JPM: “Central Banks Have Created Unprecedented Distortions In Government Bond Markets”

As part of his just released 2017 outlook, JPM’s Michael Cembalest, chairman of markets and investment strategy, notes that while “political upheavals and unorthodox central bank actions persist” he prdictes “more of the same in 2017: single digit returns on diversified investment portfolios as the global economic expansion bumps along for another year.” Of course, the alternative is a recession call, which considering the current expansion will be the third longest in US history by the time Trump is inaugurated in less than three weeks, is probably not too farfetched.
Something else, however, caught our eye: the same observation that was considering “fake financial news” less than a decade ago, and is now part of the mainstream jargon – the following statement by the JPM strategist:
‘True Believer’ central banks have created unprecedented distortions in government bond markets. Bond purchases and negative policy rates by the ECB and Bank of Japan led to negative government bond yields. Whatever their benefits may be, they also resulted in profit weakness and stock price underperformance of European and Japanese banks. The poor performance of European and Japanese financials was a driver of lower relative equity returns in both regions in 2015/2016.
We agree, and now that these “True believes” are being phased out – at least in mental models, and if only for the time being – replaced by hopes that Trump’s still undetermined fiscal policies and a global push for reflation will somehow bootstrap the global economy groaning under trillions in excess debt, and swamped by a demographic picture that is massively deflationary, we are far less sanguine about the “single-digit gains” forecast by JPM.

This post was published at Zero Hedge on Jan 2, 2017.

The Bitter Reality of the Stock Market ‘January Effect’

A myth gets destroyed by facts.
We’re going to read about the ‘January Effect’ on a daily basis for the next few weeks. It’s the time of the year when the stock market in the US rises because it’s January. It’s a great time to buy, the hypothesis goes. It has been around for decades and resurfaces every January.
It’s based on the idea that there are some powerful seasonal anomalies that cause stocks to rise in January. These are among the most often touted reasons:
Tax selling by investors in late December to ‘harvest’ losses they had on some stocks to offset capital gains they’d realized on other stocks. This common tax strategy, according to the ‘January effect’ hypothesis, leads to more emphatic buying in January, big enough to move the needle. Bonus time, when sudden piles of money in the hands of individual investors begin percolating through the economy, and the first thing the lucky ones buy is stocks, so the theory. Psychology, as investors, based on a new year’s resolution or whatever, decide to finally be smart about money, etc. and buy stocks.

This post was published at Wolf Street on Jan 2, 2017.

Yuan Dumps, Bitcoin Jumps As China Researchers Suggest “One-Off Devaluation” & Capital Controls

As we have detailed numerous times recently, the recent move in Bitcoin has been strongly suggesting increasing fears of capital controls and/or expectations of a looming (and quite notable) devaluation of the Yuan against the US Dollar. Tonight saw China’s largest nationalist tabloid suggesting that China should consider one-off yuan devaluation to keep the currency stable at equilibrium level. Offshore Yuan is tumbling – to new record lows.
As we noted earlier, a quick look at the uncanny correlation between the decline in the Yuan and the rise in the bitcoin, confirms that the digital currency has indeed been largely used to evade capital controls.
Based on this chart alone, the recent surge in Bitcoin would imply that a substantial devaluation of the yuan is looming. That, or even more aggressive capital controls.

This post was published at Zero Hedge on Jan 2, 2017.

WHY WE COULD SEE SILVER PRICES SPIKE IN 2017

This report from OilPrice.com is a paid advertorial.
Precious metals are an important component of every investor’s portfolio, and while gold often gets all the hype, another precious metal will be a much better bet in 2017: Silver.
The market for silver continues to tighten as supply has failed to keep up with demand for much of the past decade. Silver is used in all facets of modern life, including electronics, medical devices, engines, batteries, solar panels, LED lighting, semiconductors, touch screens, dentistry, and nuclear reactors. The list goes on.
Demand for silver is up by more than 35 percent since 2009, while supply only grew by a little more than 10 percent. In 2015 alone, global demand for silver exceeded supply by roughly 129 million ounces, or about 11 percent of overall demand. With silver consumption set to expand indefinitely, the supply deficit will continue to put upward pressure on prices in the years ahead.
The set-up here is fantastic because indications are that we are on the edge of another bull run at a time when silver mining stocks are significantly undervalued. Silver prices had a good run for most of 2016, but have fallen back in recent weeks as the dollar has strengthened and uncertainty surrounding the U. S. presidential election abated. But the pause in the run up in prices will be brief, offering investors an appetizing entry point for a crucial commodity in today’s globalized economy.

This post was published at The Daily Sheeple on JANUARY 2, 2017.

SRSrocco Top 2016 Posts & My Commentary For 2017

If we thought 2016 was an interesting year, 2017 will certainly top it and be even more tumultuous. With President-elect Donald Trump to head the White House in a few weeks, many in the precious metals and alternative media community believe the ‘WORST IS OVER.’ This is one hell of a lousy assumption.
Matter-a-fact, President-elect Trump will likely precipitate the collapse quicker than a Clinton regime. Why? Because Trump has no idea just how much the U. S. financial and economic system are propped up. When Trump starts to open the massive ‘CAN OF WORMS’ in the U. S. government, this will likely cause serious dislocations in the entire system.
That being said, here is a list of the top SRSrocco Report posts for 2016. I have the most viewed articles listed first, then the top social media articles. What is interesting this year, is that an ENERGY ARTICLE enjoyed the top viewed ranking. This is a first year that an energy article received the most views.
To read the article, just click on the image:

This post was published at SRSrocco Report on January 2, 2017.

Will The U.S. Hit The Wall In 2017?

The parabolic move in the stock market, housing prices and the U. S. dollar, while touted by the media and Wall Street as evidence that ‘all is well and getting better,’ is perhaps the most visible signals that the U. S. financial and economic system is ‘melting up’ before it collapses.
Yes, I know the truthseeking community has been playing ‘Chicken Little’ since the internet stock bubble days, and admittedly the powers that be have been able to extend and pretend for a lot longer than I would have bet on 15 years ago.


This post was published at Investment Research Dynamics on January 2, 2017.

2 OF THESE #’s ARE REAL: $20 TRILLION US DEBT, $1,025 BITCOIN, $1,005 SILVER, $9,096 GOLD

The following video was published by SGTreport.com on Jan 2, 2017
Keith Neumeyer, the CEO of First Majestic Silver Corp returns to dissect the documented manipulation of the silver market in 2016, and the road ahead. As we post this interview, the stated US debt is on the cusp of $20 Trillion, Bitcoin just surpassed $1,025 yet silver sits around $16. But the hard numbers outlined at US Debt Clock.org show that the REAL silver price in today’s dollars should be $1,005/ounce. Only the clear and present manipulation of the precious metals is keeping them from reaching Bitcoin’s heights. We also get an update from Keith on Silver One Resources, First Mining Finance and First Majestic Silver.

In “Mysterious” Bond Sale, Venezuela Issues $5 Billion In Debt To Itself With China As Underwriter

While Venezuela CDS suggest the country’s default odds remain well over 90%, and its currency on the black market continues to plunge into the abyss of hyperinflation, something odd happened today: Venezuela’s government issued $5 billion in dollar debt for the first time in more than five years, selling bonds in an opaque transaction to the state bank Banco de Venezuela SA and the central bank, Reuters and Bloomberg report. What makes this “unorthodox operation” particularly strange, is that the government is effectively selling debt, and raising dollar funds from itself – it owns both the Banco de Venezuela and the central bank; it is also strange in that the transaction, according to Reuters, does not immediately bring in new funds for the cash-strapped OPEC nation.
State-run Banco de Venezuela bought the dollar-denominated notes issued on December 29, which had a 6.5% coupon and mature in 2036, in local currency at a heavily subsidized exchange rate of 10 bolivars per dollar, according to a Reuters source, meaning there was no net increase in hard currency for state coffers. The country’s exchange control system sells dollars at 10 bolivars for preferential goods such as food and medicine and for 672 bolivars for other items. Dollars on the black market currently fetch close to 3,200 bolivars.

This post was published at Zero Hedge on Jan 2, 2017.

Dynamic Momentum Trading – Part VI

This is Part VI of the Dynamic Momentum Trading series on how momentum rankings may be used to trade ETFs. It is important that the reader understand the previous posts. They can be found by beginning at Part I or by looking under the Investing selection of the main menu on this site.
The purpose of this post is to show how the numerous options in the DMS system can be eliminated without reducing the efficacy of the system.
System Options
The trading model presented thus far was established with options for testing purposes. Often critical variables can be identified but not their importance over different value ranges. The number of positions to be traded and the trading styles were two that fell into that category when designing the system.
No amount of a priori reasoning can answer how important either might be over various ranges, especially when placed into a particular model. Their own specific constructs and the constructs of a mathematical model that purports to measure the effects of current momentum on future value make such a task impossible. However, when theory cannot provide answers, empirics may.
The two variables in question are the following:
Trading Styles: Three trading styles were built into the momentum algorithm. These were Normal, Aggressive and Conservative. Number of Positions: The number of ETFs that could be traded ranged from 1 to 3. The empirics provided by extensive backtesting already performed allows reasonable answers as to the right range of values for these variables.

This post was published at Economic Noise on January 2, 2017.

10 Predictions for 2017: Gold, Stocks, Trump, Putin and War

‘As for me, all I know is that I know nothing.’ – Socrates
The quote is a paradox within itself, but sums up the outlook of anyone that has gleaned a grain of wisdom in their life. Yet, here I am offering predictions for the future, a thing one could know with even less certainty than present conditions. We study trends, monitor political events, consider ‘cui bono’ in all events and give it the old college try.
Gold at $1,500: The gold price will climb above $1,500 in 2017, with the potential to claw back towards all-time highs in the event of a currency crisis, major war or other black swan event. December 2015 will prove to be the bottom of the correction and gold will once again embark on a multi-year bull cycle. Silver at $25: The silver price will climb above $25 in 2017 with the potential to reach towards $30 per ounce. It will be pulled higher by gold but also buoyed by increased industrial demand, clean-tech demand and military spending. Dollar Rally Fades: The dollar may rally a bit higher, but the USD index will ultimately drop back below 100 during 2017 as government spending picks up and deficits soar. The de-dollarization trend will continue in earnest.

This post was published at GoldStockBull on January 2nd, 2017.

Gingrich Warns Biggest Risk For Trump Admin Is They “Lose Their Nerve”

Former Speaker of the House, Newt Gingrich, once considered a front runner for a senior position in the Trump administration, continues to take jabs at the President-elect. After being forced to apologize a few weeks back for saying that Trump no longer wishes to “Drain The Swamp” in Washington D. C., Gingrich is back with new controversial comments suggesting, yet again, that the Trump administration may ultimately cave to the demands of the far left. Per ABC News:
Less than three weeks before the presidential inauguration, leading Trump ally Newt Gingrich said his biggest worry about the incoming administration is that they will “lose their nerve.”
“Look, they’re going to arrive in Washington, and for them to be successful they have to stake out positions that [Democratic National Committee Chairwoman Donna Brazile] will not like and the left will hate,” Gingrich, a former speaker of the House, said in a joint interview with Brazile and ABC News Chief White House correspondent Jonathan Karl. “I’m worried that when they realize how big the problem is, that they decide that they’re just going to do the best they can and give in.”

This post was published at Zero Hedge on Jan 2, 2017.

The Consequences of Helicopter Money

The Federal Open Market Committee, FOMC, of the Federal Reserve voted on Dec. 14 to raise interest rates 0.25%, as we expected. The vote was unanimous including doves such as Fed governor Lael Brainard.
While the rate hike was fully expected by markets, what was not expected was that the Fed struck a hawkish stance on future rate increases. Prior to the December FOMC meeting, the forecast was for two rate hikes before the end of 2017. On Dec. 14, the Fed signaled its intention to increase interest rates three more times in 2017.
The Fed based this more hawkish view on the fact that labor market conditions continue to improve, and slow but steady progress is being made in meeting the Fed’s inflation targets. As long as labor conditions are satisfactory, and inflation is not too high, the Fed will raise rates at a tempo of 1% per year, more or less, until a ‘neutral’ fed funds rate of about 3.25% is achieved.
The Fed is engaged in this tightening cycle not because the economy is running ‘hot’ (it’s not), but because they are desperate to raise rates enough to cut them again in a future recession. The Fed is behind the curve in this process. The Fed should have raised rates to about 3.25% over the course of 2009 to 2013. But, the Fed missed this entire interest rate cycle, instead engaging in fruitless experiments in quantitative easing or QE.

This post was published at Wall Street Examiner on January 2, 2017.

What Keeps Goldman Up At Night About 2017

With 2016 still fresh in most investors’ minds, and questions about 2017 pressing, here is a summary, courtesy of Goldman’s Allison Nathan, of where Goldman believes we closed out 2016, what is in store in the coming year, and ultimately, “what keeps Goldman up at night” about 2017.
2016, and a peek at 2017
2016 was chock-full of surprises, both in markets and in politics. Ironically, though, 9 of the 12 themes we thought *might* be Top of Mind in 2016 effectively made it into our reports this year (our highest batting average yet!). We continue our year-end tradition of taking stock of our 2016 themes, updating/revisiting our favorite graphics for each issue, and highlighting what to look for in 2017.
The year began with a perfect storm of worries that had become all too familiar already in 2015. Oil prices plunged and fears of faltering growth and a sharp depreciation of China’s currency escalated, driving disruptive sell-offs in credit and other risk assets. Confidence in global growth faltered, particularly after an anemic US GDP report for Q1.
But oh, how the world has changed. Today, the price of crude oil is almost exactly double its January low in the wake of announced production cuts by OPEC and key non-OPEC producers (Russia). We expect WTI oil prices to move higher to a peak of $57.50/bbl in 1H17 as the cuts push the oil market into deficit and whittle down the current large inventory surplus. But we also expect shale producers to respond to the higher prices, implying limited upside from there.

This post was published at Zero Hedge on Jan 2, 2017.

Shrinking Oil Giant Pemex Starts 2017 on Wrong Foot

Mexico’s ATM is stewing in a toxic mix.
Despite the partial recovery of oil prices, 2016 was not a kind year to Mexico’s fast-shrinking state-owned (but soon to be privatized) oil giant, Pemex. For over 70 years the company served as a huge funding asset, at times providing as much as one-third of total government revenues. But in 2016 it became a national liability, requiring a 4.2 billion bailout from the government. It’s unlikely to be the last.
During the first 11 months of 2016, the company registered average production of 2.16 million barrels per day, its lowest in more than three decades. Pemex forecasts that production will fall to around 1.94 million barrels a day by 2017, marking the first time that the figure has fallen below the 2 million barrel point since 1980. Given the gathering deterioration in the company’s accounts – including a total debt overhang of around 100 billion – daily production could fall by as much as 1.6 million per day by 2020, Morgan Stanley warns.
As goeth Pemex’s production, so goeth Mexico’s oil revenues, which have shrunk from 6% of GDP three years ago to 2.5% today. The export figures are just as ugly. In 2011, when the price of Brent crude averaged over $100 a barrel, Pemex’s export revenues hit a historic peak of $49 billion, a monthly average of $4.11 billion. In the first quarter of 2016 the monthly average was just $893 million. That’s a plunge of 78%.

This post was published at Wolf Street on Jan 2, 2017.

Basic Income Arrives: Finland To Hand Out Guaranteed Income Of 560 To Lucky Citizens

Just over a year ago, we reported that in what was set to be a pilot experiment in “universal basic income”, Finland would become the first nation to hand out “helicopter money” in the form of cash directly to a select group of citizens.
As of January 1, 2017, the experiment in “basic income” has officially begun, with Finland becoming the first country in Europe to pay its unemployed citizens the guaranteed monthly sum of 560 euros ($587), in a “unique social experiment which is hoped to cut government red tape, reduce poverty and boost employment.” According to Olli Kangas from the Finnish government agency KELA, which is responsible for the country’s social benefits, the two-year trial with the 2,000 randomly picked citizens who starting on the first day of the year, will receive a guaranteed income, with funds that will keep flowing whether participants work or not.
The money, which is guaranteed regardless of income, wealth or employment status, is well below the average private sector income in Finland of 3,500 per month, but is still revolutionary in its broad-sweeping approach and will be closely watched by economists around the globe for its social consequences.

This post was published at Zero Hedge on Jan 2, 2017.

Trump Aide: “Zero Evidence” Russia Influenced Election, Downplays Trump’s “Hacking” Revelations

Over the weekend, Trump made waves among policy and media circles when during a brief, informal exchange with reporters on New Year’s Eve at his Mar-a-Lago estate in Palm Beach, the president-elect questioned the official version of “Russians hacking the election”, saying it was possible “somebody else” compromised the Democratic campaign’s servers, and adding that he will reveal some previously undisclosed facts in the coming days by hinting that “I also know things that other people don’t know, we they cannot be sure of the situation.”
Asked what that information included, the Republican President-elect said, “You will find out on Tuesday or Wednesday.” He did not elaborate.
This naturally prompted curiosity among the press, with some wondering what, if anything Trump knows, above and beyond what has been revealed, while others such as CNN’s Jim Sciutto, suggesting that “Trump’s promise of “new information” on #RussianHacking and his team’s subsequent backing off has echoes of the birther campaign.”

This post was published at Zero Hedge on Jan 2, 2017.