• Category Archives Economy
  • Gundlach Warns Flatter Curve Is “A Concern For US Economic Growth”

    Doubleline Capital founder Jeff Gundlach warned that the flattening yield curve could become a concern for US economic growth when two and three-year notes yield about the same, and the price per barrel of WTI crude oil plunges into the $30s, he said during a phone call with a Reuters reporter.
    The last time the spread between two- and three-year yields held below 10 basis points was around the time former Federal Reserve Chairman Ben Bernanke announced the beginning of Operation Twist and then QE3 in late 2012.

    This post was published at Zero Hedge on Jun 21, 2017.

  • Gold Market Morning: June-21-2017: Gold still stabilizing below $1,250

    Gold Today – New York closed at $1,243.50 yesterday after closing at $1,251.5 yesterday. London opened at $1,246.00 today.
    Overall the dollar was slightly stronger against global currencies, early today. Before London’s opening:
    – The $: was slightly stronger at $1.1145 after yesterday’s $1.1155: 1.
    – The Dollar index was stronger at 97.66 after yesterday’s 97.57.
    – The Yen was stronger at 111.14 after yesterday’s 111.39:$1.
    – The Yuan was slightly weaker at 6.8264 after yesterday’s 6.8258: $1.
    – The Pound Sterling was weaker at $1.2627 after yesterday’s $1.2659: 1.
    Yuan Gold Fix
    Despite the central Bank in Hong Kong statement of yesterday that it wanted a stable exchange rate to the dollar, the Yuan has weakened a little in the last two days. This does not mean the policy has changed, just as it will not be a fixed exchange rate.
    What is becoming clear is that Shanghai’s pricing power over the gold price is being proved this week and last, as it has been leading the way both ways.

    This post was published at GoldSeek on 21 June 2017.

  • 100% Chance of Recession Within 7 Months?

    We asked this question one week after Trump was elected:
    ‘What does history predict for the Trump presidency?’
    The answer we furnished – based on over a century of data – was this:
    A 100% chance of recession within his first year.
    Not a 90% chance, that is. Not even a 99% chance. But a 100% chance of recession.
    That answer came by way of a certain Raoul Pal. He used to captain one of the largest hedge funds in the world.
    And to prove his case he called the unimpeachable witness of history to the stand…
    Crunching 107 years worth of data, he showed the U. S. economy enters or is in a recession every time a two-term president vacates the throne:
    Since 1910, the U. S. economy is either in recession or enters a recession within 12 months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new president.
    Obama was a two-term president – if memory serves.

    This post was published at Wall Street Examiner on June 20, 2017.

  • Could Recent FANG Weakness Be Signaling the End of the Bull Run?

    As we survey the financial markets and global economic backdrop, it appears that a change in the wind could be slowly taking place. Across the tides of global capital markets, a chillier wind may be starting to blow, ushering in what could soon be some sweeping changes in the major trends for primary capital markets. In China, the air of debt deleveraging seems to be taking root, with tightness in the money markets, bond market collapses, bond market closures, and inverted yield curves. In addition, there are also widespread rumors surrounding the viability of an assortment of wealth management products that have embedded duration mismatch problems baked into the cake.
    Here at home in the USA, boom times remain in full swing with stock market averages busting out to new highs seemingly day-after-day. Yet, behind the bullish headlines, there seems to be developing a clear pattern of parabolic (terminal) excess within the technology space, a pattern familiar to those market watchers who recall 1999 and 2008.
    Sure enough, for the most part, today’s current valuation metrics for technology stocks are nothing close to the fantasy price-to-eyeball ratios that seemed to capture the imagination of so many when the first internet boom developed in the late 1990s and peaked in March 2000. Yet, today’s market harkens back to a blend of the pre-tech wreck mania vertical blow off patterns and the famous Nifty 50 market of the early 1970s.

    This post was published at FinancialSense on 06/21/2017.

  • China ‘Rescues’ Bond Market In Symbolic Move But Yield Curve Remains Inverted

    For the 10th day in a row, China’s bond yield curve remains inverted (the longest in history).

    With yields at 3-year highs, corporate bond issuance is evaporating, and has now emerged as the latest major, and most imminent, threat facing China’s financial sector and $10 trillion corporate debt market.
    However, it appears Chinese authorities have reached their max pain point.

    This post was published at Zero Hedge on Jun 20, 2017.

  • Oil, Gold and Bitcoin

    The falling price of oil did not garner any mainstream financial media attention until today, when U. S. market participants woke up to see oil (both WTI and Brent) down nearly $2. WTI briefly dropped below $43. The falling price of oil reflects both supply and demand dynamics. Demand at the margin is declining, reflecting a contraction in global economic activity which, I believe the data shows, is accelerating. Supply, on the other hand, is rising quickly as U. S. oil producers – specifically distressed shale oil companies – crank out supply in order to generate the cash flow required to service the massive energy sector debt load.
    I am quite surprised by the rapid fall of oil (WTI basis) from the $50 level, because I concluded earlier this year that the Fed was attempting to ‘pin’ the price of oil to $50:
    The graph above is a 5-yr weekly of the WTI continuous futures contract. Oil bottomed out in early 2016 and had been trending laterally between the mid-$40’s and $55. I read an analysis in early 2016 that concluded that junk-rated shale oil companies would implode if oil remained in the low $40’s or lower for an extended period of time. Note that some of the TBTF banks who underwrote shale junk debt were stuck with unsyndicated senior bank debt (i.e. they were unable to find enough investors to relieve the banks of this financial nuclear waste). Thus, the Fed has been working to keep the price of oil levitating in the high $40’s/low $50’s, in part, to prevent financial damage to the big banks who have big exposure to shale oil debt.

    This post was published at Investment Research Dynamics on June 21, 2017.

  • The Metals Market Is Out Of Room And Time

    Now that we have moved beyond the Fed-event, many have become quite bearish the metals once again. Many are again expecting the December 2016 lows to be tested, with just as many thinking it will be broken.
    But, what I find quite comical are those that maintain a linear perspective on the market. Each of the Fed interest raises recently has seen the metals rally right after. So, there were many coming into the Fed day expecting the same. So, this is simply yet another reminder that markets do not react linearly, and that the substance of news events or Fed actions do not predict market direction.
    As for us, our expectations have not changed no matter what the Fed did or did not do. For weeks, I had been suggesting that the GDX can rally up towards the 24 region, and then provide us with a pullback. Nothing the Fed has done or not done has moved the market at all outside of our expectations. And, thus far, the market has been playing out almost perfectly, based upon the pattern we have been outlining, which you can see based upon the attached chart we had been using this week to direct us in our expectations for the GDX.

    This post was published at GoldSeek on Wednesday, 21 June 2017.

  • Leading The Multipolar Revolution: How Russia And China Are Creating A New World Order

    The last thirty days have shown another kind of world that is engaging in cooperation, dialogue and diplomatic efforts to resolve important issues. The meeting of the members of the Belt and Road Initiative laid the foundations for a physical and electronic connectivity among Eurasian countries, making it the backbone of sustainable and renewable trade development based on mutual cooperation. A few weeks later, the Shanghai Cooperation Organization meeting in Astana outlined the necessary conditions for the success of the Chinese project, such as securing large areas of the Eurasian block and improving dialogue and trust among member states. The following AIIB (Asian Infrastructure Investment Bank) meeting in ROK will layout the economical necessities to finance and sustain the BRI projects.
    The Shanghai Cooperation Organization (SCO) and the Chinese Belt and Road Initiative (BRI) have many common features, and in many ways seem complementary. The SCO is an organization that focuses heavily on economic, political and security issues in the region, while the BRI is a collection of infrastructure projects that incorporates three-fifths of the globe and is driven by Beijing’s economic might. In this context, the Eurasian block continues to develop the following initiatives to support both the BRI and SCO mega-projects. The Collective Security Treaty Organization (CTSO) is a Moscow-based organization focusing mainly on the fight against terrorism, while the Asian Infrastructure Investment Bank (AIIB) is a Beijing-based investment bank that is responsible for generating important funding for Beijing’s long-term initiatives along its maritime routes (ports and canals) and overland routes (road, bridges, railways, pipelines, industries, airports). The synergies between these initiatives find yet another point of convergence in the Eurasian Economic Union (EEU). Together, the SCO, BRI, CTSO, AIIB, and EEU provide a compelling indication of the direction in which humanity is headed, which is to say towards integration, cooperation and peaceful development through diplomacy.
    On the other side we have the old world order made up of the IMF, the World Bank, the European Union, the UN, NATO, the WTO, with Washington being the ringmaster at the center of this vision of a world order. It is therefore not surprising that Washington should look askance at these Eurasian initiatives that threaten to deny its central and commanding role in the global order in favor of a greater say by Moscow, Beijing, New Delhi and even Tehran.

    This post was published at Zero Hedge on Jun 21, 2017.

  • Beer ATMs Threaten America’s “Waiter & Bartender” Recovery

    For 87 straight months, America’s recovery has been dominated by one ‘job’…
    Well over 5 years ago, we first dubbed the economy under Barack Obama as the “Waiter and Bartender recovery”, because while most other job categories had grown at a moderate pace at best, the growth in the category defined by the BLS as “Food Service and Drinking Workers” has been nothing short of spectacular.
    How spectacular? As the chart below shows, starting in March of 2010 and continuing through April of 2017, there have been 87 consecutive month of payroll gains for America’s waiters and bartenders, an unprecedented feat and an all time record for any job category. Putting this number in context, total job gains for the sector over the past 7 years have amounted to 2.378 million or just under 15% of the total 16.4 million in new jobs created by the US over the past 87 months.

    This post was published at Zero Hedge on Jun 20, 2017.

  • Barclays charged with fraud in Qatar case

    The Serious Fraud Office charges come at the end of a five-year investigation and relate to the bank’s fundraising at the height of 2008’s financial crisis.
    Former chief executive John Varley is one of the four ex-staff who will face Westminster magistrates on 3 July.
    Barclays says it is considering its position and awaiting further details.

    This post was published at BBC

  • Money Supply Growth Fell to a 104-Month Low in May

    Last month, the money supply growth rate in the United States fell to a 104-month low, rising by 5.91 percent. This is the lowest growth rate recorded since July 2008 when the growth rate was 5.24 percent.
    Given the imprecise nature of these estimates, however, it is fair to say that the rate of growth is essentially unchanged since March, and for the past three months, money supply growth has been at eight-year lows.
    In March, we reported that money supply growth had fallen to a 103-month low. In April, the growth rate increased slightly to 6 percent, but fell again in May.
    The M2 measure also showed a downward turn in recent months, although not to the same extent as the “Austrian” measure. In May, however, M2 growth had moderated to the point of matching our money-supply growth measure with both now being at 5.9 percent.

    This post was published at Ludwig von Mises Institute on June 21, 2017.

  • Fading Further and Further Back Toward 2016

    Earlier this month, the BEA estimated that Disposable Personal Income in the US was $14.4 trillion (SAAR) for April 2017. If the unemployment rate were truly 4.3% as the BLS says, there is no way DPI would be anywhere near to that low level. It would instead total closer to the pre-crisis baseline which in April would have been $19.0 trillion. Even if we factor retiring Baby Boomers in a realistic manner, say $18 trillion instead, what does the world look like with that additional $3.6 trillion of American income?
    It is the one that is currently being described, that which earlier this year was supposed to set up the bond market for a 1994-style ‘massacre.’ Reflation was not just some nebulous idea, though it arose out of nothing but faith, rather it was the belief in a realistic trajectory back to $19 or even $18 trillion in income (maybe $17 trillion). At that level of future income, a lot of deficiency about the current economy would quickly vanish.
    That would apply, of course, to far more than domestic circumstances. The rest of the world would be awash in US demand in terms of actual spending (the strong consumer in fact rather than just constant description). The feedback and spillover effects would restart what are now painfully broken foreign economies (not just in Brazil).

    This post was published at Wall Street Examiner on June 20, 2017.

  • Caterpillar Retail Sales Rise Most In 54 Months

    Caterpillar’s great depression ended three months ago, when in March following a record 51 consecutive months of annual declines, its global retail sales posted the first, if modest, monthly increase growing by 1% on the back of a surge in Chinese and other Asia/Pac sales. Since then the trend has accelerated, and in May the company reported that Asia Pac sales soared by 49%, the highest since April 2011, while maybe more notably, retail sales in the US rose by 2%, for the first time since May 2015.

    This post was published at Zero Hedge on Jun 20, 2017.

  • Argentina (!) Sells 100-Year Dollar-Denominated Junk Bonds

    Yield-desperate investors stop before nothing. What have central banks wrought? Junk-rated, deficit-plagued, inflation-whacked Argentina just sold $2.75 billion of 100-year dollar-denominated bonds. This was the first time ever that a junk-rated country was able to sell 100-year bonds denominated in a foreign currency, or any currency.
    Argentina sports a ‘B’ credit rating from Standard & Poor’s. Five notches below investment grade. Deep junk.
    And 100 years is a very, very long time for Argentina and its regularly beaten-up creditors: Just over the past 65 years, it has defaulted six times – in 1951, 1956, 1982, 1989, 2001, and its ‘selective default’ in 2014. Its default in 2001 on $80 billion of dollar-denominated debt was the largest sovereign default at the time.
    And yet, yield-desperate investors don’t seem to care. According to The Wall Street Journal, demand for the private-placement offering was such that Argentina could sell those ‘century’ bonds at a yield of 7.9%, down from the initial price talk of 8.25%.

    This post was published at Wolf Street on Jun 20, 2017.

  • Bill Blain Flips Out: “Not Much Surprises Me Any More About Markets, But Really? Really!?”

    On Monday morning, we reported that in a stunning development, chronic defaulter Argentina – which just one year ago emerged from its latest bankruptcy – has found enough willing greater fools to sell 100-year bonds to. One person who especially stunned, was Mint’s Bill Blain, who issued an entire note describing his disgust with what the market has devolved to.
    * * *
    Argentina 100 Year Bonds: Really? Nobody Believes, But They Will Buy.
    ‘Everyone should learn to Tango before they die.. ‘
    Markets can be a triumph of hope over reality. The news Argentina is going to launch a 100 year century bond caught my eye today.

    This post was published at Zero Hedge on Jun 20, 2017.

  • Why The (Collapsing) Global Credit Impulse Is All That Matters: Citi Explains

    One week ago, we reported that UBS has some “very bad news for the global economy”, when we showed that according to the Swiss bank’s calculations, the global credit impulse showed a historic collapse, one which matched the magnitude of the impulse plunge in the immediate aftermath of the financial crisis.
    But why is the credit impulse so critical?
    To answer this question Citi’s Matt King has published a slideshow titled, appropriately enough, “Why buying on impulse is soon regretted”, in which he explains why this largely ignored second derivative of global credit growth is really all that matters for the global economy (as well as markets, as we will explain in a follow up post).
    King first focuses on the one thing that is “wrong” with this recovery: the pervasive lack of global inflation, so desired by DM central banks.

    This post was published at Zero Hedge on Jun 20, 2017.

  • Root Monetary Behavior

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    Capitalism has always featured feedback mechanisms. They never were perfect, as nothing is going to ever be. Instead, market discipline was always a messy affair as it more often throughout history included periods of undisciplined behavior followed closely by mass exodus, crash, and then depression. Economists after 1929 thought of themselves as a replacement mechanism for self-correction.
    Regulators had until the aftermath of 2008 believed macruprudential policies and the like might be substituted for what was really a survival instinct. It was widely thought authorities could regulate self-control while at the same time unleashing the worst aspects attainable without it (TBTF was an implicit doctrine long before Bear, LTCM, and many others). Afterward, however, the idea has been rethought at least in the more extreme cases.
    In the mortgage market as well as for securitization as a process, it was pretty obvious that volume overflowed all other considerations. One of chief reasons for that was simple risk; mortgage originators were nothing but an initial warehouse. After selling into a securitization, the only ‘skin’ the originator had left was the various present value calculations on the whole future history of the deal whose full gains had already been bookedlong before a single dollar of cash flow exchanged hands. It wasn’t really much to govern prudent action.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ June 19, 2017.