Why It’s So Difficult To Call The Market Top

This is one of our favorite posts of all-time.
Thought it apropos to re-post given that everyone and their mother is trying to call the top in stocks. It’s all about yield-seeking capital flows, my friends. Tell us what interest rate is the tipping point which thwarts that behavior and we will tell you when the stock and credit markets top and flop.
‘John Bull can stand many things, but he cannot stand 2 , 0, .5 ,1, 1.5 , 2 percent’ – Bagehot
We are still far from the tipping point interest rate that sends the yield seekers back to their caves, in our opinion.
I just borrowed 5-year money for my daughter’s first car at 2.64 percent. That is less than 85 basis points over the 5-year note, for a used car!
Expensive Assets
Yes, absolutely, all assets are incredibly expensive. But pension funds are not going to make their nut sitting in cash waiting for them to get cheaper. Seniors in Europe can’t eat with their interest earnings from negative rates.

This post was published at Zero Hedge on Jun 29, 2017.

Home Attitude Adjustments

The National Association of Realtors (NAR) reported today that pending home sales declined for the third straight month. As with so many other accounts, it’s not really the downside that is relevant but how instead there has been little to no growth for quite some time now. The NAR’s index value, which is how the organization reports the level of pending sales, was 108.5 in May 2017. That’s up 42% from the low in 2010, but also slightly less than the peak in June 2013.
The immediate issue appears to be inventory, meaning the lack of it. In a separate report on resale activity, the NAR continues to estimate declining numbers of houses available for sale even though the real estate market in terms of price seems to be healthy. The change in inventory coincides, as you might expect, with the level of pending sales. The inflection for both occurs in the middle of 2015.
It is neither a housing correction nor anything like a bubble collapse. Rather it seems to be hesitation. Potential home sellers around summer 2015 appear to have grown more sensitive and cautious at the margins. Those people who might have otherwise been happy to sell and likely move up in size or price suddenly became reluctant to do so.

This post was published at Wall Street Examiner on June 28, 2017.

Final Q1 GDP Revised To 1.4% Due To Spike In Consumer Spending; Corporate Profits Tumble

Moments ago the BEA released its third estimate of GDP, according to which Q1 GDP rose by 1.4% in the quarter, above the second estimate of 1.2%, and double the initial estimate of 0.7%. It was also above the consensus estimate of 1.2%, primarily as a result of a jump in personal consumption, which contributed 0.75% to the bottom line, well above the 0.44% estimated last quarter. In annualized terms, personal consumption rose 1.1% in 1Q, beating estimates of 0.6%, and above the 0.6% second estimate however, it was still well below last quarter’s 3.5% increase.
In addition to consumer spending, the upward revision to GDP growth reflected upward revisions to exports, which were partly offset by a downward revision to business investment.

This post was published at Zero Hedge on Jun 29, 2017.

Asian Metals Market Update: June-29-2017

There is speculation all over the internet that more and more central banks are on the verge of legalizing bitcoins and other crypto currencies. Legalizing crypto currencies is a way to ensure that the elite and the state continue to control key asset classes. Bitcoins and its forms were outside the influence of central banks and global controlling forces. Legalizing bitcoins is ‘If you can’t beat them then join them first and destroy them later’. States will do everything to ensure that you pay high taxes to them. Legalizing cryptocurrencies is to ensure that the common man continues to pay for the expenses of their so called elected representatives. The US dollar is over the verge of getting replaced by bitcoins and other crypto currencies. But I believe that gold will zoom in the intermediate period between crypto currencies replacing the US dollar as the world preferred mode of exchange.
In India, the government keeps on increasing service tax every year.

This post was published at GoldSeek on 29 June 2017.

Young People in India Are Buying Gold

Young people in India are buying gold.
Indians have traditionally invested in the yellow metal. Based on sales reported by a new digital platform in the Asian country, it appears the upcoming generation has embraced their elders’ love of gold.
The Indian digital wallet company Paytm launched Digital Gold in April. Company officials say they have sold around 100 kg of gold through the application, with a 100% month-on-month growth since its launch. Paytm senior VP Krishna Hegde told the Economic Times of London that most of the customers are young people.

A majority of Digital Gold customers are within 25-35 years. Young adults are attracted to it owing to the flexibility and low ticket price it offers.’

This post was published at Schiffgold on JUNE 29, 2017.

Euro Surges, Yields And Stocks Rise As Central Banks Deliver Coordinated Message

The euro soared to the highest level in over a year while bond yields and global shares also climbed, as an ongoing barrage of coordinated hawkish comments from central banks signaled the era of easy money might be coming to an end for more than just the United States. S&P futures were fractionally in the green following the best day for US equities in two months, as banks climbed after passing the Fed’s stress tests and announcing bigger than expected shareholder payouts.
Asian stocks posted broad gains and European shares were little changed while oil climbed for the sixth consecutive day, with WTI trading above $45. The euro rose for a third day against the dollar as hawkish comments from Mario Draghi this week boosted bets the ECB is preparing to unwind stimulus, while the ECB’s attempt to walk back Draghi’s hawkishness was roundly ignored. EUR/USD rose as much as 0.4% to 1.1425, highest since June 2016.
‘It will take more than anonymous ECB sources to cool the desire to bet on the euro and dump the dollar,’ says Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. ‘Many investors are tantalized by the prospect of key quarterly meetings in September producing no move from the Fed but a plan to wind down quantitative easing at the ECB.’ The residual sentiment from Draghi’s statement meant yields across developed markets continued their upward move, with Bunds back to 0.40%, nearly doubling in the past three days.

This post was published at Zero Hedge on Jun 29, 2017.

Bill Blain: “What A Fascinating Week This Is Shaping Up To Be”

By Bill Blain of Mint Partners, Blain’s Morning Porridge – June 29th 2017
What a difference a day makes
‘And a new day will dawn for those who stand long, and the forests will echo with laughter.’
What a fascinating week this is shaping up to be – on Monday I speculated it was going to be about Central Bankers re-thinking where we are. I guess I guessed right. One of my colleagues from BGC, Ara Levonian, summed it up nicely in his daily comment this morning:
‘What a difference a day makes as the ECB pumped out a story that the whole market misinterpreted Draghi despite him speaking in English and most of us having English as out first language. Carney changed his mind from last week, which has become the norm, and said there could be need to remove some stimulus. [They] have realised the marginal utility of QE is almost non-existent now, if not negative and are SERIOUSLY WORRIED ABOUT ASSET PRICE INFLATION. (My emphasis!)
Draghi might take a tip from Alan Greenspan, who provides the most famous Central Banking quote: ‘Since becoming a central banker I have learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said.’ It’s often shortened to ‘If I have made myself clear, I’ve misspoken.’

This post was published at Zero Hedge on Jun 29, 2017.

Gold Bear Raid & Stock Market Alarm Bells Sounding – Are You Prepared? Golden Rule Radio

The following video was published by McAlvany Financial on Jun 29, 2017
This week we discuss the importance of listening to the alarm bells sounding regarding the Stock Market. These patterns of Divergence in the DOW Jones Industrial in the past have led to significant corrections and prudent investors need to be ahead of the curve. We’ll cover the Gold manipulation bear raid that occurred this last week, as well as the price movements of Silver, Platinum, Palladium, The US Dollar Index & the Dow Transports. The Dow Transports are starting to lag the Industrials another signal of instability and a pending correction for the stock market. Thanks for listening to this week Golden Rule Radio

Face to Face with the Fed

“There’s no question the banking regulators blew it leading up to the [2008] financial crisis. And the problem is we’re gonna blow it again… Human societies are prone to mass delusion.’
Well, props for honesty, I guess. But it’s about the most transparency you’ll ever get from one of the most opaque institutions on the planet, the Federal Reserve.
Your editor was present last night as Minneapolis Fed President Neel Kashkari held a ‘town hall’ meeting. Kashkari performs this exercise in public outreach every few weeks somewhere in the Fed’s sprawling District 9 – stretching from Michigan’s Upper Peninsula 1,400 miles west to Montana.
Kashkari saw the Panic of 2008 up close and personal. He was the Treasury Department’s point man for the bank bailouts. Since he began his current gig 18 months ago, he’s made it his mission to break up the big banks. We even cited his first speech on the job here in The 5: ‘I believe the biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy.’
Heh. The contrast to Fed chair Janet Yellen couldn’t be more, umm, striking.
Hours before Kashkari held court last night, Yellen was speaking in London – declaring the banks are ‘very much stronger’ and another 2008-level crisis is unlikely to occur ‘in our lifetimes.’

This post was published at Wall Street Examiner on June 28, 2017.

Cranfield: “This Was A Watershed Week For The Euro: Beware Of Getting Steamrolled”

After three days of fireworks for the Euro, when it first surged on Draghi’s hawkish comments, then tumbled on the ECB’s “clarification” to Bloomberg that the market had overreacted to Draghi, then continued to surge after Draghi himself did little to dissuade the market it was wrong, the common currency is now trading at above 1.14, or 1.1425 to be precise…

… the highest level in one year, and on a relentless push higher, as the dollar tumbles, because as Sean Callow, currency strategist at Westpac says, ‘it will take more than anonymous ECB sources to cool the desire to bet on the euro and dump the dollar,’ and adds ‘many investors are tantalized by the prospect of key quarterly meetings in September producing no move from the Fed but a plan to wind down quantitative easing at the ECB.’

This post was published at Zero Hedge on Jun 29, 2017.

Scientists Fear “Supervolcano” Eruption As Earthquake Swarm Near Yellowstone Soars To 800

More than 800 earthquakes have now been recorded at the Yellowstone Caldera, a long-dormant supervolcano located in Yellowstone National Park, over the last two weeks – an ominous sign that a potentially catastrophic eruption could be brewing. However, despite earthquakes occurring at a frequency unseen during any period in the past five years, the US Geological Survey says the risk level remains in the ‘green,’ unchanged from its normal levels, according to Newsweek.
The biggest earthquake in this ‘swarm’ – which registered a magnitude of 4.4 – took place on June 15, three days after the rumblings started. That quake was the biggest in the region since a magnitude 4.8 earthquake struck close to Norris Geyser Basin in March 2014. This magnitude 4.4 earthquake was so powerful that people felt it in Bozman Montana, about eight miles away.

This post was published at Zero Hedge on Jun 29, 2017.

After Passing Stress Tests, Wall Street Banks to Spend Like a Drunken Sailor – on their Own Stock Buybacks

Yesterday, the Federal Reserve announced the second leg of its 2017 stress tests for the nation’s most systemic financial institutions. Known as the Comprehensive Capital Analysis and Review (CCAR), the Fed said it ‘did not object to the capital plans of all 34 bank holding companies’ although Capital One Financial will be required to ‘submit a new capital plan within six months that addresses identified weaknesses in its capital planning process.’
That all clear from the Fed unleashed what JPMorgan Chase CEO Jamie Dimon fondly refers to as ‘animal spirits’ on Wall Street. The Fed had barely made its announcement when three of the biggest Wall Street banks announced they were earmarking about $47 billion to gorging on their own share buybacks. JPMorgan Chase led the pack with a potential buyback of $19.4 billion over the next 12 months, according to Bloomberg News. Citigroup has projected potential buybacks of $15.6 billion while Bank of America said it may buy back as much as $12 billion.
The mega banks on Wall Street are engaging in these buyback binges despite a growing chorus of critics who say the practice harms the overall economy.

This post was published at Wall Street On Parade on June 29, 2017.

Margin Debt Pulls Back from Record Highs

Note: The NYSE has released new data for margin debt, now available through May.
The New York Stock Exchange publishes end-of-month data for margin debt on the NYX data website, where we can also find historical data back to 1959. Let’s examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter.
The first chart shows the two series in real terms – adjusted for inflation to today’s dollar using the Consumer Price Index as the deflator. At the 1995 start date, we were well into the Boomer Bull Market that began in 1982 and approaching the start of the Tech Bubble that shaped investor sentiment during the second half of the decade. The astonishing surge in leverage in late 1999 peaked in March 2000, the same month that the S&P 500 hit its all-time daily high, although the highest monthly close for that year was five months later in August. A similar surge began in 2006, peaking in July 2007, three months before the market peak.
You may also like Robin Griffiths on 1987-Style US Market Crash
Debt hit a trough in February 2009, a month before the March market bottom. It then began another major cycle of increase.

This post was published at FinancialSense on 06/28/2017.

Euro Hits High Against The US Dollar, UK Pound And 10 Year Sov Yield Rise as BofE and ECB Mention Stimulus Withdrawal

The euro hit a 1-year high on Wednesday and German 10-year Bund yields continued to rise after doubling the previous day, as bets grew that Draghi and the European Central Bank is readying to scale back its 2-trillion-euro stimulus program.
And then the Bank of England’s Carney announced that they have to remove stimulus as well.

This post was published at Wall Street Examiner on June 28, 2017.

Warren Buffett May Soon Be The Largest Shareholder In A 2nd US Megabank

Remember when Warren Buffett anecdotally “took a bath” when he decided to effectively rescue Bank of America with a $5 bilion equity injection in 2011? He may be due for another bath any minute.
Warren Buffett, already the largest shareholder in recently disgraced Wells Fargo, could soon become the largest shareholder in another US megabank after Bank of America said it would raise its dividend by 60%, from 30 cents to 48 cents, moments after the Federal Reserve gave it and 32 other SIFI-designated US lenders the greenlight to pursue plans to return capital to shareholders (though it did ask Capital One to resubmit its plan). BAC also announced a buyback plan worth $12 billion.
Buffett said in February’s letter to shareholders that an increase in BAC’s dividend above 44 cents would likely prompt him to swap Berkshire’s preferred shares in the second-largest bank into common shares now worth about $16.7 billion, according to Reuters. Doing so would make Buffett the largest shareholder in the US’s second and third largest banks – and more than triple a $5 billion investment made fewer than six years ago.

This post was published at Zero Hedge on Jun 29, 2017.

“Fake Research”: Seattle Mayor Knew Critical Min. Wage Study Was Coming, So He Called Berkeley ‘Economists’

Earlier this week we wrote about a study published by the University of Washington which was fairly damning for Seattle’s $15 minimum wage. To our total ‘shock’, the study found that higher minimum wages caused a 9.4% reduction to total hours worked by low-skilled workers, or roughly 14 million hours per year. Given that a full-time employee works 2,080 hours per year, that’s the equal to just over 6,700 full-time equivalents who have lost their jobs, just in the city of Seattle, courtesy of moronic politicians who don’t seem to grasp basic mathematical concepts (see the full note here: Seattle Min Wage Hikes Crushing The Poor: 6,700 Jobs Lost, Annual Wages Down $1,500 – UofW Study).
As it turns out, however, the bigger story might be why the Mayor of Seattle decided to waste taxpayer money commissioning a competing study from the University of California, Berkeley…especially in light of the fact that the University of Washington study was already paid for by taxpayers and researchers on the project were granted far greater access to data.
Hmm, might it have something to do with the fact that Seattle’s mayor knew that Berkeley’s liberal economists would manipulate data in whatever way necessary to paint a rosy picture for higher minimum wages? That’s a rhetorical question…

This post was published at Zero Hedge on Jun 28, 2017.

Pending Home Sales Slowed

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.
The third consecutive decline in signed contracts to purchase previously owned U. S. homes indicates progress in the housing market is stalling on the heels of lean inventory and rising prices, according to data released Wednesday from the National Association of Realtors in Washington.
Pending home sales index dropped 0.8% m/m (est. 1% gain) after revised 1.7% slump.

This post was published at Wall Street Examiner by johnnymanzielbr ‘ June 28, 2017.

What The Fed Giveth…

Authored by 720Global’s Michael Lebowitz via RealInvestmentAdvice.com,
The Fed Giveth
In December 2008, at the peak of the financial crisis, the Federal Reserve (Fed) lowered the Federal Funds interest rate to zero. In taking this unprecedented step, many investment professionals assumed the Fed was out of bullets to stem the crisis.
Federal Reserve Chairman Ben Bernanke proved them wrong by introducing Quantitative Easing (QE). While the media lauded Bernanke for his creative ingenuity, the fact of the matter was that QE was already being employed in Japan on and off since 2001. Additionally, other versions of QE were used in the United States, most notably during the 1920’s. They did not call that era the roaring 20’s for nothing.
QE is often referred to as money printing because the Fed conjures U. S. dollar currency from thin air which it then uses to purchase financial securities. In this day and age, the Fed does not physically ‘print’ new money but effectively does so electronically with a series of 1’s and 0’s. Despite the seemingly magical way money is created for the ‘benefit of all,’ critics of QE are not so enamored with this policy tool. Maybe they understand the long history of financial hardship that has befallen nations that relied heavily on it. After nearly a decade since the Fed first administered it, the idea of reversing QE (balance sheet reduction or monetary policy normalization) has been raised by Fed officials and Wall Street pundits. The Fed’s campaign to downplay QE and the risks of a bloated balance sheet has been effective as investors seem to have little interest in the matter. The post-crisis economy and financial markets are deeply conditioned to monetary largesse and excessive liquidity. Changes to these conditions, if they do indeed occur, will elicit ‘adjustments’ likely in the form of severe volatility. Frequently, pivotal market events are not forecasted or appreciated until after the fact. The possibility that the Fed would embark upon a reversal of QE is one such event that will be disruptive to the artificial tranquility so enjoyed in the recent past. Despite widespread complacency, the increasing possibility of action is an important matter.

This post was published at Zero Hedge on Jun 29, 2017.