• Category Archives Economy
  • European Commission Trying to Seize Control of Euro

    I reported previously that the European Commission is seeking to take the clearing of the Euro derivative transactions from London and move them to Paris. The European Central Bank (ECB) is warning that it must secure strong access rights for the supervision of the cross-border settlement of financial transactions after the departure of Great Britain from the EU. About 90%+ of all euro derivatives transactions are settled via clearing houses in London such as LCH. Clearnet. In the middle of a crisis, the ECB would have no power to shut the market to protect the euro from the free market forces. Of course, what they fail to grasp here is trying to seize the euro clearing and move it by decree to Paris will only undermine the euro even more. What will they do next? Forbid the euro to trade in New York, Chicago, or Asia? Do that and the euro will become a massive short.

    This post was published at Armstrong Economics on Jun 26, 2017.

  • Haunting Photos of Shuttered Stores on Madison Avenue

    Brick & Mortar Meltdown reaches ‘Crown Jewel in American retailing.’
    Brick and mortar stores face a tough environment. Retail is shifting to online operations. E-commerce sales have surged at an annual rate of about 15% in recent years. But sales at department stores and smaller stores are deteriorating. Malls have hit hard times. Retail bankruptcies have formed a horrific litany. And the signs are visible everywhere.
    So here is the excerpt of an essay with haunting, beautiful photos of this meltdown as seen from the sidewalk on Manhattan’s glorious Madison Avenue, ‘Crown Jewel in American retailing.’ The essay, ‘Walking the Avenue with a Camera,’ was originally published on New York Social Diary, a great place to read about the goings-on in New York City.
    By David Patrick Columbia, New York Social Diary. Photos by Pierre Crosby:
    Here in New York we are experiencing a de-accessioning of retail space for retail businesses. We are seeing more store vacancies than I can ever recall in the last six decades. The City is a changing system socioeconomically. Neighborhoods come and go. In the past twenty years there has been a trend for restoration and revitalizing the communities. You can see it in all the boroughs, especially when it comes to housing. Brooklyn and Queens and Upper Manhattan, including Harlem are good examples of this progress. Although it has got more, much more expensive for the average working person, just to provide a roof over one’s head. In the 1960s when I came here out of college the rule of thumb for rental expense was one week’s salary a month. I know people today who are paying more than 50% of their monthly for shelter.

    This post was published at Wolf Street on Jun 24, 2017.

  • Dan Loeb Is Now Nestle’s 6th Largest Shareholder; Goes Activist On World’s Biggest Food Company

    Dan Loeb has returned to his earthshaking activist roots, and in a letter released moments ago, Third Point announced it is now targeting the world’s largest food company, with its biggest bet on a public company in its history, amounting to $3.5 billion.
    In the letter, Third Point announced that it currently owns roughly 40 million shares of Nestle, and that its stake, which is held in a special purpose vehicle raised for this opportunity including options, currently amounts to over $3.5 billion. Putting this number in the context of Nestle’s market cap of $264 billion, Loeb may have an uphill battle though that never stopped him before.
    Loeb’s stake of 40 million shares makes him the 6th largest holder of Nestle, above Credit Suisse Asset Management with 38 million shares and below Massachusetts Financial Services Company with 56.8 million. The Top 4 holders are BlackRock, CapRe, Norges Bank, and Vanguard.
    Third Point writes that “despite having arguably the best positioned portfolio in the consumer packaged goods industry, Nestl shares have significantly underperformed most of their US and European consumer staples peers on a three year, five year, and ten year total shareholder return basis. One year returns have been driven largely by the market’s anticipation that with a newly appointed CEO, Nestl will improve.”
    While the problems are clear, why did Third Point go activist? To maximize value of course, as It explains:

    This post was published at Zero Hedge on Jun 25, 2017.

  • “Big Swinging Dick” Defined

    “Big Swinging Dick: (Very) informal and somewhat derogatory; a trader who believes his methodology is perfect and will always result in sizable profits. However, it originally was a term of self-designation for major bond-traders. The term was popularized by the book Liar’s Poker, which describes the author’s experience as a bond trader on Wall Street in the 1980s.” Source: financial dictionary
    While much has been written about trade size, meaning how much trading capital should be risked on each trade, this remains a nebulous imprecise topic.
    That’s unfortunate because it can make all the difference between staying in the game or losing all trading capital – known in the business as ‘blowing up’. Yes, even (especially) if you are a big swinger.
    The concept of a “trading edge” is central here. Broadly speaking, this is how much a trader is expected to make over a reasonable number of trades (meaning, with some statistical significance), taking into consideration the risk of loss and how much will be made or lost with each trade on average.
    Basically, if you don’t know what your edge is you should not be trading, or gambling for that matter. Buying and holding for some time perhaps, but not regularly going in and out of the market without a good plan.

    This post was published at Zero Hedge on Jun 25, 2017.

  • The Collapse Will Be Driven By A Credit Collapse, Has The Date Been Set? – Episode 1315a

    The following video was published by X22Report on Jun 25, 2017
    Corporations are now looking at block-chain technology. Visa, Microsoft and many others are turning towards the crypto world while the corporate media and the banking community will begin to tell you how bad the block-chain is. The BIS is warning that a recession is headed our way, the corporate media is already putting out more articles of a recession. Goldman, Citi and BofA are now blaming the Fed for the past recessions. A Hedge fund manager has predicted a date of the collapse of the economy, now you know we are getting close.

  • “It’ll Be An Avalanche”: Hedge Fund CIO Sets The Day When The Next Crash Begins

    While most asset managers have been growing increasingly skeptical and gloomy in recent weeks (despite a few ideological contrarian holdouts), joining the rising chorus of bank analysts including those of Citi, JPM, BofA and Goldman all urging clients to “go to cash”, none have dared to commit the cardinal sin of actually predicting when the next crash will take place.
    On Sunday a prominent hedge fund manager, One River Asset Management’s CIO Eric Peters broke with that tradition and dared to “pin a tail on the donkey” of when the next market crash – one which he agrees with us will be driven by a collapse in the global credit impulse – will take place. His prediction: Valentine’s Day 2018.
    Here is what Peters believes will happen over the next 8 months, a period which will begin with an increasingly tighter Fed and conclude with a market avalanche:
    ‘The Fed hikes rates to lean against inflation,’ said the CIO. ‘And they’ll reduce the balance sheet to dampen growing financial instability,’ he continued. ‘They’ll signal less about rates and focus on balance sheet reduction in Sep.’
    Inflation is softening as the gap between the real economy and financial asset prices is widening. ‘If they break the economy with rate hikes, everyone will blame the Fed.’ They can’t afford that political risk.

    This post was published at Zero Hedge on Jun 25, 2017.

  • You Know It’s Bad When… Prices For Used Jets Are Cratering

    America’s wealthiest individuals are thriving thanks to an imbalance in wealth accumulation that favors the already asset-rich. But even though the number of millionaires and billionaires living in the US has been climbing, and is on track to increase by nearly 700,000 a year between now and 2021 – so long as the market avoids another crash – an influx of new potential buyers has done little to alleviate a supply glut that has been weighing on used jet prices for years.
    As the Financial Times reports, sales prices for used jets have fallen as much as 35% over the past three years, with the average price falling from $13.7 million in April 2014 to $8.9 million today.

    This post was published at Zero Hedge on Jun 25, 2017.

  • Are the World’s Billionaire Investors Actually Buying Gold?

    Infographic website Visual Capitalist recently published an eye-catching infographic on behalf of Sprott Physical Bullion Trusts which featured 4 well-known billionaire investors and their supposed investments in gold. The infographic is titled ‘Why the World’s Billionaire Investors Buy Precious Metals’ and can be seen here.
    The 4 investors profiled in the infographic are:
    Jacob Rothschild (Lord), chairman of London-based investment trust RIT Capital Partners Plc David Einhorn, president of Manhattan-based hedge fund firm Greenlight Capital Ray Dalio, chairman and CIO of hedge fund firm Bridgewater Associates, Westport (Connecticut) Stanley Druckenmiller, chairman and CEO of Manthattan-based Duquesne Family Office (and formerly of Duquesne Capital Management) Overall, four very famous investors, and four names that should at least be vaguely familiar to almost anyone who has a passing interest in financial markets and investing.
    For each of the 4 billionaires, the Sprott infographic provides a few quotes about their views on gold and then moves on to record their recent ‘Moves’ into ‘gold’, or in some cases their recent readjustments of existing ‘gold’ exposures.

    This post was published at Bullion Star on 22 Jun 2017.

  • BIS Lists The Four Biggest Threats Facing The Global Economy

    After years of fire and brimstone sermons, also known as the Bank of International Settlements’ annual reports delivered with doom and gloomy aplomb by Jaime Caruana, who year after year warned about the adverse side-effects of central bank intervention, today the BIS released its most upbeat reports in years, in which it praised the recent rebound in global growth and predicted that GDP may soon revert to long-term average levels after the sharp improvement in sentiment over the past year.
    Or maybe not, because even as talk of a “global coordinated rebound” continues, it has once again rolled over, with the US economy barely growing above stall speed, while the BIS explicitly notes that “despite the best near-term prospects for a long time, paradoxes and tensions abound” among these are the VIX…
    Financial market volatility has plummeted even as indicators of policy uncertainty have surged.
    … and the record disconnect between equities and bonds.

    This post was published at Zero Hedge on Jun 25, 2017.

  • Understanding The Cryptocurrency Boom

    I recently came across a December 1996 San Jose Mercury News article on tech pioneers’ attempts to carry the pre-browser Internet’s bulletin board community vibe over to the new-fangled World Wide Web.
    In effect, the article is talking about social media a decade before MySpace and Facebook and 15 years before the maturation of social media.
    (Apple was $25 per share in December 1996. Adjusted for splits, that’s about the cost of a cup of coffee.)
    So what’s the point of digging up this ancient tech history?
    Technology changes in ways that are difficult to predict, even to visionaries who understand present-day technologies. The sources of great future fortunes are only visible in a rearview mirror. Many of the tech and biotech companies listed in the financial pages of December 1996 no longer exist. Their industries changed, and they vanished or were bought up, often for pennies on the dollar of their heyday valuations.

    This post was published at PeakProsperity on Friday, June 23, 2017.

  • The Forgotten Depression of 1920 – 1921

    This is a syndicated repost courtesy of The Daily Reckoning. To view original, click here. Reposted with permission.
    The year is 1921…
    America is less than three years removed from triumph on the Western Front. It’s the dawn of the Roaring Twenties… and the Jazz Age.
    Warren Gamaliel Harding is America’s czar.
    And the nation is sunk in depression…
    U. S. industrial production plunged 31% between 1920 and 1921. Stock prices plummeted 46%… and corporate profits a crushing 92%.
    Unemployment ran as high as 19%. Storefronts everywhere gaped empty.
    It was the grand migraine of the day.
    Then suddenly it was over. The pain was acute… but the pain was brief.
    By 1922 prosperity was finding its legs again.
    Welcome to the Forgotten Depression of 1920 – 1921…

    This post was published at Wall Street Examiner by Brian Maher ‘ June 24, 2017.

  • Why The Next Recession Will Morph Into A Decades Long Depressionary Event… Or Worse

    Authored by Chris Hamilton via Econimica blog,
    Economists spend inordinate time gauging the business cycle that they believe drives the US economy. However, the real engine running in the background (and nearly entirely forgotten) is the population cycle. The positive population cycle is such a long running macro trend thousands of years in the offing that it’s taken for granted. It is wrongly assumed that upon every business cycle downturn, accommodative monetary and fiscal policies will ultimately spur greater demand and restart the business cycle once the excess capacity and inventories are drawn down. However, I contend that the population cycle has been the primary factor in ending each recession…and this most macro of cycles is now rolling over. Without this, America (nor the world) will truly emerge from the next recession…instead it will morph into an unending downward cycle of partial recoveries…contrary to all contemporary human experience.
    The evidence for my contention begins with the 25-54yr/old US population, which peaked in December 2007 and remains below that peak ever since (this population is presently about 400k fewer than Dec of ’07). However, total US full time employment is now 3.6 million above the previous peak in 2007. This 25-54 to FT employment relationship is now 1:1…just as it was in 1980 and 1970.

    This post was published at Zero Hedge on Jun 24, 2017.

  • Doug Noland: Washington Finance and Bubble Illusion

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    June 18 – Financial Times (Mohamed El-Erian): ‘In hiking rates and, more notably, reaffirming its forward policy guidance and setting out plans for the phased contraction of its balance sheet, the Federal Reserve signalled last week that it has become less data dependent and more emboldened to normalise monetary policy. Yet, judging from asset prices, markets are failing to internalise sufficiently the shift in the policy regime. Should this discrepancy prevail in the months to come, the Fed could well be forced into the type of policy tightening process that could prove quite unpleasant for markets.’
    I’m not yet ready to move beyond the recent focus on global monetary policy. Belatedly, the Fed has become ‘more emboldened to normalise monetary policy.’ Global policymakers may finally be turning more emboldened, though taking their precious time has nurtured alarming market complacency.
    Over a period of years, securities markets became progressively more emboldened to the view that higher asset prices were the top priority of global central banks. For years I’ve argued that this is one policy slippery slope. For good reason, markets do not these days take seriously the threat of a tightening of financial conditions. The Fed and fellow central banks will surely seek to avoid what at this point would be a painful development for the global securities markets. When faced with a well-established Bubble, the notion of a painless tightening of financial conditions is a myth.

    This post was published at Wall Street Examiner by Doug Noland ‘ June 24, 2017.

  • EUR/JPY Exchange Rate and Gold

    We argued many times that the yellow metal behaves as a currency rather than as a commodity. Hence, macroeconomic factors and currency exchange rates affect the price of gold. In previous editions of the Market Overview, we analyzed the impact of the U. S. dollar and its exchange rate with the Euro and the Yen on the gold market. We pointed out that gold is negatively correlated with the greenback, so it moves in tandem with the Japanese or European common currency, as they are the major rivals of the U. S. dollar.
    However, some analysts claim that the cross rate between the euro and the yen affects the price of gold (the term ‘cross’ meaning here that the quote does not involve the U. S. dollar). Are they right? Let’s see the chart below and check it out.
    Chart 1: The price of gold (yellow line, left axis, London P. M. Fix, weekly average) and the EUR/JPY (red line, right axis, weekly average) exchange rate from January 1999 to May 2017.

    This post was published at GoldSeek on JUNE 23, 2017.

  • They Can And Should Do More” Australian State Slams Banks With $280 Million Tax

    Australian bankers are furious after the country’s smallest state levied a ‘surprise’ tax on the country’s five biggest banks that could siphon off $280 million in profits during its first four years on the books, according to Reuters. The tax was imposed by South Australia, which is struggling with the country’s highest unemployment rate and thanks the banks should be doing more to pitch in.

    This post was published at Zero Hedge on Jun 23, 2017.

  • Draghi Doesn’t See ‘Bubbles’ – Let Me Show You Some

    Mario Draghi has again missed an exceptional opportunity to adjust monetary policy. By ignoring the huge risks that are being created from the brutal inflation of financial assets, saying that ‘there are no signs of a bubble,’ the European Central Bank (ECB) remains adamantly focused on creating inflation by decree, denying the effects of technology, demography, and overcapacity.
    ‘No signs of bubble’? I’ll show you some of them myself.
    The percentage of debt of major countries ‘bought’ by the ECB: Germany, 17%, France 14%, Italy 12%, and Spain 16%. In all cases, in 2016 and 2015 the ECB was the largest buyer of said countries’ net emissions. Ask yourself a question: On the day the ECB stops buying, which of you would buy peripheral or European bonds at these prices? Clearly, the first sign of a bubble is the absence of demand in the secondary that offsets the impact of the ECB. It indicates that the current price is simply unacceptable in an open market, even if the recovery is confirmed, especially because rates do not even reflect a minimum real return, being below inflation.

    This post was published at Ludwig von Mises Institute on June 24, 2017.

  • Market Talk- June 23, 2017

    Most core markets finished a quiet week with limited volatility and little change. The Nikkei closed small down while the JPY set a similar trend, eventually finishing mid 111’s. A lot of the talk and discussions have been around the Hang Seng and the Chinese markets. Having just included 222 of the core Shanghai this has tended to dominate much of the moves and anticipation. Authorities have additional work ahead of them but this week will reflect a key point for when potentially the second largest market in the world opened its doors. Regulators will be keen to show the world the market is also ready for the move so expect stricter conditions ahead for local financial institutions as they move to centre stage. The Shanghai again continued its positive move closing +0.35% on the day. SENSEX saw a rare pullback closing off -0.5%.

    This post was published at Armstrong Economics on Jun 23, 2017.

  • The Incredible Shrinking Relative Float Of Treasury Bonds

    Via Global Macro Monitor blog,
    Lots of hand wringing these days about the flattening yield curve. We still maintain our position that the signal from the bond market is significantly distorted due to the global central bank intervention (QE) into the bond markets. See here and here.
    Most of what is happening with the U. S. yield curve is technical. Sure, traders can get a wild hair up their arse, believing the economy is slowing and try and game duration by punting in the cash or futures markets. Given the small relative float of the U. S. Treasury bond market, however, it doesn’t take much buying to move yields. In the words of economists, the supply curve of outstanding Treasuries is very inelastic.
    This is illustrated in the following chart. The combined market cap of just Apple and Amazon at today’s close is larger than the entire the float of outstanding Treasury notes and bonds that mature from 2027-2027. We define float (US$1.16 trillion) as total Treasury securities (2027-2047) outstanding (US$1.73 trillion) less Fed holdings (US$575 billion).

    This post was published at Zero Hedge on Jun 23, 2017.