What’ll Happen to US Commercial Real Estate as Chinese Money Dries Up?

See Manhattan.
In the second quarter in Manhattan, Chinese entities accounted for half of the commercial real estate purchases with prices over $10 million. By comparison, in 2011 through 2014, total cross-border purchases from all over the world (not just from China) were in the mid-20% range.
‘At a time when domestic investors have pulled back, foreign parties have ramped up their holdings in Manhattan,’ according to Avison Young’s Second Quarter Manhattan Market Report.
This includes the $2.2 billion purchase in May of 245 Park Avenue by the Chinese conglomerate HNA Group, the sixth largest transaction ever in Manhattan. And at $1,282 per square foot, it was ‘among the highest price per pound for this type of asset.’
The purchase of the 45-story trophy tower is being funded in part by money borrowed in the US via a $508 million loan from JPMorgan Chase, Natixis, Deutsche Bank, Barclays, and Societe Generale, according to CommercialCaf. The rest is funded by HNA’s other sources, presumably in China.
The influx of Chinese money and the propensity by Chinese companies to hunt down trophy assets have propped up prices in Manhattan. And yet, despite the Chinese hunger, total sales volume has plunged, according to Avison Young:

This post was published at Wolf Street by Wolf Richter – Jul 17, 2017.

New York Attorney Demands To See Manafort’s Bank Records Over $16 Million Loan

In what should have probably been the first action in the investigation of former Trump campaign chairman Paul Manafort, WSJ reports that New York prosecutors have decided to ‘follow the money‘, demanding records relating to up to $16 million in loans from a bank run by a former campaign adviser for President Trump.
As a reminder, in mid-April, federal investigators requested Mr. Manafort’s banking records from Citizens Financial Group, the Journal previously reported, but now…

This post was published at Zero Hedge on Jul 17, 2017.

Guess What Happens In States Where Food Stamp Recipients Have To Work

Leftists are constantly reminding of us of the merits of welfare. They tell us that without the help of taxpayer funded handouts, millions of Americans will starve or be left homeless. There’s no doubt that some people really do need help, but this black and white view of welfare doesn’t paint the full picture. Conservatives and libertarians have suspected for decades that many of the people on welfare are actually mooching off of the system. So to reconcile the need to help people who are helpless with the very really problem of people abusing the system, they’ve come up with a great compromise.
In regards to food stamps, they’ve suggested that we offer food assistance on the condition that the recipients are working. Or at the very least, that they volunteer or community service or are making an effort to train themselves for a new job. So what happens in states that have work requirements for food stamp recipients?

This post was published at shtfplan on July 17th, 2017.

30-Year EM Veteran Fears “The Most Illiquid Market Conditions I’ve Ever Seen”

Low market volatility spurred a ‘torrent’ of capital flows into emerging-market debt, reflecting investor complacency and ‘excessive risk taking,’ Bank of America Merrill Lynch strategists led by David Hauner in London wrote in a report last week. He warned that the second half of the year should bring challenges for lower-rated issuers as higher interest rates in the U. S. reduce some of the appeal of junk credits with relatively steep interest rates.
‘The market is at a point where we haven’t hit a real bump in the road to wake everyone up.’
And they are not alone. Since entering the world of emerging markets nearly three decades ago, Robert Koenigsberger, who oversees $6 billion as chief investment officer at Greenwich, Connecticut-based Gramercy Funds Management, has seen more than his share of changes. One of the most consequential, BloombergQuint.com reports, is the migration of allocators from hedge funds to exchange-traded and mutual funds in recent years.
That’s effectively made ETFs one-day liquidity vehicles, versus the 90-day instruments leveraged funds typically offer, which, as Koenigsberger explains simply means:

This post was published at Zero Hedge on Jul 17, 2017.

Have Bundesbank Agents Infiltrated the Fed?

Germany’s central bank is the Bundesbank. Prior to the commencement of trading of the euro in January 1999, the Bundesbank conducted Germany’s monetary policy. The Bundesbank has a reputation for pursuing general price-level stability above all else. You might say that the Bundesbank has inflation phobia. The reason for this Bundesbank inflation phobia is the remembrance of the hyperinflation Germany experienced between World Wars I and II. Given the US central bank’s recent actions, it would almost seem that the Fed has developed inflation phobia too.
Although the US does not have general price-level stability, the rate of change of the consumer price index (CPI), no matter how you slice or dice it, is absolutely low. This is illustrated in Chart 1. Plotted in Chart 1 are the 12-month percentages changes in monthly observations of various CPI measures – the CPI including all of its goods/services items, the CPI excluding its energy goods/services items and the Cleveland Fed’s 16% trimmed-mean CPI. The 16% trimmed-mean CPI eliminates components showing extreme monthly price changes. Eight percent of the weighted components with the highest and lowest one-month price changes are eliminated and the mean is calculated from the remaining components, making the 16% trimmed- mean CPI less volatile than either the CPI or the CPI excluding prices for energy goods/services. In the 12 months ended June 2017, the percentage changes in the CPI with all items, the CPI excluding energy items and the 16% trimmed-mean CPI were 1.6%, 1.6%, and 1.9%, respectively. Moreover, the 12-month percentage change in the CPI, no matter how you measure it, has been trending lower since the first two months of 2017.

This post was published at FinancialSense on 07/17/2017.

Are Silver Prices Going Higher After Last Week’s 3.3% Rebound?

Silver prices are proving resilient once again, despite closing last week with a sell-off after silver’s latest ‘flash crash.’ Silver prices still managed to post a 3.3% weekly gain from the $15.37 close on Friday, July 7, to $15.88 on Friday, July 14.
Aided by more dovish-than-expected statements from Federal Reserve Chair Janet Yellen and a drop in the U. S. Dollar Index (DXY) from 96 to 95.13 last week, silver seems to have bottomed out. The 3.3% rise last week came after the silver price fell on July 7 to its lowest level since April 8, 2016.
That recent bout of weakness for the price of silver also caused a spike in the gold/silver ratio. So far this month, the ratio is up 3.8%, from about 74.72 to 77.58. This means it now takes 77.58 ounces of silver to purchase one ounce of gold – an indication that the silver price is very cheap right now. Cheap silver typically entices investors to buy in, which would lead the silver price higher this year.
This supports my view that those holding their silver positions will be rewarded with double-digit returns in the coming months. That’s why I’m going to share my 2017 silver price prediction with you today.

This post was published at Wall Street Examiner on July 17, 2017.

‘Investors’ Haven’t Bought Tech Stocks Like This Since Bernanke Hinted At QE2 In 2010

Investors piled $2.7 billion into QQQ (the benchmark ETF tracking the Nasdaq 100 Index) in the five days through July 14 as shares in the fund posted their biggest advance this year.
As Bloomberg notes, the biggest weekly inflow since September 2010 came as the tech-heavy index – with megacaps Apple, Amazon, Facebook, and Alphabet among its largest members – rebounded to within 1 percent of its record high.

This post was published at Zero Hedge on Jul 17, 2017.

Fundamentals Point to Bullish Future for Silver

Peter Schiff isn’t alone in saying silver is extremely undervalued right now. In fact, one analyst believes silver offers a ‘once-in-a-decade opportunity.’
In a report published at MarketWatch, Investing Haven lead analyst Taki Tsaklanos said investors need to look at silver’s fundamentals.
We are bearish for 2017. But essentially, we see a once-in-a-decade opportunity in the gold and silver market.’
Analysts say basic supply and demand will drive the silver market in the future. Total silver mined in 2016 fell by 0.6% to 885.8 million ounces. Silver scrap supply fell to 139.7 million ounces in 2016, despite higher silver prices. It was the first decline in overall silver production since 2002.
Gold Forecaster founder Julian Phillips told MarketWatch silver supply in 2016 was dropped to its lowest since 2013, silver production was down last year for the first time in 14 years, and the market saw a supply deficit for a fourth year in a row in 2016.
Silver ignores its fundamentals or it would be now climbing.’

This post was published at Schiffgold on JULY 17, 2017.

Stocks and Precious Metals Charts – No One Sees, No One Knows

“It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud. The behaviour that caused the mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of this pattern, rather than some kind of economic accident…And yet none of this conduct has been punished in any significant way.”
Charles Ferguson, Inside Job
‘The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true. It really happened. These suspicions are valid.’
Neil Barofsky
“The historical evidence is overwhelming. Many societies have done well for a while – until powerful people get out of hand. This is an easy pattern to see at a distance and in other cultures. It is typically much harder to recognize when your own society now has an elite less subject to effective constraints and more able to exert power in an abusive fashion. And given the long history of strong institutions in the United States, it appears particularly difficult for some people to acknowledge that we have serious governance issues that need to be addressed.”
Simon Johnson

This post was published at Jesses Crossroads Cafe on 17 JULY 2017.

Brodsky: This Is A Red Flag Warning

Red Flag Warning
Two identifiable dynamics may signal significant market shifts imminently:
1. The US debt ceiling will be debated soon and signs point towards a messy outcome.
2. Recent economic data have been weak, confirming our thesis that US economic growth is slowing and will not be reversed until a recession is acknowledged.
Debt Ceiling
Excessive debt has a way of catching up with people and institutions, and the first true test for the US government may be at hand. Congress was expected to raise the debt ceiling by October or else Treasury could not fund all the government’s programs and current obligations. Yet talk of Trump tax reform in 2016 may have given taxpayers incentive to defer their liabilities. As a result, Treasury received about 3 percent less in revenues than expected, accelerating the timetable to debate and raise the debt ceiling. Progress on raising the ceiling will unlikely be made in August, as Congress is in recess.

This post was published at Zero Hedge on Jul 17, 2017.

Stockholm Syndrome – Precious Metals Supply and Demand

Hostages of Irredeemable Scrip
Stockholm Syndrome is defined as ‘…a condition that causes hostages to develop a psychological alliance with their captors as a survival strategy during captivity.’ While observers would expect kidnapping victims to fear and loathe the gang who imprison and threaten them, the reality is that some don’t.
There is a loose analogy between being held hostage and being an investor in a regime of irredeemable paper currency and zero interest rates. In both cases, the victim has little hope of escape and must seek to somehow survive under malevolent conditions.
Key behaviors displayed by victims of Stockholm Syndrome are positive feelings for their captors, a refusal to work with law enforcement afterward, and even a belief in the humanity of the terrorists.
Key behaviors of investors today show eerie parallels: a desire to bid on dollars with their assets, a refusal to support the gold standard, and even a belief that the dollar is money. This last always shows when someone – even a gold bug – says gold is going up, or gold is the best performing currency, or gold has good returns.
These words up, performance, and returns indicate that the victim accepts the dollar as money, the dollar as the measure of value, the dollar as the unit of account. The victim seeks to view gold in terms of his captor’s paradigm. Much like the kidnapping victim seeks to understand his capture and even geopolitics in terms of his captor’s world view.

This post was published at Acting-Man on July 17, 2017.

JULY 17/GOLD RISES $4.20/SILVER UP ANOTHER 17 CENTS/GLD LOSES ANOTHER 1.77 TONNES DESPITE GOLD’S GAIN!!/CHINESE SMALL CAPS CRASH LAST NIGHT/ITALY CANNOT HANDLE ANY MORE MIGRANTS: GIVES THE EU AN …

GOLD: $1234.50 UP $4.20
Silver: $16.13 UP 17 cent(s)
Closing access prices:
Gold $1234.50
silver: $16.13
SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)
SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
SHANGHAI FIRST GOLD FIX: $1241.75 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1231.60
PREMIUM FIRST FIX: $10.15
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SECOND SHANGHAI GOLD FIX: $1241.37
NY GOLD PRICE AT THE EXACT SAME TIME: $1231.00
Premium of Shanghai 2nd fix/NY:$10.37
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
LONDON FIRST GOLD FIX: 5:30 am est $1229.85
NY PRICING AT THE EXACT SAME TIME: $1230.45
LONDON SECOND GOLD FIX 10 AM: $1234.10
NY PRICING AT THE EXACT SAME TIME. $1234.45
For comex gold:
JULY/
NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH: 3 NOTICE(S) FOR 300 OZ.
TOTAL NOTICES SO FAR: 120 FOR 12000 OZ (.3732 TONNES)
For silver:
JULY
51 NOTICES FILED TODAY FOR
255,000 OZ/
Total number of notices filed so far this month: 2866 for 14,330,000 oz

This post was published at Harvey Organ Blog on July 17, 2017.

China’s Ghosts Are A Future Property

The term ‘ghost city’ is a loaded one, often deployed to skew toward a particular viewpoint. In the context of China’s economy, it has become shorthand for perhaps the largest asset bubble in human history. While that may ultimately be the case, in truth China’s ghost cities aren’t about the past but its future.
There is a great deal that is misunderstood about the country’s path toward urbanization and modernity. A lot of it is simply the scale; it is incomprehensible that 300 – 500 million people could be removed from rural subsistence to urban industry, and to do so in such a short period of several decades.
These are no John Maynard Keynes’ pyramids in the desert, or the stuffing of coal mines with sacks of gold to be dug up. In other words, strictly speaking the ghost cities are not ‘stimulus’ for a Chinese economy on the slowdown to get back up. They are the intersection of idiosyncratic factors with these enormous demographic challenges.
For example, only the government can own land in China. What is ‘owned’ in the real estate market is the right to ‘land use.’ And it is a temporary one, typically only two years. Therefore, since the property is owned by the state, meaning there are no real estate taxes, and you only have a short period of time to do something, there is every incentive to build right now and wait for demand to catch up for however long that might take. In China, there is always a potential ocean of demand.

This post was published at Wall Street Examiner on July 17, 2017.

People Buy Payments (Or Why Rates Can’t Rise)

Debt drives rates lower….not higher. Debt is deflationary. See chart below and read this: pic.twitter.com/tM2a5BrIiO
— Lance Roberts (@LanceRoberts) July 14, 2017

This past week, the lovely, and talented, Danielle DiMartino-Booth and I shared a discussion on the ongoing debate of why ‘Rates Must Rise.’
For the last several years, I have produced a litany of commentary (see this, this and this) on why rates WILL not rise anytime soon, they CAN’T rise because of the relationship between debt and economic activity.
Most of the arguments behind the ‘rates must rise’ scenario are based solely on the premise that since ‘rates are so low,’ they must now go up. This theory certainly applies to the stock market which is driven as much by human emotion, as fundamentals. However, rates are an entirely different animal.
Let me explain my position using housing as an example. Housing is something everyone can understand and relate to, but the same premise applies to everything bought on credit.

This post was published at Zero Hedge on Jul 17, 2017.

The Credit Cycle Has Shifted, The Last Time We Saw This You Know What Happened – Episode 1334a

The following video was published by X22Report on Jul 17, 2017
Canadian existing home sales crash in June. Sear Canada pays out huge bonuses while laying off workers. Millennials are leaving Illinois in droves. Auto defaults soar and so do delinquencies. Companies complain they can’t find qualify employees but wages continue to drop. NY Fed Manufacturing tumbles. Banks are pulling the plug, credit is shifting and loans origination’s are stalling. Trump cuts the White House budget and the central bankers are getting very worried about what Trump is doing in regards to the banking sector.
All source links to the report can be found on the x22report.com site.

BNP Fined $246MM After Its Traders Were Found To Still Use Chat Rooms To Rig FX Trading

Two months after the Fed fined Deutsche Bank a paltry $157 million for manipulating currency markets after the German bank’s traders were found to be using “chat rooms” to rig FX trading, we learn that there was more gambling going on here, and on Monday the Fed announced that it will fine French BNP Paribas $246 million “for the firm’s unsafe and unsound practices in the foreign exchange (FX) markets.”
According to the press release, the Board levied the fine “after finding deficiencies in BNP Paribas’s oversight of, and internal controls over, FX traders who buy and sell U. S. dollars and foreign currencies for the firm’s own accounts and for customers.” And, not surprisingly we once again find that FX rigging was confined chat rooms:
“The firm failed to detect and address that its traders used electronic chatrooms to communicate with competitors about their trading positions. The Board’s order requires BNP Paribas to improve its senior management oversight and controls relating to the firm’s FX trading.”
Perhaps one day the Fed will realize that as long as its keep settling for paltry amounts that are a fraction of how much the banks make by violating the rules (and yes, participating in chat rooms), this type of behavior will never end. That day won’t be today.
In its complaint, the Fed notes that during the Review Period:

This post was published at Zero Hedge on Jul 17, 2017.

Lies, Damned Lies, and Statistics

Economics and finance are thought to be more predictable than other disciplines such as politics because they are quantifiable. This is debatable. The extent to which quantitative economic analysis is possible depends on the relationship between the number and reality. That there is a relationship is true, but the relationship is more tenuous than might be thought.
I am not talking about the possibility that economic statistics are manipulated for political reasons. This is certainly the case in some countries like China but less so, in my opinion, in Europe and the United States. But I want to put aside that theory and examine the validity of data assuming that everyone, everywhere, was honest.
Before we begin, a question…
Do you know how to separate the signal from the noise? It’s one of the most useful abilities a person can possess. But it’s also one of the hardest to acquire in the age of big data, big media bias, and the Internet, the biggest communication platform we’ve ever had. Reality gets diluted by the surreal.
Cutting through the noise to find insight and value is what has made Warren Buffett one of the most successful investors the world has seen. It’s what we strive to do here at Geopolitical Futures as well.

This post was published at Mauldin Economics on JULY 17, 2017.

When A “Black Swan” Will No Longer Do: China Warns Beware The “Gray Rhino”

Early this morning, we discussed the unexpected tumble in the Chinese small-cap stock index, the ChiNext, will plunged by over 5%…

… as a result of growing concerns that a new round of deleveraging is about to be imposed by Beijing following the conclusion of China’s 5th National Financial Work Conference (NFWC), which was attended by president Xi Jinping, and set the agenda for critical financial reforms over the coming years. As the People’s Daily noted on Monday:
The meeting, presided over by President Xi Jinping, was held against the backdrop of growing enterprise debt, an overheating real estate market, and overcapacity in such sectors as low-end manufacturing.

This post was published at Zero Hedge on Jul 17, 2017.

Bi-Weekly Economic Review: Attention Shoppers

The majority of the economic reports over the last two weeks have been disappointing, less than the consensus expectations. The minor rebound in activity we’ve been tracking since last summer appears to have stalled. Retail sales continue to disappoint and inventory/sales ratios are once again rising – from already elevated levels. Even the positive reports were clouded by negative undertones. So far though our market based indicators have not deteriorated sufficiently to create any urgency when it comes to recession.
The US economy started to rebound some last summer, something we noted through our observation of market based indicators. Interest rates started moving higher, the yield curve steepened and real interest rates rose, all before anyone had an inkling that Donald Trump would be moving into the Oval Office. The election did accelerate those trends but they were really based on an inflection in real economic activity that preceded the election. Many of our market based indicators peaked around the beginning of the year but some continued to show high expectations for the US economy well into the new year. The 10 year Treasury note yield, for instance, peaked in mid-December but didn’t really break down until spring.
As you can see, we have seen a recent rebound in yields, based primarily on optimism about the global economy. There seems to be some expectation that better growth outside the US will also be positive for growth within our own borders. There is probably some truth to that but you’d have a hard time proving it by the high frequency economic data released recently.

This post was published at Wall Street Examiner on July 16, 2017.