What Happens When Central Banks Become Major Buyers in the Stock Market? Case Study: Japan

The Bank of Japan decided at its July 28 – 29 meeting to boost its purchases of exchange-traded funds (ETFs) to an annual rate of 6 trillion yen, almost double the previous rate of 3.3 trillion yen. The BOJ began its ETF purchasing in October 2010 at a much more modest annual pace of roughly 450 billion yen. The rate was doubled to 1 trillion yen a year in April 2013 and increased further to around 3 trillion a year in October 2014. As a result of the latest doubling of the BOJ program, BOJ purchases are averaging 2.9% of daily trading values, doubling the previous average.
The ETF purchase program has the apparent objectives of improving market confidence and stimulating consumer and business spending. Its success so far in furthering those objectives has been modest at best. However, equity prices are surely higher than they would have been in the absence of these purchases. In the future, as the BOJ’s ETFs can and probably will be held by the Bank indefinitely, they will likely provide continuing psychological price support for the market.
The BOJ is buying ETFs that track the TOPIX, the Nikkei 225 Stock Average, and the JPX-Nikkei 400. The proportions of the total purchases accounted for by these three indexes have been based on market capitalization: respectively, 54%, 42%, and 4%. In May the BOJ also started buying new ETFs that include companies that are ‘proactively making investment in physical and human capital.’ The plan is to purchase 300 billion yen of such ETFs a year as part of the overall ETF program, but investors have been reluctant thus far to purchase the six new ETFs launched since May 19. Note that the BOJ is limited to holding no more than 50% of any ETF.

This post was published at FinancialSense on 08/17/2016.

How The East Coast Is Getting Rid Of Its Gasoline Glut

One month ago, before the commodity trading world’s attention turned to the unprecedented glut in gasoline stocks, we wrote “PADD 1 Is A Holy Mess” – Is This What Finally Drags Crude Oil Lower, in which we showed the historic excess of gasoline stocks on the US East Coast, known as the PADD 1 region. A week later, in a follow up article we explained that as a deluge of Chinese gasoline exports had flooded the world, the PADD1 glut was only getting worse, leading to a pile up of tankers in New York harbor. It got so bad, that gasoline stockpiles in PADD 1 rose to a record 72.5 million barrels in the week ended July 22.
Meanwhile, as crack spreads collapsed, concerns about both gasoline and oil demand emerged, leading to a sharp selloff in oil, and the recent bear market in WTI (at least until the subsequent OPEC-meeting driven rally). After all, the key bullish narrative for the oil long case was that with a strong summer driving season, gasoline was not going to be a production bottleneck, and yet this is precisely what happened.
However, over the past three weeks, gasoline inventories finally dipped, and as we reported this morning, commercial gasoline stocks declined by another 2.7 million barrels according to the DOE, the third consecutive drop…

This post was published at Zero Hedge on Aug 17, 2016.

Will The US Dollar Begin It’s Collapse This Fall? – Episode 1051a

The following video was published by X22Report on Aug 17, 2016
Cisco cut around 20,000 jobs. Retail giants slash earnings, their explanation is that the something is changing in the economy. Red warning signs that the real estate market is coming apart. Global central banks are dumping treasury bonds. The World bank has just approves China to issue the SDR. China’s yuan will be included the basket of of SDR’s this fall. Will the dollar begin it’s collapse at this time?

Stupid Is What Stupid Does – Secular Stagnation Redux

Which country, the United States or Japan, have had the fastest GDP growth rate since the financial crisis?Due to Japan’s bad reputation as a stagnant, debt ridden, central bank dependent, demographic basket case the question appears superfluous. The answer seemed so obvious to us that we haven’t really bothered looking into it until one day we started thinking about the demographic situation in the two countries. As we all know, Japan has a rapidly ageing population whereby the workforce is getting smaller for every day. Japan has had a demographic growth tax ever since 1997 when population growth overtook potential labour force growth.

This post was published at Zero Hedge on Aug 17, 2016.

Price Controls Are Disastrous for Venezuela, and Everywhere Else

Images of citizens waiting in lines to get basic goods – toilet paper, flour, milk – throughout supermarkets in Venezuela abound across the internet. Such surreal imagery is the norm in present-day Venezuela. From the 1950s to the late 1990s, Venezuela was Latin America’s most economically and politically stable country. Fast-forward to the present, and Venezuela is not only undergoing an unprecedented economic collapse, but it is also on the verge of becoming a failed state.
Understanding Venezuela’s Shortage Crisis
How could a country that was once so prosperous fall to such lows? Basic economics dictates that goods do not just vanish out of thin air. To comprehend the phenomenon of shortages in Venezuela, a cursory analysis of the economic measures passed by Hugo Chvez’s regime and his successor, Nicols Maduro, is needed.
The main culprit in Venezuela’s economic tragedy is government intervention, specifically price controls implemented during the Chvez and Maduro administrations. These controls have been the underlying factors behind the rampant scarcity of basic goods in Venezuela.
Venezuela’s Current Price Control Experiment
Emboldened after an unsuccessful coup attempt against his government in 2002, Hugo Chvez initiated a series of interventionist measures with the aim of preventing capital flight. These measures included expropriation of key industries, exchange controls, and price controls.
Despite the harmful nature of these policies, the flow of petrodollars thanks to high oil prices could give Venezuelan businesses the luxury of importing basic goods and raw materials as a short-term, fallback measure. Even with high oil prices, shortages of price controlled goods began to slowly pop up in 2006 due to the exchange and price controls.

This post was published at Ludwig von Mises Institute on Aug 16, 2016.

Cisco Fires 5,500; Market Disappointed It Wasn’t More – Shares Fall

After yesterday’s leak by CRN that Cisco would terminate some 14,000 workers, or about 20% of its 73,000 workforce, investors were looking forward to today’s earnings announcement by the tech giant not so much for whether it would beat expectations (it did not on a GAAP basis, with $0.56 in GAAP EPS, however it did beat on a non-GAAP basis, reporting $0.63, above the $0.60 expected), but whether it would indeed reduce its workforce to a level not seen in a decade.

This post was published at Zero Hedge on Aug 17, 2016.

Ford Announces Plans To Self-Destruct Starting In 2021

Ford CEO, Mark Fields, sat down with Bloomberg to discuss plans to introduce a completely autonomous car by 2021. The only real problem we see with that plan is that it pretty much ensures their own demise. That said, they’re pretty much doomed anyway so might as well go for it.
The company said it plans to have a fully autonomous vehicle — no steering wheel, no gas or brake pedals — available by 2021 for ride-hailing services.
‘We see the autonomous car changing the way the world moves once again,’ Chief Executive Officer Mark Fields said today at Ford’s research lab in Palo Alto, California. ‘They address a whole host of safety, social and environmental issues.’
Like Alphabet Inc.’s Google, Ford will skip the interim steps of driver-assisted technology as a way to evolve toward full autonomy. Its plan to deploy self-driving cars in ride-hailing and ride-sharing fleets is similar to what General Motors Co. aims to do with Lyft Inc. Ford’s 2021 scheduled start matches BMW’s ambitious timeframe.


This post was published at Zero Hedge on Aug 17, 2016.

Soros calls temp top in Gold?

The billionaire investor jumped back into trading this year with a big bet on the precious metal, buying up a 19-million share stake in the world’s largest gold producer, Barrick Gold But in the second quarter, Soros Fund Management sold the majority of his shares in the gold miner and his full stake in mining company Silver Wheaton, according to regulatory filings.
The first-quarter bet on gold looked particularly prescient, as the precious metal has rallied 26% this year. The rise in gold’s price has given an even bigger boost to gold miners, with Barrick shares surging more than 190% this year. Now, Mr. Soros’ change of heart may cause concern for those still bullish on the safe-haven metal.
While gold prices rose for the second day in a row, a ‘lasting rally however is not yet here as some wonder why Soros cut back on gold,’ said George Gero, managing director at RBC Wealth Management.
Gold prices found support from a weaker dollar Tuesday, as the U. S. currency fell to a seven-week low. However, since the start of August, the precious metal has largely gone nowhere.

This post was published at TruthinGold on August 17, 2016.

AUGUST 17/FOMC IN A SLIGHT HAWKISH MOOD YET MARKET INTERPRETS AS DOVISH/CHINA HAS MASSIVE AMOUNT OF SHIPS INTO DISPUTED WATERS/RUSSIA ENGAGES IN ARMOURED WAR GAMES/DUND AND BRADSTREET MAY LOWER T…

Gold:1342.70 down $7.80
Silver 19.63 DOWN 22 cents
In the access market 5:15 pm
Gold: 1349.00 post FOMC
Silver: 19.70
For the August gold contract month, we had a small sized 11 notices served upon for 1100 ounces. The total number of notices filed so far for delivery: 12,857 for 1,285,700 oz or tonnes or 39.999 tonnes. The total amount of gold standing for August is 42.82tonnes.
In silver we had 119 notices served upon for 595,000 oz. The total number of notices filed so far this month: 393 for 1,965,000 oz.
Let us have a look at the data for today.
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In silver, the total open interest ROSE BY A TINY 5 contracts UP to 205,905 AND MOVING AWAY FROM ITS AN ALL TIME RECORD AS THE PRICE OF SILVER ROSE BY 3 CENTS WITH YESTERDAY’S TRADING. In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.029 BILLION TO BE EXACT or 147% of annual global silver production (ex Russia &ex China).
In silver we had 0 notices served upon for nil oz
In gold, the total comex gold FELL 7,819 contracts despite the fact that the price of gold ADVANCED YESTERDAY by $10.20 . The total gold OI stands at 572,496 contracts.
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With respect to our two criminal funds, the GLD and the SLV:
GLD
we had no change the GLD/
Total gold inventory rest tonight at: 962.23
SLV
we had a huge addition of 1.519 million oz into the SLV, / THE SLV/Inventory rests at: 353.284 million oz.
First, here is an outline of what will be discussed tonight:

This post was published at Harvey Organ Blog on August 17, 2016.

How Canada Is Handling the Flood of Chinese Money

Despite a new 15% tax on foreign property buyers in Vancouver, Canada will continue to attract Chinese investment, especially in agribusiness and tourism.
On August 2nd, the provincial government of British Columbia introduced a 15% property transfer tax on foreign buyers in an effort to quell the red-hot housing market. The levy only applies to Metro Vancouver, which sees 75% of the province’s foreign investment. The majority of said investment comes from China, with foreign money overheating the sector and causing instability. Opponents of the new tax say it contravenes NAFTA agreements, as well as deals with China and 27 other nations. The BC government, in turn, maintains that it is within its rights to correct an overvalued sector that threatens local sustainability.
Vancouver’s home prices have increased by 172% in fifteen years, while incomes have only increased by 10%. Indeed, prices have increased by 38% in the past twelve months alone, with average house prices rising to CAD $946,945. Local realtors, are unsurprising, hostile to the new tax, claiming that at least 427 deals worth around $404 million are likely to collapse as a result of the new levy.
The dilemma facing Canada is how to prevent the housing bubble from bursting while continuing to encourage foreign investment. The housing sector is presently one of the main drivers (for better or for worse) of the Canadian economy. At 165%, Canada has the highest debt-to-income ratio in the G7 (80% of which are mortgages). The U. S at the height of the 2008 housing crisis only had 147%.

This post was published at FinancialSense on 08/17/2016.

Million Dollar Bounty Offered For Hillary’s “True” Health Records

As questions abound over Hillary’s “mental and physical stamina,” the Clinton campaign has come out swinging blasting any concerns over the presidential candidate’s strange behaviors as “deranged conspiracy theories” adding that Trump was “simply parroting lies.” But, if the Clinton campaign thought they could brush this off with their media pals’ help, think again as TruePundit is offering an unprecedented reward of $1 Million (One Million Dollars US) for Clinton’s true medical records.
As we noted previously, as the presidential campaign enters its final stages, probing questions have emerged about the health condition of Hillary Clinton.
Hillary’ bizarre, erratic behavior on the campaign trail (culminating with last week’s perplexing “short-circuit” comment) has left many wondering whether she is seriously ill. Hillary has at multiple times had convulsions that appear to be seizures on camera, including a series of seemingly inexplicable coughing fits.

This post was published at Zero Hedge on Aug 17, 2016.

Gold And Silver: Patience Required

I wanted to share a discussion on the metals that I had with GATA’s Bill ‘Midas’ Murphy this morning. I had emailed him to ask him if he knew of any reasons the metals were getting slammed today because the dollar was down a bit, the economic reports were poor and the stock market was selling off – all three occurrences of which are precious metals-friendly.
As Bill suggested, silver is under more pressure today than gold, with JPM going all out to get the speculative traders to sell, which helps JPM push the price down. If you look at short term chart, it would appear that silver is forming a head and shoulders ‘top’ formation, something which JPM is trying achieve, as Bill correctly pointed out.
However, technical formations almost NEVER work in the metals. Typically doing the opposite of the what the formation is indicating works the best over the last 15 years. That would imply a big upleg coming, which supports my view based on the fundamentals, which would support the view of another big move higher on the horizon.

This post was published at Investment Research Dynamics on August 17, 2016.

Charts at 3:30 – A Really Dull Market

“Even the broader stock market has moved into the gray area beyond rationality, ruled by hype and ‘adjusted’ earnings and monkeyed accountings, financial engineering, and feverish hopes for central-bank market manipulation. Everyone loves a rigged market, as long as it’s rigged the right way. We’ve come to call it, consensual hallucination.”
Wolf Richter
We have a break in the weather, and I do not wish to waste it watching this inconsequential nonsense today.
Without significant financial and political reform there will be no sustainable economic recovery.
Paul Krugman was a guest speaker on Bloomberg television today, and he is a willfully blind, walking, talking poster child for the credibility trap.

This post was published at Jesses Crossroads Cafe on 17 AUGUST 2016.

FOMC Minutes Show Fed Members Split Over July Rate-Hike, Fear Financial Risks From Low Rates

With Fed speakers attempting to jawbone the current narrative back from the uber-dovish record-high-creating Fed statement, all eyes today were glued on how hawkish the statement would be with regard 2016 hikes – few, some, or many? Since The Fed statement, GDP expectations have crashed to cycle lows but that has not seemed to stop The Fed:
*FED OFFICIALS SPLIT IN JULY ON WHETHER RATE HIKE NEEDED SOON *A COUPLE FED OFFICIALS BACKED JULY RATE HIKE *FOMC VOTERS AGREED TO WAIT FOR MORE DATA TO GAUGE ECONOMY But perhaps most notably, several Fed officials are concerned of financial risks from too low rates.
* * *
Pre-FOMC Minutes: Sept Odds 28%, Dec Odds 55%, S&P Futs 2173, 10Y 1.56%
Rate hike odds have risen again as the stock market rallied…

This post was published at Zero Hedge on Aug 17, 2016.

And The Market Breaks…

Bond yields are plunging, the USD is tumbling, and precious metals are surging after the unquestionably hawkish fed minutes… and so, how do you stop the market melting down? Break The Market…
*BATS BZX EXCHANGE HAS DECLARED SELF-HELP VS NASDAQ

This post was published at Zero Hedge on Aug 17, 2016.