WTI Slides After Disappointing Crude Draw & Production Surge

WTI prices dumped on last night’s surprise crude build but have limped back above $49 heading into the DOE prints this morning (although Russia sanctions headlines dipped it). DOE did not help as the report was a disappointment for the bulls with production rising to a new cycle high, crude inventories drawing less than expected but total U. S. oil inventories (that’s crude plus all products, including the often volatile “other oil” category) rose by 1.1 million barrels last week.
Crude +1.78mm (-3.1mm exp) Cushing +2.562mm (-700k exp) Gasoline -4.827mm (-1mm exp) Distillates -1.225mm DOE
Crude -1.53mm (-3.1mm exp) Cushing -39k (-700k exp) Gasoline -2.52mm (-1mm exp) Distillates -150k

This post was published at Zero Hedge on Aug 2, 2017.

Markets Are Virtually Risk-Free

For the last year, I have been looking for what we classify as a wave (3) to strike the 2500SPX region. And, now, we are getting quite close.
Meanwhile, this rally has brought out two camps of market expectations at this juncture, both of which I believe are wearing blinders. We read about those who believe the markets basically have no limit to their upside, and are “virtually risk-free,” and we read those who have “known” that the market will imminently crash during this entire 40% rally since February 2016.
Do you know who Goldilocks is?
Yes, the quote in the title of my article was actually posted by an “analyst” this past Friday. And it seems more and more are taking this view of the market. Why not? The market can’t seem to pullback, so they must be right. Right?
I wrote this not too long ago, but allow me to refresh your memory:
As George Santayana wisely said, ‘Those who do not remember the past are condemned to repeat it.’ And, it seems that Ms. Yellen is forgetting her history.
One of the key factors in signaling a major market top is the expectation by the masses that one cannot happen. And, anyone that knows their history knows this to be true.

This post was published at GoldSeek on 2 August 2017.

“What Could Possibly Go Wrong?” – Two Banks Answer

With much of the investing world preparing to take the next two weeks off for vacation right after Friday’s payrolls number hits, one question being thrown around by traders is “what could possibly go wrong” in the immediate future?
Answering this question this morning are two bank economists, first, below we present the thoughts from UBS’ global chief economist Paul Donovan.
What could possibly go wrong in the next fortnight? The world is in a rather dull mid-cycle economic position. This does not make for good television (hence the tendency to sensationalize dubious quality data), but it suggests a steady economic state.
The inflation story is nothing to get excited about. We have had the easily forecast rise in inflation as weirdly weak oil prices dropped out of the calculation. Now most developed economies have inflation rates around their long-term averages.

This post was published at Zero Hedge on Aug 2, 2017.

Just How Much Gold Is in London Vaults? Now We Know

You can call London the City of Gold.
According to figures released by the London Bullion Market Association (LBMA), as of March 31, vaults in London held 7,449 tons of gold. That’s the equivalent of about 596,000 gold bars. The value of the yellow metal stored in London vaults is close to $300 billion.
London is also home to 32,078 tons of silver valued at $19 billion. That’s roughly the equivalent of 1,069,255 silver bars.
The amount of gold in the city underscores its position as the world’s biggest gold trading center.

The physical holdings of precious metals held in the London vaults underpin the gross daily trading and net clearing in London. The net clearing is undertaken by the members of the London Precious Metals Clearing Limited (LPMCL). London is the largest gold trading center in the world as demonstrated by the $18.1 billion of gold which was cleared on average each day in March, 2017.’

This post was published at Schiffgold on AUGUST 2, 2017.

Trump Set To Retaliate To China’s “Unfair Trade Practices”

President Trump has given China six months to prove that it is committed to preventing a nuclear-armed North Korea, and it seems his tolerance for China’s dithering has finally reached its limit. Now that President Xi Jinping has established that his government is unwilling to engage in a meaningful crackdown on its neighbor, the era of using carrots like improving trade relations to coax China into helping solve the ‘North Korea problem’ has ended. It is now time for the stick.
According to reports in the New York Times, Wall Street Journal and Associated Press, the Trump administration is planning to use an obscure 1970s law to launch a “broad-based” investigation into whether China’s trade-related intellectual property policies constitute ‘unfair trade practices.
The US inquiry could become an obstacle for one of the Communist Party’s top economic priorities: the Made in China 2025 initiative, while calls for China to become a ‘global leader’ in ten industries with the help of huge infusions of state money.
In the coming days, the US trade rep will launch a ‘Section 301’ investigation, named after a portion of the 1974 Trade Act. Here’s a breakdown of the likely timeline for the investigation, as well as possible outcomes, courtesy of the NYT:

This post was published at Zero Hedge on Aug 2, 2017.

As Car Sales Plunge, Auto Dealers are Not Amused

Automakers’ efforts are ‘chaotic for retailers and confusing for consumers.’
AutoNation, the largest automotive retailer in the US with about 280 franchise locations – and thus a sampling for auto dealers in general – reported second quarter earnings this morning, upon which its shares (AN) fell 7%, and are down over 40% from two years ago. It took Ford shares three years to fall 40%.
AutoNation’s new vehicle revenues in the second quarter fell 4.6% year-over-year to $2.93 billion; used vehicle revenues fell 4.6% to $1.2 billion. It booked revenue gains in its high-margin areas – Parts & Service, Finance & Insurance, and Other – but that wasn’t enough to make up for the slide in new and used vehicle sales. So total revenues fell 3% to $5.28 billion.
Selling, general, and administrative expenses rose 4.5%. Net income plunged 22% to $87.7 million, which once again missed consensus earnings expectations, continuing a series of missed earnings expectations that commenced last year.
This isn’t just about a sales decline. Profit margins also declined. The profit margin on new vehicle sales fell to 4.7% in Q2 from 5.3% a year ago – not totally unexpected, given the problems in new vehicle sales across the country.
But the profit margin on used retail sales plunged. Dealers sell some used vehicles to other dealers or via auctions to get rid of these units. At AutoNation, these wholesales fell 49% to $70 million. Excluding these wholesales, used retail volume was about flat year-over-year at $1.13 billion. But gross profit on these units plunged 14.6% to $74 million.

This post was published at Wolf Street on Aug 2, 2017.

In A Better World

In a better world we might expect:
Individuals, corporations, and governments spend no more than their income. ‘Honest’ money is used by all, has intrinsic value, retains its purchasing power and is not counterfeited by individuals or bankers. Governments and bankers support and encourage ‘honest’ money. Alas, we live in this world and must realize that:
Debt has increased rapidly for the past century. Example: U. S. national debt has expanded from roughly $3 billion to $20 trillion. Currencies are IOU’s issued by central banks who promote ever-increasing currency in circulation, expanding debt, and continual devaluations in purchasing power. The ‘fiat-currency-game’ will continue until it implodes.

This post was published at Deviant Investor on August 2, 2017.

Dow To Rise Above 22,000 On Apple Earnings; Europe Pressured By Surging Euro

Nasdaq 100 futures jumped 0.8% after Apple surged to record highs following a strong beat and optimistic projections ahead of the launch of the company’s new batch of iPhones. Eminis are little changed, up 0.1% to 2,475, trailing Asian markets, while European stocks and crude oil fall.
Apple surged 6% after-hours to a new record highm taking its market capitalization above $830 billion. That should help carry the Dow through the 22,000 mark when the market opens. Among Asia’s Apple suppliers, LG Innnotek jumped 10 percent and SK Hynix, the world’s second-biggest memory chip maker, rose 3.8 percent. Murata Manufacturing firmed 4.9 percent and Taiyo Yuden 4.4 percent, helping the Nikkei up 0.47 percent.
“It is all about Apple,” said Naeem Aslam chief market analyst at Think Markets. “The firm comfortably topped its forecast and produced stellar numbers for its revenue and profit.
Oil came under pressure again as higher than expected US inventories and reports of rising OPEC output helped drive prices below back below $48/bbl (WTI crude). In FX markets, the USD dollar gave up some gains late in the session with DXY edging down by 0.1% and the euro rising to $1.1827. Treasury yields are 0.5-2bps higher across the curve with the 10y at 2.273%.

This post was published at Zero Hedge on Aug 2, 2017.

ING FX Asks Why Trump Is Making Everyone (Else) Great Again

With the USD now nearly 7% lower since Trump told the WSJ back in April that he thinks “our dollar is getting too strong”, some – such as ING – have started to wonder if Trump’s slogan, at least in the world of FX, wasn’t MAGA but rather MEGA: Make Everyone (Else) Great Again. The bank’s head of FX strategy, Chris Turner explains:
In the FX world, Making Everyone else Great Again is the new theme. Whether intentional or not, President Trump has certainly managed to keep his word on one of his pledges: concerns about a rising $ are no longer an issue for the administration, with even the Fed’s trade-weighted index now at its lowest in a year. When it comes to taking stock of the dollar’s latest plight, we believe there are two things at play.
First, is the shifting view that the US economic cycle is beginning to top out given the absence of any major Trump fiscal stimulus – in effect making the somewhat rich US assets unattractive in the eyes of a global investor. Second, is the idea of a political risk premium weighing on the dollar; while it may be slightly premature to conclude this, it is certainly one explanation for why USD crosses have sharply decoupled from interest rate differentials in recent weeks.

This post was published at Zero Hedge on Aug 2, 2017.

Europe’s Banking Dysfunction Worsens

Authored by Chris Whalen via The Institutional Risk Analyst,
‘While the US and the UK have been mired in political chaos this year, the EU has enjoyed improved economic conditions and some political windfalls. The question now is whether this good news will inspire long-needed EU and eurozone reforms, or merely fuel complacency – and thus set the stage for another crisis down the road.’ Philippe Legrain, Project Syndicate
This week The Institutional Risk Analyst takes a look a the recent reports out of the EU regarding a proposal to ‘freeze’ the retail accounts of failing European banks. The original story in Reuters suggests that our friends in Europe actually think that telling the public that they will not have access to their funds, even funds covered by official deposit insurance schemes, is somehow helpful to addressing Europe’s troubled banking system. Investors who think that Europe is close to adopting an effective approach to dealing with failing banks may want to think again.

This post was published at Zero Hedge on Aug 2, 2017.

Ron Rosen: The Dollar And Equities Will Plunge Together – While Gold Spikes

The dollar has been falling lately, which isn’t what a lot of people expected with the Fed being the only major central bank that’s raising interest rates. Higher yields on dollar balances should, according to basic economics, have attracted foreign capital to Treasury paper, thus putting upward pressure on the dollar. Didn’t happen though. The dollar is down about 10% since the Fed started tightening.
Stocks, meanwhile, might reasonably have been expected to fall, as their dividend yields become less attractive relative to rising risk-free fixed income returns. Also didn’t happen. US equities are now at record levels.
As for what happens next, Ron Rosen of the Rosen Market Timing newsletter has just published some dramatic predictions. Here’s an excerpt:
This REPORT attempts to demonstrate that the day the Dollar Index crosses beneath the 91.88 level will probably be the beginning of a collapse in the stock averages and a massive rise in the precious metals complex.
The completion of the 9 year Zig-Zag correction in the Dollar Index is telling us that D-Day will take place the day that the Dollar Index crosses beneath the 91.88 low. The following is an explanation of a Zig-Zag correction.

This post was published at DollarCollapse on August 1, 2017.

What Is It About 1906ET That Spooks Precious Metals ‘Traders’?

The always-efficient so-called markets exhibited some interesting behavior once again this evening.
First of all, Dow futures flash-smashed higher after re-opening following AAPL’s earnings blow out, only to settle back down to reality very shortly after…
However, it was the precious metals ‘markets’ that went a little turbo. At 1906ET, Silver futures flash-smashed higher, running the day’s high-stops, before plunging back to earth…

This post was published at Zero Hedge on Aug 2, 2017.

Trump’s Fatal Mistake: The President Can’t Stop Taking Credit For The Stock Market Bubble

So far it appears that Trump’s ascent to the White House is going to have a positive effect on the US economy. It’s good that we have a president who is willing renegotiate disastrous trade deals, back our country out of crippling agreements like the Paris Climate Accord, and shut down the southern border, which has allowed millions of low skilled laborers to enter the country and drive down wages for American workers.
However, that probably doesn’t justify Trump’s current enthusiasm for the American economy. Over the past few days he has taken credit for all of the recent gains in the stock market.

This post was published at shtfplan on August 1st, 2017.

Earnings Rise with Boost from Falling U.S. Dollar But Consumers Will Bear the Brunt of Rising Prices

There seems to be an unlimited supply of methods in which the rich in America keep getting richer and the average Joe picks up the tab. (Think about the $16 trillion secret bailout of Wall Street by the Federal Reserve from 2007 to 2010 for the quintessential example.)
Yesterday, Fortune Magazine ran this sobering headline: ‘The Wealth Gap in the U. S. Is Worse Than In Russia or Iran.’ The article quotes Richard Florida, author of The New Urban Crisis, as follows:
‘Inequality in New York City is like Swaziland. Miami’s is like Zimbabwe. Los Angeles is equivalent to Sri Lanka. I actually look at the difference between the 95th percentile of income earners in big cities and the lower 20%. In the New York metro area, the 95th percentile makes $282,000 and the 20th percentile makes $23,000. These gaps between the rich and the poor in income and wealth are vast across the country and even worse in our cities.’
Against that backdrop comes news from FactSet last Friday that with 57 percent of the companies in the Standard and Poor’s 500 Index reporting actual earnings results for the second quarter of 2017, ‘ten sectors are reporting year-over-year earnings growth, led by the Energy, Information Technology, and Financials sectors.’ FactSet adds this: ‘The only sector reporting a year-over-year decline in earnings is the Consumer Discretionary sector.’ That would be the sector in which the average Joe lives.

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

Can the UK’s Jacob Rees-Mogg Put the Conservatives Back on Track?

What has happened in British politics in the last year has to be one of the most shocking turnarounds in history. After Brexit, the Tories seemed unstoppable, while Labour with Jeremy Corbyn at the helm seemed close to falling apart – some even predicted the end of the party. Despite an absolutely horrendous campaign by the Conservatives for the June election, they still seemed confident that they could easily get the majority again and even increase their lead.
Then June 8 came around and changed everything. The Tories lost 13 seats and had to negotiate a coalition with the Democratic Unionist Party to regain the majority in Parliament, while Corbyn’s Labour gained 30 seats and suddenly saw itself as the winner of the election. Now, a few weeks later, Labour is leading all polls, some even by up to eight percentage points, while Theresa May is, as George Osborne bluntly proclaimed already during election night, a ‘dead woman walking.’ Months after Labour seemed close to their end, the Tories now need to react quickly.
There is good news, though, as in the last few weeks a more than peculiar phenomenon has gained steam: the “Moggmentum.” This social media trend with the objective of getting Jacob Rees-Mogg, North East Somerset’s MP, to Downing Street, has started only recently, but garnered a lot of attraction. Rees-Mogg’s odds of becoming the next leader of the Conservatives stood at 50/1 on July 1, now they are at 10/1, only bested by Boris Johnson, Philip Hammond (both 6/1), and David Davis, the current favorite (3/1). The ascendance of this until recently relatively unknown MP shows that there’s at least some hope for the Tories.
Rees-Mogg is basically the exact opposite of what the current Tory leadership is all about. While Theresa May has talked all along about government intervention into the economy with great industrial plans and a rejection of ‘untrammeled free markets’ and ‘the cult of selfish individualism’ – both written in this year’s Conservative election manifesto – Rees-Mogg has stood up for a mix of traditional conservatism and libertarianism, believing in ‘minimal state interference, free enterprise, personal liberty within a framework of tradition, self-discipline and family values, low taxes.’

This post was published at Ludwig von Mises Institute on August 2, 2017.