An Economic Showdown Is Looming

The Keynesians and the Capitalists are heading for an economic showdown at the O. K. Corral.
Keynesians believe the central government should control the economic levers affecting the masses. The economy can’t be entirely left up to the free market. Big government believers want the ‘leaders’ determining the winners and losers. Controlling reallocation of wealth preserves the power of the political class. Using tax dollars to garner votes has turned into an art form.
George Bernard Shaw said, ‘A government that robs Peter to pay Paul can always depend on the support of Paul.’
US Governmentspending.com ‘guesstimates’ 2017 spending on welfare and Medicaid will top $1.127 trillion. While the welfare class grows, Peter is working his butt off and sees a lot of his hard earned money wasted.

This post was published at Zero Hedge on Feb 15, 2017.

Whatever Happened to Inflation after All This Money Printing? It Has Arrived!

Workers, bondholders, savers get sacked. So what would Yellen do?
Consumer prices surged 0.6% in January from December, double the consensus forecast of a 0.3% rise. The sharpest monthly increase since February 2013, according to the Bureau of Labor Statistics.
Energy prices jumped 4% month over month, including gasoline which jumped 7.8%. Food prices edged up 0.1%. Within this group, ‘food at home’ was unchanged, but prices for ‘food away from home’ – restaurants, taco trucks, and the like – rose 0.4%. In just one month, the prices of apparel rose 1.4%, of new vehicles 0.9%, of auto insurance 0.8%, of airline fares 2.0%. Shelter rose ‘only’ 0.2%, as the national numbers are now feeling the downward pressure on rents in some of the most expensive rental markets in the US.
This chart shows just how sharp that jump in monthly price increases is, compared to recent years:

This post was published at Wolf Street by Wolf Richter ‘ Feb 15, 2017.

Trump Utters The Magic Word (Again) And The Dow Surges Above 20,600 (Despite VIX Spike)

Apologies for earlier error in title.
Surging inflation, plunging real wages, jumping mortgage delinquencies, and record crude and gasoline inventories… then Trump drops the ‘t’ word and the market melts up…
Intraday, March rate-hike odds hit 46%, seemingly surging off “off the table” levels before the week began…

This post was published at Zero Hedge on Feb 15, 2017.

Fed Up

Today’s Outside the Box is a special treat. My good friend and fellow Texan Danielle DiMartino Booth’s new book, Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America, was out officially yesterday, on Valentine’s Day, and already there are dozens of reviews all over the internet.
Ten years ago, Danielle left a trading gig on Wall Street to work directly for Dallas Federal Reserve President Richard Fisher. She helped him gain insights into the economy and aided in crafting his speeches and writings. Those of us who knew her knew that she was a gifted writer; and when Fisher resigned and Danielle left the Fed, she started her own website and newsletter; and now her talent is apparent to many more people. She is the third most followed person on LinkedIn, after less than a year.
And then we come to her book. It’s a simply devastating account of what actually goes on inside the Federal Reserve. To say she eviscerates that august institution is to be kind. I saw her treatment of the Fed coming, because Danielle and I have shared many conversations in which we despaired of the impact the Federal Reserve is having on Main Street. But what do you expect when you have a bunch of PhDs who share an economic philosophy and an attitude that lets them think they know just how to manage the US economy and control the price of the most valuable commodity in the world, the interest rate on the US dollar.
That low rates devastate middle-class savers and retirees (as they enrichen Wall Street and the big banks) seems not to register on the Fed’s cost-benefit analysis scale. I think longtime readers pretty well know how I feel about the Federal Reserve and their policies.

This post was published at Mauldin Economics on FEBRUARY 15, 2017.

The Selling Ends: Foreign Central Banks Buy The Most Treasuries In Over Two Years

Over half a year after we first reported last August that foreign official institutions – central banks, sovereign wealth funds and reserve managers – are liquidating US Trasuries in record amounts, a process that only accelerated into last month when official entities sold a record $405 billion in US paper in the LTM period, Bloomberg decided to catch up to the topic with “America’s Biggest Creditors Dump Treasuries in Warning to Trump.”
Well, not so fast, because as we also warned last month, based on more concurrent data from the Fed, showing Treasuries held in custody, the selloff most likely peaked in November, as December was a month in which foreigners were actively buying, not selling Treasuries.
Moments ago, data released by Treasury International Capital confirmed this, when it showed that in December after 12 consecutive months of selling by foreign official institutions amounting to $405 billion, in December the selling finally reversed, and foreign central banks added $18.6 billion in Treasuries, the single biggest monthly purchase of US paper since June of 2014….

This post was published at Zero Hedge on Feb 15, 2017.

Flynn-Russia-Trump-Markets!

Is the Flynn – Russia – Trump leaks – Russian missile ball of wax a distraction that is causing market agents to think more about other things than economic issues?
You bet.
When Congressman Kevin Brady (R-Texas) takes to doing interviews (CNN this morning) on national television and has to spend that time talking about the items listed above instead of about tax policy for US corporations and individuals, you know he’s being distracted. Brady is Chairman of the House Ways and Means Committee. The tax policy of the United States originates in his committee. The memo that outlines proposed tax strategies and rates is in the public domain only because he allowed it to be there (hat tip John Mauldin).
Read Bianco: Trump Will Bring More Inflation Than Real Growth
That memo suggests implementing an 8.75% repatriation tax that could bring one to two trillion foreign-housed dollars into the US (Cumberland Estimate). That money is owned by American corporations who park it abroad to avoid a 35% tax rate. Lower that rate to 8.75% and the impact is huge.
That memo also proposes a maximum personal tax rate of 33% and a lower tier of 25%. It further suggests a major revision in business taxation, with a top rate of 20%. The memo recommends altering capital investment treatment, reshaping the interest cost on debt, and preserving charitable deductions. It puts in place the framework for a large infrastructure expansion in the US, and it does NOT threaten the status of tax-free bonds that will be needed to finance the state and local government share of the infrastructure buildout.

This post was published at FinancialSense on 02/15/2017.

Janet Yellen Just Revealed Something Huge But No One Is Listening – Episode 1205a

The following video was published by X22Report on Feb 15, 2017
Mortgage delinquencies are on the rise. Corporate media reporting that retail are incredible in January, gas prices increased and inflation moved higher. Consumer prices surge at the fastest pace in 5 years. Industrial production declines and is at 10 month lows. GDP has been recalculated and is now down to 2.2%. The US is not in the top 10 for economic freedom. The markets are whispering something very important about inflation. Janet Yellen comes out and admits the economy is weak and don’t blame the Fed.

Yellen’s Speech Balances Stable Growth with Unstable Trump

Fed Chairwoman Janet Yellen testified before Congress today with a hawkish tone that sent gold prices downward and bond yields upwards prior and during her testimony. Gold spot prices were down around $11/oz. toward the end of Yellen’s testimony. The 10-year note rose to 2.5% from 2.43% while the 2-year note yield jumped to as high as 1.25 % from a low of 1.18% during her speech, according to CNBC.
Yellen’s comments strengthened the likelihood of interest rate increases for the foreseeable future, stating that ‘waiting too long’ would be ‘unwise’. She qualified her comments with the warning that raising rates too rapidly could ‘risk disrupting financial markets and push the economy into recession.’
But we’ve heard such data dependent, optimistic statements before. Last year’s rhetoric had a similar ring. Yellen’s strategy has always been to create just enough possibility of a rate increase to keep investors hopeful, but leave enough doubt to excuse the FOMC for not delivering. Even when the Fed delivers, as they did last December, a quarter point doesn’t even begin to approach normalizing rates. The economic woes of 2017 will more likely force the Fed to walk back their December hike rather than move forward with another.

This post was published at Schiffgold on FEBRUARY 14, 2017.

Here Is The “Catalyst” For The Market’s Inexplicable Surge: A $17 Billion Trade Gone Wrong

We have noted in the last few days the divergences between US equity and volatility markets and chatter of a major fund needing to liquidate positions. After today’s price action (and more color from trading desks) we are starting to see the ‘fingerprints’ of what appears to be a multi-billion dollar forced short cover, reportedly by Catalyst Funds’ Hedged Futures Strategy Fund (HFXAX), that has almost perfectly correlated with the linear surge in US stocks.
As RBC’s Charlie McElligott, who dug deeper into the details behind this move, notes the melt-up in the S&P is the result of “a purported / murky melt-down over the past week in a large trade by a multi-billion Dollar (open-ended) futures fund which sells vol on S&P. Without going into specifics, there is market speculation that the entity is effectively short upwards of ~$17B of SPX (deltas to buy) through selling February expiry upside 1×5 (or 1×4) call spreads.”
The trade was going well, until the S&P rose above 2,300. At that point the “convexity seemingly ‘kicked-in’ as witnessed by market participants, the short-gamma ‘take’ since has been nothing short of astonishing.”

This post was published at Zero Hedge on Feb 15, 2017.

FEB 15/ANOTHER HUGE 2.67 ‘TONNES’ OF GOLD ADDED INTO THE GLD/AGAIN NO CHANGE IN SILVER INVENTORY AT THE SLV/GOLD AND SILVER ADVANCE BY $7.80 AND 8 CENTS RESPECTIVELY/USA CONSUMER PRICES RAGING HI…

Gold at (1:30 am est) $1231.70 UP $7.80
silver was : $17.95: UP 8 CENTS
Access market prices:
Gold: $1233.50
Silver: $17.98
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:
WEDNESDAY gold fix Shanghai
Shanghai FIRST morning fix Feb 15/17 (10:15 pm est last night): $ 1242.67
NY ACCESS PRICE: $1226.50 (AT THE EXACT SAME TIME)/premium $16.17
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Shanghai SECOND afternoon fix: 2: 15 am est (second fix/early morning):$ 1241.83
NY ACCESS PRICE: $1224.70 (AT THE EXACT SAME TIME/2:15 am)
SPREAD/ 2ND FIX TODAY!!: 17.13
China rejects NY pricing of gold as a fraud/arbitrage will now commence fully
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London FIRST Fix: Feb 15/2017: 5:30 am est: $1225.15 (NY: same time: $1225.50 (5:30AM)
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London Second fix Feb 15.2017: 10 am est: $1224.40 (NY same time: $1224.80 (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.
end
For comex gold:
FEBRUARY/
NOTICES FILINGS FOR FEBRUARY CONTRACT MONTH: 1 NOTICE(S) FOR 100 OZ. TOTAL NOTICES SO FAR: 5124 FOR 512,400 OZ (15.937 TONNES)
For silver:
For silver: FEBRUARY
26 NOTICES FILED FOR 130,000 OZ/
TOTAL NO OF NOTICES FILED: 386 FOR 1,930,000 OZ
Let us have a look at the data for today
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
In silver, the total open interest FELL by A slight 752 contracts DOWN to 195,338 with respect to YESTERDAY’S TRADING. In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .977 BILLION TO BE EXACT or 140% of annual global silver production (ex Russia & ex China).
FOR THE NEW FRONT FEBRUARY MONTH: THEY FILED: 26 NOTICE(S) FOR 130,000 OZ
In gold, the total comex gold ROSE BY A WHOPPING 7,277 contracts DESPITE THE FALL IN THE PRICE GOLD ($0.50 with YESTERDAY’S trading ). The total gold OI stands at 415,128 contracts
we had 1 notice(s) filed upon for 100 oz of gold.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
With respect to our two criminal funds, the GLD and the SLV:
GLD:
We had another huge change in tonnes of gold at the GLD: a deposit of 2.67 tonnes despite the attempted whacking of gold today.
Inventory rests tonight: 843.54 tonnes
SLV
we had no changes in silver into the SLV
THE SLV Inventory rests at: 334.713 million oz

This post was published at Harvey Organ Blog on February 15, 2017.

Will Trump’s Tax Cut Happen in 2017?

The stock market has roared higher since the Trump tax cut plans were teased on Thursday, Feb. 9. Since then, the S&P 500 and Dow Jones Industrial Average have surged 1.5% and 1.8%, respectively. They’ve both closed at new all-time highs three sessions in a row.
But Trump’s tax proposal doesn’t warrant these stock market highs right now. That’s because his plans might not be implemented until late 2017 – at the earliest.
You see, President Donald Trump plans to make drastic changes to U. S. tax policy. In a nutshell, his tax cut plans primarily include…
Reducing the corporate tax rate significantly from its current 35% level to 15% Creating incentives for American businesses to keep operations in the United States Producing revenue of more than $1 trillion over the next decade to neutralize the deficit incurred from enforcing the legislation The biggest reason Trump’s tax plans are pushing markets through the roof is his proposed lowering of corporate taxes. When companies pay the government less money, they can hold onto more of their profits. This can obviously result in higher earnings and higher stock prices.

This post was published at Wall Street Examiner on February 14, 2017.

Fed Frets about Commercial Real Estate Bubble & its $2 Trillion in Loans Mostly at ‘Smaller Banks’

Fear of ‘waiting too long’ or of ‘having already waited too long?’
The fear of what Fed Chair Janet Yellen on Tuesday – and other Fed governors earlier – called ‘waiting too long’ before raising interest rates is increasingly inserting itself into Fed pronouncements. One of the aspects – and this is getting articulated with increasing intensity – is commercial real estate (CRE) and its impact on banks whose nearly $2 trillion in CRE loans are backed by collateral whose boom-prices are known to crash periodically in phenomenal busts.
Or is it the fear of ‘having already waited too long?’
Boom and bust: that’s the material CRE is made of. We had seven years of boom, and now the Fed is worried about the bust. Yellen didn’t mention CRE in her prepared testimony on Tuesday before the Senate Committee on Banking, Housing, and Urban Affairs. But it featured in the twice-yearly report that the Fed delivered to Congress in support of Yellen’s testimony.
And it wasn’t the first time that it was mentioned in these twice-yearly reports – but the fifth time in a row.

This post was published at Wolf Street on Feb 15, 2017.

2017: Euphoria…Then Panic

The stock market should see positive gains this year followed by a possible crash in the second half, technical market analyst Clif Droke says in his latest interview with FS Insider.
‘In the seventh year of most decades, we tend to see surprising strengths in equities, particularly in the period from March through July – that’s when the upside potential is best for stocks,’ Droke said.
However, he warns, what goes up must come down, and Droke expects a decline around October following a midsummer peak. In some Year 7 models, declining strength can sometimes result in a crash as well. He expects the market to ‘stick to the script’ in 2017.
Droke said the following in a recent note:
Crashes, mini-crashes, and panics are quite common in the seventh year (e.g. September 1987, October 1997, February/August 2007). It will do us well to keep this in remembrance as we enter what promises to be a year filled with tremendous opportunity for making money in the stock market – in both directions.

This post was published at FinancialSense on 02/14/2017.

Goldman Raises March Rate Hike Odds After January Inflation Spike

For those who said a March rate hike looks increasingly likely after today’s blistering CPI report, which saw inflation printing at the highest in nearly 5 years, you are not alone: moments ago Goldman’s chief economist agreed that the “firm CPI may bring forward next rate increase”, and said “as a result, we have revised up our subjective odds of a rate increase at the March FOMC meeting to 30% (from 20%), and now see it as a close call whether the committee raises rates over the next two meetings or waits until mid-year”

This post was published at Zero Hedge on Feb 15, 2017.

Obama Killed Our Economic Freedom: ‘Stagnation, Unemployment, and Deteriorating Social Conditions’

Anyone who feels like the American Dream is dead can now cite solid evidence of its abrupt end.
It seems that eight years of life under Comrade Obama was not only difficult economically, but was fiscally difficult for most American families because his administration had done so much to restrict economic freedom – until his time, a basic tenet of American life, and essential to fostering a vibrant economy in the middle and working classes.
A new set of rankings released by the Heritage Foundation in its 2017 ‘Index of Economic Freedom’ revealed that the United States has been on a continual decline over the past decade, and especially since the 2008 economic crisis. Slipping down to 17th among 180 countries, and losing ground yet again, the country that so often celebrates its shining liberty is considered to be only ‘mostly free.’
A wave of unprecedented government intervention cut deeply into both freedom and prosperity for millions upon millions of Americans; the reliance upon Federal Reserve QE programs to stimulate the economy has killed businesses, and made other reliant upon government ties to make profits (mainly at the top).

This post was published at shtfplan on February 15th, 2017.

Trader: “When Futures Are Down A Point Or Two Before The Open, I’m Asked What The Problem Is”

From the latest ‘Trader’s Notes’, authored by Richard Breslow, a former FX trader and fund manager who writes for Bloomberg
This was supposed to be the year traders were going to be hamstrung by political risk. When the late 2016 trends faltered in the new year, this was a common explanation for why. That theme has been swept away. Investors insist on living only in the here and now. After all, the bullets aren’t flying where they care.
How many times have you been asked how much of all this geopolitical risk is priced in? The simple answer is, not at all.
For every well publicized lottery ticket being bought on German yields collapsing after the French election, there are other traders buying euro upside believing the National Front can’t possibly get through the second round. And lottery tickets aren’t hedges. They don’t protect the mass of stacked trades being built up. At best they may provide a modest pricing buffer as everyone heads for the same exit

This post was published at Zero Hedge on Feb 15, 2017.

A Bloodbath Looms Over Oil Markets

Oil prices have traded reliably in the $50s per barrel since OPEC agreed to cut production last November, but having failed to break through a ceiling in the upper-$50s, crude prices are in danger of falling back again.
The oil market had wind in its sails on expectations of substantial drawdowns in inventories following the pending cut of a combined 1.8 million barrels per day (1.2 mb/d from OPEC plus nearly 0.6 mb/d from non-OPEC countries). Indeed, the IEA reports that oil inventories in OECD countries have declined for five consecutive months, although they still stand above the running five-year average. Meanwhile, in the U. S. oil inventories have actually increased significantly so far in 2017.
The shockingly high compliance rate that OPEC has thus far achieved this year, one would think, should have pushed oil prices up much higher. But crude prices have barely budged since several key market watchers, including S&P Global Platts, the IEA and OPEC, put out similar numbers that show OPEC countries have achieved a roughly 80 to 90 percent compliance rate, much higher than analysts thought would be possible from the contentious group. If OPEC took 1 mb/d off the market in January, why are prices struggling to move from the low- to mid-$50s?

This post was published at Zero Hedge on Feb 15, 2017.

Bitcoin, China, Trump and How To Protect From Financial Collapse – Jeff Berwick on Silver Doctors

The following video was published by The Dollar Vigilante on Feb 15, 2017
Jeff is interviewed by Elijah Johnson for The Silver Doctors, topics include: Bitcoin in China, free trade leads to prosperity, Chinese capital controls, China trying to slow Bitcoin adoption, capital flight, the crackdown on Bitcoin exchanges, Bitcoin regulations, a Bitcoin ETF could send Bitcoin’s price soaring, Bitcoin usage continues to rise, Trump continuing the foreign wars, global warming, the US economy, US debt and liabilities vs welfare programs, bank bail ins and insolvency, offshoring your assets, the upcoming TDV Summit and Anarchapulco