Goldman Sachs’ 2016 Review (Crossword-Style)

2016 was chock-full of surprises, both in markets and in politics.
As Goldman’s Allison Nathan explains, the year began with a perfect storm of worries that had become all too familiar already in 2015. Oil prices plunged and fears of faltering growth and a sharp depreciation of China’s currency escalated, driving disruptive sell-offs in credit and other risk assets. Confidence in global growth faltered, particularly after an anemic US GDP report for Q1.
But oh, how the world has changed. Today, the price of crude oil is almost exactly double its January low in the wake of announced production cuts by OPEC and key non-OPEC producers (Russia). We expect WTI oil prices to move higher to a peak of $57.50/bbl in 1H17 as the cuts push the oil market into deficit and whittle down the current large inventory surplus. But we also expect shale producers to respond to the higher prices, implying limited upside from there.
The rebound in oil prices led to a remarkable turnaround in credit markets, with HY Metals & Mining and E&Ps returning 49% and 36%, respectively, YTD; default rates normalizing; and spreads no longer pricing recession risk. We expect a further moderate compression of spreads in 2017 given expectations of a generally positive macro environment, gradual improvement in credit fundamentals, and, of course, our somewhat rosier oil outlook. And fears about China have generally receded into the background as Chinese policymakers continued an ambitious stimulus program that helped stabilize growth. A more dovish tilt by the Fed in response to the tightening of financial conditions caused by the Q1 sell-off also assuaged market fears. But we warn that China risk is not far from the surface.

This post was published at Zero Hedge on Dec 25, 2016.

How Americans Spent Their Money In The Last 75 Years (In 1 Simple Chart)

Consumer spending makes up a large percentage of the United States economy. We all have bills to pay and mouths to feed, but where do Americans spend their money? Here is a breakdown of how Americans spent their money in the last 75 years…
In the chart above, spending is broken into 12 categories: Reading, alcohol, tobacco, education, personal care, miscellaneous, recreation & entertainment, healthcare, clothing, food, transportation and housing. Each category is further broken down into spending by year, from 1941 to 2014, and each category is given a unique color. The data were collected from the Bureau of Labor Statistics. The data is adjusted for inflation and measures median spending of all Americans.

This post was published at Zero Hedge on Dec 25, 2016.

At What Age Do You Outgrow IKEA?

By Priceonomics
If you’re a twenty something, it may already have happened: that awkward moment when you realize all your friends have the same Pinsoshen coffee table from IKEA.
The Swedish brand’s reputation for stocking stylish furniture and selling it for low prices has made it a one-stop shop for cash-strapped students furnishing their first apartments.
But when do they leave IKEA behind in favor of something more grown-up? We wanted to find out, so we analyzed data from Earnest , a Priceonomics customer. We analyzed a dataset of more than 10,000 anonymous user responses on spending habits. When does it begin? When does it end? And where do people turn when they’re ready for something new?
We first wanted to know how reliance on IKEA changes over a person’s lifetime, so we calculated the percent of our clients who shopped at IKEA. For the sake of comparison, we did the same for Lowe’s, a home improvement chain with similar overall popularity within our dataset.

This post was published at Zero Hedge on Dec 25, 2016.

The Scariest Forecast For Treasury Bulls

With Trump’s border tax adjustment looking increasingly likely, the stock market – as JPM has warned in recent days – is starting to fade the relentless Trumponomic, hope-driven rally since election day instead focusing on the details inside the president-elect’s proposed plans. And, as explained earlier in the week, if the border tax proposal is implemented, economists at Deutsche Bank estimate the tax could send inflation far above the Federal Reserve’s 2% target and drive a 15% surge in the dollar.
While this would be bad for stocks, as a 5% increase in the dollar translates into about a 3% negative earnings revision for the S&P 500 all else equal, a surge in inflation would also wreak havoc on bond prices, and send interest rates surging, at least initially, before they subsquently plunge as a result of a rapidly tightening, deep “behind the curve” Fed unleashes a curve inversion and recessionary stagflation becomes the bogeyman du jour.
There’s more.
In a separate report by Deutsche, the bank looks at future prospects for rates and concludes that “tightening monetary policy, higher breakevens, and declining central bank purchases relative to net supply should all contribute to significant bearish steepening during 2017.”

This post was published at Zero Hedge on Dec 25, 2016.

Islamists Attack Christmas, But Europeans Abolish It

A statue of the Virgin Mary was ordered taken away by a court in the French municipality of Publier. Senator Nathalie Goulet slammed the judges as “ayatollahs of secularism”. A German school in Turkey just banned Christmas celebrations: the school, Istanbul Lisesi, funded by the German government, decided that Christmas traditions and carol-singing would no longer be allowed. A Woolworth’s store in Germany scrapped Christmas decorations telling customers that the shop “is now Muslim”. Europe is already mutilating her own traditions “to avoid offending Muslims”. We have become our own biggest enemy. Muslims are also reclaiming “the mosque of Cordoba”. Authorities in the southern Spanish city recently dealt a blow to the Catholic Church’s claim of ownership of the cathedral. Now Islamists want it back. The final result of Europe’s self-destructive secularism could seriously be a Caliphate. “Everything is Christian”, Jean-Paul Sartre wrote after the war. Two thousand years of Christianity have left a deep mark on the French language, landscape and culture. But not according to France’s Minister of Education, Najat Vallaud-Belkacem. She just announced that instead of saying “Merry Christmas”, state officials should use “Happy Holidays” — clearly a deliberate intent to erase from discourse and the public space any reference to the Christian culture in which France is rooted.

This post was published at Zero Hedge on Dec 25, 2016.

Why I’m Hopeful

Why am I hopeful? the Status Quo is devolving, and a better way of living lies just beyond the corrupt, wasteful, ruinous consumerist debt/financial tyranny we now inhabit.
Readers often ask me to post something hopeful, and I understand why: doom-and-gloom gets tiresome. Human beings need hope just as they need oxygen, and the destruction of the Status Quo via over-reach and internal contradictions doesn’t leave much to be happy about.
The most hopeful thing in my mind is that the Status Quo is devolving from its internal contradictions and excesses. It is a perverse, intensely destructive system with horrific incentives for predation, exploitation, fraud and complicity and few disincentives.
A more human world lies just beyond the edge of the Status Quo.
I know many smart, well-informed people expect the worst once the Status Quo (the Savior State and its corporatocracy partners) devolves, and there is abundant evidence of the ugliness of human nature under duress.

This post was published at Charles Hugh Smith on SUNDAY, DECEMBER 25, 2016.

Demographic Shock Ground Zero: Japan Births Drop Below Million For The First Time On Record

While both global monetary and fiscal policies struggle to keep aggregate demand if not rising, then at least constant, demographics continues to wreak havoc on the best laid plans of central planners around the rapidly aging world. Just last week we reported that in 2016, the US population grew at the slowest pace since the Great Depression, largely driven by the collapse in household formation as the number of Millennials living at home with their parents has hit a 75 year high.
However, while the US is finally starting to feel the social, political and economic hit from an aging population, nowhere is the demographic impact more visible than in what is the epicenter of the developed world’s demographic problems: Japan. It is here that according to the latest government data, the number of births in Japan is likely to fall below a million this year for the first time since data became available in 1899, reflecting a fast-ageing society and the high cost of child care.
The number of births is estimated at 981,000 this year, down from slightly more than a million last year, data from the ministry showed. Births hit a record high of 2.696 million in 1949.

This post was published at Zero Hedge on Dec 25, 2016.

Bank Of Canada Lays Out In YouTube Clip How The Economy Could Tank

As MacLean’s Jason Kirby points out, the Bank has taken to YouTube to warn Canadians about the dangers of too much debt and unrealistic house price expectations. He wonders, however, whether anyone will listen as one after another real estate bubble form in Canada, a nation whose household debt ratio has never been higher.
As BMO pointed out, when the latest household debt ratio data was released, the upward trend in household debt goes back for the 26 years for which it has records and is showing no signs of slowing down.
“While it looks as though the Vancouver housing market is cooling after the foreign buyers’ tax was implemented, the Toronto market remains very strong, and others are showing signs of improving as well,” said BMO senior economist Benjamin Reitzes.
Meanwhile, none other than Canada’s central bank has ramped up its warnings about heavily indebted households and the unreasonable expectations driving the housing market, yet all indications are that Canadians have stuffed cotton in their ears.
In Toronto, for instance, house prices are up nearly 15 per cent since the summer when Bank of Canada governor Stephen Poloz warned that price gains in the city were ‘difficult to match up with any definition of fundamentals that you could point to.’ In the more than 15 years that the Teranet-National Bank House Price Index has tracked property prices in the city, there’s never been a six-month period when prices rose that fast. Meanwhile, the latest figures released by Statistics Canada showed the household debt-to-income ratio broke yet another record in the third quarter.

This post was published at Zero Hedge on Dec 25, 2016.

A Broken Bond Bounce Beckons!

HISTORICAL CORRELATIONS GIVE US A CLUE TO WHAT MAY BE AHEAD!
A FALLING GLOBAL MARKET CAP TREND CHANNEL
The old adage that the “Trend is Your Friend” has proven to be the one that separates the winners from the losers. The key however is whether you recognize the right trend!
We are being possibly lulled into a false perception and belief of how good things appear if we solely look at the US equity rally. Yes it is temporarily rising but the 600# Gorilla is the Global Bond market and major problems are still lurking.
The trend to focus on GLOBAL MARKET CAP:
While US bank stockholders are ebullient at The Trump presidency-to-be, the rest of the world has lost a combined $1.5 trillion in market value across its bonds and stocks, Global equity and debt markets lost over $1 trillion in value last week (the week of the US FOMC meeting) – the biggest weekly loss since early May (weak China data and huge surge in dollar).

This post was published at GoldSeek on 23 December 2016.

Senator Rand Paul’s Annual Festivus Airing Of Grievances

In a time-honored tradition – started by television sitcom ‘Seinfeld’ – Senator Rand Paul aired a list of his grievances Friday for Festivus. In the past his outburst has been aimed at wasteful government spending, this year the target of his ire is the president-elect, his cabinet choices, and the media…
Hello again, I hope everyone is having a Happy Festivus! It's once again time for my annual #AiringofGrievances… pic.twitter.com/pZfRtAUtZN
— Senator Rand Paul (@RandPaul) December 23, 2016

This post was published at Zero Hedge on Dec 25, 2016.

Striking Admission By China: “Rising Social Tensions Pose Enormous Challenges To Beijing’s Stability”

Data released by China‘s NBS early last week confirmed that the latest Chinese housing bubble continued to deflate with 70-city housing price data confirming that home price inflation slowed in most cities in November, except in a few lower tier cities where home price inflation re-accelerated. The average, seasonally adjusted property price change was in November 0.7% from October, and up 12.9% yoy. This compares to October’s 1.2% mom increase and 12.7% yoy.
Average housing price growth continued to moderate in tier-1/2/3 cities.

This post was published at Zero Hedge on Dec 25, 2016.

US: Five Must Gold See Charts – Gold Miners Are ‘Running Out’ of Gold

Gold Mining Companies Are Running Out of Gold: Five Must See Charts
‘Peak gold’ – World’s gold production to peak in 2019 and decline Gold found by miners has plunged 85% over past decade Gold mining CEOs turning to deals to combat dwindling reserves Exploration more difficult and firms have cut capex ***
The reality of peak gold production has recently been acknowledged by Bloomberg and some of the financial media. Yet the mainstream, non specialist financial media has yet to cover this important topic with obvious ramifications for the gold market and the gold price in the medium and long term.

This post was published at Gold Core on December 23, 2016.

COMEX and ICE Gold Vault Reports both Overstate Eligible Gold Inventory

Introduction In the world of gold market reportage, much is written about gold futures prices, with the vast majority of reporting concentrating on the CME’s COMEX contracts. Indeed, when it comes to COMEX gold, a veritable cottage industry of websites and commentators makes its bread and butter commentating on COMEX gold price gyrations and the scraps of news connected to the COMEX. The reason for the commentators’ COMEX fixation is admittedly because that’s where the trading volume is. But such fixation tends to obscure the fact that there is another set of gold futures contracts on ‘The Street’, namely the Intercontinental Exchange (ICE) gold futures contracts that trade on the ICE Futures US platform.
These ICE gold futures see little trading volume. Nonetheless, they have a setup and infrastructure rivaling that of COMEX gold futures, for example, in the reporting of the gold inventories from the vault providers that have been approved and licensed by ICE for delivery of gold against its gold futures contracts.
At the end of each trading day, both CME and ICE publish reports showing warehouse inventories of gold in Exchange licensed facilities/depositories which meet the requirements for delivery against the Exchanges’ gold futures contracts. These inventories are reported in two categories, Eligible gold and Registered gold. Many people will be familiar with the COMEX version of the report. A lot less people appear to know about the ICE version of the report. For all intents and purposes they are similar reports with identical formats.
Most importantly, however, both reports are technically incorrect for the approved vaults that they have in common because neither Exchange report takes into account the Registered gold reported by the other Exchange. Therefore, the non-registered gold in each of the vaults in common is being overstated, in a small way for COMEX, and in a big way for ICE. And since COMEX and ICE have many approved vaults in common, technically this is a problem.

This post was published at Bullion Star on 23 Dec 2016.