Category: zerohedge

Following the Q2 GDP print, the slowing in aggregate weekly hours suggested a modest pickup QoQ in non-farm productivity, but it plunged 0.6% – dramatically missing the +0.4% exp in this preliminary Q2 report. This is the 3rd quarterly decline in a row – the first time that has happened since 1979. This three quarter plunge is the biggest drop in productivity since 1993, and this is the first YoY drop (-0.4%) since Q2 2013. All in all… a disaster!

Third quarterly decline in a row…

 

As productivity drops at fastest rate since 1993!!

As Fed-induced investment in buybacks crowds out capex, real-worker productivity is collapsing (but buy back productivity is soaring!!).

*  *  *

How can this be?? The mainstream media 'economists' are stunned. As we explained previously, there are a few reasons… Even Alan Greenspan has warned that America is "in trouble basically because productivity is dead in the water…" There are numerous reasons for this plunge in worker-productivity, from perverted inventives not to work to unintended consequences of monetary policy enabling zombies, but perhaps the most critical driver is exposed in the following dismal chart…

51% of total time spent on the Internet is on mobile devices – in 2015, first time ever mobile is #1 – to make a total of 5.6 hours per day snapchatting, face-booking, and selfying…

Source: @kpcb

So, while every effort can be made by Ivory Tower academics to solve the problem of American worker productivity, perhaps it can be summed up simply as "Put The Smart-Phone Down!"

As we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

In addition, the last 15 years also saw an outsized contribution to GDP from finance. If we look at the US GDP by contribution from value added by industry we clearly see how finance stands out in what would otherwise have been an impressively diversified economy.

With hindsight we know that finance did more harm than good so we can conservatively deduct finance from the GDP calculations and by doing so we essentially end up with no growth per capita at all over a timespan of more than 15 years! US real GDP per capita less contribution from finance increased by an annual average of 0.3 per cent from 2000 to 2015. From 2008 the annual average has been negative 0.5 per cent!

In other words, we have seen a progressive (pun intended) weakening of the US economy from the 1970s and the reason is simple enough when we know that monetary policy broken down to its most basic is a transaction of nothing (fiat money) for something (real production of goods and services). Modern monetary policy thereby violates the most sacred principle in a market based economy; namely that production creates its own demand. Only through previous production, either your own or borrowed, can one express true purchasing power on the market place.

The central bank does not need to worry about such trivial things. They can manufacture the medium of exchange at zero cost and express purchasing power on the same level as the producer. However, consumption of real goods and services paid for with zero cost money must by definition be pure capital consumption.

Do this on a grand scale, over a long period of time, even a capital rich economy as the US will eventually be depleted. Capital per worker falls relative to competitors abroad, cost goes up and competitiveness falls (think rust-belt). Productive structures cannot be properly funded and the economy must regress to align funding with its level of specialization.

In its final stage, investment give way for speculation, and suddenly finance is the most important industry, pulling the best and brightest away from every corner of the globe, just to find more ingenious ways to maximise capital consumption.

As the slave economy got perverted by incentives not to work, so does the speculative fiat based economy, which consequently create debt serfs on a grand scale.

 

Charts: Bloomberg

via http://ift.tt/2aIHD25 Tyler Durden

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

Maybe Hillary is the Deep State's shoo-in for president. But I suspect doubts in the Deep State have advanced to active sabotage for the reasons noted below.

Few would dispute that Hillary Clinton is the Establishment's candidate. It's widely accepted that the Establishment hews to a neoconservative (neo-con) foreign policy that is fully supported by America's Deep State, i.e. the centers of state power that don't change as a result of elections.

As a result, it's widely accepted that the Deep State fully supports Hillary Clinton's bid for the presidency and will move heaven and earth to get her elected. While this is a logical premise, I suspect it's overly simplistic. I suspect major power centers in the Deep State are actively sabotaging Hillary because they've concluded she is a poisoned chalice who would severely damage the interests of the Deep State and the U.S.A.

Poisoned chalice: something that seems very good when it is first received, but in fact does great harm to the person/ institution/ nation that receives it.

I realize this may strike many as ludicrous, but bear with me as we work through the notion that the Deep State would prefer Trump to Hillary.

The consensus view seems to be that the Establishment and the Deep State see Trump as a loose cannon who might upset the neo-con apple cart by refusing to toe the Establishment's Imperial line.

This view overlooks the possibility that significant segments of the Deep State view the neo-con strategy as an irredeemable failure and would welcome a president who would overthrow the remnants of the failed strategy within the Establishment and Deep State.

To these elements of the Deep State, Hillary is a threat precisely because she embraces the failed strategy and those who cling to it. From this point of view, Hillary as president would be an unmitigated disaster for the elements of the Deep State that have concluded the U.S. must move beyond the neo-con strategic failures to secure the nation's core interests.

There are other reasons why elements of the Deep State view Hillary as a poisoned chalice.

1. Hillary is an empty vessel. Nobody seriously claims she has any core beliefs that she would make personal sacrifices to support. While at first glance this may seem to be a plus, the Deep State is not devoid of values. Rather, the typical member of the Deep State has strong values and distrusts/ loathes people like Hillary who value nothing other than personal aggrandizement.

 

Hillary's sole supreme commitment is the further aggrandizement of wealth and power to her family. This makes her intrinsically untrustworthy to the Deep State, which has bigger fish to fry than the Clinton Project of aggrandizing wealth and personal power.

 

2. Hillary has exhibited the typical flaw of liberal Democrats: fearful of being accused as being soft on Russia, Syria, Iran, terrorism, etc. or losing whatever war is currently being prosecuted, liberal Democrats over-compensate by pursuing overly aggressive and poorly planned policies.

 

The forward-thinking elements of the Deep State are not averse to aggressive pursuit of what they perceive as American interests, but they are averse to quagmires and policies that preclude successful maintenance of the Imperial Project.

 

3. The Deep State requires relatively little of elected officials, even the President. A rubber stamp of existing policies is the primary requirement (see the Obama presidency for an example).

 

But the Deep State prefers a leader that can successfully sell the Deep State's agenda to the American public. (President Obama has done a very credible job of supporting the Imperial Project agenda. I think it's clear the Deep State supported President Obama's re-election.) A politician who's primary characteristic is untrustworthiness is poorly equipped to sell anything, especially something as complex and increasingly unpopular as the Imperial Project.

 

4. Hillary suffers from the delusion that she understands power politics and the Imperial Project. The most dangerous President to the Deep State is one who believes he/she is qualified to set the Imperial agenda and change the course of the Deep State as their personal entitlement.

For these reasons, elements of the Deep State might sabotage Hillary's campaign as the greater threat to American interests. Trump is as unpopular as Hillary, but his sense of self-aggrandizement and narcissism is of a different order than Hillary's. Elements of the Deep State may view Trump as more malleable (or more charitably, as more open to much-needed changes in U.S. policies) and a better salesperson than Hillary.

Although it's difficult to identify specific evidence for this, the Deep State is not as monolithic as the alternative media assumes. An increasingly powerful sector of the Deep State views the neo-con agenda as a disaster for American interests, and is far more focused on the Long Game of energy, food security, economic and military innovation and a productive response to climate change.

Trump is less wedded to the neo-con agenda than Hillary, less concerned with looking weak and more willing to cut new deals to clear the path for U.S. soft power (diplomacy, cultural influence, energy, food security, economic innovation and successful responses to climate change) rather than the neo-con obsession with hard power and the old-style Great Game of geopolitics.

So how could the forward-looking elements of the Deep State sabotage Hillary? I can think of several ways:

1. Engineer a protracted stock market decline that hits American voters in their pocketbooks before the election by gutting the "wealth effect." A plunging stock market would make a mockery of the claim that the economy is "recovering."

 

2. Continue to leak dirty laundry on Hillary, her health, the Clinton foundation scams, etc.

 

3. Put the word out to the corporatocracy, top-level media, etc., that the Deep State would prefer a Trump presidency, despite the widely held assumption that Clinton is the shoo-in Establishment candidate, and that those who cling to Hillary will pay a price later on as the neo-cons are cashiered or sent to Siberia for their failures.

Maybe Hillary is the Deep State's shoo-in for president. But I suspect doubts in the Deep State have advanced to active sabotage for the reasons noted above.

via http://ift.tt/2aZ4bqJ Tyler Durden

When socialism fails, your citizens are starving and all hope is lost, you look for… Marxist Jesus? Nicolas Maduro has hired what he calls the “Jesus Christ of Economics” Alfredo Serrano, a 40-year old Marxist economist from Spain as his new main economic advisor. 

The previous economic advisor, Miguel Pérez Abad, was fired last week after he endorsed the plan, which called for direct subsidies to the poorest families, the elimination of foreign-exchange controls and a reduction of price controls according to the WSJ.

In a pivot guaranteed to bring a tear to Paul Krugman’s eye, Serrano instead calls for even more state controls on manufacturing and food supply have largely shaped the president’s response to the country’s economic crisis. He travels with Maduro, writes his speeches and proposes ministers. According to senior Venezuelan officials, Serrano has blocked any attempts to coordinate efforts with the private sector.

Maduro previously described Serrano’s book, “The Economic Thought of Hugo Chavez” as “a very intelligent, very qualified man who’s building new concepts for a new economy of the 21st century…he’s a man of great courage.” No word on if “The Economic Thought of Hugo Chavez” is also the shortest book ever to be written.

Lastly, Serrano boasts impressive credentials. According to the WSJ, “in 2014, Mr. Serrano set up a think tank in Ecuador called the Latin American Strategic Center of Geopolitics, which lists him as a professor at eight universities across Spain and Latin America.When contacted by The Wall Street Journal, however, none of the institutions said that he had held a staff position, while five said he had taught courses at the universities only as a visiting professor. The other three said they had no record that he had ever taught any courses there.”

We leave it up to the readers if he does indeed look closer to Jesus Christ or Al Pacino’s rendition of Serpico.

via http://ift.tt/2aZ0qRR Tyler Durden

• Search for yield drives stocks higher, pound falls vs dollar (Reuters)
• China’s slowing wholesale deflation takes pressure off central bank (Reuters)
• Rajan Holds India Rates in Final Move as Inflation Quickens (BBG)
• Brent above $45 on U.S. inventories, producer action speculation (Reuters)
• Republican national security experts: Trump would be ‘dangerous’ president (Reuters)
• House Speaker Paul Ryan faces primary test after belated Trump endorsement (Reuters)
• China Warns U.K. That Relations Hang on Hinkley Point (BBG)
• Spain’s Yield Curve Flattest in More Than a Year on ECB Stimulus (BBG)
• Are Negative Rates Backfiring? Here’s Some Early Evidence (WSJ)
• China Sees Second Shipbuilder Default This Year as Economy Slows (BBG)
• Saudi-led air strikes on Yemen capital resume, nine civilians killed (Reuters)
• Fannie, Freddie Could Need as Much as $126 Billion in Crisis (BBG)
• Valeant Maintains 2016 Forecast Despite Sales, Earnings Miss (BBG)
• Struggling Japan Display says state fund promises full financial support (Reuters)
• U.K. SFO to Decide Charges in BOE Fraud Probe by Year-End (BBG)
• Colorado Activists Submit Petitions for Referendums on Fracking  (NYT)
• Turkey says rising anti-Americanism can be calmed by Gulen extradition (Reuters)
• Buffett Cash Pile Climbs to $72.7 Billion, Setting Record: Chart (BBG)

 

Overnight Media Digest

WSJ

– Online lender LendingClub Corp said Monday that its finance chief had resigned to pursue a new opportunity, a management shift that comes three months after the company ousted its founder and CEO. http://on.wsj.com/2ba0GyG

– A federal appeals court in Manhattan upheld a decision preventing Ecuadorean plaintiffs from enforcing a multibillion-dollar award against Chevron Corp, a significant win for the oil giant in a legal dispute that has lasted decades http://on.wsj.com/2b9ZvQ1

– Barclays PLC agreed to pay $100 million to end investigations by 43 states and the District of Columbia into its alleged manipulation of the London interbank offered rate benchmark in the mid-2000s. http://on.wsj.com/2ba0rUw

– A power outage at Delta Air Lines Inc grounded thousands of passengers world-wide during the height of the summer travel season, wreaking havoc on the carrier’s reservations system and drawing attention to antiquated technology that has plagued many airlines. http://on.wsj.com/2ba0sI0

 

FT

China has warned Britain that bilateral ties stand at a “crucial historical juncture” over London’s deferral of an 18 billion pound ($23.47 billion) nuclear power project, the Financial Times reported on Monday.

Wal-Mart Stores Inc, vying to better challenge Amazon.com Inc, will pay about $3 billion for internet retailer Jet.com and its innovative pricing software in the largest-ever deal for an e-commerce startup.

A German court will adopt a rarely used class-action style procedure to more efficiently process claims by investors seeking damages from Volkswagen over a diesel emissions cheating scandal, according to a ruling. The regional court in Braunschweig near Volkswagen’s Wolfsburg headquarters said on Monday it will pick one case to act as a model to help resolve as many as 170 other damages claims, the closest thing Germany has to class-action lawsuits common in the United States

 

NYT

– In an effort to halt the advance of the oil industry in Colorado, environmental activists said they submitted enough signatures on Monday to place on November’s ballot two initiatives aimed at severely limiting hydraulic fracturing. nyti.ms/2b2tQSf

– Starting in 2018, all eight “Harry Potter” films, and the coming films of the spinoff series “Fantastic Beasts and Where to Find Them,” will be seen on the NBCUniversal stations Syfy and USA, the company announced on Monday. nyti.ms/2b2u4so

– Lawyers for former Fox News chairman Roger Ailes have agreed to keep the sexual harassment lawsuit brought against him by former anchor Gretchen Carlson in New Jersey, according to a court filing on Monday. nyti.ms/2b2uAXu

– Fifty of the nation’s most senior Republican national security officials, many of them former top aides or cabinet members for President George W. Bush, have signed a letter declaring that Donald J. Trump “lacks the character, values and experience” to be president and “would put at risk our country’s national security and well-being.” nyti.ms/2b2vkeV

 

Britain

The Times

Thousands of retail investors are likely to be denied the chance of buying shares in Lloyds at a discount as the government is expected to abandon the plan in the aftermath of market uncertainty caused by Brexit. http://bit.ly/2aVoZB1

At least 30 international trade deals worth more than $20 billion to American businesses are stuck in limbo because of a political spat over the fate of the US Export Import bank. http://bit.ly/2aVsSWD

The Guardian

Warm weather and heavy discounts have helped drive a rebound in retail sales, potentially tempering fears of the UK economy grinding to a halt following the Brexit vote. http://bit.ly/2aVoWF1

EDF’s decision to invest in the 18 billion pound ($23 billion) Hinkley Point should be declared invalid, French trade unions have said, as pressure builds against the troubled nuclear power plant project. http://bit.ly/2aVpFpO

The Telegraph

Barclays is paying $100m to 44 U.S. states to settle an investigation into interest rate manipulation. http://bit.ly/2aVp5se

Britain’s pension system is facing a monumental shake-up as a select committee investigates the powers of the Pensions Regulator and the future of defined-benefit pension funds. http://bit.ly/2aVpBqc

Sky News

Trains across London, East and West Sussex, Kent, Surrey, Buckinghamshire and Hampshire are affected by the strike, which started on Monday morning. http://bit.ly/2aVpomK

UK supermarket chain Wm Morrison is likely to announce within days that it has reached a deal with the online grocer, Ocado, to take capacity at its warehouse in Erith, Kent. http://bit.ly/2aVpElF

The Independent

Three of the UK’s biggest banks have paid out billions of pounds in dividends to investors while turning a blind eye to huge capital holes in their balance sheets, researchers argue. http://ind.pn/2aVqezS

Companies in London and the South East were most severely impacted by the shock vote to leave the EU, according to a manufacturing survey. http://ind.pn/2aVq0sJ

 

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

The Financial Times published an interesting article today in which Diego Parrilla, author, investment expert and precious metals specialist, outlines the positive case for gold and why the gains seen this year are just the beginning of a new gold bull market:

Parrilla begins:

“Gold prices have rallied more than 30 per cent since the lift-off in US interest rates in December. A sharp reversal in pricing, sentiment and positioning driven by a myriad macro and micro factors has left the gold bears and bulls as polarised as ever.

The bearish camp, which has featured prominent and respected analysts like Goldman Sachs, tends to have a constructive view on the US dollar, the ability to raise interest rates, normalise global monetary policy, and generally a benign view on the global economy and inflationary risks.
The bullish camp, which I subscribe to, tends to have a more pessimistic view on the global economy and the unintended consequences of monetary policy without limits, and sees the recent price action as the beginning of a multiyear bull run in gold.

My view that there is a perfect storm for gold is based on three closely interrelated dynamics, whereby central banks and global markets are both testing the limits of monetary policy and credit markets as well as the boundaries of fiat currencies.”

He concludes:

“Time will tell if central banks and governments will be able to engineer a smooth solution to the challenges ahead, or if the remedy will be worse than the disease.

Monetary policy without limits will lead to a very wild and bumpy ride and a larger crisis than the one we have been trying to resolve: a perfect storm for gold.”

Read the FT article here

Gold and Silver Bullion – News and Commentary

Gold holds steady after recovering from 1-wk low (Reuters)

Pound Sliding on Expanded QE Spurs Dollar Strength on Divergence (Bloomberg)

Gold Hits 1-Week Low as U.S. Resilience Boosts Equities, Dollar (Reuters)

Gold Back to Futures on London Metal Exchange After Thirty Years (Bloomberg)

London Metal Exchange to launch gold spot, futures contracts (Reuters)

BARCLAYS: Nothing left to fight the coming economic storm (Business Insider)

“World Class Crash Coming No Matter What” – John Williams (John Williams)

Now The Markets Themselves Are Too Big To Fail (DollarCollapse)

One Reason Why Silver Could Hit $50.00 By 2017  (ProfitConfidential)

Bullish on gold for years: Gartman (CNBC)

Gold Prices (LBMA AM)

09Aug: USD 1,332.90, GBP 1,025.80 & EUR 1,201.74 per ounce
08Aug: USD 1,330.00, GBP 1,019.84 & EUR 1,198.86 per ounce
05Aug: USD 1,362.60, GBP 1,036.39 & EUR 1,222.53 per ounce
04Aug: USD 1,351.15, GBP 1,016.61 & EUR 1,213.87 per ounce
03Aug: USD 1,364.40, GBP 1,023.16 & EUR 1,218.96 per ounce
02Aug: USD 1,358.15, GBP 1,025.13 & EUR 1,213.10 per ounce
01Aug: USD 1,348.85, GBP 1,022.97 & EUR 1,207.76 per ounce

Silver Prices (LBMA)

09Aug: USD 19.70, GBP 15.18 & EUR 17.77 per ounce
08Aug: USD 19.66, GBP 15.04 & EUR 17.74 per ounce
05Aug: USD 20.22, GBP 15.36 & EUR 18.14 per ounce
04Aug: USD 20.16, GBP 15.25 & EUR 18.11 per ounce
03Aug: USD 20.59, GBP 15.43 & EUR 18.39 per ounce
02Aug: USD 20.71, GBP 15.65 & EUR 18.51 per ounce
01Aug: USD 20.51, GBP 15.56 & EUR 18.37 per ounce

Recent Market Updates

– Irish Banks Most Vulnerable In Stress Tests – Banking Contagion In EU Cometh
– Gold In Sterling 2.2% Higher After Bank Of England Cuts To 0.25% and Expands QE

– Silver Kangaroo Coins – Sales Surge To Over 10 Million
– Trump, Clinton, “Ugliest” Election Coming – Gold’s “Summer Doldrums” Prior To Resumption of Bull Market
– Marc Faber: Invest 25% Of Investment Portfolios In Gold Bullion
– “Could Not Invent A More Bullish Story For Gold Bullion”
– Gold In Bull Market – “Every Reason For It To Continue” – Frisby In Money 
– Is Gold Set To Hit $1,500 Per Ounce?
– Why Italy’s bank crisis could be a ‘ticking time bomb’
– Gold Holds Near Two-Week Low as Risk Appetite Rises on U.S. Data
– IMF Scraps Forecast for Global-Growth Pickup on Brexit Fallout
– Gold, Trump and Rates: Bank That Foresaw Rally Flags $1,500
– Gold Lower After Central Bank’s Surprise Move
– “We Are On the Cusp of an Explosion in the Silver Price”

via http://ift.tt/2aIL3Pw GoldCore

The bad blood between Turkey and Russia over the November downing of a Russian fighter jet over Turkey is all but forgotten as Turkish president Recep Tayip Ergodan is to meet with “his friend” Vladimir Putin in the latter’s home town of St. Petersburg in hopes of turning a fresh page in the two countries’ relations. It will be their first meeting since diplomatic relations between the two nations turned icy cold late last year. In a slap to the face of its Western friends, as the FT puts it, instead of visiting a Nato ally, Erdogan’s first trip abroad since surviving last month’s coup attempt the Turkish president is going to Vladimir Putin’s Russia.

In a dramatic pivot by Turkey, the summit has taken on broader geopolitical significance. “The west is criticising Erdogan over his crackdown in the wake of the coup, and Erdogan is denouncing them over that,” said Alexei Malashenko, an analyst at the Moscow Carnegie Centre. “This tension between Turkey and its Nato allies is extremely beneficial to Russia.” The rapprochement between Moscow and Ankara began in June, before the coup attempt, when the Kremlin accepted Mr Erdogan’s apology for the downing of the aircraft over Turkey’s shared border with Syria. Within days, officials from both countries had begun talks to roll back sanctions Russia imposed on Turkey following the incident the FT adds.

Since then broader issues have pushed Moscow and Ankara closer together, “including the desire to teach the west a lesson and shared interests in dealing with the regional security threat.” Ankara also welcomed the fact that Moscow gave its unequivocal backing to Turkey following the failed coup.

“We appreciate the fact that the Russian Federation assumed a clear position on this issue,” Ibrahim Kalin, Mr Erdogan’s spokesman, told Russian news agency Tass last week. This tone contrasts with Ankara’s rhetoric towards its allies. Mr Erdogan has repeatedly lashed out at the US for its response to the coup attempt and its failure to extradite Fethullah Gulen, the 75-year-old former imam accused of masterminding the plot from his self-imposed exile in Pennsylvania — a charge he strongly refutes.

Meanwhile, there has been an inexplicable deterioration in Turkey’s foreign relations with the west. Just hours after a visit to Turkey last week by Joseph Dunford, head of the US military, aimed at soothing tensions, Erdogan unleashed some of his harshest remarks so far. “I’m calling on the US: what kind of strategic partner are we, that you can still host someone whose extradition I have asked for?” he said. He went on to accuse the west of supporting terrorism and said the “script” for the plot “was written outside” Turkey.

One Turkish diplomat in Moscow said: “Our relations with the US are the worst in 50 years  . . .  and that definitely makes engaging Russia an attractive option.”

Needless to say, For Putin, the tension between the Nato allies is welcome — Moscow has for two decades condemned Nato expansion and recently stepped up its criticism that the alliance was a threat to Russia. Mr Malashenko talks of a “revival of the theory that Russia and Turkey should be close because both are former empires . . .  simultaneously European and somehow unique.”

Meanwhile, Ankara appears to expect much from the much anticipated meeting, suggesting that the Kremlin has all the leverage ahead of today’s summit.

“This will be a historic visit, a fresh start. I believe that a new page will be opened [during]… the negotiations with my friend Vladimir [Putin],” President Erdogan told TASS news agency in an exclusive interview ahead of the visit, adding that “there is yet much for our countries to do together.”

Erdogan’s statement was echoed by Turkish ambassador to Russia Umit Yardim, who told RIA Novosti: “I can definitely say that it will be a historic meeting. We were preparing it for nearly one month.” He said the two leaders are expected to meet tête-à-tête and then come out with a “roadmap” to help bring Russia-Turkey relations “to a brand new level.”

While Ankara is obviously eager to improve ties with Moscow, which have seen a dramatic downturn as of late, Russia has maintained a more reserved and pragmatic approach. “The Syrian crisis will be discussed in depth and we hope that Turkey’s position will become more constructive,” Yury Ushakov, Vladimir Putin’s foreign policy aide, told reporters on Friday.

Moscow and Ankara still largely disagree on Syria, as Turkey wants President Bashar Assad to be ousted, while Russia supports him and the Syrian army in their fight against Islamists. Russia’s Defense Ministry has accused Turkey of aiding Islamic State (IS, previously ISIS/ISIL) in the past, citing data indicating that the militants are being re-supplied and re-armed from Turkey. Kremlin spokesman Dmitry Peskov said on Tuesday: “We have a serious conversation ahead on how, at what pace, and in what sequence we will work on restoring our relations.”

Erdogan, Putin talks expected to boost trade relations https://t.co/49Zqg9OOEq http://pic.twitter.com/uEpDutd8tK

— ANADOLU AGENCY (ENG) (@anadoluagency) August 9, 2016

The talks will likely center on “current economy-related issues” and the Syrian crisis. “You may feel free to forecast that an in-depth conversation on regional affairs, including Syria, will also take place,” he stressed.

Relations between the two countries began to thaw in late June after Erdogan sent a letter to the Kremlin that was viewed in Moscow as offering an apology for downing Russia’s jet. The letter, quoted by the Kremlin, said Turkey was “ready for any initiatives to relieve the pain and severity of the damage done.” Moscow said it acknowledges that Turkey is serious about restoring closer relations between the two countries. “The Turkish President is coming to St. Petersburg, despite a relatively complicated situation at home,” Ushakov asserted.

* * *

And while Turkey pivots to Russia, the bigger question is what happens to Turkish relations with the west next. Western diplomats, cited by the FT, worry that Ankara could use Russia as a lever in its relations with the west, including over Syria. Turkey cut off power to the Incirlik air base, from which the US launches bombing raids against Isis, for a week after the coup.

Russian and Turkish diplomats said they expected Turkey would now tone down public criticism of Bashar al-Assad, Syria’s president, and privately acquiesce to Moscow’s position that his regime is one of the guarantors of preserving Syrian statehood at least during a transition period. Ankara has backed rebels battling forces loyal to Mr Assad, while Russia supports the Syrian leader’s regime. In return, Turkey will hope that Mr Putin will agree to moderate his support for Syria’s Kurds, although one Russian foreign policy expert said any policy revision would be “tricky” in practice. “Ties with the Kurds run deep throughout Russia’s diplomatic community, and we will never give up this asset,” he said.

Despite shared interest over regional issues, officials in Moscow and Ankara also remain guarded in guessing the outcome of their leaders’ meeting. “One should not expect things to very quickly return to the level where they were before the [fighter jet] incident,” said Dimitry Peskov, Mr Putin’s spokesman who spent eight years as a diplomat in Ankara. “It will take time to restore trust.”

Mr Malashenko said the test of whether the reconciliation was strategic or a tactical ruse would be evident in the pace at which Turkish-Russian economic ties were restored. One European diplomat said: “Erdogan can lash out all he likes but he needs us. He knows he cannot trust Putin. How many Turkish-Russian wars have there been over the last three hundred years? How many did the Turks win?”

* * *

Perhaps said diplomats are a tad too optimistic on the legacy ties that bind. Earlier today, Turkey struck a major blow to Europe’s critical migrant deal that is keeping millions of Syrian refugees out of Europe, when it announced that the EU’s demand that Turkey must overhaul its terror laws in return for visa-free travel is “impossible” in the aftermath of last month’s attempted coup, the country’s EU minister has warned.

In an interview with the Financial Times, Omer Celik, dealt a fresh blow to the fragile deal between the EU and Ankara that has helped stem the flow of refugees and migrants to European shores. For the EU to ease visa requirements for 79m Turkish citizens — one of a series of incentives promised in return for Turkey’s help with the refugee crisis — Turkey needs to amend its sweeping terror legislation in line with EU law and guidance from the Council of Europe.

Celik said that Turkey was open to discussions about counterterror law with European partners and could commit to reforms in the longer term. He warned, however, that it was “impossible” in the short term after the government was almost overthrown by alleged supporters of Fethullah Gulen, an exiled cleric who Turkey has branded a terrorist. He strongly denies the accusation. Celik said Turkey had survived “a coup attempt by a terrorist organisation”, adding: “We have the PKK, Daesh [Isis] and other groups launching attacks so it would not be intelligent to make an amendment in the terrorism law at this point.”

The bottom line is that suddenly the migrant deal appears close to collapse, perhaps with the “gentle nudging” of Russia. One EU diplomat based in Ankara said it was not clear that the collapse of the agreement would even make a difference. “It is not the Turks who are stopping the refugees. It is the fact that the Balkan route is closed — and that the processing in Greece is taking so long,” said the source. According to official figures, before the agreement, about 1,740 migrants were crossing from Turkey’s Aegean coast to the chain of nearby Greek islands every day. In June, the daily average was 48.

That said, we may very soon find out just how closed the Balkan route is if and when Erdogan pulls the plug. The last thing Europe already on edge following a surge in refugee terrorism- and certainly Merkel’s tumbling popularity – needs, is another million migrants taking advantage of Germany’s “open door” policy.

via http://ift.tt/2b5iG04 Tyler Durden

S&P500 index futures were unchanged (up less than 0.1%) following another modest, low-volume levitation in European, Asian shares in a mostly eventless overnight session; oil comes off following gaining overnight with WTI trading just around $43.

Government bonds advanced around the world, now that rate locks from the deluge of corporate issuance appear to have been priced in, spurred by central banks’ commitments to boost growth and a dimming outlook for inflation as commodities declined. The pound fell for a fifth day as the Bank of England resumes debt purchases to combat the fallout from Britain’s Brexit vote.

Speaking of inflation, overnight China reported its July CPI, which printed at 1.8% Y/Y, in line with expectations, and just lower than the 1.9% in June, despite concerns that severe summer flooding, which has disrupted public infrastructure and agricultural production, would increase inflationary pressures. Food prices continued to moderate, rising 3.3 percent in July compared with a 4.6 percent gain in June. Prices of pork rose only 16.1% versus a 30.1% increase in June as demand for the Chinese staple meat continued to cool from peaks hit earlier this year. Non-food inflation, however, rose 1.4 percent, compared with June’s 1.2 percent gain.

CPI inflation moderated while PPI inflation was higher in July

Meanwhile, China’s producer prices contracted for the 53rd month in a row at 1.7% on a year-on-year basis in July, modestly better than the -2.0% expected, and up from last month’s -2.6% drop.  Analysts expect producer price inflation to turn positive this year for the first time in more than four years, but the recovery at the factory gate is unlikely to lead to a rebound in private investment, which has fallen to record low growth rates.

While low inflation means Beijing has room to loosen monetary policy if needed, policymakers appear to have disparate views over how much stimulus is needed to stoke economic growth, if any, and what form it should take. Strengthening producer prices mean there is likely less need to ease in the short-term, analysts say. China’s central bank has not adjusted interest rates since October 2015. According to newswires overnight, China is not likely to inject liquidity into the market on a mass scale as policy makers have promised a neutral monetary environment for supply-side reforms.

The subdued inflationary print was seen as favorable for bonds: “Investors are more interested in government bonds as the slowing economy has reduced risk appetite and as default risks were exposed in the corporate debt market,” said Liu Dongliang, senior analyst at China Merchants Bank Co. in Shenzhen. “The bull market will continue for the rest of the year, as supporting factors will continue to exist and as the market may still expect the central bank to ease monetary policy to support growth.” Sure enough, China 10-year government bond yield falls to the lowest level since 2009, as investors prefer safety of sovereign bonds after a second Chinese shipbuilder defaults on bond payment.

There was more action in Europe, where yields on benchmark 10-year debt touched all-time lows in the U.K and Spain and matched the least in seven years in China. They also dropped in India, following a central bank meeting where the RBI kept rates unchanged. Sterling slipped to a four-week low after BOE policy maker Ian McCafferty said more easing is likely to be required, while copper reached its weakest level since July 12. European stocks rose on better-than-estimated results.

According to Janu Chan, senior economist at St. George Bank in Sydney, “We could see some short-term weakness in the pound. It was an extensive stimulus program that the BOE announced. The economy has been hit in the short-term, and could face a minor recession.” As the chart below shows, he is right: the pound sank 0.4 percent to $1.2990,adding to a five-day loss of 2.7 percent.

As Bloomberg puts it, bonds are in demand and volatility in financial markets is sliding as central banks boost quantitative easing and cut interest rates to spur inflation. The BOE resumed gilt purchases on Monday, India’s central bank Governor Raghuram Rajan said its policy stance remains accommodative and analysts forecast the Reserve Bank of New Zealand will lower its benchmark rate later this week. Supportive monetary policy has also pushed Band of America Merrill Lynch’s Market Risk index to the lowest level since early January.

The Stoxx Europe 600 Index added 0.3%. The benchmark has climbed more than 2% since the fresh stimulus measures were announced by the Bank of England. Munich Re rose 3.7 percent after the world’s second-biggest reinsurer reported quarterly net income that was more than double the average analyst projection. Altice rallied 14 percent after its profit increased amid gains in the U.S. and Portugal.  Wm Morrison Supermarkets Plc boosted a gauge of retailers, adding 2.2 percent after extending an agreement with Ocado Group Plc that will enable its online grocery business gain national coverage.  S&P 500 futures were little changed.

In commodities, the Bloomberg Commodity Index fell 0.3%, dragged down by metals. Copper declined as much as 0.8 percent, falling to the lowest in four weeks, while zinc retreated from a one-year high. Gold slipped 0.1 percent to $1,333.74 an ounce.  Crude was little changed at $43.06 a barrel in New York, after jumping 2.9 percent in the last session as the Organization of Petroleum Exporting Countries predicted the current bear market in the commodity would be short-lived.

Meanwhile in bonds, despite recent concerns about an inflationary spike, things are largely back to (ab)normal: “There is so much demand for U.S. Treasuries that it is difficult for the Fed to raise longer-term rates substantially,” Philip Marey, a strategist at Rabobank International in Utrecht, Netherlands, said, referring to the Federal Reserve. Quantitative easing from central banks elsewhere means “there will be increased scarcity of safe assets, including U.S. Treasuries. This will limit the upside potential in yields.”

The yield on Treasuries due in a decade, the global benchmark, declined two basis points to 1.58 percent at 10:48 a.m. London time. While it jumped nine basis points on Friday after better-than-expected U.S. jobs data, it’s still below the year-to-date average of 1.77 percent.

U.K. 10-year gilt yields dropped to a record low of 0.59 percent and Spain’s reached 0.97 percent, having fallen below 1 percent for the first time on Monday. Indian bonds advanced and the rupee weakened after Rajan left benchmark interest rates unchanged at his final review. The yield on sovereign notes due January 2026 dropped six basis points, the most since July 28, to 7.12 percent, prices from the RBI’s trading system show.

Investors will look Tuesday to data on wholesale inventories for June for indications of the strength of the world’s biggest economy and the likely trajectory of interest rates. Earnings will also be in focus, with Walt Disney Inc. among companies reporting.

Market Snapshot

• S&P 500 futures up less than 0.1% to 2176
• Stoxx 600 up 0.3% to 342
• FTSE 100 up 0.3% to 6832
• DAX up 0.5% to 10489
• German 10Yr yield down less than 1bp to -0.07%
• Italian 10Yr yield down less than 1bp to 1.12%
• Spanish 10Yr yield down 1bp to 0.98%
• S&P GSCI Index down less than 0.1% to 346.8
• MSCI Asia Pacific up 0.6% to 138
• Nikkei 225 up 0.7% to 16765
• Hang Seng down 0.1% to 22466
• Shanghai Composite up 0.7% to 3026
• S&P/ASX 200 up 0.3% to 5553
• US 10-yr yield down 2bps to 1.57%
• Dollar Index down 0.05% to 96.35
• WTI Crude futures down 0.2% to $42.92
• Brent Futures down 0.3% to $45.24
• Gold spot down less than 0.1% to $1,334
• Silver spot down 0.2% to $19.70

Top Global Headlines

• Randstad to Acquire U.S. Jobs Site Monster for $429m: Randstad will pay $3.40/share in cash for Monster, cos. said in statement Tues.; implies 23% premium to last close.
• Genesys Said in Talks to Acquire Interactive Intelligence: Genesys, which received $900m investment last month from PE firm Hellman & Friedman, is looking to use recent cash infusion to expand its business.
• Amazon Japan Office Said to Be Searched by Fair Trade Agency: Japanese antitrust agency looking into whether AMZN sought deals with sellers that gave it more favorable conditions over other e-commerce companies.
• Twitter Seeks to Sublease Part of San Francisco Headquarters: Co. offering about 1/4 of the space at its S.F. headquarters complex for sublease, adding to growing amount of excess offices available as technology industry cools.
• Alibaba Offers to Help Global Tech Companies Navigate China: New AliLaunch program makes use of co.’s cloud platform, can help clients with JVs, marketing; it’s biggest customer so far is SAP, which will sell its Hana data-software and services on Alibaba’s cloud.
• U.S. Bond Retreat Confounds Analysts as Fed Rate Bets Revive: Yield on benchmark 10-year U.S. sovereign debt is above median of year-end ests. compiled by Bloomberg for first time.

* * *

Looking at regional markets, Asia initially traded relatively mixed in the wake of the subdued lead from the US where stocks slightly pulled back from last week’s record highs, amid light news flow and summer-quietened trade. However, price action then staged a turnaround heading into the European session to conform with the tone set by Europe. Nikkei 225 (+0.7%) was higher as it continued to benefit from JPY weakness, while ASX 200 (+0.3%) was led by financials with ANZ shares gaining as much as 3% amid earnings. Chinese markets were mixed with choppy trade seen in Shanghai Comp (+0.7%) and the Hang Seng (-0.1%) following inflation data which suggested weak demand with CPI at a 6-month low and PPI contracted for a 53rd consecutive month. 10yr JGBs traded higher on a rebound from recent losses, while today’s 30yr auction saw mixed results, in which the b/c increased and tail in price narrowed, but the lowest accepted price and average price fell from last month.

Top Asian News

• Rajan Holds India Rates in Final Move as Inflation Quickens: Decision was predicted by 27 of 29 economists in survey
• Bank of Japan Limits Foreign Profits on Negative-Yielding Bonds: BOJ boosts dollar funding facility to ease domestic costs
• China’s Factory Deflation Narrows in Further Stabilization Sign: July PPI -1.7% y/y vs June -2.6%
• Hong Kong Property Stocks Are Hottest Since Eve of 1997 Collapse: Gains outstrip Hang Seng Index despite supply, rate concerns
• China Auto Sales Rising Most in 17 Months Spurs Inventory Relief: Passenger-vehicle sales rose 23% to 1.6m units in July
• ANZ Rises to 7-Month High as Bank Reports Capital, Asset Growth: 9-mo. cash profit drops 3% to A$5.2b

European stocks trade in the green this morning amid quiet newsflow with basic material names outperforming in the wake of Iron ore reaching 2 year highs. The Dax cash trades up around 0.5% with data flow continuing to remain light at the start of the week and as such traders will be looking towards the end of the week whereby markets will see the release of the latest US PPI, retail sales and Uni. Of Michigan data. Markets may be particularly sensitive to these releases given that markets are 50/50 over whether the Fed will hike rates this year and therefore may use the releases as an opportunity to establish a bias on this front. In terms of fixed income markets the Spanish and UK 10 years have hit fresh record low yields with participants overlooking political deadlock in Spain and markets continuing to digest the latest stimulus efforts by the BoE. Furthermore, mounting stimulus expectations for the ECB have also helped to lift peripheral paper and Spanish paper remains preferable to that of Italy amid the concerns surrounding the Italian banking sector.

Top European News

• Brexit Red Lines Drafted by EU-27 as U.K. Plans Its Strategy: U.K. PM Theresa May faces daunting array of demands from EU nations when time comes to negotiate Britain’s future relationship with bloc, analysis shows.
• U.K. Regulator’s Bank ‘Shake Up’ With Cap Fails to Create Stir: CMA recommended banks set their own limits on overdraft charges, with grace period for customers to avoid them, rather than have overdraft fees “centrally regulated,” agency said in a statement.
• Munich Re Profit Beats Estimates on Currency, Investments: 2Q profit beat analysts’ expectations as gains from currencies, investments cushioned higher claims from natural disasters, also restructuring charges at its Ergo primary- insurance unit.
• Drahi’s Altice Boosts Profit as U.S. Purchases Bring Growth: Earnings were “strong,” and co.’s projection for growth is “reassuring,” says Goldman analyst Andrew Lee.
• Italy Bank Bad Loans at EU197.9b in June: Bank of Italy: Banks’ gross bad loans rose 1.1% in June from yr earlier

In FX, the pound sank 0.4 percent to $1.2990, contributing to a five-day loss of 2.7 percent. As well as cutting interest rates for the first time since 2009, the Bank of England on Aug. 4 exceeded economists’ expectations with an announcement that it would increase its gilt-purchase program by 60 billion pounds to 435 billion pounds, starting this week. “We could see some short-term weakness in the pound,” said Janu Chan, a senior economist at St. George Bank Ltd. in Sydney. “It was an extensive stimulus program that the BOE announced. The economy has been hit in the short-term, and could face a minor recession.” Taiwan’s dollar gained as much as 0.4 percent to its strongest level in a year after trade data released Monday showed exports increased in July for the first time in 18 months. Global funds boosted their holdings of the island’s shares by about $400 million in the first two trading sessions of this week, according to data compiled by Bloomberg

In commodities, the Bloomberg Commodity Index, which measures returns on raw materials, fell 0.3 percent, dragged down by metals. Copper declined as much as 0.8 percent, falling to the lowest in four weeks, while zinc retreated from a one-year high. Gold slipped 0.1 percent to $1,333.74 an ounce. Crude was little changed at $43.06 a barrel in New York, after jumping 2.9 percent in the last session as the Organization of Petroleum Exporting Countries predicted the current bear market in the commodity would be short-lived. The group said Monday its members will hold informal talks next month and that there are “constant deliberations” over stabilizing the market. “Nobody seriously thinks that OPEC will come up with anything that will tighten supply,” said Michael McCarthy, chief strategist at CMC Markets in Sydney. “Having bounced off the support near $40, and without any further supply coming online, we’re moving toward the middle of the trading range of about $44 to $45.”

On to the calendar, where it is a busier day over in the US. First up we have the NFIB small business optimism reading for July which came in modestly less than expected at 94.6, below the 94.7 expected; up from 94.5 previous. Following that we will see the preliminary Q2 estimates for nonfarm productivity (+0.4% expected; -0.6% previous) and unit labor costs (+1.8% expected; +4.5% previous). The weak rebound in productivity growth is disappointing as it had declined in the previous two quarters. The current weakness in productivity is unprecedented in the post-WWII era and has bleak implications for future economic growth. Finally we’ll see the wholesale inventories number for June which is expected to be unchanged on the month (+0.0% expected; +0.0% previous).

* * *

Bulletin Headline Summary

• European equities enter the North American crossover modestly higher amid light newsflow with the FTSE 100 remaining at post-Brexit highs
• GBP remains out of favour with GBP/USD below 1.300 amid dovish comments from BoE’s McCafferty and disappointing UK data releases
• Looking ahead, highlights include API Crude Oil Inventories and a US 3yr Auction
• Treasuries rallied in overnight trading along with global equities as commodities slide and U.K. and Spanish 10Y yields hit all-time lows; week’s auctions begin with $24b 3Y notes, WI 0.855%; sold at 0.765% in July, lowest 3Y auction stop since 0.715% in Feb. 2014.
• Oil dropped from the highest close in two weeks amid doubts that informal talks between OPEC members next month will lead to any action to tighten supplies. Futures slid as much as 1.2% in New York after rising 2.9% Monday
• U.K. industrial production barely grew in June as the economy lost momentum before the Brexit referendum. Output rose 0.1% following a 0.6% drop in May, the Office for National Statistics said in London
• Bank of England policy maker Ian McCafferty said that officials will likely ease policy again if the economy develops in line with the central bank’s forecasts — though they should take a gradual approach
• European bankers exploited pledges by G20 and European Union finance ministers to avoid boosting capital requirements as they campaigned against the plans during earnings calls in past weeks
• Presiding over his final interest-rate review, Rajan’s announcement of more open-market debt purchases revived a rally that had been losing steam in recent days after benchmark 10-year notes capped their best month since 2013 in July
• Chinese bonds advanced, with the 10-year yield dropping to match the lowest levels since 2009, as foreign inflows increase and investors seek safety from a rising number of corporate failures
• Hong Kong real estate shares haven’t been this hot since the city’s last housing bubble burst almost two decades ago. The industry’s benchmark equity gauge has surged 37% from this year’s low in January

US Event Calendar

• 6am: NFIB Small Business Optimism, July, est. 94.5 (prior 94.5)
• 8:30am: Non-farm Productivity, 2Q P, est. 0.4% (prior -0.6%)
• 8:55am: Redbook weekly sales
• 10am: Wholesale Inventories, June, est. 0.0% (prior 0.1%, revised 0.1%)
• 10am: IBD/TIPP Economic Optimism, Aug. (prior 45.5)
• 4:30pm: API weekly oil inventories

DB’s Jim Reid concludes the overnight wrap

With limited data to respond to yesterday, price action across global equity markets was largely muted. The STOXX (+0.04%) and the S&P500 (-0.09%) were both essentially flat on the day. In Europe banks (+1.4%) and insurance (+1.5%) sectors were two of the top three performing sectors of the day, while basic resources (+1.7%) was the top performer. Oil climbed around +2.5% with some looking to an announcement yesterday that OPEC would have an informal side meeting next month at the International Energy Forum in Algeria with hopes of a renewed push for a production freeze. These things often come to nothing and tend to be discussed after a decent fall in the price but it created some attention.

Oil has given up some of its gains in Asia (-0.8%) but equity market are all fairly quiet with the Nikkei +0.35%, Hang Seng -0.19% and Shanghai Comp +0.29%. The main data has been Chinese inflation with the PPI falling less than expected at -1.7% (-2% forecast) which is actually the highest for nearly 2 years. This number was stuck near -6% in Q4 last year. CPI came in inline with estimates at 1.8%.

Back to yesterday and credit markets over in Europe saw decent performance as iTraxx Main and Crossover tightened by -2bps and -8bps respectively over the course of the day. US credit markets failed to see similar moves as CDX IG and HY were largely unchanged on the day. The latest ECB CSPP numbers (as of Aug 5th) saw purchases holding up impressively in this holiday season with the €1.764bn higher than the previous two weeks and not far off the average weekly number seen since the program started.

The other end of the risk spectrum also saw little action. German 10Y yields held steady on the day, while US 10Y yields edged marginally lower by -1bps after rising significantly on Friday. 10Y Gilt yields saw bigger moves as they fell by -6bps as markets continued to digest BoE’s aggressive policy package unveiled last week. Over in currency markets, the pound (-0.26%) continued to slide for the fourth straight day while the dollar index rose marginally by +0.27%. Gold was unchanged on the day.

In terms of data it won’t surprise you to learn that it was quiet. Over in Europe we saw German industrial production numbers for June rebound back into positive territory and come in marginally above expectations (+0.8% mom vs. +0.7% expected; -0.9% previous). However the bounce only served to reverse the decline seen in May as the demand for capital goods rebounded. It will be more interesting to watch next month’s number to see how production responds to the Brexit vote. Other data points out of Europe included French business sentiment data for July which ticked up marginally to beat expectations at 98 (vs. 97 expected; 97 previous) while the Sentix Eurozone investor confidence indicator for August rose to 4.2 (vs. 3.0 expected; 1.7 previous). There were no material data releases out of the US yesterday.

Turning over to today’s calendar now. In Europe we’ll get the UK industrial (+0.1% expected; -0.5% previous) and manufacturing (-0.2% expected; -0.5% previous) production numbers for June, with data expected to demonstrate little improvement with most of the data pre-Brexit. We’ll also see UK and German trade balance data for June, with the UK trade deficit expected to widen (-£2.55bn expected; -2.263bn previous) while the German trade surplus is expected to increase to EUR23.0bn (21.0bn previous).

It’s a busier day over in the US. First up we have the NFIB small business optimism reading for July which is expected to hold steady (94.5 expected; 94.5 previous). Following that we will see the preliminary Q2 estimates for nonfarm productivity (+0.4% expected; -0.6% previous) and unit labor costs (+1.8% expected; +4.5% previous). The weak rebound in productivity growth is disappointing as it had declined in the previous two quarters. Our Chief US economist Joe LaVorgna notes that the current weakness in productivity is unprecedented in the post-WWII era and has bleak implications for future economic growth. Finally we’ll see the wholesale inventories number for June which is expected to be unchanged on the month (+0.0% expected; +0.0% previous).

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By Chris at http://ift.tt/12YmHT5

Larry Scharf is a senior vice president of investments at Raymond James in Connecticut. One of Larry’s favourite markets – and one which he’s been studying and investing in for over 30 years – is the gold market.

I met Larry over 2 years ago when he became a client of mine and his insights into the gold market are most definitely worth your time.

Today I’ve got for you a conversation I recorded last week with Larry.  You’ll want to hear it, given that the financial house of cards is creaking and groaning with ever increasing stress while geopolitical tensions – as discussed a few weeks ago and again last week – are increasingly favourable towards gold.

Here’s just a few topics that Larry and I have covered:

• Where are we likely at in the gold cycle?
• Bullion vs. mining stocks – how to size your investment positions?
• A little known fact about Russian and Chinese buying of gold.
• How can we be so certain that “the big money” hasn’t even touched mining stocks yet?
• The relationship between the dollar and gold
• And more…

(click on the image to listen to the podcast)

For anyone who wants to connect directly with Larry you can reach him by email or by phone on 203-635-5409.

– Chris

“You have to try to put as many dots together as you can. And when you see enough of them line up you make your bet.” — Larry Scharf

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Faisal and Nazia Ali were on a Cincinnati-bound Delta flight from Paris, after celebrating their ten-year anniversary trip to London and Paris. The trip was soon going to turn into a nightmare.

According to the USA Today,

A flight crew member had complained to the pilot that she was uncomfortable with the Muslim couple in the second row of economy class.

 

The woman was wearing a headscarf and using a phone, and the man was sweating, she allegedly told the pilot…

 

The pilot contacted the ground crew. He would not take off until couple was removed…

 

The flight attendant claimed that Faisal Ali tried to hide his cell phone and that she had heard the couple use the word "Allah.”

After waiting 45 minutes in the plane, the couple was forcefully removed and told to take with them all of their personal belongings from the flight. After being extensively questioned, the couple was ultimately cleared of any wrongdoing and were put on a plane the next day.

"It was humiliating. We were treated like criminals," she said. "I thought, `We are American citizens. You can't do this to us.'

The couple, along with the Council on American-Islamic Relations (CAIR) is filing a religious profiling complaint against Delta to the US Department of Transportation. The complaint asked, amongst other things "to conduct a thorough examination into the prevailing practices of major American air carriers, including Delta Air Lines, and to develop policy guidelines on the objective factors that are to be considered when determining that a passenger may legally be removed from a flight."

Delta promptly issued a response: “ Delta condemns discrimination toward our customers in regards to age, race, nationality, religion, sexual orientation or gender. As a global airline that brings hundreds of thousands of people together every day, Delta is deeply committed to treating all of our customers with respect. Delta continues its investigation into this matter and will issue a full refund of these customers’ airfare."

Not been a great day for the Ali family or Delta…

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Submitted by Peter Diekmeyer via SprottMoney.com,

An era of slowing growth, falling corporate profits, record debt levels, and currency debauchment has many investors buying gold as a bet against global central banks.

Holding that gold outside the banking system, and for some, outside one’s own country, are increasingly popular options. Canada, Switzerland, and four other countries have particularly attractive characteristics.

Those are the conclusions of a new whitepaper produced by Sprott Money Ltd.

Canada and Switzerland are obvious choices. The True North has fabulous natural resources, one of the world’s most stable banking systems and hasn’t been attacked in more than 200 years (the last two times the Americans tried to invade – during the Revolutionary War and the War of 1812 – things did not work out so well for them).

Switzerland, which ranked first on the Tax Justice Network’s Financial Secrecy Index in 2015, has fabulous attractions as an offshore investment locale. These include a long history of offering investors a safe, discreet place to store assets. That applies doubly for gold, which has a better reputation in Switzerland than in almost any other country.

America's shaky credit history

Surprisingly, America, which many in the hard money community regard as a risky gold storage locale, also made the cut, due to its strong international reputation as a safe haven. The paper nevertheless acknowledges some worrying trends. For example, during the Obama presidency America attacked an average of one country a year, debauched its currency and curtailed freedoms.

Worse, when times are tough, the American government has a record of defaulting on its obligations.

This includes creation of currencies issued during the Revolutionary War – and by the Confederacy during the Civil War – both of which became worthless.

America also defaulted on its international obligations when, in 1971, it reneged on its commitments to back the greenback with gold.

But most importantly for gold investors, the American government also seized all private holdings when the going got tough during the Great Depression. The worry is that this could happen again.

A good place – for Americans – to store precious metals

That said, despite its many faults, America is a great place for at least one category of investors to store gold: Americans themselves.

Gold’s and other precious metals’ properties as an emergency reserve to be accessed when times get really tough imply that most investors will want to keep those assets close – where they can get their hands on them fast.

However in today’s volatile economic conditions, no one can be really be sure about how things will turn out during the coming years – let alone the coming decades.

So, for Americans, diversification by asset class and country appears to be the best risk-adjusted wealth preservation strategy. Many experts increasingly believe that holding some precious metals outside the banking system and outside of the country is a good bet.

Conversely, the paper acknowledges that based on the performance of the U.S. dollar during times of tension, international investors continue to regard America, which ranked third on the Tax Justice Network’s Financial Secrecy Index in 2015, as a safe haven.

Singapore, Germany and the Cayman Islands

The Sprott report also identifies Singapore, Germany, and the Cayman Islands as current good offshore storage jurisdictions.

The paper also acknowledges that many other international jurisdictions such as Dubai, Australia, and Hong Kong are regarded as good locales, but acknowledges that changing geopolitical risks requires constant monitoring of domestic and international investment environments.

For Americans, most of whom have never left the country, the Cayman Islands, where English is widely spoken and which offers excellent attributes as a tourist destination, appears to be a particularly attractive storage locale. After all, there is nothing wrong with combining international investing with a trip to the beach.

You can access a copy of the Sprott Money Report by clicking here.

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