US Manufacturing PMI Bounces To 9-Month Highs, ISM Drops

Following China’s great-and-terrible manufacturing PMI data overnight, Markit’s US manufacturing index surge to 9-month highs, printing at the expected 52.9 led by faster growth of output, new orders, and employment. However, in true Chinese-style, US ISM Manufacturing missed expectations (52.6 vs 53.0) with new orders and employment dropping.
So take your pick!

This post was published at Zero Hedge on Aug 1, 2016.

U.S. Economy Was Growing at the Slowest Pace Since WW II; Now It’s Worse

According to the National Bureau of Economic Research, the Great Recession (that was brought on by the implosion of Wall Street) ended in June 2009. What we’ve been in since that time is supposed to be the ‘recovery’ part of the cycle. But for tens of millions of Americans, it has been hard to tell the recovery from the crisis in terms wealth accumulation, wage growth, or ability to earn a decent rate of interest on savings.
On Friday the Commerce Department released second quarter Gross Domestic Product data, showing that the U. S. economy grew at a 1.2 percent annual rate. That tepid number came on the heels of an anemic 0.8 percent rate of GDP growth for the first quarter.
It has now been more than a decade since the U. S. economy grew at an annualized rate of 3 percent or better – the longest subpar growth stretch since the end of World War II.
Long stretches of anemic performance suggest that a ‘cyclical’ situation may have given way to a ‘secular’ or long-term trend. As a result, we are seeing the words ‘secular stagnation’ used increasingly to describe the U. S. economy.

This post was published at Wall Street On Parade on August 1, 2016.

Italian Banks Crash Despite ‘All Clear’ From EU Stress Tests

For a few minutes at the open, mainstream business media persuaded itself that the EU stress tests had proved that everything was fine in Europe’s banking system again. But very quickly, things went south with Italian banks – the center of the storm – reversing gains and then extending losses with Unicredit now down 8% (after being up 4%).
As Citi’s Christian Schulz notes, “The 2016 stress test is unlikely to fully restore investors’ trust in the eurozone banking system, in our view.”
And it seems he is right…

Monte Paschi is holding gains amid its massively dilutive capital raise, but this is noise across the stock’s bid-offer.

This post was published at Zero Hedge on Aug 1, 2016.

Gold price rally ‘set to continue’

The rally in gold prices is expected to continue as global uncertainty and volatility persists while economic growth remains weak, former International Monetary Fund deputy head John Lipsky says.
In the face of a global outlook based on negative risks and pockets of problems, Australia’s financial system is still rated as one of the most resilient in the world, Mr Lipsky says.
‘The happy news for the gold miners is that in the near term the uncertainty is not a bad thing for the gold price,’ Mr Lipsky told the Diggers and Dealers Mining conference in Kalgoorlie on Monday.
Gold producers have benefited from a surge in prices amid uncertainty, with the precious metal tipped to push above near record levels of $US1350 ($USA1775) per ounce recorded this week. Uncertainty was being driven by factors such as both major US political parties citing problems with the Trans-Pacific Partnership, Brexit negotiations around new trade deals as well as challenges facing the Chinese economy.

This post was published at TruthinGold on August 1, 2016.

Tesla, SolarCity Merge In $2.6 Billion Transaction

Concluding a transaction that surprised the world when it was announced one month ago, and which we hope the regulators are poring over as a result of a myriad of “related party transactions” and shared top shareholders…
… moments ago SolarCity (whose stock is currently halted) announced that Tesla and SolarCity would combine in all-stock deal; in which SCTY stockholders will receive 0.110 Tesla common shares per SCTY share, valuing SCTY common stock at $25.37 per share.
SCTY announced that “after comprehensive due diligence in consultation with independent financial and legal advisors, the independent members of the Tesla and SolarCity boards of directors approved this transaction”, and added that it that expects to achieve cost synergies of $150 million in the first full year after closing.
SolarCity will now have a 45-day ‘go-shop’ period, which runs through September 14, 2016. “This means that SolarCity is allowed to solicit alternative proposals during that time.” It is assured that no overbid will emerge.

This post was published at Zero Hedge on Aug 1, 2016.

IMF Deliberately Lied & Obstructed an Investigation into their EU Policies

The arrogance of those in power is typically beyond belief. Those in the International Monetary Fund have been so biased that their own refusal to review what is going on within Europe has been a great contributor to the demise of the Eurozone. It has now been acknowledged that the IMF’s top staff misled their own board based upon biased misjudgments concerning Greece. Their pro-euro stance blinded them, for they never considered that the structure of the Eurozone might be wrong. They ignored all the warning signs of an impending crisis because they simply never understood modern monetary/currency theory. The IMF lacks anyone with basic trading experience on how the currency markets function and that is the cause of this problem.
The IMF’s tangled political role in the Eurozone debt crisis as a member of the Troika has created a damaging episode in the history of Europe. The IMF’s watchdog has described the organization as having a ‘culture of complacency’ prone to ‘superficial and mechanistic’ analysis. The watchdog traces a shocking breakdown in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organization. Now with Christine Lagarde ordered to stand criminal trial in France, the board has once again ignored its duty and merely said it stands by her.

This post was published at Armstrong Economics on Aug 1, 2016.

Preview Of Key Events In The Coming Week

After last week’s central bank and GDP fireworks, we have another busy week on deck culminating with Friday’s jobs report.
This morning in Europe the early focus is on the final revisions to those July manufacturing PMI’s, along with a first look at the data for the periphery. Shortly we will provide a full breakdown of global PMI by country. Today we’ll also get the manufacturing PMI in the US which is then closely followed by the ISM manufacturing for July, along with construction spending data.
Early on Tuesday morning there’s some central bank focus in the Asia session with the RBA decision (a 25bps cut is expected). It’s possible that we also get the Japan Cabinet decision on the stimulus package announced by PM Abe last week. In Europe the only data is the June PPI report for the Euro area. In the US there’s important data in the form of the personal spending and income reports (both expected to increase 0.3% in June), while the PCE core and deflator readings for June will also be released. July vehicle sales data follows this in the evening.
In Asia on Wednesday we’ll get the Caixin services and composite data for July in China. The European session will then see the remainder of those July PMI’s (services and composites) along with Euro area retail sales data. In the US the ADP employment change print will be important to watch in light of Friday’s employment report. The ISM services reading will also be released, along with the rest of the PMI’s.
With a lack of data on Thursday morning in either Asia or Europe, it’s all eyes on the BoE at midday where a 25bps cut is expected. The inflation report will also be released. In the US session we’ll get initial jobless claims, factory orders data and the last revisions to the June durable and capital goods orders data.

This post was published at Zero Hedge on Aug 1, 2016.

Sheep flock to gold

Directly following Britain’s vote to leave the European Union, for example, the price of gold reached its highest level in two years, closing at $1,320 US an ounce, up $58.80 on that day.
‘When there’s instability in the world, everybody, it’s like a herd of sheep, they just flock to gold,’ said Van Rijk.
RBC Capital Markets released a report in July forecasting the price of gold will reach $1,500 US an ounce by 2017, a value it hasn’t seen in three years.
The report’s authors are anticipating this higher price ‘as investors look to gold as a safe haven investment’ at a time of geopolitical uncertainty and ultra-low interest rates.
Glowing through the ages, our infatuation with gold dates back to ancient civilizations.
According to the World Gold Council, the first gold coins were created around 550 BC. Gold was used as currency in many countries before an eventual switch to paper money.

This post was published at TruthinGold on August 1, 2016.

The Full Details Behind Monte Paschi’s 5 Billion Bail Out

After the close on Friday, the European Banking Authority did what it does every other year: it released the results of what it calls a “stress test” which is simply an annual exercise in boosting confidence. Case in point, the 2016 edition did not even “test” for Europe’s two biggest threats, namely negative interest rates or “Brexit.” It also did not test any banks from Greece or Portugal, knowing well what the results would have been. However, in order to retain some credibility, the same test which in previous years passed such failed institution as Dexia, Bankia and Novo Banco, had to fail one bank, and this year the honors fell to Italy’s Monte Paschi.
However, as we reported earlier on Friday, the EBA only failed Monte Paschi after the bank announced it had obtained a private bailout from a consortium of banks. The Monte Paschi bailout, a 5 billion capital increase, was unique in several ways, not least representing 5.6x BMPS’s market cap.
In a nutshell, the plan can be summarized in the following three steps:
Increase the coverage ratio for Bad debt Transfer all the existing stock of Bad debt (sofferenze) into a securitization vehicle. The senior tranche will be covered by government guarantees, Mezzanine will be bought by Atlante fund and the equity tranche will be transferred to existing shareholders and deconsolidated. A 5bn capital increase to remove the negative capital impact from the operation and maintain capital level at the current level of 11.8%. So far so good, but as Barclays’ Marta Bastoni puts it: “one problem is fixed but not easily repeatable.”

This post was published at Zero Hedge on Aug 1, 2016.

The American Dream has imploded with the Homeownership rate hitting another low: Most Americans too broke to buy a Home.

Owning a home is symbolic with having a piece of the American Dream. The stereotypical picket white fence with a nice lawn is easily conjured up in the minds of many. Yet for many, this is only a dream because it will never become reality. The American Dream has imploded with many other areas of the economy. We have hit another low when it comes to the homeownership rate. Americans are too broke to purchase homes even with record low interest rates. Home prices have increased hand and hand with the stock market but the problem is, most of the gains have gone to big investors and not families purchasing a place to live. The big bet from Wall Street was to convert many foreclosures into rentals and push rents higher. This is all interconnected like an intricate spider web and the public is the fly trying to break free. The only problem is the housing market has transformed into another trophy for big money investors.
The end of an era
Housing is an important component of the American Dream for a variety of reasons. Housing tends to be a forced savings account. Every month, some part of principal is paid down and housing normally tracks inflation. So what you have is a fixed cost and overtime, what you hope will happen is equity is built up while the payment remains the same.

This post was published at MyBudget360 on July 31, 2016.

Is Twitter “Shadow-Banning” Donald Trump?

Twitter is provably censoring Donald Trump in order to prevent him raising money for his presidential campaign.
A tweet sent out by Trump yesterday to promote his #MillionDollarMatch donation drive does not appear on Trump’s profile page nor did it appear on the feed of anyone following him.
You can check for yourself. Here is the tweet sent out by Trump yesterday and here is his main profile page – which doesn’t show the tweet. The tweet has been buried as if it never existed.
This is yet another example of Twitter shadow banning – where people on a designated ‘blacklist’ have their tweets relegated on search results and hidden from users’ timelines, while leftist politicians and commentators on a ‘whitelist’ have their tweets promoted.

This post was published at Zero Hedge on Aug 1, 2016.

The Burrito Index: Consumer Prices Have Soared 160% Since 2001

Our real-world experience tells us the official inflation rate doesn’t reflect the actual cost increases of everything from burritos to healthcare.
In our household, we measure inflation with the Burrito Index: How much has the cost of a regular burrito at our favorite taco truck gone up? Since we keep detailed records of expenses (a necessity if you’re a self-employed free-lance writer), I can track the real-world inflation of the Burrito Index with great accuracy: the cost of a regular burrito from our local taco truck has gone up from $2.50 in 2001 to $5 in 2010 to $6.50 in 2016. That’s a $160% increase since 2001; 15 years in which the official inflation rate reports that what $1 bought in 2001 can supposedly be bought with $1.35 today. If the Burrito Index had tracked official inflation, the burrito at our truck should cost $3.38 – up only 35% from 2001. Compare that to today’s actual cost of $6.50 – almost double what it ‘should cost’ according to official inflation calculations. Since 2001, the real-world burrito index is 4.5 times greater than the official rate of inflation – not a trivial difference.

This post was published at Charles Hugh Smith on SUNDAY, JULY 31, 2016.

Euro Stocks Reverse Early Gains Dragged Lower By Slumping Banks; US Futures Flat; Crude Slides

Following last Friday’s shocking weak US GDP print, Asian stocks jumped to an 11 month high on reduced prospects of a near-term rate hike, while the region also digested mostly encouraging in conflicting Chinese PMI data. European bank stocks initially rose following the release of the 2016 stress test then declined, tempering gains in global equity indexes, amid investor skepticism over the usefulness of stress-test results and weaker oil prices. Shares and currencies in emerging markets rallied to the highest in about a year, while miners and industrial metals jumped.
Declines in European banks put a dent in global equities, which rallied in July to their best month since March on prospects central banks will add to stimulus or refrain from reducing it. Traders peeled back bets on a U. S. rate hike this year after data Friday showed annualized gross domestic product rose 1.2 percent last quarter, less than half the 2.5 percent projected by economists. The Bank of Japan added to its easing last week and economists forecast policy makers in Australia and England will cut their benchmark interest rates from record lows this week.

This post was published at Zero Hedge on Aug 1, 2016.

‘We’re Not Dangerous’: Deutsche Bank’s Chief Risk Officer

No crisis at Deutsche Bank, really, I swear. When Stuart Lewis, Chief Risk Officer at Deutsche bank, was asked in an interview, published in the Frankfurter Allgemeine on Sunday, if his institution is ‘the most dangerous bank in the world’ – a reference to the IMF’s call that among globally systemically important banks, ‘Deutsche Bank appears to be the most important net contributor to systemic risks’ – he replied:
‘No, not at all. Only one IMF report has recently muddled up the situation: We are not dangerous. We are very relevant. Deutsche Bank is interwoven with the entire financial sector. We are one of the largest universal banks in the world. But to make it clear: Our house is stable. The balance sheet is healthy.’
Could he say that ‘in good conscience?’
‘Absolutely. Look at how we have capitalized the bank since the Financial Crisis. We have taken 115 billion in risks off the balance sheet and have 220 billion of liquidity. Concern for us is unfounded.’
Alas, the European Banking Authority released the stress test results on Friday. Deutsche Bank didn’t fail in part because there was no way to fail. No bank could fail, not even Italy’s Banca Monte dei Paschi di Siena which is in full collapse-and-bailout mode at this moment. Mercifully, no bank could fail the test by design. But the Tier 1 capital ratio after in the ‘adverse scenario’ made it possible to rank the banks. At Deutsche Bank, that ratio dropped to 7.8%, making it the 10th riskiest bank among all European banks in the stress test.

This post was published at Wolf Street on August 1, 2016.