspiracy theories flourish in the media. They also discuss Russia’s latest gold purchases. In the second half, Max interviews former Assistant Treasury Secretary under Ronald Reagan, Paul Craig Roberts, about the attempted Electoral College coup on Trump, and the differences between the last Cold War and the new one.

Not a Gold Bull in Sight

Jon

In last weekend’s report, we covered how the Daily Cycle count was stretching too far, so marking a Nov 15th Daily Cycle Low (DCL) made sense. Doing so means that another DC began on Nov 16, and that puts today’s date in the normal timing band for a new DCL. So with another DCL fast approaching, the capitulation decline we saw this week fits perfectly with expectations.
The large drops in Silver and the Miners are strong indications that the final capitulation for the current Daily and Investor Cycles is at hand.
(Keep in mind this is an except from a premium report published over the past weekend. Prices on charts reflect Friday’s close)
An outlook is not an absolute call, so until Gold bottoms we’ll be dealing in probabilities. I’m highlighting the most likely outcome to enable consideration of the risk/reward profiles on potential trades. So, while I expect that a major low in Gold is imminent, traders should still be cautious. I cannot stress enough that traders must be both realistic and patient as they consider possible market moves. And they need to understand that trading with a good probability of success does not guarantee that they will be correct.

This post was published at GoldSeek on 20 December 2016.

Mark Hanson Explains Why “A 1% Mortgage Rate Surge Changes Everything”

Jon

Zillow is rapidly catching up with where the rest of the mortgage providers offer 30 Year Fixed Rates Mortgages, and as it reported moments ago, the 30 Year Fixed in the Zillow Mortgage Rate Monitor rose from 3.94% to 4.1% in the week ended today.
As we reported previously, the latest Wells 30Year Fixed refi rate is now 4.625%, with the overall complex about 100 bps higher from where it was just a few months ago. The move prompted none other than Frddie Mac to issue a warning about the future of the housing market.
Is that a big move? The answer, conveniently, comes from a just released note by housing expert Mark Hanson who explains why a “1% rate surge changes everything”
* * *
The Rate Surge Changes Housing Affordability Statistics
Redfin.com did a purchase market survey of 2400 ready-buyer users between Nov 7 and 11 – right when rates first started surging and were much lower than today – on how a 1% jump in interest rates would impact their purchase decision, if at all.
Note, today rates are 50 bps higher than when the survey was done and up greater than the 1% referred to in the questioning.

This post was published at Zero Hedge on Dec 20, 2016.

A New World Order Is Emerging in Natural Gas

Jon

Brazil’s Petrobras and partners produced their billionth barrel of oil from presalt fields this month. Underlining one of the biggest shifts to happen this decade in global crude output.
And news yesterday suggests we may be about to see another mega-shift in energy. In the worldwide natural gas business.
That was a deal struck by petro-major BP. Which is spending nearly a billion dollars to get into projects in an unexpected part of the world: western Africa.
BP said it has reached an agreement to buy stakes in development projects in Senegal and Mauritania. Which the major is acquiring from junior developer Kosmos Energy, in exchange for $162 million cash – and subsequent payment of $754 million in appraisal and development expenses.

This post was published at FinancialSense on 12/20/2016.

Krugman: “Trump’s Economic Team Is A Gathering Of Gold Bugs”

Jon

To join Trump admin, you have to be white nationalist conspiracy theorist, but must also be always wrong re your supposed area of expertise — Paul Krugman (@paulkrugman) December 20, 2016

Paul Krugman wants you to know that, in his view, the markets are misinterpreting “Trumponomics” and because he is far smarter than you, the markets, and pretty much anyone else, it’s important to pay attention.
Of course, this shouldn’t be terribly surprising as Trump could literally announce that he found a cure for cancer and Krugman would immediately take to the New York Times to pen an op-ed defending malignancies, and how its eradication would mark the end of “hope” for mankind.
In any event, Krugman posted a short article to his twitter account this afternoon warning that the markets’ interpretation of “Trumponomics” is all wrong. While the confused Keynsian would ordinarily praise aggressive infrastructure plans, like the one proposed by Trump, in this case he’s willing to make an exception and notes that the plan looks more like a “privatization scheme” than an “actual plan to boost public investment.” And while Krugman has never before seen a budget deficit that he didn’t criticize for being too small, Trump’s “privatization scheme” combined with “tax cuts for the rich” suddenly has him extremely worried about federal debt balances.
Financial markets seem to have decided that the Siberian candidate will pursue strongly expansionary macroeconomic policy. Long-term interest rates have risen sharply; expected inflation is also up, although not as much.

This post was published at Zero Hedge on Dec 20, 2016.

Brandon Smith Warns the System Is Crashing: ‘Prepare for Bank Confiscations, Shortages, Insurgency’

Jon

What is the anatomy of a breakdown?
The past eight years have been extremely difficult for the real economy. Central bank intervention has propped up the stock market at the expense of the main street economy, at the expense of middle class security, at the expense of jobs.
And everyone knows that game can’t continue. The question is how it will play out, and how long the game will be.
The Federal Reserve finally announced rate hikes – planning one incremental increase after another throughout the coming Trump Administration.
Close to a decade of stimulus, quantitative easing, zero interest rates and easy money for those on top is coming to an end. For all those who have borrowed, it means that the burden of debt is coming due – and the biggest borrower of all, the U. S. government, will face huge new costs in the form of increased interest on $14 trillion in debt:
Rising interest rates help savers and hurt borrowers. As the biggest borrower on the planet, the U. S. government will soon begin paying more to investors holding roughly $14 trillion in Treasury debt. ‘As debt continues to grow and interest rates return toward more normal levels, interest spending is slated to be the fastest growing part of the budget.’ (source)

This post was published at shtfplan on December 20th, 2016.

All cash buyers dominate Florida and Midwest: The significant number of all cash buyers continues to add strain to families looking to buy.

Jon

There has been little discussion in 2016 regarding the volume of all cash buyers. We have grown accustomed to anomalies in the housing market. Rapid dips and jumps in prices are now assumed to be a part of the system. Massive numbers of investors buying single family homes are now assumed to be status quo. And the number of all cash transactions is seen as normal when in fact, all cash buyers were usually a small part of the market. All of this is abnormal in the housing market pre-2000s but we are now living in a very different world. Yet people still have a hard time understanding the volume of all cash buyers in certain markets. Clearly most of these buyers are investors. Even a home costing $200,000 is out of reach for the regular family living paycheck to paycheck without a mortgage. And mortgage rates just increased at their fasted clip in many years thus making it more expensive to buy a home. In some markets, cash buyers dominate sales volume.
The all cash buyer is still out in force
All cash buyers represent a clear sign that investors are still buying. However, it should be noted that volume in many markets is low. All cash buyers are out in full force in Florida and the Midwest. These investors are largely buying up single family homes and looking to capitalize on two trends:
-1. The rental Armageddon trend
-2. Trying to buy and sell into this wild uptrend in the market

This post was published at Doctor Housing Bubble on December 20th, 2016.

The World’s Largest Trading Floor Is For Sale

Jon

Back in September, before the much hoped for Trump “renaissance” of Wall Street, we presented two pictures that summarized the recent transformation of the US financial sector from a trader- to an algo-centric one.
We showed the trading floor in UBS’ Stamford office, once the largest in the world and big enough to hold 23 basketball courts, and which was a symbol of everything that went right on Wall Street. Packed with traders, it was a non-stop cacophony of screaming, constant motion and furious energy – to an outsider sheer chaos, which somehow ended up generating millions in profits for the bank every day. Some time around 2008, just before the financial crisis hit, it looked like this.

Fast forward 8 years later, when all that’s left of the UBS trading floor, and the legacy of that version of Wall Street, is this:

This post was published at Zero Hedge on Dec 20, 2016.

The Trump Doctrine: A Work in Progress

Jon

The world is in a “frenzy of study,” Henry Kissinger said in a recent interview. At home and abroad, strategists and pundits are trying to piece together a blueprint of American foreign policy under US President-elect Donald Trump from a stream of tweets, some campaign slogans, a few eye-catching Cabinet picks, meetings at Trump Tower, and a pingpong match already underway with Beijing. Highbrow intellectualism can be a handicap in this exercise. Commentators among the Washington establishment have been quick to dismiss Trump’s foreign policy moves outright as erratic and self-serving over the past few weeks. In an op-ed entitled “Trump Failed His First Foreign Policy Test,” for instance, columnist David Ignatius admonished the president-elect for the “hot mess” his phone call with Taiwanese President Tsai Ing-wen precipitated. Trump makes people uncomfortable. It’s what he does best, in fact. But how this quality applies to foreign policy is a question that merits deeper exploration than knee-jerk displays of stricken disbelief. After all, as Kissinger noted in his Dec. 18 interview, “a president has to have some core convictions.”
So what are Trump’s? From what we can discern so far from his upbringing, the trajectory of his career and the profiles of those who have infiltrated his inner circle, Trump prizes business acumen and a “killer” instinct for managing affairs. He has enough corporate firepower in his Cabinet to fill the next Forbes’ list. By nominating ExxonMobil CEO Rex Tillerson as secretary of state, he has demonstrated his belief that tough deal-making – identifying sources of leverage and showing a willingness to use them – is the secret to running a country and presiding over the international system. Trump does not fear nationalism; he sees it as the natural and rightful path for every state, the United States included, to pursue in protecting its interests. He also seems to have internalized the idea that the United States is losing its competitiveness and that internationalist foreign policy is to blame. Finally, Trump apparently believes that US foreign policy has become too predictable and overwrought with diplomatic formality. Better to say it like it is and call out institutions and conventions that have outlived their usefulness.

This post was published at FinancialSense on 12/20/2016.

China Cuts Offering Size Of 3, 7 Year Bonds By 40% Over Concerns Of More Failed Auctions

Jon

The danger signs are building up for the Chinese bond market.
First, last Thursday, Chinese bond futures crashed by the most on record forcing China’s regulator to briefly halt trading in the security until the panic fades.
Then, on Friday, a Chinese bill auction technically “failed” when it was unable to find enough buyers for the total amount offered for sale.
At the same time, interbank lending among Chinese banks effectively froze when, as a result of the spike in overnight lending rates, the PBOC was forced to intervene by providing a “massive” amount of liquidity . The PBOC tapped an emergency lending facility it created in 2014 to extend 394 billion yuan ($56.7 billion) in six-month and one-year loans to 19 banks. That pushed the net amount extended through the facility to 721.5 billion yuan so far in December, a monthly record, according to Beijing-based research firm NSBO. The central bank also injected a net 45 billion yuan into the money market on Friday, following a net 145 billion yuan cash infusion on Thursday. The PBOC also ordered a few large banks to extend longer-term loans to nonbank financial institutions, while China’s securities regulator asked brokers tasked with making a market in bonds to continue trading and not shut any companies out of the market, according to Mr. Zheng of Dongxing Securities.

This post was published at Zero Hedge on Dec 20, 2016.

Morgan Stanley Fined $7.5 Million For Commingling Customer Cash In “Delta One” Desk Trades

Jon

On Tuesday, the SEC announced that Morgan Stanley will be fined $7.5 million to settle civil charges that it violated customer protection rules, when it used trades involving customer cash to lower its borrowing costs. The SEC said MS will settle the case without admitting or denying the charges, effectively letting slide a violation which, in an exaggerated format, was exposed as a quasi-criminal offense engaged in by Jon Corzine’s now defunct MF Global.
Ok so, Morgan Stanley engaged in some creative “commingling” – what’s the big deal, most banks do it. What makes this particular case curious is the basis of the commingling: it involves some of the more interesting, and abstract, concepts of modern finance, including Morgan Stanley’s “Delta One” trading desk, as well as the rehypothecation of collateral, all of which participated in a complicated violation of customer protection.
While we present more details below, here is a quick primer on the Customer Protection Rule:
“it is intended to safeguard customers’ cash and securities so that they can be promptly returned should the broker-dealer fail. The SEC order finds that from March 2013 to May 2015, Morgan Stanley’s U. S. broker-dealer used transactions with an affiliate to reduce the amount it was required to deposit in its customer reserve account.”
According to the SEC order, Morgan Stanley’s transactions violated the Customer Protection Rule, which prohibits broker-dealers from using affiliates to reduce their customer reserve account deposit requirements.
In the SEC’s order, the regulator says that Morgan Stanley had its affiliate, Morgan Stanley Equity Financing Ltd., serve as a customer of its U. S. broker-dealer, a relationship that allowed the affiliate to use margin loans from the U. S. broker-dealer to finance the costs of hedging swap trades with customers. The margin loans lowered the borrowing costs incurred to hedge these swap trades and reduced the U. S. broker-dealer’s customer reserve account deposit requirements by tens to hundreds of millions of dollars per day.

This post was published at Zero Hedge on Dec 20, 2016.