Month: September 2017

Shortly after President Trump backed away from his demand that $1.6 billion in funding for his border wall be included in a continuing-resolution bill to avert a government shutdown, the White House late Friday sent a request for $8 billion in emergency funding for the Hurricane Harvey cleanup effort, and asked that the money be tied to a bill to raise the US debt-ceiling limit. Trump’s request that the two legislative priorities be combined in one bill likely won’t go over well among Congressional Republicans, according to Bloomberg.

Rep. Mark Meadows of North Carolina, the leader of the House Freedom Caucus and perhaps Trump’s most intransigent political adversary, urged lawmakers on Thursday not to bundle the two legislative priorities. In a tweet, Meadows said it’d be “inappropriate” and “would send the wrong message” to use Harvey funds as leverage to force conservatives to vote for a debt-ceiling increase.

The aid money will be needed to shore up the nearly bankrupt FEMA’s finances before some 450,000 Texans file requests for aid. The rising toll of flood-related property damage is expected to quickly deplete the $10 billion left in the coffers of the National Flood Insurance Program.

Using #Harvey relief spending to pass a separate, unrelated bill would be inappropriate and send the wrong message https://t.co/DwHxp6IphB

— Mark Meadows (@RepMarkMeadows) August 31, 2017

Here’s Bloomberg:

“In a letter to House Speaker Paul Ryan requesting the storm aid, Budget Director Mick Mulvaney stops short of explicitly asking for the two to be linked. But the letter makes clear that the emergency spending will accelerate the timetable for raising the limit and conveys the idea that failure to pay obligations could imperil essential government services.

 

The White House disaster aid request includes $7.4 billion for the Federal Emergency Management Agency and $450 million for the Small Business Administration. The request is intended primarily to cover funding demands through the end of the federal fiscal year on Sept. 30.”

The administration intends to ask Congress to allow the aid to be disbursed in one lump sum, rather than parceling out in monthly installments.

“The White House will ask Congress to provide FEMA with $6.7 billion in that legislation, and provide the full funding upfront, rather than pro-rating the appropriation out over the entire fiscal year, an administration official said. That request, if adopted by lawmakers in a vote likely to come at the end of the month, would provide FEMA with additional flexibility to fund Harvey relief efforts in the new fiscal year.”

Republicans are expected to vote on disaster relief next week after they return from summer recess. Congress is already facing a grueling legislative calendar in September with only 12 working days to pass a continuing resolution, disaster relief, a debt-ceiling increase and, potentially, their effort to repeal and replace Obamacare after the Senate Parliamentarian informed party leaders that the provisions allowing them to pass their health-care bill with a simple majority will expire at the end of the month.

“The administration’s move will test the willingness of Republicans in Congress to link the two must-pass pieces of legislation. House GOP leaders plan to vote next week on Trump’s request in initial disaster relief funding but they don’t plan to include a U.S. debt-limit increase in the legislation, two GOP congressional aides said before Mulvaney’s letter was sent.

 

"The president visited Texas on August 29, 2017 to reassure the people of Texas that the Federal Government would help them rebuild from the catastrophic flooding and damage to affected communities," Mulvaney said in the letter. "This request is a down-payment on the President’s commitment to help affected States recover from the storm, and future requests will address longer-term rebuilding needs."

According to Bloomberg, citing unnamed Congressional aides, the Senate might be more willing to combine both measures in a bill, and the House, bizarrely, might be more willing to pass a bundled bill if it makes it through the Senate first. Despite the reported rift between Trump and Senate Majority Leader Mitch McConnell, the Kentucky Republican has promised to cooperate with the president. He hasn’t said whether he’d prefer to combine, or separate, Harvey funding and the debt-ceiling increase.

“‘Working closely with the President and the House of Representatives, the Senate stands ready to act quickly to provide this much-needed assistance to those impacted communities, and support first responders and volunteers,’ he said.”

House Speaker Paul Ryan has also been conspicuously silent about how the House intends to pass Harvey relief…

As families & communities begin long recovery from Hurricane Harvey, House will act quickly on @POTUS request for emergency relief funding.

— Paul Ryan (@SpeakerRyan) September 2, 2017

…though he recently told a Wisconsin newspaper that Congress “will not default” on its debts.

“Ryan told the Milwaukee Journal Sentinel, though, that Congress has until October to act on the debt limit.

 

‘We will not default,’ the Wisconsin newspaper quoted Ryan as saying. ‘We’ve got a lot of options on our plate. We’re going to assess those options. We have until October to figure that one out.’”

We probably won’t have a clear picture of the combined bill’s chances. For what it’s worth, Goldman is optimistic that a compromise can be reached. It recently lowered its odds of a government shutdown to 15%, down from 50% last week.

Goldman: the probability of a government shutdown has declined further from our prior assessment of 35% and now put it at around 15%.

— zerohedge (@zerohedge) September 1, 2017

Let's hope, for the disaster victims' sake, that the squid is right.

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By Jamie Dupree of PBP.

Former U.S. House IT aide Imran Awan pleaded not guilty Friday to federal charges that he and his wife lied on an application for a home equity loan, as prosecutors dropped hints about a broader probe of Awan and his family members related to their computer work in recent years for Rep. Debbie Wasserman Schultz (D-FL) and a series of other Democratic lawmakers in the Congress.

A federal judge also agreed to return $9,000 seized from Awan when he was arrested at Dulles Airport in late July, as the feds and Awan’s legal team agreed to ensure that the money is used only to pay for the cost of Awan’s legal defense.

While the existing case against Awan and his wife, Hina Alvi, is related to whether they did not tell the truth on a loan application to a Capitol Hill credit union – documents in the matter again suggested at a larger investigation, possibly relating to more than just matters of bank fraud.

In a letter about evidence in the case, U.S. Attorney Channing Phillips described the probe as one that involved, “voluminous discovery,” citing items that were found in a Congressional office building back in April, which seemingly may have belonged to Awan.

This "laptop bag" found in April could well be the piece of equipment that had drawn the interest of Rep. Wasserman Schultz earlier this year, when she verbally berated the Capitol Hill Police chief at a House budget hearing, demanding that an item be returned to her office.

“I think you’re violating the rules when you conduct your business that way,” Wasserman Schultz said bluntly, as she told the chief that he should “expect that there will be consequences.”

The chief said he was not returning the piece of equipment that officers had found, because it was part of an investigation, which he did not detail.

From prosecutors, this evidence letter was the first official confirmation that there were items found on Capitol Hill which had a direct link to Imran Awan.

Still unclear is what exactly that earlier investigation has uncovered.

In a hearing before Federal Judge Tanya S. Chutkan, the judge refused to allow a citizen investigator from Indiana to join the case; he claimed he could provide evidence to the feds that shows a broader misuse of government resources by Awan and his family during their Capitol Hill employment.

Judge in #Awan hearing wants request to grant Awan more freedom in writing. Will issue ruling by Oct 6

— BuckTheSystem (@RiggedSys) September 1, 2017

Awan, his wife, and several of their relatives were barred from the Congressional IT system in February, as Democratic lawmakers quickly fired them from part-time IT jobs – but Capitol Police and investigators have still not formally said what problem led to that decision.

Unlike other Democrats who had employed the family members, Awan and his wife, Hina Alvi, were kept on the payroll by Rep. Wasserman Schultz – Alvi until she returned to Pakistan with their children in early March, while Awan was paid until he was arrested and charged with bank fraud.

Newly released payroll figures from the U.S. House of Representatives show that Awan was paid $5,000.01 as a “shared employee” in the second quarter of 2017 by Wasserman Schultz.

That was more than the $1,494.45 that Wasserman Schultz had paid Awan in the first quarter of this year.

At today’s hearing, Awan’s lawyers asked that he be allowed to venture up to 100 miles from home, as he evidently is now driving for Uber, as a way to make money.

The judge asked for written arguments to be filed on that request. The next hearing for Awan is set for October 6.

 

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Yesterday, the San Francisco fire department scrambled a team of firefighters to the city’s Russian consulate (scheduled to be vacated today in the latest tit-for-tat diplomatic escalation between the US and Russia) following reports of “blowing smoke”, only to learn that the Russians were engaged in what appears to have been some last minute confidential document “redaction.”

Maria Zakharova, the spokeswoman for the Russian foreign ministry, explained that the smoke was part of a “mothballing” according to Reuters.

“In relation to this, the windows could be closed, the light could be turned off, the water could be drained out, the heating appliances could be turned off, the garbage could be thrown away, essential services could be turned off and many other things,” she wrote on social media.

Of course, what was really going on was some last minute document destruction (although the old-fashioned way and not involving a hammer, several blackberries, and thousands of deleted emails) and as subsequent events have showed, the Russians had reason to be paranoid: on Saturday, the US unveiled its intention to search the soon to be vacant Russian trade mission in Washington, a move which has infuriated Moscow, prompting Russia to summon the deputy chief of mission of the US Embassy in Moscow to lodge a note of protest over the planned search, the Russian Foreign Ministry said.

Anthony F. Godfrey was summoned to the ministry on Saturday, it said in a statement, adding that Russian diplomats have been denied access to the trade mission building despite it being owned by Russia and protected by diplomatic immunity. 

The ministry called the planned “illegal inspection” of Russian diplomatic housing an “unprecedented aggressive action”, which could be used by the U.S. special services for “anti-Russian provocations” by the way of “planting compromised items”.

“We consider the planned illegal search of Russian diplomatic premises in the absence of Russian officials and the threat we have received to break down the door of the building as an aggressive action, which the US intelligence service may use to orchestrate an anti-Russian provocation by planting compromising items.”

We call on Washington to refrain from compromising the immunity of Russian missions in the USA https://t.co/A4eTKbhVUa#RussiaUSA http://pic.twitter.com/A8YkrLCWNP

— MFA Russia ???????? (@mfa_russia) September 2, 2017

Moscow has called on Washington to stop violating international law and refrain from compromising the immunity of Russian missions in the country. Otherwise, retaliation may follow, the ministry warned. On Friday, Russian Foreign Ministry spokesperson Maria Zakharova said the FBI was planning to search the general consulate premises, including homes of the diplomatic staff, which would violate diplomatic immunity.

Former US diplomats, questioned the reasons behind the searches, saying it will only lead to a further escalation of tensions. The US authorities are highly unlikely to find “anything of interest” in the Russian Consulate in San Francisco, as there is probably nothing more than “confidential diplomatic materials,” which are supposed to be there anyway, said Ted Seay, a former US diplomat.

“What are our people going to do in your ambassador’s apartments or in the consulate in San Francisco? Look for illegal recipes for borsch? Of course, you have to respond and to go into our consulate in St. Petersburg – looking for what? Perhaps, for too many copies of Doctor Zhivago in the embassy’s library?” John Graham, former US ambassador to Libya, said.

“This foolishness happens [but] it happens usually at the lower levels,” he added. Meanwhile, Seay warned that “things are already too tense between the two countries” and both sides should proceed with “great care. To me, that means again that anyone who is actually planning to raid diplomatic premises in San Francisco, has lost their mind,” the former US diplomat said.

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On Tuesday, just as Hurricane Harvey was peaking, we reported that according to ship-tracking data compiled by Bloomberg, as well as MarineTraffic real-time tracking, at least 25 tankers carrying almost 17 million barrels of imported crude oil were drifting near Texas and Louisiana ports, unable to offload because of closures from Tropical Storm Harvey.

Since then the situation has deteriorated by more than double, and as of Friday evening, Bloomberg reports that 54 tankers with capacity more than 33 million barrels either to deliver imported crude from Latin America, Europe, Caribbean, Africa and Middle East or receive U.S. supplies are drifting off U.S. Gulf Coast as several key ports remain closed while others are open with restrictions.

The historic “tanker traffic jam”, last observed nearly two years ago as traders scrambled to store crude tankers in the same region in hopes of contango, can be seen on the Marine Traffic map below, only this time it has little to do with the shape of the oil strip, and everything to do with the logistical complications following Harvey :

Source: Marine Traffic

According to Bloomberg, as of Sept. 1, 37 Aframaxes, 3 VLCCs, 8 Suezmaxes, 6 Panamax tankers are currently waiting off ports of Corpus Christi, Houston, Galveston, Freeport, Texas City, Beaumont, Nederland, Port Arthur, Port Neches, Sabine and Lake Charles, La. This is 8 more then the 29 tankers carrying 18.6mm bbl as of Aug. 31.

That said, the situation is slowly but surely getting resolved as more ports are starting to let traffic sneak through. On Friday, the port of Corpus Christi reopened to ship traffic, making way for seven refineries in the area to go back online. The Texas Gulf Coast supplies one-fourth of the nation’s oil and gas. Hurricane Harvey caused a severe hiccup in the gasoline supply chain over the last week, creating consumer panic and long lines at gas stations.

The first vessel to arrive since closure of the channel for Hurricane Harvey sails
under the Harbor Bridge in Corpus Christi on Friday, Sept. 1

The port received its first tanker on Friday, Sept. 1, six days after closing in preparation for the storm, which came to shore as a Category 4 hurricane on Aug. 25. Some 20 vessels have been awaiting berth assignments and will now be able to enter Corpus Christi Channel.

Opening the port positioned Corpus Christi as the largest refining center fully operational on the Texas coast at this time. Nearly 100 percent of the electric power has been restored to the city’s refineries, while similar operations in Houston and Texas are tackling major flooding.

The nation’s economy depends on the port’s continued operation. More than 80,000 jobs depend on the Corpus Christi Ship Channel, where more than $100 million worth of goods pass through every day. Port of Corpus Christi stakeholders generate $350 million a day in national economic output

Here are some additional GOM port updates courtesy of Bloomberg:

• Kinder Morgan, Colonial will commingle gasoline grades on products lines
• Magellan is said to plan limited restart for Longhorn, BridgeTex
• Houston port partial reopening is said to still affect tankers
• U.S. Coast Guard says Port Corpus Christi to allow larger ships
• Four Aframax tankers enter port of Corpus Christi after storm
• Texas City refinery to resume exports as tankers arrive

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In a bizarre twist to an already unusual story, a convoy of 17 buses carrying Islamic State terrorists and their families has remained stranded since Thursday in the Syrian desert as the US, Russians, and Syrians discuss their fate: attack the convoy or allow it to pass? Regardless of what happens, emerging photos and video depicting ISIS' retreat from Lebanon as well as their current helpless plight stuck in the middle of Syria constitutes perhaps the most significant blow to ISIS propaganda to date.

Earlier this week we reported on the unusual deal which allowed a large convoy of Islamic State fighters and their families to exit their contested stronghold along the Syrian-Lebanese border under the watch of the Lebanese and Syrian armies and Hezbollah after being defeated. As first announced by Hezbollah's Secretary General Hassan Nasrallah in a speech Monday night, the deal involved the transportation of 26 wounded and 308 ISIS fighters, along with 331 civilian family members via buses and ambulances to Syria's eastern province. The controversial deal was struck in return for the bodies of 9 Lebanese soldiers, kidnapped by ISIS in 2014.

Stranded ISIS convoy: there are over 600 in the group, which includes civilian family members. Photo source: Stripes, via Arabic media.

ISIS convoy in Syria. Photo source: Louai Beshara/Agence France-Presse

That convoy was allowed to enter Syria but was attacked by the US-led anti-ISIL Coalition on Wednesday as it crossed open desert on its way to the Islamic State stronghold of Deir Ezzor. Per coalition statement, the convoy wasn't attacked directly – just outlying ISIS vehicles which were attempting to join and bolster the transport. Part of the highway in front of the convoy, including a key bridge, was further targeted in order to stop its movement.

Pretty sure ISIS won't make a video about this adventure https://t.co/l2tsTKk3QE

— aris roussinos (@arisroussinos) September 1, 2017

According to the latest update (released Friday afternoon) from the US coalition (@CJTFOIR), the buses remain stranded. Apparently, deliveries of food and water have been made:

After turning around and heading back west from the Abul Kamal area, the convoy of 17 buses containing hundreds of armed ISIS fighters and their families remains in the Syrian Desert between Humayma and As Sukhnah.

 

…In accordance with the law of armed conflict, the Coalition has struck ISIS fighters and vehicles, including a tank, armed technical vehicles, and transport vehicles seeking to facilitate the movement of ISIS fighters to the border area of our Iraqi partners. Food and water have been provided to the convoy.

The ISIS convoy had reportedly been on an indirect and lengthy route through Syria, likely in order to avoid air strike, before being halted. On Friday the Syrian and Lebanese governments extracted another concession as part of negotiations over the fate of the convoy: ISIS handed over the body of an Iranian Revolutionary Guard officer to Hezbollah.

Meanwhile Hezbollah's Nasrallah revealed that he personally negotiated the deal with Syrian President Assad, who displayed initial reluctance. As Fox News reports:

"I went to President Assad…I went to Damascus," he said, adding that he sought to convince Assad to let the convoy pass through government territory.

 

"He [Assad] told me, this is embarrassing for us, but no problem," Nasrallah told supporters gathered in eastern Lebanon for a "victory rally" to celebrate the expulsion of ISIS from the border area.

 

"The Syrian government has put up with the embarrassment for the sake of Lebanon," he said.

The ceasefire agreement immediately sparked controversy in the region, especially in Iraq, whose leaders see the deal as intentionally allowing more terrorists to settle at its own border. The US coalition was also quick to accuse the deal's brokers as being soft on terrorism and said, "relocating terrorists from one place to another is not a lasting solution.”

But as we pointed out, the US and its allies have routinely allowed for ISIS retreats and transfers much larger in scale which appear purposefully designed to put pressure on the Syrian government. One of the more shocking admissions of such a strategy came in 2016, when then Secretary of State John Kerry was caught on audio telling a Syrian opposition gathering, which met on the sidelines of a U.N. General Assembly meeting, that Obama hoped to use ISIS as leverage against Assad. According to Kerry on the leaked audio (25:50):

"And we know that this was growing, we were watching, we saw that DAESH was growing in strength, and we thought Assad was threatened"… "(We) thought, however, we could probably manage that Assad might then negotiate. But instead of negotiating he got Putin to support him."

One knowledgeable reporter on the ground has observed that the ordeal has been a huge blow to ISIS propaganda. Robert Fisk reports, "some ISIS leaders in Syria did not want members of the group who had surrendered territory to be welcomed back into the so-called caliphate, and the militants should have fought to the death instead." Other observers of Islamic State social media accounts have noted that ISIS members have reacted in disbelief, claiming the entire brokered deal and ISIS retreat to be a fiction of Hezbollah media.

At the moment, terrorists and their families remain sitting on chartered buses in Syrian no-man's land awaiting the decision of regional and foreign militaries controlling land and air over Syria. Will the convoy be destroyed or allowed to pass? Will the US coalition strike and kill over 300 civilian ISIS family members in the process? Simple imprisonment could prove difficult as the ISIS militants were allowed to carry small arms as part of the deal and will surely go down fighting at this point. Or there's the remote chance that the Syrians and Hezbollah actually desire for the US to attack the convoy: the Syrian and Lebanese governments could maintain they upheld their end of the bargain (this becomes important for potential future battlefield deals brokered with other groups), while the US would claim the moral high ground of fighting terror. 

Whatever scenario unfolds, this currently developing story is arguably one of the strangest to come out of recent events in the war.

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Authored by Daniel Lang via SHTFplan.com,

Nothing epitomizes the failure of Europe’s immigration policies more than the notorious “no-go zones.”

For decades the West has opened its borders to people who don’t share their values, and the West has utterly failed to encourage these people to assimilate. To even suggest that is now considered racist in many European countries.

The lack of assimilation has reached a degree that many of these populations have become resentful of their mediocre status in society, and have actually become more insular. Younger generations of these immigrants are more likely to follow ideologies like radical Islam, and they’re less likely than their parents to interact with native born Europeans. Many of them don’t even speak any European languages.

The result has been the rise of dozens of no-go zones, which dot the urban landscapes of Europe. These are places that act as ethnic enclaves within their host countries. They are nations within nations, where outsiders are routinely shunned, berated, and beaten if they dare enter. In addition to that, they’ve become hotbeds of terrorism and civil unrest. And believe it or not, these Islamic no-go zones are beginning to show up in the United States.

That’s according to Raheem Kassam, a conservative political activist and author from the UK. He recently wrote a book on the subject of no-go zones, which reveals startling similarities between the Middle Eastern enclaves of Europe and America.

Places like the Cedar Riverside area of Minneapolis, where Shariah cops make house checks to make sure Somali refugees are not becoming too Westernized, and Hamtramck, Michigan, where the call to prayer is blasted over loudspeakers in Arabic and storefronts that once peddled Polish sausage are now brimming with halal meats.

 

These can be the early warning signs of a budding no-go zone, says Kassam. But even more crucial, he says, is the level of assimilation by second and third generation Muslim Americans. If the experience of Europe is any indication, trouble is on the horizon for U.S. cities.

Of course, America has always had neighborhoods that were predominantly inhabited by various immigrant groups. But over time those immigrants still assimilated. That’s not what we’re seeing is America’s Muslim neighborhoods.

“But you look at the Muslim immigrants and they’re not doing that, they’re actually further ghettoizing, they’re moving inward, not outward.”

 

Polls by Pew Research show a higher proportion of young Muslims backing terrorism, supporting death for apostasy [leaving Islam], death for homosexuals, and the idea that the woman must cover herself with the hijab or the burqa.

 

So it’s the opposite trend of Little Italy becoming less like Italy and more like America.

 

“You see a higher disposition than their parents who believe these things,” Kassam said. “They’re holding onto this Muslim-American sort of thing, and they’re being supported by the political left.”

 

Kassam includes a whole chapter on Hamtramck, which in 2015 became the first U.S. city to elect a majority-Muslim city council. Several years before that, in 2011, the city approved the Muslim call to prayer over loudspeakers, effectively chasing away many of the last Polish holdouts.

What’s going on in Europe right now should stand as a warning to Americans. Those countries have made a terrible mistake with their immigration policies, which they may be paying for over the next few generations. But unlike Europe, we still have time to change course. We can still adopt a sensible immigration policy that invites people who treasure our values, and turns back those who would have no respect for what we stand for.

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For millions of middle- and working-class Americans, the "American Dream" is all but dead.  Far from being able to afford their own homes, the Fed’s latest survey on the wellbeing of US households revealed that nearly a quarter of Americans are unable to pay their monthly bills on time, and nearly half have less than $400 in the bank…

But in what’s perhaps the most comprehensive analysis of the financial security of American workers, a study published by HowMuch.net explores the true cost of living for working-class Americans in dozens of US cities.

What they found is hardly surprising. In most areas of the country, the average working-class household would be running a spending deficit. According to HowMuch’s methodology, the best place to live from a financial perspective on an Average Joe’s salary is Fort Worth, Texas, which would leave a working-class family with a $10,447 surplus at the end of the year. On the flip side, that same family would need an additional $91,184 just to break even in New York City.

To arrive at these scores, the researchers used data from the Bureau of Labor Statistics for income levels, the National Bureau of Economic Research for tax data, and the U.S. Department of Agriculture for the cost of food.

Newark, NJ, Chesapeake, VA and Jacksonville, FL are the only coastal cities where a worker can adequately support his family without accumulating debt. Notice there are exactly zero affordable cities on the west coast.

Likewise, San Antonio is the only one of the top 10 most populated cities where a working-class family can afford a decent living. Out of the top 50 cities, only a dozen qualify.

HowMuch illustrates its data in the map below. The darker the shade of red, the worse off the typical working-class family is. The darker the shade of green, the better off they would be. The size of the bubble also fits on a sliding scale—large and dark red means the city is totally unaffordable. Bigger dark green bubbles likewise indicate a city where the working class can get by.

And as you can see, the red is much more prominent than the green.

So where are the best places for working-class families to live? Here are the top five cities with the net surplus wokers are left with after living expenses.

1. Fort Worth, TX ($10,447)

2. Newark, NJ (($10,154)

3. Glendale, AZ ($10,120)

4. Gilbert, AZ ($9,760)

5. Mesa, AZ ($7,780)

And here are the five worst cities, with their associated cost-of-living deficits.

1. New York, NY (-$91,184)

2. San Francisco, CA (-$83,272)

3. Boston, MA (-$61,900)

4. Washington, DC (-$50,535)

5. Philadelphia, PA (-$37,850)

Readers can take a more in-depth look at the data using HowMuch’s True Cost of Living tool, which is available here.
 

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Precious Metals Outperform Markets In August – Gold +4%, Silver +5%

 – All four precious metals outperform markets in August
– Gold posts best month since January, up nearly 4%
– Gold reaches highest price since US election, climbs due to uncertainty and safe haven demand
– S&P 500 marginally higher; Euro Stoxx, Nikkei lower for month
– Platinum is best performing metal climbing over 5%
– Palladium climbs over 4% thanks to seven year supply squeeze
– Fear, uncertainty and political sanctions are amongst biggest drivers for precious metals
– Never been a better time to diversify and rebalance portfolios with stocks and bonds near record highs and looking vulnerable

Editor: Mark O’Byrne

Market Performance in August (Finviz.com)

All four precious metals have made gains in the month of August.

Whilst platinum and palladium’s leading performances can largely be attributed to industrial factors they have also benefited from the safe haven demand which is driving gold and silver prices.

Safe haven demand really came into its own this last month. Issues with North Korea have stepped up a level whilst markets have finally begun to question the complacency they have been feeling in regard to the US political and financial situation, geopolitical risk and the increasingly uncertain outlook for the global economy.

Ultimately very little is known about what will happen with the US debt ceiling, increasingly overvalued stocks (both the NASDAQ and  the S&P500), Trump’s plans for corporate tax, dealings with North Korea and (not forgetting) Venezuela.

We are living in very uncertain times indeed and investors decided to allocate funds to the ultimate safe havens – the precious metals.

Gold shines as investors rush into safe havens

This week gold rose to its highest point so far in 2017 as tensions between North Korea (but really, the rest of the world) and the US ramped up. For the month of August the price is up 3.59%.

Silver was also up thanks to safe haven demand, but its 5% climb was also in part due to manufacturing demand. Currently, about 55% of all silver consumed is for industrial use.

Gold has so far risen in every month, bar June.

Gold’s climb has in part been due to ongoing demand from countries such as China and India, but it has primarily been driven by the desire in the West to own a safe haven. This is not surprising given the ongoing concerns regarding North Korea, Venezuela, the Middle East and a lack of cohesion in the Trump administration.

One of the dampeners on gold and silver has been the Federal Reserve’s plans to raise interest rates. However, when they did so it had little effect. Expectations for further hikes are falling. Going forward Yellen and team are expected to slow down on further interest-rate increases which has provided an additional boost for the gold price.

In the very short-term storm Harvey in Houston, Texas has also impacted the price of gold and silver. As a result of lost income and recovery operations, US GDP is expected to be lower in the third-quarter than was initially expected.

In the long-term investors will look to gold and silver as they begin to price risk into the market. Yesterday we expressed our concerns over market complacency whilst other financial organisations have begun to warn clients about the overpriced equity markets and lack of perceived risk.

It is also worth noting an expected climb in demand from China. Mark Tinker, Head of AXA Framlington wrote in a note that China’s pricing of assets in yuan (together with the plan by the Hong Kong Stock Exchange to  sell yuan-priced physical gold contracts) could allow them to trade out of the banking system in the US

“Having accepted payment for oil or gas in RMB, the seller, be it Russia or Saudi Arabia or anyone else for that matter, does not have to worry about having excess RMB, they can simply trade it back into gold,” Tinker said. “We are moving to a multi-polar world.”

Platinum gains as Russia feels the pain

Platinum has performed very well so far in the second half of the year. This most recent surge has likely come about thanks to further sanctions being placed on Russia by the US. Russia is the world’s second biggest producer of the metal.

The World Platinum Investment Council outlined the following arguments for platinum’s role as a safe haven investment asset:

– Supply demand fundamentals are strong and ETF holdings are stable, despite price volatility
– Risks of supply declines are underestimated – cost pressure and falling mining investment continue – Downside risks to platinum automotive demand are overestimated
– Futures positioning follows poor sentiment with high correlation to price
– Platinum is undervalued against its past, its production cost and against gold

Palladium climbs on Vauxhall’s woes

Palladium is currently at a 16 year high. There is a major tightening in the supply of palladium because of increased demand for it in engines. 67% of palladium supply is used in car engines to clean exhaust gases from gasoline engines. There is obviously a major push for ‘clean’ transport and the Vauxhall emissions scandal and obviously helped boost demand.

Inventories of palladium supply are down by abut 45% this year, whilst supply trails demand by the most in the seven years.

Despite the increase in supply, there has been a significant number of redemptions in the the two main U.S. and European palladium ETFs – the ETFS Physical Palladium Shares and the ZKB Palladium. By the 22nd August $49 million had been traded in. Supply in the spot market is reportedly so tight that companies are being forced to trade in multiple ETF shares in order to redeem them with the issuer in exchange for physical palladium.

ETFs are now being treated like palladium warehouses.

It is also important to note that, like platinum, palladium is also hugely affected by the sanctions on Russia.

It is also important to note that ETFs are a risky way to invest in precious metals and most investors would be better served owning actual precious metals rather than paper or digital proxies.

Conclusion: Stars aligning? Outlook good for rest of 2017

Earlier this week we explained how investors shouldn’t always be focused on price. Whilst it is nice to look at the metrics for August and see that all precious metals are up, we should instead focus on why they are up and most importantly the diversification benefits for our portfolios.

Precious metals are largely climbing because the perceived risk in the political and financial system is also climbing. Interestingly many commentators do not feel some risky issues have been wholly appreciated by the markets.

Problems such as North Korea are such serious risks that even someone who pays no attention to markets could spot it. The issue is that you have an overvalued stock market and a US President who cannot get his people together. This means that the US debt ceiling issue might ground the U.S. government to a halt.

These issues are ones which have not yet been fully priced into the markets. They likely will be in the coming months and then the safe haven role of the precious metals and gold in particular will come into its own.

News and Commentary

Gold up 4% in August – largest monthly gain since January (Marketwatch)

Gold steady near 9-1/2 month highs as N.Korea tensions persist (Reuters)

Gold Scores Fifth Monthly Increase; US Mint Bullion Sales Slow in August (Coin News)

Gold edges lower, but N.Korea worries lend support (Nasdaq)

Massive wartime bomb to be defused near German gold reserves (Irish Times)

Source: Marketwatch

From Stocks to Bonds, the Bear-Market Signals Are Multiplying (Bloomberg)

Rothschild reduces exposure to US stocks amid turmoil (Standard)

Five charts show why millennials are worse off than their parents (FT.com)

When the Butterfly Flaps Its Wings – Kunstler (Zerohedge)

Buffett: North Korea situation is very concerning (CNBC)

Gold Prices (LBMA AM)

01 Sep: USD 1,318.40, GBP 1,020.18 & EUR 1,107.98 per ounce
31 Aug: USD 1,305.80, GBP 1,013.17 & EUR 1,098.31 per ounce
30 Aug: USD 1,310.60, GBP 1,014.93 & EUR 1,096.71 per ounce
29 Aug: USD 1,323.40, GBP 1,020.34 & EUR 1,097.36 per ounce
25 Aug: USD 1,287.05, GBP 1,003.90 & EUR 1,090.90 per ounce
24 Aug: USD 1,285.90, GBP 1,003.26 & EUR 1,090.44 per ounce
23 Aug: USD 1,286.45, GBP 1,004.33 & EUR 1,091.68 per ounce

Silver Prices (LBMA)

01 Sep: USD 17.50, GBP 13.53 & EUR 14.69 per ounce
31 Aug: USD 17.34, GBP 13.47 & EUR 14.62 per ounce
30 Aug: USD 17.44, GBP 13.49 & EUR 14.60 per ounce
29 Aug: USD 17.60, GBP 13.59 & EUR 14.62 per ounce
25 Aug: USD 17.02, GBP 13.26 & EUR 14.40 per ounce
24 Aug: USD 16.93, GBP 13.20 & EUR 14.36 per ounce
23 Aug: USD 17.06, GBP 13.32 & EUR 14.48 per ounce

Recent Market Updates

– 4 Reasons Why “Gold Has Entered A New Bull Market” – Schroders
– Gold Reset To $10,000/oz Coming “By January 1, 2018” – Rickards
– Gold Surges 2.6% After Jackson Hole and N. Korean Missile
– Diversify Into Gold On U.S. “Political Instability” Advise Blackrock
– Trump Presidency Is Over – Bannon Is Right
– The Truth About Bundesbank Repatriation of Gold From U.S.
– Cyberwar Risk – Was U.S. Navy Victim Of Hacking?
– Global Financial Crisis 10 Years On: Gold Rises 100% from $650 to $1,300
– Mnuchin: I Assume Fort Knox Gold Is Still There
– Buffett Sees Market Crash Coming? His Cash Speaks Louder Than Words
– Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High
– Must See Charts – Gold Hedges USD Devaluation, Rise in Oil, Food and Cost of Living Since Nixon Ended Gold Standard
– World’s Largest Hedge Fund Bridgewater Buys $68 Million of Gold ETF In Q2

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

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