Will Central Banks Derail The Shale Boom?

Authored by Nick Cunningham via OilPrice.com,
The U. S. Federal Reserve has already increased interest rates several times, most recently in June, with promises to do much more. Rate hikes pose a problem for the oil industry, which has used debt to underpin a drilling boom across the U. S. shale patch. Higher rates could raise the cost of drilling.
But low oil prices, and few prospects for a strong rebound in the near-term – and possibly even the medium- and long-term – undercut the rationale for higher rates. After all, inflation is soft, and low commodity prices have a lot to do with that.
In fact, the decline of oil prices this year has led to even lower inflation than expected, not just in the U. S., but also in Europe. The Fed has insisted that weak inflation is ‘transitory,’ but more people are starting to wonder if that is true. ‘There is now a much bigger chance that there will be an important disinflationary impact from lower oil prices,’ Thierry Wizman, global interest rates and currencies strategist for Macquarie, told MarketWatch. With oil prices and broader inflation low, why raise rates? Still, the Fed seems intent on moving forward. And the Bank for International Settlements (BIS), a group of central banks from around the world, urged central banks a few days ago to continue the ‘great unwinding.’ That is, the extraordinary monetary stimulus stemming from the 2008-2009 financial crisis needs to be reined in. Fed chair Janet Yellen has warned about overpriced asset classes, a side effect of loose monetary policy. The hawkish Fed thinks that monetary policy needs to tighten in order to prevent overheating.

This post was published at Zero Hedge on Jun 30, 2017.

Banks Add $40 Billion in Value After Fed Stress Tests (Less Real Estate Lending, Omitted Lenders)

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.
The Federal Reserve has released their stress test for banks. And all large banks passed!! (Bloomberg) – The biggest U. S. banks added more than $40 billion in market value after the Federal Reserve’s annual stress tests opened the way to surprisingly big increases in dividends and share buybacks.
Wells Fargo & Co. jumped 4.1 percent while Citigroup Inc. surged as much as 3.8 percent in New York trading Thursday. Regions Financial Corp. and KeyCorp also climbed as the KBW Bank Index rose the most since April.
‘The results came in well ahead of both our estimates and consensus estimates as the Fed allowed for a large step-up’ in payouts to shareholders, Scott Valentin, an analyst at Compass Point Research & Trading LLC, said in a note titled ‘Fed Unlocks Treasure Chest of Capital Return.’
JPMorgan Chase & Co., Citigroup and Bank of America Corp. unveiled plans on Wednesday to boost payouts more than analysts had projected, after every lender passed the Fed tests for the first time since the central bank began the reviews in the wake of the 2008 financial crisis.
Capital One Financial Corp. slipped 0.7 percent after it was the lone bank to stumble through the exam, garnering conditional approval to make payouts while it fixes ‘material weaknesses’ in planning. The company reduced its buyback program for the next four quarters 30 percent compared to the previous year’s total.

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

U.S. Gold Exports Surge As Its Gold Trade Deficit Continues

It’s no secret that the East (Asians and Indians) continue to acquire a lot of gold as Western demand has weakened this year. According to the most recent data released by the USGS – United States Geological Survey, U. S. gold exports surged during the first four months of the 2017 versus the same period last year.
How much? A great deal. In the first four months of 2017, the U. S. exported a stunning 173 metric tons of gold (5.5 million oz) compared to 119 metric tons (3.8 million oz) during the same period last year. Thus, U. S. gold exports Jan-Apr 2017 surged 45% versus last year.
This is quite a large increase. I would imagine part of the increase is due to the fact that U. S. precious metals retail demand is off considerably ever since Trump was elected President. U. S. Gold Eagle sales are down a whopping 62% 1H 2017 versus the same period last year.
For example, the U. S. Mint sold 501,000 oz of Gold Eagles during the first half of 2016, versus 192,000 oz for the first half of 2017. This is a drop of 309,000 oz.

This post was published at SRSrocco Report on JUNE 30, 2017.

Everyone Calm Down – One Trader “Looks Into The Abyss”

Relative to the market’s complacent nonchalence this year, the last two weeks have seen violent swings across almost every asset class as ‘no brainer’ stocks tumble, perennially dovish central bankers turn hawkish, and suppressed volatility has a mini-Minsky moment. But for all the hand-wringing over this ‘regime shift’, former fund manager and FX trader Richard Breslow has a simple message – calm down and be careful what you think happened this week…
Via Bloomberg,
It’s been a week filled with hyperbole. Trial balloons dressed up as pre-commitments. A little volatility described in cataclysmic terms and compared to jarring historical market upsets. Feverish extrapolation masquerading as revised forecasts. Central bankers daring to go where no one has gone before. It’s been an interesting, and in many ways fun, few days, but based on what we can possibly know at this point, unlikely to be enshrined in trading lore.

This post was published at Zero Hedge on Jun 30, 2017.

Getting Taxpayer-Funded Free Stuff Is not “Religious Liberty”

There seems to be some confusion among religious columnists as to what constitutes religious freedom and what does not.
In a recent column for Crisis, Thomas Ascik claims that the US Supreme Court’s ruling inTrinity Lutheran v. Comer is a victory for “the free exercise of religion.”
The ruling essentially states that church organization can now receive government grants for amenities and activities that are not specifically religious activities. In the case of Trinity Lutheran specifically, the church had applied for a government grant to repave its playground with recycled automobile tires.
The state of Missouri denied the grant to the church on the grounds that it was a religious organization. Now SCOTUS has ruled such exclusionary policies are unconstitutional.
That’s fine as far as it goes. I have no more of a problem with Trinity Lutheran receiving state funds than with Secular Daycare Brand X receiving them. In both cases, the taxpayers have been ripped off and their money handed over to someone else. The fact that Trinity Lutheran is a church is not the problem in this equation.
But, let’s not pretend that getting a government grant has anything to do with the free exercise of religion or religious liberty. In no way did the grant-selection process mean that Trinity Lutheran or its membership was prevented from freely exercising its faith. As a result of the grant going to some other organization, the building was not seized by the state, the members were not silenced, and the church’s publications were not censored.

This post was published at Ludwig von Mises Institute on June 30, 2017.

“The Fed Is Preparing To Make The Rich Poorer”: BofA

Remember when – for years and years after the grand, global QE experiment started – any suggestion that central bankers are the primary cause behind global wealth inequality, and thus directly responsible for such political outcomes as Brexit and Trump – was branded as a conspiracy theory by bloggers living in their parents’ basement? We do, because we were accused over and over of just that (our position on the Fed and other central banks should be familiar to all by now).
Well, as of this morning, none other than the chief investment strategist at BofA, Michael Hartnett, is a basement dwelling, tinfoil hatter because in his latest Flow Show report, writes that “central banks have exacerbated inequality via Wall St inflation & Main St deflation.”

Of course we knew that, you knew that, and pretty much everyone else knew that, but those whose jobs depended on not admitting it, kept their mouths shut terrified of pointing out that the central banking emperor is not only naked, but an idiot. Well, the seal has been broken, and even the biggest cowards from within the financial establishment, most of whom can be found on financial twitter for some inexplicable reason, can speak up now.

This post was published at Zero Hedge on Jun 30, 2017.

The Good, the Bad, and the Ugly of Annuities

The following is a summary of our recent podcast interview, which can be accessed on our site here or on iTunes here.
For many, an annuity can be a great way to shelter capital for retirement, however, as with most contracts, all of the nuances, fees, expenses, and details need to be understood up front.
This time on Financial Sense we spoke with Rob Bernard, a financial advisor at PFS Group, about what investors need to know when considering annuities, and how to make the most of the benefits annuities offer.
The Ins and Outs of Annuities
There are three types of annuities: fixed, variable, and immediate.
A fixed annuity is set for a period of time, normally at a fixed interest rate, often with a teaser rate for a year, and a floating thereafter.
A variable annuity is set up with various mutual funds inside of it. It incorporates stock market performance into its valuation and will gain value with the markets.
An immediate annuity is annuitized right away, allowing an investor to begin receiving payments from the start.

This post was published at FinancialSense on 06/30/2017.

Dollar, Bond “Carnage” Pauses; Global Stocks Rebound Led By Tech Shares

S&P futures rebounded shortly after the stronger than expected European CPI print, rising 0.3% to 2,426, as markets try to forget all about yesterday’s brief 50% VIX surge and tech rout, which trimmed the seventh consecutive quarterly gain for the S&P 500 Index to 2.4%. Europe shares rose 0.4%, led by tech stocks, after a drop in Asian markets, as oil and the dollar gained.
The action this week however, yesterday’s equity fireworks notwithstanding, has been in dollar and bonds, where as Bloomberg says this morning, the “carnage has paused for a breather” with Treasuries steady after yields across the globe rose this week as central bankers shifted toward a more hawkish tone while the dollar gained against most G10 peers, paring its worst weekly loss in six.
Putting the dollar’s quarterly performance in context, it is down -4.8% in Q2, its worst quarterly performance since 2010. Market skepticism remains over the Fed’s dots and tightening intentions, the recent 22 bps of curve flattening, and what the ECB may do next. “Obviously there’s a shift afoot. It really seems that there’s some coordinated effort going on out here among the G10 central banks,” said Stephen Innes, head of trading in Asia-Pacific for OANDA in Singapore, referring to the series of hawkish-sounding comments on monetary policy.

This post was published at Zero Hedge on Jun 30, 2017.

Beyond Bitcoin

Last week we wrote a simple introduction to digital currencies, describing the motivation of their creators, the technologies that underlie them, and some of the pitfalls that may be waiting for speculators. A lot of readers found the piece helpful; if you haven’t seen it, please feel free to request a free copy.
Bitcoin and other digital currencies were designed as forms of ‘digital gold’ that would meld characteristics of physical gold with those of electronic money. They may or may not ever become viable media for storing and exchanging value. For now, they remain highly speculative, highly volatile, and subject to a variety of risks that are nearly impossible to evaluate. Some of those risks are existential and could lead to the collapse of digital currency systems, either because of the regulatory crackdown or because of a technical failure from unexpected advances in computing technology. We concluded that for now at least, digital currencies are for intelligent and careful speculators who have some idea what they’re getting into – but definitely not for investors.
With all that said, some of the most interesting things about digital currencies are not the currencies themselves, but the technologies that underlie them. We’re not kidding ourselves; the current bubble in bitcoin, ether, and several other digital currencies is much more exciting than the underlying technologies. Still, those technologies may ultimately prove to be more influential on the global economy and the global financial system than the currencies they were created to support.
The Technologies That Make Bitcoin Work
As we mentioned last week, bitcoin rests on two key technological innovations: public/private key encryption and the blockchain. Public/private key encryption has been around since 1976; the blockchain was an innovation contributed by bitcoin’s anonymous inventor when he wrote the white paper that launched the currency in 2008.

This post was published at FinancialSense on 06/30/2017.

Warren Buffett Becomes Bank Of America’s Top Shareholder, Books $12 Billion Profit

As we previewed exactly 24 hours ago, Buffett’s Berkshire Hathaway said it will exercise warrants to swap its preferred Bank of America shares for 700 million shares of BAC common stock, making Buffett the largest shareholder, surpassing BlackRock, Vanguard and State Street . Buffett is also the top shareholder at Wells Fargo.
Buffett exercised his warrants, which were due to expire in 2021, to swap $5 billion in preferred stock worth about 6% of the company for common stock at $7.14 a share, less than a third of yesterday’s closing price of $24.32, effectively translating in a profit of $12 billion for the Omaha octogenarian. The decision was prompted by the latest Fed stress test, which allowed the bank to hike its dividend by 60%, from 30 cents to 48 cents. BofA also announced its plans for a record $12 billion stock buyback, almost immediately after the Federal Reserve gave it the green light on Wednesday, while also approving the capital-return plans of 32 other US banks that received the SIFI designation.

This post was published at Zero Hedge on Jun 30, 2017.

Frontrunning: June 30

Rhetorical question of the day: Twisted Geniuses or Bumbling Ex-Academics? (WSJ) Markets Steady on Quarter’s Last Day (WSJ) Their fortunes enmeshed, Trump and Putin to hold first meeting next week (Reuters) Oil Is Set for Longest Rally of 2017 (BBG) Brightening economy sets euro up for strongest quarter since debt crisis (Reuters) Eurozone Inflation Falls Again in Setback for ECB (WSJ) Trump’s Travel Ban Takes Effect, Setting Strict Entry Limits (WSJ) China says HK joint declaration no longer has meaning (Reuters) U. S. likely to bar Japan investigators from interviewing warship crew, official says (Reuters) Chinese Regulators Play Whac-A-Mole With Banks (WSJ) Trump says he is sending federal help to fight Chicago crime (Reuters) Iraq’s Dilemma: Who Will Lead the Next Big Fight Against ISIS? (WSJ) Shkreli’s Hedge Fund Went From Success to Bust in 31 Minutes (BBG) Ron Dennis to Sell Stakes in McLaren, Step Down as Chairman (BBG) Twitter is looking for ways to let users flag fake news, offensive content (WaPo) Europe’s Car-Leasing Boom Sets Off Alarm Bells (BBG) Google’s Main Strategy Is Under Threat From EU (WSJ) German lawmakers approve same-sex marriage in landmark vote (Reuters) Electric Cars Are Coming Faster Than You Think (BBG) China ‘outraged’ by $1.42 billion planned U. S. arms sales to Taiwan (Reuters) Traders Who Left Banks for Hedge Funds Now Heading Back to Banks (BBG) Heathrow Express Braces for Crossrail to End Airport Monopoly (BBG)

This post was published at Zero Hedge on Jun 30, 2017.

Following Latest Woman Bashing, Growing Numbers Question Trump’s Fitness for President

‘Donald Trump Is Not Well,’ is the headline over an OpEd at the Washington Post this morning by Mika Brzezinski and Joe Scarborough, hosts of the MSNBC show, Morning Joe. The OpEd comes in response to a sexist rant against Mika Brzezinski by the President of the United States yesterday on his Twitter page. Invoking for the second time his fixation about women and blood, the President called Brzezinski ‘low I. Q. Crazy Mika’ and said that at a prior visit to his Mar-a-Lago residence in Palm Beach she was ‘bleeding badly from a face-lift.’ (The hosts called the face-lift allegation a lie.)
Adding some background evidence to their claim that the President ‘is not well,’ the MSNBC hosts wrote:
‘From his menstruation musings about Megyn Kelly, to his fat-shaming treatment of a former Miss Universe, to his braggadocio claims about grabbing women’s genitalia, the 45th president is setting the poorest of standards for our children.’

This post was published at Wall Street On Parade on June 30, 2017.

China PMIs Unexpectedly Accelerate Despite Ongoing Employment Contraction

Validating the recent surge in iron ore, which has jumped more than 18% from 2017 lows hit just two weeks ago on speculation the PBOC may be willing to flirt with another round of inflation, overnight Beijing reported an unexpectedly strong bounce in its manufacturing and service sectors.
China’s NBS June manufacturing PMI came in at 51.7 for June, above both the previous reading of 51.2 and expectations of a 51 print, remaining comfortably above the 50-point expansion line. This was the second highest level of 2017, on the back of improving market sentiment and industrial upgrading, according to an NBS statement posted on its website, despite an ongoing troubling contraction in the employment subindex. Unlike the Caixin PMI, the official index tracks mostly larger, state-owned enterprises.

Two key sub-indices both increased from the previous month, although ominously the employment index declined for one more month and remained in contraction territory:
The production sub-index went up to 54.4 in June, higher than 53.4 in May. The new order sub-index also increased to 53.1 in June from 52.3 in May. The employment index slightly declined to 49.0 in June, from 49.4 in May.

This post was published at Zero Hedge on Jun 30, 2017.

Ron Paul on Making Money Great Again

The following video was published by misesmedia on Jun 30, 2017
Dr. Ron Paul joins Jeff Deist to talk about his decades as a congressman fighting the Fed, his efforts to legalize the use of gold and silver as untaxed currency, and his involvement with sound money initiatives in states like Arizona and Wyoming. Plus, Dr. Paul shares some great anecdotes about Reagan’s Gold Commission, Alan Greenspan, and Paul Volcker.

Nobel Prize Economists Calls High Stock Market Values ‘Concerning’

During a recent interview on CNBC’s Power Lunch, Nobel Prize winning economist Robert Shiller called stock market valuations ‘concerning’ and hinted that markets could be set up for a crash.
Several other notable economists have recently expressed concern about surging stock markets, particularly in the US. Marc Faber has predicted ‘massive’ asset price deflation – possibly of drop of as much as 40% in stock market value. Billionaire investor Paul Singer recently said the financial system is not sound. And former Ronald Reagan budget director David Stockman said we should get ready of ‘fiscal chaos.’ Now Shiller has weighed in, pointing out that market valuations are at ‘unusual highs’ and noting that if history is any indication, it could foreshadow an upcoming crash.

Shiller and fellow economist John Campbell developed the cyclically adjusted price-earnings ratio (CAPE).

This post was published at Schiffgold on JUNE 30, 2017.

US: New Sanctions Against North Korea Target China, Too

The US Department of the Treasury unveiled new sanctions June 29 targeting Chinese entities allegedly acting as fronts for North Korean interests, including the Dalian Global Unity Shipping Company and two Chinese nationals. Most notably, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a proposal to bar US institutions from transacting with the Chinese-run Bank of Dandong, which it accuses of carrying out money laundering for the North Korean government. This would require a two-month comment period before going into effect.
In 2005, Washington similarly went after Macau-based Banco Delta Asia for money laundering on behalf of North Korea and froze $24 million in assets. The proposed US actions against Bank of Dandong (and those against Banco Delta Asia) fall under Section 311 of the US Patriot Act, which the Treasury used in June 2016 to name North Korea a “primary money-laundering concern.” Bank of Dandong itself has been in the US crosshairs since 2016, but along with Bank of China and China Merchants Bank, it claimed to have since halted remittances to North Korea.

This post was published at FinancialSense on 06/30/2017.

Stock Markets Hyper-Risky

The US stock markets have enjoyed an extraordinary surge this year, shattering all kinds of records. It’s been fueled by hopes for big tax cuts soon from Trump’s Republican government. But such relentless rallying has catapulted complacency, euphoria, and valuations to dangerous bull-slaying extremes. This has left today’s beloved and lofty stock markets hyper-risky, with mounting potential for serious selloffs erupting.
History extensively proves that stock markets are forever cyclical, no trend lasts forever. Great bulls and bears alike eventually run their courses and give up their ghosts. Sooner or later every secular trend yields to extreme sentiment peaking, then the markets inevitably reverse. Popular greed late in bulls, and fear late in bears, ultimately hits unsustainable climaxes. All near-term buyers or sellers are sucked in, killing the trend.
This mighty stock bull born way back in March 2009 has proven exceptional in countless ways. As of mid-June, the flagship S&P 500 broad-market stock index (SPX) has powered 262.7% higher over 8.3 years! Investors take this for granted, but it’s far from normal. That makes this bull the fourth-largest and second-longest in US stock-market history! And the few superior bull specimens vividly highlight market cyclicality.
The SPX’s biggest and longest bull on record soared 417% higher between October 1990 and March 2000. After it peaked in epic bubble-grade euphoria, the SPX soon yielded to a brutal 49% bear market over the next 2.6 years. The SPX wouldn’t decisively power above those bull-peaking levels until 12.9 years later in early 2013, thanks to the Fed’s unprecedented QE3 campaign! The greatest bull didn’t end well at all.

This post was published at ZEAL LLC on June 30, 2017.