China Releases Secret Data On Crude Oil Inventories

China is bothering energy analysts and investors. It’s bothering them because it has been on a buying spree for crude in the last two years but nobody knows for sure how much of it the world’s second-largest consumer of oil has stashed away in strategic and commercial tanks.
At least, that was true up until this morning, when China graciously reported their oil strategic inventory reserves as of the first of the year – 31.97 million tons, or between 33 and 36 days’ worth of China imports. The figure, which is higher than analysts had expected, may not mean a whole lot, because we still don’t know anything about how much they have amassed since then, and it doesn’t include any information about what may be stashed away in commercial storage facilities.

This post was published at Zero Hedge on Sep 6, 2016.

A Convocation of Interventionists, Part 2

Pleas for More Deficit Spending We continue with our Jackson Hole post mortem – including remarks that were made by economists and monetary bureaucrats shortly before and after the pow-wow and seem to be connected to the discussions there.
We should preface the following with a Mises quote, as the simple concept he remarks upon below is apparently not well understood by the people running the monetary GOSPLAN show (which doesn’t say much for them).
‘[T]here is need to emphasize the truism that a government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens’ spending and investment to the full extent of its quantity.’

This post was published at Acting-Man on September 6, 2016.

Keiser Report: Will the dollar live to die another day? (E963)

The following video was published by RT on Sep 6, 2016
In this episode of the Keiser Report, Max and Stacy discuss the new m-SDR and ask will the dollar live to die another day? And are SDRs forever? As the G20 in China concludes they ask whether the new Special Drawing Right is the first step toward one world currency. In the second half, Max interviews Dan Collins of about yuan internationalization and China’s quantum satellite.

Dollar hegemony endures as share of global transactions keeps rising — Ambrose Evans-Pritchard

The U.S. dollar is tightening its grip on the global financial system at the expense of the euro, entrenching American hegemony and rendering the US Federal Reserve more powerful than at any time in history.
Newly-released data from the Bank for International Settlements (BIS) show that the dollar’s share of the $5.1 trillion in foreign exchange trades each day has continued rising to 87.6pc of all transactions.
It is the latest evidence confirming the extraordinary resilience of the dollar-based international order, confounding expectations of US financial decline a decade ago.
Roughly 60pc of the global economy is either in the dollar zone or closely tied to it through currency pegs or ‘dirty floats’, and the level of debt issued in dollars outside U.S. jurisdiction has soared to $9 trillion.

This post was published at The Telegraph

‘Flash Boys’ IEX stock exchange opens. Its goal: Rein in high-frequency traders

At mutual fund giant Capital Group, investment managers study stocks, looking to buy when they’re underpriced and sell when they’re overpriced. That’s how the downtown L.A. firm has made healthy returns for its millions of investors since the 1930s.
But over the last few years, Capital Group has been looking toward something else to help boost its returns: a new stock exchange founded by a group of Wall Street evangelists, lauded in a bestselling book and powered by a spool of 38 miles of fiber-optic cable tucked away in a New Jersey data center.
That new exchange, the Investors Exchange or IEX, the subject of Michael Lewis’ 2014 book ‘Flash Boys: A Wall Street Revolt,’ was founded on the premise that ordinary investors – particularly the middle-class ones whose money is managed by big firms like Capital Group – need protection from high-speed trading firms that manipulate the market.
After a nearly yearlong struggle for approval from the Securities and Exchange Commission, IEX today becomes a public stock exchange, like the New York Stock Exchange and NASDAQ, marking a victory for both the upstart exchange’s founders and Capital Group.

This post was published at Los Angeles Times

Another Greek Standoff: Europe Refuses Athens’ Bailout Payment Until Reforms Are Implemented

One of the longest running, recurring jokes in European high finance is that insolvent Greece pretends to reform (it has been mostly delaying and extending the mandated budget cuts, many of which involve unpopular mass terminations of government workers), while Europe pretends to send it money (most of the cash goes to various creditors, most notably the ECB and the IMF). To be sure, one of the reasons why last year’s Greek bailout was rushed – and passed – is that much as Varoufakis had anticipated, Europe had no choice but to “bail” Greece out at any cost, since that meant avoiding an impairment on ECB debt, which may have led to domino-effect fallout. It also explained why the funds were promptly wired over to Athens, just so Athens could then quickly turn around and wire it all right back.
This particular farce, however, is now once again in jeopardy, because with no imminent maturities or coupons owed to the Troika of institutions who can not be defaulted upon, Europe has decided to play hardball, and as Reuters reports overnight, citing Handelsblatt, Greece is once again facing a bailout standoff with its creditors as eurozone countries have refused to release additional funds to Athens this month. After approving a first tranche of 10.3bn this spring, of which 7.5bn has so far been released, the 19 finance ministers are due to disburse the rest this month but are said withhold payment for the rest of the year. A further finance ministers’ meeting is planned for 21 September.

This post was published at Zero Hedge on Sep 6, 2016.

A Convocation of Interventionists – Part 1

Modern Economics – It’s All About Central Planning We are hereby delivering a somewhat belated comment on the meeting of monetary central planners and their courtier economists at Jackson Hole. Luckily timing is not really an issue in this context.
When discussing papers and speeches delivered at the annual Jackson Hole meeting, it is important to consider the wider socio-economic context. As this article suggests (still the most recent reference available on the topic), the Federal Reserve has essentially bought off the economics profession.
A great many US economists list ‘monetary policy’ in some shape or form as a specialty, or more generally, ‘macroeconomic policy formation and aspects of public finance’. More than half of the editors of the top seven academic economic journals are on the Fed’s payroll and serve as gatekeepers. The Fed employs hundreds of economists directly, and provides 100ds of millions of dollars in grants to outside economists.
We are quite certain that the situation in other countries is very similar. It is easy to see why practically nofundamental criticism of the monetary system is forthcoming from the economics profession. The basic assumption that money and credit should be centrally planned is rarely challenged (or almost never). Economists naturally won’t bite the hand that feeds them.

This post was published at Acting-Man on September 6, 2016.

Traders Return From Vacation To Find S&P Futures Flat, Oil And Dollar Lower, Amid Flurry Of M&A

The return from summer holidays has started in much the same way as we left off August, with another subdued session that has seen European stocks little changed, Asian shares advance and S&P futures are modestly in the green amid a flurry of M&A. The US dollar weakened, with the Bloomberg Dollar Index down 0.2% for the 2nd day in a row as prospects for a U. S. interest-rate hike this month remained subdued.
Among the main overnight news, Bayer AG sweetened its takeover bid for Monsanto Co. for the second time, saying it would be prepared to pay $127.50 a share for the U. S. seed giant provided a negotiated deal can be reached. Monsanto ended last week at $107.44 in New York. Saudi, Russia pledge oil cooperation without agreeing freeze; Fresenius SE buys Spanish hospital group for $6.42 billion. In eco data, German factory order data (July 0.2%, vs exp.0.5%, Last -0.3%) today offered the latest in a recent trend of disappointing data from euro zone and BRC data cast a shadow on U. K. economy. ‘After a sharp fall in July, business surveys have rebounded in the U. K. in August, suggesting that although the economy should slow in 2H, it is unlikely to experience a sharp recession such as we forecast in June,’ Credit Suisse analysts write in note
The final Eurozone Q2 GDP print of 0.3%, came in line with expectations, however the bulk of gains (green in chart below) came from trade as a result of the recent decline in the Euro. The ECB may have trouble maintaining the recent rate of declines when it meets on Thursday, September 8, when the best announcement the market may hope for is for Draghi to extend the ECB’s bond buying into 2017.

This post was published at Zero Hedge on Sep 6, 2016.

Ireland ‘Especially Exposed’ To ‘International Shocks’ Warns Central Bank

Ireland remains especially exposed to another financial shock because of the extremely high levels of public and private debt, the open nature of the economy, and Brexit, Irish Central Bank Governor Philip Lane has warned in a pre-budget letter to Minister for Finance, Michael Noonan.
‘Ireland is especially exposed due to the legacy of high public and private debt levels, the sensitivity of small, highly-open economies to international shocks and Brexit-related vulnerabilities,’ Ireland’s Central Bank Governor said.
The letter was covered in the Irish Independent, Irish Times and Irish Examiner. This is something we covered in our interview with Max Keiser last week – see here.
There are many potential international financial and geopolitical shocks today which have the potential to derail the very fragile economic recovery or indeed contribute to a new global debt crisis.
Geopolitical risk remains very high. ‘Brexit’ has created a whole new set of risks to Ireland, the UK and the Eurozone itself. The Middle East remains a powder keg and tensions with Russia remain very real. There is the real risk of conflict and the consequent effect on oil prices, global markets and the global economy.

This post was published at Gold Core on September 6, 2016.

Morgan Stanley Throws In The Bearish Towel, Sees S&P At 2,300 On A 19x “Bull Case” PE Multiple

When Morgan Stanley’s Adam Parker had a notable change in heart earlier in the year when he turned from a raging bull to a muted bear, it unleashed a series of odd letters to MS clients such as this one from April where “In Bizarre, Schizophrenic Note Morgan Stanley Compares Rally Chasers To “Cockroaches“, followed by an angry noted aimed at “Fake Contrarians Who “Only Care About Price“, culminating with a letter in July in which he feared becoming the “counter-indicating idiot.”
Well, several months later, with the central banks refusing to allow his bearish narrative to manifest itself, this morning Parker flip-flopped again, and once more threw in the towel, this time reverting back to his old bullish ways, when overnight he released a note titled that “We Think the US Stock Market Is Going Higher“, something he didn’t think for most of 2016.
The justification of his racent change of heart was the same one used by so many other analysts who have zero fundamental legs to stand on: the Fed Model, or low bond yields resulting in high equity valuations. This is what he said:
We are raising our 12-month price targets for the S&P 500 – base case from 2200 to 2300, bear case from 1600 to 1800, and our bull case from 2400 to 2500. Our bull-bear skew is balanced, and our base case upside is now mid-single-digit, consistent with our continued optimistic outlook. While we have argued many times that we think forecasting the market-level price-to-earnings ratio is difficult, our best guess is that growth and interest rates ultimately matter in the long term. In fact, we have shown that historically, there was a relationship between real yields and price-to-earnings ratios for the markets Exhibit 1).

This post was published at Zero Hedge on Sep 6, 2016.

Sorry, Krugman: Austerity Is Good for the Economy

Paul Krugman again went after Germany on August 26 in his New York Times column, “Germany’s Drag.” After the German government posted a 1.2 percent of GDP fiscal surplus for the first half of 2016 – way above the IMF forecast of 0.3 percent – it seems as if Krugman couldn’t contain himself anymore. He claimed that “what we’re seeing in elite circles is a very belated but still welcome realization that monetary policy badly needs an assist from fiscal expansion.” However, there are two evil opponents of more government spending: The Republican Party in the US, led by Paul Ryan (the “hard-line, Ayn Rand-loving and progressive-tax-hating conservative”), and Germany.
However, his critique of the German austerity measures seems rather dubious, considering that European countries with budget surpluses or small deficits have clearly done better than countries with high deficits since the economic crisis. One just needs to look to countries such as the United Kingdom, Ireland, or even Spain – the countries that reduced their deficits significantly in recent years – and compare them with Greece or Portugal. One will easily discover which policies worked better. Also, Scandinavian countries, which Krugman is generally very fond of, have consistently posted small deficits or even surpluses in the past, as well. In 2015, Norway reached a surplus of 5.7 percent of GDP and Sweden had a balanced budget. But strangely enough, the great, socialist Nordic countries don’t count here for Krugman. Still, there seems to be a clear correlation between economic growth and low deficits, as can be shown in the following graph.

This post was published at Ludwig von Mises Institute on September 6, 2016.