OPEC Out! This week’s meeting was really a bust!

In May, I wrote an article titled ‘The OPEC Epoch is Over,’ which pronounced OPEC officially dead and predicted oil prices would plunge again. So far, I’ve been wrong about a second perilous plunge in oil prices. However, even as market heavyweights herald this week’s OPEC meeting for pumping up oil prices, a few voices join this lightweight in saying this meeting proves OPEC is over.
The Financial Times says, ‘Oil Output-Cut Pact Spells ‘the Beginning of the End’ for OPEC.’
The recent OPEC oil output-cut deal ‘will come to symbolize the passing of one of the world’s most powerful cartels,’ the Financial Times predicts…. ‘After 50 years in control of the oil price, OPEC has submitted to the economic power of a much-changed global market. The deal represents the recognition of their own impotence by a group of countries that once held unchallenged power,’ writes Nick Butler, a visiting professor and chair of the Kings Policy Institute, London. (Newsmax)
In other words, OPEC has given up on the Saudi brainstorm of flushing the US out of the oil export market. Contrary to the Saudis’ expectations, the US oil industry did not fold, though it buckled a bit. Saudi Arabia was forced to fold first.
The US industry trimmed a lot around the edges, with several companies failing while others became more economical and survived. Necessity once again became the mother of invention. Fracking operations slowed but kept going. Production has been capped in ways that can come quickly back on line if prices start to rise, but that will be an equilibrium force that pushes back down on prices as soon as they start to look profitable.

This post was published at GoldSeek on Sunday, 4 December 2016.

The Weighted Average Cost Of Capital

When I was fresh out of college in the mid-90s, I landed a job at Merrill Lynch. I was an “investment banking analyst”, which meant I had no life outside of the office and hardly ever slept. I pretty much spoke, thought, and dreamed in Excel during those years. Much of my time there was spent building valuation models. These complicated spreadsheets were used to provide an air of quantitative validation to the answers the senior bankers otherwise pulled out of their derrieres to questions like: Is the market under- or over-valuing this company? Can we defend the acquisition price we’re recommending for this M&A deal? What should we price this IPO at? Back then, Wall Street still (mostly) believed that fundamentals mattered. And one of the most widely-accepted methods for fundamentally valuing a company is the Discounted Cash Flow (or “DCF”) method. I built a *lot* of DCF models back in those days.
I promise not to get too wonky here, but in a nutshell, the DCF approach projects out the future cash flows a company is expected to generate given its growth prospects, profit margins, capital expenditures, etc. And because a dollar today is worth more than a dollar tomorrow, it discounts the further-out projected cash flows more than the nearer-in ones. Add everything up, and the total you get is your answer to what the fair market value of the company is.

This post was published at PeakProsperity on Friday, December 2, 2016,.

Where the Spot Silver Price Is Headed Now

This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission.
The spot silver price is up today (Friday), as precious metals traders await Italy’s referendum on Sunday, or ‘Quitaly.’ Uncertainty and fears of the outcome have investors around the world heading into safe-haven investments.
That’s part of the reason we see silver prices climbing even higher in 2017.
Shortly before noon today (Friday), the spot silver price was up $0.23, or 1.37%, at $16.81 an ounce.
But Italy’s vote this weekend isn’t the only thing moving silver prices today. Precious metal investors are also reacting to the November jobs report.
The U. S. Labor Department reported early this morning that employers added 178,000 workers last month. That was in line with the 180,000 analysts had forecast. The unemployment rate unexpectedly dropped to 4.6% from 4.9%.

This post was published at Wall Street Examiner by Diane Alter ‘ December 2, 2016.

Goldman’s Bear Case In 7 Steps: “We Are In The 98th Percentile Of Historical Valuations”

Having been on the fence about an upside case for the S&P for the greater part of 2016, Goldman’s chief equity strategist David Kostin finally threw in the towel earlier this week when, as we reported, Goldman raised its S&P price target from 2,100 (as of year end 2016) to 2,400 for mid-year 2017 on what it calls “Trump Hope” (as apparently does everyone else, see “The World Has Changed” – Average S&P Target Before Trump: 2,087; After Trump: 2,425“), which it then sees dipping to 2,300 by year-end 2017 on “Trump Fear.”
Having explained what “Trump Hope” means before, here is a quick recap of what “Fear”, according to Goldman Sachs whose former partner Steve Mnuchin will be running the US Treasury, looks like: by mid-2017 inflation will reach the Fed’s 2% target, labor costs will be accelerating at an even faster pace, and policy rates will be 100 bp higher than today. Rising inflation and bond yields typically lead to a falling P/E multiple. Congressional deficit hawks may constrain Mr. Trump’s tax reform plans and the EPS boost investors expect may not materialize. Potential tariffs and uncertainty around other policy positions may raise the equity risk premium and lead to lower stock valuations in 2H.
And here are the details, where as Goldman politely puts it, is where the “devil is to be found.” First, as Goldman warns, while investors have been focusing on the prospect of a lower statutory corporate tax rate, the firm’s US economist Alec Phillips notes that it will likely come with provisions that will offset much of the benefit of a lower rate. For instance, under the House Republican plan, several corporate tax incentives, such as the interest expense deduction, would be repealed. Furthermore, the plan proposes a redefinition of foreign and domestic income based on where sales, rather than production, occurs. Furthermore, under Mr. Trump’s plan, the deficit as a percentage of GDP would jump from 3.2% in 2016 to 5.0% in 2017 and 6.1% in 2018. The annual deficit will rise from a projected $590 billion in 2016 to $960 billion in 2017 and $1.2 trillion in 2018. Our US economics team has a more restrained baseline forecast that projects the deficit as a percentage of GDP will be 3.4% in 2017 and 4.0% in 2018 while the deficit will total $650 billion in 2017 and $800 billion in 2018.

This post was published at Zero Hedge on Dec 3, 2016.

A Big Swirling Italian Mess

‘Move to Italy. They know about living in debt: They don’t care.’
– John Lydon
‘Italians were eating with a knife and fork when the French were still eating each other.’
– Mario Batali
Italians are headed to the polls this Sunday (and thus this letter is reaching you a little earlier than usual) – but no one is quite sure what is on the ballot. On the surface, the voters are considering whether to approve constitutional reforms that should make the government operate more effectively (or not, depending on your point of view). But many people think the real question is whether the current government should stay in power and whether Italy should remain yoked to the Eurozone.

This post was published at Mauldin Economics on DECEMBER 2, 2016.

Italian Banks on the Brink

There’s an old saying: ‘What’s sauce for the goose is sauce for the gander.’ The meaning is obvious – if you insist on something for others, you have to be prepared to hold yourself to the same standard.
A version of that is playing out in Europe today. And right now the strongest signal is not coming from Germany – it’s coming from Italy. Italian banks are in deep financial distress (as were banks in Cyprus and Greece from 2011 to 2015). This involves the Banca Monte dei Paschi di Sienna (BMP), the world’s oldest bank still in operation, founded in 1472.
Monte Paschi’s trouble began in 2007 when it agreed to buy another Italian-based bank, Banca Antonveneta SpA. It offered 9 billion euros in an all-cash deal just as the global financial crisis was unfolding. The deal proved a disaster for Monte Paschi. It damaged its ability to withstand losses following the 2008 crisis.
Then investment bankers stepped in and sold Monte Paschi derivatives contracts that ended up hiding the bank’s surging losses from regulators. These deals only weakened the bank’s shaky finances.

This post was published at Wall Street Examiner by James Rickards ‘ December 2, 2016.

Why Politics is So Important Right Now – Markets Depend On The Confidence

Our computer has been doing a fantastic job forecasting BREXIT, then Trump and that Hollande would not make the final round for elections in France. But why are these events even important? No it is not that Trump will save the day. He will perhaps help give the USA some breathing room. But the collapse that is underway started in Europe. It will then migrate to Japan, and finally come to the USA.
Merkel and Hollande were the pillars of Europe. Taking out BREXIT was the first leg of the stool, Hollande was the second leg of this three-legged stool holding up Europe. The collapse of confidence behind the euro is directly tied to politics. Remove Merkel, and we will begin to see how quickly Europe will unravel.

This post was published at Armstrong Economics on Dec 3, 2016.

It Could Finally Be Time For Gold To Really Shine

This is a syndicated repost courtesy of The Felder Report. To view original, click here. Reposted with permission.
Over the summer I noted that gold, after a great run during the first half of the year, was running into important long-term resistance. A few weeks later, in a conversation with Grant Williams for RealVision, I noted that sentiment in gold had also gotten far too euphoric. The precious metal needed a pullback before it would be able to embark on its next leg higher.
To be clear, I still believe gold has started a new bull market. Furthermore, the case for owning gold has not diminished because of Donald Trump’s election victory. If anything, it has strengthened. The prospect of rising deficits and inflation enhance the bullish case for owning gold, especially when you consider the fact that the Fed, or any other central bank for that matter, is not likely to change dramatically from its incredibly dovish biasany time soon.
And thanks to the ‘Trump Triumph Trade,’ we have now seen a healthy pullback in gold accompanied by a complete shift in sentiment. Outflows from the gold ETF have persisted every day for nearly three straight weeks since the election. Headlineshave become very bearish again, similar to what we saw as gold bottomed late last year. From a contrarian standpoint this is all very constructive.

This post was published at Wall Street Examiner by Jesse Felder ‘ December 2, 2016.

Doug Noland: Trump, Bonds, Peripheries, China and Italy

This is a syndicated repost courtesy of Credit Bubble Bulletin. To view original, click here. Reposted with permission.
The trading week saw WTI crude surge 12.2%. The GSCI commodities index jumped 5.8%. Wheat dropped 3.6% and corn fell 3.1%. Italian 10-year yields fell 18 bps, and Greek yields dropped 37 bps. Meanwhile, Portuguese yields jumped 13 bps. In U. S. equities, Bank stocks (BKX) jumped 1.5%, while the Morgan Stanley High Tech index dropped 3.4%. The Biotechs (BTK) sank 6.4%. The DJIA was little changed, while the small caps fell 2.4%. Just another week for unstable global markets.
Pre-election trepidation morphed into post-election market exuberance, in only the latest demonstration of the power of an over-liquefied market backdrop. Here in the U. S., the bullish imagination has been captivated by the Trump administration’s pro-growth agenda, with a focus on tax and health-care reform, deregulation and infrastructure spending. The DJIA this week added slightly to record highs.
Meanwhile, a decidedly less halcyon reality seems to be coming into somewhat clearer focus: Trump’s victory likely marks a major inflection point for global markets. Bond yields have shot higher, while inflation expectations are being reset. The U. S. dollar has surged, while the emerging markets have come under pressure. From U. S. equity and bond ETFs to international financial flows, ‘money’ is sloshing about chaotically.

This post was published at Wall Street Examiner by Doug Noland ‘ December 3, 2016.

Ford CEO Expresses Interest In Working With Trump; Says Less Regulation Is Key To Saving U.S. Jobs

With Carrier setting the precedent for what future negotiations with the Trump administration may look like, Ford CEO Mark Fields has come forward to layout potential policy changes that would be important to preserving auto jobs in the United States. Not surprisingly, per an interview with Bloomberg, Fields’ opening “ask” focused on less restrictive fuel economy standards, new currency-manipulation rules to promote free and fair trade and corporate tax reform.
Ford Motor Co. was a target of Donald Trump’s criticism on the campaign trail for building cars in Mexico, and now that Trump will be president, Ford said it’s willing to work with him to keep jobs in the U. S. — provided Trump puts the right policies in place, according to the automaker’s chief executive officer. ‘We will be very clear in the things we’d like to see,’ Mark Fields said in an exclusive interview Friday at Bloomberg offices in Southfield, Michigan.
Among them, according to Fields: currency-manipulation rules to promote free and fair trade, tax reform and safety guidelines for autonomous vehicles.
Fields said that Ford plans to lobby the new president to soften U. S. and state fuel-economy rules. They hurt profits by forcing automakers to build more electric cars and hybrids than are warranted by customer demand, he said.
‘In 2008, there were 12 electrified vehicles offered in the U. S. market and it represented 2.3 percent of the industry,’ Fields said in the interview. ‘Fast forward to 2016, there’s 55 models, and year to date it’s 2.8 percent.’

This post was published at Zero Hedge on Dec 3, 2016.

The Fix Is Already In, as Italy’s Moment of Truth Beckons

Banks cannot be allowed, at any cost, to suffer the consequences of their own mismanagement, or worse.
Italy holds a constitutional referendum on Sunday. Europe is sick and tired of national referendums, in the opinion of Jean Claude Juncker, the president of the European Commission. Over the past week, Juncker has urged EU leaders not to hold more referendums as he fears that other European electorates may take a leaf out of the UK’s book and vote to leave:
‘Regarding referenda on EU membership, I think it is not wise to organize this kind of debate, not only because I might be concerned about the final result but because this will pile more controversy onto the huge number already present at the heart of the EU.’
It’s not hard to understand Juncker’s distaste for referenda: the EU has been on the losing end of just about every popular vote of this fledgling century. Whenever people in Europe have been given the rare opportunity to vote on Brussels-related business, they invariably vote against Brussels. In fact, the only vote the EU has won this century was in Ireland in 2009, and that was only after the people had first voted against the Treaty of Lisbon. It was the wrong answer and voters were politely invited to reconsider. Or else.

This post was published at Wolf Street by Don Quijones ‘ December 3, 2016.

Fake News and War Party Lies

‘I have in my possession a secret map, made in Germany by Hitler’s government – by the planners of the New World Order,’ FDR told the nation in his Navy Day radio address of Oct. 27, 1941.
‘It is a map of South America as Hitler proposes to reorganize it. The geographical experts of Berlin, however, have ruthlessly obliterated all the existing boundary lines … bringing the whole continent under their domination,’ said Roosevelt. ‘This map makes clear the Nazi design not only against South America but against the United States as well.’
Our leader had another terrifying secret document, ‘made in Germany by Hitler’s government. …
‘It is a plan to abolish all existing religions – Protestant, Catholic, Mohammedan, Hindu, Buddhist and Jewish alike. … In the place of the churches of our civilization, there is to be set up an international Nazi Church…
Current Prices on popular forms of Gold Bullion
‘In the place of the Bible, the words of ‘Mein Kampf’ will be imposed and enforced as Holy Writ. And in place of the cross of Christ will be put two symbols – the swastika and the naked sword. … A god of blood and iron will take the place of the God of love and mercy.’
The source of these astounding secret Nazi plans?
They were forgeries by British agents in New York operating under William Stephenson, Churchill’s ‘Man Called Intrepid,’ whose assignment was to do whatever necessary to bring the U. S. into Britain’s war.

This post was published at Lew Rockwell on December 3, 2016.

In The Year Of Fake News, Finance Cannot Be Entertainment

Submitted by Raoul Pal via LinkedIn.com,
Let’s call 2016 the year of ‘fake news’, when scandalous, entertaining algorithm-based headlines helped usher in one of the biggest political upsets of all time in the US Presidential election. Coverage was driven by candidates’ sensationalized commentary, but missed capturing the real temperature across half of America. As The New York Times’ Jim Rutenberg wrote, ‘the news media by and large missed what was happening all around it, and it was the story of a lifetime.’ Media became somewhat of a manipulation game that discouraged us from understanding the crux of the real news.
Online, aggregated viewpoints bombarded us on a personalized internet and rarely did we encounter a scenario that we have to disagree with. People were sick of the establishment, and forced themselves to be heard.
Investment investigator Gordon Dee Smith forecasted on Real Vision TV how the hyper-connectivity communication revolution can mean major consequences for the world of politics and business. Disparate rebels with an agenda can quickly form tribal affinity groups and emerge without warning, potentially taking down companies and governments, changing policy, shaping or even destroying careers, or bankrupting a company. We’ve witnessed it firsthand.
But this general populist backlash that we’re seeing now isn’t new. It was born out of the 2008 financial crisis. Many are still coming out of that debt burden and harbor a sense of deep resentment and suspicion. Wall Street knew what was taking place then, but like today, the media didn’t paint a full picture for everyone. As a result people lost their homes, their jobs and their life savings.
Nearly 10 years later, even after such a catastrophe and with more platforms for information delivery, finance is still treated like a backroom club or entertainment. The focus remains on headlines and groupthink when it should stand for so much more than that.

This post was published at Zero Hedge on Dec 3, 2016.

Propaganda – How Bad American Press Has Become

The release of Newsweek’s now famous Madam President before the election was decided is a mistake that is not intentional. ‘Dewey Defeats Truman’ was another major mistake when the Chicago Daily Tribune on November 3, 1948, announced Truman lost to Dewey. The paper became famous when it was held up by Truman at a public appearance following his successful election, smiling triumphantly at the error. Trump should do the same for history with Newsweek, who printed 125,000 copies, and then recalled them. The asking price has been for $95 to $1,000 a copy.
However, the content of this magazine is venomous that demonstrates how bad the propaganda has become in its attempt to brainwash the public. It not only said that Hillary took the high road when she did not running a constant negative campaign, but then Newsweek called the people who supported Trump ‘deplorables’ who asked for the 19th Amendment to be repealed, which prohibits any United States citizen from being denied the right to vote on the basis of sex. Never in all the mud-slinging in this campaign did I ever hear anyone say that women should be denied the right to vote. Who made up this outright lie?

This post was published at Armstrong Economics on Dec 3, 2016.

Deutsche Bank Pays $60 Million To Settle Gold-Manipulation Lawsuit

2016 is shaping up as the year when countless conspiracy theories will be confirmed to be non-conspiracy fact: from central bank rigging of capital markets, to political rigging of elections, to media rigging of public sentiment, and now, commercial bank rigging of both silver and gold. In short, “tinfoil hat-wearing nutjobs living in their parents basement” were right all along.
In early October, we reported that “In A Major Victory For Gold And Silver Traders, Manipulation Lawsuit Against Gold-Fixing Banks Ordered To Proceed,” however one bank was exempt: Deutsche Bank. The reason why was known since April, when we first reported that Deutsche Bank had agreed to settle the class action lawsuit filed in July 2014 accusing a consortium of banks of plotting to manipulate gold and silver. Among the charges that Deutsche Bank effectively refused to contest were the following:
employment of a manipulative device claims bid-rigging, and unjust enrichment. price fixing and unlawful restraint price manipulation claims aiding and abetting and principal-agent claims. An affidavit filed in October shed more light on the settlement process:
The negotiations with Deutsche Bank over the material terms of the Settlement took place over several months starting in December 2015 and continuing until the Deutsche Bank Settlement Agreement was executed on September 6, 2016. Following initial phone calls with Deutsche Bank’s counsel in December 2015, Lowey and Grant & Eisenhofer engaged in lengthy negotiations with Deutsche Bank’s counsel over the material terms of the settlement, including the amount of the settlement consideration, the scope of the cooperation to be provided by the Deutsche Bank Defendants, the scope of the releases, and the circumstances under which the parties would have the right to terminate the settlement.

This post was published at Zero Hedge on Dec 3, 2016.

Bottom Fishing

U. S. Markets showed weakness this past week as they are working off their overbought conditions very nicely now.
Many stocks are nearing support areas along with the indices, and I’m looking to buy the weakness in the week or so ahead.
Metals are trying to solidify support now and move higher which they really need to do, soon.
As I’ve talked about in weeks past, this is traditionally a very strong time of year for the metals so if they can’t get going now, when can they?
Expect lots of action this December as we move to close out the wild year that was.
Gold lost just 0.05% last week and does have a double bottom in place now.
A break of the downtrend line around $1,190 is the first buy level as we move off support.
That said, if we move back under $1,170 then we should resume the move lower.

This post was published at GoldSeek on Sunday, 4 December 2016.

Gold And Silver – Do Not Expect Much Difference With Trump Compared To Obama

Saturday 3 December 2016
Obama was the ‘Yes, we can!’ hope and change candidate that become the deep state elite’s presidential lackey. It was Obama’s choice to sell his political and personal soul in serving the globalists.
History has been somewhat hidden from the public but still in the open for those who take the time to look. The US went bankrupt in 1933 when Roosevelt declared the Bank Holiday. Its purpose was to eliminate any and all banking independence and give all control over to the Federal Reserve cartel. Every bankrupt entity has a bankruptcy judge to oversee the bankruptcy. That job went to the Secretary of the Treasury as agent for the globalists that took control over the United States.
Does anyone ever wonder why the Secretary of Treasury is always chosen from Goldman
Sachs? It is the banking arm for the globalists. As a bankrupt entity, the corporate United States has no choice and must bow to the dictates of the Treasury Secretary. Trump has no choice. This is one of the reasons why this country has constantly been under the War Powers Act since the 1930s. Under the War Powers Act, the Constitution is suspended, and the president ‘runs the country’ by Executive Order.

This post was published at Edge Trader Plus on December 3, 2016.

The Imperial Presidents From the Fall of the American Republic

‘An imbalance between rich and poor is the oldest and most fatal ailment of all republics.’
“And I’ll leave you with one set of numbers that I found today, which is just an absolute for this whole thing. In 2015, Wall Street Bonuses, not regular compensation, bonuses, seven years after they were bailed out with the public purse, totaled $29.4 billion dollars.
Total compensation paid to every single person in this country who makes minimum wage totaled $14 billion…
The era of neo-liberalism is over. The era of neo-nationalism has just begun.”
Mark Blyth
‘There may be thunder in Europe but it is in America the lightning will fall.’
Ambrose Bierce

This post was published at Jesses Crossroads Cafe on 03 DECEMBER 2016.

Debunking GFMS’ Gold Demand Statistics

What came to light as on odd discrepancy between GFMS’ Chinese gold demand and ‘apparent supply’ has proven to be a tenacious cover-up by the oldest consultancy firm in the gold market. And not only does GFMS publish incomplete and misleading data on Chinese gold demand, all its supply and demand data is incomplete and misleading. As a result, the vast majority of investors across the globe has been brainwashed to believe total gold supply and demand mainly consists of global mine output and jewelry demand. In reality, the supply and demand data GFMS publishes is just the tip of the iceberg. But the firm is reluctant to admit this publicly, lest their business model would be severely damaged.
GFMS has denied all allegations about their incomplete Chinese gold demand statistics by continuously making up false arguments. Therefore, BullionStar will debunk, once more, such arguments spread by GFMS – which are supposed to explain how from January 2007 until September 2016 the difference between GFMS’ Chinese gold demand and apparent supply reached over 4,500 tonnes – in order to expose true Chinese gold demand.

This post was published at Bullion Star on 3 Dec 2016.