How to Own Your Own Gold Mine

Public equity markets are in many ways a sophisticated game of pump-and-dump. Your stocks soared in 1996-1999, then crashed in 2000. They soared again in 2002-2007, then crashed in 2008. They’re soaring again now.
Guess what comes next?
For the most part, wealth managers are more interested in their wealth than yours. All kinds of fees and commissions are designed to separate you from your money. When markets turn with a vengeance, you’re the one left holding the bag.
Think passive investing and indexing are the answer?
Guess again. Active managers do difficult work in research, asset allocation, capital commitment, and price discovery. Active investors are a beast of burden like an elephant.
Passive investors, including ETFs, are like parasites on the back of the elephant. A few parasites do just fine, and the elephant doesn’t notice at first. Eventually there are so many parasites that the elephant dies, and the parasites die too.
Today, passive investors make up more than 50% of total assets under management. The parasites are winning. When markets correct, passive investors are like deer in the headlights – they can’t short or go to cash. They have to ride the index down.

This post was published at Wall Street Examiner on June 23, 2017.

First India Bans Cash, Now It’s Targeting Gold

In November of last year, India banned certain cash notes in a bold move to force businesses into the banking system to better harvest more taxes from its livestock.
Now, under the guise of ‘improving transparency’ and forming a ‘common market,’ India has begun targeting gold with new taxes, regulation, and incentives for citizens to turn over their undeclared gold to the financial sector.
Roughly 86% of India’s economic activity happened in cash at the time much of it was banned. Presumably that includes the $19-billion-per-year retail gold industry. Again, it appears that India’s government (central bankers) wants a bigger cut of the action and to better track the private assets of citizens.
Bloomberg has been reporting that India’s government is teaming up with crony gold dealers to plan a complete revamp of its gold policy – which is always code for ‘control, regulate and tax.’
Bloomberg reports:

This post was published at Zero Hedge on Jun 25, 2017.

Haunting Photos of Shuttered Stores on Madison Avenue

Brick & Mortar Meltdown reaches ‘Crown Jewel in American retailing.’
Brick and mortar stores face a tough environment. Retail is shifting to online operations. E-commerce sales have surged at an annual rate of about 15% in recent years. But sales at department stores and smaller stores are deteriorating. Malls have hit hard times. Retail bankruptcies have formed a horrific litany. And the signs are visible everywhere.
So here is the excerpt of an essay with haunting, beautiful photos of this meltdown as seen from the sidewalk on Manhattan’s glorious Madison Avenue, ‘Crown Jewel in American retailing.’ The essay, ‘Walking the Avenue with a Camera,’ was originally published on New York Social Diary, a great place to read about the goings-on in New York City.
By David Patrick Columbia, New York Social Diary. Photos by Pierre Crosby:
Here in New York we are experiencing a de-accessioning of retail space for retail businesses. We are seeing more store vacancies than I can ever recall in the last six decades. The City is a changing system socioeconomically. Neighborhoods come and go. In the past twenty years there has been a trend for restoration and revitalizing the communities. You can see it in all the boroughs, especially when it comes to housing. Brooklyn and Queens and Upper Manhattan, including Harlem are good examples of this progress. Although it has got more, much more expensive for the average working person, just to provide a roof over one’s head. In the 1960s when I came here out of college the rule of thumb for rental expense was one week’s salary a month. I know people today who are paying more than 50% of their monthly for shelter.

This post was published at Wolf Street on Jun 24, 2017.

Japan’s Bond Market Grinds To A Halt: “We’ll Go Days When No Bonds Trade Hands

The Bank of Japan may or may not be tapering, but that may soon be moot because by the time Kuroda decides whether he will buy less bonds, the bond market may no longer work.
As the Nikkei reports, while the Japanese central bank ponders its next step, the Japanese rates market has been getting “Ice-9ed” and increasingly paralyzed, as yields on newly issued 10-year Japanese government bonds remained flat for seven straight sessions through Friday while the BOJ continued its efforts to keep long-term interest rates around zero.
The 10-year JGB yield again closed at 0.055%, where it has been stuck since June 15m and according to data from Nikkei affiliate QUICK, this marks the longest period of stagnation since 1994,

This post was published at Zero Hedge on Jun 25, 2017.

Dan Loeb Is Now Nestle’s 6th Largest Shareholder; Goes Activist On World’s Biggest Food Company

Dan Loeb has returned to his earthshaking activist roots, and in a letter released moments ago, Third Point announced it is now targeting the world’s largest food company, with its biggest bet on a public company in its history, amounting to $3.5 billion.
In the letter, Third Point announced that it currently owns roughly 40 million shares of Nestle, and that its stake, which is held in a special purpose vehicle raised for this opportunity including options, currently amounts to over $3.5 billion. Putting this number in the context of Nestle’s market cap of $264 billion, Loeb may have an uphill battle though that never stopped him before.
Loeb’s stake of 40 million shares makes him the 6th largest holder of Nestle, above Credit Suisse Asset Management with 38 million shares and below Massachusetts Financial Services Company with 56.8 million. The Top 4 holders are BlackRock, CapRe, Norges Bank, and Vanguard.
Third Point writes that “despite having arguably the best positioned portfolio in the consumer packaged goods industry, Nestl shares have significantly underperformed most of their US and European consumer staples peers on a three year, five year, and ten year total shareholder return basis. One year returns have been driven largely by the market’s anticipation that with a newly appointed CEO, Nestl will improve.”
While the problems are clear, why did Third Point go activist? To maximize value of course, as It explains:

This post was published at Zero Hedge on Jun 25, 2017.

The canary in the asset bubble is popping: $3.8 trillion bubble that you are probably not aware of.

The death of retail as we know it is real. People are shifting their buying habits online in a fast and furious way. The only retail outlets that seem to be thriving are dollar stores but they are thriving because many Americans are living paycheck to paycheck and online shopping is too expensive for some. So it should come as no surprise that the way things were once done is being upended again by technology. Giants like Amazon and Wal-Mart are cannibalizing entire industries. Back in 2012 Amazon had less than 10 million Prime subscribers. Today it is over 80 million. So the big bubble that is now imploding is that in commercial real estate. There is $3.8 trillion in commercial real estate loans outstanding and the bubble in this market couldn’t be peaking at a worse time.
The peaking CRE bubble
Keep in mind that a large portion of commercial real estate is driven by malls and retail locations. Americans are still shopping but they are shopping online. The old model is cracking hard and we are deep into bubble territory here.
Take a look at CRE values:

This post was published at MyBudget360 on 2017/06/23.

Russia Said To Recall Ambassador At Center of Trump Controversy: Report

According to BuzzFeed, which cites three anonymous sources, Russia is reportedly recalling Ambassador Sergey Kislyak, the man who dared to do his job and talk to US politicians and visible public figures, and who according to The Hill had “emerged as a focal point in the FBI probe into Russia’s election meddling.” While the Kremlin has not confirmed the report, BuzzFeed adds that Kislyak is scheduled to leave Washington next month, following a July 11 going-away party at the St. Regis Hotel, two blocks away from the White House.

This post was published at Zero Hedge on Jun 25, 2017.

Oil Trade And QQQ Update

I would like to put out a short update on the oil market and my view of the QQQs being a proxy for the Hi-Tech end of the market. With the hard sell off in the oil market of this week this would seem a logical place to give it a rest and for a short seller to step over to the sidelines for a while. Anytime the market has gotten itself to this level of being oversold we have seen a rip to the upside.
One of the keys to being a successful short seller is to know when its time to press ones bet. Extended moves to the downside come from oversold levels and I am going to show you why I believe we may have further to go to the downside before this current move is over.
You should recall we executed our first short position in oil in the beginning of March just prior to oil falling out of the descending triangle . Keep in mind the dynamics of a descending triangle is where the ceiling of supply gets lower as time progresses. Each time price rises it meets selling at a lower level. Note below once the triangle got established the higher volume bars were red indicating sales volume. This was an in-your-face bearish announcement to anyone who cared to listen. But typically not many care to listen to the language of the market… so they were ‘surprised’.

This post was published at GoldSeek on 26 June 2017.

America’s Unfolding Pension Crisis

News headlines are reporting daily on a pension crisis unfolding in the US. To understand how we got here, there are five major factors that led us to this point:
Generous payouts Inadequate contributions Low interest rates Longer life spans Overly optimistic return assumptions Lawrence McQuillan detailed how all of these are converging together in one hot mess for America’s largest and most underfunded state when he wrote his must-read book, California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis.
As he said to us at the time, during a book interview with FS Insider, the money just isn’t there and now politicians are ‘scrambling’:

This post was published at FinancialSense on 06/23/2017.

Central

The Phelan Act of 1920 sounded simple in principle. It authorized the various Federal Reserve Banks, at that time twelve district branches operating independently, to charge progressive interest rates on the rediscounting activities at their respective windows (the discount rate was the interest charged to obtain collateralized funds from the various reserve banks). Private banks in each district were given a set credit line to be used in the regular course of business. Any borrowing above that amount would be subject to rate gradation according to the Phelan Act.
The rationale for doing so from the perspective of the Federal Reserve was twofold. The banking system was coming off its WWI inflationary boom which would be a strain on liquidity and credit. The reserve system had to be sensitive to that development, but also wished to remain true to Bagehot’s so-called golden rule to lend freely but at a high rate. Thus, if a bank wished to borrow in excess it could, but it had to be prepared to pay up for it.
Each 25% increase in borrowing beyond the set limit would cost an additional one half of one percent above the prior effective rate. If the amount in the previous period was at or below the limit, it would be a penalty rate above policy discount rate. For further excessive amounts, the escalated cost would be added in addition to whatever marginal rate previously in effect.

This post was published at Wall Street Examiner on June 23, 2017.

“Big Swinging Dick” Defined

“Big Swinging Dick: (Very) informal and somewhat derogatory; a trader who believes his methodology is perfect and will always result in sizable profits. However, it originally was a term of self-designation for major bond-traders. The term was popularized by the book Liar’s Poker, which describes the author’s experience as a bond trader on Wall Street in the 1980s.” Source: financial dictionary
While much has been written about trade size, meaning how much trading capital should be risked on each trade, this remains a nebulous imprecise topic.
That’s unfortunate because it can make all the difference between staying in the game or losing all trading capital – known in the business as ‘blowing up’. Yes, even (especially) if you are a big swinger.
The concept of a “trading edge” is central here. Broadly speaking, this is how much a trader is expected to make over a reasonable number of trades (meaning, with some statistical significance), taking into consideration the risk of loss and how much will be made or lost with each trade on average.
Basically, if you don’t know what your edge is you should not be trading, or gambling for that matter. Buying and holding for some time perhaps, but not regularly going in and out of the market without a good plan.

This post was published at Zero Hedge on Jun 25, 2017.

Italian Taxpayers To Foot 17 Billion Bill As Rome Bails Out Another Two Insolvent Banks

Two weeks after the first, and biggest, European bank bail-in took place under the relatively new European bank resolution mechanism, the EBRD, when Spain’s Banco Popular wiped out the holders of its most risky securities, including equity and AT bonds, and then selling what was left of the bank to Santander for 1 – a process that took place without a glitch – Italy may have just killed any hope of a European banking union, when the bailout of two small banks made a “mockery” of Europe’s new regulation.
Late on Sunday, Italy passed a decree that will effectively sell the good part of the two banks to Intesa, Italy’s second-largest and best-capitalized bank. Intesa said last week that it would be willing to buy the best assets for a token price of 1 as long as the government assumed responsibility for liquidating the banks’ large portfolio of sour loans. As a result, Italy said it would commit as much as 17 billion in taxpayer funds to clean up the two failed “Veneto” banks in one of Italy’s wealthiest regions and support the takeover of their good assets by Intesa Sanpaolo SpA for a token amount. After an emergency cabinet meeting on Sunday, Finance Minister Pier Carlo Padoan said the Italian government will provide Milan-based Intesa with about 5.2 billion euros to allow it to take on Banca Popolare di Vicenza SpA and Veneto Banca SpA assets without hurting capital ratios, The European Commission, in a separate statement, said it approved the plan for the two banks and that it is in-line with state-aid rules.
Unlike the Banco Popular bail-in by Santander, however, Intesa would only take on the good assets. PM Gentiloni said the lenders will be split into good and bad banks and that the firms, with taxpayers on the hook for the bad banks. The process was rushed to allow the failed banks to reopen on Monday and avoid a depositor panic and bank run. The intervention is necessary because depositors and savers were at risk, Gentiloni said. The northern region where they operate ‘is one of the most important for our economy, above all for small- and medium-size businesses.’

This post was published at Zero Hedge on Jun 25, 2017.

The Morgan Report’s Weekly Perspective June 25, 2017

The following video was published by The Morgan Report on Jun 25, 2017
The Morgan Report is all about YOU and how you can build and preserve Wealth for generations to come. We know it can sometimes seem a daunting task to protect your assets and preserve or grow your wealth. Over 15 years ago, a small group of us started The Morgan Report and formed an exclusive membership organization to promote personal freedom, an honest money system, free market wealth accumulation and asset protection.

Total Return With Floating Rate Bonds

News headlines are reporting daily on a pension crisis unfolding in the US. To understand how we got here, there are five major factors that led us to this point:
Generous payouts Inadequate contributions Low interest rates Longer life spans Overly optimistic return assumptions Lawrence McQuillan detailed how all of these are converging together in one hot mess for America’s largest and most underfunded state when he wrote his must-read book, California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis.
As he said to us at the time, during a book interview with FS Insider, the money just isn’t there and now politicians are ‘scrambling’:

This post was published at FinancialSense on 06/23/2017.

“Boo Hoo Hoo” – New Jersey College Fires Black Professor For Making Racist Remarks

Essex County College in New Jersey has fired adjunct professor Lisa Durden after she made racially insensitive remarks during an interview with Tucker Carlson on Fox News two weeks ago, according to the Associated Press. College officials said they received complaints about Durden’s interview, with some university constituents upset about statements that were disparaging to white people. During the interview, Durden, who is black, discussed a Memorial Day event held exclusively for black people hosted by a Black Lives Matter group.
When Carlson asked Durden for her thoughts, she interrupted the host, saying: ‘Boo hoo hoo. You white people are angry because you couldn’t use your white privilege card’ to attend the event. The show aired June 6, and the school suspended Durden with pay two days later. She addressed the matter during a public meeting Tuesday with school officials, but was soon fired, according to the AP.
In a statement from College President Dr. Anthony E. Munroe obtained by the Daily Caller, Munroe quoted Dr. Martin Luther King Jr. and said he’s committed to maintaining a welcoming environment for people of all races. He added that the school will be forming a committee devoted to making students of all backgrounds feel welcome.


This post was published at Zero Hedge on Jun 25, 2017.

Get Ready For “QT1”: A First Look At The Fed’s Hidden Policy

The Federal Reserve is now setting out on a new path for quantitative tightening (QT) after nine years of unconventional quantitative (QE) easing policy. It is the evil twin of QE which was used to ease monetary conditions when interest rates were already zero.
First, it is important to examine QE and QT in a broader context of the Fed’s overall policy toolkit. Understanding the many tools the Fed has, which of them they’re using and what the impacts are will allow you to distinguish between what the Fed thinks versus what actually happens.
We have a heavily manipulated system. For years, if not decades, monetary policy has been flipping back and forth between how the economy actually works and what the Fed believes works.
QE was a policy of printing money by buying securities from primary dealers and to ease monetary conditions when interest rates were at zero. QT takes a different approach.
In QT, the Fed will ‘sell’ securities to the primary dealers, take the money, and make it disappear. This is an attempt to ultimately reduce the money supply and implement a policy of tightening money.
There’s a bit of a twist to that selling. Today the Fed’s balance sheet stands at $4.5 trillion. It started at $800 billion in 2008 and has increased over five times that since the crisis. Now they’re going to try to get the balance sheet back to normal levels.

This post was published at Zero Hedge on Jun 25, 2017.

The Collapse Will Be Driven By A Credit Collapse, Has The Date Been Set? – Episode 1315a

The following video was published by X22Report on Jun 25, 2017
Corporations are now looking at block-chain technology. Visa, Microsoft and many others are turning towards the crypto world while the corporate media and the banking community will begin to tell you how bad the block-chain is. The BIS is warning that a recession is headed our way, the corporate media is already putting out more articles of a recession. Goldman, Citi and BofA are now blaming the Fed for the past recessions. A Hedge fund manager has predicted a date of the collapse of the economy, now you know we are getting close.

Perfect Storm 2.0 – Will The Auto Industry Ever Be The Same Again?

To better understand why the automotive industry is in the middle of a perfect storm, first go back and consider the also perfect set of events that led to a robust recovery and a record setting 2016 sales year.
Our Last Recession
In 2009, the automotive industry faced a great challenge. New light vehicle sales dropped to 10.4 million, GM and Chrysler went through bankruptcy reorganizations, retail dealers closed and many folks lost their jobs. The US government felt the need to act in order to support the very vital automotive industry (3% of GDP & 10% of manufacturing). The Fed also stepped in to help stimulate the overall economy by reducing interest rates.
Consumer Purchasing Power
For the purpose of this piece, the central focus will be placed on the purchasing power of the consumer. With no bottom in sight for falling new vehicle sales, our government attempted to stimulate demand by approving the 3 billion dollar Cash for Clunkers program beginning on July 1, 2009. Consumers received as much as $4,500 for trade vehicles that qualified for ‘clunker’ status. The trade value of $4,500 represented a $75-$90 reduction in monthly payment on a 60 month loan assuming good credit. The program would run until a specific end date or until the total approved funds ran out. Consumers responded very well to the stimulus and sales spiked sharp for a brief period till the program ended on August 24, 2009. This program also had an impact on the supply of used vehicles since all qualifying trades were destroyed as part of the transaction.


This post was published at Zero Hedge on Jun 25, 2017.

Mad Hawk Disease Strikes Federal Reserve

‘A serious writer may be a hawk or a buzzard or even a popinjay, but a solemn writer is always a bloody owl.’
– Ernest Hemingway
***
Welcome to the new, improved, faster-to-read, better yet still-free Thoughts from the Frontline. My team and I have been doing a lot of research on what my readers want. The reality is that my newsletter writing has experienced a sort of ‘mission creep’ over the years. Bluntly, the letter is just a lot longer today than it was five or ten years ago. And when I’m out talking to readers and friends, especially those who give me their honest opinions, many tell me it’s just too much. There are some of you who love the length and wish it were even longer, but you are not the majority. Not even close. We all have time constraints, and I wish to honor those. So I am going to cut my letter back to its former size, which was about 50% of the length of more recent letters. (Note: this paragraph is going to open the letter for the next month or so, since not everybody clicks on every letter. Sigh. Surveys showed us it’s not because you don’t love me but because of demands on your time. I want you to understand that I get it.) Now to your letter…
Longtime readers know I am not the Federal Reserve’s #1 fan. I can’t recall ever resting easy, confident that the Fed was ably looking out for our economy and banking system. However, I have experienced varying degrees of skepticism and distrust. I must also acknowledge that we are all still here despite the Fed’s many mistakes.
Once or twice a year the Fed rekindles my frustration and concern with a particularly boneheaded statement or policy change. Last summer, the Fed’s annual Jackson Hole Economic Policy Symposium outraged and saddened me at the same time – which, given my emotional makeup, is quite an accomplishment. I shared my rage with readers in ‘Monetary Mountain Madness.’ Feel free to read it again if you enjoy a good rant. I would have been even more depressed if I had known that one of the academic presenters there, Marvin Goodfriend of Carnegie Mellon University, an unabashed cheerleader for NIRP, would appear on the short list of candidates for Donald Trump’s first two appointments to the Fed.
Goodfriend is nominally a monetarist, but he doesn’t quack or waddle like any monetarist I know. The session that he presented was entitled ‘Negative Nominal Interest Rates.’ In the first paragraph of the first section of his paper, he says that ‘[M]y current paper makes the case for unencumbering interest rate policy so that negative nominal interest rates can be made freely available and fully effective as a realistic policy option in a future crisis.’

This post was published at Mauldin Economics on JUNE 25, 2017.