Bank Deregulation Back in Vogue: It’s time to dance the last fandango!

The Great Recession was so great for the only people who matter that it is time to do it all again. Time to shed those bulky new regulations that are like clod-hoppers on our heals and dance the light fantastic with your friendly bankster. Shed the encumbrances and get ready for the new roaring twenties.
The banks need to be able to entice more people into debt because potential borrowers with good credit and easy access to financing are showing no interest in taking the banks’ current enticements toward greater debt. That could indicate the average person is smarter than the banks and apparently recognizes they are at their peak comfort levels with debt. The banks, on the other hand, want to reduce capital-reserve requirements in order to leverage up more.
Thus, President Trump, blessed be he, is working (in consort with the Federal Reserve) on cutting bank stress tests in half to once every two years and working to significantly reduce the amount of reserve capital banks are required to keep. He also wants to make the stress tests a little easier to pass. Such are the plans of his Goldman Sachs economic overseers to whom Trump has given first chair in various illustrious White House departments.
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This post was published at GoldSeek on 26 July 2017.

Who Bought The New Greek Bonds: Here Is The Answer

After triumphantly returning to the bond market three years after it last issued a euro-denominated long bond (which one year later nearly defaulted when only a third bailout prevented Grexit), this morning Bloomberg has provided details of who the lucky buyers of the just priced 3BN bond offering were. And not surprisingly, the biggest source of new funds for the Greek government (which will then use most of this to pay interest owed to the ECB) were US buyers.
As Bloomberg notes, just under half, or 1.425BN of the 3BN deal was new money with 1.57b of existing paper rolled, with the following geographic distribution of new sources of cash:
U. S. 44% U. K./Ireland 26% Greece 14% France 7% Spain/Portugal/Italy 3% Germany/Austria 3% Others 3% By investor type:
Fund managers 46% Hedge funds 36% Banks/private banks 13% Others 5%

This post was published at Zero Hedge on Jul 26, 2017.

The Mother of All Bubbles

We live in a world full of bubbles just waiting to pop.
We have reported extensively on the stock market bubble, the student loan bubble, and the auto bubble. We even told you about a shoe bubble. But there is one bubble that is bigger and potentially more threatening than any of these.
The massive debt bubble.
In a recent piece published by Business Insider, US Global Investors CEO Frank Holmes calls it ‘the mother of all bubbles.’
According to the Institute of International Finance (IIF), global debt levels reached a staggering $217 trillion in the first quarter of 2017. That represents 327% of global GDP. To put that into perspective, before the 2008 meltdown, global debt was a mere $150 trillion.

This post was published at Schiffgold on JULY 26, 2017.

Risk has been Abolished, According to Institutional Investors

Why? Wall Street sells ‘more financial products and generates more profits when investors are bullish.’
‘Covenant-lite’ loans – risky instruments issued by junk-rated borrowers, with few protections for creditors – set an all-time record at the end of the second quarter.
They’re part of the risky universe of ‘leveraged loans,’ and they’re secured by some collateral, but they don’t come with the protections and restrictive maintenance requirements in their covenants that traditional leveraged loans offer creditors.
Even leveraged loans with more restrictive covenants are so risky that banks just arrange them and then try to off-load them to institutional investors, such as pension funds or loan funds. Or they slice and dice them and package them into Collateralized Loan Obligations (CLOs) and sell them to institutional investors. Leveraged loans trade like securities. But the SEC, which regulates securities, considers them loans and doesn’t regulate them. No one regulates them.
The amounts are not trivial. Total outstanding leveraged loans in the US reached nearly $1 trillion ($943 billion) at the end of the second quarter, according to S&P Capital IQ LCD. And covenant lite loans made up 72.5% of them, the highest proportion ever.

This post was published at Wolf Street By Wolf Richter ‘ Jul 26, 2017.

Beware The Ides Of October…

– Mark Twain (maybe)
We have been speaking a lot about how the liquidity in the market today is different than in the past. The chart below reflects this better than anything we have seen.

The monetary base in the U. S. has exceeded M1, the most narrow definiton of money, since the financial crisis. The monetary base consists of money in circulation and reserves held at the Fed (see definition below).
The M1 money multiplier is still less than one, which reflects that for every dollar created by the Fed – an increase in the monetary base – results in a less than one dollar increase in the money supply (M1). Credit and deposit creation of commercial banks is thus still impaired, though improving and its repairment may be one reason why the Fed is a bit nervous and in tightening mode.
A rapid turnaround and improvement in the money multiplier, which may be also be reflected in improving bank net interest margins and growing balance sheets, could act as an early indicator of potential inflationary pressures and a flag that the massive amount of high powered money in the financial system is being converted to credit based money.

This post was published at Zero Hedge on Jul 26, 2017.

RECONCILING THE US DOLLAR OUTLOOK with the SUPER BULLISH GOLD AND SILVER COTs…

Because the dollar has such an important bearing on everything, especially the Precious Metals, it is timely for us to take a close look at it here after its recent steep drop, for as some of you may have seen, a number of indicators pertaining to the dollar suggest that, possibly after some further downside it is likely to bounce, or at least take a rest in a sideways range for a while, before the decline perhaps resumes in earnest. We’ll start by looking at a couple of these indicators. The latest US dollar Hedgers chart, which is a form of COT chart, is certainly starting to look bullish, and until these positions ease somewhat, further significant downside for the dollar in the short-term looks unlikely.
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Meanwhile the latest Dollar Optix, or optimism chart, also shows that pessimism is getting overdone. This doesn’t necessarily mean that the dollar’s downtrend is done, however, as minor rallies can cause this to ease before it then plumbs new lows. These two indicators taken together suggest that a relief rally is likely in the dollar soon, perhaps after it drops a bit lower first, although they don’t mean that the rally will get very far.

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

Mr. Trump: You May Not Want To Take Credit For The Stock Market Just Yet

Stock market is still bullish
If you have followed my analysis through the years, you would know that I have correctly been steadfastly bullish the stock market for quite some time. In fact, I was one of the very few who expected the market to rocket higher even after Donald Trump won the election last year.
And, now, we are approaching the S&P 500 target in the 2500SPX region we expected to strike in 2017. However, just because the market has rallied strongly after the election as we expected, it does not mean we expect it to continue into the next election season. And, let me explain why that is so important.
‘It’s the economy, stupid’
James Carville, one of President Clinton’s campaign strategists, coined a term years ago which has been considered the most important factor for an incumbent President being able to win re-election:
‘It’s the economy, stupid.’

This post was published at GoldSeek on Wednesday, 26 July 2017.

The US Dollar – Looking For a Bounce

Recent Price Action
The US Dollar Index (DXY) continued to move lower this week having lost another 1.4% from the previous weeks close. This continued move lower came after the DXY had already lost over 8% from the highs that were struck in January. While the Dollar is still getting hammered on both the charts and in the media the DXY is now coming into a fairly strong support zone that should ideally provide at least some temporary relief from the onslaught that the DXY has seen as of late.
Anecdotal and Other Sentiment Indications
Last week I had written about the news that was all over the financial press claiming that US Dollar was down because the Republicans were unable to be able to pass their health care bill. I noted how the pundits were claiming that this was evidence that the ‘Trump Trade’ was breaking down and that the continued uncertainty in the White House would surely cause the US Dollar to continue to fall lower.
This week I am reading that not only do the Republicans need to get their act together to allow the US Dollar back on solid ground but that US Treasury Yields must also move higher before the US Dollar had any chance of bouncing. This is supposedly due to the US Political situation weighing down on US yields which were then in turn not allowing the US Dollar to bounce.
Well even if we were to believe the first argument that, the US Political situation was weighing down on US Treasury yields, one simply has to look at a chart to know that there is no correlation between US Treasury yields and the value of the US Dollar on either a long or even a short term basis. Sometimes they move together and other times they don’t but again there is no consistent relationship suggesting that US Treasury yields have any effect at all on the value of the US Dollar.
So if you are serious about trying to determine what is going to happen next in the market; instead of listening to the pundits attempt to assign causality to something that has nothing to do with the markets, or correlations that clearly do not stand the test of time, wouldn’t it be much easier to simply analyze the market for what it really is and just allow Sentiment to Speak.

This post was published at GoldSeek on Wednesday, 26 July 2017.

Ahead Of The Fed: Strongest Demand For 2Y Paper Since 2015

With the FOMC members currently huddling deep inside the bowels of the Marriner Eccles building, perhaps scheming how to spook markets by announcing a surprise rate hike tomorrow, one would have assumed demand for 2 Year paper in today’s auction would be less than stellar. One would be wrong, because moments ago the Treasury sold $26bn in 2 year paper to what was clearly an overabundance of demand: the high yield of 1.395% stopped through the When Issued 1.401% by 0.6 bps, and was the highest yield going back to October 2008.
The bid-to-cover rose to 3.06 from 3.03 in June, and was above the six previous auction average of 2.84. It was also the highest Bid to Cover since November 2015.
The internals were also rather impressive, with Indirects taking down 58.5%, above the 56.6% in June, and above the 6MMA of 54.1%. Directs were awarded 16.9%, down slightly from 18.4% last month and above the 6 month average of 13.7%. Combined these two meant record buyside interest, leaving Dealers with just 24.6% of the auction, down from 25.0% and below the 32.1% 6month average. This was the lowest Dealer award on record.
In other words, if anyone was worried about a surprise announcement by the Fed tomorrow, one which would send 2Y yields spiking, it wasn’t to be found among the bidders for today’s auction.

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

Russian’s Add Official Gold While China Hides More Gold

As China has cooled her heals as far as adding more physical gold to their official gold holdings, Russia pushes forward. Another month, another big pile of gold added Russia’s central bank holdings.
While 8.5 tons is down from their norm, which is usually mid-high teens of tonnage per month, it is still pushing them higher in gold holdings.
The interesting part of the China equation is the fact that Russia agreed to sell China upwards of 100 tons per annum beginning last year.
As we reported in September 2016
Wether China is going to making jewelry, trinkets or has other ideas we can confirm Russia will be supplying China with a lot of gold in the coming months and years – from Reuters
VTB Bank, Russia’s second-largest lender, said on Tuesday:
* VTB plans to supply 15-20 tonnes of gold to China in the next 12 months;
* VTB plans to continue increasing gold supplies to China, the exact volume of supply is subject to demand in the region;
* In April, VTB said it aimed to supply between 80 and 100 tonnes (2.57-3.22 million troy ounces) of gold to China per year;
* In the second quarter of 2016, VTB dispatched its first batch of gold to China, becoming the first Russian bank to start direct supplies of physical gold to the world’s largest buyer and consumer of the precious metal.

This post was published at Alt-Market on Tuesday, 25 July 2017.

What If The Debt Ceiling Turns Ugly: How To Trade A Fall Spike In Volatility

As we first showed last week, while the equity market has remained completely oblivious to what the upcoming debt ceiling fight, which Morgan Stanley admitted over the weekend “worries us most” of all upcoming catalysts, the same can not be said of the T-Bill market, where 3M-6M yields have inverted the most on record on concerns about a potential selloff (or worse) in 3M bills which mature just after the time the US Tsy is expected to run out of cash, should the debt ceiling debate fail to result in a satisfactory outcome.

And while it is a gamble to suggest that stocks will ever again respond to any negative news or still have any capacity to discount any future event or outcome, Bank of America dares to go there, and advises clients that between seasonality, and the already record low VIX, the debt ceiling is a sufficiently risky event to expect that equity volatility will finally wake up, and that “seasonality + catalysts suggest record low vol likely unsustainable through the fall.” Here’s the big picture from Nitin Saksena and team:
While VIX has been making headlines for the most consecutive closes in history below 10 (now 8 days), medium-term VIX futures have quietly fallen to ~10-year lows, breaking the previous record from summer 2014. However, we think volatility is unlikely to sustain these extreme lows in the fall and like selling Oct VIX puts as (i) seasonal patterns suggest the VIX troughs in Jul and peaks in Sep/Oct, (ii) the VIX has ‘settled’ below 12 in only two of the past 27 Octobers, and (iii) fundamentally, the threat of debt ceiling brinkmanship in Sep/Oct, which has already spooked the T-bill market, should help support equity volatility. For example, we like selling the VIX Oct 12 put vs. the 14/19 call spread for zero-cost upfront (Oct futures ref 13.35).

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

The Elites Are Privately Warning About A Crash “Russia Hack” Evidence

Many everyday citizens assume powerful global financial elites operate behind closed doors in secret conclaves, like the scene of a Spectre board meeting in the recent James Bond film.
Actually, the opposite is true. Most of what the power elite does is hidden in plain sight in speeches, seminars, webcasts and technical papers. These are readily available from institutional websites and media channels.
It’s true that private meetings occur on the sidelines of Davos, the IMF annual meeting and G-20 summits of the kind just concluded. But the results of even those secret meetings are typically announced or leaked or can be reasonably inferred based on subsequent policy coordination.

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

The Impending Business Travel Revolution

Prediction: Within 10 years every single airline will be reduced to carriers that operate routes consisting entirely of flights of more than 1,000 miles, most over water.
Why?
Because self-driving cars.
The long-haul trucking industry is going to get it up the pooper first, simply because of the cost of tractors. Self-driving vehicles there are a moderate cost increase and they eliminate the nut in the cabin that makes mid-five to low-six figures and as such they pay for themselves in a single year. You will still have drivers for the local segments but the automation will hook up and run the trailer from Terminal A -> Terminal B, where it will automatically undock and drop it, instantly deleting 80% of the truck drivers in the economy.
But as the cost comes down to where the additional cost gets under $5,000 — and it will be a while before the hardware and software is that cheap, probably 20 years or so — the airline industry is finished.
Look folks, most cars today can be retrofitted as the automakers have moved to electric steering assist (as opposed to hydraulic) for fuel economy reasons, every engine is DBW (no mechanical link between the throttle and pedal in the cabin) and brake systems now have both retardation and application available via the ABS pump which is routinely used for both since it does traction control as well. They’re four-channel too, unlike the brake pedal which is one-channel, which means they can be more-efficient than even a highly-skilled driver in terms of stopping ability. (As an aside a highly-skilled driver can beat the ABS-n-mash-pedal mode; I can quite-handily outperform these systems in crap conditions, but they’re a vast improvement for the “slam on brake” crowd, which is most people. But no driver with a one-channel system can beat a 4-channel system that is applying, rather than retarding, the brakes.)

This post was published at Market-Ticker on 2017-07-26.

Markets On Hold Ahead Of FOMC Meeting Conclusion This P.M.

This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.
(Kitco News) – World stock markets were mostly firmer in subdued trading overnight, as the marketplace awaits today’s FOMC meeting conclusion. U. S. stock indexes are slightly higher just ahead of the New York day session.
Gold prices are moderately lower today on more profit-taking from the shorter-term futures traders, after recent price gains.
Traders and investors are awaiting the conclusion of the Federal Reserve’s Open Market Committee meeting (FOMC) that began Tuesday morning and ends early this 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 U. K.’s second-quarter GDP came in at up 0.3% on the quarter and up 1.7%, year-on-year. Those numbers were right in line with market expectations.

This post was published at Wall Street Examiner on July 26, 2017.

Ted Butler Quote of the Day 07-26-17

I have been expecting a price explosion in silver since early May, when the COMEX positioning extremes in silver hit then-record levels (Remember the unprecedented 17 days of consecutive price declines?). But incorporated in my price explosion premise was that the raptors would be ready sellers of their big long positions as prices rose. With the new COT report indicating that not only have the raptors not begun to sell on higher prices, they actually added new longs. If this was no fluke and is indicative that the raptors may be in no rush to sell, then who the heck is going to sell to the technical funds when they plow onto the buy side?

There’s no question that the technical funds will rush to buy (or attempt to buy) many tens of thousands of COMEX gold and silver contracts on higher prices from here; the only question is who will sell to them? If it isn’t the raptors, it is a near-certainty that prices will explode.

This is the perfect set up for a selling vacuum and price explosion that I have long envisioned, but not with such clarity. If there’s ever been a better time to be positioned to the maximum for a silver rally than now, that time is unknown by me.

A small excerpt from Ted Butler’s subscription letter on 22 July 2017.

More precious metals news & information available at
Ed Steer’s Gold & Silver Digest.
 

When Will The ECB Run Out Of German Bunds To Buy: Here Is The Math

Speaking earlier on Monday, ECB governing council member Ewald Nowotny said that despite growing market concerns, the ECB “sees no need to set a timetable to end bond buying” adding that “the question is not when but how to continue. That will depend on the economic projections for 2018, which we will have in the fall […] It’s not about an abrupt halt, but about registering that we are no longer confronted by such an acute crisis as we were when we implemented the measures. I consider it wise to step off the gas slowly.”
In other words, just like all other central bank pronouncements, this too was meant to instill confidence in the economy. There is just one problem: the question which Nowotny tried so hard to ignore is precisely the one that matters as we most recently explained in “Both ECB And BOJ Are Just Months Away From Running Out Of Bonds To Buy.” The question is even more relevant considering it has been the ECB’s purchases of corporate (and government) bonds that has led to a record drop in European credit spreads as we showed yesterday.

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

Why Surging UK Household Debt Will Cause The Next Crisis

– Easy credit offered by UK banks is endangering ‘everyone else in the economy’
– UK banks are ‘dicing with the spiral of complacency’ again
– Bank of England official believes household debt is good in moderation
– Household debt now equals 135% of household income
– Now costs half of average income to raise a child
– Real incomes not keeping up with real inflation
– 41% of those in debt are in full-time work
– 1.537 trillion owed by the end of May 2017
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Editor: Mark O’Byrne
Why UK household debt will cause the next crisis
‘Household debt is good in moderation,’ Alex Brazier, executive director of financial stability at the Bank of England (BoE), told financial risk specialists earlier this week. But, it ‘can be dangerous in excess.’
The problem with ‘in moderation’ is that no-one knows what a moderate measure of something is until they have had too much of it. Sub prime borrowers in the U. S. and property buyers in Ireland and the UK did not know they would contribute to a global debt crisis. Central bankers in Germany in the early 1920s and more recently in Zimbabwe never thought they were doing something that would be as detrimental as it ultimately was.

This post was published at Gold Core on July 26, 2017.

Hecho En Mexico: 2017 Auto Production In Mexico Surges Despite Trump Attacks

Earlier this year, before then President-elect Trump even moved into the White House, he picked several very public fights with auto manufacturers over their increasing reliance on Mexico for incremental production volumes.
In a January 3rd tweet, the President-elect said ‘General Motors is sending Mexican made model of Chevy Cruze to U. S. car dealers-tax free across border. Make in U. S. A.or pay big border tax!’
General Motors is sending Mexican made model of Chevy Cruze to U. S. car dealers-tax free across border. Make in U. S. A.or pay big border tax!
— Donald J. Trump (@realDonaldTrump) January 3, 2017

Then, on the same day, Trump took a victory lap after apparently convincing Ford to walk away from a new $1.6 billion production facility in Mexico. Of course, we’ve since noted that the production volume intended for that abandoned Mexico facility has instead been shifted to China…but who can keep track (see: Remember When Ford ‘Cancelled’ That Plant In Mexico? Well, They’ve Just Moved It To China).

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

Congo’s mining revenue ‘missing’ – Global Witness

According to a Global Witness report, the money is being distributed through corrupt networks linked to President Joseph Kabila.
At least $750m (580m) has gone missing over the past three years, it says.
The government has not commented but has previously denied allegations of corruption in its mining sector.
DR Congo is Africa’s biggest producer of copper and the world’s largest supplier of cobalt used in batteries for electric cars.
It is also rich in gold, diamonds and coltan, used in mobile phones, but its people remain among the poorest in the world following years of conflict and mismanagement.

This post was published at BBC