Another Great JBSFC

Last evening’s program was excellent, as usual, with a discussion of the US election in the context of the New Cold War.
As we do every week, we urge you to take the time to fully listen to this entire podcast. You simply won’t find this kind of dialogue anywhere else in the western media.

This post was published at TF Metals Report on August 10, 2016.

‘The Bond Rally of a Lifetime’

In 1981, as inflation and Treasury yields were screaming to new heights, good friend Gary Shilling had the audacity to announce, ‘We’re entering the bond rally of a lifetime.’ He was right, as that bond rally is already 35 years old and I think it will see a few more birthdays. Gary’s with us today to assert that the rally is still underway – and to back up that assertion with a rather compelling case for Treasuries and for the ‘long bond’ (the 30-year) in particular.
Gary recalls his famous public debate on stocks versus bonds with Professor Jeremy Siegel of Wharton, in 2006 – just before the Great Recession kicked in and sent Treasury prices sky-high. Siegel remarked to the audience of 500, ‘I don’t know why anyone in their right mind would tie up their money for 30 years for a 4.75% yield’ (the then-yield on the 30-year Treasury). When it was Gary’s turn, he asked the audience, ‘What’s the maturity on stocks?’ He got no answer, but pointed out that unless a company merges or goes bankrupt, the maturity on its stock is infinity – it has no maturity. His follow-up question was, ‘What is the yield on stocks?’ to which someone correctly replied, ‘It’s 2% on the S&P 500.’
Gary continued, ‘I don’t know why anyone would tie up money for infinity for a 2% yield. I’ve never, never, never bought Treasury bonds for yield, but for appreciation, the same reason that most people buy stocks. I couldn’t care less what the yield is, as long as it’s going down since, then, Treasury prices are rising.’

This post was published at Mauldin Economics on AUGUST 10, 2016.


Gold:1344.30 UP $5.30
Silver 20.13 up 32 cents
In the access market 5:15 pm
Gold: 1347.00
Silver: 20.17
For the August gold contract month, we had a good sized 102 notices served upon for 10,200 ounces. The total number of notices filed so far for delivery: 11,645 for 1,164,500 oz or tonnes or 36.221 tonnes
In silver we had 3 notices served upon for 15,000 oz. The total number of notices filed so far this month: 274 for 1,370,000 oz.
Let us have a look at the data for today
In silver, the total open interest FELL BY A LARGE 4,597 contracts DOWN to 210,647 YET STILL CLOSE AN ALL TIME NEW ALL TIME RECORD DESPITE THE FACT THAT THE PRICE OF SILVER ROSE BY 4 CENTS WITH YESTERDAY’S TRADING. In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.053 BILLION TO BE EXACT or 150% of annual global silver production (ex Russia &ex China).
In silver we had 3 notices served upon for 15,000 oz
In gold, the total comex gold ROSE 605 contracts as the price of gold ROSE by $4.60 YESTERDAY. The total gold OI stands at 575,399 contracts.
With respect to our two criminal funds, the GLD and the SLV:
we had no changes in GLD/
Total gold inventory rest tonight at: 972.62 tonnes
we had no changes in the SLV, / 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 10, 2016.

San Francisco Rental Market Shows Signs Of Cracking Under Pressure Of Excess Supply

Luxury apartment buildings in San Francisco are starting to offer some pretty serious incentives as America’s most expensive rental market shows more signs it’s on the verge of cracking. Excess supply of luxury apartments in San Francisco is putting serious downward pressure on rental rates as pointed out by Yahoo Finance:
‘Listings that once rented in just two to three weeks can now take two to three months to rent,’explains Paul Hwang, principal broker at Skybox Realty, a San Francisco-based real estate agency. At least four new apartment buildings have opened within a three-block radius of one anotherduring the last 18 months in San Francisco’s thriving South of Market neighborhood, which is home to major tech companies like Airbnb, Pinterest and Yelp (YELP).
Those four buildings – Jasper, 340 Fremont, 399 Fremont and Solaire – frequently offer some sort of bargain for prospective renters. 340 Fremont is offering six weeks of free rent; Solaire is pitching four weeks of free rent, free on-site storage and $1,000 discounts to renters who work at tech companies like Apple (AAPL), Facebook (FB) and Yahoo (YHOO). Meanwhile, another building, 399 Fremont, even tried giving away free bikes one weekend.

This post was published at Zero Hedge on Aug 10, 2016.

Rio Diving Pool Goes From Crystal Clear To Dirty Green Overnight Due To “Proliferation Of Algae”

Olympic divers splashed into a green pool. The big question is, why was it green? #Rio2016
— CNN (@CNN) August 10, 2016

When we previously warned Olympic athletes that the various bodies of water surrounding Rio were “contaminated with raw human sewage teeming with dangerous viruses and bacteria” we expected that the “water issues” in Rio would be exclusive to open bodies of water and not the controlled environments of swimming/diving pools. Turns out we were wrong.
On Tuesday, athletes returning to the diving pool for another day of competition found that one of the pools had turned bright green overnight. The mystery left many athletes, including silver medalist David Boudia, wondering what had happened:

This post was published at Zero Hedge on Aug 10, 2016.

This Little-Known ‘Export War’ Is the Real Reason Behind Cheap Oil

The real reason why oil prices bottomed out last week has been completely overlooked by media pundits. Yet it may be the most important factor in oil pricing today.
You see, Saudi Aramco, Saudi Arabia’s national oil company and the largest oil company in the world, is the bellwether for what all of OPEC is likely to do at any given time.
And last week, Saudi Aramco cut its prices to the Asian market significantly.
Here’s why… and what that means for oil going forward…

This post was published at Wall Street Examiner by Dr. Kent Moors ‘ August 10, 2016.

Gilt Trip: The Bank of England Just Learned a Lot About Bond Market Liquidity

I was going to call the Bank of England’s bond buying program ‘Helter Skelter,’ but Tracy Alloway has a more pleasant song to associate with the BOE’s bond buying.
(Bloomberg) – Tracy Alloway – You can’t always get what you want.
On Tuesday, the Bank of England didn’t manage to buy all the gilts it wanted at a reverse auction – the first such shortfall since it began its bond-buying program back in 2009. The ‘uncovered auction’ happened as investors proved reluctant to part with their holdings of longer-dated U. K. government bonds and could create a headache for policy makers seeking to offset the economic impact of the Brexit referendum by lowering borrowing costs.
The central bank snafu sparked a lively discussion over whether the BOE is reaching Japan-like technical limits in its sovereign-bond purchases or simply suffering from a temporary summertime trading lull. While the fact that today’s auction proceeded without incident suggests the latter, the hiccup still speaks to a truism of the long-running debate over the ease of trading in the bond market; namely that a lack of liquidity is the flip side of a rampant search for yield amid low interest rates.

This post was published at Wall Street Examiner on August 10, 2016.

New Labor Productivity Numbers: The Worst in 35 Years

The Bureau of Labor Statistics released new data on labor productivity today. During the first quarter of 2016, labor productivity fell 0.5 percent, making the first quarter the third quarter in a row for falling productivity. Prior to the first quarter of this year, labor productivity had not fallen three quarters in a row since 1979 in the lead up to the 1980 recession and the 1981-82 recession.
The only other period with such a long period of declining productivity can be found in 1973 and 1974 in the midst of the 1973-75 recession following the Nixon shock:

This post was published at Ludwig von Mises Institute on 08/09/2016.

Be on Alert for a Pop Higher in Volatility

Summary: The trend in equities continues to be higher, even a very short term basis. As equity prices move higher, volatility is compressing. That, on its own, is not bearish, as volatility can stay low for months as equities grind higher. But it’s noteworthy that volatility has popped higher in each of the past seven Augusts. Combined with an unusually tight trading range in SPX and an extreme in the volatility term structure, short term traders should be on alert for a pop higher in volatility. That may well correspond with SPX approaching its next “round number” milestone at 2200.
This week, the major US equity indices – SPX, NDX, and COMPQ – all traded at new bull market highs. Moreover, RUT has traded at a new 12-month high. None of these, nor the DJIA, has closed below its 50-dma since late June. All are trading above their rising 5, 10, 20 and 50-dmas. The trend for US equities remains higher, even on a very short term basis.
As always, the first sign of a weakening trend will be consecutive closes below the 5-dma, which will then flatten or inflect downwards. As of today, that is not the case for any of the US equity indices.
In our last update, we shared several studies related to trend, breadth, sentiment, macro and corporate reports that supported higher equity prices in the month(s) ahead. That continues to be the case.

This post was published at FinancialSense on 08/10/2016.

The Minimum Wage: Taking Away the Right to Work

Do you believe that a minority teenager, maybe a high school drop out, with very few job skills, has a right to work? Or do you believe that being low skilled, maybe so low-skilled that you can only command $8 or $9 an hour in the job market, means you should have this right taken away? Oddly enough, for the progressive left, those who claim to be the most compassionate in our society, have adopted the latter position. In fact, the position that was adopted by the Democratic Party platform this summer argues that anyone whose skills are so low that they can’t command $15 and hour has no right to gainful employment. They argue that any employer who attempts to hire such a person at a rate that is commensurate with his or her skills will be breaking the law and subject to severe penalties.
This is the reality of raising the minimum wage. If you are in favor of a legal hourly minimum wage of $15 you are arguing that a person loses his right to be employed if his skills are not at a level where he can generate at least an equal amount in production for an employer. (It should be noted that you are actually saying more than this since to hire someone for $15 an hour it probably costs an employer about $17 or $18 given Social Security taxes and mandated benefits like, in some cases, health insurance.)
Of course, this is not how the minimum wage is typically described. When raising the minimum wage is discussed we typically hear moralistic platitudes like ‘no one should be forced to work for less than $15 per hour’ or people ‘deserve to receive a living wage.’

This post was published at Ludwig von Mises Institute on Aug 10, 2016.

Hedge Funds Haven’t Generated Any Alpha Since 2011: This Is What They Blame It On

To say that hedge funds have had a tough time navigating the world of activist central banks and pervasive central-planning, would be a vast understatement.
As Barclays writes in a recent report titled “Against All Odds“, looking at hedge fund alpha and returns, from 1993 – May 2016, HFs produced cumulatively ~134% of alpha. However, peak cumulative alpha over the period was 139%, achieved in 2011, which suggests that in the last almost 4.5 years, HFs actually generated negative cumulative alpha starting around 2011. Incidentally, that is around the time when both central banks fully took over capital markets, when “expert networks” were busted, and when trading on inside information became virtually impossible.
More specifically, Barclays calculates, the average monthly alpha has declined to -0.07% (annualised ~0.8%) from 2011 to May 2016 compared to an average of 0.48% (-5.9% annualised) for the entire period analysed (1993 to May 2016).

This post was published at Zero Hedge on Aug 10, 2016.

Did US Consumers Finally Tap Out? BofA Internal Card Data Shows Significant July Spending Slowdown

Ahead of this Friday’s retail sales report, which bulls are hoping will show a continuation of the strong spending trends revealed in last month’s data, Bank of America is once again the bearer of bad news.
As BofA reports in a note released this morning, according to the bank’s internal aggregated credit and debit card data, consumer spending slowed in July, with retail sales ex-autos down 0.3% mom on a seasonally adjusted basis. This follows the flat pace in June for retail sales ex-autos. As chief economist Michelle Meyer points out, “we think the recent weakening in consumer spending is largely a cooling down after the exceptionally strong gains from March through May (Chart 1).
Looking at the full year, BofA finds that retail sales ex-autos are only up 0.7% yoy, and points out that Census Bureau data have closely followed the trend in the BAC data, suggesting that the market should prepare for either a downward revision to the June data and/or disappointing July figures: “In our view, this sets up for a softer Census Bureau retail sales report on Friday – we would not be surprised to see either disappointing July sales and/or a downward revision to June.”

This post was published at Zero Hedge on Aug 10, 2016.

Strong 10Y Auction Stops Through, As Foreign Central Bank Buyers Flood Right Back

Moments before today’s auction printed just after 1.01pm Eastern, the When Issued was trading at 1.505%, virtually unchanged from last month’s 1.504%, yet what a difference a month makes. Whereas last month the 10Y came with a high yield that tailed by 1.2 bps as Indirect bidders tumbled to the lowest since January 2015, today we have seen foreign central banks flood right back, as Indirects took down a whopping 72.2%, just shy of the all time high seen back in May when Indirects were responsible for 73.5% of the issue.

This post was published at Zero Hedge on Aug 10, 2016.

When Will the Record Corporate ‘Debt Binge’ Collapse?

‘This year is unlike anything ever seen in the history of finance.’
After a historic ‘debt binge,’ leverage levels among the 2,200 largest US corporations, excluding financial institutions, have reached ‘record highs,’ Standard and Poor’s warns. It blamed the Fed-fueled ‘excessive liquidity and low borrowing costs in the capital markets,’ along with declining profits.
Now these companies, and ‘particularly those at the lower end of the credit spectrum,’ of which there are more and more, ‘are as vulnerable to downgrades and defaults as they were in the period leading up to the Great Recession – and perhaps more so.’
S&P Global Ratings sees a clear cause for concern as aggregate debt levels and leverage components that we use to help determine the financial profile of rated companies now exceeds that which we saw just prior to the most recent economic and financial crisis.
The report measures leverage as the ratio of median debt to EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization, a measure of operating cash flow). And that ratio hit the highest level in 10 years.
Junk-rated companies are the most at risk. The credit cycle may have peaked. New financing may become more expensive and harder to come by. And refinancing existing debt may be impossible to do. But these companies’ existence depends on being able to get new financing and to roll over existing debt at super-low interest rates. If they can’t, they’re heading into debt restructuring or bankruptcy – as many have already started to do.

This post was published at Wolf Street by Wolf Richter ‘ August 10, 2016.

Gold Daily and Silver Weekly Charts – Up On Falling Dollar Early, Hit in the NY Trade

“In an age where everything is for sale, ethical accountability is rendered a liability, and the vocabulary of empathy is viewed as a weakness, reinforced by the view that individual happiness and its endless search for instant gratification is more important than supporting the public good and embracing an obligation to care for others.
Americans are now pitted against each other as neo-liberalism puts a premium on competitive cage-like relations that degrade collaboration and the public spheres that support it.”
Henry Giroux
Gold and silver were rallying early, breaching 1350 and moving higher, on a weaker dollar and a ‘risk off’ reaction to the latest round of buying of financial paper.
However, gold was hit in the NY trade, and recovered only some of that, but still closing higher around 1347 with silver hanging another close over 20.
The chart formations remain highly positive for both gold and silver, but the needed breakout continues to elude.
The Royal Bank of New Zealand will be looking at a cut in their interest rates later tonight our time.

This post was published at Jesses Crossroads Cafe on 10 AUGUST 2016.

Oman Refuses To Attend Algeria Oil Producer Meeting, Leaving OPEC Oil “Plan” In Limbo

Having briefly dipped under $40, oil quickly rebounded over the past few days after the now traditional rumors of an “imminent” OPEC oil supply cut re-emerged, with the catalyst this time supposedly being the informal meeting set to take place next month in Algeria. Alas, this “plan” to push the price higher appears to have just suffered a terminal setback after Oman announced it would not participate in a meeting of oil producers and consumers in Algeria next month “as it is disappointed by the group’s failure to address the issue of low oil prices” the Minister of Oil and Gas Mohammad bin Hamad al-Rumhy said on Wednesday, cited by Reuters.
The International Energy Forum, which groups producers and consumers, is due to meet on Sept. 26-28 in Algiers. Qatar said on Monday that OPEC members had agreed to hold talks on the sidelines, which served as a substantial upside catalyst to WTI and Brent.
Alas, any credibility OPEC may have left evaporated when Oman, a small non-OPEC oil producer, said that it doesn’t “see the point of continuing to be part” of the group, Rumhy told Reuters in an interview in Muscat.

This post was published at Zero Hedge on Aug 10, 2016.

Gold And Silver Are Headed For New Highs

I’ve been pounding the table since late January that the third leg of the gold and silver bull market had started in mid-December. It’s also been quite clear to me that the western Central Banks had lost their ability to push the price of gold/silver down. Now the best they can hope for is to maintain a ‘controlled retreat’ – i.e. do what they can to limited rate at which the metals move higher. That’s why we get these ‘zip line’ price plunge formations followed by another ‘stair step’ higher.
But don’t take it from me. Andy Hecht, a famed oil trader, had this to say:

This post was published at Investment Research Dynamics on August 10, 2016.

Who Are You Going to Believe – the Commerce Dept. or ISM, Autodata & the BLS?

This past July 29, the Commerce Department surprised the economic cognoscenti by reporting that its advance estimate of second quarter real GDP annualized growth was a paltry 1.2%. The consensus estimate of Street economists was north of 2%. Oh my, with growth this anemic, the Fed certainly would not entertain raising its policy interest rates at its upcoming September 20-21 meeting, would it? Yes, it might. And here’s why.
Firstly, the advance estimate of GDP is called that because it is made in advance of the Commerce Department having all of the data that goes into the GDP calculation. For example, Commerce does not have the complete inventory, trade and construction data. So Commerce makes educated guesses as to what the missing data might turn out to be. Moreover, some of the ‘hard’ data Commerce has is actually ‘soft’ and will be revised in the coming months. As previously incomplete data are available and revisions to previously available data are made, Commerce releases a revised estimate of GDP a month after the release of its advance estimate. And then a ‘final’ estimate of GDP is released by Commerce a month following the release of the revised estimate. But the final estimate is not really final inasmuch as Commerce keeps revising a given quarter’s GDP years after the release of the not-so-final estimate. To illustrate this revision process, I pulled out of the air (thin air? drink) estimates of the annualized change in real GDP for the first quarter of 2014. The advance estimate was 0.1%. Two months later, the ‘final’ estimate was minus 2.9%. As of July 29, 2016, the estimate of the annualized change in Q1:2014 real GDP was minus 1.2%. So you can see that ‘there is many slip twixt the cup and the lip’ when it comes to advance estimates of GDP and later estimates.

This post was published at FinancialSense on 08/10/2016.