Did the Sub-Prime 2.0 Bubble Just Burst?

As you know, we’ve been tracking the sub-prime auto-loan industry closely.
Our view is that this industry represents the worst of the worst excesses of our current credit bubble, much as the subprime mortgage industry represented the worst of the worst in excess for the Housing Bubble.
For this reason, we refer to sub-prime auto-loans as Subprime 2.0.
As you no doubt recall, it was when housing prices rolled over in 2006 that the sub-prime mortgage industry began blowing up. After all, the only reason those loans were being made was because housing prices were going up. So once housing rolled over, it was only a matter of time before the sub-prime mortgage players blew up.
Well, the same thing that happened to housing in 2006 is now happening in automobiles: prices are rolling over. So the value of the underlying assets is now falling.

This post was published at GoldSeek on 3 August 2017.

Why Art Cashin Is Nervous: “10% Of The Dow Has Provided 50% Of The Gains”

From Art Cashin of UBS:
We’ve noted over the last two weeks that the Dow Industrials have been diverging from most other indices and particularly the Dow Transports. An important part of the divergence has been the relative narrowness of the rally in the Dow. In today’s WSJ, Justin Lahart took note of the narrowness:
Americans cheering the U. S. stock market’s latest milestone should pause to thank the rest of the world for making it possible. The Dow Jones Industrial Average breached 22000 Wednesday after rising more than 2000 points so far this year. Boeing counted for 563 points of that gain. About 60% of its sales come from overseas.
No. 2, contributing 283 points, is Apple, which gets two-thirds of its sales abroad.
No. 3 is McDonald’s, contributing 239 points; foreign sales count for about two-thirds of its total.
Indeed, while there are notable exceptions (hello, International Business Machines ), the greater the share of a company’s sales come from overseas, the better its stock has tended to perform this year.

This post was published at Zero Hedge on Aug 3, 2017.

The New Yorker Releases Audio Of Infamous Profanity-Filled Scaramucci Call

The New Yorker has released audio of the profanity-filled phone call between reporter Ryan Lizza and former White House communications director Anthony Scaramucci that helped lead to the latter’s firing.

Lizza on Thursday discussed the widely reported call with David Remnick, editor of the New Yorker. The two listened to excerpts from the Scaramucci conversation and analyzed what they said about the Trump administration.
Below is audio of the call and of Remnick’s segment with Lizza.

This post was published at Zero Hedge on Aug 3, 2017.

USD: Setting Up a Rip-Your-Face-Off Rally or in Freefall?

There’s not much to encourage Bulls in the daily chart of the USD.
The U. S. dollar’s relentless decline this year poses a question: is the USD setting up for a monster rally, or is it in a slow-motion crash? Opinions vary, of course, as to the possible reasons for the massive decline: European growth is better than expected, Trump’s presidency is going nowhere, the Federal Reserve won’t be raising rates, and so on.
The nice thing about charts is they summarize all these inputs into a snapshot. So let’s take a look at the daily and weekly charts of the USD.

This post was published at Charles Hugh Smith on Thursday, August 03, 2017.

India’s Economy Crashes After “Mind-Bogglingly Inane” Tax System Strikes Back

With just a hint of schadenfreude, we note that, following our discussion of “how to destroy an economy”, India’s Composite PMI collapsed to 46.0 in July – its lowest on record (well below the kneejerk lows after demonetization in November) as the “mind-bogglingly inane” new tax system and demonetization efforts continue to crush the poor and feed the wealthy.
As Goldman Sachs notes India’s Nikkei Markit services PMI contracted in July after reaching a 8-month high in June, following a decline of manufacturing PMI on Tuesday. The fall was led by a significant decline in new business, suggesting a worsened business sentiment after the GST implementation on July 1.
Main points:
India’s Nikkei Markit services PMI contracted to 45.9 (the lowest reading since September 2013). Combined with the manufacturing PMI reported on Tuesday, the July composite PMI fell to 46.0, the lowest reading since March 2009. Among subcomponents, the new business index fell the most to 45.2 (from 53.3 in June), reflecting disruptions caused by the GST. As the press release from Markit Economics mentioned, ‘Most of the contraction was attributed to the implementation of the goods & services tax and the confusion it caused”. The employment index for services fell to 48.9 (from 51.8 in June). That said, the index for business expectations rose to a 11-month high to 62.3, suggesting optimism from services providers about the future once they have more clarity about the new tax system.

This post was published at Zero Hedge on Aug 3, 2017.

Earnings Beat “Fist Pumps” Very Muted This Quarter

Via Global Macro Monitor,
Stephen Gandel of Bloomberg out with a good piece this morning on:
…shares of companies that have reported both better-than-expected profits and sales for the second quarter have barely budged this earnings season. It’s the least fist-bumping investors have done for great quarters in 17 years. – Bloomberg
Is this the beginning of a catch up trade?
Stocks rose during the recent earnings recesssion through P/E multiple expansion and this just may be the market allowing fundamentals to catch up with prices. Nah, that’s too rational.
Too much catching up to do as noted by Howard Marks comments below.
The S&P 500 is selling at 25 times trailing-twelve-month earnings, compared to a long-term median of 15. The Shiller Cyclically Adjusted PE Ratio stands at almost 30 versus a historic median of 16. This multiple was exceeded only in 1929 and 2000 – both clearly bubbles. While the ‘p’ in p/e ratios is high today, the ‘e’ has probably been inflated by cost cutting, stock buybacks, and merger and acquisition activity. Thus today’s reported valuations, while high, may actually be understated relative to underlying profits.

This post was published at Zero Hedge on Aug 3, 2017.

Apple Now Owns $51.5 Billion In Treasurys, More Than Mexico, Turkey Or Norway

Every quarter, Apple manages to impress with its gargantuan cash hoard, which in Q2 rose to $262 billion (which however is $153 billion net of debt), a new all time high as shown in the chart below.

While it is widely known that of this $262 billion, the vast majority, or $246 billion is held offshore, what is less appreciated is that Apple’s actual cash is just $18.6 billion. The rest is held in various securities, both short- and long-term, something we first reported back in September when we introduced readers to Braeburn Capital, the firm that actually manages Apple’s quarter trillion in asset holdings.
In the five years that have passed since then, Apple’s AUM have grown. Substantially.
As the company reported in its latest 10Q, as of June 30, AAPL now owns enough assets to not only put even the world’s largest hedge fund, Bridgewater with less than $200Bn in assets to shame, but some of the world’s largest holders of Treasurys. Of its total $243 billion in Short and Long-Term securities, Apple owned a whopping $51.5 billion in Treasurys, split between $20.1 billion in T-Bills and $31.3 billion in Treasury Bonds.

This post was published at Zero Hedge on Aug 3, 2017.

FDIC’s Hoenig: Bank Lending Weak Because of Payouts (99% Net Income Distribution)

Thomas Hoenig, the former KC Fed Chairman and current vice chairman of the Federal Deposit Insurance Corporation (FDIC) stated recently that banks are choosing to distribute their earnings to investors rather than lend.
WASHINGTON (Reuters) – Big banks say tight U. S. financial regulation forces them to sit on capital and not put money to work by making loans, but in truth they choose to distribute all of their earnings to investors instead of lending them, a long-time regulator said in a letter to two powerful senators released on Wednesday.
Using public data to analyze the 10 largest bank holding companies, Hoenig found they will distribute more than 100 percent of the current year’s earnings to investors, which could have supported to $537 billion in new loans.
On an annualized basis they will distribute 99 percent of net income, he added.

This post was published at Wall Street Examiner by Anthony B Sanders ‘ August 3, 2017.

AUGUST 3/GOLD RECOVERS FROM LAST NIGHT’S 7 PM FLASH CRASH BUT STILL DOWN $3.65/SILVER DOWN 10 CENTS/DESPITE THE DROP IN PRICE OF GOLD YESTERDAY, OPEN INTEREST RISES BY OVER 7,000 CONTRACTS/WAR OF…

GOLD: $1268.70 DOWN $3.65
Silver: $16.64 DOWN 10 cent(s)
Closing access prices:
Gold $1268.60
silver: $16.68
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: $1268.88 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1263.50
PREMIUM FIRST FIX: $5.38
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SECOND SHANGHAI GOLD FIX: $1266,17
NY GOLD PRICE AT THE EXACT SAME TIME: $1262.30
Premium of Shanghai 2nd fix/NY:$3.47
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
LONDON FIRST GOLD FIX: 5:30 am est $1261.80
NY PRICING AT THE EXACT SAME TIME: $1262.25
LONDON SECOND GOLD FIX 10 AM: $1268.10
NY PRICING AT THE EXACT SAME TIME. $1267.35
For comex gold:
AUGUST/
NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH: 73 NOTICE(S) FOR 7,300 OZ.
TOTAL NOTICES SO FAR: 3212 FOR 321,200 OZ (9.990 TONNES)
For silver:
AUGUST
2 NOTICES FILED TODAY FOR
10,000 OZ/
Total number of notices filed so far this month: 413 for 2,065,000 oz

This post was published at Harvey Organ Blog on August 3, 2017.

Toronto Housing Market Implodes: Prices Plunge Most On Record

Until mid 2017, it appeared that nothing could stop the Toronto home price juggernaut:

And yet, In early May we wrote that “The Toronto Housing Market Is About To Collapse“, when we showed the flood of new home listings that had hit the market the market, coupled with an extreme lack of affordability, which as we said “means homes will be unattainable to all but the oligarchs seeking safe-haven for their ‘hard’-hidden gains, prices will have to adjust rather rapidly.”

This post was published at Zero Hedge on Aug 3, 2017.

Gold’s future confiscation is a growing reality, as currency confidence slides!

Article – Part 5
The subject of gold’s confiscation has come onto our screens again, but this time, being described as a ‘Myth’ in the future. This thought comes from Canada, a favorite place for U. S. citizens to store their gold in the hopes that it will be outside the reach of the U. S. Federal Reserve.
We respond to the article that described it as a myth, because we are firmly of the opinion that as we move from dollar hegemony to a multi currency, world currencies will find themselves competing against each other [race to the bottom] and increase the prospects for the confiscation of gold held in storage companies and by dealers as well as making such dealing illegal again.
This makes the confiscation of gold and eventually silver, a future reality. It is impossible to give a date when this will happen making now a prudent time to act.
a)Covered in the first part: In this article we will look at the real reasons why the U. S. confiscation took place and its broad objectives as well as the underlying principles behind the confiscation and how they can apply in the future. b)Covered in the first part: We will show how the confiscation of gold in 1933 wasnot a money supply issue, nor will it be in the future. c)Covered in the second part – We will highlight why such underlying principles are beginning to appear now, as this new global monetary system arrives on stage.

This post was published at GoldSeek on 3 August 2017.

It’s Quiet, Too Quiet – One Trader Warns Tomorrow’s Jobs Data May Change All That

Yesterday marked 3 months (70 trading sessions) since the S&P 500 increased by more than 1% in any one day (and it has only fallen by more than 1% in any day three times in the last 10 months). As former fund manager Richard Breslow notes, “It’s been goodly, as opposed to awfully, quiet.” But, as he details, tomorrow’s non-farm payrolls data will be the catalyst for the next month’s slings and arrows of outrageous fortune generation (or loss)…
Via Bloomberg,
It’s been goodly, as opposed to awfully, quiet in the early goings-on today. Ranges have been tight. There have been good numbers and disappointing ones. Earnings beats but also misses. Decent auction results which didn’t seem to need much of a contrived concession, but on the other hand didn’t move yields all that much. The last round of Fed speakers were heard and the markets largely responded by reminding themselves that these folks have already declared themselves on holiday. And their comments were taken as such. It’s been a real throwback day, without a sea of green or red on the screens denoting everything moving in mindless lockstep.

This post was published at Zero Hedge on Aug 3, 2017.

“The US Is Staring Down A Technical Default” – Here Are The Five Debt Ceiling Scenarios

In a note released on Monday commenting on the looming US debt ceiling showdown and the growing threat of a government shutdown and technical default by the US, Compass Point analyst Isaac Boltansky said he is becoming increasingly concerned that fall deadlines for federal government funding and the debt ceiling will prove tougher than the market currently expects, resulting in “markets roiled heading into 4Q and Fed’s policy normalization trajectory facing complications.” He adds that the increasingly fragmented legislative landscape may be set to “transition from inaction to dysfunction”, citing such factors as:
Lawmakers return in Sept. with no clear strategy GOP leaders will likely be forced to rely on sizable contingents of Democrats Current spending caps for FY2018 are “despised” by both Democrats, Republicans, but for wholly different reasons White House’s position remains unclear as Treasury Sec. Steven Mnuchin has repeatedly called for a clean debt ceiling increase, but over the weekend President Donald Trump and OMB Director Mick Mulvaney suggested putting legislative activity on hold until health care is addressed

This post was published at Zero Hedge on Aug 3, 2017.

Bears Throw In The Towel: FANG Shorts Hit All Time Low

At the end of May, when Bank of America looked at some of the most widely held stocks by active managers, it found that FANG stocks (FB, AMZN, NFLX, GOOG/GOOGL) have returned nearly 30% YTD vs. 8% for the S&P 500. More importantly, it found that managers were 32% overweight Information Technology + Internet & Catalog Retail (a Discretionary industry), which was driven by a remarkable 71% overweight in FANG stocks.

This post was published at Zero Hedge on Aug 3, 2017.

Surprise! Gold Prices Have Beaten the Market So Far this Century

Spot gold finished July up more than 2 percent, its best month since February, when it returned 3.7 percent. The yellow metal responded to a struggling U. S. dollar, which has lost more than 10 percent so far this year relative to other currencies and is currently at a 15-month low. The dollar could very well continue to slide on additional political uncertainty surrounding President Donald Trump and his administration. This would mean further upside for gold and gold stocks.

This post was published at GoldSeek on Thursday, 3 August 2017.

Western Central Bank Fear Of Gold Is In The Air

Ballooning open interest, heavy fix selling, aggressive post-settlement selling, flash crashes – this all seems a lot of bother. Perhaps the Other Side is afraid of something. – John Brimelow from his Gold Jottings report
Wednesday evening at 7:06 EST, at one of the least liquid trading periods of the 23 hour trading day for Comex paper gold, a ‘motivated’ seller unloaded 10,777 August gold contracts into the CME’s Globex trading system, knocking the price of gold down $9 in 25 minutes. There were no obvious news or events reported that would have triggered any investor to dump over 1 million ozs of gold with complete disregard to price execution.

This post was published at Investment Research Dynamics on August 3, 2017.