The Hard Way is the Right Way

You’ve probably noticed that I’ve spent a lot of time over the past six weeks talking about ETFs.
I talked about individual investors perhaps unwisely using ETFs to mimic the behavior of macro portfolio managers. I talked about how low transactions costs on ETFs sometimes lead people to make suboptimal decisions. I went over in detail how to select an ETF from an array of choices. I talked about ETF ticker clutter, and how the proliferation of ETFs has made the job of selecting one more difficult. I talked about smart beta and ETF liquidity. And I talked about the philosophy of indexing in general, and how when indexing is taken to extremes, it causes distortions. This is a pretty good summary of the thinking on the current state of the ETF industry – if you haven’t read these pieces, I suggest you check them out.
And of course, my new ETF-focused newsletter, ETF 20/20, launched on Monday. The response has been overwhelming, which shouldn’t be a surprise. Imagine being coached on building a diversified ETF portfolio by an ETF expert – at a cost of a dinner for two at Applebee’s. Including drinks.
People say ETFs are cheap, and ETF advice, like robo-advisors, is cheap. This takes it to another level.

This post was published at Mauldin Economics on OCTOBER 19, 2017.


GOLD: $1288.40 UP $7.20
Silver: $17.25 UP 25 cents
Closing access prices:
Gold $1289.65
silver: $17.26
PREMIUM FIRST FIX: $13.10(premiums getting larger)
Premium of Shanghai 2nd fix/NY:$13.10(PREMIUMS GETTING LARGER)
LONDON FIRST GOLD FIX: 5:30 am est $1283.40
For comex gold:
For silver:
15,000 OZ/Total number of notices filed so far this month: 779 for 3,895,000 oz
BITCOIN CLOSING;$5681.00 BID/$5699.00 UP $95.00

This post was published at Harvey Organ Blog on October 19, 2017.

Buy-The-Black-Monday-Echo-Dip – Stocks Dip & Rip After China Bubble Warnings
— StockCats (@StockCats) October 19, 2017

NOTE: Before we start – something went very funky in the last couple of minutes of the market today – TRUMP SAID TO BE LEANING TOWARD POWELL FOR FED CHAIR: POLITICO – a Dovish pick…
For a brief moment there this morning, some reality poked its head out of the cave after PBOC’s Zhou raised fears of asset bubbles needing to be controlled, Hong Kong stocks crashed, Spain appeared to invoke Article 155, and AAPL slid on sales concerns… but that did not last long as commission-takers reminded the machines that 1987 can never happen again.. ever.. and that every dip is beholden to be bid…
Small Caps and Nasdaq remain red on the week as The Dow pushes on…

This post was published at Zero Hedge on Oct 19, 2017.

Stocks and Precious Metals Charts – All Is Well -1987 and Its Consequences

“On a side bar. remember a couple of years ago, when I went on CNBC to talk to them about things that were happening in the markets in the afterhours that didn’t make sense, and looked like an ‘outside force’ was moving them? And they laughed at me, and told me to take my theory to Hollywood, and see if they would make a movie of it! And then a month or so later, a guy came out and proved my theory? Well. I have to believe that the rise of Gold and Silver, the rise of Treasury yields, and Oil, all being reversed on a dime, smells like PPT. it walks like PPT. and it talks like PPT.”
Chuck Butler, Everbank World Markets
‘Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole.’
Robert Heller, Federal Reserve Board
“There is no trap so deadly as the trap you set for yourself.’
Raymond Chandler, The Long Goodbye
Today is the 30th anniversary of Black Monday, the crash of 1987. I remember it very well.
As you may not recall, on Tuesday following the crash, with the futures market indicating a significantly lower open, Alan Greenspan and the Fed came in buying SP 500 futures in order to turn the markets around. And it worked. And it continued, with the Fed supporting the equity markets with jawboning, persuasion, and occasionally direct intervention, so that by the end of the year all was well with the markets.

This post was published at Jesses Crossroads Cafe on 19 OCTOBER 2017.

S&P Spikes Into The Close After Politico Reports Again Powell Is Leading Fed Candidate

Hawkish Fed Chair is bullish
Dovish Fed chair is bullisher
— zerohedge (@zerohedge) October 19, 2017

One week after Politico reported for the second time that Trump, and Treasury Secretary Steven Mnuchin, were leaning toward Fed governor Jerome “Jay” Powell for Fed Chair, Politico’s Ben White and Josh Dawsey decided to triple down, and with minutes left until the close, Politico reported – for the third time in three weeks – that “Powell is the leading candidate to become the chair of the U. S. central bank after President Donald Trump concluded a series of meetings with five finalists Thursday, three administration officials said.”
Repeating what it had said one week ago, and then a week prior (which is fine, algos and millennial traders these days have short memories) the authors repeated that “Trump hasn’t yet made a final decision” and that “Powell, known as Jay, has been heavily favored by Treasury Secretary Steven Mnuchin, who is leading the Fed chair search for Trump.”
As for the other candidates, Politico had this to say:

This post was published at Zero Hedge on Oct 19, 2017.

No Vol And No Volume – Even The WSJ Questions Equity Melt-Up

It’s encouraging to see that one mainstream media outlet questioning the recent market melt-up which wasn’t just notable for the lack of volatility, but also a severe lack of volume. The new normal seems to be ‘No vol and no volume’, although we saw a bit of a regime shift today, before the normal reversal.
The WSJ noted today that ‘Stocks continue to hit record highs, yet those pushing them there are trading less and less. The number of stocks and exchange-traded products changing hands in the U. S. and Europe has fallen steadily in recent months as ultralow volatility, a lack of market-moving news and the rising popularity of passive investment funds have kept many investors on the sidelines.’
The chart below of trading volume in both regions is ugly, to say the least, especially in Europe where it’s the lowest in five years. Aggregated trading volume for NYSE, NYSE American, NYSE Arca and the NASDAQ this month is reported to be down 12% versus the average for the year and 22% below last year’s average. It’s become so bad that even ETF trading is 8.5% below last year.

This post was published at Zero Hedge on Oct 19, 2017.

Trump Met With Janet Yellen; Meeting Lasted 30 Minutes

#BreakingNews WH official tells me Janet Yellen's meeting with @realDonaldTrump has just come to an end. More to come.
— Brian Schwartz (@schwartzbFBN) October 19, 2017

The anticipated meeting between president Trump and Janet Yellen has concluded, and according to Fox News, it lasted no more than 30 minutes, running from 2:00PM to 2:30PM, or barely enough for Trump to stop patting himself on the back about the yuuge Dow Jones rally under his presidency.
And to think it was a just over a year ago that Trump was bashing Yellen for creating a stock bubble with the help of low rates, shortly after urging his fans to sell their stocks.
As a reminder, last September, Trump said that “keeping the rates artificially low so the economy doesn’t go down so that Obama can say that he did a good job. They’re keeping the rates artificially low so that Obama can go out and play golf in January and say that he did a good job. It’s a very false economy. We have a bad economy, everybody understands that but it’s a false economy. The only reason the rates are low is so that he can leave office and he can say, ‘See I told you.’
Which in light of recent Trump tweets is… ironic.

This post was published at Zero Hedge on Oct 19, 2017.

Bernie To Americans: “Sure, You’ll All Pay More Taxes… But You’ll Get More Free Stuff”

Vermont Sen. Bernie Sanders, the runner-up for the Democratic Party’s nomination for president in 2016, told an audience on CNN Wednesday night that Americans would be happy to pay more in federal income taxes if he could just explain to them it would mean they’ll get more ‘free’ government benefits, including health care, child care and college.
As’s Derek Hunter details, in a televised debate against Texas Sen. Ted Cruz, Sanders told the audience the American people would support his economic vision if only he were able to explain it to them.
‘If we can explain to people, ‘Yeah, you’re going to be paying more in taxes. It’s going to be a progressive tax system,’’ Sanders told the crowd,

This post was published at Zero Hedge on Oct 19, 2017.

This is What it Looks Like When Credit Markets Go Nuts

Pricing of risk kicks bucket in record central-bank absurdity.
As the days pass, the perverse effects of central bank policies on the financial markets are getting more and more amazing. This includes the record-setting nuttiness now reigning in the European bond market, compared to the mere semi-nuttiness in the US bond market.
The 10-year yield of US Treasury Securities closed at 2.34% yesterday and at 2.33% today. This is low by historical standards. It’s barely above the rate of consumer price inflation as measured by CPI, which was 2.2% in September. This means that coupon payments barely make up for the loss of purchasing power. If inflation ticks up just a little, bondholders will be left in the hole. And a yield this low doesn’t compensate bondholders for any other risks, including duration risk, which can be significant. In other words, this is a bad deal.
But in this strange world, it looks practically sane, compared to the Draghi-engineered negative-yield absurdity that has overtaken the Eurozone, where the average yield of euro junk bonds – the riskiest bonds out there – dropped to 2.16%.
This chart, based on the BofA Merrill Lynch Euro High Yield Index via the St. Louis Fed, shows how the average euro junk-bond yield (red line) has plunged so far this year, on the way to what? Zero? The 10-year US Treasury yield (black line) has started rising in past weeks and, in late September rose above the euro junk bond yield for the first time ever:

This post was published at Wolf Street on Oct 19, 2017.

Global Stocks Down On 30th Anniversary of ‘Black Monday’

(Kitco News) – World stock markets were mostly lower overnight. U. S. stock indexes are pointed toward solidly lower openings when the New York day session begins. The bourses are seeing some profit taking after recently hitting record or multi-year highs. Today is the 30th anniversary of the ‘Black Monday’ record-setting crash of the U. S. stock market.
Gold and silver prices are firmer in pre-U. S.-session trading, on a bit of safe-haven demand amid the drop in world stock markets today.
In overnight news, China’s gross domestic product was reported up 6.8% in the third quarter, year-on-year. That’s just a bit down from the 6.9% rate in the second quarter.

This post was published at Wall Street Examiner on October 19, 2017.

Bank Run Imminent? Catalan Separatists Urge Supporters To Pull Cash From Bank

As tension escalate in Spain, Catalan Separatists are potentially about to do some real damage and hit Spain where it really hurts.
In a tweeted message to their 270,000 followers, Assemblea Nacional urged supporters to pull cash from CaixaBank and Banco Sabadell branches between 8 am and 9am Friday to protest at their decision to shift their legal domiciles out of the region…
Dem , priorit riament de 8 a 9 h, ves a un dels 5 principals bancs i retira la quantitat que vulguis en efectiu. Sn els teus diners!
— Assemblea Nacional (@assemblea) October 19, 2017

This post was published at Zero Hedge on Oct 19, 2017.

Petro-Plunder Worsens in Mexico

Scaring off sorely needed investments in fuel distribution systems.
A year and a half after Mexico opened its fuel market to private competition, almost all gasoline sold at BP and Royal Dutch Shell stations continues to come from state-owned Petrleos Mexicanos, A. K. A. Pemex.
Mexico lacks a sufficiently advanced and coordinated network of oil pipelines and storage terminals that would allow the flow of imported products from the port to the gas stations. As the company’s chief executive, Jose Antonio Gonzlez Anaya, said in a recent visit to Washington, Pemex has a ‘grotesque lack of storage and transportation capacity.’
Mexico allowed private companies to import fuel for the first time in April 2016 under broader reforms aimed at encouraging competition and investment. So far, 32 private companies have sent diesel to Mexico and 17 have brought in gasoline, according to Mexico’s Energy Secretariat. But the volumes are a tiny fraction of the nearly 800,000 barrels per day that Pemex imports.

This post was published at Wolf Street on Oct 19, 2017.

On a Knife’s Edge: 3 Reasons the Next Crash Could Be Worse than Black Monday

Thirty years ago today, the US stock market had its worst single day in history.
On Oct. 19, 1987, now known simply as ‘Black Monday,’ the Dow Jones Industrial Average lost 508 points. That represented 22.6% of its value.
Over the last couple of year, stocks have enjoyed a meteoric rise. The Dow closed above 23,000 for the first time this week. But in recent months, bankers and investors around the world have expressed started expressing concern about the rapidly inflating stock market bubble and its future impact on the world economy. Just last month, Tiger Management co-founder Julian Robertson unequivocally called the US stock market a bubble and blamed it on the Fed’s interventionist monetary policy.
At some point, the soaring market will fall back to earth, and MarketWatch columnist Howard Gold says the next crash may prove worse than Black Monday.
As Gold points out, in the aftermath of the 1987 crash, the recession didn’t officially kick off until 1990. That was nearly three years after Black Monday. As a result, a lot of people dismiss the 1987 crash as a mere blip on the radar. But Gold cites a book by Diana B. Henriques to make the case that Black Monday was more than just one bad day. Henriques argues it was a painful bear market that lasted three months and included a nearly 35% drop in the Dow Jones.

This post was published at Schiffgold on OCTOBER 19, 2017.

Is Bitcoin the New Gold? Goldman Doesn’t Think So

A recent note to clients authored by Goldman Sachs analysts, including Jeffrey Currie and Michael Hinds, emphasized the continuing importance of gold and silver to investors, saying precious metals remain a relevant asset class in modern portfolios. The report focused on precious metals’ durability and intrinsic value, noting they are neither a historic accident nor a relic, even with new assets such as cryptocurrencies emerging.
The use of precious metals is not a historical accident – they are still the best long-term store of value out of the known elements.’
The note also focused on Bitcoin, saying investors shouldn’t consider cryptocurrencies the ‘new gold.’
Gold wins out over cryptocurrencies in a majority of the key characteristics of money.’
As summarized by Bloomberg, the Goldman note emphasized that both uncertainty and wealth creation drive investment in gold.

This post was published at Schiffgold on OCTOBER 19, 2017.

Robert Shiller: 1987 Could Happen Again

Oct. 19, 1987, was one of the worst days in stock market history. Thirty years later, it would be comforting to believe it couldn’t happen again.
Yet that’s true only in the narrowest sense: Regulatory and technological change has made an exact repeat of that terrible day impossible. We are still at risk, however, because fundamentally, that market crash was a mass stampede set off through viral contagion.
That kind of panic can certainly happen again.
I base this sobering conclusion on my own research. (I won a Nobel Memorial Prize in Economic Sciences in 2013, partly for my work on the market impact of social psychology.) I sent out thousands of questionnaires to investors within four days of the 1987 crash, motivated by the belief that we will never understand such events unless we ask people for the reasons for their actions, and for the thoughts and emotions associated with them.
From this perspective, I believe a rough analogy for that 1987 market collapse can be found in another event – the panic of Aug. 28, 2016, at Los Angeles International Airport, when people believed erroneously that they were in grave danger. False reports of gunfire at the airport – in an era in which shootings in large crowds had already occurred – set some people running for the exits. Once the panic began, others ran, too.

This post was published at Zero Hedge on Oct 19, 2017.

Gold Price Rallies as China Fears ‘Minsky Moment’

Gold price losses of 2.0% for the week so far were cut to 1.2% lunchtime Thursday in London, as world equities fell from new record highs and government bond yields rose against a backdrop of fresh geopolitical tensions from Spain to India and China.
After Wall Street set new all-time highs last night, gold priced against the rising US Dollar touched $1288 per ounce as Western stock markets marked the 30th anniversary of October 1987’s Black Monday – the sharpest ever 1-day fall in equities – by falling some 0.7% on average.
Commodities slipped and major government bond prices rose, nudging longer-term interest rates lower.
The weakest UK retail sales data in 4 years meantime saw the Pound retreat to a 1-week low on the foreign exchange market, helping the UK gold price in Pounds per ounce to halve this week’s earlier 1.5% loss to trade at 976.
“From being the most hated developed market currency earlier this year,” says a Hedge Fund Watch from French investment bank Societe Generale, “Sterling is now back in favour” with speculators.

This post was published at FinancialSense on 10/19/2017.

What Dennis Gartman Remembers Most From “Black Monday”

Excerpted from the latest Gartman Letter, and presented without commentary (but with some highlighting).
Everyone seems to be writing about what they remember about the Crash of ’87 and we remember it well… very… and breaking with our common use of the ‘royal we’ in our commentary and using the personal pronouns instead, from this point onward…what I remember is the sheer irrationality of the day in question; the utter and sheer panic by those who had in the past never panicked and the effect it had upon me.
On the Friday before the ‘Crash’ I was in Raleigh, North Carolina with close friends from my days at the CBOT of several years earlier: Brian O’Doherty, who played football for our beloved NC State University and who traded in the bond pit… and Carl Boraiko… one the best floor traders in T-notes, Bonds and the NOB spread I’ve had the privilege of knowing… and several others. We were there to go to the NC State v. lemson game on Saturday and were playing golf at the Duke University Golf Course on Friday when one of us noticed that the Dow was ‘Down a hundred!!’ that afternoon as we checked our phone pagers that were suddenly paging us all, for there were not Iphones then. The Dow had never been down 100 point before… ever! It was shocking, to say the very least. As a former floor trader and having been writing TGL for three years at the time, and having warned previously about the dangers of ‘portfolio insurance’ I was fearful… very… about what might happen on Monday’s opening as a result.

This post was published at Zero Hedge on Oct 19, 2017.

What a Gold-Backed Yuan and Cryptocurrencies May Mean for the Dollar

Amoungst all the crypto news this, and crypto news that, was a tiny item appearing in the Nikkei Asian Review on September 1st. Reporting from Denpasar, Indonesia, Damon Evans wrote, ‘China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.’
Not bitcoin backed, not ethereum backed, g-o-l-d backed. How low tech of the Chinese. For the moment, oil is priced in dollars, whether it’s Brent or West Texas Intermediate.
Evans explained,
China’s move will allow exporters such as Russia and Iran to circumvent U. S. sanctions by trading in yuan. To further entice trade, China (the world’s largest oil importer) says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.
This will be China’s first commodities futures contract open to foreign companies such as investment funds, trading houses and petroleum companies.

This post was published at Ludwig von Mises Institute on October 20, 2017.