What Few Expect: Inflation Will Surge, Destablizing the Status Quo

Few seem to ponder what global shortages in key commodities might do to prices.
If there is any economic truism that is accepted by virtually everyone, it’s that inflation is low and will stay low into the foreseeable future. The reasons are numerous: technology is deflationary, globalization is deflationary, central banks will keep interest rates near-zero essentially forever, and so on.
Just for laughs, let’s look at healthcare, almost 20% of America’s entire economy, as an example of low inflation forever. If being up over 200% in the 21st century is low inflation, I’d hate to see high inflation.
Here’s the official Consumer Price Index (CPI), which as many have noted, severely distorts real-world inflation by claiming big-ticket items such as college tuition and healthcare are mere slivers in household budgets.
Note the remarkably stable trend line in CPI over the past 40 years. This certainly doesn’t shout “inflation is near-zero and will stay low indefinitely.”
Here’s the PCE, Personal Consumption Expenditures, the Federal Reserve’s favored measure of core inflation. Let’s put it this way: either the PCE is real and the CPI is false, or vice versa; they can’t both be accurate measures of real-world inflation.

This post was published at Charles Hugh Smith on OCT 3, 2017.

Toys R’ Us Has a New Plan to Save Itself – but It Won’t Work

Just two weeks after filing for Chapter 11 bankruptcy protection, beleaguered toy retailer Toys R Us has debuted a plan it hopes will save the company.
Spoiler alert: It’s awful, and it won’t work.
You see, the retailer was already in deep, irreversible trouble before it filed for bankruptcy. And this last-ditch effort to reel customers in is only going to dig its grave deeper.
Here’s why…

This post was published at Wall Street Examiner by Casey Wilson ‘ October 3, 2017.

Comex Silver “Deliveries” Surge In September

Though Comex metal “delivery” remains a sham and circle jerk where The Banks simply shuffle paper warehouse receipts and warrants, we thought the latest totals for September were noteworthy enough to bring them to your attention.
Again, we’ve written about this on countless occasions and this post is not meant to imply that “the Comex is about to break” or that “there is a run on The Banks”. Instead, September saw the continuation of two trends of which you need to be aware. Comex “deliveries” are up dramatically in 2017 and JPM continues to stand down.
First, take a look at the historical pattern of “deliveries” during the so-called “delivery months” of March, May, July, September and December. Below is a summary of the “delivery” activity for 2015:

This post was published at TF Metals Report on October 3, 2017.

Spain’s King Felipe Condemns Catalan “Disloyalty” As Rajoy Mulls “Nuclear Option”

Echoing the sentiment from his prime minister Mariano Rajoy, in a nationwide address on Tuesday night, Spain’s King Felipe VI said that Spanish democracy is in a serious moment, and accuses Catalan separatist leaders of violating constitution.
“For some time now, certain officials in Catalonia have repeatedly, consciously and purposefully breached the constitution and their statute of autonomy”
Toeing the government line, the King said referendum plans were illegal, and that it is “irresponsible” to conduct risks economy.
The King appealed for calm, says he remains committed to unity and, without a trace of irony, the unelected monarch said that Catalan separatists have “shattered Spain’s democratic principles.”
Some more highlights of his speech, courtesy of The Spain Report:

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

OCT 3 A/BANKER RAIDS FAIL IN THEIR ATTEMPT TO CAUSE GOLD AND SILVER OPEN INTEREST TO FALL/SPAIN IS NOW PARALYZED WITH STRIKES AND PROTESTERS/WORK IN PROGRESS/

GOLD: $1272.00 down $2.75
Silver: $16.61 up 1 CENT(S)
Closing access prices:
Gold $1271.10
silver: $16.63
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: $n/a DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $n/a
PREMIUM FIRST FIX: $8.24 (premiums getting larger)
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SECOND SHANGHAI GOLD FIX: $n/a
NY GOLD PRICE AT THE EXACT SAME TIME: $/na
Premium of Shanghai 2nd fix/NY:$13.00 (PREMIUMS GETTING LARGER)
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
LONDON FIRST GOLD FIX: 5:30 am est $not important
NY PRICING AT THE EXACT SAME TIME: $not important
LONDON SECOND GOLD FIX 10 AM: $1283.10
NY PRICING AT THE EXACT SAME TIME. 1283.10
For comex gold:
OCTOBER/
NOTICES FILINGS TODAY FOR SEPT CONTRACT MONTH: 1601 NOTICE(S) FOR 160,100 OZ.
TOTAL NOTICES SO FAR: 2040 FOR 204,000 OZ (6.345 TONNES)
For silver:
OCTOBER
12 NOTICES FILED TODAY FOR
60,000 OZ/
Total number of notices filed so far this month: 316 for 1,580,000 oz

This post was published at Harvey Organ Blog on October 4, 2017.

Homebuilder Stocks Surge To Bubble Highs, There’s Just One Thing…

A key index of housing stocks has finally made it back to the highs of last decade’s bubble.
As Dana Lyons explains, one of the, in some ways surprising, achievements of the current bull market in stocks has been its ability to resuscitate former busted bubble sectors once left for dead. For example, early this year we saw the Nasdaq 100 finally break decisively above its dotcom-laden bubble top of 2000. This year has also seen a resurgence in bank stocks, with the dead cats jumping off the financial crisis mat to within spitting distance of their pre-crisis levels. And in this latest rally, we are seeing another former bubble poster child building its way back up to its former highs – housing stocks.
In fact, at the end of last week, the benchmark PHLX Housing Sector Index (HGX) made its way all the way back to its 2005 bubble top for the first time in a dozen years.

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

Precious Metals Monthly Charts

The precious metals sector started September with a bang. Gold, which had already eclipsed $1300/oz, pushed to $1360/oz while Silver broke its downtrend line (from its late 2012 and 2016 peaks). Unfortunately, precious metals would soon reverse course and more. Gold ended September down nearly 3% and below $1300/oz. Silver lost 5% and its breakout. The gold mining indices (GDX, GDXJ, HUI) lost 7% to 8%. The monthly charts argue the major breakout from multi-year bottoming patterns will have to wait until 2018 at the soonest.
Gold’s bearish September reversal occurred at multi-year resistance. On a chart showing daily or weekly closing prices, Gold’s highest close in September occurred at the resistance line connecting its early 2014 and 2016 highs. In addition, Gold opened near $1330 (critical monthly and quarterly resistance), traded above it but then closed well below it. While it is difficult to see, Silver opened very close to key resistance at $17.80, traded up to $18.29 (near major monthly resistance) but closed the month well below $17.00. Silver failed in a resistance area that has been very important (note the arrows) for the past 10 years. Gold failed at a level that has been important since 2014.

This post was published at GoldSeek on 3 October 2017.

Active Bond Traders Have Never Been More Short Treasurys: Is A Squeeze Imminent?

Yesterday, when discussing Crispin Odey’s letter to clients and what appears to be his “Hail Mary” trade, we pointed out that according to his latest client letter, the billionaire hedge fund manager has effectively bet everything on a plunge in bond prices, with a whopping 135% net short in gilts and JGBs.
We noted that, in light of recent shifts mostly among the CTA and hedge fund crowd, he is hardly alone in his mega bearish outlook on bonds.
Sure enough, according to the latest JPMorgan survey (for the week through Oct. 2) the bank’s clients as a whole have dramatically soured on Treasuries, with 44% holding a short position relative to their benchmark, the most since 2006, or before the financial crisis, and up from 30 percent in the prior period. Among those who actively place bets, such as speculative accounts, a record 70% were short, while an unprecedented (and impossible) 0% responded that they were long: in other words, everyone is on the same side of the boat.

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

This Bearish Silver Price News Won’t Prevent a Rebound Before 2018

The big silver price news that’s dragged the metal lower over the last month is the dollar’s rebound. After hitting a 32-month low of 91.35 on Sept. 8, the U. S. Dollar Index (DXY) – an index measuring the dollar against currencies like the yen and euro – has since recovered 2.4% to 93.54.
Since silver is priced in the dollar, any rally in the currency lowers demand from users of different currencies, which is bearish for silver prices. This is what pulled silver prices down 1.8% last week (Friday, Sept. 22, to Friday, Sept. 29) and 5.1% lower in September.
Investors saw a brief relief last Monday, Sept. 25, when the price of silverbumped back above $17. However, this was short-lived as silver quickly retreated below that level, where it has remained since.
I predicted we’d continue to see short-term weakness in silver, based on my expectation that the dollar had not finished its dead cat bounce. That’s when a long-declining asset – like the dollar, which is down 9.2% this year – briefly rebounds before falling again.

This post was published at Wall Street Examiner by Peter Krauth ‘ October 3, 2017.

Sustainability Or Growth? E&Ps Face A Difficult Decision

Only 16 E&Ps are expected to grow production and keep spending within cash flow
U. S. unconventional E&Ps often find themselves in a difficult position in the current environment. The environment has long been ‘grow or die,’ with high emphasis placed on companies growing production. Firms that have little growth prospects generally trade at significantly lower multiples.
On the other hand, a different group of investors have much different priorities.
Many investors have begun to place a premium on operational sustainability instead of growth. These investors prefer that companies are able to sustain operations and generate free cash flow, rather than spend beyond their means to keep growing.
Companies, then, are often forced to decide. Is it worthwhile to spend beyond cash flow to grow? The ideal company is able to do both, but most must choose one or the other. A tough downturn and volatile commodities prices have made E&Ps and investors cautious.
Out of 119 E&P companies, 72 are predicted to have average 2017 production exceed Q4 2016 production. Significantly fewer, only 27, are expected to have positive free cash flow in 2017. These two are not mutually exclusive, as a total of 16 companies have both positive free cash flow and production growth.
These 119 companies are plotted below.

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

Is This the Next Supermarket Chain to Melt Down?

The Fresh Market’s bonds plunge as Cerberus and other PE firms are circling.
The Fresh Market had made its name once upon a time by focusing on higher-margin groceries, such as imported cheeses and organic produce and wooing customers with on-site butchers. In March 2016, it was acquired by private-equity firm Apollo Global Management. As private company, it no longer has to report earnings publicly. But now its bonds are crashing.
Monday last week, it disclosed to some investors that same-stores sales had plunged 8.2% in the quarter, and that Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) was a lower-than-hoped for $29.3 million, according to Debtwire. This set off the bond plunge for the week.
There was more, according to Debtwire:
The market was also taken aback by the company’s disclosure that it recently obtained a $50 million unsecured revolver from its parent [Apollo], raising questions as to why it needs the extra liquidity. As of 30 July, TFM had $32.9 million of cash and $74.6 million of borrowing availability under its existing $100 million revolver.

This post was published at Wolf Street on Oct 3, 2017.

Gold: Demand Vacuum Has Silver Lining

Since I issued my ‘book profits now’ call for gold several weeks ago, the price has declined relentlessly from the $1360 area high. Investors want to know if I see signs that a fresh rally could begin. The good news is that gold/silver stocks and silver bullion look better than gold bullion. Some stocks are rallying strongly while gold oozes lower. Please click here now. This is the main problem for gold right now; a collapse in Indian market demand. Prime Minister Modi has acted more like Prime Minister Napoleon over the past year. He’s lorded over a collapse in manufacturing, anemic jobs growth, and tanking GDP. He has essentially devolved into what I call a ‘taxaholic’. He’s maniacally obsessed with expanding government size at the expense of the economy. Modi has ordered jewellers to file what he calls ‘Know Your Client’ forms on gold jewellery purchases of 50,000 rupees or more. That has helped hammer demand by about 50%. It coincided with major flooding that prevented buyers from going to the stores. Over the past few weeks, Indian gold imports have been negligible. Commercial COMEX traders have sold into that demand vacuum, pushing the gold price down by about $90 an ounce. Dhanteras marks the start of Diwali on October 17. I expect some pick-up in demand then. Unfortunately, that doesn’t happen for another two weeks. The Chinese ‘Golden Week’ holiday is also in play. Gold markets in China close for the holiday. Western gold bugs are finding the holiday is anything but golden for them, as the price seems to melt lower on a daily basis.

This post was published at GoldSeek on 3 October 2017.

Stocks and Precious Metals Charts – End of the Line

“If govts take control of virtual currencies no need for tax bills & payment issues. Taxes, fines, etc automatically deducted from your account. Tax collectors & intel community can hardly wait for mandated single ledger for crypto currency systems, (w/global access for them). As govts tighten grip on virtual currencies, individual discretion on money mgmt will become restricted and right of privacy extinguished.”
Dr. Harald Malmgren
“One Ring to rule them all, One Ring to find them,
One Ring to bring them all, and in the darkness bind them,
In the Land of Mordor where the Shadows lie.”
J. R. R. Tolkien, The Lord of the Rings
Non-farm Payrolls report on Friday.

This post was published at Jesses Crossroads Cafe on 03 OCTOBER 2017.

The Laffer Curve is misleading and dangerous

The logic underlying the Laffer Curve is that the greater the tax on production, the lesser the amount of production. As a broad-brushed economics principle this is reasonable, but the Laffer Curve itself is bogus. Unfortunately, this bogus curve is being used to justify bad government policy.
Before I get into why it is bogus and how it is being used to justify bad policy, here is a representation of the Laffer Curve from an Investopedia article:

This post was published at GoldSeek on 3 October 2017.

One Trader Warns Of “The True Danger Ahead”

It’s easy for me to sit back and take pot shots at the hedge fund gurus calling for a repeat of the 2008 crash. Spouting words about markets never repeating the previous crisis is kind of cheap. If I am so sure history won’t repeat, why don’t I offer an alternative theory? Well, at the risk of embarrassing myself, here it goes.
The biggest risk out there is not credit. It is not the monster short VIX speculative position. It is not CDX leverage.
The true DANGER AHEAD lies in the universal belief that treasuries (and other sovereign fixed income) offer a perfect hedge versus risk assets.

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

Taxing Puerto Rico to Save US Shippers

In theory, capitalism is all about healthy competition, which makes producers deliver quality goods and services at lower prices.
Competition helps everyone, even producers. After all, if your competitors keep knocking you down, that means the market is suggesting you try something else.
While most business leaders give lip service to the inherent fairness of free markets, in practice many try to avoid competition. Brilliant people devote entire careers to building innovative ‘moats’ around themselves. The pharmaceutical industry, to name just one, is highly adept at it.
That’s all fine – until those businesses enlist the government to help them. Government exists to promote the common interest, not any particular company or industry.
All that comes to mind in the aftermath of Hurricane Maria. Among other things, the storm exposed a century-old law that needs us to take a good, hard look at it.
Bringing Home the Nautical Bacon
Wesley Jones was a US senator from the state of Washington from 1909 until his death in 1932, a few days after losing his reelection bid.

This post was published at Mauldin Economics on OCTOBER 3, 2017.

Trump’s Tax Reform: On the Right Track

The tax reform proposal offered last week by President Trump and Republicans in Congress would be an improvement over the current system, but more so for corporate income taxes than for individual income taxes. It appears that the biggest advantage the proposal offers individual taxpayers is a simplified tax structure, whereas significant cuts are in the works for corporate taxes.
Individual Income Taxes The proposal reduces tax brackets from seven to three: 12%, 25%, and 35%. The degree to which this might represent a tax cut remains to be seen because the proposal does not say at what income levels those brackets would be effective. The standard deduction would almost double, meaning that those at the bottom end of the income distribution would surely enjoy a reduction in income taxes.
The proposal would broaden the tax base by eliminating many deductions and credits. The home mortgage interest deduction and deduction for charitable contributions would be retained, but deductions for payments of state and local taxes are eliminated. This deduction favored taxpayers in high-tax states and effectively provides a subsidy to high-tax states financed by taxpayers in low-tax states.

This post was published at FinancialSense on 10/03/2017.

Watch Live: Wells Fargo CEO To Apologize (Again) To Congress For Massive Fraud

“One Year Later” is the title of the hearing that Wells Fargo CEO Tim Sloan faces this morning with the Committee on Banking, Housing, & Urban Affairs.
A year after former CEO John Stumpf was grilled by lawmakers over the bank’s massive scandal over fake accounts, Sloan will tell the panel he is ‘deeply sorry’ for the scandal but also that Wells ‘is a better bank today than it was a year ago,’ according to prepared remarks.
‘I apologize for the damage done to all the people who work and bank at this important American institution,’ Mr. Sloan is expected to tell the Senate Banking Committee.
As WSJ reports, regulators last year fined Wells Fargo $185 million for ‘widespread illegal’ sales practices that included opening as many as two million deposit and credit-card accounts without customers’ knowledge.

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

I Know What the Economy Did Last Summer Part 1 : Carmageddon and the Retail Apocalypse

Summer closed in a whirlwind of weather chaos for the United States and its territories. At the start of the summer, the US economy began to show signs that it was flying apart. The two most obvious were the big blowouts in the auto industry and in retail, not all of which could be attributed to a shift to online sales.
Carmageddon crashes on
The auto industry rolled over this year and began a decline similar to the one we experienced at the start of the Great Recession. (See ‘Carmageddon Crashes into ‘the Recovery’ Right on Schedule.’)
In response, car markers started offering record incentives (like $0 down, 0% interest on a 80-month loan), which brought an improvement to sales in July. You have to ask, just as I did back in 2007, ‘What is the end game when such incentives take profit down to nil?’
Used car prices, on the other hand (not having such major incentives), plunged to their lowest level since 2009. New car prices have also fallen all year (as another part of the major incentives) and dropped almost a thousand dollars on average just between June and July (as part of the incentives package).

This post was published at GoldSeek on 3 October 2017.