Submitted by David Stockman via Contra Corner blog,

The posse of fools in the Eccles Building is so petrified of a stock market hissy fit that it has more or less created a Wall Street doomsday machine.

After trolling on the zero bound for 89 straight months now, the FOMC falsely believes that it has levitated the U.S. economy to the cusp of full-employment via massive liquidity and wealth effects pumping.

As a consequence, it refuses to let the market have breathing room for even a modest correction, insisting that just a few more months of this monetary lunacy will permit a return to some semblance of normalcy.

But it never gets there. The truth is, this so-called recovery cycle is now visibly dying of old age and being crushed by the headwinds of global deflation. Rather than acknowledge that the jig is up, our feckless monetary politburo just equivocates, procrastinates and prevaricates about the monumental policy failure it has superintended.

So the casino punters just won’t go home. They hang around against all odds, failing to liquidate and thereby enabling the robo machines to engage in endless and pointless cycling between chart points. As shown in the graph below, this has been going on for nearly 600 days now.

But of late the churning has been occurring in an increasingly narrow channel. Accordingly, the spring is being coiled ever more tightly.

When this 83-month long simulacrum of a economic recovery finally rolls over into recession someday soon, therefore, the implosion will be thunderous. The robo-machines will chase the punters out the casino exits in an epic stampede of selling.

^SPX data by YCharts

Indeed, given the headwinds emanating from all corners of the global economy and financial system it is hard to believe that any sentient carbon units actually participated in today’s 19th nervous short squeeze in as many weeks. Among other things, first quarter results have been fully posted and it turns out that the S&P 500 companies earned $87 per share during the last 12 months (LTM).

That’s down from the $99 per share LTM figure posted in Q1 last year and the peak of $106 per share recorded in the year ended in September 2014.

In short, reported GAAP earnings—–the honest kind companies report to the SEC on penalty of jail—— are now down 18% from their recent bubble cycle peak. But since the S&P 500 has remained within 3% of its May 2015 all-time high (2130), it  means that the PE ratio has been rapidly inflating right into the teeth of falling profits and a rapidly cooling domestic and global economy.

In fact, the market closed today at 23.9X, which is a truly ludicrous valuation level. We are in the waning days of the third bubble cycle of the 21st century, yet the casino is pricing current earnings as if recessions have been outlawed and that the long-term growth trend of earnings is in double digits..

So here’s a spoiler alert.  When S&P 500 earnings peaked prior to the financial crisis in the June 2007 LTM period, they clocked in at $85 per share.

The arithmetic of the matter, therefore, is that corporate earnings have grown at a miniscule 0.2% annual rate during the last nine years. Take the inflation out of that and adjust for nearly $3 trillion of stock buybacks and shrinkage of the share count in the interim, and you have less than no growth at all.

The worse thing is that we have been here before – at this same juncture exactly eight years ago in May 2008. The just completed earnings season had generated S&P profits of about $61 per share. That was down more than 25% from the prior year peak of $85, but the casino punters ignored the warning signs. The S&P 500 index remained within 3% of its November 2007 high (1570) for a few more months.

Then the sky fell. Nine months later the market was down by 57% and the U.S. economy was in the worst recession since the 1930s.

More crucially, the sell-side assurance that the severe earnings decline then underway was just the “pause that refreshes” and that profits would rebound to $100 per share in no time, proved to be dead wrong.

By the following spring, LTM profits for the S&P 500 companies posted at just $7 per share!

Now, we have no idea how far earnings will fall this time, but we do note that on the eve of the cyclical contraction in May 2008, the S&P 500 was trading at the same drastically inflated multiple as today——- 24X LTM earnings.

We also note that recessions are precipitated not by lagging indicators such as the dubious BLS monthly jobs surveys, but by the accumulation of excess inventories in the face of weakening sales. Here is what happened last time the punters insisted on staying in the nosebleed section of the casino when earnings were already falling rapidly.

 

Nor is this time any different. As of March, total business sales in the U.S. economy—manufacturing, wholesale and retail——were down 5.5% from their July 2014 peak, while the inventory ratio has soared back up into the recession zone.

That’s right. The scarlet “X” is back.

It means not merely that recession is just around the corner. That eventuality is guaranteed by the fact that this tepid recovery is already very long in the tooth by historical standards and by the reality that global trade, industrial production and PMI’s are slipping into recession mode virtually everywhere.

What is also proves is that the Fed and other central banks have absolutely destroyed the last semblance of honest price discovery. How is any other conclusion possible?

That is, with headwinds ranging from the tottering Red Ponzi of China, to the collapse in Brazil, the depression in the Baaken and Texas shale patch, the plunge in Japan’s trade accounts, the swirling liquidity crisis in the petro-states, the slump in German exports, the double digit decline of US freight volumes, the flat-lining of temp agency employment levels and much more, why would any rational investor pay 23.9X for the S&P 500 at this juncture—–and especially after nine years of no earnings growth?

Alas, they wouldn’t.

Wall Street has indeed become a doomsday machine and the Fed has zero chance of stopping its eventual implosion.

So in the interim the posse of monetary cranks in the Eccles Building ought to just stop their dangerous charade; it’s only feeding the robo-machines and putting everyone else deeper into harms’ way.

via http://ift.tt/20ABTFn Tyler Durden

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

Early last Thursday, EgyptAir 804 disappeared over the Mediterranean, becoming the second civilian airliner in less than seven months to go down while flying either to or from Egypt. Both this incident and Metrojet 9268’s disaster of last October were terrorist acts. Tourism to Egypt, a major earner of foreign exchange, has already been flat for years and will suffer even further from these airline disasters.

The World Travel & Tourism Council (WTTC) provides figures on the total contribution of travel and tourism in Egyptian Pounds. If we convert this to U.S. dollars (USD) at the black market (read: free market) exchange rate, the results are not pretty. 

 

 

Egypt’s tourism problem is only one of many facing President Sisi. For starters, dwindling foreign reserves, a half-baked currency, and elevated inflation will likely prove to be President Sisi’s Achilles’ heel. The Central Bank of Egypt (CBE) is currently reporting an annual inflation rate of 10.3 percent, but that is far from the truth. Utilizing changes in black market exchange rate data and applying the Purchasing Power Parity theory, I calculate the inflation rate to be over four times higher than what the CBE reports, hovering between 40 and 50 percent for the past several months. Egypt is lying to the world about the strength of the Pound and the severity of its inflation problems (see the charts below). And lies are nothing more than a form of propaganda.

 

 

 

Perhaps that’s why the press corps travelling with Secretary of State John Kerry to Egypt was not permitted beyond Cairo’s airport, as David Sanger of the New York Times reported last Wednesday. Who wants a probing press to ask embarrassing questions about the economy when you’re lying?

via http://ift.tt/1s9rwgM Steve H. Hanke

A calm protest quickly turned violently chaotic at a Donald Trump rally yesterday in Albuquerque, New Mexico. Protesters started to gather around 4pm in what until then was a low key protest: they chanted anti-Trump slogans, held anti-Trump signs and waved Mexican flags before the demonstration descended into chaos with some protesters standing on top of police cars, at which point all hell broke loose.

 

Protesters began to throw water bottles and yell profanity and aggressive taunts; the scene then quickly escalated to what one police officer called “the gauntlet of hate.”

“You’re a wetback” someone from the crowd yelled at a Trump supporter, while things like “go back to Mexico”, and “socialism never, capitalism forever” could be heard being yelled back in response.

Parents escorted scared kids past the chaos, and eventually police even set up a mounted horse unit to deter the crowds. However this was not enough, as protesters eventually began to riot. Rocks and bottles were thrown at police, and the protesters were eventually able to break through barriers, allowing them to rush the entrance of the convention center, at which point the riot police responded with tear gas.

According to CNN, his supporters chanted “build that wall” during his rally on Tuesday in Albuquerque where a little less than half of the population is Hispanic or Latino.

“Watching thugs (and) punks in Albuquerque – en route to California. They don’t even know what they are protesting,” Trump aide Dan Scavino said on Twitter.

As vendors fled, protesters grabbed merchandise and set things on fire the Albuquerque Journal reports.

The chaos got so out of control, local police eventually had to call in reinforcements from around the state in order to deal with the protesters, whose numbers swelled to over 600 according to estimates.

By 11:30pm, police in riot gear were continuing to patrol the streets, but the scene had returned to normal at that point.

 

 

 

Video from @dcbigjohn shows police using horses to break up protesters outside Trump rally in Albuquerque tonight http://pic.twitter.com/R2LzUNvAm6

— BuzzFeed News (@BuzzFeedNews) May 25, 2016

Several #APD officers are being treated for injuries as a result of being hit by rocks. At least one subj arrested from the riot.

— Albuquerque Police (@ABQPOLICE) May 25, 2016

via http://ift.tt/1s9r1TY Tyler Durden

Iconic jeweler Tiffany reported Q1 earnings which continued the recent slide in top and bottom line on the back of a clearly weaker domestic and global consumer, and which not only missed the top and bottom line, printing at $891.3MM (exp. 914.9MM) and $0.64 (exp. $0.68), respectively, but also reported a steep drop in same store sales which tumbled 9% in Q1, double the 4.6% expected drop, and also slashed guidance, expecting full year 2017 EPS to be down in the mid-single digits, compared to its previous guidance which expected earnings to stay flat or fall by up to mid-single digit in percentage terms.

Sales at the jeweler’s stores open for more than a year fell 10 percent in the Americas region in the first quarter ended April 30. Analysts on average had expected a 9.1 percent decline, according to research firm Consensus Metrix. Tiffany’s net income fell 16.6 percent to $87.5 million, or 69 cents per share.

The 7.4% drop in total revenue was the steepest sales drop in six quarters. Once again the company blamed a stronger dollar for discouraging tourists from buying its high-end jewelry, even though the dollar was notably weaker Y/Y in the first quarter, as the company does not even bother to pull up a stock chart.

The Company’s reported net sales reflect either a translation-related benefit from strengthening foreign currencies or a detriment from a strengthening U.S. dollar. Internally, management monitors and measures its sales performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating sales made outside the U.S. into U.S. dollars

GAAP Sales decline in the upper single digits in every single market except Japan, where Tiffany saw a 8% boost.

While many, especially the Fed which is said to hike as soon as next month, tout an imminent consumer recovery, Tiffany did not see it. Here is its full outlook:

Management is now forecasting full year earnings per diluted share in 2016 to decline by a mid-single-digit percentage from 2015’s adjusted earnings per diluted share (which excluded loan impairment and certain staffing and occupancy charges – see “Non-GAAP Measures”). Management also expects diluted EPS in the second quarter to decline by a similar rate as occurred in the first quarter. The forecast is based on the following full year assumptions, which are approximate and may or may not prove valid: (i) worldwide net sales declining by a low-single-digit percentage from the prior year; (ii) worldwide gross retail square footage increasing 2%, net through 11 openings, 6 relocations and 10 closings; (iii) operating margin below the prior year’s 19.7% (excluding the prior year’s charges – see “Non-GAAP Measures”) due to an expected increase in gross margin more than offset by SG&A expense growth; (iv) interest and other expenses, net unchanged from 2015; (v) an effective income tax rate slightly lower than the prior year; (vi) a modest year-over-year strengthening of the U.S. dollar; (vii) net inventories unchanged from the prior year; (viii) capital expenditures of $260 million; and (ix) free cash flow (net cash provided by operating activities less capital expenditures) of at least $400 million.

According to Reuters, Tiffany’s reluctance to offer promotions has been turning away thrifty shoppers, while a stronger dollar has made purchases more expensive for tourists.

“We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the U.S. and Asia, particularly in Hong Kong,” Chief Executive Frederic Cumenal said.

Shares of the company, whose “Blue Book” collection was flaunted by actress Cate Blanchett on the Oscar red carpet this year, fell 4.5% to $61 in premarket trading on Wednesday.

via http://ift.tt/1Ud6lna Tyler Durden

• Oil nudges $50 a barrel as investors bet on shrinking overhang (Reuters)
• From hinterland to wonderland: China’s ‘teapot’ refinery boomtowns (Reuters)
• Peter Thiel Has Been Secretly Funding Hulk Hogan’s Lawsuits Against Gawker (Forbes)
• China Wants to Set Prices for the World’s Commodities (BBG)
• Big Banks Ladle On the Risk (WSJ)
• China Said to Plan Asking U.S. on Timing of Fed Rate Hike (BBG)
• ECB credit buying to start small, betting on issue boom (Reuters)
• HP Enterprise to Spin Off, Merge Services Business (WSJ)
• Swedish court upholds Assange arrest warrant (Reuters)
• Trump Unveils Stable of Republican Donors (BBG)
• Ryan Said to Tell Confidants He’s Ready to End Trump Standoff (BBG)
• Clinton blasts Trump for cheering housing bubble burst (Reuters)
• Goldman Sachs Sees Malaysian Deals Evaporate Amid 1MDB Concerns (BBG)
• Trump on the defense over Clinton’s housing market digs (CNN)
• Nerves of Steel Pay Off as Metals Bonds Jump on Materials Rally (BBG)
• Deutsche Bank Trading Woes Exposed in Slide Down Currency League (BBG)
• Jailed Ukraine pilot heads home under prisoner swap with Russia (Reuters)
• Polish minister says looking for solutions to constitutional row (Reuters)
• Shell Cuts 2,200 More Jobs to Withstand Lower-For-Longer Oil (BBG)
• Microsoft May Cut 1,850 Jobs as Nadella Pares Phone Ambitions (BBG)
• Sanofi to unveil challenge to Medivation’s board (Reuters)

 

Overnight Media Digest

WSJ

– Hewlett Packard Enterprise Co plans to spin off most of its technology services operations and merge them with those of Computer Sciences Corp., in an $8.5-billion transaction that marks HP Enterprise’s latest adjustment to a shifting landscape that is roiling the market for corporate technology. (http://on.wsj.com/1U8f1s4)

– Eurozone finance ministers and the International Monetary Fund patched together a deal in the early hours of Wednesday that clears the way for fresh loans for Greece and sets out how the country could get debt relief in the future. (http://on.wsj.com/1U8exSJ)

– A real estate firm that has been a favored investment of Tennessee Republican Senator Bob Corker is under investigation by federal law enforcement officials for alleged accounting fraud, according to people familiar with the matter. (http://on.wsj.com/1U8eQx2)

– Attorney General Loretta Lynch said Tuesday she has decided to seek the death penalty for Dylann Roof, a white man charged with killing nine parishioners at a black church in Charleston, S.C., last year. (http://on.wsj.com/1U8eKFB)

 

FT

* Greg Tufnell, ex-managing director of Mothercare is leading a bid to acquire BHS.

* Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” on Tuesday, but said it was open to engage further in negotiations.

* Dozens of French police raided Google’s Paris headquarters on Tuesday, escalating an investigation into the digital giant on suspicion of tax evasion.

 

NYT

– Toyota Motor Corp and Volkswagen AG, two of the world’s largest automakers, said they were stepping up to invest in technology start-ups that are working to change the way people travel by car. Toyota said it had formed a partnership with and invested an undisclosed amount in Uber, the biggest ride-hailing company. Gett, the app popular in Europe, said it was working with Volkswagen, and the automaker was investing $300 million in the start-up. (http://nyti.ms/1VhDvEu)

– Monsanto Co rejected Bayer AG’s $62 billion takeover offer on Tuesday, calling the takeover approach by the German giant too low. (http://nyti.ms/1Rpd9JL)

– Months after Hewlett-Packard split itself into two publicly traded companies, one of those new smaller businesses plans to become even smaller. Hewlett Packard Enterprise Co will sell its enterprise services business, whose offerings include call centers and network maintenance, to the Computer Sciences Corp in an all-stock deal, the companies announced on Tuesday. (http://nyti.ms/1qIulnK)

– Media mogul Sumner Redstone confirmed on Tuesday the appointment of two new members to his irrevocable trust, which will control the future of his companies, as well as new directors to National Amusements, the private theater chain company through which he controls his $40 billion media empire. (http://nyti.ms/1UcFLKR)

 

Canada

THE GLOBE AND MAIL

** The Canadian government is preparing to reject the permanent residence applications of three Chinese people who work for China’s telecom giant Huawei, citing concerns of spying, terrorism or government subversion. The cases come after Huawei, which started operating in Canada in 2008, faced spying concerns in recent years. (http://bit.ly/1s9cMOY)

** Broadcast regulator Canadian Radio-television and Telecommunications Commission wants to know how pick-and-pay television is working out so far, and is calling Canada’s largest cable and satellite distributors to account for the way they’ve rolled out new choices to viewers. (http://bit.ly/1Tz263c)

NATIONAL POST

** After some rocky years of revitalizing the business at Indigo Books and Music Inc, Heather Reisman is in growth mode again as she unveiled the company’s latest store concept in west Toronto on Tuesday, the closest realization yet of her long-held vision to create a so-called “cultural department store.” (http://bit.ly/247gGnt)

** About four in 10 Canadian homeowners says they were “caught short” in the past year without enough money to meet their expenses, according to a survey out on Tuesday. Manulife Bank paints a dim picture of Canadians with rising debt who could be sitting on a potential land mine if interest rates start rising. (http://bit.ly/1XuD9e1)

 

Britain

The Times

The pressure on Deutsche Bank’s British chief executive grew yesterday after one of the top ratings agencies cut the German lender’s credit standing and warned that his chances of delivering an ambitious turnaround plan were becoming more remote. (http://bit.ly/1OV1LLs)

The Guardian

Britain’s leading tax and spending think tank, the Institute for Fiscal Studies, has warned that leaving the European Union would force ministers to extend austerity measures by up to two years to achieve a budget surplus. (http://bit.ly/20xYcLS)

French investigators have raided Google’s Paris headquarters, saying the company is now under investigation for aggravated financial fraud and organised money laundering. (http://bit.ly/1WPN1Aq)

The Telegraph

U.S. agricultural business Monsanto rejected a $62 billion takeover offer from German drugs and crops giant Bayer yesterday as it believes the current proposal is “incomplete and financially inadequate”, but said it is willing to engage in further negotiations. (http://bit.ly/1s8iFvY)

A Portuguese-backed consortium is in pole position to save BHS after Matalan founder John Hargreaves and Select Fashions Cafer Mahiroglu retreated from the bid battle. (http://bit.ly/1U862XP)

Sky News

Twitter has confirmed rumours it is going to stop counting attachments in its 140-character limit, giving users leeway to be more wordy. (http://bit.ly/1UcetV3)

Bank of England Governor Mark Carney came under fire at a grilling by MPs today when he was accused of rehashing “propaganda” on the economic consequences of Brexit. (http://bit.ly/25ft8Ec)

The Independent

Google could face a claim for billions of euros in back taxes after 100 police and tax investigators raided the company’s offices in Paris as part of an investigation into alleged systematic fraud. (http://ind.pn/27RpxOT)

The chief executive of French energy giant EDF said the company “can’t afford to keep the UK waiting” and hinted a decision regarding the Hinkley Point C nuclear project in Britain could be reached before the summer. (http://ind.pn/1VgHwZW)

 

 

via http://ift.tt/1NMfP9Z Tyler Durden

In his latest contrarian comments to Reuters, Jeff Gundlach focused on the recent flipflopping by the Fed and its various speakers who are now positioning the market for an imminent rate hike despite the US economy still treading water, and said that while many Fed officials are “dying to raise rates,” but all that matters is Janet Yellen’s opinion, a glimpse of which we will get as soon as this Friday when she speaks at Harvard. “All that matters is Yellen. She is still there.” 

Last week, New York Federal Reserve President William Dudley said the U.S. economy could be strong enough to warrant an interest rate increase in June or July, reinforcing the drum beat from within the Fed in recent days that rate increases are coming soon. A range of policymakers with normally varying views on monetary policy are now stating a rate increase is possible at the next policy meeting in June.

Further, he noted something many have suggested, namely that sentiment from late 2015 has returned, when the market was optimistic that just because the Fed is hiking that some surprising surge in the US economy is on deck: both the Fed and the market were wrong: “I feel like we are back in December again, where everyone thinks that there is a super secret that some Fed officials have this knowledge that the economy is really good.”

There was no super secret and in fact, the Fed was proven very wrong when the market tumbled shortly after the hike.

As a result, he said on Tuesday that the rally in U.S. stocks, which began on Monday, feels like a short squeeze and characterized U.S. stocks as “dead money.“

His sentiment echos that of not only Goldman, which recently unveiled a surprising warning hinting a drop back to 1850 is in the cards, but also that of Bank of America which last night said that “we are seeing the same decoupling between US and EM stocks that that turned out a leading indicator in Aug and again in Jan.“

Gundlach has been generally bearish on stocks in recent months as the market has gone largely nowhere. It remains to be seen if central banks will allow him to be right, and when.

via http://ift.tt/1OMOXS7 Tyler Durden

The single biggest event overnight was the PBOC’s devaluation of the Yuan to the lowest since March 2011, setting the fixing at 6.5693, the highest in over 5 years and in direct response to a stronger dollar, which however if one looks at the DXY remains well below the recent highs in the 100 range, suggesting for China this is only just beginning.

 

However, the fact that there was not more volatility in onshore and offshore overnight FX also comforted the market that at the same time as its was devaluing the PBOC was also intervening in the FX market, thus providing some assurance it would not allow runaway “risk off” sentiment prevail, nor would it promote another blitz round of capital outflows, leading to another gradual levitation in overnight risk.

Whether the PBOC is successful this time happens remains to be seen, but for now algos and traders decided to ignore the loud warning signal by China, and focused on oil instead which after yesterday’s sharp API inventory drop has pushed to fresh 7 month highs, higher by another 1% as the likely resumption of production by domestic producers is widely ignored. Instead, the market also focused on yesterday’s new home sales, a data point with a 15% interval of confidence, as confirmation that the US economy is back on the mend, and thus any imminent rate hike by the Fed would be justified… just like in December.

Trader sentiment confirmed as much: “Strong U.S. new home sales have added credence to the Fed’s claims that the U.S. economy may be strong enough for another rate hike in June or July,” said Angus Nicholson, a Melbourne-based market analyst at IG Ltd. “Japanese equities in particular are relishing the strong U.S. dollar.”

As a result, global equities rose to a two-week high amid increasing investor optimism that the world economy can withstand higher U.S. interest rates. Oil advanced and gold fell amid a retreat in the dollar. The MSCI All Country World Index climbed for a second day, European equities jumped, and futures signaled a higher opening for U.S. shares. Emerging-market stocks rose the most in six weeks, while South Korea’s won led currencies higher even as China set the yuan’s reference rate at the weakest level since 2011. Crude rallied above $49 a barrel as gold slid for a sixth day. Greek bonds increased, pushing the 10-year yield below 7 percent for the first time since November, after its creditors agreed to release bailout funds. The cost of insuring corporate debt against default fell to the lowest in almost a month.

 

Traders are now pricing in a one-in-three chance of higher borrowing costs in June. That’s up from 4 percent last Monday. July is the first month with more than even odds for a rate hike. Fed Chair Janet Yellen is scheduled to speak on Friday after European markets close.

While recently the market was spooked by the prospect of an imminent rate hike, as Bloomberg adds “improving confidence in financial markets is tempering anxiety over the Federal Reserve’s plans to raise U.S. interest rates, potentially as soon as next month.” Adding to the confidence, recent polls show growing support for the U.K. to remain in the European Union, the rally in commodities is damping the risk of deflation, and a measure of economic surprises in the world’s largest economies hit its highest level this year. Still, faith in global growth prospects has been easily shaken, with global equities failing to make any gains in 2016.

“U.S. data is supporting the view that if we don’t see stellar growth, at least we don’t see a recession, and that’s a good thing,” said Michael Woischneck, who oversees about 300 million euros at Lampe Asset Management in Dusseldorf, Germany. “If the Fed has the chance to hike again then it should take this opportunity as the market is very prepared. We also have a deal for Greece that has helped perceptions change in the European market.”

The Stoxx Europe 600 Index added 1.1% in early trading, with almost all industry groups climbing. Carmakers, insurers and banks posted the biggest gains. The equity measure closed above its 50-day moving average on Tuesday for the first time after slipping below it earlier this month. That sends a short-term bullish signal in technical analysis, according to Saxo Bank A/S trader Pierre Martin.

The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong surged 2.8 percent, the most in more than a month. Benchmark gauges in South Korea, Taiwan, the Philippines, Russia and Dubai increased at least 1 percent.

Futures on the S&P 500 added 0.5 percent, indicating U.S. equities will extend gains after rising 1.4 percent on Tuesday. Investors will look to data on services output and house prices due Wednesday for signs of the health of the world’s biggest economy amid increasing bets that the Fed is confident enough to raise rates.

The yield on 10-year U.S. Treasuries increased by one basis point to 1.87 percent, matching its average level for 2016. The U.S. is selling $34 billion of five-year securities on Wednesday after investors snapped up a $26 billion auction of two-year notes on Tuesday, leaving primary dealers with the lowest award at a sale of the debt in data going back to 2003.

“The Treasury yield could end up a little bit above 2 percent” as the Fed raises rates, said Stephen Roberts, an economist at Laminar Group Pty, a Melbourne-based fixed-income adviser. “The U.S., of developed economies, has had the best of the economic recovery we’ve had since the global financial crisis.”

Markets snapshot

• S&P 500 futures up 0.4% to 2083
• Stoxx 600 up 0.9% to 347
• FTSE 100 up 0.5% to 6168
• DAX up 0.6% to 9899
• S&P GSCI Index down 0.4% to 363.5
• MSCI Asia Pacific up 1.5% to 127
• Nikkei 225 up 1.6% to 16757
• Hang Seng up 2.7% to 20368
• Shanghai Composite down 0.2% to 2815
• S&P/ASX 200 up 1.5% to 5373
• US 10-yr yield up less than 1bp to 1.87%
• German 10Yr yield down 1bp to 0.17%
• Italian 10Yr yield down 3bps to 1.45%
• Spanish 10Yr yield down 2bps to 1.56%
• Dollar Index up 0.02% to 95.59
• WTI Crude futures up 1% to $49.13
• Brent Futures up 1% to $49.11
• Gold spot down 0.5% to $1,222
• Silver spot up 0.2% to $16.25

Top Global News

• Microsoft May Cut 1,850 Jobs as Nadella Pares Phone Ambitions: Company will incur about $950 million in new charges. Last week Microsoft sold its feature phone business to FIH
• Goldman Sachs Sees Malaysian Deals Evaporate Amid 1MDB Concerns: Once among top banks, Goldman was 18th in 2015 M&A rankings. U.S. authorities said to subpoena ex-Goldman banker in probe
• CYBG Soars in London Trading as CEO Pledges to Eliminate Jobs: Clydesdale and Yorkshire bank owner to reduce expenses. Lender has gained more than 40% since its February IPO
• Exxon, Chevron Oppose Environmental Drive to Cut Big Oil’s Reach: Shareholders will vote on limiting oil and gas exploration. Money saved would be paid to investors in dividends, buybacks
• US Foods Seeks to Shake Off Failed Merger With $1 Billion IPO: Food distributor 1 of 2 national players in fragmented field. Owners KKR, CD&R don’t plan to sell shares in offering
• China Said to Plan Asking U.S. on Timing of Fed Rate Increase: U.S.-China Strategic & Economic Dialogue set for June 6-7. China said to be preparing for potential market, yuan impact
• U.S. Said to Investigate InBev Distribution Incentiv: Investigation over new incentives that encourage independent distributors to sell more of its own beer brands at expense of competing craft brews, Reuters reports, citing 2 unidentified people with knowledge.

Looking at regional markets, we start as usual in Asia where equities tracked the firm gains from Wall Street where strong New Home Sales data and advances in oil bolstered sentiment. Nikkei 225 (+1.6%) benefited from renewed press reports that Japanese PM Abe will delay the sales tax hike, while ASX 200 (+1.5%) was led higher by the uptick in energy in which WTI futures rose above USD 49/bbl to hit YTD highs. Chinese bourses conformed to the upbeat tone in the region with the Hang Seng (+2.8%) and Shanghai Comp (-0.2%) bolstered following another inter-bank liquidity injection and reports CSRC plans to open the futures market to investors abroad. 10yr JGBs traded higher
despite the risk-on sentiment in the region, as the BoJ were in the market to purchase over JPY 1.2trl in government debt. BoJ Governor Kuroda stated the BoJ is to be mindful of the balance sheet and later added they will ease further if FX impacts price goal. Kuroda further stated that there is currently not a big risk of JGB yield volatility.

Asia Top News

• China Weakens Yuan Fixing to Lowest Since 2011 as Dollar Climbs: Reference rate was lowered by 0.3% to 6.5693/dollar
• Singapore Economy Gets Temporary Boost From Manufacturing: 1Q GDP +0.2% q/q vs est. +0.6%
• Mitsubishi Motors Corrects Last Year’s Earnings on Data Scandal: Charge reflects costs to compensate owners, Japan govt
• Toyota to Invest in Uber to Explore Ride-Share Partnership: Cos. enter into MOU

European equity markets have also carried through the overnight risk on sentiment to trade firmly in the green this morning (Euro Stoxx: +1.6%). Financials are among the best performers in Europe, particularly from the periphery given the overnight Greek deal. Elsewhere Marks & Spencer are the worst performers in Europe today after their pre-market earnings and trade lower by around 9%. Fixed income markets have seen Bunds initially fall in tandem with the surge higher in equities, with the German benchmark trading firmly below 163.50 before staging a recovery heading into the North American open . Meanwhile, in the wake of the aforementioned Greek deal, Eurozone periphery yields have declined, with the Greek 10Y below 7% for the first time since November’15.

Top European News

• UniCredit CEO Departure Puts Focus on Bank’s Capital Strategy: Chairman Giuseppe Vita to lead search for new CEO, bank says. Marco Morelli was approached for the role, person says
• Deutsche Bank Trading Woes Exposed in Slide Down Currency League: After topping Euromoney ranking for 9 years, lender slips to 4. Bank’s market share shrinks to 7.9%, from 14.5% a year earlier
• Bayer Says It’s Confident It Can Meet Monsanto Deal Demands: German company says it will address finance, regulatory issues. Monsanto rejected $62 billion offer, which it said was too low
• BASF Feels No Pressure as Rivals Plan $170 Billion of Deals: Chemical maker focused on operations, Asia chief Gandhi says. BASF’s strategy under CEO Bock has been consistent, he says
• Apollo Said to Seek $3.5 Billion to Scoop Up Bad European Debt: No better time for credit investors as banks hampered: Black. Strategy to target bad loans held by institutions under stress
• Greece Wins Pledge for Debt Relief as IMF Bows to Euro Proposal: MF makes ‘major concession’ in Eurogroup negotiations. First aid payment to be made in June to cover debt servicing
• Brexit Vote Could Extend U.K. Austerity by Two Years, IFS Says: IFS says quitting EU might add 40 billion pounds to borrowing. Economic damage would dwarf savings on payments to EU budget
• ECB Officials Say Euro Area Needs Coordinated Economic Policies: France’s Villeroy, Spain’s Linde comment at Madrid conference. Extraordinary monetary stimulus hasn’t yet restored inflation

In currencies, the biggest FX news overnight was China’s central bank weakened its currency fixing by 0.3 percent to 6.5693 per dollar, the lowest since March 2011. However, since the yuan in Hong Kong was little changed at 6.5650 and the onshore rate was down 0.05 percent to 6.5620, many have speculated that despite the sharp easing, the PBOC continues to intervene and will not the currency lead to a resumption in capital outflows. The Bloomberg Dollar Spot Index declined 0.1 percent, trimming this month’s advance to 3.4 percent. The yen was little changed near 110 versus the greenback after Goldman Sachs Group Inc. predicted the Japanese currency would slide 12 percent by this time next year.  The MSCI Emerging Markets Currency Index climbed 0.2 percent. The won rose 0.9 percent, boosted by optimism that strength in the U.S. economy will shore up demand for South Korean exports. Malaysia’s ringgit strengthened 0.6 percent and Russia’s ruble gained for a second day to a one-week high.  Forwards on the Nigerian naira soared as traders increased bets on Nigeria’s currency weakening, with rates on three-month contracts jumping 16 percent to 288 per dollar. The central bank voted to allow “greater flexibility” in the foreign-exchange market on Tuesday, signaling policy makers may abandon a currency peg they’ve held for 15 months.

In commodities, oil extended gains in New York from the highest closing price in seven months after U.S. industry data showed crude stockpiles declined, easing a glut. Inventories dropped by 5.14 million barrels last week, the American Petroleum Institute was said to report. Data from the Energy Information Administration Wednesday is forecast to show supplies fell. West Texas Intermediate rose 1.1 percent to $49.15 a barrel and Brent added 1.1 percent to $49.16. WTI closed at a premium to Brent Tuesday for the first time in almost two weeks. Gold dropped to the lowest level in almost seven weeks. Bullion for immediate delivery fell 0.5 percent to $1,220.81 an ounce. Most industrial metals declined, with nickel dropping 0.2 percent and aluminum losing 0.3 percent. Copper rose 0.6 percent to $4,630 a metric ton.

On today’s US event calendar the early focus is on the April advance goods trade balance reading where some further widening of the deficit is expected mostly due to an expected recovery in imports. Away from that there will be further housing market data in the form of the FHFA house price index for March, while later this afternoon the flash May services (53.0 expected) and composite PMI’s are due out. Fedspeak wise we’ll hear from Harker again while Kashkari and Kaplan are also scheduled for talks.

Bulletin Headline Summary From RanSquawk and Bloomberg

• European equities followed suit from their US and Asian counterparts to trade higher across the board with news of a Greek deal and energy markets also guiding price action
• GBP has once again been a key source of focus for FX markets with GBP/USD briefly breaking above 1.4650 before paring gains in recent trade
• Looking ahead, highlights include BoC Rate Decision, US Trade Balance, Services PM! and DOE U.S. Inventories, Fed’s Harker, Kashkari and Kaplan
• Treasuries little changed in overnight trading as global equities rally along with oil; Treasury auctions continue with sale of $34b 5Y notes, WI 1.41%; last sold at 1.41% in April, first tail by a 5Y auction since January.
• Chinese officials plan to ask their American counterparts in annual talks next month about the chance of a Federal Reserve interest-rate increase in June, according to people familiar with the matter
• The ECB expanded the size of its debt-buying program in April by a third to €80 billion ($89 billion) a month and appears to be running out of securities eligible under its own rules
• ECB will aim to buy €5b-€10b worth of corporate bonds per month after it starts “small” in June, Reuters reports, citing several unidentified central bank people with knowledge of matter
• Brazil bond investors are dialing back their optimism after newly appointed Finance Minister Henrique Meirelles acknowledged that the country’s fiscal problems are much worse than anyone had imagined
• A meeting of euro-area finance ministers in Brussels paved the way for a €10.3 billion ($11.5 billion) aid payout to Greece but left important details to be hammered out after Germany’s federal election next year
• Greece’s bonds advanced, pushing 10-year yield below 7% for the first time since November, was as high as 19% last July
• Sovereign 10Y yields mixed; European, Asian equities higher; U.S. equity-index futures rise; WTI crude oil higher, precious metals mixed

US Event Calendar

• 7:00am: MBA Mortgage Applications, May 20 (prior -1.6%)
• 8:30am: Advance Goods Trade Balance, April, est. -$60b (prior -$56.9b)
• 9:00am: House Price Purchase Index q/q, 1Q (prior 1.4%)
• 9:00am: FHFA House Price Index m/m, March, est. 0.5% (prior 0.4%)
• 9:45am: Markit US Services PMI, May P, est. 53.0 (prior 52.8)
  • Markit US Composite PMI, May P (prior 52.4)

Central Banks

• 9:00am: Fed’s Harker speaks in Philadelphia
• 11:40am: Fed’s Kashkari speaks in Bismarck, N.D.
• 1:30pm: Fed’s Kaplan speaks in Houston

DB’s Jim Reid concludes the overnight wrap

Although credit spreads are generally wider in May on the back of very strong issuance, a number of major equity bourses returned back to positive territory for the month yesterday. Indeed the S&P 500 (+1.37% yesterday, +0.52% MTD) and DAX (+2.18% yesterday, +0.18% MTD) were last positive for May on the 16th and the 10th respectively. The Stoxx 600 (+2.21%) actually went into positive territory (+0.77%) for first time this month following the biggest one day gain yesterday since April 13th. It was hard to pinpoint one particular trigger for yesterday’s rally but one theme which was constant on both sides of the pond was the strong performance for Banks. Indeed a contributor to this may have been some of the comments coming from ECB Supervisory Chief Daniele Nouy. Speaking at a conference in Madrid, Nouy made mention of the ECB still having a lot of work to do on addressing legacy assets and particularly non-performing loans but that the Bank ‘will fast come with certain proposals’. She also highlighted that she is comfortable with the current minimum capital requirements for banks in Europe. Indeed it was the peripheral bourses that outperformed yesterday with the FTSE MIB in particular rallying to the tune of +3.34% with the likes of Monte de Paschi, Banco Popolare, Intesa Sanpaolo and UBI up between 5% and 10%.

Some of the commentary also pointed towards the latest bumper housing data in the US as helping to nudge rate expectations and yields a little higher and so in turn lending a helping hand in the rally for financials. In fairness much of the rally had already occurred prior to the data but in any case it helped to consolidate gains and was perhaps just evidence that investors are becoming a little more comfortable with the prospect of a possible rate move this summer. New home sales rose an impressive +16.6% mom in April which compared to expectations of just +2.4%. As a result the annualized rate rose to 619k from 531k which is the highest since January 2008 while the monthly surge was actually the biggest since 1992. That helped the US Dollar to strengthen +0.70% relative to the Euro while 10y Treasury yields edged up just shy of 3bps (2y yields were up a less impressive 1bp). By the end of play the odds of a move in June are now 34% (from 32%) with July consolidating around 54%.

Meanwhile rising Oil prices did little to spoil the mood yesterday as WTI (+1.12%) ignored yesterday’s stronger Dollar and has in fact crept back above $49/bbl this morning (and testing the YTD highs) in Asia following a similar magnitude gain ahead of today’s US stockpile data. Elsewhere Gold (-1.75%) tumbled yesterday and is now down over 5% this month.

Before we look at how markets have followed up in Asia, there’s been some positive news to come out of the Eurogroup meeting overnight following 11 hours of talks with the announcement that Greece’s creditors have come to an agreement on allowing for the release of €10.3bn of aid as well as committing to debt relief in later years. It appears that it is the IMF which has backed down somewhat from its previous harder stance with the agreement that the Fund will continue to participate in the nation’s rescue package too. Greek press Ekathimerini is reporting that conditional debt relief is to be granted from 2018 while a statement from the Chair of the meeting, Eurogroup President Dijsselbloem, said that ‘we achieved a major breakthrough on Greece which enables us to enter a new phase in the Greek financial assistance programme’. The finer details should get debated today but so far it looks like there are valid grounds for optimism that this is a big positive step in the right direction.

Refreshing our screens this morning, the positive lead from the US and Europe yesterday has continued this morning in Asia where we’ve seen a decent rebound across the majority of bourses. The Hang Seng (+2.56%) is leading the way, while the Nikkei (+1.80%) is not far behind. In China the Shanghai Comp (+0.41%) and CSI 300 (+0.50%) are both higher while elsewhere the Kospi (+1.15%) and ASX (+1.73%) are also stronger. Credit markets are rallying too with the iTraxx Aus, Asia and Japan indices 3-5bps tighter. There’s also been some activity in FX markets this morning with the main news being that the PBoC has set the CNY fix at its weakest level since March 2011. Indeed the fix was set 0.34% weaker although the current spot rate this morning (around 6.562) is still below the levels reached in the volatile month of January when there was arguably alot more focus on where the PBoC was setting the reference rate for the currency.

Back to yesterday, there was actually a reasonable amount of focus on some of the other chatter coming from the ECB yesterday. Vice-President Constancio said that in his view it is still too early to start discussing further stimulus from the ECB as a response to more challenging financial conditions. Constancio said instead that he prefers to hold tight to wait and see what the effects are of the latest round of measures from the Bank. Meanwhile the ECB’s latest edition of its semi-annual Financial Stability Review showed that a rise in political risk ‘poses a challenge to fiscal and structural reform implementation and, by extension, public debt sustainability’. The review went on to show that this in turn could put renewed pressure on vulnerable sovereigns while potentially contributing to contagion and re-fragmentation in the Euro area.

Meanwhile, over in the UK a fresh EU UK referendum poll released late last night for the Times newspaper and run by YouGov showed an even running between the Remain and Leave camps at 41% each. The Bloomberg headline suggests that the poll covered the May 23rd and 24th period. The last YouGov/Times poll had been split at 44% to 40% in favour of Remain.

Rounding off the other economic data that was released yesterday, in the US the only other release of note was the Richmond Fed manufacturing index for May which provided for further evidence of softness in the sector after dropping 15pts this month to -1 (vs. +8 expected). New orders were also down a significant 18pts. Prior to this in Europe, Germany had reported no change in its final Q1 GDP revision of +0.7% qoq. Meanwhile the May ZEW survey was released which revealed a 5.4pt increase in the current situation component to 53.1 (vs. 49.0 expected). The expectations survey however was down a disappointing 4.8pts to 6.4 (vs. 12.0 expected). It’s worth noting that our German Economists have now revised down their Q2 GDP forecast from 0.3% to 0.1% as they expect material payback for the Q1 strength. While they remain optimistic with regards to the labour market, they think that the impetus from low oil prices to real income is fading. In addition, the mild winter has allowed construction work to be pulled forward, albeit the payback might be limited by the strength of underlying construction demand.

Looking at today’s calendar, this morning we’re kicking things off in Germany where shortly after this hits your emails the latest German consumer confidence data is out. We’re staying in Germany shortly after that when we’ll get the IFO survey for May where a modest increase in the business climate reading is expected. This afternoon in the US the early focus is on the April advance goods trade balance reading where some further widening of the deficit is expected mostly due to an expected recovery in imports. Away from that there will be further housing market data in the form of the FHFA house price index for March, while later this afternoon the flash May services (53.0 expected) and composite PMI’s are due out. Fedspeak wise we’ll hear from Harker again at 2.00pm BST while Kashkari (4.40pm BST) and Kaplan (6.30pm BST) are also scheduled for talks. It’s a busy day for ECB speak meanwhile with Villeroy, Schulz, Knot, Constancio and Praet all due to talk this morning. The EU finance ministers meeting also continues in Brussels today while Central Bank wise the only scheduled monetary policy meeting of note is the Bank of Canada this afternoon (no change expected).

via http://ift.tt/1TDK0PR Tyler Durden

 

Precious Metals: Fake-Rally Ends, Hostage Markets Return

Written by Jeff Nielson

 

 

Back at the beginning of 2009, we had a real rally in the precious metals sector. The price of gold increased by roughly 2 ½ times. Silver led the way, rising more than double that amount. And the precious metals miners soared much higher, leveraging the gains in metals prices – as they must do, in any legitimate rally.

The rally occurred immediately after the Crash of ’08, the manufactured crash at the end of the Big Banks’ previous bubble-and-crash cycle. It occurred after a sharp, ruthless take-down of precious metals prices had established a clear “bottom” in those markets. That rally was terminated in 2011, by the Big Banks, in one of the most-obvious price-capping operations in the history of markets.

What has followed is 5+ years of what has previously been referred to as “Hostage Markets”: markets which were kept in a permanent choke-hold since that date, with prices grinding steadily lower and lower. This brings us to the beginning of 2016.

At the beginning of this year; the price of gold did something which we had not seen for several years: it went up. At the beginning of this year; the mainstream media did something which we had not seen for several years: it began praising gold as an asset class – and announced that “a new rally” had begun. The talking heads proclaimed that the “fundamentals” for gold were now bullish, and thus the price should start to steadily rise.

There was never any reason to consider this to be a real, spontaneous rally, and several strong arguments to conclude that this was an upward price-fixing operation of precious metals prices, to set the stage for a larger, general crash, at the end of the current eight-year, bubble-and-crash cycle from the Big Bank crime syndicate.

1) Nothing at all has changed in precious metals markets (except the rhetoric of the mainstream media) versus the last 5+ years.

2) Silver has failed to “lead the way”, as it must in any/all legitimate rallies.

3) The Big Banks remain in complete control of all markets.

Taking these reasons in order, mainstream propagandists have proclaimed that precious metals markets are now supported by bullish fundamentals. However, the “fundamentals” for gold and silver have remained equally bullish throughout the 5+ years where we were forced to endure Hostage Markets. In other words, any “reason” that could be made for gold and silver prices to rise now was equally valid, at all times over the past 5+ years.

“Technical analysis” (a pseudo-science with little statistical validity) would argue that the reason we are supposedly seeing a rally in 2016 is because gold and silver have “built a base” over the past 5+ years, and thus are now “ready” for the next leg higher, in their long-term bull market. However, this argument only applies to asset classes which have already risen to fair-market value.

In 2011, even after the large 2+ year rally in these sectors, neither gold nor silver was even close to any fair-market price . As “monetary metals” the primary fundamental of gold and silver is that their prices mustreflect any/all increases in the supply of money (i.e. “inflation”).

When B.S. Bernanke perpetrated his infamous “helicopter drop”, printing U.S. funny-money at an astronomical rate, never before seen in any large economy in modern history, he ultimately quintupled the U.S. monetary base. The price of gold would have had to duplicate this quintupling, as a starting point, before one could even begin to consider this a fair-market price.

At the beginning of the Bernanke helicopter-drop, gold was priced at roughly $800/oz. This meant that the price of gold would have had to rise to at least $4,000/oz (at a minimum) before it would/could be necessary for the market to “build a base” (to support even higher prices).

While the price of silver did rise roughly proportionately in comparison to Federal Reserve funny-money creation, this was only because silver started the rally priced at roughly $8/oz – at a 100:1 price ratio versus gold. As educated readers are aware, the legitimate, long-term price ratio for gold and silver is 15:1, reflecting the natural occurrence of these metals in the Earth’s crust. Thus the price of silver would have had to rise to over $50/oz (higher than its 2011 peak) just to be priced rationally versus gold at the start of 2009.

In other words, in order for silver to (rationally) reflect Federal Reserve money-printing and the long-term price ratio versus gold, first the price of silver would have had to rise by a factor of roughly seven (just to be rationally aligned versus the price of gold), and then it would have had to increase by an additional factor of five – to mirror the Federal Reserve’s monetary insanity .

This means that the price of silver would have had to rise somewhere above $200/oz (in 2011), before there could be any rational argument that it was priced at fair-market value at that time. Thus, in 2011, when the prices of gold and silver were first capped, and then taken down, there was never any reason for that rally to have ended. The 5+ years of Hostage Markets which we saw with precious metals should have never occurred.

Similarly, at the start of this fake rally, the gold/silver price ratio was at an ultra-absurd level of roughly 80:1, with silver priced at roughly $13/oz (USD). Even if already priced at a correct price ratio, the price of silver would have to lead the price of gold in any legitimate rally because the silver market is much, much smaller. However, at the ultra-compressed price ratio which existed at the beginning of 2016, if a legitimate rally had begun in precious metals markets, the price of silver would have exploded out of the starting blocks – leaving gold well behind in its wake.

Instead, we saw the price of gold “rally” for the first two months of this year, while the price of silver lagged. Understand the arithmetic here. At an 80:1 price ratio, if only 1.5% of the money entering this sector went into silver, the price of silver would have had to rise at a faster rate than gold .

In the real world, the quantity of investment dollars going into silver is roughly parallel to the quantity of dollars going into gold. Had a similar ratio of investor dollars entered the bankers “paper bullion” markets the price of silver would have had to rise roughly 20 times faster/higher than the price of gold during this supposed rally.

The notion, in this “precious metals rally”, that no one was buying silver is patently absurd. The price of silver during most of this fake-rally wasn’t merely improbable, it was impossible.

Lastly, the Big Bank crime syndicate remains totally in control of what we call our “markets” (for lack of a better word). Currency prices remain fixed (rigged). Equity market prices remain fixed (rigged). Bond market prices remain fixed (rigged). Are we to believe that the banksters simply ‘forgot’ to continue their precious metals price-fixing – even as the mainstream media was shouting the word “rally” at the top of its lungs?

Simply, the rise in the price of gold (and muted rise in silver) which has taken place this year could have only occurred with the tacit support – if not overt assistance – of the Big Bank crime syndicate. At the same time, it is common knowledge that the banksters are firmly committed to suppressing precious metals prices, at all times.

…central banks stand ready to lease gold in increasing quantities should the price rise. 

– Testimony of Federal Reserve Chairman Alan Greenspan, July 24th 1998

The bankers “stand ready” to suppress the price of gold. Always. Eternally. Thus when we saw precious metals prices start to rise steadily/modestly at the beginning of this year, while the bankers remain in complete control of our markets, it could only have been because they wanted prices to rise.

Why? This question has already been answered . The current eight-year, bubble-and-crash cycle manufactured by the Big Banks is nearing its end. When this Next Crash is detonated, this crime syndicate obviously doesn’t want precious metals to stand out as “safe havens” — as all of their corrupt, paper assets are plunging in value.

The problem: with gold and silver already at rock-bottom prices at the beginning of 2016, it would have been very difficult to crash those markets (along with everything else). Thus the banksters need to march gold and silver prices higher, to some modest level, before they were set up to be crashed along with all other asset classes.

Now, the fake-rally appears to be at its end. This headline has been repeated again and again and again and again in the mainstream media over the past several days.

Gold in Longest Slump since November as Fed Signals Higher Rates

 Translation: a Fed-head talked about raising interest rates, and the price of gold fell. It is a headline which could have been copied-and-pasted out of any mainstream publication, any week, during the 5+ years of Hostage Markets.

Now here is the important point. When precious metals began their real rally at the beginning of 2009, the Fed-heads were already promising to raise interest rates then, as well. In fact they were promising much more. The Federal Reserve solemnly promised to fully “normalize” interest rates – quickly and immediately – at the beginning of 2009. Not some token, 0.25% rate increase. Fully normalized interest rates: meaning a benchmark rate of at least 2 – 3%.

Precious metals markets ignored that talk. All through 2009; the Fed-heads “promised” to raise interest rates, and gold and silver prices rose. All through 2010; the Fed-heads “promised” to raise interest rates, and gold and silver prices rose. All through the first 4 months of 2011; the Fed-heads “promised” to raise interest rates, and gold and silver prices rose.

Then, suddenly, after 28 months of the Fed-heads “promising” to raise interest rates, never keeping their promises , and precious metals prices continuing to rise, we had this paradigm suddenly reverse, for no reason. After 28 months of consecutively telling the same lie; suddenly precious metals prices began falling steadily, via nothing more than the same Compulsive Liars telling the same lie – which had previously been completely ignored.

The precedent, over the past eight years, is unequivocal. In a real rally, precious metals prices are not deterred from rising via Compulsive Liars simply repeating the same lie, over and over and over. It is only in the realm of Hostage Markets where (supposedly) these markets “react” to the same lie (and same Liars) which they had previously ignored, for several years.

A Fed-head talks, and precious metals markets fall. Readers are invited to call this paradigm of fraud anything that they want. But the one thing they can’t call this is “a rally”.

 

 

Please email with any questions about this article or precious metals HERE

 

 

Precious Metals: Fake-Rally Ends, Hostage Markets Return

Written by Jeff Nielson

 

 

via http://ift.tt/1NM31QH Sprott Money

By now we are accustomed to hearing about US spy planes flying recon missions that are either infringing or extremely close to infringing on the borders of other countries – especially Russian borders.

A US defense attache has been summoned by Russia's Defense Ministry to explain why a US spy plane was not only flying close to Russia's border on Sunday, but dangerously close to civilian aircraft as well. The US crew had not provided any information regarding its flight to air traffic controllers in the region, despite flying at the same altitude as scheduled civil aviation flights, and at least two passenger jets belonging to major European airlines were endangered by the then unknown aircraft according to Interfax. Planes headed to Switzerland from Japan even even reported visual contact with the US plane.

It's also important to note that the spy plane had its transponders turned off, something that Russia explicitly said not to do if the US is going to be sniffing around Russia's borders.

As RT reports

“As the result of the unprofessional actions of the American plane crew, the hazard of a collision with civil aviation planes was created," Russia's Defense Ministry said, adding that it asked the US official to take measures to prevent such incidents from happening near Russia's borders in the future.

 

At least two passenger jets belonging to major European airlines were endangered by the then-unknown aircraft over the neutral waters of the Sea of Japan on Sunday, Interfax reported.

 

The "unknown aircraft" was flying at the altitude of some 11,000 meters (36,000 feet) and did not respond to air traffic control, the agency said citing its source. Russian air controllers had to immediately change the flight path of a KLM Boeing-777, which was in the same region en route from Japan to Holland.

 

Pilots from another airplane, operated by Swiss airlines, heading to Switzerland from Japan, even reported "visual contact with a large four-engine aircraft, which was in direct proximity to their plane" and sent no recognition signals, the source said. The flying altitude for the Swiss jet also had to be changed by the air traffic control.

* * *

Clearly the US needs to stop with these missions before someone gets hurt and an international incident is triggered, however knowing that will never happen, might we suggest that the US at least get to the point where its spying isn't detected every single time.

via http://ift.tt/1UcTFN8 Tyler Durden

Submitted by Claudio Gras via Acting-Man.com,

Will the Swiss Guarantee CHF 75,000 for Every Family?

In early June the Swiss will be called upon to make a historic decision. Switzerland is the first country worldwide to put the idea of an Unconditional Basic Income (of $2,500 per month for every man, woman, and child for doing absolutely nothing) to a vote and the outcome of this referendum will set a strong precedent and establish a landmark in the evolution of this debate.

 

The Swiss Basic Income Initiative in a demonstration in front of parliament. As we have previously reported (see “Swiss Parliament Shoots Down Socialist Utopia” for details), Switzerland’s parliament has already rejected the idea, with even the socialists voting against it (proving that they are still in possession of most of their marbles and quite likely in possession of an abacus as well).

 

The Swiss public will have to approve or reject a change in the constitution that would allow for the introduction of an Unconditional Basic Income (UBI), or a preset, monthly minimum income to be paid out by the government to every adult and child in the country if their income falls below a specific threshold. Even though details of this proposal have been few and far between, the most commonly cited amount of this guaranteed income would be 2,500 Swiss Francs for adults and 625 francs for children. The architects of the proposal stress that this government-guaranteed payment, unlike the current benefit programs, will be entirely “no questions asked”, i.e., it will not be means-tested and will apply to every person legally living in Switzerland.

Currently, these are all the details that the Swiss have at their disposal to make their decision. No plan has so far been put forward to specify how such a proposal would be financed, whether an increase in income tax or VAT will have to be enforced, which specific existing welfare programs it would replace or how the glaringly obvious exploitation possibilities of such a plan would be avoided, without any kind of means test – or without “asking any questions”, according to one of the campaign’s catchphrases.

The main argument of the supporters of this initiative is that it would support the people that will, or already do, lose their jobs to automation and technological progress; a defensive move against “the rise of the robots” as they put it. They also claim that such a measure will give people the opportunity to grow, to learn and to pursue skills or professional goals that are now rendered prohibitive by their current meaningless and mundane jobs, that they are forced into in order to simply pay their bills. “What would you do if your income were taken care of?” asked the pro-UBI campaign in Geneva, with a poster that officially made it into the Guinness Book of Records as the world’s largest.

 

Meet the world’s largest poster ever. As to the answer to the question, a number of people would  likely immediately proceed to party. The poster unfortunately fails to ask “who is going to pay for it?” – or better said, who will be robbed at gunpoint to pay for it.

 

 

The Free Lunch – A Fantasy as Old as Methuselah

The promise of a free lunch is by no means a new thing in politics. Getting “something for nothing” is an age-old shiny trinket that has been dangled before the eyes of the public since time immemorial. In fact, it has appeared so excruciatingly often in our political history, for centuries on end, that one would think that it wouldn’t work anymore; not in 2016, surely. And yet it does. UBI is the proof that there are still people who choose to believe that “no strings attached” freebies and gifts are promises one can rely on and build an economy on, especially when they are coming from their government and rulers.

However, there are always some strings attached to such gifts and if history has taught us anything on this matter, it is the distinction between a gift and a bribe. Unsavory political ideologies and catastrophic cultural philosophies often tend to make their debut in front of the public hidden inside a Trojan gift horse. Unrealistic yet enchanting promises have always been a reliable political tool and it has never been a big strategic challenge to corrupt the people by granting the majority something that was stolen from minorities.

 

Another recent demonstration by UBI supporters in Switzerland – this one suggests that “robots” will actually pay for it all. This is based on a combination of the popular Luddite error that  “machines will make us all jobless” (an idea proven consistently wrong since the early 19^th century when the original Luddites went around to break machines, but who cares about evidence when changing the world is at stake!) and the fantasy that the world of Star Trek has already arrived, and machines will simply produce everything we need and want “for free” at the push of a button, in a kind of economic perpetuum mobile. Thus, we can now get serious about erecting the long dreamed of socialist Utopia – and this time, we’re going to get it right, you just wait and see!

 

We can easily spot the parallel in the promotion of Basic Income: Even though the architects of UBI in Switzerland, quite wisely, omit any reference to the realistic and structural aspects of their scheme, at the end of day, someone will have to pay for it. “Tax the 1%!”, argue their international fellow travelers, which, rather predictably, makes UBI even more attractive to a large portion of the public. This whole discussion about UBI reminds us of the following quote by Thomas Jefferson:

“A government big enough to give you everything you want, is a government big enough to take away everything that you have.”

 

Thomas Jefferson knew a thing or two about the true nature of government. By accepting a “free lunch” offered by the government, one is no longer free, but becomes dependent on the whims of the ruling elite – which is of course precisely what the ruling elite wants. In other words, what happens in reality is the exact opposite of what the UBI supporters imagine will happen. They assert that a basic income distributed by the State will “free people”, as they will no longer be forced to deal with the drudgery of having to earn a living. Thus, in a quite Orwellian twist, dependency is marketed as “freedom”.

 

 

The Cultural Argument for Collectivism

Key figures of the pro-UBI camp take pride in claiming that the main motivation behind the campaign is not economic but cultural. They say this proposal aims to make people think about the nature of life and work, it is a way to liberate them from the jobs they don’t like but need, a status which the scheme’s advocates, quite unhistorically, equate to the indignity of slavery. On top of this, they claim, UBI will help society survive the imminent unemployment apocalypse: they believe that with the help of automation and artificial intelligence 50% of all the existing jobs will be taken over within the coming decade by computers and machines.

 

The original Luddites were slightly less imaginative: instead of demanding a basic income, they simply went and smashed the machines they thought would take away their jobs. The underlying notion was simply anti-economic: it asserted that the very goal of economic activity, namely producing more with less, was somehow “evil”. Taken to its logical conclusion, this means one would have to reject civilization altogether and return to the “noble savage” life of cavemen and jungle dwellers bereft of tools (a life that would be nasty, brutish, very short and marked by a distinct lack of iPhones).

 

Such an argument might sound superficially rational, but it goes deeper than that: It presupposes that we as human beings see ourselves downgraded and equated to a machine, like just another cog that can be replaced at any time, in a system where man is literally defined as a human resource.

The truth is that it is indeed a cultural debate, far more than it is an economic one. The only conceivable aim of such a factually unhinged and unfounded proposal can be to gauge the mind-set of the Swiss people in this moment in time. The outcome of this referendum can provide a valuable insight into the Swiss mentality, and whether the Swiss  actually prefer collectivism over individualism. Such a signal could serve as cue for a further escalation of government empowerment: After all, the collapsing centralized system is bound to show symptoms of desperation by “doubling down” and accelerating and maximizing its centralization efforts. Thus focusing on the symptoms and secondary effects is futile; a real difference can only be made by addressing the root cause, the system itself.

 

Since the collapse of the Soviet system (of which many prominent Western economists asserted as late as the 1980s that it would eventually overtake capitalism and free markets – which goes to show how utterly blinded by ideology and statolatry the profession has become), most socialists have stopped making economic arguments in favor of socialism, realizing they are no longer credible. Instead they are now making moral and cultural arguments in favor of collectivism. Allegedly, although it will make us poorer, socialism is “morally superior” to the free market system. One might want to ponder the victims of the Chinese Cultural Revolution in this context – when the protection of individual rights is abandoned in favor of vague and pious notions of the “collective good”, things often tend to get real ugly very quickly.

 

Despite the economic non-sequiturs and the plain Utopianism that lie at the core of the idea of a Universal Basic Income, the concept seems to be gaining popularity worldwide. Canada is set to conduct an experiment with this idea later this year. The city of Utrecht in the Netherlands is launching a pilot program, Finland is planning a two-year trial and a British proposal is gathering interest, while the nonprofit group Give Directly will start providing a guaranteed income to 6,000 Kenyans this month in a decade-long scheduled program and track the results. The idea seems to be gaining traction due to the Western Left’s efforts, however the polls in Switzerland are painting a dramatically different picture: the UBI initiative is projected to suffer a crushing defeat.

 

A Bastion of Liberty

The Swiss have been voting counter-intuitively for years: When they held a referendum for or against six weeks of vacation, or when they were called upon to vote for an initiative advocating fewer working hours, or even when they made their choice on the issue of the minimum wage, they always delivered outcomes that seemed surprising to the rest of the West, especially the rest of Europe. Up to now, the Swiss have consistently rejected interference by the state when it came to such topics and have refused to grant more powers to their government. Even in recent years, when the trend in favor of aggressive state expansionism seems to be stronger than ever, Switzerland appears to still hold the line as the last bastion of liberty that remains standing.

So what is so different about the Swiss then? Switzerland is indeed very different, because it became a nation by its peoples’ own will, based on limited government, strong private property rights and a direct democracy founded on the principles of subsidiarity. This has always required open dialogue and being exposed to different ideas and values: Vigorous debate itself leads to an enlightened society. Thus, the essential difference lies in the nation’s culture, mentality and philosophy.

 

High up in the Swiss Alps, where they are playing strange instruments. The Swiss have always stood up for the rights of the individual against the State. They successfully defended themselves against the Hapsburg dynasty and other would-be conquerors, and attempts to introduce collectivist decay from within have been consistently rejected as well.

 

The Swiss have grown up in an environment in which the people were always able to decide for themselves, but they also have a long tradition of doubt and of dissent. Every critical issue is discussed and decided by the people, the actions of government are subject to the judgment of and limited by the citizenry. All viewpoints are heard, even anti-establishment voices have their say, and critical thinking provides the basis for society’s future. However, this is only possible when people rely on their own mind to think about the issues individually and independently.

Switzerland is therefore quite a hostile terrain for those who wish to promote “free lunches” and “no strings attached” gifts. A long history of independent thinking, of consequential analysis and of government limitation, makes it very easy for the Swiss to see past the populism-fueled empty promises and the associated publicity stunts. The upcoming rejection of the UBI proposal on June the 5th will and should serve as a reminder that the Swiss still remain the exception to the rule.

via http://ift.tt/1YYdXLK Tyler Durden