The main focus this week will be on President Trump’s speech to Congress and Chair Yellen’s speech which is the last before the blackout period. US durable goods, ISM, the BoC rate decision, EZ CPI, UK PMIs and a busy calendar in Australia & Scandinavia also coming up.

Investors are hoping that the long-awaited speech from President Trump to a joint session of Congress will deliver more clarity on the agenda for the new administration. Meanwhile, Fed Chair Yellen’s speech on Friday will be the final piece of communication from the Fed before the new blackout period, and should set the tone heading into the next FOMC meeting.

Elsewhere, there will be MP meetings in Hungary, Malaysia, Israel & Ukraine. Ratings reviews are scheduled in Hungary, Lebanon & Qatar.

* * *

In addition to Trump’s address to Congress on Tuesday at 9pm which is the main event for markets this week, there’s still a relatively packed data docket to get through with the final PMI’s in Europe to be confirmed on Friday, a second reading of Q4 GDP in the US tomorrow and also an economic outlook speech by Fed Chair Yellen on Friday in Chicago. On that it’s worth noting that the March hike probability did steadily climb last week to 40% on Friday from 34% the week prior based on Bloomberg’s calculator but you’d imagine that in order for the Fed to really have the option of hiking next month, Yellen will have to make a much stronger case relative to what’s been said recently.

As Goldman summarizes, the key economic releases this week are the durable goods report on Monday, the second estimate of Q4 GDP on Tuesday, the ISM and PCE reports on Wednesday, and the ISM non-manufacturing report on Friday. In addition, there are several scheduled speaking engagements from Fed officials this week, including speeches by Federal Reserve Chair Yellen and Vice Chair Fischer on Friday. The Beige Book for the March FOMC period will be released on Wednesday.

In other data

• In the US, in addition to the Trump, Yellen and Fischer speeches, we also get a number of data releases including durable goods, personal income & spending, ISM, construction spending, vehicle sales and several other Fed speakers.
• In the Eurozone, the main focus will be on inflation data, with preliminary releases from Spain, France Italy and Germany, as well as the aggregate print. The French election ‘poll watch’ also continues, with the next key event the publication of Emmanuel Macron’s manifesto on March 2nd.
• In the UK, PMIs will be the main release, but note also the M4 report with data on foreign purchases of Gilts. The House of Lords also begin detailed examination of the Brexit Bill and can propose amendments.
• In Japan, we get inflation and labor market data as well as retail sales and IP.
• A busy week ahead in Australia. Q4 GDP will be the key release, with growth expected to rebound after the negative print in Q3. We receive the partial indicators of Balance of Payment, company profits and inventories ahead of the GDP release, and also monthly activity indicators of private sector credit, house prices, building approvals and trade.

A breakdown of key events by day courtesy of DB:

It’s a quiet start to the week in Europe this morning with just February confidence indicators for the Euro area due out. In the US this afternoon we’ll get a first look at the January durable and capital goods orders data as well as pending home sales and the Dallas Fed manufacturing survey index.

Tuesday kicks off in Japan where the latest retail sales, housing starts and industrial production data are due. In the European session we’ll get France CPI, PPI and Q4 GDP and the February CPI estimate for the Euro area. Trump’s speeceh will be the key political and market highlight.

Over in the US it’s all eyes on the second reading of Q4 GDP, while core PCE, wholesale inventories, advance goods trade balance, S&P/Case Shiller house price index, Chicago PMI and Richmond Fed manufacturing survey round out a busy day of releases.

In Asia on Wednesday the early focus is on the official manufacturing and services PMI’s in China. Over in Europe we’ll then get the final February manufacturing PMI’s followed by CPI in Germany and UK credit and money aggregates data. In the US there is more important data in the form of the January core and deflator PCE readings, ISM manufacturing, construction spending, vehicles sales and the final manufacturing PMI. Thursday looks set to be quieter with just Euro area PPI due in the morning and initial jobless claims in the US.

We end the week on Friday in Japan with CPI and the latest employment  numbers. China will also release the Caixin services and composite prints. In Europe we get the remaining services and composite PMI revisions for February as well as Euro area retail sales. The final services and composites are then due in the US alongside the ISM non-manufacturing print.

Away from the data the Fedspeak during the week consists of Kaplan today, Williams and Bullard on Tuesday, Kaplan and Brainard on Wednesday and then a bumper day on Friday headlined by Fed Chair Yellen when she gives an economic outlook speech in Chicago. Fischer, Powell, Evans, Lacker and Mester will also speak. Away from that, arguably the biggest event of the week is President Trump’s address to a joint session of Congress at 9pm ET in the US on Tuesday (early Wednesday morning in the UK). Also worth noting is the House of Lords debate on Brexit where talks are due to start about a more detail examination of the proposed bill.

* *  *

A table summary of key US events:

Goldman breaks down the week’s key events together with consensus estimates:

Monday, February 27

• 08:30 AM Durable goods orders, January preliminary (GS +2.0%, consensus +1.7%, last -0.5%); Durable goods orders ex-transportation, January preliminary (GS flat, consensus +0.5%, last +0.5%);
  Core capital goods orders, January preliminary (GS +0.2%, consensus +0.5%, last +0.7%); Core capital goods shipments, January preliminary (GS +0.2%, consensus +0.2%, last +1.0%): We expect durable goods orders to rise 2.0% reflecting a seasonally adjusted rebound in commercial aircraft orders following weaker-than-expected results in December. However, our expectations for the core measures are low. Despite strong manufacturing survey data in January and encouraging company results and commentary, we expect only a 0.2% increase in both core capital goods orders and core capital goods orders shipments, reflecting mean reversion, Chinese New Year effects, and the lagged impact of dollar strength. January industrial production of business equipment was also surprisingly soft, edging up just 0.1%. We expect durable goods orders ex-transportation to remain unchanged.
• 10:00 AM Pending home sales, January (GS -1.0%, consensus +1.0%, last +1.6%): Despite generally favorable weather, regional housing data released so far suggest a pullback in contract signings for existing homes in January, possibly reflecting the recent rise in mortgage rates that may have weighed on the new homes sales report last week. We expect a 1% drop in the pending homes sales index, which would mostly reverse December’s 1.6% increase. We have found pending home sales to be a useful leading indicator of existing home sales with a one- to two-month lag.
• 10:30 AM Dallas Fed manufacturing index, February (consensus +19.4, last +22.1)
• 11:00 AM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Federal Reserve President Robert Kaplan will participate in a moderated discussion at the Price College of Business at the University of Oklahoma. Audience and media Q&A is expected.

Tuesday, February 28

• 08:30 AM GDP (second), Q4 (GS +2.1%, consensus +2.1%, last +1.9%); Personal consumption, Q4 (GS +2.6%, consensus +2.5%, last +2.5%): We expect a two-tenths upward revision in the second estimate of Q4 GDP, featuring a one-tenth upward revision to personal consumption (to +2.6%) and additional upward revisions to residential investment and private inventories.
• 08:30 AM U.S. Census Bureau Report on Advance Economic Indicators; Advanced goods trade balance, January (GS -$66.4bn, consensus -$66.0bn, last -$64.4bn); Wholesale inventories, January preliminary (consensus +0.4%, last +1.0%): We expect the goods trade deficit to widen $2bn to $66.4bn in January following last month’s $1.2bn tightening, reflecting higher nominal petroleum imports and the relatively early Chinese New Year, which is likely shifting the timing of imports from February to January and could also delay some capital goods exports. Available port statistics suggest an improvement in both inbound and outbound container traffic, suggestive of an increase in gross trade volumes.
• 09:00 AM S&P/Case-Shiller 20-city home price index, December (GS +0.9%, consensus +0.7%, last +0.9%): We expect the S&P/Case-Shiller 20-city home price index to rise 0.9% in the December report following a 0.9% increase in the prior month. The measure still appears to be influenced by seasonal adjustment challenges, and we place more weight on the year-over-year increase, which at 5.3% is in line with recent trends.
• 09:45 AM Chicago PMI, February (GS 54.0, consensus 53.0, last 50.3): We expect the Chicago PMI to increase to 54.0 in February after falling to 50.3 in the January report. Our slightly-above-consensus forecast reflects the general improvement in manufacturing surveys as well as encouraging commentary from industrial firms.
• 10:00 AM Conference Board consumer confidence, February (GS 111.5, consensus 111.0, last 111.8): We expect consumer confidence to remain relatively stable at 111.5 following last month’s 1.5pt pullback to 111.8. Our forecast reflects encouraging consumer sentiment measures in February as well as recent stock market strength.
• 10:00 AM Richmond Fed manufacturing index, February (consensus +10, last +12)
• 12:45 PM Kansas City Fed President George (FOMC non-voter) speaks: Kansas City Fed President Esther George will give the keynote speech on the U.S. economy and monetary policy at “Banking and the Economy: A Forum for Women in Banking” in Midwest City, Oklahoma. Audience Q&A is expected.
• 03:00 Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Fed President Patrick Harker will give a speech on the economic outlook at the 16th Annual Economic Outlook event at LaSalle University in Philadelphia, Pennsylvania.
• 03:30 PM San Francisco Fed President Williams (FOMC non-voter) speaks: Federal Reserve Bank of San Francisco President John Williams will give a speech on the economic outlook at the Santa Cruz Chamber of Commerce in California. Audience and media Q&A is expected.
• 06:50 PM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Federal Reserve President James Bullard will give a speech on the U.S. economy and monetary policy at the 2017 GWU Alumni Lecture in Economics event hosted by George Washington University in D.C. Audience and media Q&A is expected.

Wednesday, March 1

• 8:30 AM Personal income, January (GS +0.4%, consensus +0.3%, last +0.3%); Personal spending, January (GS +0.3%, consensus +0.3%, last +0.5%); PCE price index, January (GS +0.47%, consensus +0.5%, last +0.2%); Core PCE price index, January (GS +0.33%, consensus +0.3, last +0.1%); PCE price index (yoy), January (GS +2.0%, consensus +2.0%, last +1.6%); Core PCE price index (yoy), January (GS +1.8%, consensus +1.7%, last +1.7%): Based on details in the PPI and CPI reports, we forecast that the core PCE price index rose +0.33% month-over-month in January, which would be enough for the year-over-year rate to round up to +1.8%. Additionally, we expect that the headline PCE price index increased 0.47% in January, or 2.0% from a year earlier. We expect a 0.4% increase in January personal income and a 0.3% rise in personal spending.
• 10:00 AM ISM manufacturing, February (GS 57.0, consensus 56.0, last 56.0): Regional manufacturing surveys continued to climb in February, and we expect ISM manufacturing to advance to 57.0 in the February report. The Philly Fed (+19.7pt to 43.3) and Empire (+12.3pt to 18.7) manufacturing sector surveys both strengthened further following encouraging January reports. The Kansas City survey also increased notably (+5pt to 14). Our manufacturing survey tracker—which is scaled to the ISM index—rose to 58.8 in February from 56.4 in January.
• 10:00 AM Construction spending, January (GS +0.6%, consensus +0.6%, last -0.2%): We expect construction spending to increase 0.6% in January, following a 0.2% decline in December that reflected weaker state and local spending and flat private nonresidential construction activity.
• 12:30 PM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Federal Reserve President Robert Kaplan will discuss local and national issues at the Workforce Development Roundtable and Community Luncheon hosted by Paul Quinn College in Dallas, Texas.
• 02:00 PM Beige Book, March FOMC meeting period: The Fed’s Beige book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The January Beige Book reported that activity continued to expand across most districts. Manufacturing activity picked up while residential investment was mixed. Additionally, employment conditions continued to improve and wage growth increased a bit. In the March Beige Book, we look for additional anecdotes related to the state of manufacturing activity, price inflation, and wage growth.
• 04:00 PM Total vehicle sales, February (GS 17.7mn, consensus 17.7mn, last 17.5mn): Domestic vehicle sales, February (GS 14.1mn, consensus 13.6mn, last 13.6mn)
• 06:00 PM Fed Governor Brainard (FOMC voter) speaks: Federal Reserve Governor Lael Brainard will give a speech on the economic outlook and monetary policy at the “Malcolm Wiener Lecture in International Political Economy” at Harvard University. Audience Q&A is expected.

Thursday, March 2

• 08:30 AM Initial jobless claims, week ended February 25 (GS 240k, consensus 245k, last 244k); Continuing jobless claims, week ended February 18 (consensus 2,065k, last 2,060k): We expect initial jobless claims to decline 4k to 240k. The ongoing improvement in jobless claims provides additional evidence of underlying improvement in the pace of layoffs, and we also note the year-to-date improvement in several energy-producing states. Accordingly, we expect the pace of layoffs to remain low.
• 07:00 PM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Federal Reserve President Loretta Mester will participate in a moderated discussion at an event hosted by the Athena Center for Leadership Studies at Barnard College. Audience Q&A is expected.

Friday, March 3

• 10:00 AM ISM non-manufacturing, February (GS 57.0, consensus 56.5, last 56.5); We expect the ISM non-manufacturing survey to increase 0.5pt to 57.0. Regional non-manufacturing surveys for February have been encouraging and signal moderate expansion in service-sector business activity. Both the Philly Fed’s nonmanufacturing survey (+4.7pt to +38.0), and the NY Fed’s survey (+9.5pt to +14.5, after our seasonal adjustment) strengthened in February. Overall, our nonmanufacturing survey tracker ticked up to 56.5 from 56.2 in January.
• 10:00 AM Fed Presidents Evans and Lacker speak: Chicago Fed President Charles Evans (FOMC voter) and Richmond Fed President Jeffrey Lacker (FOMC non-voter) will participate in a discussion on inflation expectations and inflation dynamics at the U.S. Monetary Policy Forum hosted by the University of Chicago Booth School of Business in New York.
• 12:15 PM Fed Governor Powell (FOMC voter) speaks: Federal Reserve Governor Jerome Powell will participate in a discussion roundtable on “Innovation, Technology, and the Payments System” at an event hosted at the Yale Law School on “Blockchain: The Future of Finance and Capital Markets”. Audience Q&A is expected.
• 12:30 PM Fed Vice Chair Fischer (FOMC voter) speaks: Federal Reserve Vice Chair Stanley Fischer will give a speech on “Fed Monetary Policy Decision Making” at the 2017 Monetary Policy Forum in New York. Audience Q&A is expected.
• 01:00 PM Fed Chair Yellen (FOMC voter) speaks: Federal Reserve Chair Janet Yellen will give a speech on the economic outlook at the Executives Club of Chicago. Audience Q&A is expected.

Source: DB, GS, BofA

via http://ift.tt/2l4bB4B Tyler Durden

Equity Funds Buy Gold Now, 1987 Redux?
SUMMARY
written by Vince Lanci for Marketslant.com
Be careful what you wish for. More equity funds are buying Gold as a hedge against stock exposure. That is a 2-edged sword.

OVERVIEW
Gold is reflecting many basic worries that have no seeming resolution on the horizon
Eurozone elections,
Problems in Venezuela,Greece,Italy,
Currency changes in India

GOLD AWARENESS INCREASES
We’ve noticed more stock market ‘hedgers’ buying the rally. This growing number of buyers hedging their stock market exposure would appear to be solid evidence of a changing view towards Gold. And for sure it does reflect anxiety and raised awareness to Gold and Silver’s qualities in the broader markets.
We want to add an important historical caveat that should not be ignored. Ever.

THE CRASH OF 1987 WAS A DISASTER FOR GOLD
In 1987 on the morning of the Stock market crash, Gold was called to open “limit up”. When the Comex actually opened, futures were trading Limit Down. This was almost entirely a function of margin calls being issued for funds who had bought stock on margin and had to raise cash immediately.
The first thing these funds did was liquidate all other holdings in subservience to their stock positions. That meant Gold, their hedge, got dumped.

SIZE MATTERS WHEN THE EXIT LIGHT GOES ON
Fund managers did not understand the size of the Gold market then and the resulting stampede killed Gold. In the end they had to puke their stock positions to, but not until they and their advisors told them to liquidate their winners first. Gold went from being a winning effective hedge to a loss.
Many funds still do not understand the importance of exit liquidity. We strongly advise you as a Gold Investor to brace yourselves if Stocks drop precipitously again. It would be a buying opportunity for sure. But only if you are not leveraged.

BE BULLISH STOCKS
History may not repeat itself. Many Funds understand the risks now. But newer funds run by managers who only know the world of Bernanke and Yellen may not.
Just know that more people are using Gold as a stock market hedge right now. That is not a bad thing in and of itself. It is a horrible thing if those buyers are long stocks on leverage. And if recent history of funds using Gold as a hedge for ‘event risk’, like the Brexit Gold Exit are any indication, the risk to Gold is real.
If stocks were to plummet, we’d like to see gold hold. Seeing this, we could reasonably assess the market as balanced between sellers liquidating to handle stock margin calls and buyers expecting a QE 4 or in the least another ‘non-rate hike’ quarter.
What a Gold investor should want is for stocks to not selloff, but trade sideways now. This will be a sign of market balancing future economic expectations, which includes high values due to inflation’s effect on earnings. This in turn makes Gold the undervalued asset for those stock longs looking for something else to buy.

We are on the road and writing with less than ideal graphic capabilities. A thank you to George Gero for some of he data below.

THIS MORNING:
Gold pausing recent rally, ahead of President Trump speaking tomorrow night
Traders considering March Open Meeting of the FED as well
Friday’s WSJ had a gold story. Assume more buying with headline watchers at least initially

TAPE WATCHING:
Open interest near year high 456,473 in futures
Funds added as 1250 area was reached.
Momentum funds now buying alongside genuine ‘worry money’
Copper 276018 also good amount OI.
Silver open interest is 210,996.
Gold-silver ratio 68.35,
Gold-plat 228.80
Dollar index 101 and change
April-June spread gold 330, as rollover not a factor yet.

Silver story next as the market has indeed started its climb to the $21 area where that big chunk of calls was sold last week as reported here previously.
Good luck
Vbl

via http://ift.tt/2lgPtiu Vince Lanci

Buy the Trump-speech rumors?

Bonds ain't buying it…

 

Hard Data is not supportive…

 

And everyone's buying protection…

 

Still none of that matters – Warren Buffett just told everyone we're not in a bubble… despite his favorite indicator being in a bubble…

Bonus Chart…

via http://ift.tt/2mmyuAx Tyler Durden

 

Interested in precious metals investing or storage? Contact us HERE 

 

 

 

 

The NEW U.S. Economic Mythology

Written by Jeff Nielson (CLICK HERE FOR ORIGINAL)

 

 

The Corporate media lies to us, all of the time. This is not an assertion, merely an elementary observation. With a real “free press”, we see occasional moments where different media outlets may agree on the interpretation of particular events and/or the relative importance of events. All other times, we see a divergence of opinion between media outlets.

This is what we would expect to see. Homo sapiens are a contrarian species. We all have our own ideas – or at least we used to.

What do we see with the Corporate media today? We see a small collection of gigantic corporations which control everything we see and hear. That’s called an oligopoly. It is not even legal. And with rare exceptions, we see these gigantic corporations saying the same thing, all the time.

That’s not a free press. That’s a propaganda machine. And when a propaganda machine repeats the same message over and over, we have a name for that too. We call it brainwashing.

For example; for many, many decades, marijuana was supposedly one of the Demon Drugs. Not only did it pose several grave perils to our health, but it was a “gateway drug”. Let little Johnny or Janey get their hands on a joint, and next thing you know they would be shooting heroin.

Was any of that true? Of course not. It was all propaganda.

Today, we know that marijuana’s active ingredients have many benign and even therapeutic applications. As jurisdictions across North America now begin legalizing the recreational use of marijuana, the only difference being noticed by the governments of those jurisdictions is more tax dollars in their coffers – and less-crowded jails.

We’re not only fed legal propaganda and brainwashing, we’re also subjected to economic brainwashing. And nowhere do we see more intense brainwashing than with respect to the Mighty U.S. Economy.

For many, many years, when the U.S. economy was genuinely prosperous, successive U.S. governments had an overt and explicit “strong dollar policy”. A strong currency was good. Having each dollar in a consumer’s wallet stretch farther was good, because that consumer could buy more goods.

However, when the evil Alan Greenspan and his successor B.S. Bernanke were ordered by their oligarch Masters to begin to rapidly dilute and debase the U.S. dollar, the elementary logic of a strong-dollar policy became inconvenient for the oligarchs. New propaganda had to be invented.

Suddenly, a strong currency was bad. “Competitive devaluation” became the new mantra of the U.S. government and the subordinate puppets across the Western world. It was good to have a weak currency. It was good for each dollar in a consumer’s wallet to be devoured by inflation. It was good for consumers to buy less and less goods because their dollar was shrinking – not stretching.

It never made any sense. But the brainwashing has been repeated to us over and over, year after year, and so we (most of us) believe it.

Then these same oligarchs decided to manipulate the U.S. dollar upward, pushing it to absurd heights versus almost every currency on the planet. Has the (new) “strong dollar” hurt the U.S. economy? Apparently not, because what we hear every minute of every day is that the Federal Reserve is on the verge of pulling the trigger on higher interest rates because the U.S. economy is so damn strong.

Then we have oil.

For many, many years; we have been told that high oil prices are bad. Why? Because we use oil (directly or indirectly) in almost all human economic activity. Dramatically pushing up the price of a primary economic input is like a tax on the economy. Indeed, the mainstream media has often uttered precisely that phrase: “higher oil prices are a tax on the economy.”

Just as it is elementary logic that a strong currency is good, it is also elementary logic that high oil prices are bad – bad for everyone except oil producers. But this logic is suddenly no longer convenient for the oligarchs, so once again they have ordered their media foot soldiers to invent new propaganda. Note the speed with which this new propaganda message has been injected into the Corporate media megaphone.

The crazy idea that higher oil prices might be good for the economy right now

That propaganda headline was rolled out less than a year ago at the Washington Post. See how audacious this propaganda machine has become. It acknowledges that the mere suggestion that high oil prices might be good is crazy. Then the propaganda mouthpiece who wrote this propaganda goes on to “explain” to the insipid sheep reading the article why high oil prices are actually a good thing.

Scarcely more than six months later; we see this propaganda headline from the hardcore brainwashing machine known as Bloomberg News.

What Will Lift World Economy? Goldman Says Higher Oil Prices

Suddenly, the “crazy” idea that higher oil prices are a good thing is no longer being introduced in a sheepish, almost apologetic manner. Now it is being presented to us as the new wisdom, uttered by none other than the economic sages (i.e. compulsive liars) of Goldman Sachs.

We’re brainwashed with various forms of ludicrous mythology on a regular basis. The point of this article is not to merely point out that the Corporate media has once again been caught passing off ridiculous lies. That’s nothing more than another “dog bites man” story.

The real importance of pointing out the New U.S. Economic Mythology comes in looking past the mere propaganda itself. There could be no possible reality where imposing a “tax on the economy” could be good for the economy. It might be good for the government collecting the tax, but it’s certainly never good for the economy itself.

How has the propaganda machine endeavoured to pass off this ridiculous lie? Why has the propaganda machine been told to pass off this ridiculous lie?

First the “how”. Why are high oil prices now supposedly “good for the economy”, when this could never possibly be true? It’s because – get ready for this – there is “not enough inflation”. There’s nothing at all new about that lie. The prostitutes of the Federal Reserve have been peddling this nonsense for years. From 2013, and once again from Bloomberg:

Why the Fed Worries Inflation Is too Low

Regular readers already know that this is a heinous lie. Inflation is economic cancer. Inflation is exactly like “a tax on the economy” because as with a tax, it claws away our purchasing power. It is impossible for a human being to have “not enough cancer”. It is impossible for an economy to have “not enough inflation”.

Making this lie especially heinous is that we have much too much inflation. Food prices are soaring at a double-digit rate, with only brief lulls between the next explosion in prices. Housing prices are soaring higher at a rate never before seen in our lifetime. We have far too much inflation, yet the liars of the Corporate media and the liars of the Federal Reserve and the liars of our puppet governments tell us there is “not enough inflation”.

So why bring oil into this? Why try to pass off two utterly absurd lies together, simultaneously? We need higher oil prices because there is not enough inflation.

To understand the necessity for the Corporate media to attempt to pass off two ridiculous lies simultaneously requires turning back the clock a few years, back to when the U.S. government chose to manipulate the price of oil to a rock-bottom level. That’s what we were told.

Barack Obama publicly boasted that lower oil prices were “part of the U.S. strategy” to punish Russia. Of course in reality the actual manipulation of oil markets was carried out by the banking crime syndicate, known to regular readers as the One Bank. But the bankers kept oil prices too low for too long.

Russia is still standing. However, a few more months of $30/barrel would have completed the vaporization of the much-hyped U.S. shale oil sector. That would have been embarrassing for the oligarchs. Shale oil had to be saved. Oil prices had to rise. But now another problem.

How does the Corporate media continue to pretend there is a “U.S. economic recovery” as oil prices rise significantly? How can the Federal Reserve continue to pretend that it’s “about to raise interest rates” with oil prices rising? More potential embarrassment for the oligarchs and their lackeys.

New mythology was necessary. Higher oil prices are good (a lie) because there is not enough inflation (a lie). And those lies are now necessary because the Corporate media has been ordered to continue to pretend there is a U.S. recovery (a lie) and pretend that the Federal Reserve is “about to raise interest rates” (a lie).

Oh what a tangled web we weave when first we practice to deceive.

One caveat on the last of the Big Lies currently being passed off about the U.S. economy. It is possible that the Federal Reserve may suddenly begin to normalize interest rates – once their oligarch Masters give them the word that it’s time to torpedo the U.S. stock market bubble.

Warren Buffett is 86 years old, and currently sitting on a cash hoard of $85 billion vampire-dollars. Those two numbers both tell us that the Next Crash is coming sooner, not later.

 

 

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The NEW U.S. Economic Mythology

Written by Jeff Nielson (CLICK HERE FOR ORIGINAL)

via http://ift.tt/2l4UAr5 Sprott Money

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

What we have is a bunch of sclerotic, dying institutions and systems resisting anything and everything that threatens to disrupt the status quo.

One way to understand the rising sense of disintegration and discord around the globe is to realize that those systems that aren't busy being born are busy dying–and virtually none of our primary systems are busy being born.

The line is from Bob Dylan's song It’s Alright, Ma (I’m Only Bleeding): "he not busy being born is busy dying."

What does busy being born mean? For both individuals and systems, it means adapting by advancing understanding, flexibility and capabilities.

Systems that are dying are rigid, mal-adapted, resistant to change, obsessed with obscuring their failure and retaining their grip on cronyist privilege and power. Big Pharma: dying. Banking: dying. Governance, a.k.a. political processes: dying. Enforced consensus: dying.

Those slices of the economy that are exposed to competition and innovation have a choice: adapt or die. Everything that is protected by monopoly–private-sector cartels, government, government-managed sectors such as Big Ag, Big Pharma, Military-Industrial Complex, Higher Education and the entire intelligence agency alphabet soup–are focused on maintaining their grip on power.

"Adaptation" for those systems busy dying has been reduced to limiting transparency, PR campaigns aimed at diverting attention from their rackets, devoting resources to protecting their cronyist skims, desperately clinging to the status quo and fighting off innovation that threatens to disrupt their rackets.

What we have is a bunch of sclerotic, dying institutions and systems resisting anything and everything that threatens to disrupt the status quo, and a much smaller, agile ecosystem that is busy being born: crypto-currencies, peer-to-peer networks, automation, software that's eating the world, decentralized governance processes, localized production and more.

Here's what happens when the mode of production is dominated by static, self-serving cartels, monopolies and bureaucracies: productivity tanks as adaptation and innovation are limited to narrow bands that exclude the central institutions of governance and the economy.

And here's how a dying status quo maintains the illusion of legitimacy and solvency: it borrows and blows trillions of dollars to prop up its dying institutions and systems.

via http://ift.tt/2lYknR0 Tyler Durden

As observed earlier in the day, as part of the leaked preliminary Trump budget, the president was set to unveil major spending increases for US defense offset by cuts to federal agencies, and other non-defense sectors. And on Monday morning, the first details emerged, including that the boost to defense spending is expected to be about 10%, or some $54 billion, and will be revenue neutral, offset by cuts in non-defense areas, and will not “add a dime to the deficit.” As Trump said, he is seeking a “historic increase” in military spending.

“This budget will be a public safety and national security budget,” Trump told state governors at the White House. “It will include an historic increase in defense spending to rebuild the depleted military of the United States of America at a time we most need it,” he said.

One of the officials cited by Reuters said Trump’s request for the Pentagon included more money for shipbuilding, military aircraft and establishing “a more robust presence in key international waterways and chokepoints” such as the Strait of Hormuz and South China Sea.

A second official said the State Department’s budget could be cut by as much as 30 percent, which would force a major restructuring of the department and elimination of programs.  Some defense experts have questioned the need for a large increase in U.S. military spending, which already stands at roughly $600 billion annually. By contrast, the United States spends about $50 billion annually on the State Department and foreign assistance.

The White House will send federal agencies their proposed 2018 budget allocations at noon Monday, according to an Office of Management and Budget official. The official provided no specific details during a call with reporters about the rest of the budget, including the baseline figure being used for the cuts or over what period they would be made. The initial blueprint of the president’s budget will be released in mid-March, and the administration’s entire fiscal proposal is expected later in the spring.

The outline due next month will include only targets for discretionary spending programs, which represent around one-third of total federal spending. The blueprint won’t include proposed changes on tax policy or mandatory spending.

To offset the defense spending increase, the White House is seeking corresponding cuts of $54 billion in non-defense categories, including “large spending cuts” to foreign aid, the EPA, the State Department and safety programs. The official also added that most agencies would see funding reductions.

“Most federal agencies will see a reduction as a result,” the official said, with cuts falling most heavily on “lower priority” programs as well as foreign aid. When asked where the extra $54 billion will be spent, the official said “predominantly it will go to the Pentagon,” but declined to name specific offices.

According to The Hill, the budget will fundamentally alter the spending rules known as the sequester brokered in a 2013 deal between President Obama and Congress. That agreement set a cap on discretionary spending across the federal government, which affected defense and non-defense spending equally.

The punchline: according to the White House, the budget, at least as it stands right now, won’t add a dime to the deficit, suggesting that if only for the time being, the dramatic debt-funded spending spree remains on hold.

According to the WSJ, the Trump administration said the funding request will show that Mr. Trump is following through on promises he made during his campaign to boost military spending and put “America First,” a campaign theme he sounded in his inaugural address last month. It isn’t clear how the offsetting cuts will allow him to also make good on promises to ramp up funds for border security, infrastructure and veterans’ health care.

For now we await more details. As the NY Times reported ovenright, Trump’s plan which is a collaboration between budget director, Mick Mulvaney; NEC director Gary Cohn; and Steve Bannon, is meant to make a “big splash” and has been carefully timed to come the day before the president’s address to Congress.

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The Dallas Fed Manufacturing survey soared – for the 6th straight month – to 24.5 in February (smashing expectations of a modest dip to 19.4). This is the highest since April 2006.

This is a 4 standard deviation beat of analysts’ expectations, well north of even the highest forecast.

While the headline data soared, we note, however, that wages declined, workweek dropped, prices paid surged, and new orders tumbled.

Another soft survey ‘beat’ as hard data (core durable goods) misses.

As good as it gets?

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With the dollar sliding on rising fears Trump may disappoint in his address to Congress tomorrow evening, moments ago the dollar spiked, and risk assets rebounded after headlines hit from Reuters and Bloomberg in which Trump previewed what he would say, saying he would have a “big statement” on infrastructure in his Tuesday speech, adding that “we’re going to start spending on infrastructure big.”

• TRUMP SAYS HE WILL HAVE BIG STATEMENT ON INFRASTRUCTURE IN HIS TUESDAY SPEECH.
• TRUMP SAYS “WE’RE GOING TO START SPENDING ON INFRASTRUCTURE BIG”
• TRUMP SAYS THERE IS `NO CHOICE’ BUT TO SPEND ON INFRASTRUCTURE
• TRUMP SAYS HE HAS `REALLY, REALLY GOOD’ SOLUTION TO OBAMACARE

Among the key soundbites from Trump’s meeting with governors at White House.

• “I wonder how many people are hurt” when driving “through a tunnel and a tile falls off,”
• “We’re going to start spending on infrastructure big”
• He wants “free” and “fair” trade; U.S. should be “taxed at the same amount the other countries”

However, fading the optimistic tone, Trump also warned that his tax plan would be released only after Obamacare is tackled, and health plan costs are known:

• TRUMP SAYS HIS TAX PLAN WILL BE RELEASED AFTER ADMINISTRATION PROPOSAL ON OBAMACARE
• TRUMP SAYS CAN’T DO TAX PLAN UNTIL KNOW HEALTH PLAN COSTS

In other words, Trump’s “phenomenal” tax plan, the catalyst for much of the market’s recent move, may not be unveiled for a long time as a result of the previously noted hurdles facing Obamacare’s repeal and replace. That said, he expressed optimism on the topic of repealing and replacing Obamacare, saying “we have come up with a solution that I think is really, really good.” It remains to be seen what it is.

For now algos heard “big” when it comes to Trump’s plans and loved it, and the result was a spike in both the USD…

… and the S&P.

Of note, the biggest rebound is in the infrastructure and construction sectors, rising on renewed hopes of an infrastructure stimulus.

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Against expectations of a 0.6% rise, pending home sales in January plunged 2.8% MoM – the biggest drop since May.

The West – the most expensive region – saw the biggest decline, down 10.3% MoM with The Midwest also tumbling 5.2% MoM.

As mortgage rates have soared since the election (and mortgage applications tumbled), affordability has become a major issue according to NAR with pending home sales at the lowest in a year.

 

And it's going to get a lot worse…

Lawrence Yun, NAR chief economist, says home shoppers in January faced numerous obstacles in their quest to buy a home.

"The significant shortage of listings last month along with deteriorating affordability as the result of higher home prices and mortgage rates kept many would-be buyers at bay," he said.

 

"Buyer traffic is easily outpacing seller traffic in several metro areas and is why homes are selling at a much faster rate than a year ago. Most notably in the West, it's not uncommon to see a home come off the market within a month."

According to Yun, interest in buying a home is the highest it has been since the Great Recession. Households are feeling more confident about their financial situation, job growth is strong in most of the country and the stock market has seen record gains in recent months. While these factors bode favorably for increased sales in coming months, buyers are dealing with challenging supply shortages that continue to run up prices in many areas.

"January's accelerated price appreciation is concerning because it's over double the pace of income growth and mortgage rates are up considerably from six months ago," said Yun. "Especially in the most expensive markets, prospective buyers will feel this squeeze to their budget and will likely have to come up with additional savings or compromise on home size or location."

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After months of tough talk from the Trump administration on NAFTA and border tariffs on goods imported from Mexico, among other issues, Mexico’s top trade negotiator, Economy Minister Ildefonso Guajardo, is now ratcheting up his own threats from south of the border.  Speaking to Bloomberg over the weekend, Guajardo said that Mexico will walk away from NAFTA if the U.S. insists on slapping duties or quotas on any products from Mexico.

“The moment that they say, ‘We’re going to put a 20 percent tariff on cars,’ I get up from the table,” Mexican Economy Minister Ildefonso Guajardo said in an interview. “Bye-bye.”

 

This doesn’t mean, Guajardo emphasized, that Mexico would be looking to scrap Nafta. But by saying it refuses to even discuss the kind of tariffs President Donald Trump has long trumpeted, the country is ratcheting up the pressure on U.S. negotiators and effectively daring them to pull out of the 23-year-old pact.

 

Mexican officials have said they expect official talks to start in June. And if they fail? “It wouldn’t be an absolute crisis,” said Guajardo, who headed the Nafta office of the Mexican embassy in the U.S. in the early 90s, when the pact was being written and implemented.

 

Of course, the increased rhetoric from Mexico comes after Trump has seemingly made a hobby of threatening border tariffs on auto imports since November 8th with tweets targeting pretty much every auto OEM from GM to Toyota.  Here is just one illustrative tweet storm from early December:

The U.S. is going to substantialy reduce taxes and regulations on businesses, but any business that leaves our country for another country,

— Donald J. Trump (@realDonaldTrump) December 4, 2016

fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. ……

— Donald J. Trump (@realDonaldTrump) December 4, 2016

without retribution or consequence, is WRONG! There will be a tax on our soon to be strong border of 35% for these companies ……

— Donald J. Trump (@realDonaldTrump) December 4, 2016

wanting to sell their product, cars, A.C. units etc., back across the border. This tax will make leaving financially difficult, but…..

— Donald J. Trump (@realDonaldTrump) December 4, 2016

these companies are able to move between all 50 states, with no tax or tariff being charged. Please be forewarned prior to making a very …

— Donald J. Trump (@realDonaldTrump) December 4, 2016

expensive mistake! THE UNITED STATES IS OPEN FOR BUSINESS

— Donald J. Trump (@realDonaldTrump) December 4, 2016

 

Guajardo warned that, despite Trump’s vow to drain the swamp, opening up NAFTA to new duties would bring lines of lobbyists (a.k.a. swamp dwellers) from every industry imaginable all looking for a competitive edge.

Without Nafta, trade between Mexico and the U.S. would be ruled by World Trade Organization strictures limiting tariffs either country can impose on the other, with the average for Mexico at around 3 percent, according to the Mexico City-based political-risk advisory firm Empra. That “would take away some of our margin of competitiveness,” the minister said, but would be manageable.

 

Guajardo said part of the reason his country is unwilling to consider any new Nafta duties is because of a possible domino effect. “Opening the door to tariffs is very dangerous, because it’s like opening Pandora’s box — the lines of people asking for protectionism in Washington would reach to Maryland, and in Mexico City they’d reach to Puebla.”

 

The border-adjustment tax, he said, is something that’s squarely a domestic fiscal matter for the U.S. He also said it would be complicated to implement, and would no doubt result in mirror changes from other nations that would aim to level the playing field. Washington’s going that route “would require a crazy amount of control on the origin of merchandise and inputs.”

Meanwhile, as we’ve noted before, whether it’s simply negotiating rhetoric or not, Mexico is also publicly playing up potential trade deals with other South American countries that could fill the void created if NAFTA falls apart.

In Brazil in particular, Mexico sees what Guajardo called “very, very high potential” in areas including automobiles. “I’m not going to negotiate with Brazil for its pretty face. I’m going to negotiate with Brazil because they’re going to open their car-manufacturing market,” said the minister, who has overseen negotiations for the Trans-Pacific Partnership and is working to update the country’s free-trade agreement with the European Union.

 

Mexico is also seeking to have TPP members join the Pacific Alliance, which includes Chile, Peru and Colombia. TPP nations have been invited to participate in the Latin American group’s meeting in March, Guajardo said. In one of his first acts as president, Trump pulled the U.S. out of the Pacific trade deal, designed to knit together almost 40 percent of the global economy.

All of which should make for a very fun summer of 2017 complete 100’s of entertaining tweets and leaked phone call transcripts from the White House to Mexico.

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