Why This “Boom” Doesn’t Feel Like One

President Obama’s High Command at the Fed has had the luck which Napoleon looked for in his generals. The exercise of two Yellen puts seems to have delayed the late dangerous stage of asset price inflation to beyond 2016 Election Day.
Growing evidence and diagnostic power supports the view that the asset price inflation disease now afflicting the global economy is a historically rare form albeit also present in the last decade. President Bush, however, did not appoint lucky Fed generals. The Great Panic and Recession arrived before 2008’s Election Day.
The Two Types of Asset-Inflation Disease: Depression vs. Boom
Four episodes of asset price inflation since the mid-1980s (when Paul Volcker abandoned his ‘hard money’ policy) have added importantly to the available data on the asset-price-inflation disease. The hypothesis has become plausible that asset price inflation, always of monetary origin, comes in two distinct types rather than just one.
The first and best known is the boom-type (type A) and includes examples such as 1924-9, 1962-8, 1985-9, 1995-2000. The second is the depression-type (type B) and includes 1934-7, 2003-7, and 2010-?. Type B is comparatively modern, stems from radical monetary experimentation, accompanies continuing economic weakness and has an end phase which can be more deadly than that of type A.
Both types of asset price inflation are characterized essentially by out-of-control money empowering irrational forces in financial markets. The flawed mental processes documented by behavioral finance theorists gain prominence in market price determination and so the signals which guide the invisible hands become highly distorted.
The disease passes through several stages including a late-mid phase when speculative temperatures are already falling sharply in some areas while still rising elsewhere. In the final stage there is a widespread crash across financial markets and the onset of recession. Beyond those common features there are five important differences.

This post was published at Ludwig von Mises Institute on Oct 19, 2016.

“We Should See Massive Fed Intervention” – What Tudor Jones Said 29 Years Ago After Black Monday Crash

“This is a market that has been seriously overvalued for some time,” exclaims Paul Tudor Jones, “and what we are seeing today is the piercing of the bubble…” adding that “Wall Street was uniformly unprepared for this kind of a drop.”
Of course Bill Griffeth asks should we buy this dip… Tudor Jones replies – so ironically on this 29th anniversary of the Black Monday collapse in the US equity market –
“we should see massive Federal Reserve and Government intervention in the FX and debt markets to stem what has unquestionably been a panic.”
But Tudor-Jones cautions:

This post was published at Zero Hedge on Oct 19, 2016.

Too Many Tired Bulls

When US stocks broke to new record highs in July we began to see excessive optimism creeping into the indices. In August and September, we warned that a top was forming and lower prices into October were likely. We would extend that corrective phase into November-December given the continued call option speculation by investors.

This post was published at FinancialSense on 10/19/2016.

California Attorney General Launches Criminal Probe Into Wells Fargo Over Fake Accounts

John Stumpf is now gone from Wells Fargo, but his – and the bank’s – problems may be just starting.
According to a report by the LA Times, California Department of Justice is investigating Wells Fargo on allegations of criminal identity theft over its creation of millions of unauthorized accounts, according to a search warrant sent to the bank’s San Francisco headquarters this month. The warrant and related documents, served Oct. 5 and obtained by The Times through a FOIA request, confirm that California AG Kamala Harris, in the final weeks of a run for U. S. Senate, has joined the growing list of public officials and agencies investigating the bank in connection with the accounts scandal.
As Reuters adds, the AG warrant seeks to seize documents at Wells, and cites probable cause that felonies were committed at the bank.
Harris’ office demanded the bank turn over a trove of information, including the identities of California customers who had unauthorized accounts opened in their names, information about fees related to those accounts, the names of the Wells Fargo employees who opened the accounts, the names of those employees’ managers and emails or other communication related to those accounts. Her office is also requesting the same information about accounts opened by Wells Fargo workers in California for customers in other states.

This post was published at Zero Hedge on Oct 19, 2016.

Here’s a unique way to make money from the British pound’s historic plunge

Here’s a great example of how, no matter what’s happening in the world, there’s always an abundance of compelling, lucrative opportunities.
Lately the British pound has plunged to historic lows.
The pound recently touched a 31-year low against the US dollar, and an all-time low against the euro.
And earlier this month the pound shed nearly 3% of its value in the course of a single day.
That’s simply not supposed to happen to a major currency.
A move of just 1% for a major currency is considered shocking. Currencies are supposed to be stable, not ultra-volatile like a penny stock.
Yet these sharp swings keep happening to the pound, mostly out of Brexit fears.
Emotion has taken over. There’s no rational basis for the pound being this cheap – merely panicked selling on the assumption that everyone else is going to be selling.

This post was published at Sovereign Man on October 19, 2016.

US Freight Volume Drops to Lowest Level since 2009, ‘Industrial Recession’ Hits Full Stride, Overcapacity Crushes Rates

‘We’ve been patiently waiting for the consumer.’
This just keeps getting worse. The Cass Freight Index, tracking US shipment volumes by all modes of transportation, fell 3.1% in September from a year ago, the 19th month in a row of year-over-year declines, and the worst September since 2009!
Donald Broughton, Chief Market Strategist at Avondale Partners, wrote in thereport:
After offering a glimmer of ‘less bad’ hope in August [the index was down ‘only’ 1.1% year-over-year], the Cass Freight Index shipments data in September disappointed, providing hindsight that August only gave us ‘false hope.’
September data is once again signaling that overall shipment volumes (and pricing) continued to be weak in most modes, with increased levels of volatility, as all levels of the supply chain (manufacturing, wholesale, retail) continue to try and work down inventory levels.
There were some areas of growth for shipments. Ecommerce has been reliably booming, as brick-and-mortar retailers lose their footing, a structural shift in the retail industry that will continue to play out over the years. Shipments for the auto and housing/construction industries also grew in September, but at a lower rate.

This post was published at Wolf Street by Wolf Richter ‘ October 19, 2016.


Gold $1267.90 UP $7.10
Silver 17.62 UP 3 cents
In the access market 5:15 pm
Gold: 1269.50
Silver: 17.69
The Shanghai fix is at 10:15 pm est and 2:15 am est
The fix for London is at 5:30 am est (first fix) and 10 am est (second fix)
Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.
And now the fix recordings:
Shanghai morning fix OCT 18 (10:15 pm est last night): $ 1267.16
Shanghai afternoon fix: 2: 15 am est (second fix/early morning):$ 1265.60
London Fix: OCT 19: 5:30 am est: $1269.75 (NY: same time: $1266.75: 5:30AM)
London Second fix OCT 19: 10 am est: $1269.80 (NY same time: $1269.80 , 10 AM)

This post was published at Harvey Organ Blog on October 19, 2016.

Sharps Pixley’s Ross Norman: Central bank manipulation of gold wouldn’t surprise me

GATA Secretary Chris Powell has invited me to reply to his October 15 commentary — in which he replied to my article of the 14th, wherein I rebutted an academic study that concluded that the London gold price fix was manipulated.
If you look at my article (and indeed previous ones) you will see that my aim is to defend the integrity of the London gold fix as a method to derive a fair benchmark price. My aim is not to defend the integrity of the institutions operating the fix.
The reason for this is that I simply do not have the visibility over all fixing members and their every trade that I would need to say that these guys are 100-percent honest. No one does.
That said, I do know that the market traders at the banks are heavily outnumbered by in-house compliance people and it would be close to impossible for them to do anything improper even if they wanted to. The level of forensic investigation into any position taking is actually quite staggering. In the absence of any evidence to the contrary I simply don’t have a view either way.
I might add that I have the same ambivalence toward GATA.

This post was published at GATA

Saudi Bank Stress Builds as Kingdom’s Cash Injection Falls Short

Saudi Arabia has work to do to ease pressure in the kingdom’s banking system.
The interest rate banks charge one another for loans rose by the most since August on Sunday, extending a trend that’s slowing earnings and corporate borrowing in the world’s biggest oil exporter. The increase is defying the central bank, which has sought to ease the cash crunch by relaxing lending limits, offering new borrowing facilities and injecting funds into the financial system, including 20 billion riyals ($5.3 billion) pledged Sept. 25.
‘Rates won’t easily come down with one $5 billion injection,’ said John Sfakianakis, director of economic research at the Gulf Research Center Foundation in Riyadh. ‘Bringing them down would require a significant liquidity injection effort. The $5 billion is a good step forward, but given the asset size of Saudi banks it would require several additional injections.’
Financial institutions in the Arab world’s largest economy are bearing the brunt of a halving of oil prices since 2014. Economic growth in the kingdom is slowing, curtailing bank deposits just as the government increases borrowing to help plug a budget deficit that last year was the widest since 1991.
The three-month Saudi Interbank Offered Rate, or Saibor, used as a benchmark to price loans, has climbed 15 successive months to the highest in seven years, according to data compiled by Bloomberg. It gained 84 basis points this year to 2.386 percent on Monday, compared with a 27 basis-point advance in the London Interbank Offered Rate for dollars. Meanwhile, the loans-to-deposit ratio among Saudi banks, a key measure of liquidity, rose to 90.8 percent in August, the worst since 2008.

This post was published at bloomberg

Euro ‘house of cards’ to collapse, warns ECB prophet — Ambrose Evans-Pritchard

The European Central Bank is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned.
“One day, the house of cards will collapse,’ said Professor Otmar Issing, the ECB’s first chief economist and a towering figure in the construction of the single currency.
Prof Issing said the euro has been betrayed by politics, lamenting that the experiment went wrong from the beginning and has since degenerated into a fiscal free-for-all that once again masks the festering pathologies.
‘Realistically, it will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly,” he told the journal Central Banking in a remarkable deconstruction of the project.

This post was published at The Telegraph

World Stock Markets Mixed Overnight; China Economic Data Mostly Upbeat

(Kitco News) – Asian stock markets were mixed overnight, despite some mostly upbeat economic data coming out of China. European stock markets were mostly lower.
U. S. stock indexes are pointed toward narrowly mixed openings when the U. S. day session begins in New York. Gold prices are trading moderately higher on more short covering and bargain hunting. The gold bulls are having a decent week, so far.
China’s economy grew by 6.7% in the third quarter, year-on-year, which was in line with market expectations. The figure was also the same as the second quarter. China also reported its retail sales increased by 10.7% in September, from a year earlier. That number was also in line with expectations. China’s industrial production was up 6.1% in September, year-on-year. That number was a miss to the downside. Overall, the data from the world’s second-largest economy was deemed upbeat. Indeed, other major world economies’ economic growth numbers don’t come anywhere close to China’s.

This post was published at Wall Street Examiner by Jim Wyckoff ‘ October 19, 2016.

‘Subtle Forward Guidance’ – Trying To Fool The Marginal Oil Investor Everything’s Under Control

In the years following the 2008 crash and today, the use of forward guidance from central banking policy makers has become increasingly important. What this nonsense ultimately has translated into is a ridiculous track record in posting upbeat assessments on the economic environment, aimed at trying to fool the marginal investor into believing ‘there are no need for worry, central bankers have everything under control’. Unsurprisingly, as with all psychological conditioning, forward guidance have lost its effect as more and more market participants lose confidence in central banks and their promise that everything will eventually mean revert to happier days. Contrary to what the smartest people on the planet are saying. Fool me once, shame on you, fool me twice shame on me.
This unfortunate practice is making in-roads into the most important of commodity markets: crude oil. Ever since the last QE taper in June 2014 triggered a dollar rally and a corresponding crash in oil prices, OPEC has been struggling to find its role in this new normal. Market power has, with the emergence of QE and ZIRP/NIRP, been moved to a different set of central planners than themselves, namely those controlling the flow of credit into and around the system.

This post was published at Zero Hedge on Oct 19, 2016.

The Fed Thinks It Can Use the “Natural” Interest Rate to Fine-Tune the Economy

It is widely accepted that by means of suitable monetary policies the US central bank can navigate the economy towards a growth path of economic stability and prosperity. The key ingredient in achieving this is price stability.
Some experts are of the view that what prevents the attainment of price stability are the fluctuations of the federal funds rate around the neutral rate of interest also known as the “natural rate.”
The neutral rate, it is held, is one that is consistent with stable prices and a balanced economy. What is required is that Fed policy makers successfully target the federal funds rate towards the neutral interest rate.
Once the Fed brings the federal funds rate in line with the neutral interest rate, price stability and thus economic stability can be reached, so it is held.
Recently, some officials at the Fed have adopted a view that the natural rate is currently very low, and that its decline may reflect a loss of economic potential. If this way of thinking is valid then there are immediate implications for the Fed: a low natural rate means the Fed could not move its short-term federal funds rate very high before policy becomes too tight.

This post was published at Ludwig von Mises Institute on Oct 18, 2016.

10-Trillion-Dollar Bye-Bye – The Calm Before The Storm

Calm Before The Storm
From a cyclical perspective, the stock market has effectively gone nowhere since mid-2014 (with zero total return on the broad NYSE Composite since then). The past two years can be characterized less as an ongoing bull market than as the extended top-formation of the third speculative episode since 2000, the third most extreme equity market bubble in history (next to 1929 and 2000), and the most extreme point of overvaluation in history across the broad cross-section of individual stocks and asset classes.

This post was published at Zero Hedge on Oct 19, 2016.

Will a US Digital Currency Make the Fed Even More Dangerous?

In a recent episode of Ron Paul’s Liberty Report, the former presidential candidate and Libertarian icon examines the future of digital currency. Paul and co-host Daniel McAdams talk with NYU Law Fellow and digital currency expert Max Raskin about how a future form of US digital money might give the Federal Reserve even more control over monetary policy than it enjoys today.

This post was published at Schiffgold on OCTOBER 19, 2016.