It’s January 2013, With a Twist

The title was not meant as a play on words in reference to Operation Twist, but now that I think about it, maybe it should be. The Post-Twist financial world is far different than it was before the genius that is Ben Bernanke’s ‘bigger than yours or mine’ brain concocted a maniacal plan that would ‘sanitize inflation’ signals from the bond market and break the then highly elevated yield curve.*
So, why is today like early 2013 and why is there a twist to that view? Because two indicators have come together to point to economic stability (at least) in the US, with the twist being that other indicators are pointing to a potential unchaining of inflation this time, unlike the 2013 time frame, which was in the grips of global deflation (and Goldilocks in the US).
So gold bugs, don’t get too concerned just yet. The sector has been overdue for a correction and that is what it has been getting. Speaking of sanitizing things, over bullish gold sector sentiment has needed a good clean out. The 2013 signal immediately preceded the worst of the precious metals bear market, but the 2016 signal need not for reasons explained later in the article.
However, gung ho bugs should have a plan to moderate or alter their views on gold stocks because they are likely to be nothing special, fundamentally, in what unfolds going forward. In other words, you should tune out gold obsessives who want you to be enthralled with this sector above all others (or modify the types of precious metals stocks you invest in, which we often discuss in NFTRH).

This post was published at GoldSeek on 2 October 2016.

Meanwhile, Saudi Stocks Crash Near 7 Year Lows

Despite the Deutsche-driven bounce in Western markets on Friday, the ‘panic in The Kingdom’ that we highlighted earlier in the week is accelerating fast. Following demands from officials for banks to reschedule loans to clients affected by last week’s decision to cut salaries and bonuses for state employees, Middle-East bank stocks are collapsing and Saudi’s Tadawul Index is back near its 2009 lows…
The weakness – despite crude strength – was driven by Saudi Arabia’s central bank decision to direct local lenders to reschedule the consumer loans of clients affected by last week’s decision to scrap the bonuses and allowances of many state employees. As Bloomberg reports,

This post was published at Zero Hedge on Oct 2, 2016.

On Trump and Taxes

Oh my, the breathless NYT reports, after aiding and abetting breaking the law by releasing part of a NY state tax return that was stolen (if it’s a true copy) from Trump.
The return showed a roughly $900 million net loss one year.
This, the Times reports, means that Trump may not have paid any federal (or state) taxes for many years.
To which I say: So what?
Let me remind you that the way you generate a net operating loss (NOL) is by losing money. In this case (if the return is factual) Trump lost a lot of money. The tax code allows you to reduce your tax liability when you lose money until your operating income reaches zero (and I remind you, the last 10 to 30 grand of it has already reached a zero payment liability, so you in fact “throw away” that amount worth of tax “benefit” right up front) but you cannot get a refund on previous taxes paid as you accumulated that capital when you take a loss. This is similar but not identical to capital loss treatment.
What happens with a capital loss is that the loss is rolled forward and you may take up to $3,000 a year against future income until it is exhausted, and you may also offset it dollar-for-dollar against future profits (capital gains.) A NOL also can used to “look back” for up to 3 years; which way you wish to go with that will depend on both the tax rates involved and your expected future plans (if the business is shut down then the choice is obvious, but if not it’s quite a bit more complex.)
There’s nothing wrong with this. You lost actual money to generate the NOL in the first place.

This post was published at Market-Ticker on 2016-10-02.

Restaurant Industry, Leading Indicator of US Economy Sours, Bankruptcies Pile up

‘Very challenging’ sales trends.
On Friday, September 30, Restaurants Acquisitions, the operator of Black-eyed Pea and Dixie House restaurant chains, converted its Chapter 11 filing to Chapter 7 liquidation. The bankruptcy court order noted the company had shuttered its restaurants and management had resigned.
The day before, Cosi Inc., a fast-casual chain with 1,100 employees filed for bankruptcy. It closed 29 of its 74 company-owned restaurants and laid off 450 people. The 31 independently owned franchise operations continue operating.
Also last week, Logan’s Roadhouse, a casual steakhouse with over 200 locations, closed more than 10 restaurants, on top of the locations it had already closed in August when it filed for Chapter 11 bankruptcy.
Eight restaurant companies representing 12 chains have filed for bankruptcy since December: Restaurants Acquisitions, Cosi, Logan’s Roadhouse, Fox & Hound, Champps, Bailey’s, Old Country Buffet, HomeTown Buffet, Ryan’s, Johnny Carino’s, Quaker Steak & Lube, and Zio’s Italian Kitchen.
Restaurants are precarious creatures. They lease costly space and have to invest in equipment and furnishings. It’s a competitive environment, with high expenses and little pricing power. To expand, they load up on debts. Some, like Cosi, always lose money. Customers are finicky and fickle. When new competitors come along, or when the economy tightens, customers thin out and creditors begin to fret and turn off the money spigot.

This post was published at Wolf Street on October 2, 2016.

Do you believe in housing market cycles? Some analysts do and many markets are hitting an exuberant apex.

The economy and stock market definitely go in cycles. Real estate was largely immune to this up until the late 1990s when creative financing was introduced into this largely boring sector. Aside from pocket bubbles and localized frenzies, real estate was a fairly drab and reliable asset class. That of course has dramatically changed. People forget about cycles and I am consistently reminded of Black Swan events. Over 7,000,000 people lost their homes to foreclosures over the past decade. 1,000,000 of these were in California yet somehow, the nonsensical drumbeat that buying a home is always a good deal is being echoed by house humpers. Back in the last cycle there were investors from Nevada and Arizona and they were simply adamant that no bubble was possible. ‘These places rent out and cover the loan!’ Until local economies got hit. Or they were able to flip in a short period and make a good amount of money. Until prices went down. Some seem to think banking is fantastic again and fail to look at what just happened with Wells Fargo. Yeah, everything is Kosher. That time was different. Yet this time, it is a stable market even when magnificent crap shacks in the Bay Area are going for way above one million dollars. Cycles in real estate are now a thing thanks to the massive debt fueling this machine.
The housing cycle based on various markets
Someone sent over a really interesting chart in terms of housing markets and what stage they were in based on market cycles. I like to think of real estate as a massive cruise ship. To turn a ship from its current course takes a lot of time. And also, like a cruise ship, people get lazy and simply follow the herd and eat themselves into a coma of nonsensical information.
At this point, it is safe to say that the previous bubble is a long gone memory for most. All those ‘losers’ that lost their homes simply did not have the winning formula. And here is the thing, say you bought a home for $600,000 and it is now worth $800,000. You only get that money when you close escrow and tap the money out.

This post was published at Doctor Housing Bubble on October 2nd, 2016.

What Deutsche Bank Thinks Of The Mess At… Deutsche Bank

Every Friday after the close, we eagerly look forward to the weekly post-mortem summary by one of our favorite credit analysts, Deutsche Bank’s Dominic Konstam who better than most on Wall Street, cuts through the noise. However, things get awkward when the primary “signal” in any given week is emitted by his employer, Deutsche Bank: how does a strategist discuss global financial markets and events when the biggest variable is the source of your own paycheck: just what does one say without sounding conflicted or hypocritical?
In Konstam’s case, the answer to “how do you describe global markets in a few paragraphs when your employer is the primary source of market volatility” is the following
Well we could talk about the current European financial bank stress.
There are some very obvious issues, many not new and it is clear that there is a very bleak potential outcome that would warrant much lower market rates and a significant decline in risk assets.
Equally though there are many alternative scenarios that involve some combination of moral suasion, policy intervention and regulatory ‘relief’ that would avoid a major risk off event and allow markets to focus on the fundamentals of growth and current central bank monetary policies.

This post was published at Zero Hedge on Oct 2, 2016.

Some Deutsche Bank Clients Unable To Access Cash Due To “IT Outage”

Here come novations
— zerohedge (@zerohedge) September 29, 2016

While it now seems that Friday’s rumor of a substantially reduced Deutsche Bank settlement with the DOJ, which sent the stock price soaring from all time lows, was false following a FAZ report that CEO John Cryan has not yet begun the renegotiation process, and in the “next few days” is set to fly to the US to discuss the proposed RMBS misselling settlement with the US Attorney General, Germany’s largest lender continues to be impacted by the public’s declining confidence, exacerbated over the weekend by a disturbing “IT glitch.”
For one, it remains unclear if Friday’s report halted, or reversed, the outflow of cash from DB’s prime brokerage clients, which as Bloomberg first reported last week was a major catalyst for the swoon in the stock price. However, as UniCredit’s chief economist Erik Nielsen notes in a Sunday notes, one thing is certain: “so long as a fine of this order of magnitude ($14 billion) is an even remote possibility, markets worry.”
There is also the threat of the bank’s massive derivative book, which despite attempts of many pundits to gloss over, over the weekend none other than JPM admitted that that is what the markets will likely be focusing on for the foreseeable future: “In our opinion it is not so much funding issues but rather derivatives exposures that more likely to trouble markets going forward if Deutsche Bank concerns continue. This is especially true if these concerns propagate into a confidence crisis inducing more rapid unwinding of derivative contracts.”
Indeed, as we first hinted last Thursday…

This post was published at Zero Hedge on Oct 2, 2016.

JPMorgan Joins Yellen and Summers In Hinting The Fed May Buy Stocks Next

During her latest testimony in Congress, when asked by rep Mick Mulvaney if the Fed has considered buying equities, Janet Yellen had a cryptic, yet open to interpretation answer: “the Federal Reserve is not permitted to purchase equities. We can only purchase U. S. treasuries and agency securities. I did mention in a speech in Jackson Hole, though, where I discussed longer term issues and difficulties we could have in providing adequate monetary policy. Accommodation may be somewhere in the future, down the line that this is the kind of thing that Congress might consider.”
Then, the very next day, during a video conference Q&A, Yellen once again unexpectedly latched on to the topic of the Fed buying stocks, saying that “the idea of expanding into areas like equities might be ‘good thing to think about,’ noting that (for now) The Fed is more restricted in which assets it can purchase than other central banks. If we found, I think as other countries did, that they could reach the limits in terms of purchasing safe assets like longer-term government bonds, it could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions.”
Assets such as equities.
Then, jumping on to the idea of nationalizing the stock market, none other than the world’s most farcical former econopundit, Larry Summers, who has plunged to such recent depths he has to retweet himself on Twitter to get page views for his blog, “floated the idea of continuous purchases of stocks as a potential ingredient in a recipe for the developed world to strengthen economies struggling with subdued growth and inflation.”

This post was published at Zero Hedge on Oct 2, 2016.

Is the U.S. Dollar Set to Soar?

Which blocs/nations are most likely to face banking/liquidity crises in the next year?
Hating the U. S. dollar offers the same rewards as hating a dominant sports team: it feels righteous to root for the underdogs, but it’s generally unwise to let that enthusiasm become the basis of one’s bets.
Personally, I favor the emergence of non-state reserve currencies, for example, blockchain crypto-currencies or precious-metal-backed private currencies–currencies which can’t be devalued by self-serving central banks or the private elites that control them.
But if we set aside our personal preferences and look at fundamentals and charts, odds seem to favor the U. S. dollar (USD) making a major move higher in the next few months. Let’s start with a national index of finance-power which combines GDP, military spending, banking, foreign direct investment (FDI) and foreign exchange:

This post was published at Charles Hugh Smith on OCTOBER 02, 2016.

Clinton Campaign Admits Hillary Used Same Tax Avoidance “Scheme” As Trump

Well this is a little awkward. With the leaked 1995 Trump tax returns ‘scandal’ focused on the billionaire’s yuuge “net operating loss” and how it might have ‘legally’ enabled him to pay no taxes for years, we now discover none other than Hillary Rodham Clinton utilized a $700,000 “loss” to avoid paying some taxes in 2015.
The Clinton Campaign was quick to jump on the leaked Trump tax filing with Robby Mook tweeting…

This post was published at Zero Hedge on Oct 2, 2016.

PERFECT STORM: PEAK GOLD & PEAK GLOBAL DEBT — Bryan Slusarchuk

The following video was published by SGTreport.com on Oct 2, 2016
As the brutal correction in the mining stocks continues, we welcome Bryan Slusarchuk the President of K92 Mining back to provide an update and to discuss the concept of ‘peak gold’ which some analysts predict will occur in 2019 as global demand for physical gold continues to outstrip supply. In fact, Slusarchuk notes that 90 million ounces of NEW gold must be discovered each year just to keep pace with demand — however only 10 – 15 millions ounces of physical are being discovered annually. And as global debt continues to compound exponentially, we are in the perfect storm for gold and gold miners.

Trump International Hotel Vandalized By Black Lives Matter Activists, Media Absent

Sssh. Don’t tell anyone but Black Lives Matter’s protesters just vandalized the Trump International Hotel in Washington D. C.
As IJR reports, the words “No Justice” and the word “Peace,” with a red line through it, flank the left side of what appears to be the front entrance, the words “Black Lives Matter -Van” are sprayed to the right.
Earlier today, security officers were seen putting wooden boards up to block the vandalism:

This post was published at Zero Hedge on Oct 2, 2016.

Is America Becoming A Vast Debtor’s Prison?

PM
Since the United States was founded, citizenship has represented a safe haven from oppressive regimes around the world. By preserving the principles of small government and free markets, those who were willing to work hard found success, and America became a magnet for innovation. But as the U. S. continues to erode personal and economic freedom, more people than ever before are handing over their U. S. passports to seek better opportunities abroad.
The staggering amount of debt held by the American empire ensures the public will be working it off for generations to come. The government has already begun its campaign to make it more difficult to leave the country, and it has also begun to crack down on the finances of the eight million Americans living abroad. Regardless of whether you’re a millionaire with multiple foreign bank accounts or a recent college graduate with a boatload of debt, the status of being a United States citizen brings with it a burden that will only grow heavier over time.
Tax Refugees
Since 2008, the number of individuals giving up their citizenship has increased by almost 560%, setting new records each of the past three years. Some of these expats are motivated by the extra tax load paid when working abroad, while others are trying to avoid student loan debt. Others have just had enough of the encroaching police state.

This post was published at Zero Hedge on Oct 2, 2016.

Monthly Charts Argue for Lower Prices in Precious Metals Complex

The trading month doesn’t always end on a Friday but when it does we like to take a look at the monthly charts. Generally, I prefer daily and weekly charts because they have more data points. However, monthly charts carry more significance than weekly charts which carry more significance than daily charts. You get the point. One reason and a good reason we expect the current correction to continue is the sector monthly charts.
The chart below plots the monthly candle charts of GDX and GDXJ. Earlier this year the miners exploded above their 20-month moving averages and into a new bull market. They were trading at three year highs before a bearish reversal in August that reversed the entire gains from July. September saw a recovery but failure to hold most of those gains. This tells us that selling pressure remains present and miners will likely see lower prices in October.

This post was published at GoldSeek on 2 October 2016.

A strange sentiment conflict

As the name suggests, the weekly American Association of Individual Investors (AAII) sentiment survey is an attempt to measure the sentiment of individual investors. The AAII members who respond to the survey indicate whether they are bullish, neutral or bearish with regard to the US stock market’s performance over the coming 6 months. The AAII then publishes the results as percentages (the percentages that are bullish, neutral and bearish). The Consensus-inc. survey is a little different in that a) it is based on the published views of brokerage analysts and independent advisory services and b) the result is a single number indicating the bullish percentage. However, the results of both surveys should be contrary indicators because in both cases the surveyed population comes under the broad category affectionately known as ‘dumb money’.
In other words, in both cases it would be normal for high bullish percentages to occur near market tops (when the next big move is to the downside) and for low bullish percentages to occur near market bottoms (when the next big move is to the upside). That’s why the current situation is strange.

This post was published at GoldSeek on 2 October 2016.

From Bank of England to LBMA: The ‘independent’ Chair of the LBMA Board

In a recent article titled ‘Blood Brothers: The Bank of England and the London Bullion Market Association (LBMA)’, I charted the extremely close historical and contemporary relationship between the LBMA and the Bank of England. This article highlighted that:
the LBMA was established in 1987 by the Bank of England the original bullion bank founding members and steering committee members of the LBMA represented 6 commercial banks active in the London Gold Market, namely, N. M. Rothschild, Mocatta & Goldsmid, Morgan Guaranty Trust, J. Aron, Sharps Pixley (former Sharps Pixley), and Rudolf Wolff & Co. the Bank of England has been involved in the affairs of the LBMA from Day 1 in 1987, and continues to this day to have observer status on the LBMA Management Committee the Bank of England has observer status on not just the LBMA Management Committee, but also on the LBMA Physical Committee and in the LBMA Vault Managers group the Financial Conduct Authority (FCA) also has observer status on the LBMA Management Committee although there are 2 other London financial market committees closely aligned with the Bank of England, and populated by bank representatives, that publish the minutes of their regular meetings, namely the Foreign Exchange Joint Standing Committee, the Sterling Money Markets Liaison Committee, the LBMA Management Committee does not publish the minutes of its meetings, so the public is in the dark as to what’s discussed in those meetings Note that ‘observer status’ does not mean to sit and observe on a committee, it just means that the observer has no voting rights at committee meetings. Note also that the structure of the LBMA Management Committee has recently changed to that of a Board, so the Committee is now called the LBMA Board.

This post was published at Bullion Star on 2 Oct 2016.

Giuliani Rages That Mainstream Media Has Lost Its Mind Over Trump’s NOLs

Earlier this morning we wrote about the New York Times article that exposed Trump’s 1995 tax returns and its $916mm net loss. Without any evidence whatsoever, the New York Times used the existence of the net loss to argue that Trump likely hasn’t paid taxes in the past 20 years (see “Trump “Deep Throat” Emerges: Someone Leaks Donald’s ’95 Tax Filing To The NYT“).
Of course, as anyone with any financial sense at all knows, net operating losses are a very common tax deduction used by most corporations, including the New York Times (as we pointed out earlier), to offset taxable gains. Is it really a shock to anyone that corporations don’t pay taxes when they lose money? So, from a practical standpoint, the only thing the New York Times really “uncovered” was that Trump lost a whole lot of money on bad casino deals back in the mid-90s which, of course, we all knew already.
But, the facts have not stopped the main stream media from launching a full-on attack against Trump, proving once again that, in the best case scenario, they’re completely ignorant of basic financial concepts or, in the worst case, they’re simply once again exposing their own extreme political bias.
The first example of grandstanding over the Trump tax “issue” comes to us via CNN’s Jake Tapper on a State of the Union interview with former New York City Mayor Rudy Giuliani. Here are a couple of the priceless, “well-informed” one-liners offered up by Tapper:


This post was published at Zero Hedge on Oct 2, 2016.

Pensioners Beware – Brits Considering First Step Toward Slashing Pension Benefits

Pensioners around the world should take note of the controversial new legislation being considered by the UK Parliament’s Work and Pensions Select Committee that would allow private businesses to cut pension costs bysuspending contractual inflation-linked benefit increases. Of course, this could be just a crucial first step in the long journey toward cutting pension benefits and finally admitting that many defined benefit pension plans around the globe are nothing more than insolvent, ponzi schemes.
Committee Chairman Frank Field told the Financial Times that the goal of the proposed legislation is to simply create an environment that helps insure the “survival” of defined benefit pension plans for now “which gives you flexibility in the longer run.”

This post was published at Zero Hedge on Oct 2, 2016.