FX Traders Have To (Re)Learn A New Skill

Dear FX traders: forget the dot plot, and prepare to learn a new – or to some forgotten – skill: how to read trade flows.
As Bloomberg’s Vincent Cignarella and Andrea Wong point out, currency traders accustomed to analyzing the Fed’s dot plot and monthly U. S. jobs figures to predict the direction of the world’s reserve currency are having to learn, or in some cases re-learn, a largely forgotten ability: how to scrutinize trade data. With protectionism, border tax, VAT and trade wars the buzzword of the day, suddenly international trade is all that seems to matter, and yet “It’s been decades since investors gave significant thought to the data amid easing trade tensions.”
What’s more, traders will have to learn to think small again – the flows represent a drop in the bucket for a currency market where about $5 trillion exchanges hands every day. In a world of $4 trillion central bank balance sheets, a syplus measured in billions may seem like an anachronism, but it suddenly matters a lot.
With the dollar near a 14-year high and Donald Trump accusing countries including China and Japan of keeping their currencies weak to gain trade advantages, Cignarella writes, the risk is any widening in the U. S. trade deficit may prompt a reaction from the president and spur a dollar selloff. Indicatively, on Friday, Trump was quiet after China’s monthly trade surplus with the U. S. slipped to a seven-month low of $21.4 billion.

This post was published at Zero Hedge on Feb 10, 2017.

Market Talk – February 10, 2017

Asia benefited from new record highs in the US and really set the pace for the end of the week. The Nikkei was certainly the star performer adding 2.5% on the day taking the index to 19,400 with many talking the psychological 20k is next weeks target number. The JPY suffered against the USD falling to the mid 113 level with attempts made late in US trading at the 114 handle. In China’s Export numbers saw the release better at 7.9% against an estimated 3.3% while Trade Balance came in at $51.35bn against an estimated $47.9bn. The CNH (off-shore) was last seen around the 6.8700 late in US trading. In cash we saw the Shanghai close 0.5% while the Hang Seng added just small closing 0.2%.
Europe had many rumours early in the session but most concerns fears of credit rating downgrades. Much talk surrounded France and Italy given their country’s bond market performance and the ongoing talk around political uncertainties. Which many still discussing the US infrastructure talk we understandably saw basic materials perform along with the US Dollar. All this talk helped energy prices with WTI gaining nearly 2% in Friday trading. If the globe were a yield curve traders would be selling the belly and buying the wings as this trend looks to be with us for a while. Europe closed mixed with many looking for inspiration.

This post was published at Armstrong Economics on Feb 10, 2017.

How The Flash Crash Trader Was Scammed Out Of A $50 Million Fortune

The sad saga of Navinder Sarao, who on April 20, 2015 became the scapegoat for the May 2010 flash crash and was sentenced to up to 360 years in prison – he will find out later this year the actual length of his prison sentence – got its latest twist today thanks to a fascinating report how in addition to having lost his freedom, Nav also lost all of trading fortune, some $50 million of it.
As Bloomberg’s Liam Vaughn recounts, “it took Navinder Singh Sarao a long time to accept that he might have been scammed out of $50 million. Stuck in London’s Wandsworth prison, wracked with anxiety and unable to sleep, the realization dawned on the man dubbed the ‘Flash Crash Trader’ as slowly as spring turned to summer outside the barred window of his jail cell.”

This post was published at Zero Hedge on Feb 10, 2017.

Recession Alert: Treasury Receipts Turn Negative For The First Time Since The Financial Crisis

On the surface, today’s monthly budget statement showed good news: in January the US Treasury brought in total receipts of $344 billion, versus outlays of only $293 billion, resulting in a surplus of $51 billion, substantially greater than the $40 billion expected (and well above last year’s $28 billion deficit), a surplus which however was largely due to a law requiring the IRS to delay sending out tax refund checks to household claiming certain tax credits. For the fiscal year through Jan.31, the total US budget deficit was $157 billion, and set to keep rising this year and for the foreseeable future.

This post was published at Zero Hedge on Feb 10, 2017.

RBC Warns “It’s The Melt-Up That Hurts”

After an outstanding start to the year for Equity hedge funds, this most recent gap move higher in stocks (while rates and FX remain firmly ‘in range’) is pretty-much exactly what RBC’s Charlie McElligott warned is a “bad scenario” for equities funds.
Risk-assets to fresh highs alongside a ‘reflation impulse’ re-rack (S&P eminis through their 1 year trendline resistance as we speak, while the early scan (revisions / updates coming later of course) of new positioning data shows a remarkable jump in TY (UST 10Y fut) open interest 70k (!) as shorts re-engage SIZE, h/t RBC Futures).
Inputs:
First-and-foremost, the Trump drive-by statement on a ‘phenomenal’ tax plan to purportedly be released in the next ‘two or three weeks’ satiates the market’s primary desire for clarity and positive-messaging on the tax cuts and how they are going to be funded to keep them ‘rev neutral’ (BAT? VAT? Cash flow taxation? No interest deduction? A replacement of ‘amortization of cap goods’ by instead a deduction of ‘capital purchases’? Have House and Senate somehow shockingly ‘aligned’ after being so ‘apart’ on this topic?) As a reminder, the tax cuts are by far-and-wide the largest driver of the S&P target upgrades that daisy-chained Street-wide in December.

This post was published at Zero Hedge on Feb 10, 2017.

Weekend Reading: Fed Up

Submitted by Lance Roberts via RealInvestmentAdvice.com,
As discussed yesterday, the markets have been quiet. Too quiet. That makes me worry as generally when volatility resurfaces it has not been kind to investors in the short-term.
But despite the lack of volatility in the market, the S&P eclipsed 2300 yesterday breaking through the psychological barrier on its continued quest towards 2400.

This post was published at Zero Hedge on Feb 10, 2017.

Gold: What You’re Not Being Told…

There’s been plenty of virtual ink spilled about the most contentious metal on Earth – that ‘barbarous relic’ we know as gold.
Consequently, much is now commonly known about the Midas metal.
To name a few fun facts…
Gold melts at 1064.43 degrees centigrade, can conduct both heat and electricity and never rusts.
It was considered by ancient Egyptians as the ‘skin of the Gods.’
It has been discovered on every continent on Earth.
It’s so pliable, it can be made into sewing thread and a single ounce of golden thread can be stretched up to 50 miles.
It’s so rare that the world pours more steel in an hour than it has poured of gold in all of recorded history.

This post was published at Laissez Faire on Feb 10, 2017.

Demise Of The American Farmer Reflects The Demise Of The Middle Class

Too much debt, poor capital allocation decisions (McMansions, expensive leased cars, spending to ‘keep up with the Jones’) and declining disposable income. It’s hitting the general middle class in America similarly to the way in which it is hitting the American family farmer.
The Wall Street Journal posted an article titled, ‘The Next American Farm Bust Is Upon Us’ earlier this past week. The bubble in farm land, just like the general real estate bubble, was precipitated by the Fed’s money printing and general easy money policies. The cover story was that the policy was directed at stimulating economic activity. But the actual result varies, with banks, corporations and ultra-wealth elitists benefiting to the detriment of the rest of the country.
A friend and colleague of mine who happens to be a wheat farmer shared with me his real life experience with trying to compete against the Monsanto-driven corporate farms in this country. He’s working to move the production of his farm from wheat to industrial hemp but will need legislative help in his State to accomplish this:
Where some farmers get in trouble is spending too much for new equipment, and/or not fertilizing enough (or at all)… and/or not being good farmers in general.

This post was published at Investment Research Dynamics on February 10, 2017.

Daniel Tarullo, Fed’s “Regulatory Point Man”, Unexpectedly Resigns

Last October, as part of the Podesta email leaks, we disclosed the particularly close relationship between Fed governor Dan Tarullo and Barack Obama, which emerged as part of a previously undisclosed memo involving the AIG bailout. We speculated that as a result of this now public disclosure it was possible that Tarullo’s days at the Fed were numbered should Donald Trump win the election. Trump won, and moments ago Dan Tarullo unexpectedly announced that he is resigning in early April, just days after the Fed’s general counsel Alvarez also announced that he is departing the Fed.
What makes Tarullo’s resignation particularly notable is that Tarullo has been the Fed’s “regulatory point man” since 2009, suggesting some regulatory friction has emerged.
In light of Trump’s vow to crush Wall Street regulations, one can see why Tarullo thought his services are no longer necessary.
Tarullo’s brief resignation letter to Fed Chairwoman Janet Yellen didn’t give a reason for his departure. He said he has been privileged to serve at the Fed for eight years. The letter said his resignation will take effect ‘on or about’ April 5.
As the WSJ further notes, “Tarullo’s future has been a matter of debate in the financial sector. He was appointed by President Barack Obama in January 2009 and overhauled the way the Fed oversees the largest U. S. banks.

This post was published at Zero Hedge on Feb 10, 2017.

FEB 10/SILVER THE STAR OF THE DAY UP 19 CENTS/GOLD DOWN ONLY 70 CENTS WITH A FAILED CARTEL RAID/TRUMP AGREES WITH CHINA’S ONE CHINA POLICY/COURT OF APPEALS RULE AGAINST TRUMP AS HE GOES BACK TO T…

Gold at (1:30 am est) $1234.40 DOWN $0.70
silver was the star of the day: $17.19: UP 19 cents
Access market prices:
Gold: $1234.00
Silver: $17.96
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:
FRIDAY gold fix Shanghai Shanghai FIRST morning fix Feb 10/17 (10:15 pm est last night): $ 1235.90
NY ACCESS PRICE: $1225.00.60 (AT THE EXACT SAME TIME)/premium $10.90

This post was published at Harvey Organ Blog on February 10, 2017.

Has The “Fade The Trump Trade” Ended?

Submitted by Kevin Muir via The Macro Tourist blog,
Remember last month when everyone was hot and bothered about all the TRUMP trades? Whether it was long Russell 2000 futures, short bonds, long US dollar or short gold, most market participants were busy extrapolating the violent market moves months into the future. You were deemed an idiot if you didn’t buy into the ‘Trump will fix everything’ mantra. Even supposedly long term investors like Warren Buffett were busy chasing the stock market higher.
At that time I created a volatility weighted TRUMP basket of those four trades (long small caps & US dollar while short bonds & gold) that I viewed as the poster children of Trumphoria. In early January I warned this TRUMP basket was already acting poorly and might have bad news written all over it.
How has it done since then? Well, it has continued to drift lower. It even hit new lows for the corrective move yesterday.

This post was published at Zero Hedge on Feb 10, 2017.

THE GREAT PRECIOUS METALS MARKET DISCONNECT: A Ticking Time Bomb

The Great Precious Metals Market Disconnect that took place four years ago is now a ticking TIME BOMB. While the Fed and Central Banks have been relatively successful in propping up the broader stock, bond and real estate markets, time is not on their side. The more the highly inflated markets continue higher, the more breath-taking will be the inevitable collapse.
Now, I am not just pandering hype here, there is plenty of data to support the evidence that the precious metals suffered a serious disconnect from the broader markets in 2012 and continue to be held down like a coiled spring. One of my readers forwarded me this excellent chart which shows this perfectly.

This post was published at SRSrocco Report on February 10, 2017.

The most successful investment strategy in the world

Education is a BIG part of a having a Plan B… especially when it comes to money.
In light of the obvious risks that we discuss on a regular basis, safeguarding (and growing) our savings is absolutely critical.
Finance can be a little bit scary and seem quite complicated at first.
No one comes out of the womb a financial expert. And they certainly don’t teach this stuff in a government-controlled public school system.
But just like speaking a foreign language or learning to drive, knowing how to properly manage money is a SKILL.
And it’s one that can be learned. By ANYONE.
The difference between knowing versus NOT knowing how to manage money can have an EXTRAORDINARY impact on your life.

This post was published at Sovereign Man on February 10, 2017.

US Rig Count Rise Continues: What Will OPEC Do If The Market Doesn’t Rebalance?

EIA confirmation of OPEC cut-compliance is trumping the dismal inventory data and surging US production for now. However, as US oil rig counts continue to rise ( 8 to 591 – highest since Oct 2015) with US crude production charging ahead with it, the question many should be asking (given all-time record high net long speculative positioning in WTI/Brent) is “what will OPEC do if the market doesn’t rebalance?”
The rise in rig counts has been all Permian and all horizontal. Oil rig counts rose 8 this week to 591 – the highst since Oct 2015

This post was published at Zero Hedge on Feb 10, 2017.

Tarullo Bails!

The WSJ is reporting that Daniel Tarullo has submitted a resignation letter and will be departing the Fed Board in early April. This is an interesting resignation in light of the recent regime change in Washington. One narrative of the Trump administration has been “deregulation.” The WSJ notes that one of the two (now three) vacancies on the Fed Board is the vice chairman position, which is “in charge of bank oversight.” Tarullo took up the regulatory tasks in the absence of the chairman.
Tarullo is an Obama appointee, whose term is not supposed to expire for another 5 years. But since he had become the go-to man for regulatory matters and Trump is expected to pick his own preference for the vice chairman position, there was likely to be a budding conflict within the Fed. His exit creates a much simpler environment for the Trumpians to pursue their goals. Whether or not there is actual deregulation or another government sham under the label of deregulation remains to be seen. What is important is the extent of the regime change.
This news comes on the the heels of another Fed man – general counsel Scott Alvarez – who made his own retirement announcement earlier this week. Alvarez has a long history at the Fed, but most relevant to the deregulation theme is this from a WSJ piece several years ago:
He was at the center of efforts to stabilize the financial system in 2008, and has fiercely defended the Fed’s role and its authority to provide support for big banks during the crisis. Mr. Alvarez also has played a key role in writing the new rules implementing Dodd-Frank, which was aimed at protecting the system from future crises.

This post was published at Ludwig von Mises Institute on Feb 10, 2017.