Monte Paschi Rescue On The Rocks: Regulators Now “Expect Bank To Ask Italy For Bailout”

Ever since two months ago, when Italy’s third largest bank – and the world’s oldest – Sienna’s Monte dei Paschi, failed Europe’s latest stress test, it had scrambled, and assured markets, that it would obtain a private sector cash injection, aka bailout, amounting to roughly 5 billion in fresh capital, there was significant speculation in the Italian press that the capital raise was not going well as third party investors were uncomfortable to allocate funds to a bank whose history of failure and unprecedented bad NPL book remained a daunting obstacle. The reason why Monte Paschi was forced to seek a private sector bailout is that Germany had repeatedly shut down Italian PM Matteo Renzi’s attempts to pursue a public sector bailout. Instead, the Germans demanded that instead of a public sector bailout the bank should implement a bail-in, and impair various liabilities, which however could result in another bout of public anger, due to the substantial retail investment in the bank’s unsecured bonds, perhaps culminating with a run on the bank.
In any case, there was little news about BMPS’ ongoing bailout plan, and now we know why: according to Reuters, European regulators expect Italian bank Monte dei Paschi di Siena will have to turn to the government for support, although Rome – as expected – would strongly resist such a move if bondholders suffered losses. Making matters worse, in the first half of 2016 much of the public’s attention had focused on the infamously unstable Italian banks, of which Monte Paschi was the weakest link, and as such the reemergence of solvency concerns involving the Italian lender could potentially reignite fears about the broader banking sector even as the Italian referendum due sometime in late October or November, gets closer.
Which brings us back to the latest Reuters update on the BMPS’ bailout progress, or lack thereof: according to the news service, “while the bank is determined to see through the capital raising, if it were to disappoint, it would be left with a capital hole. Now euro zone authorities are considering whether state support would have to be tapped after what bankers have described as slack interest in the bank’s share offer.”

This post was published at Zero Hedge on Sep 22, 2016.

Gold and Silver Market Morning: Sep-22-2016 — Gold and silver jumping in dollars, not Euros, after the Fed!

Gold Today -New York closed at $1,334.00 after the previous close of$1,314.60 yesterday. London opened at $1,332.70.
– The $: was weaker at $1.1232: 1 from $1.1147: 1 yesterday.
– The Dollar index was weaker at 95.26 from 95.96 yesterday.
– The Yen was stronger at 100.64: $1 up from 101.50: $1 yesterday against the dollar.
– The Yuan was stronger at 6.6696: $1 from 6.6726: $1 yesterday.
– The Pound Sterling was stronger at $1.3057: 1 from yesterday’s$1.2998: 1.
Yuan Gold Fix
New York, Shanghai and London were roughly in line, adjusting them for changing exchange rates as all financial markets reacted to the Fed statement.
All financial markets now need time to digest the announcement and feed this information into prices. Overall, we see the dollar gold price continuing to benefit from the words of Mrs. Yellen.
LBMA price setting: The LBMA gold price setting was at $1,332.45against yesterday’s $1,319.60.
The gold price in the euro was set at 1,186.35 against yesterday’s 1,183.55.
Ahead of the opening of New York the gold price was trading at $1,333.10 and in the euro at 1,187.54. At the same time, the silver price was trading again at $19.88.
Silver Today -The silver price rose to $19.83 at New York’s close yesterday up from $19.23, Friday.

This post was published at GoldSeek on 22 September 2016.

Bond Math Class

Last week, I mentioned that retail investors have been seduced by a can’t-lose investing strategy that might stop working (and fail spectacularly) right at the worst possible time.
You might have heard that there were three dissents at the FOMC meeting yesterday – a rare occurrence indeed.
We’re getting closer to a genuine tightening of monetary policy – and with every passing day we’re also getting closer to the point where the ‘easy’ trade suddenly becomes hard. (For a counter-intuitive but ultimately more sensible trade, check out the current issue of Street Freak.)
Hold that thought…
Bond Math Class
I’ve taken bond math classes out the wazoo. The best of them was in the summer of 2001 at Lehman Brothers. Lehman Brothers wasn’t going to teach a bad bond math class, not at the firm that became synonymous with bond trading itself. I was ready to start whipping ‘em around. Pity I ended up in stocks.
Now, the tables have been turned, and I am the old, wizened professor, dropping some knowledge on the younger generation. I occasionally teach finance to MBA students, and there are a couple of chapters on bonds where the students have to get their calculators out.

This post was published at Mauldin Economics on SEPTEMBER 22, 2016.

JPM’s Head Quant Throws In The Bearish Towel; Sees Nothing But Smooth, Levitating Markets Ahead

The last time JPM’s head quant Marko Kolanovic warned about imminent market volatility was just two weeks ago, and was duly noted here in “JPM’s Head Quant Is Back With A Stark Warning: Volatility Is About To Surge; Here’s Why.” And, as has so often been the case, he was right: as he follows up in a victory lap note released moments ago, Kolanovic notes that “in our note on September 6th, we called for an increase in market volatility and deleverage of systematic strategies. A few days after, the volatility of US equities tripled and global equity markets were down between 2.5% and 5%. The pullback in US markets was smaller than overseas as S&P 500 price momentum held positive (CTAs didn’t go short the S&P 500) which we forecasted would be a stabilizing factor (in addition, there was a large idiosyncratic move up in Apple and related companies).”
That said, the selling was less than he expected: as Kolanovic notes, since “S&P 500 momentum held and short term volatility stayed below 20% (in part due to VIX investors rushing to sell around half of their long ETP exposure), the amount of equities sold was likely half of what was sold in August/September of last year.”
Another stabilizing factor was the low exposure of long-short equity hedge funds that did not have to sell (unlike last year). Another interesting development is that the liquidity of equity markets held up very well during the selloff. Equity market liquidity (as measured by futures market depth) was fairly high during July and August, and when deleveraging started on September 9th, liquidity dropped more gradually. The Figure below shows the relationship between market volume and market depth/liquidity for S&P 500 futures over the past year. One can see that during the most recent surge in volume (and selling) market depth was ~3 times higher than on 8/24/15.”

This post was published at Zero Hedge on Sep 22, 2016.

Reason for Bullion Bulls to Take Heart

I tend to regard any rally stirred up by Yellenblather with skepticism, and that was my initial reaction to the moderate rally in gold and silver futures on Wednesday. On examining their respective intraday charts at the end of the day, however, I found persuasive evidence that there is more to come – and not necessarily just a little bit of upside either. Comex Silver, for one, looks bound most immediately for a 20.350 target that lies about 40 cents above today’s settlement price. And if the futures blow past that number with ease, I’d infer that bulls have a shot at 22.460, or even 23.745 before the intermediate-term bullish cycle begun early in June is spent. Visit our 24/7 chat room and share timely ideas and real-time results with great traders from around the world. Click on the link for a free trial subscription.

This post was published at SilverSeek on September 21, 2016 –.

Gold Up 1.5%, Silver Surges 3% – Yellen Stays Ultra Loose At 0.25%

Gold was up 1.5% and silver surged 3.1% yesterday after Janet Yellen again failed to raise rates from record lows at 0.25%. The Fed maintained ultra loose monetary policies which are again creating stock and bond market bubbles in the U. S. and other countries.
***
Global stocks and commodities also rose on continuing relief that the Fed continues ZIRP and remains ultra loose along with the BoJ, BOE and ECB whose policies are even looser. The BoJ also maintained ultra loose monetary policies at negative 0.1 percent rate and said it would continue buying government bonds at the current pace for the time being.

This post was published at Gold Core on September 22, 2016.

Don’t Believe the Fed; the U.S. Consumer Is Far from Strong

Yesterday the Federal Open Market Committee (FOMC) of the Federal Reserve released its policy statement, which included its announcement to stand pat on interest rates at this meeting. The third sentence of this policy statement went like this: ‘Household spending has been growing strongly….’ To use the parlance of Wall Street, the Fed was putting lipstick on a pig.
The average American might read that statement as it bounced around the newswires and conflate ‘household spending’ with a strong consumer. Nothing could be further from the truth. Household spending data is actually capturing how Wall Street masterminds continue to fleece the 99 percent.
Just six days before the FOMC policy statement was issued, this is how USA Today reported on the strength of the consumer based on the Commerce Department’s release of retail sales data:
‘U. S. retail sales slumped in August as auto and gasoline purchases fell and a core reading was unexpectedly weak, raising questions about consumer spending growth in the current quarter.
‘Sales fell 0.3%, more than the 0.1% decline economists expected. A core measure – that excludes the volatile categories of autos, gasoline, building materials and food services – slipped 0.1%. Economists had forecast a 0.4% rise.’

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

Russia To Supply China With Up To 100 tonnes Of Gold Annually

Russia’s second largest bank, VTB Bank, announced a deal to supply Russia with 12-15 tonnes of gold in the next 12 months. The amount supplied will increase over time and eventually reach 80-100 tonnes annually: Reuters Link.
Perhaps the most interesting aspect of this will be to see if the World Gold Council acknowledges this gold as ‘Chinese imports.’ The WGC and other entities which purport to track global gold ‘consumption’ have been reporting declining demand for gold in China, based on declining imports from Hong Kong. Of course, these ‘official’ sources completely ignore the fact that China imports an unknown amount of gold through the ports of Beijing and Shanghai…move along, nothing to see there…
The unarguable scheme by western Central Banks to suppress the price of gold with paper gold is contingent on the ability to deliver actual physical gold into China and India. In this blog’s educated opinion, the supply of gold available to make this happen is running low: Central Bank gold stock plus investor custodial gold that has been hypothecated.

This post was published at Investment Research Dynamics on September 22, 2016.

NAR Stumped As Existing Home Sales Slide Continues; Lack Of Household Income Growth Blamed

After last month’s unexpected, dramatic 3.4% drop, and 1.64% Y/Y decline – the first annual decline since November 2015 – the weakness in exiting home sales continued today, when the NAR reported that in July sales of existing homes dropped another -0.9% from a downward revised 5.38MM to 5.33MM, missing expectations of a rebound to 5.45 million.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 0.9 percent to a seasonally adjusted annual rate of 5.33 million in August from a downwardly revised 5.38 million in July. After last month’s decline, sales are at their second-lowest pace of 2016, but are still slightly higher (0.8 percent) than a year ago (5.29 million).
As the NAR reported, existing-home sales eased up in August for the second consecutive month despite mortgage rates near record lows as higher home prices and not enough inventory for sale kept some would-be buyers at bay. Only the Northeast region saw a monthly increase in closings in August, where inventory is currently more adequate. Some of the key details from the report: 4.6 months supply in Aug. vs. 4.7 in July. Inventory fell 3.3% to 2.04m homes. First time buyers comprised 31% of total sales; all cash were 22%; investors represented 13% while distressed sales were 5% of total sales

This post was published at Zero Hedge on Sep 22, 2016.

JPM Agrees With Trump That Fed Is Political, Accuses Yellen Of “Distorting Asset Markets, Blowing Bubbles”

While Janet Yellen vocally denied Donald Trump’s allegation that the Fed is political, and is “keeping interest rates intentionally low for the Obama administration”, an unexpected supporter for Trump “conspiracy theory” emerged overnight when JPM’s chief global strategist, David Kelly slammed the Fed, telling CNBC that the Fed, by not hiking rates again, is “doing long-term harm to the economy by not hiking interest rates.” The perplexed strategist added that “the economy has hit every target they have set. And we’ve got an inappropriate level of interest rates which is distorting asset markets, blowing bubbles and will eventually end up in inflation. They’re imposing long-term harm for no short-term good here.”
Well, maybe not quite: for a quick glimpse of the “short-term good” just look at any stock ticker today: everything is green, as the VIXplosion continues to drag volatility to an 11-handle, unleashing a risk-parity/CTA buying spree as noted earlier.

This post was published at Zero Hedge on Sep 22, 2016.

Medical Care Costs Are Skyrocketing!

We try our best to stay away from sensationalism here at Financial Sense but this chart speaks for itself. Medical care costs have skyrocketed this year and are now at the highest annual growth rates since 2007, just prior to the last recession.
If you look at this data going back to 1948, which you can do so here, you’ll see that 9 of the 11 prior recessions were associated with a sustained increase in medical care costs. For that reason, we are going to keep a close eye on our recession indicator going forward since, with economic growth already weak, this could very well be the straw that breaks the camel’s back.

This post was published at FinancialSense on 09/20/2016.

Another day in government’s office

Today as I do every day I went to my website’s many RSS feeds and read reports and commentaries that have become painfully familiar. Here are some items I found:
David Stockman’s hard-hitting article that urges Donald Trump to slam the Fed in the upcoming presidential debate for its crucifixion of what Stockman calls Flyover America. ‘The Fed’s core policies of 2% inflation and 0% interest rates . . . are based on the specious academic theory that financial gambling fuels economic growth and that all economic classes prosper from inflation and march in lockstep together as prices and wages ascend on the Fed’s appointed path.’ Stockman adds: ‘Putting the wood to the Fed is the right answer for what ails the American economy. Monday night would be a good place for the Donald to line-up with the 90% who have been left behind.’
Unfortunately, putting the wood to the Fed doesn’t mean eliminating it, in Stockman’s view.

This post was published at GoldSeek on Thursday, 22 September 2016.

Trump and Clinton Are ‘Positive For Gold’ – $1,900/oz by End of Year

Trump or Clinton are ‘positive for gold’ and prices could rise to between $1,700 and $1,900 per ounce by year end according to Canadian gold mining magnate Rob McEwen.
Gold ‘is a currency that doesn’t have a liability attached to it,’ McEwen said Tuesday in an interview with Bloomberg at a gold conference in Colorado Springs.
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‘A store of value that has gone for millennia. And the big argument against gold used to be it costs you money to store it. Right now, it’s costing you money to store your cash.’
As reported by Bloomberg:
Robert McEwen, one of the gold’s industry’s most unabashed bulls, is predicting prices could surge as much as 44 percent by the end of the year as confidence in the economy buckles.
The metal could trade in a range of $1,700 an ounce to $1,900 by the end of 2016 as uncertainty builds around the stability of global currencies and sovereign debt, said McEwen, who’s so enamored by bullion that he’s founded two producers: McEwen Mining Inc. and Goldcorp Inc. Record-low global interest rates will cause a ‘huge amount of anxiety’ for investors, who will turn to gold as a store of value and an alternative asset, he said.
Bullion’s 2016 rally comes after three straight annual losses. Prices have slumped 31 percent since reaching an all-time high of $1,923.70 in 2011.

This post was published at Gold Core on September 21, 2016.

Living In A Van Down By The River – Time To Face The True State Of The Middle Class In America

Do you remember the old Saturday Night Live sketches in which comedian Chris Farley portrayed a motivational speaker that lived in a van down by the river? Unfortunately, this is becoming a reality for way too many Americans. As the middle class has shrunk and the cost of living has increased, a lot of people have decided to quite literally ‘live on the road’. Whether it is a car, a truck, a van, a bus or an RV, an increasing number of Americans are using their vehicles as their homes. Just recently, someone that I know took a trip down the west coast of the United States and stayed at a number of campgrounds along the way. What she discovered was that a lot of people were actually living at these campgrounds. Of course there are some that actually prefer that lifestyle, but many others are doing it out of necessity.
Earlier this week, Circa.com posted a story about ‘the van life’. One of the individuals that they featured was a recent graduate of the University of Southern California named Stephen Hutchins. Without much of an income at the moment, he decided that the best way to cut expenses was to live in his van…
‘The main expenses are insurance for the van, which is like $60 a month,’ said Hutchins. ‘Then, I have a storage unit for like $60.’
That puts his monthly rent at $120. The van cost him just $125 at an auction.

This post was published at The Economic Collapse Blog on September 21st, 2016.

Lemmings only function in the stock market is to serve as Cannon Fodder

A genius can’t be forced; nor can you make an ape an alderman.
Thomas Somerville
From the Tulip bubble to the financial meltdown of 2008, the theme has been the same. The masses never learn, they always cry foul on the way down but gurgle with joy on the way up. In other words, when they are making money, they are okay with the risk, but when they start to lose, they scream bloody murder.
Nature created the masses to serve as cannon fodder, and no matter what is done, nothing will change this. History is replete with examples of individuals who tried to help the masses; their only reward, in general, was the gallows or the bullet, depending on the era. It comes down to perception; you cannot force someone to latch on to yours and vice versa. This is why the Fed spends such an inordinate amount of time to alter the masses perception, and it was done gradually over a period of many decades. Try talking to a regular person about the dangers of Fiat and how the Fed is ruling the world; most will roll their eyes at you and treat you like are a madman. Sadly, the Gold Bugs do not understand this concept; there is no such thing as absolute truth because any truth or lie is based on the angle of observance and depending on the angle, thetruth could appear to be a lie to another. The top players have done a fantastic Job of conning the masses, and it will take an impressive amount of pain and misery to change their outlook. Thus without a doubt, we can state that today’s mountain of debt which appears insane might one day seem to be sane in comparison ten years from today.

This post was published at GoldSeek on 22 September 2016.

OECD Warns Fed, BOJ, ECB of Asset Bubbles, ‘Risks to Financial Stability,’ Pinpoints US Stocks & Real Estate

But the Fed is steadfastly blind to bubbles & their consequences.
The Organization for Economic Co-operation and Development threw the Fed and the Bank of Japan – even as they had their meetings today – a curve ball.
We in the US woke up to a new central-bank term: ‘yield curve control.’ This is what the BoJ promised its rapt audience of hedge fund managers. Another Kuroda surprise. His negative-interest-rate surprise in February was just aping the ECB. But now he has come up with something for which no one had even coined a word.
The BoJ will target 0% yield for the 10-year Japanese Government Bond, which had been negative for months. So it’s trying to push up the 10-year yield a smidgen. Shorter maturities would still sport a negative yield. This would steepen the yield curve. In effect, the BoJ will control the yield curve. By the end of next year, it might own 50% of all JGBs. Why even pretend there’s still a bond market? Maybe it’s just for entertainment.
And the Fed once again refused to raise interest rates by almost nothing from next to nothing, after flip-flopping about it for nearly three years.
But now even the OECD is fretting about these scorched-earth policies that have been dogging the global economy, which just keeps getting worse.
The OECD estimates in its Interim Economic Outlook that for member nations as a whole, GDP-per-capita will grow only 1% in 2016, ‘which is half the average in the two decades preceding the crisis.’
Per-capita is what counts. It’s what people experience. It’s their slice of the economic pie. Population growth papers over a lot of ills for economists: for example, in the US, 14 million jobs were created since the Financial Crisis, which has been touted endlessly. But the US population grew by 15 million people. Now there are fewer jobs ‘per capita’ than there were at the depth of the Financial Crisis. That’s why per-capita matters.

This post was published at Wolf Street by Wolf Richter – September 21, 2016.

Fed’s National Activity Indicator Average In Contraction For 19th Month – Worst Non-Recessionary Streak In 49 Years

For 19 straight months, the smoothed average of the Chicago Fed’s National Activity Index has been in contraction. This is the longest period of contraction without a recession in the 49 year history of the indicator…
August’s CFNAI crashed to -0.55 (against expectations of 0.15)…

This post was published at Zero Hedge on Sep 22, 2016.