Financial Weapons Of Mass Destruction: The Top 25 U.S. Banks Have 222 Trillion Dollars Of Exposure To Derivatives

The recklessness of the ‘too big to fail’ banks almost doomed them the last time around, but apparently they still haven’t learned from their past mistakes. Today, the top 25 U. S. banks have 222 trillion dollars of exposure to derivatives. In other words, the exposure that these banks have to derivatives contracts is approximately equivalent to the gross domestic product of the United States times twelve. As long as stock prices continue to rise and the U. S. economy stays fairly stable, these extremely risky financial weapons of mass destruction will probably not take down our entire financial system. But someday another major crisis will inevitably happen, and when that day arrives the devastation that these financial instruments will cause will be absolutely unprecedented.
During the great financial crisis of 2008, derivatives played a starring role, and U. S. taxpayers were forced to step in and bail out companies such as AIG that were on the verge of collapse because the risks that they took were just too great.
But now it is happening again, and nobody is really talking very much about it. In a desperate search for higher profits, all of the ‘too big to fail’ banks are gambling like crazy, and at some point a lot of these bets are going to go really bad. The following numbers regarding exposure to derivatives contracts come directly from the OCC’s most recent quarterly report (see Table 2), and as you can see the level of recklessness that we are currently witnessing is more than just a little bit alarming…

This post was published at The Economic Collapse Blog on May 15th, 2017.

Trader Admits Sad Truth – “There’s Little Upside To Believing Anything Nowadays”

Day after day, we are witnessing new and inexpicable shifts in the so-called stock ‘market’ and machines and men battle it out (the latter losing to the former) in the war of information overload and trend analysis. As Richard Breslow, a former FX trader and fund manager who writes for Bloomberg, wrote so pointedly, one of the, many, evil consequences of the current trading environment is that people aren’t really paying attention to what’s going on.
What looks like hyper-sensitivity to every headline and news tidbit, is merely a manifestation of the sad truth that investors have realized there’s very little upside to believing in anything. Market narratives aren’t carefully crafted as new information deepens their texture. They change as if investors are wantonly playing with the remote control on the television set.

This post was published at Zero Hedge on May 15, 2017.

Some Of The Funds Losing Billions In Puerto Rico’s Historic Bankruptcy

In the aftermath of Puerto Rico’s historic bankruptcy, a clearer picture of losses accrued by U. S. mutual funds on their holdings of Puerto Rican debt is beginning to emerge: the WSJ has calculated the red ink at as much as $5.4 billion over the last five years on total holdings of $14.6 billion. Wall Street’s paper of record lists the funds who have piled up losses, both realized and unrealized, on the trade. These include: Franklin Resources, Oppenheimer, Vanguard, Goldman Sachs Asset Management, Western, Lord, Abbett, AllianceBernstein and Dreyfus.
Of these, Franklin and Oppenheimer are the biggest losers, according to Morningstar data cited by the Journal. Oppenheimer has lost as much as $2.1 billion, and Franklin as much as $1.6 billion. That’s compared with AUMs of $230 billion and $741 billion, respectively.
Meanwhile, six other fund families managed by Vanguard, Goldman, Western Asset, Lord Abbett, AllianceBernstein Holding and Dreyfus have racked up between $100 million and $200 million in losses each.
Of course, in the grand scheme of the funds’ AUMs, the losses so far are negligible, so before retail investors assume that Meredith Whitney’s prediction is finally coming true, resulting in another muni fund panic, it is worth recalling that all these funds have at least $100 billion each in muni-bond assets under management. Furthermore, these investors are likely in better shape than some of their hedge fund colleagues as the damage done to mutual funds, and by extension the retirees and middle-class savers to which they cater, will be an important factor in the court-mandated restructuring of the island’s debt, which begins Wednesday with a hearing in San Juan.
As a reminder, earlier this month, the island’s governing body petitioned for – and its federal oversight board approved – its own version of bankruptcy protection under Title III of a rescue law passed by Congress late last year.

This post was published at Zero Hedge on May 15, 2017.

Tax Reform and the ‘Repatriation’ Trade

Since the Trump victory we have heard all about the coming fiscal policies that would replace the non-stop and brilliantly evil* monetary policies employed by the Fed since the 2008 market crash. These fiscal policies range from the hair-brained (rust belt factory job repatriation) to the silly (building a border wall in lieu of modernizing security-focused information and surveillance technologies) to the arduous (fixing the Healthcare system) to the sound (well-targeted tax cuts). We’ll get tax cuts, but how well targeted they’ll turn out to be will be debated endlessly and I for one don’t think the trend of the rich getting hyper richer and the poor getting poorer is going to reverse any time soon. For reference, see this post at Biiwii.
Under the taxation aspect of the coming fiscal policy bundle, a consensus is gathering about how unbelievably beneficial this will be to the large, multi-national technology companies. We are talking the likes of Apple, Intel, Cisco, Microsoft, etc. So much so that Tom McClellan is eventalking about a ‘QE coming for Tech’ in the form of repatriation of massive hordes of sheltered tax dollars.
Now, these are the financial markets and as with the bullish play on Europe’s actual QE as noted by Kevin Muir of the Macro Tourist, we need to realize that these kinds of stories come out in mature bull markets. I am not saying I am not on board; indeed I still lean bullish on the markets, but resoundingly bullish assertions… meet grain of salt.

This post was published at GoldSeek on 15 May 2017.

Stocks and Precious Metals Charts – No Worries

As a reminder there will be a stock option expiration this week.
There will be a Comex precious metals options expiration next week.
The commodities were rallying a bit today on a lower dollar and higher oil.
The SP managed to stick a cash close over 2400.
No worries in the markets. As long as the volumes are low and the news is less than a punch in the face.

This post was published at Jesses Crossroads Cafe on 15 MAY 2017.

Spicer Back At The Podium With Monday’s Press Briefing

After evading the press for much of the past week in the aftermath of Comey’s firing, and following this weekend’s unconfirmed report that Trump may be seeking to fire Sean Spicer (along with several other key members of the Trump inner circle), not to mention the latest SNL skit, today’s press briefing may be somewhat awkward affair for the White House press secretary.
Expect more of the same: questions on Comey, whether there is a growing chasm between Trump and the Senate on healthcare policy as well as questions on the global malware attack.

This post was published at Zero Hedge on May 15, 2017.


GOLD: $1230.65 UP $4.60
Silver: $16.62 UP 20 cent(s)
Closing access prices:
Gold $1230.75
silver: $16.65
Premium of Shanghai 2nd fix/NY:$16.18
LONDON FIRST GOLD FIX: 5:30 am est $1231.50
For comex gold:
For silver:
For silver: MAY
Total number of notices filed so far this month: 4439 for 22,195,000 oz

This post was published at Harvey Organ Blog on May 15, 2017.

Let Them Eat Cake

All the signs of peak bubble conditions are back – levels comparable to 1929, 2000, and the 2008 financial crisis. Artificially low interest rates coupled with quantitative easing (QE) has brought back the same dynamics that caused previous bubbles to pop as a result of unsustainable extremes, with runaway debt levels up and down the line at center. Yes, the cake eaters have been running rampant since 2008, however even with low interest rates sponsoring the largest debt bubble in history, this madness can’t continue indefinitely. The debt bubble(s) will be popped at some point (soon?).
This is evidenced in bank runs emerging in periphery economies – periphery economies that are coming closer to the core every day. As with the last such instances few saw coming at the time, the next unwinding will most assuredly arrive as well, this time likely exhibiting characteristics of previous episodes as well. Like the Canadian mortgage lender that recently crashed some 60% in one day, the single biggest surprise when they start will likely be the speed at which things can unravel, as cake eaters have become desensitized to such risk with the market interventions these past years.
Certainly some of the cake eaters in Canada have had their bell’s rung in past few weeks – with many more such instances likely on the way later this year – ‘the bell toll’s for thee’.

This post was published at GoldSeek on 15 May 2017.

Oil Jumps as Saudis And Russians Agree to Extend OPEC Deal Into 2018

What Saudi Arabia’s Oil Minister said in March will not happen, has happened: in a joint statement, Khalid al-Falih and his Russian counterpart Alexander Novak said that OPEC and Russia have agreed to extend the oil production cut deal struck at the end of last year until March 2018.
The news immediately sent prices higher, although the rise was capped by yet another weekly build in the number of active drilling rigs in the US, bringing the total up to 885 – an increase by 479 rigs over the past 12 months, along with production increases in Libya.
At around US$49 a barrel for WTI and US$52 for Brent, the benchmarks are basically where they were at the time the initial OPEC deal was announced. In the first few weeks after the announcement, prices spiked to US$55-56 for Brent and US$54 for WTI, but that didn’t last long: there was too much doubt among investors and traders that the deal would succeed.
In the beginning of the production cuts, the initial cause for worry was that some OPEC members would cheat as they have a history of doing so. As compliance continued growing at a steady, commendable rate, another problem came to the fore: US shale producers were expanding production in a no-nonsense manner. Crude oil inventories in the world’s top consumer were rising by millions of barrels every week and global stockpiles remained stubbornly above the five-year average.

This post was published at FinancialSense on 05/15/2017.

Here’s Why You’ll Pay Higher Gas Prices Whatever The Market

The average gasoline tax in the U. S. is 49.5 cents per gallon, according to data from the American Petroleum Institute. That’s not too bad as far as averages go, but it has been climbing over the last five years and it will continue rising as states lose hope that the federal government will chip in for infrastructure construction and maintenance, and transportation.
Washington has been wary of raising the federal fuel tax. So wary, in fact, that the last time it adjusted the rate was more than two decades ago. Meanwhile, international oil prices have been jumping up and down, cars have become much more fuel efficient, and inflation has been biting into state income from gas taxes. In addition, there is a whole new challenge in the shape of electric vehicles that in the future will increasingly undermine fuel sales income for states.

This post was published at Zero Hedge on May 15, 2017.

SWOT Analysis: It Could Be Time to Invest In Commodities

The best performing precious metal for the week was nearly a tie with platinum up 0.85 percent and silver with a gain of 0.70 percent, as gold, silver and platinum began to find support towards the close of the week. A Bloomberg survey this week shows that traders are split on their outlook for gold prices, with six bullish and four bearish. Gold demand is rising in the world’s two biggest gold markets, India and China. In India, gold imports increased more than four-fold in April, reports Bloomberg, to 98.3 metric tons compared to 22.2 tons a year earlier, in anticipation of the wedding season. Meanwhile in China, gold demand may rise to the highest level in four years in 2017. Consumption could surpass 1,000 metric tons compared to 975 tons last year, driven by slowing property prices and tensions with North Korea. Bank of China International led a $29 million capital raise for an online trading platform, G-banker. G-banker allows users to buy, sell, deposit and withdraw gold on its digital platform and mobile app.

This post was published at GoldSeek on 15 May 2017.

Too Far, Too Fast? Strategists Expect European Stocks To Tumble By Year-End

Equity strategists are cooling on the prospects for further gains in European stocks just as investors poured a record amount of money into the region’s equity funds…
After a French election victory for centrist Emmanuel Macron and analysts suggesting that optimism over better profits is largely priced in, forecasters now see fewer triggers for the rally to continue in 2017.

This post was published at Zero Hedge on May 15, 2017.

Warning: Get Your Money Out Of Bond Funds

Whenever I constructed a ‘difficult to sell’ muni deal, I could count on the Rochester Family of Funds[Oppenheimer’s Rochester muni fund complex] to buy the deal if there was some ‘juice’ in the yield. After all its other peoples money right? – an email from a multi-decade muni bond professional to IRD this a.m.
IRD warned about Oppenheimer’s exposure to Puerto Rico in July 2015
Puerto Rico officially filed bankruptcy and it appears that Oppenheimer Funds will be taking it on the chin to the tune of at least $2.1 billion in losses. Oppenheimer was the biggest bagholder of PR bonds. In July 2015, Investment Research Dynamics issued this warning about leaving money in Oppenheimer bond funds:
The Oppenheimer Funds mutual fund complex is the largest bagholder of Puerto Rico’s debt. including $4.4 billion of uninsured bonds. Not including tobacco bonds, insured debt and pre-funded bonds, as much as 13% of some of Oppenheimer’s bond funds’ total holding holdings are in Puerto Rico bonds. – Oppenheimer Will Be A Bagholder

This post was published at Investment Research Dynamics on May 15, 2017.

The Math Behind OPEC’s Revised Production Cut Still Does Not Work

#India #oil demand growth is slowing and may be only +185,000 bpd this year, says JBC #Energy, vs +290,000 in 2016 ( @IEA )#OPEC #OOTT #gas
— Christopher Johnson (@chris1reuters) May 15, 2017

“Whatever it takes.”
That’s what Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak said in a statement overnight in Beijing they would do to reduce the global oil inventory overhang, using the immortal phrase coined by ECB’s Mario Draghi five years ago in his successful bid to defend the euro. For OPEC, however, “whatever it takes” may not be enough.
As reported earlier oil surged today, with Brent rising above its 50 and 200 DMA, after Saudi Arabia and Russia announced an agreement that the OPEC production cuts of 1.2MMbbls agreed upon last year in Vienna, should be extended through the end of the first quarter of 2018, effectively assuring that the May 25 OPEC summit later this month will agree on the same. There is, however, a problem: based on the simple math, a simple extension will not be nearly enough to bring the oil market back into balance.

This post was published at Zero Hedge on May 15, 2017.

No…You Can’t Have Your 90’s Back

As I was writing the newsletter this past weekend, the following email rolled into my inbox:
‘The S&P will double. And not just eventually. But over the next 5 years (or sooner). Sounds like a Herculean task on the surface, but it’s really not.
My 5-year doubling thesis also means that we won’t see another recession until stocks double again, nor will we see another bear market until stocks double again. Got it?’
The email goes on to make the case as to why the markets will do something that has never occurred before in history, or ‘why this time is different,’ which can be summed up in one word – ‘Trumponomics’
‘It’s no secret that the market has been re-energized this year on the Trump administration’s pro-growth agenda, which includes the highly anticipated corporate tax cuts.
There’s no doubt some of that will go to stock buybacks. But with the US suddenly becoming one of the most business-friendly countries in the world, you will see massive new corporate investment.
These tax cuts alone could usher in decades of new prosperity.
And it should be noted that these aren’t one-time stimulus packages that provide only temporary incentives and modest economic benefits. We’re talking about transformational growth due to long-term structural changes in how companies do business in America.
Instead of the subpar 1.5-2.0% annual GDP that the market has been struggling to achieve over the last 8 years, the economy is expected to double that pace to 3-4%. But even with the weaker than normal economic pace we have been going through, the market in just the last 5 years has produced a total compounded return of 98.2%.
So it’s not hard to imagine that if GDP were to double, earnings would soar, and stocks could easily gain another 100% over the next 5 years, and likely a whole lot more!’

This post was published at Zero Hedge on May 15, 2017.

Can Puerto Rico Escape Disaster?

In early May, Puerto Rico filed for bankruptcy in federal court to stave off lawsuits, under a law Congress passed last year, to help the island cut its debt and escape financial disaster. The saga now heads to federal court, where the struggle between Puerto Rico and its creditors will be decided.

The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) law set up a federal oversight board to handle the territory’s debt negotiations and the financial obligations it owes.
Article III of PROMESA provides temporary protection from litigation, which expired last week. Puerto Rico has no way to pay the $123 billion in bonds and pension debt it owes, which includes more than $49 billion in pension liabilities.
PROMESA requires good-faith negotiations toward an out-of-court deal before any filing, as well as to establish ‘procedures necessary to deliver’ audited financial statements for any entity entering bankruptcy.
Some Puerto Rican agencies still have not published such statements, and creditors have complained for a while that the oversight board has not done enough to encourage compromises outside of court.
Is Puerto Rico like Greece?
Well no. Public lenders, such as the Eurozone and the International Monetary Fund (IMF), mostly hold Greece’s debt. Puerto Rico’s debt is in the hands of private investors, like hedge funds, mutual funds, and individuals.

This post was published at FinancialSense on 05/15/2017.

Key Events In The Coming Quiet Week: US Industrial Production In Focus

It is a relatively quiet week for economic news in the and Eurozone with focus turning to UK data, Japan 1Q GDP, inflation in Canada & Australia’s employment report. Norway GDP should show continued improvement and the Riksbank proposal on a new policy target will also draw interest. In EM there are monetary policy meetings in Chile, Indonesia, Mexico and Poland.
The start to the week is even more quiet today with no significant data to highlight, while in the US the May empire manufacturing reading is due along with the NAHB housing market index for May.
On Tuesday, with little of note in Asia it’ll be straight to Europe where the final April CPI revisions are due in France along with the April CPI/RPI/PPI data docket in the UK. Euro area Q1 GDP and March trade data follows, while the May ZEW survey is also due in Germany. In the US tomorrow we’re due to receive April housing starts, building permits and industrial production data.
We’re kicking off Wednesday in Japan where the March industrial production print is due. In the UK we’ll get March and April employment data, while April CPI for the Euro area is also due.
There is no data of note in the US on Wednesday.
Thursday kicks off in Japan again with the Q1 preliminary GDP report, while in China we’re also due to get April property prices data. In France on Thursday we’ll get Q1 employment data while in the UK we’ll get April retail sales. In the US on Thursday the data includes initial jobless claims, Philly Fed business outlook for May and Conference Board’s leading index for April.
It’s a quiet end to the week on Friday. In Germany we get April PPI while in the afternoon session we get the flash consumer confidence reading for the Euro area in May. There is no data in the US on Friday.

This post was published at Zero Hedge on May 15, 2017.

Gold and Silver Market Morning: May 15 2017 – Gold still consolidating with a stronger bias!

Gold Today – New York closed at $1,227.90 Friday after closing at$1,219.30 Thursday. London opened at $1,231.00 today.
Overall the dollar was weaker against global currencies, early today. Before London’s opening:
– The $: was weaker at $1.0979 after Friday’s $1.0864: 1.
– The Dollar index was weaker at 98.82 after Friday’s 99.64.
– The Yen was stronger at 113.32 after Friday’s 113.75:$1.
– The Yuan was stronger at 6.8919 after Friday’s 6.9047: $1.
– The Pound Sterling was stronger at $1.2919 after Friday’s $1.2875: 1.
Yuan Gold Fix
The Shanghai Gold Exchange was trading at 276.90 towards the close today. This translates into $1,244.66. New York closed at a $16.76discount to Shanghai’s close Friday. London opened at a discount of$13.66 to Shanghai’s close today.
Shanghai continues to rise, pulling London higher and now New York higher. Pricing power is with Shanghai today.
On today’s moves, we would say Shanghai is dominating pricing power at the moment.
LBMA price setting: The LBMA gold price was set today at$1,231.50 from Friday’s $1,227.90.

This post was published at GoldSeek on 15 May 2017.