Peak US Asset Prices? Japanese Acquisitions Hit Record

Their buying binge in the US goes into the ‘Contrarian Indicators’ category.
After eight phenomenal years of surging stock prices in the US, buyers are getting cold feet: Acquisitions targeting US companies dropped 15% so far this year, to $789 billion, according to Dealogic. In Japan, it’s worse: Acquisitions targeting Japanese companies have plunged 41% to $33.6 billion.
But despite the M&A downturn in both countries, there is one peculiar element that is booming: Japanese companies are acquiring US firms at record pace. This year’s 141 deals exceed the prior record for this time of the year by 18%.
In a deal announced on August 24, SoftBank, a Japanese multinational telecommunications and Internet conglomerate that already owns some US jewels such as Sprint and has $135 billion in interest-bearing debt, invested $4.4 billion in US startup WeWork. The deal is rumored to value WeWork at $20 billion.

This post was published at Wolf Street on Aug 27, 2017.

How Did Things Get This Bad This Fast for Oil Giant, Pemex?

A slew of reasons. But one stands out, and it’s not the price of oil.
One of the biggest surprises awaiting seasoned travelers to Mexico these days is the daily sight of privately branded gasoline stations. For the past eight decades Mexican drivers had only one choice of filling station: state-owned oil behemoth Petrleos de Mexico (A. K. A. Pemex). Now they have six.
Of the first five private companies to open operations in the sector, three were Mexican (Hidrosina, La Gas, and Oxxo Gas) and two were US-based (Gulf and Petro-7). From 2018, foreign operators will even be allowed to sell imported gasoline from the gas stations they operate. It will be the first time since Mexico’s oil industry was nationalized, in 1938, that non-Mexican gasoline will be legally sold from non-Mexican gas stations.
This massive increase in competition is yet another big blow for an already debilitated Pemex and its myriad partners, for whom the retail business is (or at least was) a vital source of funds and profits, generating roughly 730 billion pesos ($36 billion) of revenues a year. Debt-burdened Pemex needs every peso it can get its hands on.

This post was published at Wolf Street on Aug 27, 2017.

Gold Stocks Quietly Leading Gold

Welcome to the dog days of summer. The low volatility in precious metals continues. Janet Yellen or some other Fed heads said something Friday. Precious Metals sold off but quickly recovered. It appears that not much has transpired in recent weeks as precious metals have grinded higher, albeit slowly. However, while it may be a fledgling development, the miners appear to be leading Gold now.
In the chart below we plot a number of markets including Gold, GDX, GDXJ, our 55-stock junior index and our optionality index. We marked three points that help inform our analysis.

This post was published at GoldSeek on 27 August 2017.

“Pray For A Bear Market”: One Bank’s “Paradoxical” Advice To Active Managers

Back in April, we showed that according to a Goldman Sachs report, the current run of chronic active manager underperformance began shortly after the launch of QE in 2009.
As discussed earlier today by Matt King in his report on “one-way” markets resulting from QE and ETFs, this period has been marked by “stubbornly low volatility and dispersion”, something Goldman first observed four months ago:

This post was published at Zero Hedge on Aug 27, 2017.

Mexican Peso Tumbles As Trump Repeats Border Wall, NAFTA Threats

We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada. Both being very difficult, may have to terminate?
— Donald J. Trump (@realDonaldTrump) August 27, 2017

While much of Trump’s Sunday tweets have focused on the government response to the devastation resulting from the historic Texas and Houston flooding as Tropical Storm Harvey is expected to unleash as much as 40 inches of rain, the US president managed to sneak in a few threats to his North American neighbors, reiterating what he has periodically said, most recently last week, that the U. S. may cancel the North American Free Trade Agreement.
Trump also said that “with Mexico being one of the highest crime Nations in the world, we must have THE WALL. Mexico will pay for it through reimbursement/other.”

This post was published at Zero Hedge on Aug 27, 2017.

“Unloading Dollar Assets Would Be Most Effective” – Chinese State Media Unveils Trade War ‘Countermeasures’

After President Trump declared “economic war” with China, seemingly following Bannon’s strategy to maintain hegemony…
‘We’re at economic war with China,’ he added. ‘It’s in all their literature. They’re not shy about saying what they’re doing. One of us is going to be a hegemon in 25 or 30 years and it’s gonna be them if we go down this path.’
Bannon said he might consider a deal in which China got North Korea to freeze its nuclear buildup with verifiable inspections and the United States removed its troops from the peninsula, but such a deal seemed remote. Given that China is not likely to do much more on North Korea, and that the logic of mutually assured destruction was its own source of restraint, Bannon saw no reason not to proceed with tough trade sanctions against China.
‘To me,’ Bannon said, ‘the economic war with China is everything. And we have to be maniacally focused on that. If we continue to lose it, we’re five years away, I think, ten years at the most, of hitting an inflection point from which we’ll never be able to recover.’
China state media immediately signaled the nation would hit back against any trade measures, as it has done in past episodes, and now, thanks to a treatise in Chinese official mouthpiece, China People’s Daily newspaper, we have an idea of what those countermeasures could be…

This post was published at Zero Hedge on Aug 27, 2017.

Stocks and Precious Metals Charts – Non-Farm Payrolls and Comex Option Expiration Next Week

There will be an option expiration on the Comex tomorrow, August 28th for the September contracts for gold and silver.
Silver is a more significantly active metal in the September contract. The focus in gold trading now has shifted to October and December.
Gold is jammed into resistance at the $1300 level as can easily be seen in the price chart below.
There will be a Non-Farm Payrolls Report for the month of August on Friday, September 8.
Please remember the people of Texas who are suffering the adverse effects of a hurricane with very heavy flooding.
My son returned a week early from his Summer internship in Texas at my request. I was suddenly concerned about the queen and asked him to come home. His manager was very accommodating given the circumstances, and he drove back over a three day period. In doing so he missed all of the bad weather there, for which I am grateful.

This post was published at Jesses Crossroads Cafe on 27 AUGUST 2017.

What Is the Liquidity Trap?

Some economists such as a Nobel Laureate Paul Krugman are of the view that if the US were to fall into liquidity trap the US central bank should aggressively pump money and aggressively lower interest rates in order to lift the rate of inflation. This Krugman holds will pull the economy from the liquidity trap and will set the platform for an economic prosperity. In his New York Times article of January 11, 2012, he wrote,
If nothing else, we’ve learned that the liquidity trap is neither a figment of our imaginations nor something that only happens in Japan; it’s a very real threat, and if and when it ends we should nonetheless be guarding against its return – which means that there’s a very strong case both for a higher inflation target, and for aggressive policy …(of the central bank).
But does it make sense that by means of more inflation the US economy could be pulled out of the liquidity trap?

This post was published at Ludwig von Mises Institute on 08/25/2017.

Bernanke Flip-Flops: Will Be Keynote Speaker At Blockchain Conference

Echoing his predecessor Greenspan’s shift to the ‘dark side’ (fully supportive of a gold standard after leaving office), former Fed Chair Bernanke now appears to be full-heartedly supportive of cryptocurrencies having warned in 2015 of “serious problems” with bitcoin due to its “instability” and “anonymity.”
As CoinTelegraph reports, in an interesting turn of events, former chairman of the Federal Reserve Ben Bernanke, will be the keynote speaker at a Blockchain and banking conference in October hosted by Ripple.
Bernanke is an interesting call for the keynote speaker as he has criticized cryptocurrencies in the past… (via Qz.com)
[Bitcoin]’s interesting from a technological point of view. We’re in a world where the payments system is evolving quickly and new approaches to managing payments are proliferating, and some of the ideas around bitcoin will no doubt be useful in doing that.

This post was published at Zero Hedge on Aug 27, 2017.

US Dollar Falls To Lowest Level Since January 2015 On Depressing Jackson Hole Speakers (10Y-2Y Slope Declines To 82.82 BPS)

The monetary retreat at Jackson Hole, Wyoming today was a dovefest. ECB’s Draghi and Bank of Japan’s Kuroda both said that accomodative monetary policy will continue.
And Yellen said very little of substance with no hint of tightening.
The reaction? The US Dollar fell to its lowest level since January 2015.

This post was published at Wall Street Examiner on August 25, 2017.

Finding The Root Cause Of Recessions

Two things bear most of the blame: external shocks and economic volatility.
The U. S. managed to avoid recession after the financial crisis, but Japan has succumbed to three contractions since 2009. Economic volatility is a key reason for this divergence, and that tells us a great deal about the risk of future U. S. recessions.
During this decade, both the U. S. and Japan have experienced multiple growth rate cycles, which consist of alternating periods of rising and falling economic growth. Japan had four growth rate cycle (GRC) downturns, three of which turned into recessions; the U. S. experienced three GRC downturns, none of which were recessionary. Why not?

This post was published at Zero Hedge on Aug 27, 2017.

Doug Noland: Yellen in Jackson Hole

‘A resilient financial system is critical to a dynamic global economy – the subject of this conference. A well-functioning financial system facilitates productive investment and new business formation and helps new and existing businesses weather the ups and downs of the business cycle.’ Janet Yellen, ‘Financial Stability a Decade after the Onset of the Crisis,’ August 25, 2017
I would add that a well-functioning financial system is critical to long-term social, political and geopolitical stability. Importantly, well-functioning finance would have mechanisms that promote adjustment and self-correction. This is fundamental to market-based systems. I would argue that this is also a basic premise of sound money and finance. Sound finance would neither suppress market volatility nor work to repeal business cycles – but would instead have inherent characteristics that counteract protracted market and economic excess.
For starters, I question whether a so-called ‘resilient financial system’ is necessarily a sound one. As we have witnessed, obtrusive government measures can dictate ‘resilience’ – in terms of extended sanguine backdrops free from volatility, risk aversion and crisis. Yet this type of resilience fosters excesses that can inevitably end with a financial and economic crash.

This post was published at Wall Street Examiner on August 26, 2017.

Gone With The Wind Banned From Memphis Theater

When Vice News argued that perhaps Mt. Rushmore should be demolished, running a headline which declared without irony – “Let’s Blow Up Mount Rushmore” (a headline subsequently scrubbed) – we suggested that the fanatical push to sanitize all historic monuments and public references to past political leaders perceived as ‘tainted’ or controversial “may have hit peak crazy here.” Well, we were wrong – it appears the PC mob is now coming for the film industry.
The historic Orpheum Theatre in Memphis, Tennessee has decided to censor “Gone With the Wind” from a line-up of movies it will show as part of its 2018 Summer Movie Series after dubbing it racially “insensitive”. The 1939 classic film, based on the book by Margaret Mitchell, is set on a plantation in the American South during the Civil War and Reconstruction era, and is widely considered by critics and historians to be among the greatest American movies of all time. It broke Academy Award records at the time, receiving eight Oscars including a Best Supporting Actress for Hattie McDaniel, who became the first African-American Academy Award-winner. It also remains the highest grossing film of all time (with ticket prices adjusted for inflation) – beating out even Star Wars.

This post was published at Zero Hedge on Aug 27, 2017.

DOLLAR update as LOSS OF RESERVE CURRENCY STATUS LOOMS…

The dollar is on course to lose its reserve currency status. This is not something that will happen overnight, it will be a process, but at some point there is likely to be a ‘sea change’ in perception, as the world grasps that this is what is happening, which will trigger a cascade of selling leading to its collapse, whereupon gold and silver will rocket higher.
A big reason for the dollar finding support in recent years and doing relatively well versus its peers has been the perception that the US is the last and best ‘safehaven’ in a world beset with instability and terrorism etc , but that perception is changing as US society starts to polarize in a dangerous manner. In addition, the continued provocations and threats by the US towards China and Russia has driven them into making preparations to ditch using the dollar, and these preparations are well advanced, and have included buying huge quantities of gold. Thus the dollar is looking increasingly vulnerable.
On the long-term 20-year chart for the dollar index we can see that it is still at a fairly high level after its gains during 2014 and 2015, but appears to be marking out a ‘Broadening Top’ pattern. On this chart we can also see that if it proceeds to fall hard soon, it won’t be the 1st time – it suffered a brutal decline between the start of 2002 and early 2008 – and that was before it was threatened with the loss of its reserve currency status, so the looming bearmarket could clearly be much, much worse.

This post was published at Clive Maund on August 27, 2017.

Matt King: Global QE And “ETFs Everywhere” Have Created An Unstable, One-Way Market

While the financial industry remains divided over what precisely is the cause of the malaise that affects modern markets, characterized by plunging volumes and trading activity, record low volatility and dispersion, a relentless ascent disconnected from fundamentals, and generally a sense of foreboding doom, manifested by an all time high OMT skew – or record high price for crash insurance – as discussed previously…

… it can agree on one thing: it has something to do with the interplay of QE, the artificial force that has disconnected market prices from values for the past 8 years, and ETFs, which as some prominent investors have said are “devouring capitalism.” They also agree that the combination of QE and ETFs have made the market almost entirely “one-sided”, and thus prone to collapse when conditions finally reverse.

This post was published at Zero Hedge on Aug 27, 2017.

Are The Metals About To Go Parabolic?

First published on Sun Aug 20 for members: With the metals providing us with the pullback we were expecting in our report last weekend (Aug 12-13), they continued to push higher from that pullback. Moreover, the structure continues to look quite bullish. However, the only question the market has yet to answer is if we see one more drop before the parabolic rally commences, or if we simply begin to rally strongly from here.
Since the market has not done anything unexpected this past week, I have to note that my overall perspective has not changed. My main expectation is still looking for a bit more pullback before we are ready to rally through resistance. Moreover, there is really not much more I am able to provide by way of further analysis to what I have been saying all week:
When dealing with fireworks, all it takes is one spark, and the entire box can be ignited. The metals market is in no different position right now. It does have the potential for a direct break out, and if we should see silver take out its blue box overhead with strong buying volume, do not stand in its way, since it means someone has lit the match, and it will likely have begun the heart of its 3rd wave higher.
As far as GDX is concerned, as I have been saying for the last several weeks, the micro structure is truly messy on this rise. While GLD and silver have been displaying truly ideal Elliott Wave structures, GDX has been an overlapping mess.

This post was published at GoldSeek on 25 August 2017.

As Jackson Hole Ends, Here Is The Truth

The 2017 edition of the Jackson Hole symposium is officially over, and while central bankers disappointed markets by not providing any insight into their views on monetary policy (assuming they have any) they instead focused on market stability, and patted themselves on the back for creating a fake “risk-free environment” (which they justify by the record low VIX, even if ignoring the record high cost of crash insurance).
In an amusing twist, Janet Yellen’s speech started off by highlighting that one of the key features of the $14 trillion in post-crisis central bank asset purchases, which has resulted in central banks purchases accounting for 40% of global GDP, is pervasive risk amnesia:
A decade has passed since the beginnings of a global financial crisis that resulted in the most severe financial panic and largest contraction in economic activity in the United States since the Great Depression. Already, for some, memories of this experience may be fading–memories of just how costly the financial crisis was and of why certain steps were taken in response.

This post was published at Zero Hedge on Aug 27, 2017.

Is The Precious Metals Sector Set-Up For A Big Run?

I had not noticed until I looked mid-day today (Thursday, Aug 24th) and saw that the HUI index was above 200. It ended up closing just above 200. I want to see it hold above 200 dma and move higher from there before I get excited. But the chart has become mildly bullish. GDX, which is a larger representation of the large-cap mining stocks, looks even more bullish that the HUI:

I’m not big advocate of using chart ‘technicals’ to forecast the next move in any market, but many traders, hedge funds and investors use them and they can become ‘self-fulfilling prophecies.’ You can see that GDX (same with HUI and GDXJ) has been trending sideways since early February in a pattern of rrowing volatility. Chartists look at this as a pattern that predicts a big move in either direction. I’ve drawn in a white downtrend line through which the GDX appears to have climbed over. It’s also now above its 50/200 dma’s (yellow and red lines, respectively). I’m not ready to declare a ‘break-out’ yet, but I’m feeling optimistic going into the eastern hemisphere’s biggest seasonal period for accumulating physical gold.

This post was published at Investment Research Dynamics on August 27, 2017.