Caterpillar Hits All Time High After Raising Guidance On Chinese Construction Boom

As is customary for the heavy-industrial equipment manufacturer, Caterpillar yesterday reported its retail sales, one day ahead of earnings, and as we discussed, the number was solid with Caterpillar reporting the longest positive streak in retail sales going back 51 months.
It was also a hint as to what the Dow-member would report today for its second quarter earnings, which showed a surprisingly strong performance with CAT posting impressive Q2 Q2 EPS of $1.49, above the Est. $1.25, and revenue of $11.33Bn, also beating estimates of $10.89BN, both largely due to the ongoing Chinese construction boom as the company itself admitted.
“Our team delivered an impressive quarter. As demand increased, we continued to control costs and generated higher profit margins,” said Caterpillar CEO Jim Umpleby. “While a number of our end markets remain challenged, construction in China and gas compression in North America were highlights in the quarter. Mining and oil-related activities have come off of recent lows, and we are seeing improving demand for construction in most regions.”

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

Inside the Mind of a Crowd

John Maynard Keynes once wrote what may be one of the most insightful observations on financial markets ever conceived:
We have reached the third degree where we devote our intelligence to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth, and higher degrees.
Now, what exactly is he talking about?
While it sounds like Keynes may have been practicing some rare form of martial arts, or Zen meditation, he was actually talking about financial markets … in particular, how to predict them.
Most subscribers are probably familiar with the old ‘Newspaper Beauty Contest’ story. If not, you can click here for a longer description, but here’s the gist:
A newspaper would run photographs of beautiful women and ask readers to mail in a ballot with their choice of which girl was the prettiest. Those who picked the girl that received the most votes would be entered into a drawing for a prize.
The decision-making hierarchy for submitting an entry to this contest goes like this:
– First-degree reasoning: ‘I think this girl is the prettiest, so I’ll pick her.
– Second-degree reasoning: ‘I think that most people will find this girl the prettiest, so I’ll pick her.’

This post was published at FinancialSense on 07/25/2017.

The Breakdown Before the Breakthrough

Since our last note, the US dollar index has made its way down to the lows of last summer, currently hovering just above the Brexit upside pivot from June 24th, 2016.
Although asset trends can elicit major technical breaks from oversold conditions (i.e. crash), the more probable outcome from our perspective favors another retracement bounce, before traders can set their sights on breaking through long-term underlying support that’s confined all declines in the dollar index over the past 3 years.
Maintaining a KISS approach of lower highs and lows that has served traders well this year in the US dollar index, we would look for the highs from early July to contain a prospective bounce. This methodology also applies to the flipside of momentum for potential lows in the euro, yen and gold – with the two latter assets also likely influenced by the short-term respective trends in equities and yields. In this respect, over the near-term the Japanese yen and gold could hold up better than the euro, as we suspect the rally in equities gives back this months gains – largely supporting the uptrend in long-term Treasuries and buttressing safe haven assets like the yen and gold.

This post was published at GoldSeek on Tuesday, 25 July 2017.

Can Britain Afford To Be A Hard Power?

Recently the UK Royal Navy and Ministry of Defence unveiled their brand new aircraft carrier HMS Queen Elizabeth at a cost of 3 Billion Pounds. This at a time when UK national finances are under heavy pressure and the country has been experiencing seven years of severe austerity.
It has recently come to light that in true Ministry of Defence fashion (poor project management & wasteful spending, duplication, poor planning, lack of oversight and accountability) the true costs are set to rocket even further for more aircraft needed to be able to land properly on HMS QE. How very British. The decision to go ahead with a brand new and very expensive aircraft carrier for the UK at a time of acute social and economic headwinds has been hailed by some as an exciting new weapon in Britain’s hard power arsenal that will allow Britain to punch above her weight in world affairs and global power projection rankings in Jane’s Weekly.

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

World Stock Markets Mixed, Quiet; FOMC Meeting In Spotlight

This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.
Global equity markets were steady to narrowly mixed in quieter overnight dealings. U. S. stock indexes are pointed toward firmer openings when the New York day session begins. The U. S. indexes are at or near record highs with no early chart clues to suggest they are topping out.
Gold prices are moderately lower in pre-U. S. session trading, on some normal profit taking from recent gains that saw prices hit a four-week high on Monday.
Focus of the world marketplace is on the Federal Reserve’s Open Market Committee meeting (FOMC) that begins Tuesday morning and ends early Wednesday afternoon with a statement. No changes in U. S. monetary policy are expected. However, the Fed could indicate the timing of reducing its big balance sheet of U. S. securities. The tone of the FOMC statement will also be important for markets. Just recently Federal Reserve Chair Janet Yellen has sounded a more dovish tone on U. S. monetary policy.
In overnight news, the closely watched German Ifo business sentiment index rose to a record 116.0 in July, from 115.2 in June. A July reading of 114.9 was forecast.

This post was published at Wall Street Examiner on July 25, 2017.

Lagarde Hints At IMF Being Based In China In Future

In a comment sure to stir up questions over dollar hegemony (and new world order conspiracy thoughts), IMF Managing Director Christine Lagarde admitted during an event today in Washington that The International Monetary Fund could be based in Beijing in a decade.
As Reuters reports, Lagarde said that such a move was “a possibility” because the Fund will need to increase the representation of major emerging markets as their economies grow larger and more influential.
“Which might very well mean, that if we have this conversation in 10 years’ time…we might not be sitting in Washington, D. C. We’ll do it in our Beijing head office,” Lagarde said. Lagarde’s comments build on questions raised in May on The IMF’s push for World Money… Yi Gang, the Deputy Governor of the People’s Bank of China disclosed to the IMF panel that,
‘China has started reporting our foreign official reserves, balance of payment reports, and the international investment position reports.’ ‘All of these reports, now, in China are published in U. S dollars, SDR and Renminbi rates… I think that has the advantage of reducing the negative impact of negative liquidity on your assets.’

This post was published at Zero Hedge on Jul 24, 2017.

Gold Seasonal Sweet Spot – August and September – Coming

– Gold seasonal sweet spot – August and September – is coming
– Gold’s performance by month from 1979 to 2016 – must see table
– August sees average return of 1.4% and September of 2.5%
– September is best month to own gold, followed by January, November & August
***
Looking back at gold’s performance since 1979, August and September are big months for the yellow metal. What is the cause? No one really knows but there are some theories that have been thrown around.
The adage ‘sell in May and go away’ is common in the mining sector. Investors are back from vacation and ready to deploy their cash in a big way. Concurrently, the largest financial crashes have occurred in September and October, investors are also buying gold to hedge their portfolios.
Indian wedding season is huge for gold, and if you have ever been to a traditional Indian, its easy to see why India is the World’s largest consumer of gold jewelry. Throw Christmas into the mix, and you have the perfect retail storm.

This post was published at Gold Core on July 25, 2017.

More Commitment of Traders Perspective

We all saw a lot of commentary and “analysis” over the weekend regarding the latest Commitment of Traders report. Again, these numbers are most important when considered through the lens of historical perspective and that’s what we attempt to show you today.
It’s going to be a long and busy week. From Fedlines to Durable Goods to GDP…there’s a lot going on. And Lord knows what lies ahead politically and geo-politically! Here’s just a brief summary:

The metals have begun the week just slightly to the upside and this is nice. More on this later today and as we go through the week, of course.

This post was published at TF Metals Report on Monday, July 24, 2017.

Banks Are Scheming To Dominate A Future Cashless Society

Visa recently announced its new Cashless Challenge program, which offers $10,000 to restaurants willing to transition into accepting only digital payments. As the largest credit card processor in the U. S., it’s no surprise Visa is spearheading this campaign.
Under the guise of increasing transparency and efficiency, they’ve partnered with governments around the world to help convert financial systems into cashless models, but their real incentive is the billions of dollars in extra transaction fees it would generate.
‘We are declaring war on cash,’ Visa spokesman Andy Gerlt proudly proclaimed after the program was announced.
The food-based small businesses Visa is targeting are among those that benefit most from accepting cash from customers. When transactions are for amounts less than $10, the fees charged cut significantly into profits. Only 28% of food trucks currently accept credit card payments because of the huge losses they incur from them. The bribe from Visa may seem appealing up front but will be mostly paid back to them over the next few years in fees alone.

This post was published at Zero Hedge on Jul 24, 2017.

Peak Shale: Anadarko Just Became The First US Oil Producer To Slash CapEx

It appears that Horseman Global’s Russell Clark may have been spot on with his bearish take on the US shale sector.
As a reminder, in his latest letter to investors, Clark said that “the rising decline rates of major US shale basins, and the increasing incidents of frac hits (also a cause of rising decline rates) have convinced me that US shale producers are not only losing competitiveness against other oil drillers, but they will find it hard to make money…. at some point debt investors start to worry that they will not get their capital back and cut lending to the industry. Even a small reduction in capital, would likely lead to a steep fall in US oil production. If new drilling stopped today, daily US oil production would fall by 350 thousand barrels a day over the next month.”
What I also find extraordinary, is that it seems to me shale drilling is a very unprofitable industry, and becoming more so. And yet, many businesses in the US have expended large amounts of capital on the basis that US oil will always be cheap and plentiful. I am thinking of pipelines, refineries, LNG exporters, chemical plants to name the most obvious. Even more amazing is that other oil sources have become more cost competitive but have been starved of resources. If US oil production declines, the rest of the world will struggle to increase output. An oil squeeze looks more likely to me.
While the bearish thesis has yet to play out, moments ago Anadarko poured cold water on US energy investors after it missed earnings badly, reporting a Q2 EPS loss of 77c, more than double the 33 cent loss expected. However, what was far more concerning to shale bulls (and perhaps oil bears), is that the company admitted that it can no longer support its capital spending budget, and it would cut its 2017 capital budget by $300 million, becoming the first major U. S. oil producer to do so, as a result of depressed oil prices. In March, Anadarko had forecast total 2017 capex of $4.5 billion to $4.7 billion, a continuation of the recent CapEx rebound which troughed in Q3 2016.

This post was published at Zero Hedge on Jul 24, 2017.

Stunning Lack of Market Decline Highlights Surreal New Normal

Investors are conditioned to believe the Fed has got their back. But they might be wrong. To say the stock market is on a roll is an understatement. The Big Three indexes (S&P 500, Dow Jones Industrial Average, NASDAQ) are making fresh highs, mostly because of valuation expansion. That is what investors are focused on. But what about the lack of market decline? The dynamics behind this fact could speak louder than any stock rally could.
The Wall Street Journal is reporting that major indexes haven’t gone a calendar year without a five-percent-or-more pullback in 20 years. The last time this happened was following the ‘Brexit’ referendum, which eked out a 5.2% peak-to-trough loss. While not quite a ‘calendar’ year, it was over a year ago that this happened. In fact, the 267-day streak with a five-percent decline is the longest going back to 1996.
Additionally, the S&P 500 has only experienced a 2.8% drawdown year-to-date. This, in contrast to a historical average of 14.4%. If it holds, it would be the second smallest drawdown in 60 years.

This post was published at Wolf Street on Jul 25, 2017.

Something Big, Bad And Ugly Is Taking Place In The U.S. Retirement Market

While the highly inflated value of the U. S. Retirement Market reached a new high this year, something is seriously wrong when we look behind the scenes. Of course, Americans have no idea that the U. S. Retirement Market is only a few steps from falling off the cliff, because their eyes are focused on the shiny spinning roulette wheel called the Wall Street Stock Market.
Yes, everyone continues to place their bets, hoping and praying that they will win it big, so they can retire in style. Unfortunately, American gamblers at the casino have no idea that the HOUSE is out of money. The only thing remaining in their backroom vaults is a small stash of cash and a bunch of IOU’s and debts.

This post was published at SRSrocco Report on JULY 24, 2017.

Russian central bank still adding to its gold reserves — Lawrie Williams

Unlike the other big central bank buyer of gold, China, Russia is continuing to add to its gold reserves and reporting its increases. China has not reported any reserve increases since last October, but the general belief is that it is almost certainly adding to its gold reserves big time regardless and only reporting its increases when it deems it opportune to do so. Certainly known gold flows into the country, together with its own gold output as comfortably the world’s No. 1 gold producer, suggests this as China’s estimated gold consumption probably only accounts for around half of that being absorbed by the country on an annual basis, and this disregards any gold being imported from unknown sources that may not find its way into official data.
In June Russia added a further 300,000 ounces (9.33 tonnes) of gold to its reserves according to the regular monthly statement of its gold holdings by the Russian Central Bank. This brings its current total holdings to some 1,716 tonnes – still the world’s sixth largest national holding as reported to the IMF – and continuing to close the gap with the official Chinese figure of 1,842.6 tonnes. The June additions are much smaller than those reported for May (700,000 ounces or 21.8 tonnes), but more than the 6.2 tonnes it added in April. Russian gold reserve additions do fluctuate on a month by month basis, but recently it has been adding to its gold reserves at around 200 tonnes annually. For H1 2017 the total to date is 100.9 tonnes so the nation is right on track to add a similar 200 tonne amount to its official gold reserves in the current year.

This post was published at bloomberg

BoJ Keeps Rates Unchanged, Postpones 2% Inflation Deadline

The Bank of Japan kept its monetary stimulus program unchanged even as it pushed back the projected timing for reaching 2 percent inflation for a sixth time.
The downgraded price outlook will raise more questions about the sustainability of the BOJ’s stimulus at time when other major central banks are turning toward normalizing their monetary policy. The European Central Bank, which is said to examine options for winding down quantitative easing, concludes its own governing council meeting later on Thursday.
By again delaying the timing for hitting its price goal, the BOJ acknowledged the need to continue easing for at least several more years, probably beyond 2020 because of a sales-tax increase scheduled for late 2019, said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG and a former BOJ official.
“Going forward, there will be even more attention on the sustainability of the stimulus from market participants and lawmakers,” Shirawaka said.
BOJ Governor Haruhiko Kuroda said it was regrettable the central bank needed to push back its inflation goal again, saying it hadn’t intentionally made its forecasts too optimistic. He noted that central banks in the U.S. and Europe had also overestimated inflation.

This post was published at bloomberg

Deutsche Bank CEO tells staff: Prepare for Brexit “worst outcome“

Deutsche Bank CEO John Cryan told employees that the German lender is preparing for a hard Brexit in which roles will “inevitably” move from London to Frankfurt.
Cryan said in a video announcement on July 11 that the bank “will assume a reasonable worst outcome” from the U.K.’s talks with the European Union, according to a Bloomberg News report.
“The worst is always likely to be worse than people can imagine,” Cryan said.
Deutsche Bank operates a branch in the U.K., and while London is one of the firm’s major investment banking hubs, Cryan said he will move “the vast majority” of the markets balance sheet to Frankfurt. As a result, some roles will move too.
“There’s an awful lot of detail to be ironed out and agreed, depending on what the rules and regulations turn out to be,” Cryan said in the video. “We will try to minimize disruption for our clients and for our own people, but inevitably roles will need to be either moved or at least added in Frankfurt.”

This post was published at Business Insider

U.S. Mega Banks Are This Close to Breaking Their Profit Record

The last time big U.S. banks made so much money, the financial world was heading toward the brink of collapse. This time, it’s stiff regulation that’s in danger.
Ten of the nation’s biggest lenders including JPMorgan Chase & Co. and Bank of America Corp. together made $30 billion last quarter, just a few hundred million short of the record in the second quarter of 2007, according to data compiled by Bloomberg. The achievement comes just as the industry’s long campaign against post-crisis rules finds traction with the Trump administration.
Banks have been decrying regulations aimed at curbing risk, blaming them for hurting capital markets and discouraging lending to consumers and companies. President Donald Trump, echoing those complaints, has asked regulators to find ways to ease off. But in this year’s second quarter, banks saw their profits propped up by lending operations even after a surge in revenue from more volatile trading units subsided.
‘It shows that the legislation we passed in no way retarded the ability of the banks to make money,’ said Barney Frank, the former congressman whose name is on the 2010 law tightening industry oversight. Banks are supporting the economy, he said. And ‘very specifically, it refutes Trump’s claim that we cut into lending. How do banks make record profits if they can’t lend — especially when they’re down in trading?’
The second quarter wasn’t a fluke. Even looking at the past 12 months, profits are still near the same level as 2007.

This post was published at bloomberg

New Age Mandate — Doug Noland

There is no doubt that central bank liquidity backstops have promoted speculation, securities leveraging and derivatives market excess/distortions. I also believe they have been instrumental in bolstering passive/index investing at the expense of active managers. Who needs a manager when being attentive to risk only hurts relative performance? And the greater the risk associated with these Bubbles – in leveraged speculation, derivatives and passive trend-following – the more central bankers are compelled to stick with ultra-loose policies and liquidity backstops.
After all, who will be on the other side of the trade when all this unwinds? Who will buy when The Crowd moves to hedge/short bursting Bubbles? This is a huge problem. Central bankers have become trapped in policies that promote risk-taking and leveraging at this precarious late-stage of an historic Global Bubble. These days, central bankers cannot tolerate a ‘tightening of financial conditions,’ and they will have a difficult time convincing speculative markets otherwise.
I’m reminded of the Rick Santelli central banker refrain, ‘What are you afraid of?’ Yellen and Draghi seemingly remain deeply concerned by latent market fragilities. How else can one explain their dovishness in the face of record securities prices and global economic resilience. A headline caught my attention Thursday: ‘Bonds: ECB Gives ‘Green Light’ to Summer Carry Trades, BofA says.’ It’s been another huge mistake to goose the markets this summer with major challenges unfolding this fall – waning central bank stimulus, Credit tightening in China and who knows what in Washington and with global geopolitics.

This post was published at Credit Bubble Bulletin

There Is Only One Empire: Finance

Any nation-state that meets these four requirements is fully exposed to a global loss of faith in its economy, debt, balance of payments and currency.
There’s an entire sub-industry in journalism devoted to the idea that China is poised to replace the U. S. as the “global empire” / hegemon. This notion of global empire being something like a baton that gets passed from nation-state to nation-state is seriously misleading, in my view, for this reason: There is only one global empire: finance. China and the U. S. both exist within the Empire of Finance. Virtually every mercantile nation with access to global markets lives, works and thrives/dies within the Empire of Finance. Every nation that allows capital to flow into its economy is subservient to the Empire of Finance. Every nation with capital and debt markets exposed to (or dependent on) global financial flows is just another fiefdom in the Empire of Finance. China has thrived within the Empire of Finance by creating more debt and at a faster rate of expansion than any other fiefdom. China has brought 20 years of future growth and income forward, and eventually that vein of “wealth” runs out as time advances into the stripmined future.

This post was published at Charles Hugh Smith on MONDAY, JULY 24, 2017.