The Fed’s Definition Of Price Stability Is Probably Different Than Yours

The Federal Reserve Act, as mandated by Congress, established a dual mandate to guide the Federal Reserve (Fed) in setting monetary policy. Price stability, one of the mandates, benefits economic growth as it allows investors, corporations, and consumers the ability to better predict future prices and therefore allocate investments and spending in a more optimal manner.
To consider why price stability is beneficial, consider an oil producer deciding whether or not to invest in a new well. To simplify the analysis, assume the producer only needs to consider three variables to properly evaluate the project: (A) investment costs (fixed/variable), (B) a reliable estimation of the amount of oil, and (C) the future price of oil. The expected return equation dictates that profits must be greater than costs (B x C must be greater than A) to forecast a profit on the investment. The company has some control over investment costs and the surveying methods to determine the success of the well, but they have little if any control over the future price of oil. Therefore, the more stable and predictable the future price of oil, the more comfort the producer can have in making its decision about a new well.

This post was published at Zero Hedge on Jul 4, 2017.

Buy Gold Stocks Now

1. The latest gold price action is a near-perfect reflection of the current market fundamentals.
2. Please click here now. Double-click to enlarge.
3. Gold has arrived at my $1220 – $1200 conservative investor buy zone.
4. The market is seasonally soft in the summer months, but two key price drivers are poised to create the next rally.
5. The first is the US jobs report. It’s scheduled for release on Friday at 8:30AM. Market participants are going to be looking at wage price inflation as much as they are looking at the total number of jobs created.
6. Gold has a rough general tendency to soften ahead of this report, and then rally strongly following its release.
7. The $1220 – $1200 support zone is an ideal price area for gold bugs to buy in anticipation of a post jobs report rally!
8. Please click here now. Double-click to enlarge this seasonal spot gold chart, courtesy of Dimitri Speck.
9. This chart should be used by all gold bugs as a key reference chart to understand gold’s seasonality.
10. In a nutshell, the summer is the best time to accumulate gold, and February is a great time to book some profits.
11. The current price softness is seasonally normal, and it’s exacerbated by the decision of bullion banks to halt imports into India.
12. They decided to halt imports until they got clarification about applying the new GST regime to the gold market. It appears that June imports were only about five tons.

This post was published at GoldSeek on 5 July 2017.

Carmageddon: Record Incentives And Financing Terms Fail To Stem The Auto Bleeding In June

GM's inventory has officially hit a 10-year high. 980,454 units in stock (a 105-day supply) as of June 30, the most since June 2007.
— Nick Bunkley (@nickbunkley) July 3, 2017

Yesterday we noted that auto investors celebrated the fact that, while auto sales were down massively year-over-year (to the tune of nearly 6% for the Detroit 3), June figures were ‘less bad’ than expected, so ‘good’. All of which sparked even more ‘irrational exuberance’ among OEM equity owners and sent Ford/GM shares soaring.
But, rather than focus on the headline numbers, perhaps those equity owners should spend a little more time analyzing the record incentives and deteriorating underwriting standards that have been required to generate those ‘less bad’ results.
Take, for example, incentive spending for the month of June. As Automotive News points out, overall industry incentive spending soared nearly 10% YoY with brands like Hyundai and Honda slashing 42% and 20%, respectively, to move their bloated dealer inventories.
ALG reports automakers spent an average of $3,550 per new vehicle sold in June, up 9.7 percent from a year ago. The average discount is expected to account for 10.8 percent of the average transaction price of vehicles sold last month — marking the 11th time in the past year that incentive spending has accounted for 10 percent or more of the sale price, according to industry forecasters.
Autodata Corp. says average incentive spending heading into June was up 15 percent to $3,516 per vehicle sold. Despite weakening demand for cars, incentive spending for