US Bank Stocks Slide After New Fed Tests Suggest Need For “Significant Increase In Capital”

Two weeks after European and Japanese banks threatened mutiny against new banking capital requirements set forth by the Basel Committee, Bloomberg reports that Wall Street would have to come up with billions of dollars in additional capital in a proposed revamp of the Fed’s stress tests. US bank stocks are sliding on the news, falling back to the reality of lower and flatter yield curves as well as systemic threats from Deutsche Bank.
The European banking system is in trouble. Despite stocks relatively sober reaction, Sub CDS are exploding higher…

This post was published at Zero Hedge on Sep 26, 2016.

This Silver To Gold Ratio is INSANE & UNSUSTAINABLE — Keith Neumeyer

The following video was published by on Sep 26, 2016
Keith Neumeyer, President and CEO of First Majestic Silver Corp and Chairman of First Mining Finance returns to SGT report to discuss the roller coaster ride for mining stocks in 2016 and where he think we are in the current correction. Always a straight shooter, Keith bemoans the current 70 to 1 silver to gold ratio asserting that it is no longer sustainable as miners like First Majestic are only yielding only 9 ounces of silver for every one ounce of physical gold they find, and that real world ratio is continuing to decline.

The “Nightmare Scenario” For The Bank Of Japan Is Starting To Come True

On Friday, when we summarized why “It May Be Over For The BOJ” we presented a variety of sellside opinions, all of which were unanimously pessimistic on the BOJ’s latest policy, we observed that the weakest link for the BOJ’s latest incernation of QE, aka QQE with Yield Curve Control, or QQEWYCC (which even rhymes) would be if the 10Y JGB resumed its drift lower into negative territory, coupled with a return to curve flattening, two adverse side effects of its own prior policy which the BOJ is now explicitly trying to undo due to their adverse impact on the local banking and pension sectors.
However, as we noted overnight, in a very ominous development, or what already dubbed the BOJ’s “nightmare scenario” – for both the credibility of the BOJ and the return of VaR shocks first in Japan and soon elsewhere – the 10Y JGB did indeed resume sliding into deeper negative territory, away from Kuroda’s 0% price target, resulting immediately an a resumption in curve flattenting.

This post was published at Zero Hedge on Sep 26, 2016.

Asian Metals Market Update: September-26-2016

This is really a big week for gold, silver and copper. The recent range trade in them should be breached and a new range formed. Gold will break free from the $1300-$1370 range. Silver will break free from the $1850-$2050 range. Crude oil will break free from the $42.50-$49.50 range. A bad trade and you just might not be capable to trade for the rest of the year. A good trade will imply a Diwali in the shradh period. Please do not curse luck if you did a bad trade. Patience, instincts and timing will be the key to trade not just this week but also for the rest of the year.
Previously one of my clients was a compulsive daily trader. If by the evening he/she did not get an opportunity to trade, then he/she would (in my view) end up with a bad stomach. Slowly I tried to convince them to do away with this compulsive mentality to trade and wait for the right time to trade. Over a period of time, he/she is very happy as profits are there, the constant niggling thought to recover previous day losses are not there and confidence to trade and invest has increased multiple times.

This post was published at GoldSeek on 26 September 2016.

Truth in Numbers

Fed Chair Janet Yellen recently said that the Federal Reserve is “generally pleased” with the US economy. She did so at the same time she was noting for listeners that the Fed’s median projection for the change in real GDP for both 2016 and the longer run had been lowered to 1.8% from 2.0%.
It was lip service at its finest; meanwhile, the updated projections were starkly modest when taking into account some large gains in median household income and household net worth recently reported by the US Census Bureau and the Federal Reserve.
If one took those gains at face value, one might think the US economy is booming. It isn’t, though, because consumers have been more reserved with their spending and because the Fed’s monetary policy, which rests on the wealth effect, isn’t a one-for-all policy.

This post was published at FinancialSense on 09/26/2016.

Saudi Arabia Bails Out Banking System After Interbank Rates Hit 2009 Highs

Amid what some might call self-inflicted economic collapse, Saudi Arablia has announced a $5.3 billion bailout of its banking system as interbank borrowing rates near the highest since Lehman. In what the supposedly central bank calls “supportive monetary policy…on behalf of government entities,” is easing liquidity constraints with 28-day repo agreements and is the second liquidty injection this year.
While Saudi default risk has fallen – as the entire world has been liquified in recent months – it remains worse than Mexico, Russia, and South Africa.
As Bloomberg reports, The Saudi Arabian Monetary Agency, as the central bank is known, is giving banks about 20 billion riyals ($5.3 billion) of time deposits ‘on behalf of government entities.’ It’s also introducing seven-day and 28-day repurchase agreements, as part of its ‘supportive monetary policy.’ It didn’t provide further details.

This post was published at Zero Hedge on Sep 26, 2016.

Deutsche Bank in Free Fall. Shares, CoCo Bonds Plunge. Merkel Gives Cold Shoulder on Bailout. Bank Denies Everything

When will she buckle?
Shares of Deutsche Bank got bashed 7.6% today, to 10.49 in Frankfurt, down 67% from April 2015, to the lowest level since they started trading on the Xetra exchange in 1992. They traded below that level in the early 1980s, but decades of inflation have whittled down the purchasing power so much that comparisons are meaningless.
Deutsche Bank’s 5-year default probability spiked to the highest level this year.
Its balance sheet, bloated with opaque risks, equals 58% of Germany’s GDP. It lost 6.8 billion last year. To hang on another day and to prop up Tier 1 capital, it has raised $20 billion in capital, in 2010 and 2014, by selling shares and diluted existing shareholders, and by issuing contingent convertible bonds.
These infamous ‘CoCos’ are designed to be ‘bailed in’ before taxpayers get to foot the bill. Thus, they’re a measure of investor fears about getting bailed in.

This post was published at Wolf Street on September 26, 2016.

BofA Fined $12.5 Million For Creating At Least 15 Mini “Flash Crashes”

One of our recurring activities over the past few years was, in collaboration with Nanex, to point out the countless mini-flash crashes that take place almost on a daily basis across the equity market. Although not as dramatic as the far more popular major flash crashes of May 2010 or August 2015, these recurring events merely served to underscore just how broken and fragment the market plagued by HFTs has become.
And while the HFT lobby was quick to point out that mini flash crashes do not really take place and it is all just a fabrication by the “anti-HFT crusaders”, moments ago the SEC validated our previous observations, when it announced that Merrill Lynch has agreed to pay a $12.5 million penalty for unleashing at least 15 mini flash crashes between 2012 and 2014, as a result of maintaining “ineffective trading controls that failed to prevent erroneous orders from being sent to the markets.”
An SEC investigation found that Merrill Lynch caused market disruptions on at least 15 occasions from late 2012 to mid-2014 and violated the Market Access Rule because its internal controls in place to prevent erroneous trading orders were set at levels so high that it rendered them ineffective. For example, Merrill Lynch applied a limit of 5 million shares per order for one stock that only traded around 79,000 shares per day. Other trading strategies had limits set as high as 25 million shares, which Merrill Lynch reduced to 50,000 shares after the SEC’s investigation began.

This post was published at Zero Hedge on Sep 26, 2016.

“My Order Book Is Abysmal” – Dallas Fed Contracts For 21st Straight Month

For the 21st month in a row, Dallas Fed’s manufacturing outlook remains stuck in contraction (-3.7 vs -2.5 exp). This is the longest streak outside of recession in the survey’s history as new orders cratered (one respondent noting “my order book is abysmal”) and inventories tumbling (not good for GDP).
Probably nothing…
The respondents had some very clear insight into the state of the ‘recovery’:
The labor pool we draw from is the same as construction home building. Since that segment is going strong, we have had to hand out more money to our senior employees in order to keep them.

This post was published at Zero Hedge on Sep 26, 2016.

Gold and Silver Market Morning: Sep-26-2016 — Gold and silver building strength!

Gold Today -New York closed at $1,337.90 Friday after the previous close of $1,337.10. London opened at $1,334.00.
– The $: was weaker at $1.1252: 1 from $1.1212: 1 Friday.
– The Dollar index was weaker at 95.32 from 95.41 Friday.
– The Yen was stronger at 100.44: $1 up from 100.84: $1 Friday against the dollar.
– The Yuan was slightly weaker at 6.6701: $1 from 6.6693: $1 Friday.
– The Pound Sterling was slightly weaker at $1.2933: 1 from Friday’s $1.2968: 1.
Yuan Gold Fix
New York, Shanghai were in line but London again tried to pull prices down, while exchange rates showed a slightly mixed picture with the dollar tending weaker.
The gold price in global gold markets is trying to weaken as the gold price appears to be gathering strength to attack overhead resistance once more.
LBMA price setting: The LBMA gold price setting was at $1,336.30against Friday’s $1,335.90.
The gold price in the euro was set at 1,187.61 against Friday’s 1,191.12.
Ahead of the opening of New York the gold price was trading at $1,337.00 and in the euro at 1,186.71. At the same time, the silver price was trading again at $19.50.

This post was published at GoldSeek on 26 September 2016.

ECB Board Member Admits Central Bank’s Monetary Policy Risks “Tearing Up Social Fabric”

Time to toss yet another “conspiracy theory” on the composite heap of “theories that became fact.” A recurring theme we have pounded the table on over the past nearly 8 years is that central bank policy has been the primary driver leading to not only a record wealth and income divide, but to such manifestations of populist (and nationalist) fury as Brexit, the gradual collapse of the Eurozone and, of course, Trump.
Moments ago, ECB board member Benoit Coeure, speaking in Rome, said that “low forever” rates would risk tearing up the social fabric. Translated: if extended indefinitely, the ECB’s monetary policy risks the collapse of not only the Eurozone, but also could lead to social unrest, violence and even civil war.
Quoted by Bloomberg, Coeure said that ‘moving from interest rates being ‘low for long’ to being ‘low forever’ would severely limit the room for maneuver for conventional monetary policy tools, but even more worryingly, it would threaten the contract between generations as well as risk tearing up our social fabric.’ Which is a more polite phrasing of what we have said all along: that it is central banks themselves, and their idiotic policies that have led the world to the current unstable state, when mass shootings and/or terrorist activity has become an almost daily event.

This post was published at Zero Hedge on Sep 26, 2016.

Trump Takes The Lead In Latest Bloomberg Poll As All Eyes Turn To Tonight’s Debate

Tonight’s debate is anticipated to draw an audience of up to 100mm as viewers are “expecting the unexpected”. Anticipation for some sort of controversy at tonight’s debate grew over the weekend after chatter arose on twitter that Bill’s former mistress, Gennifer Flowers, may attend the debate as Trump’s guest. Viewers will also be focused on whether or not the debate moderator, Lester Holt, steps in to “fact check” Trump, a controversial policy that landed CNN’s host, Candy Crowley, in hot water back in 2012 after she “fact checked” Mitt Romney even though her “facts” turned out to be inaccurate.
Meanwhile, the New York Times endorsed Hillary for President (shocking, we know) by offering up a scathing review of Trump called “Why Donald Trump Should Not Be President” which, among other things, describes Trump as a “man who dwells in bigotry, bluster and false promises.” Of course, the NYT attack piece on Trump called on all the typical democrat narratives against republicans noting that Trump’s “campaign marked by bursts of false and outrageous allegations, personal insults, xenophobic nationalism, unapologetic sexism and positions that shift according to his audience and his whims.” Of course, the Times also chose to hammer Trump on his “brazen refusal to disclose his tax returns” and his “questionable” ties to Russia. So, basically the same old stuff.
We guess the NYT has chosen to simply ignore the myriad of scandals, sorry plumes of smoke, surrounding their chosen candidate.
In any event, here is where things stand in the latest polls at we head into tonight’s debate.
The latest Bloomberg poll, out today, reveals a 2-point lead for Trump in a 4-way race.

This post was published at Zero Hedge on Sep 26, 2016.

Citi Slams “Increasingly Bizarre” Presidential Race As Morgan Stanley Unveils Trump “Contingency Plans”

Confirming that even Wall Street’s forecasts are as volatile as general election polling, over the weekend Citi hiked their odds of a Trump presidency from 35% to 40% (having previously lowered it in the same interval), noting that ‘polls have started to tighten ahead of the U. S. presidential election, and Citi has raised the probability of a Trump victory.” Nonetheless, quoted by Bloomberg, Citi said that its “base case is for a Clinton victory and mostly continuity in policies, which would leave U. S. and global growth expectations relatively unchanged,’ while describing the U. S. contest as ‘increasingly bizarre.’
‘But a Trump victory is a wild card and Citi expects this, among lingering uncertainties from Brexit and elsewhere, may cap the prospects for global growth to pick up in the remainder of the year,’ it said.
In terms of what assets Citi believes will be impacted, the banks says that it “expects a Trump win would bring out higher volatility in gold and forex, which in turn should lead to higher volumes in other precious metals.’ The reason why gold may be in for a bumpy ride in the final quarter is that in case Trump’s odds rise even more, investors will be preparing for the possibility of higher U. S. interest rates. Under the bank’s base case it may be at $1,320 in the final quarter, or $1,425 under the bull case, which included the possibility of a Trump win.
Elsehwhere, in a report issued this morning by Morgan Stanley’s Michael Zezas, the bank said that “improved odds of a Trump win raise risks to our ‘policy incrementalism’ thesis. If Clinton’s lead remains slim, or worsens, markets may start reflecting Trump’s potential early policy path: tax reform & trade protectionism. We ID vol hedges across assets and strategic considerations for US rates.”

This post was published at Zero Hedge on Sep 26, 2016.

When It Comes to Wall Street Money, Trump Is No Purer Than Clinton

Donald Trump has made a big deal about Hillary Clinton being beholden to Wall Street. That’s true. Wall Street’s mega banks and hedge funds have been major donors to Clinton’s campaign committees after showering her and Bill Clinton with millions of dollars for speeches. But Donald Trump is just as beholden to Wall Street’s mega banks because they are financing his business empire, doing so frequently behind an opaque curtain.
On August 21, the New York Times ran a front-page article by Susanne Craig that pegged Trump’s business debt at $650 million. Three days later, Fortune’s Shawn Tully took a closer look and pegged Trump’s debt at $1.11 billion.
According to Trump’s financial disclosure form updated in May of this year, hundreds of millions of dollars of Trump’s business debt will ‘mature’ over the next seven years. But we don’t actually know what ‘mature’ really means. Are these adjustable rate loans and the interest rate will simply reset on the maturity date? Are these interest-only loans with balloon principal payments at maturity? Are the loans subject to rollover based on a positive reappraisal of the value of the underlying collateral of the commercial real estate?
On September 19 Bloomberg News reported that banks are scaling back lending for commercial real estate ‘as slowing global economic growth, uncertainty over interest-rates increases and pockets of overbuilding spark concern that commercial real estate prices are due for a fall after almost doubling in six years.’
Trump has said that his adult children will run his business enterprises should be become president. But Trump will be in a position, just as a President Hillary Clinton would, to grant Wall Street mega banks their wish list for Chair of the Federal Reserve, Treasury Secretary, Securities and Exchange Commission Chair and appointees to head other Federal bank regulators. That certainly adds some leverage to the art of the deal.

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

Precious metals update

Not much has changed in the precious metals markets in spite of all the hoopla associated with the Bank of Japan meeting last week and the FOMC.
Both metals are trapped in sideways trading range patterns.
As you can see from both charts, gold and silver had nice up-weeks but neither one has done anything conclusively.
The grinding consolidation patterns that have been in place since July continue.
Until we get a clear breakout, in either direction, they remain short-term oriented markets.

This post was published at Trader Dan on September 24, 2016.

Turkey Lashes Out At Moody’s After Downgrade To “Junk” Sends Turkish Assets Plunging

Late on Friday, rating agency Moody’s cut Turkey’s sovereign credit rating to Ba1 or “junk” from Baa3, citing worries about the rule of law after an attempted coup and risks from a slowing economy, in a move that could deter billions of dollars of investment. “The drivers of the downgrade are … the increase in the risks related to the country’s sizeable external funding requirements (and) the weakening in previously supportive credit fundamentals, particularly growth and institutional strength,” Moody’s said in an e-mailed statement. “The government’s response to the unsuccessful coup attempt raises further concerns regarding the predictability and effectiveness of government policy and the rule of law.”
“The large-scale suspensions in the civil service raise doubts over the capacity of Turkey’s policy-making institutions to make meaningful further progress in both legislating and implementing the reform program,” Moody’s said.
Moody’s did however keep its rating outlook “stable,” saying Turkey’s flexible $720 billion economy and strong fiscal track record offset the balance-of-payments pressures it faces. As Reuters notes, Turkey depends on investment flows to fund its current account deficit – one of the biggest in the G20 – and service its foreign debt. Ratings downgrades could force it to pay more to borrow money in international markets.

This post was published at Zero Hedge on Sep 26, 2016.

Banner Year For Covered Call Trading

Covered Call trading is often one of the first types of trading that new options traders encounter, and for good reason. Covered Calls in most instances carry no more risk of loss than outright stock ownership; thus anyone who has traded stocks can usually handle these options contracts without taking on any more risk than they otherwise would in their stock trades.
But, Covered Call options, just as stock ownership, are not without risk. Covered Call sellers can and do lose considerable amounts of capital at times, particularly when stock prices decline. In addition, the seller of a Covered Call gives up all or part of the profits on the selected stock, and thus can lose out on tremendous gains when stocks rally.
The quandary for the Covered Call trader is that it involves considerable risk – nearly the same as buying shares of stock – but limits the possibility of any immense reward. Certainly the trader receives compensation for this in the form of an option premium; but that premium can either be too small to offset the risk of owning the stock (if the stock price falls sharply) or too small to offset the reward that otherwise would have been obtained (if the stock rallies).
That makes Covered Call trading ideal only in a market in which stock prices move sideways. The seller of the Covered Call in a sideways market neither suffers losses from steep declines in stock prices, nor gives up what might have been potential gains from price increases. Though there have been up days and down days, stock prices have been going mostly sideways for quite some time now. That means 2016 has been a banner year for Covered Call trading.

This post was published at ZenTrader on September 26, 2016.

Pushing On A String

Interest rates are zero (ZIRP) now, at least for some people – right? If you are rich and don’t need money, they are zero. And if you have money in the bank they are also zero, and will likely be negative (NIRP) if trends in Europe are any indication, as central authorities continue attempting to force money into the markets / economy. With these policies, you would think the economy would be doing better, as who in their right mind would pay to keep money on deposit with risky banks, at least if one understand that’s what you are doing. Unfortunately however, most people actually don’t understand this, and literally don’t know what else to do with their money that’s not perceived as ‘risky’, so the insanity intensifies.
Thing is, in spite of all the money printing required to get interest rates down to these levels (financial repression), and the money coming out of the banking system that’s going into the asset bubbles, it’s no longer enough to keep them inflated, which is especially true in real estate at present. That’s right, America, like Japan for all these years now, has reached the point of perpetual decrepitude (because of demographics) despite conventional money printing measures currently being applied (Abenomics), better known to some as ‘pushing on a string’. US Housing Price Index Rises 0.2% in June; Slowdown Evidence Accumulates; Existing-Home Sales Lose Steam in July; and Housing Markets in Hamptons, Aspen, and Miami Are All Crashing are just a few of the recent headlines.

This post was published at GoldSeek on Monday, 26 September 2016.

BoJ, FOMC and Where to Now?

The Bank of Japan gave us a glimpse as to just how far down the rabbit hole we may have to follow global policy makers as we try to make sense of ever more complex and shall we say, innovative’tools’ being used in the effort to engineer individual economies and asset markets within the global financial system. BoJ announced it would conduct ‘JGB purchase operations’ in order to ‘prevent the yield curve from deviating substantially from the current levels’.
The market initially interpreted this to mean BoJ stood in support of a rising yield curve, which would for example, help the banks (ref. MTU and SMFG, which exploded higher off of the support levels we had projected), but by the end of the week the Japanese Yield Curve had eased substantially and there seemed to be confusion about what the policy’s intent, or would-be effects, actually were. I wonder if the BoJ even fully knows what it is doing now. Lots of moving parts in a complex system.
As for the FOMC, it was non-business as usual. For all the pomp and bluster of the August-September Jawbone blitzkrieg we’ve been subjected to, the damn committee simply rolled over again, admonishing through hints that they really, really mean it when they imply a rate hike is still coming in 2016. But for now and to the surprise of very few, they did what they have done for the last 8 years; obfuscate and delay.
This time we even saw renowned dove Eric Rosengren rightly (in my opinion) shifting to the hawk side of the table as he observes a landscape of cranes to nowhere in Boston and extrapolates… ‘hmmm, I think we are blowing an asset bubble’. Yet still, the committee chaired by Janet Yellen – she of the hawk-tinged Jackson Hole Jawbone (with handy QE ‘tools’ in her back pocket) went on to vote NO HIKE despite elevating CPI and soaring real estate, healthcare and services costs. Also, let’s not forget the ‘near all-time highs’ stock market, which unsurprisingly got an across the board price surge in response.
Where to now? Speaking as a lowly participant, I gave my stance in Friday’s in-day market update (profit retention). As you will see in this week’s report, weekly US stock market charts remain just fine, as we have noted for months now. But the daily charts of NDX and SPX used in the update gave some parameters to shorter-term correction potentials. What’s more, the global macro is a confusing mess. Japan took confusion to a new level last week, but the US is also a Wonderland of its own, post-2008.

This post was published at GoldSeek on 26 September 2016.