From Crypto To Qatar – These Were The Best & Worst Assets In 2017

2017 saw global central bank balance sheets explode almost 17% higher (in USD terms) – the biggest annual increase since 2011 – and while correlation is not causation, one can’t help but see a pattern in the chart below…
Global stocks up, Global bonds up, Global commodities up, Financial Conditions easier (despite 3 Fed rate hikes), and Dollar down (most since 2003)…
As we noted earlier, Craig James, chief economist at fund manager CommSec, told Reuters that of the 73 bourses it tracks globally, all but nine have recorded gains in local currency terms this year.
‘For the outlook, the key issue is whether the low growth rates of prices and wages will continue, thus prompting central banks to remain on the monetary policy sidelines,’ said James. ‘Globalization and technological change have been influential in keeping inflation low. In short, consumers can buy goods whenever they want and wherever they are.’
Still, the good times may not last: an State Street index that gauges investor risk appetite by what they actually buy and sell, suffered its six straight monthly fall in December, Reuters reported.
“While the broader economic outlook appears increasingly rosy, as captured by measures of consumer and business confidence, the more cautious nature of investors hints at a concern that markets may have already discounted much of the good news,’ said Michael Metcalfe, State Street’s head of global macro strategy.

This post was published at Zero Hedge on Fri, 12/29/2017 –.

Global Stocks Set To Close 2017 At All Time Highs, Best Year For The Euro Since 2003

With just a few hours left until the close of the last US trading session of 2017, and most of Asia already in the books, S&P futures are trading just shy of a new all time high as the dollar continued its decline ahead of the New Year holidays.
Indeed, markets were set to end 2017 in a party mood on Friday after a year in which a concerted pick-up in global growth boosted corporate profits and commodity prices, while benign inflation kept central banks from snatching away the monetary punch bowl. As a result, the MSCI world equity index rose another 0.15% as six straight weeks and now 13 straight months of gains left it at yet another all time high.
In total, world stocks haven’t had a down month in 2017, with the index rising 22% in the year adding almost $9 trillion in market cap for the year.
Putting the year in context, emerging markets led the charge with gains of 34%. Hong Kong surged 36%, South Korea was up 22% and India and Poland both rose 27% in local currency terms. Japan’s Nikkei and the S&P 500 are both ahead by almost 20%, while the Dow has risen by a quarter. In Europe, the German DAX gained nearly 14% though the UK FTSE lagged a little with a rise of 7 percent.
Craig James, chief economist at fund manager CommSec, told Reuters that of the 73 bourses it tracks globally, all but nine have recorded gains in local currency terms this year.
‘For the outlook, the key issue is whether the low growth rates of prices and wages will continue, thus prompting central banks to remain on the monetary policy sidelines,’ said James. ‘Globalization and technological change have been influential in keeping inflation low. In short, consumers can buy goods whenever they want and wherever they are.’

This post was published at Zero Hedge on Fri, 12/29/2017 –.

The Results of Financialization – Part III

THE BIG REVERSAL
After three and half decades the global economy has now entered a three and half year period of slow rotational change which will likely be seen in future years as the “Great Reversal”.
DEBT + DEMOGRAPHICS + DISRUPTION = DEFLATION
We are leaving an era which as witnessed unprecedented global debt growth, work force demographics and the emergence of profoundly disruptive technologies. These trends through globalization, labor arbitrage, and oversupply have coupled to deliver slow inflation, disinflation and even deflation in various areas of the world.
What we have experienced during this era on a global basis is:
A decline in real interest rates (which have been a prime supporter of asset prices), A drop in real labor earnings in advanced economies, and, A meteoric rise in inequality within countries alongside a drop in inequality between them.

This post was published at GoldSeek on 5 November 2017.

Why Warsh, Not Taylor, Is Most Likely To Upset Stock Bulls

From the Macro View by Bloomberg macro commentator Ye Xie
Warsh, Not Taylor, Carries Most Risk for Stocks: Macro View
Kevin Warsh, and not John Taylor, is most likely to upset equity bulls, if appointed as the next Fed chair.
While now seen as a long shot, Warsh is the one candidate who seems to believe that policy makers should respond to financial cycles, instead of solely focusing on business cycles.
There’s an intellectual debate within the central bank community that could reshape policy making for years to come.
Mainstream inflation targeters, like Janet Yellen & Co. may be inclined to raise rates, but they’ll have to pause and reassess if consumer price growth remains subdued for longer than envisioned.
This group, which holds sway at all major central banks, pays attention to asset valuations but doesn’t see them as a primary factor in setting interest rates.
BIS economist Claudio Borio thinks differently. In a speech last month, he argued that central banks have little influence over consumer prices because of technology and globalization.
Low inflation, Borio argued, may be permanent and insensitive to policy rate changes. If central banks maintain low interest rates, they drive up asset prices and increase financial instability. Instead, policy makers should .tolerate low inflation and keep monetary policy tight to prevent asset bubbles
Central bankers in this camp are more asset-price dependent, rather than economic-data dependent. If the new Fed chair follows this thinking, the stock market will have a lot to worry about. So who is most likely to sympathize with this view?
The front runners — Taylor, Yellen and Jerome Powell — seem to be working with the traditional Phillips curve framework.
And the Taylor rule is based on the trade-off between inflation and the output gap. As my colleague Cameron Crise argued before, the Taylor-rule based policy rate may not be as high as commonly perceived, once you adjust the parameters.

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

Mapping What Every State In America Is Best At

Company towns used to be a defining feature of the American economy. Nowadays, as Raul at HowMuch.net notes, thanks to globalization and offshoring, it is much harder to find employers that exert such influence over a small town(with a few notable exceptions).
That being said, specific industries still tend to grow in clusters and can dominate the economy of a particular region. To understand this new reality, we mapped the most important industries by state according to the U. S. Bureau of Economic Analysis, which takes into account an industry’s collective output as a percentage of the overall GDP. For simplicity, we excluded government jobs and real estate.

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

Globalization Is Poverty: “The Endgame Is Painfully Obvious”

Central bankers have never done more damage to the world economy than in the past 10 years. One may argue this is because they never had the power to do that. If their predecessors had had that power, who knows? Still, the global economy has never been more interconnected than it is today, due mostly to the advance of globalism, neoliberalism and perhaps even more, technology.
***
Ironically, all three of these factors are unremittingly praised as forces for good.
But living standards for many millions of people in the west have come down and/or are laden with uncertainty, while millions of Chinese now have higher living standards. People in the west have been told to see this as a positive development; after all, it allows them to buy products cheaper than if they had been made in domestic industries.
But along with their manufacturing jobs, their entire way of life has mostly disappeared as well. Or, rather, it is being hidden behind a veil of debt. Still, we can no longer credibly deny that some three-quarters of Americans have a hard time paying their bills, and that is very different from the 1950s and 60s. In western Europe, this is somewhat less pronounced, or perhaps it’s just lagging, but with globalism and neoliberalism still the ruling economic religions, there’s no going back.

This post was published at Zero Hedge on Oct 17, 2017.

What Few Expect: Inflation Will Surge, Destabilizing 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.

This post was published at Charles Hugh Smith on TUESDAY, OCTOBER 03, 2017.

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.

Asian Metals Market Update: August-29-2017

North Korean risk is adding to the support of gold and silver bulls. Everywhere there is fear of Islamic terrorists striking anytime. The problem is not with Islam as a religion. The problem is with Saudi Arabia’s form of ‘Wahhabi Islam’ which is very brutal and inhumane. Saudi’s are luring more and more people to practice ‘Wahhabi Islam’ with the sole motive of ruling the world in the future. Crude oil money has ensured that Saudi’s finance the globalization of ‘Wahhabi Islam’ in every nook and corner of world. The American politicians are happy as it keeps American arms manufacturers full of long term orders. Religious terrorism along with political terrorism will continue to lend support to gold, silver, bitcoins and other non US dollar forms of investment.
Wednesday is a big day for metals and the US dollar with US GDP numbers and August private ADP numbers.

This post was published at GoldSeek on 29 August 2017.

A Tale of Two ‘Deflationary’ Booms – The Gilded Age vs. Today

The forces of globalization during the past two decades have been stronger than at any time since the era of ‘the Great Deflation’ which started in the aftermaths of the US Civil War and the Franco-Prussian War, and continued through the 1880s. During teh earlier period, the US economy enjoyed record growth in prosperity. But, during the present era of globalization, the US and most advanced economies have grown fitfully and overall slowly. An obvious question is whether that divergence in outcomes is due to the very different monetary environments (The US and most of Europe were on gold in the first era with prices falling, while monetary experimentation under a global 2% inflation standard prevailed in the second).
RELATED: “A Modern Concept of Asset Price Inflation in Boom and Depression” by Brendan Brown
In searching for the answer there are two channels to follow, both involving counterfactual analysis. The first is to study the early episode (the early 1870s to the end of the1880s) and determining whether it would have been less glorious if the monetary environment had been the same as in the present episode (the mid-1990s to now). The other channel is an investigation of the present episode so as to determine whether a sound money regime – as in the earlier episode – would have produced a much better outcome. In conducting the latter search, the analyst should be alert to hints of the world which might have been in the actual world and indeed there are positive findings here.

This post was published at Ludwig von Mises Institute on August 18, 2017.

Stocks and Precious Metals Charts – The Calm Before the Storm

‘In truth, however, nothing is inevitable and very little is new. And tech is no more the root of the problem than are trade or globalization. Many of our most vaunted innovations are simply methods — electronic or otherwise — of pulling off some age-old profit-maximizing maneuver by new and unregulated means.’
Thomas Frank
‘It is my purpose, as one who lived and acted in these days, first to show how easily the tragedy of the Second World War could have been prevented; how the malice of the wicked was reinforced by the weakness of the virtuous.’
Winston S. Churchill, The Gathering Storm
Here is some knowledge.

This post was published at Jesses Crossroads Cafe on 13 JULY 2017.

The Bankers’ Endgame and the Rise of Gold and Silver

We’re going to owe Chicken Little an apology
In May 2007, in Subprime America Infects Asia and Europe I predicted a severe financial crisis was imminent: the risks that have lain dormant beneath globalization’s foundation are about to erupt and a reordering of the world’s financial geography is about to ensue. It’s spring 2007 and the sun is shining in the US, backyard BBQs are being cleaned in anticipation of summer’s use. A severe financial crisis, however, is in the offing; a crisis as unexpected as the Golden State Warrior’s last minute steak to the NBA playoffs.
An unexpected financial crisis, however, will be much more consequential than Don Nelson’s magical resurrection of the Warrior’s NBA hopes. There, at least, the Warriors will have a chance. But because most people don’t know a financial crisis is coming, they will have little chance of survival. This summer, America’s subprime CDOs are coming home to roost, and not just to the US.
In July 2007, two multi-billion dollar subprime hedge funds collapsed. One year later, the greatest financial crisis since the 1930s bankrupted Wall Street banks; real estate fell 40 – 70%; and central banks flooded markets with zero-cost credit and trillions of dollars in quantitative easing to keep stocks from crashing, setting in motion a still-inflating stock market bubble to replace the collapsed 2002-2007 real estate bubble that revived markets after the 2000 dot.com crash.
After the 2008 crisis, unprecedented central bank efforts to prevent the bankers’ endgame temporarily delayed its inevitable resolution. Today, however, the banker’s edifice of debt has reached such levels that systemic dangers, e.g. speculative bubbles, low inflation, low growth, etc. increasingly threaten global markets. The bankers’ endgame is accelerating.

This post was published at GoldSeek on 10 July 2017.

Dudley in a Good Place

Crashing Unemployment
Dear Mr. Dudley, Your recent remarks in the wake of last week’s FOMC statement were notably unhelpful. In particular, your explanation that further rate hikes are needed to prevent crashing unemployment and rising inflation stunk of rotten eggs. Quite frankly, crashing unemployment is a construct that’s new to popular economic discourse, and a suspect one at that. Years ago, prior to the nirvana of globalization, the potential for wage inflation stemming from full employment was the main concern.

This post was published at Acting-Man on June 27, 2017.

An Open Letter To The Fed’s William Dudley

Authored by MN Gordon via EconomicPrism.com,
Dear Mr. Dudley,
Your recent remarks in the wake of last week’s FOMC statement were notably unhelpful.
In particular, your excuses for further rate hikes to prevent crashing unemployment and rising inflation stunk of rotten eggs.
Crashing Unemployment
Quite frankly, crashing unemployment is a construct that’s new to popular economic discourse, and a suspect one at that.
Years ago, prior to the nirvana of globalization, the potential for wage inflation stemming from full employment was the going concern. Now that the official unemployment rate’s just 4.3 percent, and wages are still down in the dumps, it appears the Fed has fabricated a new bugaboo to rally around. What to make of it?
For starters, the Fed’s unconventional monetary policy has successfully pushed the financial order completely out of the economy’s orbit. The once impossible is now commonplace.

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

Financial Fragility Reaching a Critical Mass

There are several key factors that have contributed to the financial fragility of the masses and our economy today. First, is that over the past 30 years, globalization and technology have helped to reduce the number of middle-class jobs available domestically. Fewer jobs and superfluous workers have led to stagnating incomes for most. At the same time, living expenses for critical services that are domestically-produced like education, medical services, child-care, housing and fresh food have all strongly outpaced income gains.
Today a middle-class lifestyle in America (ie., comfortable housing, transportation, food, health care and one family vacation a year), is estimated to require about 130k of annual household income for a family of 4. The median US household income, however – at 50k a year – is less than half the funds needed. In Canada, estimates of ‘middle class’ expenses vary in the range of 50-100k a year (see: Just who are middle-class). According to the latest 2014 StatsCan census, the median Canadian household income was $78,870.
To plug spending deficits over the past 3 decades, families have increasingly added debt. American households now owe a record $12.7 trillion and Canadians $2 trillion, as of Q1 2017. Not only does servicing this debt further diminish disposable cash flow, but it also keeps people from building up net savings from their income.

This post was published at FinancialSense on 06/07/2017.

What’s Killing the Middle Class? (Part 2)

The Powers That Be are perfectly fine with your transition to proletarian debt-serf. Yesterday we covered the usual suspects in the decline of the middle class as a financial-political bulwark against oligarchy / dominance of rentier elites: globalization, automation and the asymmetric distribution of rewards favoring the few over the many. Today, let’s cover the politically explosive systemic dynamics behind the erosion of middle class income, wealth and political influence. 1. I hope you won’t be too shocked that the core dynamic driving middle class decline is the way we create and distribute money, i.e. central-planning by central banks. As I have explained many times, those closest to the central bank money spigots can borrow essentially unlimited sums at near-zero interest rates.

This post was published at Charles Hugh Smith on MONDAY, MAY 08, 2017.

Le Pen, Macron Progress To Second Round As Establishment Parties Crash

With more numbers coming from the French Interior Ministry, as of 11:31 p.m. local time Macron’s lead is growing to 23.61% as more city votes are counted, vs Le Pen 22.20%, with 41 Million votes counted, or 85.4% of the total. The gap is likely to expand as the final votes are tallied.
Earlier, in a race that was too close to call up to the last minute, Macron, a pro-EU ex-banker and former economy minister who founded his own party only a year ago, was projected to get 23.7 percent of the first-round vote by the pollster Ifop-Fiducial and 24 percent by Harris. Le Pen, leader of the National Front, was given 21.7 percent by Ifop and 22 percent by Harris. Other pollsters projected broadly similar results.
Defeated Socialist candidate Benoit Hamon, Socialist Prime Minister Bernard Cazeneuve and defeated right-wing candidate Francois Fillon all urged voters to rally behind Macron in the second round. A new Harris survey saw Macron winning the runoff by 64 percent to 36, and an Ipsos/Sopra Steria poll gave a similar result.
According to Bloomberg, the key takeaways are as follows:
Winners: Independent centrist Emmanuel Macron, in his first run for office, and the National Front’s Marine Le Pen, who succeeded in detoxifying her anti-immigrant party enough to make the second round (as her father did in 2002). The runoff campaign over the next two weeks will feature a stark contrast between Macron’s pro-EU, pro-globalization world view, and Le Pen’s call to close borders and quit the euro currency. Polls show Macron winning handily.

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

“The Bear Market Is On Hold”: Deutsche Bank Throws In The Towel On Its Treasury Short

Six months ago, Deutsche Bank’s Dominik Constam – who roughly one year ago was lamenting the trendy at the time “secular stagnation” theme as an example of “capitalism in crisis” and was blasting negative rates as the “failure of globalization” – turned from prominent bond bull to bond bear, predicting a sharp jump in Treasury yields as the Trump reflation trade picked up traction and as Fed tightening accelerated pace.
Fast forward to this weekend, when Konstam became only the latest bond bear to throw in the towel on his trade reco, and as he abruptly writes in the latest edition of DB’s Fixed Income Weekly, “We are revising our forecasts lower – the bear market we expected to continue through 2017 seems to be on hold mainly due to the lack of progress on structural tax reform and we do not expect that to change anytime soon.”
In short, the “bear market is on hold” with the stated reason Trump’s failure to enact his proposed fiscal stimulus. Now if only somebody had warned Wall Street’s brightest and best paid minds just one week after Trump’s election that the president’s plan to “make America great again” was not going to happen…
In any event, here is Konstam explaining why he threw in the towel.

This post was published at Zero Hedge on Apr 9, 2017.

From “Dissensus” To “Democrazy”: A Warning From Deutsche Bank

Last October, Deutsche Bank’s credit derivatives expert Aleksandar Kocic, one of the best stream-of-consciousness, James Joyceian writers among the Wall Street sell-side, penned what was at the time the best summary why the existing politcal system was fracturing with every passing day. As Kocic put it, the most likely origin of the anti-global sentiment expressed in the past year, in the UK with Brexit and in the US with Donald Trump – incidentally, Kocic wrote his essay three weeks before Trump won – was the result of a “buildup of discontent due to failure to develop a convincing response to economic slowdown in the last years.”
Kocic said that having been repeatedly ignored for years as central banks took the reins in hopes of fixing the global economy, only to leave a world that is vastly better for the 1% and starkly worse for everyone else, “this has recently emerged as the main theme of public discourse.” More relevant, however, to the current presidential campaign, is the dead-end which as Kocic frames it, show “to what extent the Change is as necessary as it is politically impossible.”
While the Deutsche Banker did not explicitly phrase it, the reality is that it is indeed globalization – with its focus on “global economic interests” – that has left ordinary people, affected by local issues, disenchanted and increasingly angry, to wit: “The underlying problem can be traced back to the fact that economic interests have become increasingly global while politics, the ability to decide, remained passionately local and, as such, unable to operate effectively at the planetary level.”

This post was published at Zero Hedge on Apr 8, 2017.