Saudi Arabia To Trim Oil Exports To US To Force Inventories Lower

Authored by Zainab Calcuttawala via OilPrice.com,
Riyadh plans to purposely reduce exports to the United States to force a reduction in the latter’s sizeable inventories, which are preventing a greater rise in global oil prices, according to Saudi Oil Minister Khalid Al-Falih.
Just one day after OPEC announced a nine-month extension to its November production cut deal, the top oil official told reporters on Friday that ‘exports to the U. S. will drop measurably.’
Two sources close to the matter told Bloomberg that starting next month, Saudi crude supplies to American importers will be reduced to below one million barrels a day next month – a 15 percent decrease from the monthly average so far in 2017.

This post was published at Zero Hedge on May 27, 2017.

One Bank Spots An “Amber Warning Sign” Inside The Vol Complex

In a time when record low volatility has spawned a cottage industry of vol and Vix experts, with analysts desperate to explain either why volatility is where it is – here the simplest explanation is not only the record injection of liquidity by central banks pushing risk assets to all time highs but the fact that even hedge funds appear to have thrown in the towel on alpha-generation and are barely trading, as shown last week..

This post was published at Zero Hedge on May 27, 2017.

How Not to Study the State

My most memorable high school experience occurred on the first day of my senior year. I was sitting in an Advanced Placement US Government class when the teacher posed a simple question to the students. It was a question intended to set the course in motion, and get us fledgling statecraft scholars thinking.
The question was, ‘what is government?’
My hand was in the air before he completed the sentence. (I had prepared an answer in anticipation of the course.) Holding on to my holster full of knowledge garnered from my proudly self-described ‘intellectually avant-garde’ internet musings, I said, ‘Governments (i.e., states in this case) are those organizations that have monopolized the use of force over any given geographical region.’
I then felt embarrassment as my passionate answer was struck down by laughter from the class. My teacher looked down at the floor, unsure how to respond. He had obviously never heard such an answer before, and recovered by reverting back to his conventional train of thought and answering the question as he had been conditioned to: ‘Governments’ he said, ‘are simply those institutions that make policy.’
I do not remember what he said next. Though I do remember what I was thinking, or rather, what I was feeling.
And I was feeling frustrated and unsatisfied.

This post was published at Ludwig von Mises Institute on May 27, 2017.

The Golden Conspiracy

Authored by Jim Rickards via The Daily Reckoning blog,
Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion.
There is statistical evidence piling up to make the case, in addition to anecdotal evidence and forensic evidence. The evidence is very clear, in fact.
I’ve spoken to members of Congress. I’ve spoken to people in the intelligence community, in the defense community, very senior people at the IMF. I don’t believe in making strong claims without strong evidence, and the evidence is all there.
spoke to a PhD statistician who works for one of the biggest hedge funds in the world. I can’t mention the fund’s name but it’s a household name. You’ve probably heard of it. He looked at COMEX (the primary market for gold) opening prices and COMEX closing prices for a 10-year period. He was dumbfounded.
He said it was is the most blatant case of manipulation he’d ever seen. He said if you went into the aftermarket, bought after the close and sold before the opening every day, you would make risk-free profits.
He said statistically that’s impossible unless there’s manipulation occurring.

This post was published at Zero Hedge on May 27, 2017.

The Disappeared Economy

This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
At the end of April 2015, the Commerce Department reported that unadjusted durable goods shipments (ex transportation) had totaled $177.6 billion in the month of March 2015. That represented just a half of one percent year-over-year gain, but at a crucial moment in economic history the plus sign was quite welcome for the attempt at the ‘transitory’ narrative. That estimate, however, was made using a benchmark process set the year earlier, one that didn’t fully incorporate the 2012 Economic Census.
There have been three annual benchmark revisions since that time, each pushing the estimate lower and lower. The latest, the May 2017 set of revisions, now figures durable good shipments contracted by 1.4% that pivotal March. It may not seem like much of a difference +0.5% to -1.4%, but that is only because we cannot straight away conceive of the effect in non-linear fashion, the absence of compounding.

This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ May 26, 2017.

Kushner Role In White House Suddenly Unclear; May “Return To Private Life”

In the first segment of Friday night’s “Trump bombshell” report published almost at the same time by Reuters and the WSJ, anonymous sources reported that Trump is preparing a “war room” upon his Saturday return from Europe, to “combat negative reports and mounting questions about communication between Russia.” We did point out some discrepancies: on one hand, Reuters said that Steve Bannon and Jared Kushner (who subsequently WaPo reported was trying to set up “backchannels” with Russians in the second Friday night long-weekend bombshell) were coordinating the “war room” and the White House’s new messaging effort, which also aims to push Trump’s policy agenda and schedule more rallies with supporters. On the other hand, contradicting Reuters, WSJ reported that neither Bannon nor Kushner were safe in the upcoming White House spring cleaning overhaul.

This post was published at Zero Hedge on May 27, 2017.

The Great Reset, Part Two

‘Premature optimization is the root of all evil…’
– Donald Knuth, from his 1974 Turing Award lecture
This is the second of two letters that I think will be among the most important I’ve ever written. These letters set out my philosophy about how we have to invest in the coming days and years. They are the result of my years spent working with clients and money managers and thinking about the economic and particularly the macroeconomic world. Because of some of the developments I will be discussing, I think the future is likely to be extremely challenging for traditional portfolio allocation models. In these letters I also discuss some of the changes in my thinking about the new developments in markets that allow us to more quickly adapt to a changing environment – even when we don’t know in advance what that environment will be. I hope you today’s letter helpful. At the end I offer a link to a special report with more details.
Last week I discussed what I think will be the fallout from the Great Reset, when the massive amounts of global (and especially government) debt and the bubble in government promises will have to be dealt with. I think we’ll see a period of great volatility in the markets.
I offered a solution for dealing with this complexity and uncertainty in the markets by diversifying trading strategies. But that diversification must reflect a rethinking of Modern Portfolio Theory, including a significant reshaping of valuations in asset classes. We’ll deal with those topics today.

This post was published at Mauldin Economics on MAY 27, 2017.

Doug Noland: Moody’s Downgrades China

This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
Marie Diron, Moody’s associate managing director, Sovereign Risk Group, commenting Wednesday on Moody’s Chinese downgrade (Bloomberg Television): ‘It is likely to be a very medium-term and gradual erosion of credit metrics and we are looking at the policies that the government is implementing. The authorities have recognized the risks that come with high leverage and have a very broad agenda of structural reforms and we take that into account to the point that we think leverage will increase more slowly than it has in the past. But still these measures will not be enough to really reverse the increase in leverage.’
I’ve always felt the rating agencies got somewhat of a bum rap after the mortgage finance Bubble collapse. Sure, their ratings methodologies were flawed. In hindsight, Trillions of so-called ‘AAA’ MBS were anything but pristine Credits. And, again looking back, it does appear a case of incompetence – if not worse. Yet reality at the time was one of home prices that had been inflating for years with a corresponding long spell of low delinquencies and minimal loan losses, along with GDP and incomes seemingly on a steady upward trajectory. The GSEs had come to dominate mortgage finance, while the Fed had market yields well under control. Washington surely wouldn’t allow a housing crisis, which ensured that markets were absolutely enamored with anything mortgage related. So the mortgage market enjoyed bountiful liquidity conditions, and it was just difficult for anyone – including the ratings firms – to see what might upset the apple cart.

This post was published at Wall Street Examiner by Doug Noland ‘ May 27, 2017.

Western Washington University Hosts Workshop On How To “Reduce The Impact Of White Privilege”

As part of its Campus Equity and Inclusion Forums, the enlightened faculty of Western Washington University have decided to host a workshop that aims to “reduce the impact of white privilege on social and academic relations”…because the best way to address racial barriers (real or imagined) is to host a workshop that targets individuals based purely on their race.
The workshop series, highlighted by The College Fix earlier today, will be hosted by history professor Randall Jimerson who presumably has a lot of personal atoning to do for his white skin. Jimerson noted that while the seminar is open to everybody, it’s especially helpful for white folks who need to learn “how to reduce the expression and effects of their white privilege.”
‘Most people of color are aware of the existence of ‘white privilege,’ whether or not they have applied this term to the disparity between their experiences and those of white people,’ he said via email. ‘Thus, I assume that the main focus will be on helping white participants to understand, explore, and accept (or reject) the concepts embedded in this phrase.’ ‘I hope that the conversation will then move to ideas about how to reduce the impact of ‘white privilege’ in our daily interactions with other people, and in our consciousness of race and other socially-constructed concepts.’
Thankfully, Jimerson noted that racism among white people is not based on “biology, but only on social constructs historically designed to privilege ‘white’ people over all others”…which means all white people can be cured of their illness through sensitivity training at any number of liberal bastions of higher education around the country…so it’s a good news day.
READ MORE

This post was published at Zero Hedge on May 26, 2017.

Shari’ah-Compliant Crypto Gold: Could Islam Be Preparing For A New World Reserve Currency?

Authored by Shannara Johnson via HardAssetAlliance.com,
It all started pretty harmlessly: in December 2016, after about 12 months of deliberations, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the World Gold Council announced a new ‘Shari’ah Standard on Gold.’
The new standard was celebrated as a potentially big boost for global gold demand as it would give more than 2 billion Muslims in the world access to gold-based financial products that were previously forbidden to them.
That included vaulted gold, gold accumulation plans, gold certificates, gold-backed ETFs like GLD, and gold mining stocks.
Under Shari’ah law, physical gold was considered a ‘ribawi item,’ which means it could only be used as a currency and worn as jewelry, but it couldn’t be traded for speculation or future value. However, Muslim investors were well aware that the $1.8 trillion Islamic finance business was missing out on important opportunities.

This post was published at Zero Hedge on May 26, 2017.

Connecticut Credit Risk Soars To Record High As Tax Receipts Tumble

Connecticut’s general-obligation bonds are riskier than ever as plummeting income-tax collections and a $2.3 billion budget deficit moved all three credit rating companies to downgrade its debt.

As Bloomberg details, tax receipts for the current fiscal year ending in June will be about $451 million short of estimates from January, prompting Governor Dannel Malloy to empty the state’s already small budget stabilization fund. To help close the gap, public employees agreed to accept a 3-year wage freeze and to contribute more for their pension and health-care benefits under a tentative deal that would save more than $1.5 billion over the next two years.

This post was published at Zero Hedge on May 26, 2017.

On Gold, Dollars, & Bitcoin

Authored by Paul Brodsky via Macro-Allocation.com,
We have been bullish on gold – the barbarous relic; King Dollar – the modern hegemon; and Bitcoin – the crypto currency investors love to hate. One might say our feet have been planted firmly in the past, present and future. (We may not have three feet, but let’s go with it.) Are we hedging our bets, being too cute by half, or is there a cogent rationale that unifies bullishness for money forms most would consider incongruous and at-odds with each other?

This post was published at Zero Hedge on May 26, 2017.

These ‘High-Five’ Stocks Are Having a Massive Influence on the Market

Apple (AAPL), Alphabet (GOOG), Microsoft (MSFT), Amazon.com (AMZN), and Facebook (FB) &mndash; these five companies are the five largest companies in the S&P 500 based on market capitalization. In aggregate, their market value is $2.93 trillion!
Why are we bothering to point out their collective market capitalization? Because size matters greatly in a market-capitalization weighted index like the S&P 500 (and Nasdaq 100 for that matter).
There is more to it than that, though, for individual investors to consider.
Following Directions
So, just how big are these five companies combined? Here are some eye-opening facts for perspective:

This post was published at FinancialSense on 05/26/2017.

Does the Stock Market Have a Case of Bad Breadth?

Overview
How measuring stock market and economic breadth can be a useful investing tool. Hindenburg Omens over the last several weeks have occurred, which is typically a warning sign. A look under the market’s hood reveals some interesting insights. Move in 10-Yr UST yields may hold the key to the stock market’s next move. Breadth is one of the most powerful tools available to investors and can be used to measure the health of any stock market or economy. Simply put, it is a measure of the level of participation of stocks in a bull market or, in terms of an economy, the number of regions or states participating in an economic expansion.
One way to think about this is to imagine a rocket containing many thrusters. If all the thrusters are working, the rocket will have no problem pushing higher. But, if some of the thrusters run out of fuel or burn out, the rocket will start to slow and eventually fall. In this case, breadth is a measurement of how many thrusters are working to gauge how high or how long the rocket can climb. If something has “strong breadth,” it can continue higher. If it has “weak breadth,” there is a higher likelihood that it’ll start to slow and eventually fall.

This post was published at FinancialSense on 05/26/2017.

Why bad economic theories remain popular

Ludwig von Mises and Friedrich Hayek, the most prominent ‘Austrian’ economists of the time, anticipated the 1929 stock market crash and correctly predicted the dire consequences of government attempts to artificially stimulate economic growth in the aftermath of the crash. John Maynard Keynes, on the other hand, was totally blindsided by the stock market crash and the economic disaster of the early 1930s. And yet, Keynes’s theories gained enormous popularity during the 1930s whereas the work of Mises and Hayek was largely ignored. Why was it so?
Keynes became popular because he told the politically powerful what they wanted to hear. In particular, he provided power-hungry politicians with intellectual support for the schemes they not only already had in mind, but in many cases were already putting into practice. Despite being riddled with errors, Keynes’ theories also appealed to many economists because the implementation of these theories would confer a lot more influence upon the economics fraternity. The fact is that in a free economy there wouldn’t be much for an economist to do other than teach economics. He/she would certainly never have the opportunity to be involved in the ‘management’ of the economy.
The points outlined in the above paragraph, along with Keynes’ charisma and salesmanship, explain why ‘Keynesian’ economic theories became dominant, but it doesn’t explain how they managed to stay dominant in the face of an ever-growing mountain of evidence indicating that they result in long-term economic decline.

This post was published at GoldSeek on 26 May 2017.

Sentiment Speaks: Central Banks Control Nothing

Many believe in the Fed/PPT’s Omnipotence
The thickness of intellectual dishonesty amongst pundits and analysts in this stock market needs a power-saw to be cut through. And nothing presents this perspective more clearly than the certain belief in the power of central banks to prop up our market. In fact, this past week, we even heard from Asher Edelman, as quoted on ZeroHedge, that he has ‘no doubt’ that the Plunge Protection Team – of which the US Central Bank is a member – is behind the stock market’s rally this year. But, this is no different than the exact same perspectives we read of many others who make the same claim about why the market is rallying well beyond anything they can understand.
First, the PPT was created to enhance “the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets and maintaining investor confidence.” Moreover, it was only supposed to act when the market becomes “disorderly,” in other words, when the markets drop strongly. Yet, many are so perplexed by this current market rally, which will likely take us well over 2500 in the S&P 500, that they are grasping at straws to understand why we have come up this high when they did not foresee it. So, they have clearly regressed to blaming their lack of understanding about the market on the Tooth Fairy . . .er . . . I mean Peter Pan . . .er . . . I mean the PPT/Fed.

This post was published at GoldSeek on 26 May 2017.

Ted Butler Quote of the Day 05-27-17

The big (near) surprise in silver in the last reporting week is that the technical funds actually added aggressively to short positions despite an increase in prices because the moving averages weren’t penetrated. Even though that’s what occurred this week as well, the prior reporting week featured a large increase in total open interest, suggesting something unusual was up. This week, total silver open interest is down, so I feel it would be too much to hope for a repeat of last week’s results (although I’d love to be wrong).

It seems to me that even though the key moving averages weren’t penetrated this reporting week, the one dollar increase in price over the past two weeks should have been enough to have persuaded some technical funds to buy back short positions on a loss-limiting basis. In fact, I think there might have been as many as 10,000 contracts of commercial selling and managed money short covering. I would guess that the commercial selling was mostly of the raptor long liquidation variety and I am not expecting that JP Morgan increased its short selling. Nor do I think many managed money longs were added, just shorts bought back.

Even if the silver report indicates an expected deterioration of 10,000 net contracts or so, it’s important to remember that there was an improvement of nearly 80,000 net technical fund contracts over the prior four reporting weeks, so the market structure in silver should still be good to go (for an explosion). The wonder is that here we are, nestled just slightly below the major technical fund buy signal of upward moving average penetration,

with a COT setup as good as I can remember. As The Wall Street Journal points out – it’s increasingly a quant investment world. What it doesn’t point out is that the quants are on the wrong side of COMEX silver in a very big way.

A small excerpt from Ted Butler’s subscription letter on 24 May 2017.

More precious metals news & information available at
Ed Steer’s Gold & Silver Digest.
 

RBC: “Something Is Wrong Here: Indicators Are Flashing An Imminent Yield Breakdown Warning”

While stocks continue rising to all time highs on the back of a handful of tech stocks, the tension below the bond market grow, only not in the direction that an all time high in the S&P would suggest. As RBC macro strategist Mark Orsley writes in a Friday note, “I am finding it increasingly difficult to see a near term catalyst for UST’s to sell off. In fact, almost all indicators I watch are flashing a warning that a breakdown in yields (longer end) is increasingly probable” and urges readers to “position/protect for a move to 2.00%.”

This post was published at Zero Hedge on May 26, 2017.