Day: September 3, 2017

China Begins To Reset The World’s Reserve Currency System

Jon

It’s a strategic move swapping oil for gold, rather than for U. S. Treasuries, which can be printed out of thin air. – Grant Williams
A report released by the Nikkei Asian Review indicates that China is prepared to release a yuan-denominated oil futures contract that is convertible (backed by) physical gold. The contract will enable China’s largest oil suppliers to settle oil sales in yuan, rather than in dollars, and then convert the yuan into gold on exchanges in Hong Kong and Shanghai.
This is a significant step in removing the global reserve currency status of the dollar and resetting the the global economic and geopolitical ‘landscape.’ Over the past several years, China has quietly established yuan-based currency exchange facilities, which has set up the ability to implement this new non-dollar trade settlement financial instrument. According to the Brookings Institute, 34 Central Banks around the world have signed bilateral local currency swap agreements with the PBoC as of of the end of September 2016, including the major oil-producing countries. With this new contract, China’s largest oil suppliers will now be able to transact directly with China, and other oil importing countries, using yuan which are directly convertible into gold to settle the trade.

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

Cohn “Fed Chair” Odds Plunge In Prediction Markets

Jon

Odds that Gary Cohn will replace Yellen are dropping like a stone on PredictIt. Putting Cohn behind Warsh and Yellen…
If tax reform looks stalled, and we should find out in the next few weeks, is there any reason for Gary Cohn to stick around if he concludes he won’t be appointed Fed Chair? We wonder.
Especially after his recent comments to the Financial Times,
Gary Cohn, the top White House economic official, said the Trump administration ‘must do better’ in condemning neo-Nazis and white supremacists following the violent protests in Charlottesville this month that sparked one of the biggest controversies of Donald Trump’s presidency.

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

Could the Stock Market Crash?

Jon

Oh, Janet. We hope you are right. One should never say never – that has a nasty habit of coming back to bite you.
Texas and Houston are currently going through their crash. No, not a stock market crash but a hurricane and flooding crash. Hurricane Harvey has been called a ‘once in 500 years’ event.’ Except in the past twelve years, we have also had Hurricane Katrina and Sandy. They were called ‘once in 100 years events.’ The 400-year difference seems moot. It is becoming a little flippant to call them ‘once in a lifetime’ events when three ‘lifetime’ events have occurred in twelve short years. Yet, for all of them the experts did not see the devastation that was coming.
And so it is with stock market crashes. That is why we don’t believe that Janet Yellen should be so sanguine that another one won’t happen in our lifetime. Since 1900, at least twelve have occurred. Most, if not all, were not predicted by economists, central bankers, media, or politicians. Those that did predict a coming crash were usually called charlatans, doomsayers, cranks, perma-bears, and worse. We’ve been called perma-bears. Frankly, we prefer to call our viewpoint cautious optimism. We’ve also been called a gold-bug but that is another story.
The twelve crashes since 1900 we can cite are as follows:

This post was published at GoldSeek on 4 September 2017.

Gold Breakout And Upside Targets

Jon

Gold cleared $1300 early in the week and padded its gains on Friday even amid a bullish weekly reversal in the US Dollar. Gold’s breakout was validated by a strong monthly close on Thursday and then a strong weekly close Friday. As predicted, the miners perked up with the breakout in Gold. GDX and GDXJ gained nearly 6% and 7% respectively for the week. Look for the miners to continue to trend higher as Gold attempts to retest its 2016 highs around $1375/oz.
The miners (GDX and GDXJ) have more immediate upside potential. The daily line charts show two levels of resistance. The first level is around $26 for GDX and $38 for GDXJ while the second level is $28 for GDX and $40-$41 for GDXJ.

This post was published at GoldSeek on 4 September 2017.

FX Week Ahead: Cue The ECB To Disappoint; Buying Time For Fed To Catch Up?

Jon

After another ‘interesting’ non farm payrolls report, we start the week on a quiet note as the US observes the Labour Day holiday and Canada day speaks for itself. Plenty of volatility to expect thereafter though, as it is the ECB’s turn to manage market expectations, which so far show little sign of moderating as EUR longs are keen to hold positioning into a much expected tapering signal.
After the weaker US jobs report, which we will cover (briefly) later, we saw a well timed news report that the ECB are in no rush to make a decision next week and that plans for adjusting the APP may not be ready until December. There is no questioning the fact that the governing council want to temper the EUR rally, as they observed the ‘FX overshoot’ in their last meeting minutes. Since then, the spot rate has been ramped up past 1.2000 but with limited hang time above here, and the US data induced return higher was stopped short of this psychological level before the news-wires hit. Back under 1.1900, it looks to be another reluctance pullback, and one which now depends largely on the USD, as EUR proponents can only see one way for policy to go from here and do not seem to be too concerned as to where entry levels are!

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

What “Coordinated Recovery”? Global Negative Yielding Debt Hits One Year High Of $7.4 Trillion

Jon

Two weeks ago, we were surprised to find that despite the recent “growth promise” of what has been called a coordinated global recovery, the market value of bonds yielding less than 0% had quietly jumped by a quarter in just one month to the highest since October 2016.
Since then, the paradoxical divergence between the reported “strong” state of the “reflating” global economy and the amount of negative yielding debt, has only grown, and as JPM reports as of Friday, Sept. 1, the global market value of government bonds trading with negative yield within the JPM GBI Broad index rose to $7.4 trillion, up 60% from its low of $4.6 trillion at the beginning of the year.

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

Trump Commits To Using “Nuclear Capabilities” To Defend US Terroritory, Allies

Jon

In what we believe is a significant escalation and potentially a hint as to the president’s thinking, President Trump said during a phone call with Japanese Prime Minister Shinzo Abe that the US remains committed to defending its territories and allies using all “diplomatic, conventional and – here’s the big one – nuclear – capabilities at our disposal.” This is the first time Trump has explicitly referenced possible involvement of nuclear weapons in a US response to its isolated antagonist, and also means that the two world leaders discussed the possibility of a nuclear response.
TRUMP REAFFIRMS U. S. COMMITMENT TO DEFEND THE U. S. & ALLIES USING FULL RANGE OF DIPLOMATIC, CONVENTIONAL AND NUCLEAR CAPABILITIES: STATEMENT The White House released a statement about what the two leaders discussed on the call. It’s available in full below:

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

De-Dollarization Accelerates: China Readies Yuan-Priced Crude Oil Benchmark Backed By Gold

Jon

The world’s top oil importer, China, is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U. S.-dollar denominated benchmarks by trading in yuan, Nikkei Asian Review reports.
The crude oil futures will be the first commodity contract in China open to foreign investment funds, trading houses, and oil firms. The circumvention of U. S. dollar trade could allow oil exporters such as Russia and Iran, for example, to bypass U. S. sanctions by trading in yuan, according to Nikkei Asian Review.
To make the yuan-denominated contract more attractive, China plans the yuan to be fully convertible in gold on the Shanghai and Hong Kong exchanges.

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

Texas Governor: “Harvey Could Cost Up To $180 Billion”

Jon

Texas Governor Greg Abbott said on Sunday that it could cost as much as $180 billion to rebuild Texas following Hurricane Harvey, more than four times what most experts expected ($40 billion). If accurate, Harvey would beat out Hurricane Katrina (total: $160 billion) for costliest storm in US history.
‘Katrina caused if I recall more than $120 billion but when you look at the number of homes and business affected by this I think this will cost well over $120 billion, probably $150 to $180 billion,’ Abbott told Fox News, adding, ‘this is far larger than Hurricane Sandy.’
Aside from a handful of meteorologists like Dr. Joel N. Myers, founder, president and chairman of AccuWeather, who predicted – apparently with a surprising degree of accuracy – that Harvey-related costs could pile as high as $190 billion, few anticipated the extensive flooding damage the storm would cause in Houston, the fourth-largest city in the US, which contributes some $500 billion to US GDP every year.


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

Sentiment Speaks: Greed Is Not Good

Jon

As many of you know, I run a trading room with well over 3000 members, and have over 450 money manager clients. I have seen the good, the bad, and the ugly as far as what traders and investors do through the years. And, no matter how much I warn about the pitfalls in the market, many chose to ignore me, and eventually learn on their own the hard way.
First, I would suggest you begin by reading an article I wrote several years ago, which should describe what every new trader/investor goes through as they begin their career. And, if it sounds familiar, well, then you are in good company, as most of us have gone through it. The question is if you will learn from it. Unfortunately, most do not.
Leveraged ETF’s
But, what makes it even worse is the advent of the leveraged ETF’s, which significantly exacerbate the situation noted in the article above.
You see, most people do not understand how they work. And, yes, that even includes analysts. They are designed in such a way that if you are not catching a strong trending move perfectly, they will lose money. Even if the market is moving sideways, these leveraged ETF’s lose money. And, if the market moves down, well, they lose money twice or three times as fast. So, unless you are able to time the market absolutely perfectly, then you should NEVER, EVER, EVER buy and hold one of these instruments. They are designed to be a trading vehicle and nothing more.

This post was published at GoldSeek on 4 September 2017.

So About ‘Dem Norks….

Jon

The problem with drawing red lines is that when someone steps over one you are compelled to act on pain of being labeled a “pussy.”
That’s not a good thing when the topic is international relations; it inevitably leads to not only more provocation but much worse, it leads others to believe you won’t act when you say you will, and thus you become an unreliable party.
It is never in the best interest of a nation to be unreliable. Unpredictable can be an asset in certain circumstances, but never unreliable.
So now, with the Norks setting off what was probably a multi-stage (fusion/fission) weapon, that is “hydrogen bomb”, we have a big problem.
The claim has been made through the years that North Korea will not be “permitted” to become a nuclear weapon state.
It just did — so what are we going to do about it?

This post was published at Market-Ticker on 2017-09-03.

Russia Urges Washington To “Come To Their Senses” Over Consulate, Denounces “Blunt Act Of Hostility”

Jon

Already furious over Washington’s “unprecedented aggressive action,“ at the Russian consulate in San Francisco, Moscow has responded with an official statement calling the “occupation” of diplomatic properties in the US a “blunt act of hostility.”
As a reminder, Russian diplomats were denied access to the trade mission building despite it being owned by Russia and protected by diplomatic immunity.
The ministry called the planned ‘illegal inspection’ of Russian diplomatic housing an ‘unprecedented aggressive action’, which could be used by the U. S. special services for ‘anti-Russian provocations’ by the way of ‘planting compromised items’
Searches of the Russian premises began on Saturday, after the US State Department ordered the foreign ministry on August 31 to vacate the premises by September 2.

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

Doug Noland: Strong Data and Conspicuous Bubble Excess

Jon

Analysis surrounding economic data is especially interesting these days. As always, there’s ample opportunity to pick and choose data points to support a particular perspective. I hold the view that economic activity is generally more robust than given credit for (especially in bond markets). The analytical community for the most part downplays economic strength. No reason to stir the Fed or the fixed-income markets. Besides, these days most economic data have minimal market impact. Beyond reports on consumer inflation and wage growth, little seems to garner much interest from Federal Reserve officials.
U. S. Manufacturing payrolls increased 36,000 (estimate 8k) in August, the strongest monthly gain since March 2012. Moreover, July growth was revised up 10,000 to 26,000. One must look all the way back to the 2010 recovery for a stronger two-month period of manufacturing job gains. And while overall August payroll gains (156k) lagged expectations (180k), it’s worth mentioning the much stronger number out of ADP. At 236,600 jobs added, August ADP was the strongest since March (255k). One must go back many years to find a stronger August report from ADP.
The US ISM Manufacturing index was reported Friday at a stronger-than-expected 58.8, the highest reading since April 2011. Prices Paid remained unchanged at an elevated 62, with Production up slightly to 61. New Orders were little changed at 60.3. Notably, Employment jumped 4.7 points to 59.9, the strongest reading since June 2011. Manufacturing strength was broad-based, with 14 of 18 industries reporting growth for the month. A Bloomberg article quoted Timothy Fiore, chairman of ISM’s factory survey committee: ‘Really, really strong month for manufacturing… We’re seeing a significant expansion.’ And with an estimated 500,000 vehicles to be scrapped after hurricane Harvey, the auto manufactures no longer face much of an inventory issue. Ford and GM gained about 5% in three sessions.

This post was published at Wall Street Examiner on September 2, 2017.

Hedge Fund CIO: “Want To Make A Grown Nerd Cry? Run A 500% Rate Increase Through His Risk Model”

Jon

August is over, which means that Eric Peters, the CIO of One River Asset Management, is back to doing what he is so very good at: distilling the week’s events and latest financial and economic trends into pithy, one-paragraph aphorisms. Without further ado, here is an anecdotal excerpt from his latest weekend notes.
Scary Movie
I love movies. Scary ones especially. Keep your happy endings, give me chainsaws. Meat hooks.
I’ll never forget ERM in 1992. That was my first real snuff flick as a Lehman prop trader. The Italians never stood a chance in the film, they never do. Show me an Italian who can resist a dark woodshed and I’ll show you a hero in a hockey mask.
At least the Swedes put up a fight in the flick. Their central bankers raised overnight rates to 500%. Want to make a grown nerd cry? Run that interest rate through his risk model. But of course, not a single propeller-head imagined such a monster.

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

“We’ll See” Trump Responds Asked If He’ll Attack N.Korea, May Halt Trade With Any Country Doing Business With Kim

Jon

After President Trump condemned North Korea’s “hostile and dangerous” actions this morning, hours after the rogue state’s 6th nuclear test, and according to the Kim regime first test of a hydrogen bomb, the press wanted to know one thing: will the US attack North Korea? “We’ll see,” Trump responded, leaving church when a press pooler shouted a question about if he plans to attack North Korea. Earlier, commenting on Twitter, Trump called the country “a rogue nation which has become a great threat and embarrassment to China, which is trying to help but with little success”, although that statement too failed to provide clarity into what the next tactical step could be.
As reported shortly after midnight ET, the latest North Korean provocation reinforced the danger facing America, Trump had said earlier in a series of tweets, adding that “talk of appeasement” is pointless. “They only understand one thing!” Trump wrote, without elaboration, as he prepared to meet later with his national security team. It was the first nuclear test since Trump took office in January.
The precise strength of the explosion, described by state-controlled media in North Korea as a hydrogen bomb, has yet to be determined. According to the AP, South Korea’s weather agency said the artificial earthquake caused by the explosion was five times to six times stronger than tremors generated by the North’s previous five such tests. The impact reportedly shook buildings in China and in Russia.


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

Secular Bulls

Jon

This week was the first week of the rest of you life, as well as the mark of the resumption of the secular bull market in gold.
Things are really shaping up nicely in the precious metals arena.
Gold broke a major trend-line and closed the month with a breakout on expanding volume on the all important monthly chart.
Nothing is ever for sure in trading but this is very solid action.
As for stocks, there is no rest at all and I love it.
The strength is real.
Let’s see if we can see the strength continue into fall.
Often, September isn’t so hot in stocks but it’s never set in stone.

This post was published at GoldSeek on 4 September 2017.

Mnuchin: Debt-Limit Should Be Tied To Harvey Disaster Funds

Jon

After warning earlier this week that the Hurricane Harvey cleanup effort would drain the government’s coffers more quickly than expected – meaning that Congress would need to pass a bill to raise the debt ceiling ASAP – Treasury Secretary Steve Mnuchin flopped on his previous position and joined Trump in urging lawmakers to combine funding for Harvey relief with the debt-ceiling bill, arguing that appropriating the money would be ‘useless’ unless he had the power to spend it. His remarks followed a formal request from the White House for $8 billion in Harvey relief funding, which Budget Director Mick Mulvaney said should be combined with a debt-ceiling bill.
When asked about the administration’s plans – including Trump’s decision to back off on his demand that $1.6 billion in border wall funds – Mnuchin refused to comment beyond saying that he agreed with the president.


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

“Appeasement Will Not Work”: Trump Responds To North Korea “Hydrogen Bomb” Test

Jon

Following remarks from the leaders of South Korea and Japan, President Donald Trump has responded to North Korea’s latest “perfect” nuclear test, emphasizing that South Korea’s “talk of appeasement will not work,” and that Kim Jong Un and his government “only understand one thing!” He added that the nuclear test is an embarrassment…to China.
In both tone and substance, Trump’s response echoed his tweet from last week when he said that the US’s policy of paying the North “extortion money” wasn’t working, and that “talking is not the answer” to the North’s nuclear threat, although it is unclear if the latest provocation will prompt the US president to do anything more than just jawbone again.
North Korea has conducted a major Nuclear Test. Their words and actions continue to be very hostile and dangerous to the United States…..
— Donald J. Trump (@realDonaldTrump) September 3, 2017

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