The Obama/Fed Misery Index (Terrible Wage Growth/Doubling Federal Debt And Worst Wealth Distribution Since The Great Depression)

Now that the Obama Reign of (Economic) Error has ended, let’s examine a new misery index that demonstrates how most Americans suffered from a nonexistent economic recovery even with a doubling of the Federal debt.
Here is a chart showing Federal debt held by investors (as opposed to Federal debt held by government accounts) as a percentage of gross domestic product that grew from less than 40% to over 72% of GDP. Also notice that average hourly earnings of production and nonsupervisory employees YoY never exceeded 2.8% after the end of The Great Recession.

This post was published at Wall Street Examiner on January 22, 2017.

Goldman Warns The Following Assets Are “Most Vulnerable To Substantial Repricing”

In an overnight note by Goldman’s Ian Wright titled “Calm before the storm”, which looks at pricing of risk during the current low-vol episode, the GS strategist writes that in the run up to the inauguration last Friday of the 45th President of the US, investors have remained keen to discuss all things at the intersection of President Trump and markets. And yet, despite the uncertainty, volatility has been very low, which is why Goldman tries to estimate which assets appear the most fragile in the event that volatility picks up.
Goldman uses three frameworks (valuation, vol-adjusted move sizes, and return distribution tail widths) and its forward-looking overlay to assess which asset classes appear “most vulnerable to substantial repricing.” This is what the bank found:
“We do not see any asset classes as particularly ‘stable’ at this point in time. In our view, at an asset class level, both credit and FX seem the most vulnerable by most metrics. In addition, at an individual asset level, German and UK rates and the S&P 500 appear most vulnerable.“
Some more details from Goldman:

This post was published at Zero Hedge on Jan 23, 2017.

Free Trade versus “Free Trade”

NPR featured an unintentionally funny piece this morning on Donald Trump’s views toward the EU and free trade. The guest, former US ambassador to the EU Anthony Gardner, rightfully criticized the president’s view that “protection will lead to great prosperity and strength,” and called for continued global engagement by US companies and consumers. But he revealed, perhaps inadvertently, what political actors mean by “free trade.”
Specifically, Gardner expressed great skepticism towards the prospect of the US striking a bilateral free-trade deal with the UK, supposedly one of Trump’s top objectives in his upcoming meeting with new Prime Minister Theresa May. Free-trade agreements are complex, Gardner informed us, and negotiating one will be neither easy nor quick.
Why? To economists, free trade means the absence of government interference with trade: no tariffs, quotas, subsidies, or other interventions, explicit or implicit. To politicians, “free-trade” means a complex set of managed trade policies (Gardner even referred to the solemn obligation to “write the rules for global trade,” which in his mind is something either our government does or a foreign government does). Which imports will be taxed, and at what rates? Which exports will be subsidized, and at what levels? How will labor, environmental, and social policies be enforced by domestic and foreign governments? For government officials, countries are engaged in “free trade” when they agree on a complex package of explicit and implicit taxes and subsidies such that neither has a special advantage over the other, or is disadvantaged relative to some other trading partner (however such advantages are defined).

This post was published at Ludwig von Mises Institute on Jan 23, 2017.

The Air Is Releasing From The Hope Bubble

The post-election run-up in stocks was fueled purely by ‘hope and change’ energy. Now that Trump has assumed the mantle, reality will hit like an icy shower. The non-‘alternative facts’ about the economy continue to show contraction in real economic activity. The retail sales report for December was an utter disaster, especially if you strip out gasoline and autos.
The price of gasoline rose in December, which raised the nominal level of gasoline sales but inflation-adjusted is another matter. With autos, as it turns out based on measurable dealer inventories, a large portion of the auto ‘sales’ were deliveries to dealers financed by ‘floor financing programs’ and not actual sales to end-users.

This post was published at Investment Research Dynamics on January 23, 2017.

For The First Time Ever Russia Beats Saudi Arabia As China’s Top Oil Supplier

While OPEC members were infighting over crude production and export quotas, posturing with temporary production cuts (just so the Saudis could get a six month reprieve during which it clears out a massive internal crude glut), Russia was busy capturing market share, and according to overnight Chinese data, Russia overtook Saudi Arabia as China’s top oil supplier last year for the first time ever boosted by robust demand from independent Chinese “teapot” refineries.
Russia boosted oil exports to China by 24% from 2015 to 52.5 million metric tons, or 1.05 million barrels per day, according to data released Monday by the General Administration of Customs, cited by Bloomberg. In a blow to Ridyah’s ambitions, the Middle Eastern kingdom slipped to second place, shipping 51 million tons, or 1.02 million barrels per day, little changed from a year earlier.
For December, Russia also held the top spot with supplies up 4.8 percent from the same month a year earlier at 1.19 million bpd. Meanwhile Saudi sales dropped nearly 20 percent from a year earlier to 841,820 bpd, data from the Chinese General Administration of Customs showed.

This post was published at Zero Hedge on Jan 23, 2017.

Gold Price To 2 Month High As Fiery Trump Declares World Order

Gold price to 2 month high as fiery Trump declares New American Order
– ‘Trumponomics’: Politics and economic policy in 140 characters
– The ‘intelligence’ according to Trump
– Trump, Putin and Russia – the great bromance
– Trump – Bull in a China shop
– Trade and currency wars with China and other nations
– Trump – Fan of gold and golden tweets
– Conclusion – Trump may be the ‘Golden Ticket’
On Friday Donald J Trump became the 45th President of the United States of America.

This post was published at Gold Core on January 23, 2017.

Shiller Warns US Stock Market ‘Trump Effect’ “Is Based On Illusion”

Speculative markets have always been vulnerable to illusion. But seeing the folly in markets provides no clear advantage in forecasting outcomes, because changes in the force of the illusion are difficult to predict.
In the US, two illusions have been important recently in financial markets.
One is the carefully nurtured perception that President-elect Donald Trump is a business genius who can apply his deal-making skills to make America great again.
The other is a naturally occurring illusion: the proximity of Dow 20,000. The Dow Jones Industrial Average has been above 19,000 since November, and countless news stories have focused on its flirtation with the 20,000 barrier – which might be crossed by the time this commentary is published. Whatever happens, Dow 20,000 will still have a psychological impact on markets.
Trump has never been clear and consistent about what he will do as president. Tax cuts are clearly on his agenda, and the stimulus could lead to higher asset prices. Lower corporate taxes are naturally supposed to lead to higher share prices, while cuts in personal income tax might lead to higher home prices (though possibly offset by other changes in the tax system).
But it is not just Trump’s proposed tax changes that plausibly affect market psychology. The US has never had a president like him. Not only is he an actor, like Ronald Reagan; he is also a motivational writer and speaker, a brand name in real estate, and a tough deal maker. If he ever reveals his financial information, or if his family is able to use his influence as president to improve its bottom line, he might even prove to be successful in business.

This post was published at Zero Hedge on Jan 23, 2017.

The Bank of England and the ECB Have a Credibility Problem

Mainstream media are worried about 2017 shocks. So they should be. If you had gambled a pound (or euro) this time last year on a triple accumulator; Leicester City to be English football champions, Brexit, and then Trump, you would have redeemed your betting slip for a million. Bookmakers are not offering odds anywhere like that on a ‘quad’ bet now popular; i) Geert Wilders (Netherlands, March 15th), presently polling at 20%, ii) Marine Le Pen, (France, April 23rd), 25%; iii) Frauke Petry and Jorg Meuthen (Germany, August 27th), 13.5%; iv) Beppe Grillo of 5 Star (Italy, date uncertain, perhaps October), 28%.
For the ECB and Bank of England, already struggling with separate credibility problems discussed below, any such shocks might prove rather welcome. How so, you may ask, given that they lobbied for ‘Remain’ and obviously would have been delighted with Clinton?
Since quelling Bundesbank objections to QE at end 2014, the ECB has had a free run to apply whatever monetary policies it likes. However, unemployment levels (although declining for several quarters) are still worrying, and sections of Europe’s banking system do not feel particularly safe. However, many hedge funds and other highly leveraged investors have had another decent year making fairly obvious bets on the increasingly predictable policy responses to various events (Brexit and Trump, perhaps not Leicester City). The ECB has always had one eye on protecting its reputation.

This post was published at Ludwig von Mises Institute on January 23, 2017.

SWOT Analysis: Gold Moves On Trump Inauguration

By Frank Holmes
The best performing precious metal for the week was palladium with a gain of 4.92 percent. Most of the gains came on Friday after Sibanya Gold’s proposed acquisition of Stillwater Mining passed U. S. antitrust conditions. Not only does Stillwater produce palladium, it’s also one of the largest recyclers of used automobile catalytic converters. James Steel of HSBC noted that the supply of palladium has stagnated in recent years while auto sales have soared. Gold traders and analysts surveyed by Bloomberg are bullish on the metal for a fourth straight week, citing uncertainty surrounding Donald Trump’s inauguration today. ‘As the inauguration of Trump draws close, I think people are realizing that potentially this could be a very stormy Presidency and gold may well benefit from that,’ said David Govett earlier in the week, an analyst at Marex Spectron Group in London. The start of the year is usually positive for gold, reports Bloomberg. As you can see in the chart below, China attracted $52 million into commodity-linked ETFs over the past week. A weakening yuan and capital outflows from the Asian nation are adding to the global forces helping to boost demand for gold, reports Bloomberg. Investors are seeing an alternative after the yuan sustained its worst annual loss against the dollar in more than two decades, the article continues.

This post was published at GoldSeek on Monday, 23 January 2017.

Peso, Loonie Drop After NAFTA Renegotiation Executive Order Headlines

Confirming his campaign rhetoric and inaugural address tone, President Donald Trump is expected to sign an executive order as early as Monday to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico, according to NBC News’ Kristen Welker.
President Donald Trump is expected to sign an executive order as early as Monday stating his intention to renegotiate the free trade agreement between the United States, Canada and Mexico, a White House official told NBC News. Eliminating the North American Free Trade Agreement (NAFTA), which was crafted by former President Bill Clinton and enacted in 1994, was a frequent Trump campaign promise.
The deal was intended to eliminate most trade tariffs between the three nations, increase investment and tighten protection and enforcement of intellectual property.

This post was published at Zero Hedge on Jan 23, 2017.

The US dollar is now overvalued against almost every currency in the world

In September 1986, The Economist weekly newspaper published its first-ever ‘Big Mac Index’.
It was a light-hearted way for the paper to gauge whether foreign currencies are over- or under-valued by comparing the prices of Big Macs around the world.
In theory, the price of a Big Mac in Rio de Janeiro should be the same as a Big Mac in Cairo or Toronto.
After all, no matter where in the world you buy one, a Big Mac generally consists of the same ingredients – two all beef patties, special sauce, etc.
A Big Mac currently sells for 49 pesos in Mexico, for example; at the current exchange rate, that’s about $2.23 US dollars.
Meanwhile in Switzerland, a Big Mac sells for 6.50 francs, or roughly USD $6.35.
This means that a Big Mac in Switzerland costs 2.8x as much as the exact same burger in Mexico.

This post was published at Sovereign Man on January 23, 2017.

The Dollar Index Is At A Crucial Level

Via Dana Lyons’ Tumblr,
The U. S. Dollar is testing the breakout point of its 20-month trading range.
On an Inauguration Day in which the overriding theme of the incoming President’s speech was one of protectionism, it was fitting that the Chart Of The Day dealt with the U. S. Dollar protecting its own chart ‘turf’. Following the Dollar’s explosive rally from 2014 to 2015, it settled into a 20-month consolidation. In the case of the Dollar Index (DXY), this relatively tight range stretched from roughly 92.5 to 100.5. In the frenzied post-election action in the financial markets, the DXY was finally able to break out above the top of its range. And after a brief test of the 100.5 breakout area in early December, the DXY traded as high as 103.82. In recent weeks, however, we have seen it pull back to where it is once again presently testing the 100.5 breakout level.

This post was published at Zero Hedge on Jan 23, 2017.

Futures, Dollar Slide; European Stocks At 3-Week Lows As “Trump Reality Sets In”

While US stocks closed near session, and all time highs on Friday, the first green close on inauguration day in over 50 years, Monday has seen a modest case of buyer’s remorse, with European stocks sliding, Asian shares mixed and U. S. futures lower as the dollar weakened for the 3rd consecutive day to a six-week low, dropping as much as 1% against the Yen, as anxious investors awaited more details of Donald Trump’s policies, or – as Reuters put it – the “Trump reality set in.” While European shares and US equity futures sold off in early trading, tracking the USDJPY, the now traditional buying levitation wave has emerged, pushing US futures close to unchanged on the session.
The modest risk off session, which comes after world stocks hit multi-year highs earlier this month on expectations Trump would boost growth and inflation with extraordinary fiscal spending measures, has seen shares in developed markets fall with the dollar, while lifting metals and Treasuries after Donald Trump offered little more on plans to boost growth while stirring concerns over protectionism in his first days in office. Europe’s Stoxx 600 Index dropped to its lowest level this year, while U. S. futures slid and the dollar fell against all major peers. The weaker currency pushed aluminum to the highest in more than a year, while ten-year Treasury yields fell a second day.
“The focus this morning is on the protectionist rhetoric and the lack of detail on economic stimulus, so it’s a nervous start (to the presidency),” said Investec economist Victoria Clarke. “The other concern is how the Fed interprets Trump’s stance, the worry being the less he does on fiscal stimulus the more nervous they may get on pushing the rate hikes through.”
While the U. S. President’s campaign-trail promises to boost growth and spending helped drive a post-election rally in equities and the dollar, by Monday, investors were calling into question how words would be translated into actions. So far, Trump has focused on a feud with the press over attendance at his inauguration rather than offer concrete plans, leaving investors in limbo. As the chart below shows, while stock dispersion may have risen in recent weeks, cross-asset correlation remains as high as ever, with most asset classes trading largely as a continuation of the Trump trade.

This post was published at Zero Hedge on Jan 23, 2017.

“China’s Carl Icahn” Hedge Fund Billionaire Sentenced To Five And A Half Years In Prison

Back in late 2015, when the Chinese stock bubble had violently burst and was suffering daily moves of 10% in either direction as retail traders scrambled to get out of what until recently was a “sure thing”, Beijing did what it does best, and found a convenient scapegoat on which to blame the market crash – which was function of the country’s relentless debt bubble and lack of trading regulations – in late 2015 it arrested one of the most prominent hedge fund traders, Xu Xiang, also known as ‘hedge fund brother No. 1′ and “China’s Carl Icahn” for his phenomenal, and rigged, winning record in the stock market, who ran the Shanghai-based Zexi Investment.
Which is not to say that Xu wasn’t engaged in shady activites: while the country’s stock prices plummeted in 2015, Zexi’s investments earned an average 218%, far more than the second-most profitable player, Shen Zhou Mu Fund, which reported a 94% yield, according to market analysis website
Xu was detained by police in November 2015 on the highway between Shanghai and Ningbo, in an arrest that was captured in photographs and widely circulated on social media. Police later froze over $1 billion of shares in listed companies with connections to Xu’s investments, according to exchange filings by those firms. Xu, born in 1976, started investing at high school in the eastern city of Ningbo, according to the official People’s Daily. Skipping university, he instead became a professional investor, accumulating over 4 billion yuan in personal wealth and managing tens of billions of yuan, the People’s Daily reported in 2015.

This post was published at Zero Hedge on Jan 23, 2017.

“Protection will lead to great prosperity”

After being mostly off the grid on Friday, I listened to the Trump inauguration speech on Saturday morning. While I have lots of thoughts and opinions, I want to focus on an item where I am qualified; namely my former area of expertise as someone who was in essence told by the media over and over again ‘you don’t exist’, while the consumerist, financialized and globalized economy flourished. By ‘you’ I of course mean me, an owner of a small American manufacturing business. My area of focus from the speech…
‘We’ve made other countries rich while the wealth, strength and confidence of our country has dissipated over the horizon. One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind. The wealth of the middle class has been ripped from their homes and then redistributed all across the world. But that is the past and now we are looking only to the future.
We assembled here today are issuing a new decree to be heard in every city, in every foreign capital and in every hall of power. From this day forward a new vision will govern our land. From this day forward it’s going to be ‘America first… America first… America first’!
Every decision on trade, on taxes on foreign affairs will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs.
Protection will lead to great prosperity and strength… ‘
There was reason for concern about unfair trade back in the 1990’s as a predatory Wall Street feasted, and the financialized, consumer economy (overseen by the real economic blight known as the Federal Reserve) benefited at the expense of many of those workers back then. But in my own experience, these pressures forced us to automate and become exponentially more efficient. Quality came up, costs went down and most importantly profitability and employee compensation went up. From 2004…

This post was published at GoldSeek on Monday, 23 January 2017.

Foreigners Are Dumping U.S. Debt At A Record Pace And Our $20 Trillion National Debt Is Poised To Become A Major Crisis

While most of the country has been focused on the inauguration of Donald Trump, a very real crisis has been brewing behind the scenes. Foreigners are dumping U. S. debt at a faster rate than we have ever seen before, and U. S. Treasury yields have been rising. This is potentially a massive problem, because our entire debt-fueled standard of living is dependent on foreigners lending us gigantic mountains of money at ultra-low interest rates. If the average rate of interest on U. S. government debt just got back to 5 percent, which would still be below the long-term average, we would be paying out about a trillion dollars a year just in interest on the national debt. If foreigners keep dumping our debt and if Treasury yields keep climbing, a major financial implosion of historic proportions is absolutely guaranteed within the next four years.
One of the most significant aspects of the ‘Obama legacy’ is the appalling mountain of debt that he has left behind. As I write this article, the U. S. national debt is sitting at 19.944 trillion dollars. During Obama’s eight years, a staggering 9.3 trillion dollars was added to the national debt. When you break that number down, it comes to more than a hundred million dollars every single hour of every single day while Obama was living in the White House. In just two terms, Obama added almost as much to the national debt as all of the other presidents before him combined.
What Obama and the members of Congress that cooperated with him have done to future generations of Americans is beyond criminal.

This post was published at The Economic Collapse Blog on January 22nd, 2017.

Trump Warns “We Are Going To Be Imposing A Very Major Border Tax”, Will “Cut Regulations By 75%”

One look at the Dollar Index in the last week and it’s clear just how ‘variable’ President Trump’s position has been on trade and so-called ‘border adjustments’. In the space of a few days, he has swung from being against a border adjustment, to possibly being for it, and now today confirming that “we are going to impose a major border tax.” Yen, Peso, and Loonie are all sliding further on the headline.
Specifically, as the clips below show, Trump promised business leaders a “very major” border tax and said he would cut regulations by 75%. Trump held a breakfast meeting with the business leaders he named to an advisory panel on manufacturing, led by Andrew Liveris, chief executive officer of Dow Chemical Co. Other business leaders at the morning meeting with Trump included Michael Dell, chairman and CEO of Dell Inc.; Jeff Fettig, chairman and CEO of Whirlpool Corp.; Mark Fields, president and CEO of Ford Motor Co.; and Marillyn Hewson, chairman and CEO of Lockheed Martin Corp.
Some highlights: ‘We’re trying to get it down to anywhere from 15 to 20 percent, and it’s now 35 percent, but it’s probably more 38 percent than it is 35′ ‘What we want to do is bring manufacturing back… It’s what the people wanted’ ‘What we want is fair trade’

This post was published at Zero Hedge on Jan 23, 2017.

Gold Trumps Stocks In Presidential Transition Years

Bullion bulls betting that this rally has more room to run have history on their side with the arrival of a new U. S. president.
As Bloomberg reports, a look at recent presidential transitions supports optimism among traders over the metal’s prospects. Gold has averaged gains of almost 15% in years marking the inauguration of a new president since the 1970s, advancing in five of those seven years. In contrast, the S&P 500 index of equities declined in four of those years for an average loss over the period of 0.9 percent.

This post was published at Zero Hedge on Jan 23, 2017.

Ireland’s Monetary Gold Reserves: High Level Secrecy vs. Freedom of Information – Part I

This article and a sequel article together chronicle a long-running investigation that has attempted, with limited success to date, to establish a number of basic details about Ireland’s official monetary gold reserves, basic details such as whether this gold is actually allocated, what type of storage contract the gold is stored under, and supporting documentation in the form of a gold bar weight list. Ireland’s gold reserves are held by the Central Bank of Ireland but are predominantly stored (supposedly) with the Bank of England in London.
At many points along the way, this investigation has been hindered and stymied by lack of cooperation from the Central Bank of Ireland and the Irish Government’s Department of Finance. Freedom of Information requests have been ignored, rejected and refused, and there has also been outright interference from the Bank of England. Many of these obstacles are featured below and in the sequel article.
6 Tonnes of Gold Ireland ‘only’ owns 6 tonnes of gold in its monetary reserves, which is a fraction of the gold holdings that many of the large European central banks are said to hold. For such a small holding, it may be surprising that basic details of the Irish gold remain a closely guarded secret. However, it’s worth remembering that Ireland is a member of the Eurozone, that the Central Bank of Ireland is a member bank of the European Central Bank (ECB), and that the Irish gold is (supposedly) stored at the Bank of England vaults. Given the clubs that the Central Bank of Ireland is in or is a part of, it is arguably ECB policy and Bank of England policy on gold secrecy which primarily dictates what the Central Bank of Ireland is allowed to say or not to say about the Irish gold reserves.

This post was published at Bullion Star on 23 Jan 2017.