Questions

We often have discussions in the office that consist primarily of asking questions. Sometimes they are questions we don’t think people are asking enough, sometimes questions we are sick of hearing and most often questions which we can’t answer. Not questions that only we can’t answer but rather ones that no one can answer based on real facts. I find these discussions very helpful and thought it might be interesting to expand the conversation and include our readers. It’ll usually just be stream of consciousness on my part, whatever comes to mind, but sometimes we’ll try a theme. So, this is the first edition of what I hope becomes a regular feature called Questions.
Why did the US yield curve steepen after Draghi’s comments last week? Draghi said that ‘deflationary forces’ are being replaced by reflationary ones and bonds sold off worldwide. The yield curve in the US steepened along with those in Europe. The 10 year yield has risen 20 basis points in five trading days so nominal growth expectations rose after his comments. Real growth expectations rose too as TIPS sold off. So either investors believe that Draghi knows something they don’t or that ending QE – which is what this implies – is positive for growth. With central bankers’ credibility in the toilet I’m left wondering if all the world’s QE has actually been counterproductive.

This post was published at Wall Street Examiner on July 3, 2017.

David Stockman On The Coming Carmageddon

Ben Bernanke’s successors at the Fed and other global central banks still don’t get it.
Falsified debt prices do not promote macroeconomic stability. They lead to reckless credit expansion cycles that eventually collapse due to borrower defaults. We’re now seeing that play out in the auto sector, especially since anyone who can fog a rearview mirror has been eligible for a car loan or lease.
If that reminds you of the sub-prime housing disaster, you’d be right.
That, in turn, will make the looming collapse even worse, due to the sudden drastic shrinkage of credit in response to escalating lender losses.

This post was published at Zero Hedge on Jul 3, 2017.

4th of July: Why the Shadow Government Hates Independence Day

SARTRE
21st Century Wire
The only conclusion any honest American citizen can come to is that the Republic is dead. Once again the flags wave and the songs play as the parades march to celebrate another 4th of July.
Picnic meals are eaten while children frolic in the warn sunshine of summer. Few people reflect on the true meaning that established the solemn commemoration of the nation’s birth. The reality of this post federation of independent state sovereignty is that a centralized federal behemoth has superseded the original intent of Thomas Jefferson’s vision: ‘That government is best which governs least’.
Today the society that exists demands compliance or compels obedience by way of punishment.

This post was published at 21st Century Wire on JULY 4, 2017.

Rich White House Staffers Paid Handsome Salaries

Nearly half of the Trump administration’s White House staff will earn in excess of $100,000 per year, according to new salary details released last Friday.
While some staff work pro bono, such as ‘First Daughter’ Ivanka and her husband Jared Kushner, 22 of Trump’s aides, including some with a net worth in the tens of millions of dollars, earn $179,000 per annum.
These include press secretary Sean Spicer, worth $4.5 million; chief of staff Reince Priebus, worth $8 million; senior counselor Kellyanne Conway, who disclosed assets worth up to $39.3 million; and chief strategist Steve Bannon, who sits atop a fortune worth between $9.5 and $48 million.
This comes as no surprise, as a substantial portion of Congress are also millionaires, but it only reflects that the American government is out of touch with the people it rules.

This post was published at The Daily Sheeple on July 3, 2017.

America Celebrates 4th Of July With Burger Prices At 3-Year Lows

Amazon’s impending takeover of Whole Foods Market isn’t the only thing weighing on grocers’ spirits this Fourth of July holiday. As Bloomberg reports, booming meat supplies have sent ground-beef prices to three-year lows, squeezing food sellers’ margins ahead of the top grilling day of the year, when 87% of US consumers are expected to barbecue.
What’s worse, the surge in production has kept in-store prices low, while wholesale costs have risen.
Here’s Bloomberg with more:
‘American beef production is expected to climb 4 percent this year to 26.292 billion pounds, the highest since 2010, the U. S. Department of Agriculture estimates. The gain comes as feed has stayed cheap for livestock producers, with corn futures falling for four straight years through 2016. Pork and chicken output will both reach records.
Higher output is helping to keep ground-beef prices low at the grocery store. Retail costs have stayed cheap even as wholesale costs climbed, signaling that consumers will likely enjoy lower bills for the next year and a half as production keeps expanding, said Chris Hurt, a professor of agricultural economics at Purdue University in West Lafayette, Indiana.

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

War on Gold, War on Korea, China Collapse and More

Guest Post from Money Metals Exchange
Listen to the Podcast Audio: Click Here
Mike Gleason (Money Metals Exchange): I wanted to ask you about a tweet you sent out earlier this month – and for people who want to follow you there, it’s @JamesGRickards – but in that tweet you wrote:
Just informed that Scotia Bank branch is now a gold buyer only. Will not sell to retail clients. Get it while you can. War on gold is here.
Expand on that here, Jim. What did you make of that move and why did you make those comments?
Jim Rickards: Sure. We have a war on cash. I think that’s pretty well known to the listeners, so we see it everywhere. India just abolished its two most popular forms of cash. They literally woke up one day and they said, I think it was the 2,000 rupee note and the 1,000 rupee note, if I’m not mistaken. I believe those are the right denominations. Not worth a whole lot by our standards, worth like $15 or whatever. But they were, by far the most popular and widely used, widely circulated bank notes in India. And the government just woke up and said they’re all illegal. They’re worthless. Just like that. Now what they said is, ‘Now you can take them down to the bank and you can hand them in, and we’ll give you digital credit in your account – oh by the way, the tax inspector’s going to be there asking you where you got the money.’ So obviously it was designed to flush out people suspected of tax evasion.
Although, in fact it turned out that there weren’t that many tax cheaters. They were just people who actually preferred money. They preferred cash and they were forced out of the system, forced into this digital system. And there were all kinds of negative repercussions of that. So, there’s a whole country that abolished the most popular forms of cash.
Sweden is very close to cashless. You go around the United States, you might have some, what we call in Philadelphia ‘walking around money.’ I can look in my wallet and there’s probably some 20s and maybe a couple 50s in there, but when you transact, you get paid digitally. You pay your bills with automatic debits. You transfer money with wire transfers. You use your debit card. You use your credit card, etc. You shop on Amazon, you pay with a debit or credit card, etc. maybe PayPal. And I do that. Everyone does that. I’m no different. I’m not exempt from or outside the system.

This post was published at Deviant Investor on July 4, 2017.

Why Was Gold Slammed And The Dow/SPX Pushed Higher?

Something ugly could be hitting the financial/economic system soon. To blatantly hit gold like this when no one is around is a sign of desperation. The FANGS had an brutal reversal today despite the squeeze higher in the broad indices. TSLA soared early on Elon Musk’s shameless puffery – which often borders on outright fraud – and reversed to the downside, while the SPX and Dow were being pushed higher by the Plunge Protection Team. Both indices closed well of their higher. Auto sales for June were once again well below expectations. GM’s inventory soared despite a stated goal to reduce it inventory from over 110 days to 70. A lot of workers will lose their jobs. Household debt – mortgage, auto, credit card – will go unpaid…
The Trump Presidency is floating on the fumes of questionable sanity as an impeachment Bill is being sponsored in the House by 25 Reps. The case to be made that Trump is not mentally competent enough to have his index finger on the red button that launches nukes at Russia grows stronger by the day.

This post was published at Investment Research Dynamics on July 3, 2017.

Undercover Investigation Exposes Deteriorating Auto Lending Standards In Europe; No Job, No Problem

Over the weekend we wrote a note about how the European auto lenders are becoming just about as ridiculously undisciplined as their counterparts in the United States. Apparently an ever-growing reliance of European millennials on lease financing has auto ABS investors worried about a potential crash in used car prices at some point in the not so distant future…that sound familiar to anyone?
But a new undercover investigation by the Daily Mail exposes just how “undisciplined” the auto lending market has become in England. Here are the headlines:
Reckless car loan salesmen exposed: How dealers are luring young drivers into massive debt by offering them new top-brand cars with NO cash up front Salesman are offering customers cars worth up to 20,000 for no deposit The deals make the customers pay back hundreds of pounds a month for years The cars are being offered to those on low wages and with poor credit rating Experts in the City fear the huge numbers could default and cause a crash If drivers fall behind on payments the cars can be automatically repossessed Of course, for American auto consumers nothing about the headlines above is all that shocking. In fact, we recently noted how one dealership in Texas was literally marketing a $1,500 “Low Credit Score” discount to buyers on a $55,000 truck. We guess it never occurred to anyone that perhaps, just maybe, a person with a credit score under 620 shouldn’t be shopping around for a $55,000 vehicle?

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

The Best And Worst Performing Assets In The First Half Of 2017

The first half of the year may have been forgettable for a majority of the smart money and hedge funds, with nearly 80% once again underperformingttheir benchmarks due to months of P&L crushing short squeezes, but it was a buoyant time for equity markets and virtually all asset classes, for one simple reason: a record central bank liquidity injection of over $1.5 trillion YTD. Of course, that central banks had to flood markets with so much liquidity as the global economy is allegedly recovering is the main reason why nobody actually believes in said “recovery”, and neither do the central bankers.
They did succeed however in generating outsized returns for the first 6 months of 2017, and as Deutsche Bank’s Jim Reid writes, the first half of 2017 has been an overall positive half year for our sample of assets. Reid continues below:
Indeed with measures of volatility for a number of asset classes at historically low levels, 32 out of 39 assets in our sample have delivered a positive total return while 35 assets have done similar in USD terms. In summary, equity markets have led the way with 9 out of the top 10 positions in our leaderboard. The peripherals stand out the most with the Greek Athex (+40%), IBEX (+24%) and Portugal General (+22%) all delivering decent double digit returns. European Banks (+20%) have extended a rally which started this time a year ago following a torrid start to 2016. EM equities (+19%), Stoxx 600 (+17%) and the S&P 500 (+9%) have also seen a more than solid start to the year. For bonds, in USD terms returns sit in the +2% to +9% range with the peripherals outperforming.

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

Enjoy Your Dependence Day, America

It was not that long ago that a group of men and women in this nation decided they had enough.
They didn’t have electric power. They didn’t have Teslas. Most homes didn’t have any sort of “plumbing”; there was an outhouse, as the named implied, out back — which was little more than a pit and a shack around it. Taking a bath required heating water over a fire, which then could be poured into a tub; a “shower” was unheard of. Indeed these people didn’t have cars; they rode horses or walked, and many could not afford a horse, so feet it was. There was no “welfare”, no AFDC and no Obamacare. If you didn’t work you either found someone who took pity on you — privately — or starved. They did have firearms, but not because someone gave them to them, and in fact the government kept trying to confiscate them or limit what they could own or where they could carry them.
The genesis of the American Revolution was a modest but real increase in taxes that the Crown attempted to impose, especially on what was at the time an effective national beverage — tea. I remind you that at the time the effective tax rate in the Colonies was a mere 2%, and the increase proposed was tiny.
Yet it, along with a government that wanted to tell people how to live, pushed the nascent Americans far enough over the edge that they grabbed rifles and told the soldiers — and the Crown to “get out.”

This post was published at Market-Ticker on 2017-07-04.

UK House Prices ‘On Brink’ Of Massive 40% Collapse

– UK house prices on brink of massive 40% collapse
– UK at ‘edge of worst house price collapse since 1990s’
– Two leading economists warn of property crash
– ‘We are due a significant correction in house prices’
– Brexit and wages failing to keep up with inflation to trigger collapse
– Trend starting in London before fanning out to rest of UK
– UK homeowners unconcerned – 58% expect prices to rise
– Over 1 million mortgages under threat in UK
– Concerns of return of new ‘negative equity’ generation
– Huge denial amid recency bias and endowment bias – emotional attachment to expensive things we buy – especially our homes
– Good news for first time buyers – bad news for UK banks and indebted, vulnerable UK consumers and economy
***
Two leading economics professors have warned that the UK housing market is on the brink of a 40% collapse, echoing the early 1990s property crisis.
‘We are due a significant correction in house prices. I think we are beginning to see signs that correction may be starting’ Paul Cheshire, a professor of economic geography at the London School of Economics told the Mail on Sunday.

This post was published at Gold Core on July 4, 2017.

Missouri Reverses St. Louis Minimum-Wage Hike

A week ago, we reported on a study from the University of Washington that exposed how the city of Seattle’s progressive minimum wage increases, which began in 2015, are – contrary to the hopes of so many liberals – actually crushing the city’s poor.
Specifically, 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 equivalent to just over 6,700 full-time equivalents who have lost their jobs, just in the city of Seattle.
While the higher minimum wage law remains intact in liberal Washington State – despite the research suggesting that it’s harming Seattle’s most vulnerable workers – the Missouri legislature recently acted to prevent a similar catastrophe from playing out in St. Louis by passing what’s known as a preemption law to invalidate a city-approved minimum wage hike that was slated to take effect in late August. The hike would’ve raised the city’s minimum wage to $10 an hour, from the state-approved $7.70.

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

Keiser Report: Rationing of Money (E1092)

The following video was published by RT on Jul 4, 2017
From Mexico City, Max and Stacy discuss rationing healthcare and investment opportunities. Max continues his interview with economist and columnist Alejandro Nadal about Trump’s economic and geopolitical policies and what they mean for Mexico.

The Death of the European Banking Union

In early June, the failure of the Spanish bank Banco Popular seemed to work smoothly under the new European resolution rules. The relatively new Banking Union seemed to work in achieving its goal to limit moral hazard. Losses were imposed upon junior bondholders and shareholders whereas Spanish taxpayers did not pay a dime. Although there are many defects with the new resolution framework, it seemed to be a step in the right direction. This impression was short lived and died when the Italian government agreed to use 17 billion of taxpayer’s money for two failed banks, Veneto Banca and Banca Popolare di Vicenza, in late June. Thus, Italian senior bondholders will be protected despite the philosophy of the new bail-in framework according which bondholders shoulder losses if a bank fails. Consequently, the two banks’ senior bond prices rose by more than 15% on Monday.
What is the Banking Union? After the 2007 financial crisis and during the 2010 – 2012 debt crisis, the European banking sector was weakened to a considerable extent. Consequently, the European Central Bank (ECB) and national governments made an extensive use of bail-outs to stabilize the banking sector. As an unintended consequence, the liquidity and capital provided to banks meant that the financial position of both the monetary authorities and the national governments deteriorated and the incentives for banks to act prudently were distorted.

This post was published at Ludwig von Mises Institute on July 4, 2017.

Romania hit by $4.4-billion damage claim over stalled gold mine project

A Toronto-listed mining company is claiming $4.4 billion in damages from Romania at the World Bank’s arbitration tribunal, accusing Bucharest of unfairly blocking its $2 billion project to create one of Europe’s biggest gold mines and expropriating its assets.
Gabriel Resources won a licence in 1999 to exploit the Rosia Montana gold and silver deposits in Transylvania, but was never granted the necessary permits. The company says it has complied with all necessary Romanian and European Union legal requirements.
Environmental groups and local campaign groups have fought a bitter battle against the mining plan, saying it would destroy a region of natural beauty and damage historic mine workings dating from Roman times. Some of the biggest street protests since the Communist era broke out in Romania in 2013 after the then socialist-liberal coalition sent a draft law to parliament giving the go-ahead to the project. An incoming socialist government in January this year asked UNESCO to grant world heritage status to Rosia Montana — which would end any chance of developing the mine.

This post was published at Financial Times

Traders Who Left Banks for Hedge Funds, Heading Back to Banks

Traders who fled banks for hedge funds are on their way back to Wall Street.
This month, Barclays Plc hired Chris Leonard, a founder of two hedge funds in the decade since he left JPMorgan Chase & Co., to turn around U.S. rates trading. At the end of last year, ex-bankers Roberto Hoornweg and Chris Rivelli, both of Brevan Howard Asset Management, left that London hedge fund for banks.
Recruiters say these moves and others aren’t just the usual attrition: banks in New York and London are interesting employers again a decade after the financial crisis, and may get involved in more proprietary trading if President Trump eases regulatory burdens. There’s also another factor: many macro funds just don’t make money anymore.
‘In the last quarter of the year or first quarter of 2018, you will find more people leaving the hedge funds to join banks to run proprietary money,’ said Jason Kennedy, chief executive officer of the Kennedy Group in London, which hires for banks and hedge funds. ‘The banks will become more attractive in terms of jobs and pay.’
That’s due to expectations that Donald Trump will be good for bankers. In a report released June 12, the U.S. Treasury Department urged federal agencies to re-write scores of regulations that Wall Street has frequently complained about in the seven years since the passage of the Dodd-Frank Act. They include adjusting the annual stress tests that assess whether lenders can endure economic downturns, loosening some trading rules and paring back the powers of the watchdog that polices consumer finance.

This post was published at bloomberg

Doug Noland: The Road to Nornalization

it’s ironic that the Fed has branded the banking system cured and so well capitalized that bankers can now boost dividends, buybacks and, presumably, risk-taking. As conventional central bank thinking goes, a well-capitalized banking system provides a powerful buffer for thwarting the winds of financial crisis. Chair Yellen, apparently, surveys current bank capital levels and extrapolates to systemic stability. Yet the next crisis lurks not with the banks but in the securities and derivatives markets: too much leverage and too much ‘money’ employed in trend-following trading strategies. Too much hedging, speculating and leveraging in derivatives. Market misperceptions and distortions on an epic scale.
Compared to 2008, the leveraged speculating community and the ETF complex are significantly larger and potentially perilous. The derivatives markets are these days acutely more vulnerable to liquidity issues and dislocation. Never have global markets been so dominated by trend-following strategies. It’s a serious issue that asset market performance – stocks, bond, corporate Credit, EM, real estate, etc. – have become so tightly correlated. There are huge vulnerabilities associated with various markets having become so highly synchronized on a global basis. And in the grand scheme of grossly inflated global securities, asset and derivatives markets, the scope of available bank capital is trivial.
I realize that, at this late stage of the great bull market, such a question sounds hopelessly disconnected. Yet, when markets reverse sharply lower and The Crowd suddenly moves to de-risk, who is left to take the other side of what has become One Gargantuan ‘Trade’? We’re all familiar with the pat response: ‘Central banks. They’ll have no choice.’ Okay, but I’m more interested in the timing and circumstances.

This post was published at Credit Bubble Bulletin

Debt Is the Third Benjamin Franklin Certainty — David Stockman

Benjamin Franklin supposedly said, ‘In this world nothing can be said to be certain, except death and taxes.’
If old Ben were still around he would surely add ‘debt’ to his famous saying. Indeed, a recent Experian study of its 220 million consumer files actually proves the case.
It turns out that 73% of consumers who died last year had debts which averaged nearly $62,000. In addition to the kind of debt that apparently always stays with you – credit cards and car loans – it also happened that 37% of the newly deceased had unpaid mortgages and 6% still had student loans with an average unpaid balance of $25,391!
Once upon a time people used to have mortgage burning ceremonies when later in their working years the balance on the one-time loan they took out in their 30s to buy their castle was finally reduced to zero.
And there was no such thing as student loans, and not only because students are inherently not credit worthy. College was paid for with family savings, summer jobs, work study and an austere life of four to a dorm room.
No more. The essence of debt in the present era is that it is perpetually increased and rolled-over. It’s never reduced and paid-off.

This post was published at Daily Reckoning

We Must Declare Independence

As Independence Day comes around again we should spend a few moments between barbecue and fireworks to think about the meaning of independence. The colonists who rebelled against the British Crown were, among other things, unhappy about taxation. Yet, as economist Gary North points out, the total burden of British imperial taxation was about one-to-two percent of national income.
Some 241 years later, Washington claims more of our money as its own than King George could have ever imagined. What do we get in this bargain? We get a federal government larger and more oppressive than before 1776, a government that increasingly views us as the enemy.
Think about NSA surveillance. As we have learned from brave whistleblowers like William Binney and Edward Snowden, the US intelligence community is not protecting us from foreigners who seek to destroy our way of life. The US intelligence community is itself destroying our way of life. Literally every one of our electronic communications is captured and stored in vast computer networks. Perhaps they will be used against ‘dissidents’ in the future who question government tyranny.
We have no privacy in our computers or our phones. If the government wants to see what we are doing at any time, it simply switches on our phone camera or computer camera – or our ‘smart’ television. Yet today we continue to hear, ‘I’ve got nothing to hide.’

This post was published at Ludwig von Mises Institute on July 4, 2017.

This Is What A Hunger-Games-Society Looks Like

The burned out shells of vacant buildings and crumbling infrastructure, the mobs of dispossessed youth wandering the streets, the constant violence and threats of violence set against a soundtrack of car alarms, bumping car stereos, and the distant hum of an electric transformer buzzing like a swarm of electric flies feasting on the carcass of a once thriving city-at a cursory glance these places seem ungovernable, or at the very least ungoverned.
But here lies the ultimate irony: the citizens residing in these districts are possibly the most intensely governed people in the country. From birth until death, they are shuffled through an almost constant stream of government institutions: government housing, public schools, welfare, the penal system-the list is almost endless.

This post was published at Zero Hedge on Jul 3, 2017.