An Unsolvable Math Problem: Public Pensions Are Underfunded By As Much As $8 Trillion

Defined Benefit Pension Plans are, in many cases, a ponzi scheme. Current assets are used to pay current claims in full in spite of insufficient funding to pay future liabilities… classic Ponzi. But unlike wall street and corporate ponzi schemes no one goes to jail here because the establishment is complicit. Everyone from government officials to union bosses are incentivized to maintain the status quo…public employees get to sleep better at night thinking they have a “retirement plan,” public legislators get to be re-elected by union membership while pretending their states are solvent and union bosses get to keep their jobs while hiding the truth from employees.
We even published a note several days ago entitled “Establishment Tries To Suppress “Dissident Actuaries” Explosive Report On Public Pensions,” which pointed out that the American Academy of Actuaries and the Society of Actuarieskilled a report that would have warned about the implications of lowering long-term expected returns on pension assets. Apparently the truth was just too scary.
Bill Gross has been warning of the unintended consequences of low interest rates for years, and reiterated his concerns to Bloomberg recently:

This post was published at Zero Hedge on Aug 9, 2016.

Messages From Emerging Markets and Cyclicals

Emerging Markets Break Out
Assisted in part by some improvement in China, emerging markets (EEM) recently cleared a resistance zone that had bounded prices for several months. From Bloomberg:
Since China is a major export market for developing nations from Brazil to South Africa, signs of an improvement in the nation’s manufacturing industry bolsters the case for investing in riskier assets….’Reasonable data from China has opened a window for emerging markets to outperform,’ said Maarten-Jan Bakkum, a senior strategist at NN Investment Partners in The Hague, who favors Indian shares. ‘Emerging markets have been very strong relative to developed markets in the past week.’

This post was published at FinancialSense on 08/09/2016.

This is When the Jobs ‘Recovery’ Goes KABOOM

A peculiar phenomenon has set in.
This cannot be good for jobs: In the second quarter, nonfarm business sector labor productivity – defined as output per hour worked – fell by an annual rate of 0.5% from the first quarter, the Bureau of Labor Statistics reported today. The third quarterly decline in a row.
The last time it dropped for three quarters in a row was from Q3 1973 through Q3 1974 (5 quarters). Alas, in November 1973, the economy entered a recession. Several quarters in a row of declining productivity is not kind to the economy.
The productivity decline in the second quarter this year was the result of output edging up at a seasonally adjusted annual rate of 1.2% while hours worked to obtain this output rose 1.8%. Year-over-year, productivity fell 0.4%.
Here is what this looks like on a quarterly (blue columns) and year-over-year (red line) basis (chart via BLS):

This post was published at Wolf Street by Wolf Richter ‘ August 9, 2016.

Chinese Bond Yields Tumble To 2009 Lows As Spooked Investors Rush Out Of Potential Defaults

The biggest (unspoken of) bubble in the world, just got bubblier. Following the lowest 10Y China government bond auction yield since records began in 2004, a surge of foreign inflows (seeking yield) combined with domestic flight-to-safety from the increasingly default-ridden corporate bond sector has sent China’s government bond yields to 2009 lows.
10Y Chinese government bonds offer a 120-140bps yield enhancement over Treasuries (and far more over JGBs or Bunds), which has sparked a surge of demand, sending the yield to near record lows in 2009…

This post was published at Zero Hedge on Aug 9, 2016.

Bank Of England Suffers Stunning Failure On Second Day Of QE: “Goodness Knows What Happens Next Week”

It started off well enough.
On the first day of the Bank of England’s resumption of Gilt QE after the central bank had put its monetization of bonds on hiatus in 2012, bondholders were perfectly happy to offload to Mark Carney bonds that matured in 3 to 7 years. In fact, in the first “POMO” in four years, there were 3.63 offers for every bid of the 1.17 billion in bonds the BOE wanted to buy.
However, earlier today, when the BOE tried to purchase another 1.17 billion in bonds, this time with a maturity monger than 15 years, something stunning happened: it suffered an unexpected failure which has rarely if ever happened in central bank history: only 1.118 billion worth of sellers showed up, meaning that the BOE’s second open market operation was uncovered by a ratio of 0.96. Simply stated, the Bank of England encountered an offerless market.

This post was published at Zero Hedge on Aug 9, 2016.

Forget The Fed’s 0.25%, Short-Term Rates Have Already Risen By 1% For The Real World

The Fed has only raised rates once ( 0.25%) in this so-called tightening cycle but the short-term rate where the rubber meets the road, Libor, has tightened by nearly 1% (1yr Libor), and it has risen more than 30 basis points in the last 5 weeks! This has put 4 times the Fed’s tightening pressure on all types of US Dollar borrowers around the world; from adjustable mortgages to student loans to financing for ships. This should be a major concern for the Fed.

This post was published at Zero Hedge on Aug 9, 2016.

Marc Faber Issues A Stunning Warning That A Gigantic 50 Percent Stock Market Crash Could Be Coming

Are we about to witness one of the largest stock market crashes in U. S. history? Swiss investor Marc Faber is the publisher of the ‘Gloom, Boom & Doom Report’, and he has been a regular guest on CNBC for years. And even though U. S. stocks have been setting new record high after new record high in recent weeks, he is warning that a massive stock market crash is in our very near future. According to Faber, we could ‘easily’ see the S&P 500 plunge all the way down to 1,100. As I sit here writing this article, the S&P 500 is sitting at 2,181.74, so that would be a drop of cataclysmic proportions. The following is an excerpt from a CNBC article that discussed the remarks that Faber made on their network on Monday…
The notoriously bearish Marc Faber is doubling down on his dire market view.
The editor and publisher of the Gloom, Boom & Doom Report said Monday on CNBC’s ‘Trading Nation’ that stocks are likely to endure a gut-wrenching drop that would rival the greatest crashes in stock market history.
‘I think we can easily give back five years of capital gains, which would take the market down to around 1,100,’ Faber said, referring to a level 50 percent below Monday’s closing on theS&P 500.
Of course Faber is far from alone in believing that the market is heading for hard times. Just recently, I wrote about how legendary investor Jeffrey Gundlach is warning that ‘stocks should be down massively’ and that he believes this is the time to ‘sell everything’.
And on Tuesday, Donald Trump told Fox News that the stock market is ‘a big bubble’…

This post was published at The Economic Collapse Blog on August 9th, 2016.

THE COMING BREAKDOWN OF U.S. & GLOBAL MARKETS EXPLAINED… What Most Analysts Miss

The U. S. and world are heading toward an accelerated breakdown of their economic and financial markets. Unfortunately, the overwhelming majority of analysts fail to understand the root cause of this impending calamity. This is also true for the majority of precious metals analysts.
The reason for this upcoming systemic collapse of the U. S. and Global markets is quite simple when you understand the information and are able to CONNECT THE DOTS. While it has taken me years of research to be able to finally put it all together, new information really put it all into perspective.
Yes… a HUGE LIGHT BULB went off, but unfortunately the realization is much worse than anything I imagined before. I briefly discussed this in my last article, The Coming Global Silver Production Collapse & Skyrocketing Silver Value.
The information discussed in this article makes it abundantly clear that the precious metals will be the GO TO ASSETS in the future. The standard financial practice of investing most of one’s assets in stocks, bonds and real estate will no longer be true. What little investment strategies are left in the future will turn to PROTECTING WEALTH, rather than building wealth. The days of acquiring wealth are coming to and end… and fast.
So, now I will try to lay out all the details in a way that will make this easy to understand. However, I have a word of warning. Those who are able to connect the dots… it’s like taking the RED PILL, you can’t unlearn what you now realize.

This post was published at SRSrocco Report on August 9, 2016.

China Furious, French Energy Giant Desperate, as UK Stalls $24bn Nuclear Deal

A Brexit negotiating ploy against France?
The UK government’s decision to postpone the signing of a controversial, tripartite $24-billion nuclear energy deal with state-owned companies from China and France could end up having serious ramifications not only for Britain’s relations with the world’s second largest economy, but also for the financial health of one of France’s biggest corporations.
In an opinion piece in today’s Financial Times, China’s ambassador to the UK, Liu Xiaoming, said the Hinkley Point deal represents a ‘crucial historical junction’ for relations between the U. K. and China, which has a one-third stake in the nuclear power station that was scheduled to be built by France’s majority state-owned energy giant EDF.
‘Right now, the China-UK relationship is at a crucial historical juncture,’ wrote Liu. ‘Mutual trust should be treasured even more. I hope the UK will keep its door open to China and that the British government will continue to support Hinkley Point – and come to a decision as soon as possible so that the project can proceed smoothly.’

This post was published at Wolf Street by Don Quijones ‘ August 9, 2016.

The Charade Continues – London Gold and Silver Markets set for even more paper trading

Today the London Metal Exchange (LME) and the World Gold Council (WGC) jointly announced (here and here) the launch next year of standardised gold and silver spot and futures contracts which will trade on the LME’s electronic platform LMESelect, will clear on the LME central clearing platform LME Clear, and that will be settled ‘loco London’. Together these new products will be known as ‘LMEprecious’ and will launch in the first half of 2017.
However, although these contracts are described by the LME as delivery type ‘Physical’, settlement of trades on these contracts merely consists of unallocated gold or silver being transferred between LME Clear (LMEC) clearing accounts held at London Precious Metals Clearing Limited (LPMCL) member banks (i.e. paper trading via LPMCL’s AURUM clearing system).
London Metal Exchange: LMEprecious Gold contracts – "unallocated gold" delivery through LPMCL members — Ronan Manly (@ronanmanly) August 8, 2016

For example, the contract specs for the LME’s planned spot gold trading state that the LME’s proposed settlement procedure is one of:

This post was published at Bullion Star on 9 Aug 2016.

AUGUST 9/GOLD AND SILVER REBOUND/MORE GOLD STANDING AT THE COMEX FOR AUGUST: 42.89 TONNES/JAPAN ON FULL ALERT DUE TO MISSILES FALLING INTO THEIR WATERS FROM NORTH KOREA/PROCTOR AND GAMBLE TO SHY …

Gold:1339.00 down $4.60
Silver 19.81 up 4 cents
In the access market 5:15 pm
Gold: 1340.20
Silver: 19.87
For the August gold contract month, we had a good sized 267 notices served upon for 26,700 ounces. The total number of notices filed so far for delivery: 11,543 for 1,154,300 oz or tonnes or 35.903 tonnes
In silver we had 61 notices served upon for 305,000 oz. The total number of notices filed so far this month: 271 for 1,355,000 oz.
Let us have a look at the data for today.
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In silver, the total open interest FELL BY A LARGE 2,518 contracts DOWN to 215,244 YET STILL CLOSE AN ALL TIME NEW ALL TIME RECORD AS THE PRICE OF SILVER FELL BY 1 CENT WITH YESTERDAY’S TRADING. In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.076 BILLION TO BE EXACT or 154% of annual global silver production (ex Russia &ex China).
In silver we had 61 notice served upon for 305,000 oz
In gold, the total comex gold FELL 2,696 contracts as the price of gold FELL by $1.00 YESTERDAY. The total gold OI stands at 574,794 contracts.
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With respect to our two criminal funds, the GLD and the SLV:
GLD
we had a withdrawal of 1.18 tonnes
Total gold inventory rest tonight at: 972.62 tonnes
SLV
we had a good sized change in the SLV, a deposit of 950,000 oz of silver into THE SLV/Inventory rests at: 351.765 million oz.
First, here is an outline of what will be discussed tonight:

This post was published at Harvey Organ Blog on August 9, 2016.

Gold Daily and Silver Weekly Charts – Dollar Lower, Metals Up with Silver in the Lead

‘Love can change a person the way a parent can change a baby – awkwardly, and often with a great deal of mess.’
Lemony Snicket
“Gentleness is everywhere in daily life, a sign that faith rules through ordinary things…Even in a time of elephantine vanity and greed, one never has to look far to see the campfires of gentle people. Lacking any other purpose in life, it would be good enough to live for their sake.”
Garrison Keillor
Even if the opposition party were to nominate a trained chimpanzee, which I do not think is beyond question, and may have already been done without our complete knowledge and realization, I could never find it in my heart to vote for such an iconic figure for almost everything that has gone wrong with the American dream as Hillary Clinton.
Never having voted for her or her husband is one of the few things in my life of which I am completely content, and I would hate to lose that slim comfort, especially given the times to come.
Better to vote third party with a clear conscience, than have to choose between the banality of vain avarice and his more cunning sister.
Silver led the way higher, moving towards the 20 handle, with gold hanging in to a little more than unchanged.
The dollar gave up some ground which certainly helped.
The Comex stats were so-so.

This post was published at Jesses Crossroads Cafe on 09 AUGUST 2016.

WTI Slides After Unexpected Large Crude Build

Having rallied from last week’s unexpected Cushing draw (seemingly ignorant of the crude build), crude prices faded heading into tonight’s API data. With expectations of draws across the board, crude prices tumbled after API reported a surprise build (the 3rd week in a row) of 2.09mm (-1.5mm exp.) – the biggest build in 3 months. Cushing also saw a significant build (while product inventories dropped).

This post was published at Zero Hedge on Aug 9, 2016.

The Entire Economy Is Getting Ready To Hit Rockbo – Episode 1044a

The following video was published by X22Report on Aug 9, 2016
US home-ownership is at 50 year lows. Wholesale inventories rise, but still signalling recession levels. US productivity hits rock bottom, the entire economy is collapsing and all indicators are pointing to it. Baltic Dry Index declines again. The wealthy are building panic rooms and getting prepared for the financial crisis, an event or war.

Real Time Tax Withholding Data Warns In Advance on Economic Releases

I warned in my latest Federal Revenues Report that withholding tax collections had rebounded sharply in late July, to bring the 4 week average of biweekly collections to its biggest gain in several years. That gain reached double digits, something we have not seen since 2011. That report was based on daily data through August 1.
There had been some very weak readings prior to that. Consequently I couldn’t tell whether this was just a snapback to trend, or possibly a sign that the US economy was heading into a blowoff resulting from all the monetary stimulus it has received. That stimulus has been boosted lately as negative interest rates in Europe and Japan causes capital to flee those markets and head straight for the US.
In the Federal Revenue reports, I consider and analyze a variety of Federal Taxes which the US Treasury collects and reports in real time. It’s critical information because it gives us a heads up on how the lagging economic indicators will be reported in the following month.
The 4 week data on the withholding taxes showed the increase in withholding that the month end data could not, due to calendar anomalies. In July of this year, the last day on which taxes could be collected was Friday, July 29. In 2015, the last collection day in July was the 31st. That meant that the collection of taxes due from the last 2 days of July rolled over into August this year. Those collections did not show up in the July number. As a result the year to year change for the month of July was a decline of 1%. That’s how most observers who track this information reported it, and interpreted it.

This post was published at Wall Street Examiner by Lee Adler ‘ August 9, 2016.

Why won’t this damn bull market crash and Burn?

A man makes inferiors his superiors by heat; self-control is the rule.
Ralph Waldo Emerson
Central bankers are declaring war on cash for one reason only; they want to punish savers and reward speculators and in the process destroy the middle class. The only way to maintain the illusion that all is well is to get the average Joe to embrace this illusory economic recovery and what better way to achieve this then by forcing them to speculate in the markets. The best way to force savers to speculate is to punish them for saving, and that is exactly what central bankers have been doing, and the outlook will only worsen as central banks worldwide embrace negative rates. Those calling for higher interest rates or hoping for them are living on another planet; higher rates are history. The new trend is negative rates and investors need to adapt or die; there is no middle ground here.
When savers start getting charged for saving money, they are going to withdraw these funds and try to find alternative investments. Some will buy safes to hoard their cash, and some will turn to Gold but the vast Majority will look for something to invest this money into and for most this will be the stock market. Why would they turn to the stock market? Possibly because most investors are not familiar with the concept of hard money and don’t understand that precious metals in general preserve one’s purchasing power over time. Even if they knew this concept, putting all of one’s funds into a single investment is not prudent; it is reckless. However, in this environment, allocating a percentage of your funds to Gold would not be a bad idea.

This post was published at GoldSeek on 9 August 2016.

The California Paradox: Highest Per Capita Debt, Lowest Default Rate

In the months immediately following the financial crisis, the press was filled with sad stories of countless California defaulters who had gotten burned by having too much debt (most of it invested in housing) and who promptly defaulted after the value of their primary asset, their house, plunged when the housing bubble burst. And then, these stories of financial failure gradually stopped. One reason for this is that overall per capital debt did decline… modestly. After hitting $90,000, it has since dropped to just shy of $70,000, even though it is once again rising.
Nonetheless, the average per capita debt in California remains the highest in the US by a margin of about $10,000 as the latest household credit report released today by the NY Fed showed.
Why does the average Californian carry so much debt? The answer is simple: housing. At over $50,000, or 75% of the total, the biggest component of the total debt pile is mortgage debt. Other states where residents are comparably crippled by mortgage debt include New Jersey, Arizona and so on.

This post was published at Zero Hedge on Aug 9, 2016.

Saudi Economic Collapse Leaves 16,000 Foreign Workers Abandoned In Labor Camps

Sinking oil prices and a full blown liquidity crisis has brought the Saudi Arabian economy to screeching halt, a topic we’ve explored on various occasions. The Saudi construction industry has been among the hardest hit as government building contracts have disappeared and bank financing has dried up (something we discussed in a post entitled “Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, Debt“). We got dramatic confirmation of this for the first time in late April when the BinLadin Group, one of Saudi Arabia’s biggest firms and among the Middle East’s largest builders, whose total workforce is around 200,000, announced it had just fired a quarter of its total staff amid a major operational restructuring as Saudi government spending cuts slammed the company’s primary source of revenue.
Since then it’s only gotten worse. As Bloomberg reports, construction contracts shrank by 65% YoY in 2Q16 according to Jeddah-based National Commercial Bank.

This post was published at Zero Hedge on Aug 9, 2016.