• Tag Archives Commodities
  • Traders Yawn After Fed’s “Great Unwind”

    One day after the much anticipated Fed announcement in which Yellen unveiled the “Great Unwinding” of a decade of aggressive stimulus, it has been a mostly quiet session as the Fed’s intentions had been widely telegraphed (besides the December rate hike which now appears assured), despite a spate of other central bank announcements, most notably out of Japan and Norway, both of which kept policy unchanged as expected.
    ‘Yesterday was a momentous day – the beginning of the end of QE,’ Bhanu Baweja a cross-asset strategist at UBS, told Bloomberg TV. ‘The market for the first time is now moving closer to the dots as opposed to the dots moving towards the market. There’s more to come on that front. ‘
    Despite the excitement, S&P futures are unchanged, holding near all-time high as European and Asian shares rise in volumeless, rangebound trade, and oil retreated while the dollar edged marginally lower through the European session after yesterday’s Fed-inspired rally which sent the the dollar to a two-month high versus the yen on Thursday and sent bonds and commodities lower. Along with dollar bulls, European bank stocks cheered the coming higher interest rates which should help their profits, rising over 1.5% as a weaker euro helped the STOXX 600. Shorter-term, 2-year U. S. government bond yields steadied after hitting their highest in nine years.
    ‘Initial reaction is fairly straightforward,’ said Saxo Bank head of FX strategy John Hardy. ‘They (the Fed) still kept the December hike (signal) in there and the market is being reluctantly tugged in the direction of having to price that in.’
    The key central bank event overnight was the BoJ, which kept its monetary policy unchanged as expected with NIRP maintained at -0.10% and the 10yr yield target at around 0%. The BoJ stated that the decision on yield curve control was made by 8-1 decision in which known reflationist Kataoka dissented as he viewed that it was insufficient to meeting inflation goal by around fiscal 2019, although surprisingly he did not propose a preferred regime. BOJ head Kuroda spoke after the BoJ announcement, sticking to his usual rhetoric: he stated that the bank will not move away from its 2% inflation target although the BOJ “still have a distance to 2% price targe” and aded that buying equity ETFs was key to hitting the bank’s inflation target, resulting in some marginal weakness in JPY as he spoke, leaving USD/JPY to break past FOMC highs, and print fresh session highs through 112.70, the highest in two months, although it has since pared some losses.

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

  • The World Is Creeping Toward De-Dollarization

    The issue of when a global reserve currency begins or ends is not an exact science. There are no press releases announcing it, and neither are there big international conferences that end with the signing of treaties and a photo shoot. Nevertheless we can say with confidence that the reign of every world reserve currency has to come to and end at some point in time. During a changeover from one global currency to another, gold (and to a lesser extent silver) has always played a decisive role. Central banks and governments have long been aware that the dollar has a sell-by date as a reserve currency. But it has taken until now for the subject to be discussed openly. The fact that the issue has been on the radar of a powerful bank like JP Morgan for at least five years, should give one pause. Questions regarding the global reserve currency are not exactly discussed on CNBC every day. Most mainstream economists avoid the topic like the plague. The issue is too politically charged. However, that doesn’t make it any less important for investors to look for answers. On the contrary. The following questions need to be asked: What indications are there that the world is turning its back on the US dollar? And what are the clues that gold’s role could be strengthened in a new system?
    The mechanism underlying today’s ‘dollar standard’ is widely known and the term ‘petrodollar’ describes it well. This system is based on an informal agreement the US and Saudi Arabia arrived at in the mid-1970s. The result of this deal: Oil, and consequently all other important commodities, is traded in US dollars – and only in US dollars. Oil producers then ‘recycle’ these ‘petrodollars’ into US treasuries. This circular flow of dollars has enabled the US to pile up a towering mountain of debt of nearly $20 trillion – without having to worry about its own financial stability. At least, until now.

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

  • Weekly Commentary: Monetary Disorder

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    Global Credit, Bubble and market analysis is turning more interesting.
    China August Credit data were out Friday. Total (aggregate) Social Financing jumped to 1.48 TN yuan ($225bn), up from July’s 1.22 TN and above the 1.28 TN estimate. New Loans were reported at a much stronger-than-expected 1.09 TN (estimates 750bn yuan), up from July’s 825bn. New loans expanded 13.2% y-o-y. Through August, Total Social Financing is running 18% above 2016’s record pace. Total system Credit growth (‘social financing’ plus govt. borrowings) appears on track to surpass $4.0 TN. While ‘shadow banking’ has of late been restrained by tighter regulation, household (largely real estate) borrowings remain exceptionally strong.
    It was the weaker Chinese economic data that made the headlines this week. Retail sales (up 10.1% y-o-y), industrial production (up 6.0%) and fixed investment (up 7.8%) were all somewhat below estimates. At the same time – and I would argue more importantly – Chinese inflation is running hotter than forecast. Considering the scope of the ongoing Credit expansion, inflationary pressures should come as no surprise.
    September 10 – Bloomberg: ‘Inflationary pressure emanating from the factory to the world is proving more resilient than economists have anticipated. China’s producer-price inflation accelerated to 6.3% in August from a year earlier, exceeding all but one of 38 estimates… That data… followed 5.5% readings in the prior three months… The surprise strength gives support for global inflation spanning from metals to fuel and shows the effects of resilient domestic demand and reduced supplies of some commodities.’

    This post was published at Wall Street Examiner by Doug Noland ‘ September 16, 2017.

  • Deutsche Bank: “This Is The $2.5 Trillion Question”

    Next Wednesday, the Fed is widely expected to officially launch its balance sheet reduction or “normalization” process, as a result of which it will gradually taper the amount of bonds its reinvests in the process modestly shrinking the Fed’s balance sheet.
    Very modestly. As shown in the chart below, the Fed’s $4.471 trillion balance sheet will shrink by $10 billion per month in October and November, or about 0.4% of its total AUM. Putting this “shrinkage” in context, over the same time period, the Bank of Japan and the ECB will continue adding new liquidity amounting to more than $400 billion. As a result, in Q4 net global liquidity will increase by “only” $355 billion, should Yellen begin “normalizing” in October following a September taper announcement as expected.

    That much is known, however there are quite a few unknown aspects about the Fed’s upcoming QE unwind, and as a result, Deutsche Bank writes that “the Fed is about to become hugely important for financial assets.”
    Assuming it all goes well, DB forecasts smooth sailing ahead, manifested by “nominal core rates will be relatively stable and the dollar gently weaker. 10s might trade a sustainably lower range 1.8-2.3 percent. There will be more of a gradual risk asset rotation favoring US (growth) equities, EM, some commodities at the expense of (value) equities, Eurostoxx, NKY with credit somewhere in between.”

    This post was published at Zero Hedge on Sep 16, 2017.

  • Anti-Gold Puppet Now Hints Gold Will Soar

    Several representatives of the elitists have been warning about a major global financial crisis. Recently the former Head of the Monetary and Economics Department at the Bank of International Settlements, the Central Bank of Central Banks, warned that there are ‘more dangers now than in 2007.’
    Goldman Sachs commodities analyst, Jeff Currie, who is infamous for incorrectly predicting gold would drop to $800 about three years ago, recently advised anyone listening to own physical gold: ‘don’t buy futures or ETFs…buy the real thing. . .the lesson learned was that if gold liquidity dries up along with the broader market, so does your hedge, unless it’s physical gold in a vault, the true hedge of last resort.’

    This post was published at Investment Research Dynamics on Dave Kranzler.

  • Former UBS Trader Arrested, Charged With Rigging Gold Prices

    Three years after we first identified the former head of UBS’s gold desk in Zurich as someone directly implicated in the rigging of precious metals prices, Bloomberg reports that Andre Flotron, a Swiss resident, was arrested while visiting the U. S., according to people familiar with the matter.
    Having been “on leave” since 2014, it appears Andre’s hope that he was gone but “keen to return in due time” are now up in smoke.
    As Bloomberg reports, Flotron was charged with conspiracy, wire fraud, commodities fraud and spoofing, according to a prepared complaint, and is the second person publicly charged in the U. S. investigation into the fixing of gold, silver, platinum and palladium prices.

    This post was published at Zero Hedge on Sep 13, 2017.

  • Goldman Sachs & the Volcker Rule

    Last week we heard optimistic noises coming from some of the top executives in the world of mortgage finance at the Americatalyst 2017 event. Falling interest rates have managed to get new applications for mortgage refinancing even with purchase loans for the first time in months, this as the 30-year mortgage has fallen back to pre-election levels. We’re still calling for the 10-year Treasury to go to 2% yield or lower.
    The good news for Q3 ’17 earnings is that production volumes and spreads are improving for many lenders after a dreadful start of the year. Bad news is that falling yields on the 10-year Treasury implies a significant mark-down for mortgage servicing rights (MSRs). The movement of benchmark interest rates, coupled with significantly lower lending volumes and surging prices for collateral, could make Q3 ’17 a very interesting – and treacherous – earnings period for financials with exposure to MSRs and other aspects of residential housing finance.
    Away from the blissful consideration of the housing sector, tongues were set wagging late last week when Liz Hoffman at The Wall Street Journal reported that Goldman Sachs (NYSE:GS) commodities head Greg Agran will leave the firm. ‘Mr. Agran’s departure follows the worst slump in Goldman’s commodities unit since the firm went public in 1999. Bad bets on the prices of natural gas and oil contributed to a second quarter in which the unit barely made money,’ The Wall Street Journal reported.

    This post was published at Wall Street Examiner on September 11, 2017.

  • WHY KOREAN TENSIONS SHOULD SOON EASE – effect on Dollar and Precious Metals…

    The tensions centered on the Korean peninsula should soon ease, leading to a rally in the dollar and a (mild) reaction in Precious Metals and other commodities like copper, for reasons that we will consider in this essay.
    There can be no denying that what we have previously referred to as ‘The Empire’ is intent on world domination. The evidence is there for all to see in the form of a vast network of military bases spread across the globe, and a history of invasion of various countries by the Empire in recent years in pursuit of its geopolitical objectives. The economic engine that drives the Empire and supports its imperialistic ambitions is the dollar, whose Reserve Currency status means that infinite quantities of it (or proxy derivatives like Treasuries) can be printed up and swapped for goods and services with any and all countries around the world, and it is this dynamic that supports the formidable US military machine.
    The last Empire that tried to take over the world was Nazi Germany, which recruited Japan to take over the Far East, so that together they became a global axis. As we know this led to an enormous titanic struggle for over 5 years to contain it and defeat it, resulting in immense destruction and loss of life. The reason that Hitler failed was good old fashioned imperial overreach – he didn’t know when to ‘call it a day’ and consolidate his gains, instead he tried to do what has been the undoing of most Empires in the past, take over the entire planet. Actually he got very close to creating a sustainable 3rd Reich, but made several key mistakes. The first was not overrunning Britain while he had the chance, instead he made the fatal mistake of leaving it and starting a war on a second front with Russia, which meant that, in addition to his logistical support being spread too thin, the US was later able to use Britain as an aircraft carrier to bomb Germany back into the Stone Age, which needless to say resulted in its defeat. The second mistake was permitting eastern henchman Japan to bomb Pearl Harbor, and thus bring the US into the war against both Nazi Germany and Japan. Perhaps due to parochial ignorance, Germany and Japan made the catastrophic miscalculation that they could somehow overcome the United States, which at the time was an emerging economic powerhouse. The bombing of Pearl Harbor awoke the sleeping giant and meant the beginning of the end for the Germany – Japan Empire.

    This post was published at Clive Maund on Tuesday, September 05, 2017.

  • Using Gold To Hedge Korea Nuclear War Risk? This Is How To Do It, According To Goldman

    n a note on the role of gold as a “geopolitical hedge of last resort“, Goldman chief commodities strategist, Jeff Currie, writes that while it is tempting to blame the rally in gold prices on recent events in North Korea – which have certainly helped create a bid in gold – they only explain a fraction, or ~$15/oz of the more than $100/oz rally since mid-July. Instead, Goldman finds that the events in Washington over the past two months play a far larger role in the recent gold rally coupled by a sharply weaker dollar.
    Currie writes that Goldman’s market strategists have found that Trump’s approval rating is a good proxy for this “Washington risk” with a high correlation to both interest rates and gold prices (see Exhibit 1).

    This post was published at Zero Hedge on Sep 5, 2017.

  • Trader: “Markets Have A Slightly Feverish, Twilight-Of-The-Bull-Run Feel”

    With both the S&P and global stocks once again inching back to all time highs, here are some gloomier observations from Bloomberg’s EM commentatory Garfield Reynolds, who has covered and traded FX, bonds and commodities over two decades.
    Down Under Doldrums Challenge Global Growth Hopes: Macro View
    The latest burst of chatter that global growth is finally gathering momentum seems overdone in a world beset by geopolitical nightmares of war and debt deadlock, as well as the nagging concern of demographic-driven disinflation. And the recent slump for the key risk proxies among the G-10 currencies — the Aussie and kiwi dollars — shows the need to be careful we don’t get dizzy with thoughts of success.
    The two countries backing these tenders are beholden to raw materials exports, and they straddle a decent cross-section of the key non-oil commodities — iron ore, coal, gold for Australia; milk and wool for New Zealand.
    Accelerating world output should be driving up demand for at least some of this stuff, and yet the Aussie and the kiwi languished at the bottom last month among the major G-10 currencies… along with the Brexiting pound.

    This post was published at Zero Hedge on Sep 1, 2017.

  • All Things Bullish

    Dow Theory Still Bullish
    Elliott Wave Hangs On, Too
    Your Own Personal Trading System
    All About the Profits
    Mr. Persistent
    Trump Bump
    Colorado, Chicago, Lisbon, Denver, and Lugano
    ‘Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.’
    – Sir John Templeton
    Dogs bark, birds sing, stock markets (and stocks themselves) fluctuate. Bonds, commodities, currencies, and all else that moves in the economic world will fluctuate. Only the economic market, however, transforms into a new beast when it changes direction to become a bull or a bear. Oddly, though, it’s not easy to objectively define either one: Observers see whichever they prefer to see.
    Academic research has consistently pointed out that perma-bulls and perma-bears make far less profit than those who are cautiously optimistic. It’s key to remember that a wide world of economic opportunities lurks out there – you’re not forced to choose just your home-country stocks. Indeed, a home-country bias can be problematic.

    This post was published at Mauldin Economics on AUGUST 26, 2017.

  • Gartman: “We Know For Certain That We Wish Not To Be Short Of Equities”

    Exactly two weeks after Dennis Gartman staked his reputation that “the bull market has come to an end”, the “commodities guru” appears to be getting second thoughts, and as we writes in his overnight note, he no longer “wishes to be short of equities.” While it is unclear what that means for Gartman’s “reputation”, or if one even exists, here is how he frames his quandary:
    STOCKS IN AROUND THE WORLD CONTINUE TO ADVANCE as seven of the ten markets comprising our International Index have risen in the course of the past twenty four hours; as two have fallen and as one finished its trading day unchanged. Thus, in the end, ahead of today’s Jackson Hole, Wyoming affair, stocks in global terms are up 0.25% for the day and are up 9.9% for the year-to-date.
    Importantly, the CNN Fear & Greed Index, which had fallen below the important 20 level late last week and earlier this week to the level marked as that of ‘Extreme Fear,’ has turned higher and finished last evening at 22.

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

  • This Is The Most Equity-Bullish Chart We’ve Seen Yet

    How expensive are US equities versus their peers around the world? Compared to bonds? Commodities? Are there fundamental risks we can identify?
    In the following presentation, Cantillon Consulting’s Sean Corrigan answers all of the above and details what opportunities for better asset allocation might lie ahead…

    This post was published at Zero Hedge on Aug 15, 2017.

  • Is this the Start of a Hot New Metals Bull Market?

    Major U. S. indices slid for a second straight week as President Donald Trump and North Korea both escalated their saber-rattling, with Kim Jong-un explicitly targeting Guam, home to a number of American military bases, and Trump tweeting Friday that ‘Military solutions are now fully in place, locked and loaded.’ The S&P 500 Index fell 1.5 percent on Thursday, its largest one-day decline since May. Military stocks, however, were up, led by Raytheon, Lockheed Martin and Northrop Grumman.
    As expected, the Fear Trade boosted gold on safe haven demand. The yellow metal finished the week just under $1,300, a level we haven’t seen since November 2016. Last week, Ray Dalio, founder of Bridgewater Associates, the largest hedge fund in the world, said it was time for investors to put between 5 and 10 percent of their portfolio in gold as a precaution against global and domestic geopolitical risks. The threat of nuclear war is at the top of everyone’s mind, but Dalio reminds us that our indecisive Congress could very well fail to agree on raising the debt ceiling next month, meaning a ‘good’ government shutdown, as Trump once put it, would follow.
    Dalio’s not the only one recommending gold right now. Speaking to CNBC last week, commodities expert Dennis Gartman, editor and publisher of the widely-read Gartman Letter, said that he believed ‘gold is about to break out on the upside strongly’ in response to geopolitical risks and inflationary pressures. Gartman thinks investors should have between 10 and 15 percent of their portfolio in gold.

    This post was published at GoldSeek on Tuesday, 15 August 2017.

  • Brien Lundin: If They Don’t Want You To Own It, You Probably Should

    The following video was published by ChrisMartensondotcom on Aug 14, 2017
    We’re living through the most extraordinary period of monetary printing in all of human history. It’s as widespread as it is delusional.
    One of the most perplexing mysteries to us is that right as the Federal Reserve embarked on QE3 — which was a huge, enormous, $85 billion a month experiment — commodities began a multiyear decline within two weeks of that announcement. Concurrently, the world’s central banks plunged the world into steeply negative real interest rates, a condition that has almost always resulted in booming commodity prices — but not this time. Today, the ratio between commodity prices and equities is at one of, if not the most, extreme points in history

  • Gold Up 2%, Silver 5% In Week – Gundlach, Gartman and Dalio Positive On Gold

    Gold Up 2.3%, Silver 5.3% In Week – Gundlach, Gartman and Dalio Positive On Gold
    – Gold is up 2.3% this week and silver has surged nearly 5.3% as stocks sell off on geopolitical risk
    – Billionaire fund managers and commodities experts increasingly positive on gold
    – Risks are rising, and everybody should put 5% to 10% of their assets in gold – Dalio
    – Dalio’s Bridgewater, world’s largest hedge fund, warned clients that geopolitical risks are rising
    – ‘Gold is about break out on the upside strongly’ – commodities expert Gartman
    – Gartman believes right now investors should have 10% to 15% allocation to gold
    – ‘The stock market looks a little vulnerable. The geopolitical circumstances are getting worse and worse’ – Gartman
    – Run up in gold prices is far from over due to economic risks – Gartman
    – Gold’s chart has ‘one of the most bullish’ patterns – Billionaire bond guru Gundlach
    – Gold up 6.3% and silver 8.2% in 30 days and look on verge of major move higher

    This post was published at Gold Core on August 11, 2017.

  • Indonesia Will Barter Coffee, Tea And Palm Oil For Russian Fighter Jets

    On Monday Russia warned that it would begin aggressively reducing its dependence on the US Dollar and US-based payment systems, and shortly after it confirmed just that when Indonesia announced that it will barter coffee, palm oil, tea and various other commodities in exchange for 11 Russian-made Su-35 fighter jets, calling U. S. and European sanctions against Russia “an opportunity to boost the Southeast Asian nation’s trade.”
    The Indonesian Ministry of Trade said that a memorandum of understanding for the barter was signed Aug. 4 in Moscow between Russia’s Rostec and PT. Perusahaan Perdagangan Indonesia, both state-owned companies. ‘This barter under the supervision of both governments hopefully will soon be realized through the exchange of 11 Sukhoi Su-35s and a number of Indonesian exports, starting from coffee and tea to palm oil and strategic defense products,’ Indonesian Trade Minister Enggartiasto Lukita said on Monday, as quoted by Reuters.

    This post was published at Zero Hedge on Aug 7, 2017.

  • SocGen: Stock Valuations Remain “Remarkably High” Yet Nobody Cares

    As discussed earlier, with most traders taking the next 1-2 weeks off for vacation, global markets remain on auto pilot, hitting new all time highs overnight driven by strength out of China where reflationary spirits have returned after industrial commodities surged on speculation that the PBOC’s recent attempt to contain excess liquiduity have failed (explaining the 3 consecutive days of reverse repo drains). Meanwhile, as SocGen’s Andrew Lapthorne writes, global equity markets continue to move higher, with both MSCI Developed and Emerging adding 0.4% last week. DM Is now up 12.4% in 2107 and EM an impressive 23.8% higher.
    Most markets saw gains last week, with Europe playing catch-up, having tracked down or sideways for the last few months. In local currency terms, the Eurozone is still in negative territory over the last few months, but this is more than made up for by the strength of the currency, with the MSCI Eurozone index up 5% in USD over the same timeframe. That said there were a few soft patches. The Nasdaq was down, as was the S&P 500 on an equal-weighted basis. The Russell 2000 dropped 1.2%. Japanese small cap growth stocks also faltered with the volatile Mothers index falling 3.9%.
    Will the euphoria continue? For the answer look at the Euro. As SocGen’s Andrew Lapthorne writes, earnings momentum appears increasingly polarised, “with the US enjoying its usual reporting season bounce on the back of analyst upgrades, and both Pacific ex Japan and Japan seeing sharp improvement in analyst optimism.” However both Europe ex UK and Emerging Markets, the standout US dollar performers this year, are yet to see a pickup in upgrades, with downgrades remaining more common. A big reason for this is the recent surge in the Euro, which is fast approaching 1.20, the level beyond which analysts have said any further gains will have an adverse impact on earnings.
    What about fundamentals? Here there is far less confusion, and as Lapthorne writes, “stock valuations remain remarkably high, but as valuations alone tell us little or nothing in terms of market timing, it seems valuation concerns are increasingly ignored.”

    This post was published at Zero Hedge on Aug 7, 2017.

  • Wall Street Firms Win Again, Regulators Capitulate

    Financial Crisis is forgotten. Even sounds of gentle wrist-slapping fade. Penalties imposed during the first half of 2017 on Wall Street firms by their regulators – the Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission (CFTC), and the Financial Industry Regulatory Authority (Finra) – plunged 65% compared to the same period in 2016.
    During the first half in 2016, $1.4 billion in fines were levied on Wall Street firms by the three regulators. In 2017, the total was down to $489 million, according to data collected by The Wall Street Journal.
    In this context, Wells Fargo doesn’t have much to fear after admitting a week ago that since 2012 it had quietly added unneeded comprehensive and physical damage insurance to the car payments of 570,000 (or 800,000) of its auto-loan customers.
    The SEC imposed $318 million in fines in the first half, down 58% from the same period a year ago, based on The Journal’s search of federal documents and publicly available records on the SEC’s website, along with data provided by University of Virginia law school professor Andrew Vollmer.

    This post was published at Wolf Street on Aug 7, 2017.

  • “Visions Of Cataclysms”: Why Eric Peters Is Starting A Long-Vol Fund

    Is the recent streak of record low volatility about to end?
    While countless analysts, pundits and traders have previously talked their book (if not staked their reputation) on claims VIX is set for an imminent mean-reverting spike, so far that has not happened and in fact net spec positioning in the VIX just hit a record short print as of the latest CFTC week.
    And yet, on Friday night, in a notable change to the low-vol regime, Interactive Brokers announced it would hike volatility product margins ahead of what it warned could be a 100% surge in the VIX, a move which will be promptly copied by most if not all trading platforms. Will this then become a self-fulfilling prophecy – should maringed out traders decide it makes more sense to close out vol shorts than to add more cash – it is too early to know, however, in a separate confirmation that the current low-vol regime may be ending, last week JPM’s quant strategy team reported that “following robust performance in 1H ’17, PnL of short vol premia stagnated over the past month… We see further risk for short vol from both rate increase as well as CB balance sheet renormalization.”
    YTD, short vol PnL (+5.1%) exceeds that of traditional beta (+4.2%) and value (+4.1%). Momentum YTD PnL of -5.2% arose from a broad-based decline across global equity indices (-5.1%), sovereign bonds (-2.1%), currencies (-1.4%) and commodities (-12.0%). Carry was flat (+0.9% YTD) as it was buffeted by positive bond carry (+3.9%) and negative equity index carry (-1.6%). Over the past month, short vol has stagnated at 0.26% and momentum has continued its decline by – 0.71%.

    This post was published at Zero Hedge on Aug 6, 2017.