The Chinese Credit Bubble

The confrontations between the U. S. and China on trade, currencies and geopolitics will begin immediately at a rhetorical level, but may take a year or two to play out at a policy level. Supply chains, long-term contracts, and reserve positions don’t turn on a dime even when new administrations are sworn in.
Yet, one issue that will not wait and is a ticking time bomb is the Chinese credit bubble. That bubble is primed to explode with or without new policies from Trump. When it happens and how it happens will have profound implications for your portfolio.
The dimensions of the problem are vast. China’s growth has become captive to what economists call Goodhart’s Law. This law says that when an economic metric becomes the goal of policy, it loses meaning as a metric. Goodhart’s Law applies in the case of Chinese GDP.
Once the Chinese government decided to ‘target’ GDP growth of 8 percent, or 7 percent, or 6.5 percent more recently, GDP growth lost its meaning as a reliable guide to Chinese economic performance. Instead the Chinese hit the economic target by non-economic means merely to say they hit the target.

This post was published at Wall Street Examiner on January 31, 2017.

JAN 31/GOLD AND SILVER RISE DESPITE THIS BEING THE LAST DAY FOR OPTIONS EXPIRY IN LONDON/GOLD UP $17.40 AND SILVER UP 39 CENTS/AN AWFUL DAY FOR ITALIAN BANKS; UNICREDIT POSTS A HUGE 11 BILLION EU…

Gold at (1:30 am est) $1210.60 UP $17.40
silver at $17.51: up 39 cents
Access market prices:
Gold: $1210.65
Silver: $17.56
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:
MONDAY gold fix Shanghai
Shanghai FIRST morning fix Jan 31/17 (10:15 pm est last night): $ holiday
NY ACCESS PRICE: $xxx (AT THE EXACT SAME TIME)/premium $xxx
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Shanghai SECOND afternoon fix: 2: 15 am est (second fix/early morning):$ holiday
NY ACCESS PRICE: $xxxx (AT THE EXACT SAME TIME/2:15 am)
SPREAD/ 2ND FIX TODAY!!: $xxx
China rejects NY pricing of gold as a fraud/arbitrage will now commence fully
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London FIRST Fix: Jan 31/2017: 5:30 am est: $1198.80 (NY: same time: $1198.80 (5:30AM)
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London Second fix Jan 31.2017: 10 am est: $1212.80 (NY same time: $1212.85 (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 January 31, 2017.

Apple Sells A Record Number Of iPhones, Beating Expectations As Cash Hits A Quarter Trillion Dollars

Rumors of AAPL’s demise have once again been greatly exaggerated. Moments ago, Apple reported Q1 earnings which not only beat on the top and bottom line, but also sold a record number of iPhonea in the quarter at a record 78.4 million, 2 million more than expected, at higher ASPs than expected. Earnings of $3.36 were higher than the $3.22 expected, on record revenue of $78.4 billion, above the $77.3 BN expected, and 3.3% higher than a year ago. While sales grew across the globe, revenue in China declined by 12% in the quarter, the 4th consecutive quarterly decline in a row.
‘We were surprised by the strength of iPhone 7 Plus where we were actually short of supply throughout the quarter. We’ve been able to come into supply-demand balance in January,” Chief Financial Officer Luca Maestri told Bloomberg.
The result in a nutshell:
Q1 EPS: $3.36, Exp. $3.22 Q1 Revenue: $78.4Bn, Exp. $77.3Bn Gross margin: Exp. 38.4% iPhone unit sales: 78.3 milion, Exp. 76.3 million. iPhone sales generated $54.4 billion in revenue, 69% of total. iPhone average selling price: $694.6, Exp. $688

This post was published at Zero Hedge on Jan 31, 2017.

TRUMP TO CAUSE DEBT COLLAPSE? | Greg Mannarino

The following video was published by FinanceAndLiberty.com on Jan 31, 2017
Greg Mannarino from TradersChoice.net joins FinanceAndLiberty to reveal the system is destined for failure. Debt cannot grow indefinitely. However, that does not mean collapse is imminent. Mannarino is bullish on the markets because he believes president Trump will create jobs and grow the economy. But Mannarino is also bullish on precious metals, especially silver, because debt will continue to increase. ‘Silver is the most undervalued asset in the history of the world,’ Mannarino says.

Trader Warns “Markets Are Sleepwalking Into Disaster”

U. S. equities look worryingly vulnerable, warns Bloomberg’s Mark Cudmore, warning that Trump’s doubling down on his hardline autocratic approach ensures that markets won’t be able to overlook the implications of his immigration order.
I apologize if this piece seems very similar to three of my last four columns, but markets are exhibiting exceptional complacency… That attitude may shift rapidly.
Today, futures are signaling that the S&P 500 Index may break the post-election upward trend and also fall below the 2017 volume-weighted average price of about 2,273.3. That means that on average, recent buyers are losing money while the technicals suggest holders of stocks that have made money may want to consider taking profit.

This post was published at Zero Hedge on Jan 31, 2017.

JPMorgan Is Not Looking Forward To Today’s Apple Earnings

While hardly any analysts or traders expect Apple to report blockbuster earnings today on the back of slowing smartphone sales, challenging iPhone 7 adoption, rising competition in China, and generally a loss of Apple’s trademark creative spark under the “new management” which is far more interested in stock buybacks and M&A, few are as skeptical as JPM’s Rod Hall who, following last week’s downgrade by Barclays, came this close to losing his faith in the world’s largest company (he still has an Overweight rating… of course).
This is what he said to expect in today’s AAPL earnings:
Expecting a weak iPhone unit guide with variability from ASPs, FX and Airpods
We believe guidance for FQ2 to March is likely to be lower than many expect on weaker iPhone unit volume. ASPs could partially offset this but the negative FX impact is probably enough to make the two effects a wash. Airpods, however, could add a little kick as the tiny things are nearly impossible to find with leadtimes at 6 weeks globally. At the current share price we doubt Apple deals with short term hiccups well.
Having said that we believe the stock remains a strong value opportunity assuming the board will eventually pay a higher dividend. We also buy into the consensus view that the iPhone cycle should be better this year.

This post was published at Zero Hedge on Jan 31, 2017.

Iran Is Getting Ready To Dump The Dollar & The Reason Is Unbelievable – Episode 1192a

The following video was published by X22Report on Jan 31, 2017
The next few weeks we will see if the central bankers care about the people in Greece or not. Million retail jobs in the UK are on the chopping block. German retail sales declined this past holiday season. Consumer confidence drops. Dow companies are reporting the worst earning since 2010. Case-Shiller reports that housing prices are at their highest level, but the report is from Nov 2016. Condo sales in Miami is imploding right in front of our eyes. Chicago PMI crashes to recession levels. EU is doomed and Iran is dumping the dollar because of Trump?

Stocks and Precious Metals Charts – FOMC Rate Decision Tomorrow

Gold and silver moved sharply higher today as the US dollar gave up more of its recent gains.
There was overnight commentary on the large number of Comex deliveries for the February gold contract. The gold does not go anywhere for the most part, but it does get shoved around the plate for leverage.
In other words, at the moment the precious metals are running as a paper cross trade with currencies, with actual bullion playing a minor role at best. While this is not uncommon, it is not exactly in synch with the actual physical supply and demand flows in the Asian markets. When speculation disconnects from the physical markets for long enough, we eventually get a jarring reversion.
Stocks gave it up a little, with Washington and Wall Street getting edgy over Trump and his initial executive actions, as needlessly distorted as some of them might be by the friends of Wall Street in the corporate media. The status quo has ruled the roost in this country pretty well for the past 20 years. Now that they are not handing down pre-ordained policy outcomes, they are not sure what to do. It is like a guy who has been trading on insider information for years suddenly having to figure out exactly what the markets are saying.
The next four years are sure to be interesting.
The FOMC will be announcing their latest rate decision tomorrow. Let’s see if the metals can hold close to their most recent upper trendline impact as you can see on the charts.

This post was published at Jesses Crossroads Cafe on 31 JANUARY 2017.

Despite Late Panic-Bid, Stocks Slump Most In 4 Months Amid Currency Chaos

January was a tough month for some…
The S&P 500 just posted its least volatile January in at least 55 years. Avg high-low intraday range of 0.55%, smallest since at least 1961 (@CallieBost)
January was good for gold again – the 4th positive January in a row for Gold (and 8th positive January in the last 11 years)
The Dow managed to cling to gains for the month (the first positive January for The Dow since 2013)…
The last two days have seen the biggest drop in The Dow since September 26th.
The panic bid in Small Caps saved them from 4th January in a row of losses…

This post was published at Zero Hedge on Jan 31, 2017.

Ray Dalio Sours On Trump, Warns His Policies “Could Hurt The World Economy (And Worse)”

Less than a week after Donald Trump won the presidency, the head of the world’s biggest hedge fund, Ray Dalio, unexpectedly declared that he was a firm believer in Trump’s policies in a lengthy LinkedIn article in which he praised the coming age of Trump: “there is a good chance that we are at one of those major reversals that last a decade (like the 1970-71 shift from the 1960s period of non-inflationary growth to the 1970s decade of stagflation, or the 1980s shift to disinflationary strong growth)…. there’s a good chance that the economy/market will shift from what we have gotten used to and what we will experience over the next many years will be very different from that.”
It now appears that Trump’s honeymoon with some of the biggest asset managers is now officially over, because in his latest Daily Observations note, scooped by BBG, Dalio and co-CIO Bob Prince write that he’s becoming “more concerned that the damaging effects of President Donald Trump’s populist policies may overwhelm the benefits of his pro-business agenda.”

This post was published at Zero Hedge on Jan 31, 2017.

Ron Paul Warns: “Second Financial Bubble Going To Burst Soon… Even Trump Can’t Stop It”

By all appearances notes SHTFPlan.com’s Mac Slavo, President Trump is doing his damnedest to turn around the economy, revitalize jobs and bring back prosperity. But the larger trends are already in place; the cycle is turning, and the bust cannot be put off forever.
Federal Reserve policy has literally set the country up for collapse, and though the central bank has been very creative in making the impossible work, and putting off disaster, nothing can hold back the flood forever.
Unfortunately, it looks like Trump may be blamed for a financial crisis that he didn’t cause. Analysts, including notably Brandon Smith, may be correct in pinpointing the attempt to use the new and highly controversial president as a scapegoat for the dirty work of the bankers.
The conditions are there, and the consequences were built in when the bubble was still being pumped up. Someday it will burst. When, how, and how bad remains to be seen.


This post was published at Zero Hedge on Jan 31, 2017.

Divergence Between Dumb And Smart Money Confidence Is Approaching Record Levels

Not to be confused with Bloomberg’s Smart Money index, one of the more popular proprietary indicators is Sentiment Trader’s Smart Money/Dumb Money confidence index. For those unfamiliar, this is how ST explains this useful market timing metric.
The Smart Money Confidence and Dumb Money Confidence indices are a unique innovation that allows subscribers to see, in one quick glance, what the ‘good’ market timers are doing with their money compared to what ‘bad’ market timers are doing.
Our Confidence indices use mostly real-money gauges – there are few opinions involved here.
The Confidence Spread subtracts the Dumb Money from the Smart Money. So when the Spread is very high (above 0.25), that means the Smart Money is looking for a rally, and the Dumb Money is looking for a decline; we should expect stocks to rise after those conditions.

This post was published at Zero Hedge on Jan 31, 2017.

Gold and Silver Market Morning: Jan 31 2017 – Gold and Silver move over $1,200 without Shanghai!

Gold Today – New York closed at $1,190.90 on the 30th January after closing at $1,190.90 on the 27th January. London openedat $1,1201.00 today.
Overall the dollar was weaker against global currencies early today. Before London’s opening:
– The $: was weaker at $1.0711: 1 from $1.0696: 1 yesterday.
– The Dollar index was weaker at 100.34 from 100.55 yesterday.
– The Yen was slightly stronger at 113.66:$1 from yesterday’s 114.86 against the dollar.
– The Yuan was unchanged at 6.8772: $1, from 6.8772: $1, yesterday.
– The Pound Sterling was weaker at $1.2502: 1 from yesterday’s $1.2545: 1.
Yuan Gold Fix
Shanghai is closed today until Friday for the Lunar New Year celebrations.
LBMA price setting: The LBMA gold price was set today at$1,198.80 up from yesterday’s $1,189.85.
The gold price in the euro was set lower at 1,119.85 after yesterday’s1,115.34.
Ahead of the opening of New York the gold price was trading at $1,197.75 and in the euro at 1,118.71. At the same time, the silver price was trading at $17.18.
Silver Today – Silver closed at $17.15 at New York’s close yesterday against $17.12 on the 27th January.

This post was published at GoldSeek on 31 January 2017.

China’s Impossible Trinity

You’re probably familiar with the story of how Soros and Druckenmiller ‘broke the Bank of England’ in 92′.
The two bet against the pound believing that it couldn’t maintain its peg to the Deutsche Mark in the European Exchange Rate Mechanism (ERM). They were right. The Bank of England was forced to stop defending the peg and the pound plummeted. The Quantum Fund (Soros and Druckenmiller) netted over a billion dollars over the course of a few days. The rest is history.
Don’t miss Martin Armstrong on Capital Flows, Market Bubbles, and the Road Ahead
It was an amazing trade. It had all the markings of a ‘perfect setup’; the kind that only came around once every decade or so. It was extremely asymmetric in that the risk was clearly defined by the upper-band of the ERM peg. And if the lower bound broke, like they expected, they knew the pound would collapse due to all the investors on the wrong side forced to liquidate.
It was also a fundamentally compelling trade. The thesis was based on an economic law derived from the Mundell-Fleming model. It states that in a world of high capital mobility, a central bank can target the exchange rate or the interest rate but not both. This economic reality is also known as the policy trilemma. Here’s the following explanation from The Economist:

This post was published at FinancialSense on 01/31/2017.

Not that there’s any inflation, but . . .

The numbers are pretty startling.
Nearly 7 in 10 Americans have less than $1,000 in savings.
1 out of every 3 Americans has nothing set aside for retirement.
And, according to Federal Reserve data, the median working-age couple has saved just $5,000 for retirement.
How is this even possible?
How could it be that the citizens of the wealthiest country to have ever existed in the history of the world barely have any savings?
Simple. The cost of living has skyrocketed over time. It’s become terribly difficult for tens of millions of people to keep up. Just look at the data –
Housing prices, once again, are at all-time highs. And for those who choose to rent instead of buy, rents in many cities have also reached all-time highs.
This is especially difficult for the Millennial generation, which finds itself spending over of 40% of disposable income on housing costs.
If you add in student debt (which continues to plague millennials), that takes even more money out of their pockets each month.

This post was published at Sovereign Man on January 31, 2017.

The EU President Just Labeled America a ‘Threat’ as Bad as Radical Islam

European Union (EU) President Donald Tusk released an open letter this morning to 27 of the bloc’s leaders.
In his letter, Tusk suggested the European Union label longtime ally the United States a ‘threat,’ effectively putting America in a category alongside China, Russia, radical Islam, war, and terror.
But Tusk wasn’t finished with his rhetoric after drafting and releasing this letter…
He then turned his written message into a public speech to deliver just a few moments afterward…
The EU President Suggests Stealing an American Patriotic Adage
From the Estonian capital, Tallinn, the EU president claimed that the first weeks of Donald Trump’s presidency are contributing to the ‘highly unpredictable’ outlook for the bloc, CBS News reported this morning.

This post was published at Wall Street Examiner on January 31, 2017.

Will Record Short VIX Position Backfire On Speculators?

Speculators (a.k.a., ‘dumb money’?) are holding their largest net-short position in the history of the VIX futures contract.
Every week, the CFTC releases their Commitment Of Traders (COT) report on the collective positioning among major futures players. Like most market data, the majority of the time, we do not find the COT report on a particular contract to be of much use. However, we do make it a habit to note any extremes in trader positioning as the data can be quite enlightening at such junctures. For example, this morning we released our Chart Of The Day on Twitter and Stocktwits noting the record net-short position among Speculators in VIX futures. This can be helpful since these Speculators are notoriously off-sides at extremes.

This post was published at Zero Hedge on Jan 31, 2017.

Senate Democrats Stall Another Vote, This Time For Attorney General

Having already succeeded in delaying the confirmation of Tom Price and Steven Mnuchin, when Democrats boycotted a committee vote which had a minimum quorum requirement, moments ago Senate Democrats succeeded in stalling – if only temporarily – another confirmation when they used a procedural move on Tuesday afternoon to stall committee vote, this time on Jeff Sessions’ nomination to become US Attorney General amid last night’s controversy in which Trump fired the acting Attorney General Sally Yates for insubordination.
The announcement came after the committee took a break to allow members to vote on the floor confirmation of Elaine Chao as Transportation Secretary.

This post was published at Zero Hedge on Jan 31, 2017.

Can Trump Deliver? – Paul Craig Roberts

My view of Trump is conditional and awaits evidence. I am encouraged by the One Percent’s opposition to Trump, or we have just experienced the greatest ruse in history. Indeed, a pointless ruse, as the Establishment had its candidate in Hillary.
Trump’s executive orders don’t support the argument that he is acting for the One Percent. Trump nixed the global corporations’ beloved TPP. He is trying to close down the mass immigration that the corporations use to suppress domestic wage rates. He is committed to normalizing relations with Russia, much to the discomfort of the neoconservatives and the military/security complex.
As for Mnuchin, he left Goldlman Sachs in 2002, the same year that Nomi Prins left Goldman Sachs. That was 14 years ago. We know for a fact that Nomi, a former managing director, is not an operative for Goldman Sachs, so my position is to wait and see what Mnuchin does before we declare him to be a Goldman Sachs agent. For a different view see Nomi Prins in the Guest section of this website.

This post was published at Paul Craig Roberts on January 31, 2017.