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Was that it for the great February/March bear market rally?

After soaring by 200 S&P point from the February 11 lows, the S&P 500 appears to have finally hit a resistance at a point where GAAP P/E is now a frothy 23x, and where even Goldman says the S&P500 is overvalued based on conventional market valuation metrics. Perhaps it was the fundamentals finally catching up, or perhaps it was disappointment that the BOJ added nothing new to the stimulus menu, after last week’s Draghi’s bazooka, and coupled with the stunning announcement by China it was willing to launch a Tobin Tax, a move that confirms that under the surface China’s capital flight is accelerating, overnight global markets and US equity futures have dropped while the yen jumped the most in a week.

What is surprising, is that not even a week after Draghi’s bazooka, some are already concerned it won’t be enough: “Monetary policy does not work without fiscal reform,” Brett McGonegal, chief executive officer of Capital Link International, told Bloomberg TV. “You can keep the monetary stimulus going, but if you’re not changing anything and there’s no reform going on, you’re at this point where it’s not going to work.”

Also notable is that oil has continued its decline for the second day, and at last check WTI was down $1, or over 2% – the lowest price in a week – as focus returns to the market oversupply, Russia signalling Iran won’t join a production freeze (which means neither will Kuwait, and likely most other OPEC members) and today’s API inventory data today which will forecasts another big inventory build at Cushing. As a result, there has been notable weakness among commodities, with currencies of resource-exporting nations sliding as copper and gold prices fell, while iron ore, last week’s record highlight short squeeze, plunged the most in eight months.

“Market participants now appear to be paying greater attention to the current oversupply again,” Commerzbank analyst Eugen Weinberg says in a note. “The primary focus is on Iran, which for understandable reasons is refusing at the current time to sign up to any agreement to cap production.”

Adding more pressure on the rally, Bloomberg explains that while world equities have staged a comeback since reaching a two and a half-year low in mid-February, “so far there are few signs that monetary easing in China, Europe and Japan is pulling the global economy out of a slump. The BOJ’s decision to maintain policy was forecast by most economists and the authority said it’s prepared to ease further if needed to revive inflation expectations. The European Central Bank announced unprecedented stimulus last week, while the Federal Reserve will conclude a review on Wednesday and the Bank of England a day later.”

“Monetary policy does not work without fiscal reform,” Brett McGonegal, chief executive officer of Capital Link International, told Bloomberg TV. “You can keep the monetary stimulus going, but if you’re not changing anything and there’s no reform going on, you’re at this point where it’s not going to work.”

But as we wrote yesterday, the one event that will truly make or break the market is tomorrow’s FOMC announcement: if Yellen turns overly hawkish and there is no major revision to the dots, or – don’t even think it – the Fed shocks the market and hikes another 25 bps, then we go right back to square one, where the market was in December of 2015, terrified every time China sneezes.

Market snapshot:

• S&P 500 futures down 0.6% to 1998
• Stoxx 600 down 0.9% to 342
• FTSE 100 down 0.6% to 6137
• DAX down 0.3% to 9956
• German 10Yr yield up 1bp to 0.29%
• Italian 10Yr yield up 2bps to 1.32%
• Spanish 10Yr yield up 3bps to 1.49%
• S&P GSCI Index down 1.3% to 322.9
• MSCI Asia Pacific down 0.9% to 127
• Nikkei 225 down 0.7% to 17117
• Hang Seng down 0.7% to 20289
• Shanghai Composite up 0.2% to 2864
• S&P/ASX 200 down 1.4% to 5111
• US 10-yr yield down 2bps to 1.93%
• Dollar Index up 0.1% to 96.72
• WTI Crude futures down 2.7% to $36.18
• Brent Futures down 2.9% to $38.38
• Gold spot down 0.1% to $1,234
• Silver spot up less than 0.1% to $15.35

Global Top News

• Avon Plans to Move Headquarters to U.K. and Cut 2,500 Jobs: Will generate one-time expenses of ~$60m in 1Q, expects to generate savings of as much as $70m from the cuts by 2017
• Kuroda Holds Fire on Stimulus as Japan Digests Negative Rate: BOJ kept the target for increasing the monetary base unchanged, and left benchmark rate at minus 0.1%
• Apollo Said to Seek $700 Million for CLO Firm as New Rules Loom: New firm will issue collateralized loan obligations, as part of its effort to comply with rules designed to curb excessive risk-taking by managers of the vehicles, according to 2 people with knowledge
• Sony Buys Jackson Stake in Music Venture for $750 Million: Co. exercised right to acquire partner’s stake
• Brookfield, Qube Join Forces in A$9.1 Billion Asciano Bid: Former rival groups led by Brookfield Asset and Qube joined forces to buy Asciano in a A$9.05b ($6.8b) bid
• U.S. Steel Vows to Escalate War on Imports If Duties Fall Short: CEO Longhi vows to file 201 case if final penalties fall short
• Cliffs Natural Investors Sue for Being Shut Out of Debt Swap: Investors say Cliffs Natural has two classes of bondholders
• U.S. Ethanol Glut Begins to Test Limits of Storage Capacity: Kinder Morgan rerouted deliveries away from Illinois terminal
• Herbalife Spent $700,000 Protecting Its CEO From Threats in 2015: CEO faced threats to his well-being after Bill Ackman began accusing the company of being an illegal pyramid scheme
• Outerwall Rises 9% Post-Mkt on Strategic Alternatives, Div Boost: Hires Morgan Stanley for strategic and financial alternatives
• Question Looming Over Aubrey McClendon Crash May Go Unanswered
• GM Offers Rentals to Lyft Drivers Accelerating Challenge to Uber
• Trump Victories in Key Races Could Vanquish Kasich, Rubio
• JPMorgan Said to Prepare to Sell $1.9b RMBS: WSJ: Expected to price residential mortgage-backed deal over next 2 weeks; would hold 90% of the deal, WSJ reports
• Amazon Set to Launch Cloud Migration Service: WSJ: Thomas Publishing to transport data from own servers to Amazon’s data centers, WSJ reports
• U.S Govt May Withdraw Plan for SE Atlantic Coast Drilling: NYT

Looking at regional markets, Asian stocks traded negative following Wall St.’s lacklustre lead amid weakness in commodities, while Japan reacted to the BoJ decision to keep the policy unchanged. Nikkei 225 (-0.7%) was pressured as JPY strengthened following the BoJ decision to leave policy unchanged while also dropping its reference regarding deeper cuts into negative territory. Energy and basic materials underperformed in the ASX 200 (-1.4%) after commodity prices declined. Shanghai Comp (+0.2%) completed the somber tone with materials underperforming, while the PBoC kept its liquidity injections reserved and weakened the reference rate. 10yr JGBs traded lower and fell below 151.00 amid a lack of demand and disappointment from a lack of BoJ action.

BoJ kept policy steady with the annual rise in monetary base at JPY 80trl and interest rates held at -0.10% as expected.

• BoJ voted 8-1 to maintain monetary base and voted 7-2 to maintain its negative rate.
• BoJ said that additional easing will happen if required but removed phrase regarding cutting interest rates deeper into negative territory if deemed necessary.

PBoC sets CNY mid-point at 6.5079 vs. close. 6.5015 (Prey. mid-point 6.4913), injects CNY 20bIn via 7-day reverse repo.

Top Asian News

• Foxconn Said to Delay Sharp Deal for Clarity on Quarterly Result: Delaying finalization of its deal for Sharp to get a clear understanding of Sharp’s performance in the current qtr, increasing the chances an agreement won’t be reached this month, according to people familiar with the matter
• China Said to Draft Currency Transaction Tax to Damp Speculation: Initial rate of levy may be kept at zero, people familiar said
• Bangladesh Central Bank Chief Ready to Quit Over Cyber Heist: Atiur Rahman offers to resign
• Singapore Developers Post Lowest New Home Sales in 14 Months: Builders sold 301 units in Feb., -7% m/m
• Day of Reckoning Coming for India’s ‘Pigs With Lipstick’ Lenders: Central bank audit ending March 31 to uncover more bad debt

European markets follow on from Asia to see equities trade in the red this morning, with dampened sentiment apparent across asset classes. In terms of the session’s laggard’s, financials, material and energy names underperform , as the likes of Anglo American (-9.6%) and BHP Billiton (-5.8%) are among the worst performers in Europe. Despite the edginess in equities, fixed income have done their own thing for much of the morning, trading lower by around 20 ticks and around 161.50. Ultimately, price action could remain relatively rangebound as participants look ahead to today’s tier 1 data releases which include US Retail Sales, PPI Final Demand, Empire Manufacturing and Business Inventories.

Top European News

• Legal & General Full-Year Profit Rises on Retirement Revenue: 2015 oper. profit GBP1.46b vs est. GBP1.47b; Solvency II ratio was 169%, based on a surplus of GBP5.5b
• Antofagasta Scraps Dividend as Metal Rout Erases Most Profit: Net income ex-some items fell to $5.5m from $422.4m yr earlier, dividend scrapped as interim payment exceeds 35% payout ratio
• Sainsbury Joins Listed Supermarket Rivals Back in Growth Mode: For the first time since 2011, LFL sales are rising at Sainsbury, Tesco and Morrison; Sainsbury 4Q LFL sales rose 0.1%
• Russia Begins Syria Withdrawal as Putin Puts Onus on Assad: Jets have started to return to Russia, Defense Ministry says
• Traders Missing Rebound Yank Billions From European Stocks: U.S. traders withdraw money from euro-area ETF for fifth week
• U.K. Bond Sales Seen Jumping Most Since 2009 as Osborne Thwarted: Median forecast from dealers is for GBP139b issuance
• Italy Recovery From Recession Seen Continuing Slowly but Surely: Will extend the expansion that started last year, said 19 of 25 respondents in a Bloomberg survey published Tuesday
• Campari Agrees to Acquire Grand Marnier for $760 Million: Bid of EU8,050/shr is 60% premium to closing price

In FX, the big move this morning was expected to have been USD/JPY, but the modest dip below 113.00 was modest given the BoJ’s no change policy decision. 112.90 is the low seen here so far, and little aggressive interest to push lower from these levels seen in London. However, no such respite for GBP, which has been under the cosh since yesterday, after both NY and Tokyo sold moderate pullbacks but London more aggressively so . The latest Telegraph/ORB poll on the EU vote puts the leave camp in the lead at 49% vs 47%, but the selling began ahead of this. Cable is now in the mid 1.4100’s, while EUR/GBP is eyeing a test of the double top at .7847. Elsewhere, the USD index has ripped higher, adding momentum to Cable losses, but EUR, AUD, NZD and CAD all losing out to a more modest degree. AUD support seen in the mid .7400’s — now being tested, while USD/CAD is now close to 1.3400.

In commodities, WTI and Brent continue to slide during European trade as concerns of a global glut take hold of markets due to Iran not budging on the production freeze. Gold has rallied in the last couple of hours but it is yet to reach the highs at the beginning of the Asian sessions of 1238.13/oz. Base metals are retracing some of the moves seen yesterday after China hinted it will invest further in property sector with copper futures down nearly 1%.

After several days of quiet on the US macro front today we have a spike in data updates and the February retail sales report looks set to be the highlight where market expectations are for a -0.2% mom decline in the headline and +0.2% mom gain in the core and control group components. Also out today will be the NY Fed empire survey which is expected to remain consistent with the weakness in the manufacturing sector. The February PPI report will also be important and it’s worth keeping an eye on the healthcare subcomponent given it is used in the core PCE deflator. Also due out will be January business inventories and the March NAHB housing market index print. Away from this, tonight will see five more primaries in the US President race

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities trade lower across the board after taking the lead from Asia which saw the BoJ refrain from carrying out any additional easing
• As such, the JPY remains firmer against its major counterparts, while GBP remains out of favour as London continues aggressive selling of the currency
• Looking ahead, highlights include US Retail Sales, PPI Final Demand, Empire Manufacturing and Business Inventories
• Treasuries rise in overnight trading while global equity markets, oil sell off after BOJ refrained from additional monetary easing as they await impact of the negative rate strategy adopted in January; FOMC begins two-day meeting today.
• Deutsche Bank, whose debt plunged last month, is offering three-year notes in euros. The sale will test investor appetite for the bank’s debt following management efforts to allay concerns about capital levels
• Britain is set to increase government-bond sales by the most since the financial crisis as a cooling economy and asset- sale delays hinder plans to balance the books. Gross issuance may jump 17% in the next fiscal year
• The chances of a U.K. interest-rate cut are rising, the big risk on the horizon is June’s European Union referendum. A vote to leave the bloc could push Britain toward a recession and force the BOE to respond
• Lenders are getting stingier when it comes to funding risky U.S. real estate developments, putting pressure on landlords in need of fresh funding to keep their projects afloat
• German Chancellor Angela Merkel got her marching orders from voters to cut the flow of refugees. Now she needs Turkish President Recep Tayyip Erdogan to play along and help lift her out of a career-threatening jam
• Russia said its forces have started leaving Syria after President Vladimir Putin ordered the military withdrawal in a surprise move that puts pressure on the regime of Bashar al-Assad and opposition groups to reach a peace deal
• $8.3b IG corporates priced yesterday; MTD $94.72b, YTD $388.97b; $1.1b HY priced yesterday, $15.125b MTD
• Sovereign 10Y bond yields mostly steady; European, Asian equity markets lower; U.S. equity- index futures drop. WTI crude oil, copper, gold fall

US Event Calendar

• 8:30am: Retail Sales Advance, Feb. est. -0.2% (prior 0.2%)
  • Retail Sales Ex Auto, Feb., est. -0.2% (prior 0.1%)
  • Retail Sales Ex Auto and Gas, Feb., est. 0.2% (prior 0.4%)
  • Retail Sales Control Group, Feb., est. 0.2% (prior 0.6%)
• 8:30am: PPI Final Demand m/m, Feb., est. -0.2% (prior 0.1%)
  • PPI Ex Food and Energy m/m, Feb., est. 0.1% (prior 0.4%)
  • PPI Ex Food, Energy, Trade m/m, Feb., est. 0.1% (prior 0.2%)
  • PPI Final Demand y/y, Feb., est. 0.1% (prior -0.2%)
  • PPI Ex Food and Energy y/y, Feb., est. 1.2% (prior 0.6%)
  • PPI Ex Food, Energy, Trade y/y, Feb. (prior 0.8%)
• 8:30am: Empire Manufacturing, March, est. -10.5 (prior -16.64)
• 10:00am: NAHB Housing Market Index, March, est. 59 (prior 58)
• 10:00am: Business Inventories, Jan., est. 0% (prior 0.1%)
• 4:00pm: Total Net TIC Flows, Jan. (prior -$114b)
  • Net Long-term TIC Flows, Jan. (prior -$29.4b)

DB’s Jim Reid concludes the overnight wrap

So with the ECB ticked off, next on the central bank conveyor belt line was the BoJ this morning. Unlike what we saw from its European counterpart on Thursday, the BoJ has refrained from adding further stimulus this month. That means Japan’s new benchmark interest rate has been held at -0.1% and the annual purchases also maintained at ¥80tn a year. The decisions to hold fire on both were met with fairly convincing 7-2 and 8-1 respective majorities by BoJ board members. The bigger event now will be what Governor Kuroda chooses to say in his statement, the outcome of which we should know shortly.

Taking a look at the price action, an initial modest weakening in the Yen (touching 114.1) has given way to a decent bounce now, with the currency now +0.30% stronger on the day at 113.5. JGB yields are little changed relative to the moments prior to the decision, with the 10y currently up 2bps at -0.026%. The Nikkei is -0.89% and near its lows.

At this stage its worth putting some colour around the moves in Japanese assets since the BoJ cut rates into negative territory on January 29th. In that time (based on the intraday level just prior to the announcement and the current level this morning) the Nikkei is flat, while the Yen has strengthened over 4.5%, and 10y JGB’s are 24bps lower in yield (although have been more). In contrast, the S&P 500 and Stoxx 600 are +6.7% and +2.9% respectively, the USD index is -2%, the Euro -1.7% and 10y Treasury and Bund yields are unchanged and 12bps lower respectively. So clearly the effect has had a far greater impact on bond yields as opposed to Japanese equities, while the move for the Yen is perhaps the most curious of all.

Before we move on, a quick look at the rest of Asia this morning where it’s been a broadly weaker start on the whole. Along with those declines in Japan, the Hang Seng (-0.72%), Shanghai Comp (-1.13%), Kospi (-0.21%) and ASX (-1.30%) are all lower, while Aus and Asia credit indices are 5bps and 2bps wider respectively. Oil markets are off another percent or so which has helped US equity market futures turn negative this morning. Also of note this morning is news out of China where Bloomberg reports are suggesting that PBoC is in the process of drafting rules for a form of tax on FX transactions, in what’s said to be aimed at curbing currency speculation.

Moving on. Consolidation was the name of the game for markets yesterday and one which certainly reflected a ‘wait and see’ mode between the ECB and BoJ/Fed meetings. This was reflected by what was a fairly mundane session for US equity markets in particular where we saw the S&P 500 eventually close -0.13% (a rare decline this month) with the intraday high-to-low range a lowly 0.62% which is the smallest in 2016 so far. It’s amazing to see that the average range of the 49 trading days so far this year has been 1.73% and that 39 of those sessions have seen ranges of greater than 1%. Prior to this, European equities extended their gains with the Stoxx 600 closing +0.71%, although the post-ECB mammoth rally for European credit markets finally halted with iTraxx Main and Crossover closing 5bps and 9bps wider respectively. That said the indices are still 15bps and 47bps tighter than their pre-ECB levels. US credit also succumbed, with CDX IG over 2bps wider by the close of play.

With newsflow very light, it was Oil (a not too uncommon theme this year) which attracted the bulk of the headlines and ultimately dictated the price action for risk assets with WTI back below $38/bbl following a -3.43% decline yesterday. Much of this reflected stories emerging out of Iran with the country’s oil minister warning that the nation would not participate in an output freeze with other producers until they reached their production target of c.4m barrels a day, or roughly a third higher than current production levels. This follows the sanctions which were lifted on the country in January with the nation looking to ramp up output again to regain lost sales. Oil has risen nearly 50% from the intraday lows back in mid-February with the prospect of production freezes being a contributor in that rally. The WSJ touched on the possibility of these latest comments raising the risks that other countries involved in these talks (namely Saudi Arabia, Venezuela and Russia) may not follow through given the participation is contingent on Iran cooperating, however comments from Russia’s oil minister last night suggesting that Iran ‘may join us in the freeze with time’ and that ‘this is a normal, constructive position’ for them should abate major concerns for now.

One of the other interesting snippets from yesterday came from the European financials market and specifically UBS with the news that the Bank has issued Europe’s first coco bond since the huge sell-off which swept through the asset class in January. According to Bloomberg, the $1.5bn AT1 deal was said to have attracted $8bn of orders, with pricing also coming in tighter than the initial talk. Further evidence of the remarkable swing in sentiment that we’ve seen in the last six weeks or so.

Away from this there was little else to report yesterday. The only data of note was a robust industrial production print for the Euro area which bettered expectations at +2.1% mom (vs. +1.7% expected) in January which was the best monthly performance since 2009, with the data also helping support growth expectations for Europe. Meanwhile the ECB’s Villeroy spoke mid-morning and made mention to the need for the ECB to continue to adhere to its inflation mandate, highlighting the need for the target being essential for the ‘credibility of monetary policy’. Villeroy also noted that expanding purchases to corporate bonds is ‘a very significant signal for the real economy’.

Looking at the day ahead now, kicking off proceedings this morning will be France where we’ll receive the final revision to the February inflation report, followed later on by the Q4 employment report for the Euro area. This afternoon in the US is set to be a bumper session. The February retail sales report looks set to be the highlight where market expectations are for a -0.2% mom decline in the headline and +0.2% mom gain in the core and control group components. Also out today will be the NY Fed empire survey which is expected to remain consistent with the weakness in the manufacturing sector. The February PPI report will also be important and it’s worth keeping an eye on the healthcare subcomponent given it is used in the core PCE deflator. Also due out will be January business inventories and the March NAHB housing market index print. Away from this, tonight will see five more primaries in the US President race

 

via Zero Hedge http://ift.tt/1QUB0pc Tyler Durden

A car exploded in Berlin on Tuesday, killing the driver. 

According to some reports, the vehicle was in motion when the blast occurred. 

• GERMAN POLICE SAY ON TWITTER THEY BELIEVE AN EXPLOSIVE DEVICE CAUSED A CAR TO EXPLODE IN BERLIN

Here are the visuals from the scene: 

Berlin car bomb looks very professional, pointed charge, only killed driver, no bystanders. Interesting signature. http://pic.twitter.com/lIiJpK2UX7

— Julian Reichelt (@jreichelt) March 15, 2016

Gemäß unserer Kolleg. vort Ort, ist der PKW während der Fahrt explodiert und hat sich dann überschlagen.
^yt http://pic.twitter.com/Ae1K6OvkdG

— Polizei Berlin (@polizeiberlin) March 15, 2016

BREAKING: German police: Car explosion that killed driver in Berlin likely caused by bomb

— The Associated Press (@AP) March 15, 2016

Terror attack? Or perhaps a false flag to put still more pressure on the Merkel government to end the open-door refugee policy?

One certainly imagines it wasn’t faulty engineering – the vehicle was, after all, German-made.

via Zero Hedge http://ift.tt/1Lo1Plj Tyler Durden

By Stefan Wieler and Josh Crumb from GoldMoney.com

The full report can be accessed here
as PDF

 

Inflection
Points

 

Introduction

Gold prices
in USD have rallied strongly in recent weeks, up 18% year-to-date. Gold prices
in other currencies look similar; of the 20 most traded currencies in the
world, gold is up in all of them. In the media and in finance, as with most
exchange-traded commodities, gold is almost always quoted in USD. Hence, as
gold prices in USD moved lower over the past year, many remained under the
impression that gold was in a downtrend. However, when we look at gold priced
in the 20 most traded currencies in the world, in 80% of them, gold showed a
positive performance over the past two years. But does that mean gold in these
currencies has resumed its long term upward trend? In order to find that out,
we have created a set of intuitive rules to define inflection points at which
gold prices decisively change direction. We find that in 55% of the world’s
most traded currencies, gold has re-entered a clear uptrend.

Gold prices
in all currencies saw their peaks somewhere in 2011. What followed then was a
more or less sharp decline, but unlike for gold priced in USD, gold priced in
most other currencies troughed in late 2013 to early 2014 and has been trending
higher since. We find that for the world’s major currencies, uptrends tend to
last about 4.5 years on average during which gold prices increase by more than
100%. 95% of the world population does not use the USD as local currency and is
not paid in USD. Saving in gold has helped them to protect their wealth as
their currencies resumed their long-term decay. In the end, this is the path
all fiat currencies follow as their purchasing power declines. Gold is the only
money that has held its purchasing power over time. Indeed it is the only money
that has survived throughout history.

While the
USD and a few other currencies have so far been the outliers, prices have
reversed sharply as well. Applying our set of rules to the USD, we find that
gold has entered an uptrend as well as long as prices remain above $1165/ozt,
roughly USD100/ozt below current levels. Historically USD gold uptrends lasted
over three years and pushed gold prices up more than 200%.

 

Inflection Points

 

Gold prices rallied strongly in recent weeks in all major
currencies. In the 20 most traded currencies, gold is up between 13% and
23%year-to-date (see Figure 2). Unprecedented central bank action had pushed
gold priced in USD to an all-time high in 2011 but since then gold prices
trended down as longer dated energy prices moved sharply lower and USD real
interest rates have recovered from negative levels. (We explain how
longer-dated energy prices and real interest rates affect gold prices here.) In
the media and in finance, as with most commodities, gold is almost always
quoted in USD. Hence, as gold prices in USD have moved lower over the past
year, many remained under the impression that gold was in a downtrend. However,
a quick analysis of the year-over-year performance in gold shows that this view
is not warranted (see Figure 2). Last year, gold was flat or up in half of the
20 most traded currencies in the world. And it’s up with double digit returns
in all of them so far this year.

 

But does that mean gold in these currencies has resumed its
long-term upward trend? In order to find that out we have created a set of
intuitive rules to define inflection points at which gold prices distinctively
change direction. An inflection point is defined by two things: 1) the first
derivative of the 200-day moving average changes sign; and 2) there must be a
5% price change in the 200-day weighted moving average between two inflection
points.

The first rule simply says that the inflection point (the
point where gold ceases to be in a downward trend and enters an upward trend or
vice versa) is where the 200-day weighted moving changes direction, from down
to up or up to down. What is the 200 day weighted moving average and why are we
not simply using spot prices? The 200 day weighted moving average is the
average price of gold in a currency over the past 200 days, where the last day
is weighted with 1, the day before with 1-1/200 and so forth. The advantage of
the 200-day weighted moving average of a price is that the price history is
much smoother than just the daily price. Daily prices tend to be volatile and
change direction all the time. Hence over the analyzed period of 45 years since
1971, we could not positively identify long term trends as there would be
thousands of inflection points.

But even with the 200-day weighted moving average, there
will be some shorter periods where the curve changes direction without
establishing a clear trend change. That is where the second rule comes into
effect: An inflection point is only confirmed when the performance of the
200-day weighted average exceeds 5% (or -5% respectively) in the new direction.
In a nutshell, we define the local extrema where prices move in one direction
for at least 5% until the next local extrema. This rule allows us to identify
clear and sustainable trends. Once gold prices in a particular currency have
entered an upward trend, these trends tend to last for several years.

Before we show the results for all currencies we take a
closer look at gold in USD. The results for the USD are presented in figure 3.
There have been eight upward trends and eight downward trends since 1971. The
average trend lasted around 2.9 years where up-trend lasted slightly longer
than the average down-trends. The average uptrend yielded a performance of
207%, the average down move a performance of -39% measured by the 200-day
weighted moving average. Despite the recent rally, it is still too early to
determine whether gold in USD has re-entered an uptrend. Should gold prices not
drop below USD1165/ozt over the coming months (almost USD100/ozt below current
levels), a new uptrend will be confirmed.

 

By choosing the 200-day weighted moving average, we minimize
the number of trend changes, which allows us to identify the long term trends.
But the downside is that inflection points will only reveal themselves well
into the cycle and the inflection points on the 200-day weighted average are
lagging the true troughs and peaks (spot prices). For example, the lasted peak
in USD gold prices was in September 2011, but the 200-day weighted average only
changed trend in March 2012. In order to reduce the time lag we ran the same set of rules
but used a 50-day moving average instead. This time series is more volatile and
hence shows more frequent trend changes. By analyzing the 50-day moving average
indicated that gold in USD has already re-entered an uptrend.

For other currencies the case is much more decisive. In
euros for example, the 200-day weighted average made a low in June 2014. The
respective trough in the spot price was in December 2013. Since then prices
moved up 33%. The picture is similar for gold priced in Canadian dollars, where
prices are up 34% since the low in 2013. If historical performance is a good
indicator, these trends will continue to last for another two years and should
push gold prices substantially higher.

 

Applying these rules to the 20 major world currencies (20
most traded currencies according to the Bank of International Settlements), 55%
are now thoroughly in an uptrend (see Table 1). Of those currencies where gold
is still trending down, both the Hong Kong dollar and the Chinese yuan are
quasi pegged to the USD, so that shouldn’t come as a surprise. Excluding those
shows that in 2/3 of the world’s major currencies, gold is in a sustainable
up-trend. Table 1 shows how gold in the 20 most traded currencies has performed
through the up- and down-cycles since 1971 (some currencies with smaller price
history show shorter time-frames). On average there were eight up- and seven
down-trends. The up-trends lasted 4.5 years on average, the downtrends only two
years. Gold prices in their respective currencies were up anywhere from 133% to
several thousand % on average during an up-cycle, but only down between -24%
and -40%.

Gold has undoubtedly been a better store of value than any
currency over any prolonged period in modern history. After the sharp price
rise in the aftermath of the 2008-09 credit crisis, gold prices in all
currencies went through a period of consolidation. We believe, this was partly
because gold prices overshot to the upside and had to correct. In addition, the
sharp decline in energy prices has created negative headwinds for gold prices
in all currencies. These headwinds seem to be mostly behind us as longer-dated
energy prices have now reached unsustainable levels. (See our previous report
on this topic here.)

Gold prices in most currencies have thus resumed their long
term upward trend. 95% of the world population does not use the USD and is not
paid in USD. Saving in gold has helped them to protect their wealth as their
currencies resumed their long term decay. In the end, this is the path all fiat
currencies go as their purchasing power inevitably declines. Gold is the only
money that has held its purchasing power over long periods of time and indeed
is the only currency to have survived through history.

The USD and some USD-pegged currencies have been the
standouts of late as they appreciated vs other currencies as well as gold for
the past few years. However, with gold prices now firmly higher, gold in USD
has likely re-entered the uptrend as well. Our historical analysis implies
there is much more upside still ahead.

 

 

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Forex remains to be the largest market in the world and the least understood.  Central banks have more influence on global markets than any other force.  In other words, monetary policy is the ONLY economic indicator(s) investors should be watching, because let’s face it, if the Fed raised rates to 10% like they should do and called in all that QE money, stocks would collapse.

But yet Forex remains a mystery, something that someone may have mentioned or you heard about.. wait FX is a TV channel?  or graphics?  a movie?

One has to wonder who is more stupid, is it the clowns that worked for the big FX banks getting fined, jailed, or fired for misbehavior – or PBOC who seems intent to destroy not only any hope of becoming a ‘real’ currency (let alone a world reserve currency) but killing their trade markets as well:

In September last year, Chinese regulators stepped on the throat of a ‘fair’ market in equity futures trading and for all intent and purpose killed the Chinese equity market. Tonight – after 2 days of Yuan weakness – having warned everyon from Soros to Kyle Bass that “betting against the Yuan can’t possibly work,” The PBOC just unleashed plans for so-called “Tobin Tax” on FX transactions (which implicitly taxes each transaction, reducing liquidity, raising margins and reducing leverage).

Meanwhile, there is a real world demand for Forex, and the CME group is reporting record volumes, even 6% more than the previous record:

CME Group (NASDAQ:CME), one of world’s leading derivatives marketplaces, announced that on March 10 it reached record trading volumes for forex futures and options. The record 2 517 334 contracts were traded on the Chicago Mercantile Exchange (CME). The number is 6% higher than the previous record of March 6, 2010. Also on March 10, were traded the record 2 350 478 forex futures contracts, exceeding by 142 061 the previous record of 2 208 417 contracts from May 6, 2010. 

The record volumes were driven by the Euro FX Futures (EUR/USD) trade: $127.13 billion in notional value in futures and $18.5 billion in options.

As central banks become more and more like big hedge funds, and Forex markets become more volatile, there will be a growing need for Forex for any investment portfolio.

More and more public companies report ‘currency headwinds’ – the most notable recent report comes from Toys R Us:

Toys “R” Us Inc. said revenue slipped 2.6% in the latest quarter as the retailer faced currency headwinds over the holiday period.

The foreign exchange volatility was partially offset by the rise of same store sales of 2.3% in the fourth quarter. Currency woes, however, had a negative $169 million impact.

For the year, the toy store’s same store sales increased a modest 0.9%.

“Throughout the year, and especially during the holiday season, we focused on improving our execution to deliver a positive and memorable shopping experience to our customers,” said Dave Brandon, chief executive officer. “We significantly improved our performance, but we can and will make further progress on our quest to achieve flawless execution in every aspect of our operations.”

It must take a multi-million dollar salary to make such a bombastic statement… losing millions because of a lack of internal financial controls (i.e. no Forex hedging) and at the same time, state that we are on a ‘quest to achieve flawless execution in every aspect of our operations.’  Or maybe ‘flawless’ is executive-speak for misplacing a few million in the Forex market.  This guy should run for political office!

But it shouldn’t be alarming, in the meetings leading to the “Nixon Shock” and the modern free floating Forex system, genius statesman Henry Kissinger admitted honestly “Economics is not my Forte.”

Secretary Kissinger: But if they ask what they’re doing—let me just say economics is not my forte. But my understanding of this proposal would be that they—by opening it up to other countries, they’re in effect putting gold back into the system at a higher price.

Mr. Enders: Correct.

Secretary Kissinger: Now, that’s what we have consistently opposed.

Mr. Enders: Yes, we have. You have convertibility if they—

Secretary Kissinger: Yes.

Mr. Enders: Both parties have to agree to this. But it slides towards and would result, within two or three years, in putting gold back into the centerpiece of the system—one. Two—at a much higher price. Three—at a price that could be determined by a few central bankers in deals among themselves.

So, in effect, I think what you’ve got here is you’ve got a small group of bankers getting together to obtain a money printing machine for themselves. They would determine the value of their reserves in a very small group.

There are two things wrong with this.

Secretary Kissinger: And we would be on the outside.

We want money printing machine! We want money printing machine! (childish dancing and yelling)  

If The Fed had any sense, they would immediately raise rates to 10%, the US Dollar would soar.  Prices of imports would plummet.  Money would flow to USA like a river.  Exports, would need to be managed – but anyway the USA is a net-importer and it costs us nothing to print money and buy from foreigners.  

It’s amazing, the lack of understanding out there for the most important market in the world – the global money markets; FOREX.  On the one hand, our money is worth less and less every year (most economic actors are Forex losers).  On the other hand, Forex hedging is simple to use; and it’s possible to even make money by trading Forex.  

Elite E Services, Inc. published a book for those who want to know more about Forex “Splitting Pennies” on sale on kindle and in print from Lulu.  

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USDJPY was in full chaos mode ahead of tonight's BOJ statement. With only 5 of 40 economists expecting further actions by Kuroda (and close Abe advisor Hamada suggesting "I think the BOJ wouldn't take further action right now… probably it will be a wise decision," The BoJ decide to stay put – holding rates flat at -10bps, holding QQE buying flat, and maintaining its ETF buying program at expected levels.. After 'mixed' results following its NIRP bomb in January, perhaps it is wise to give the 'economy' time to absorb the craziness as Japan's Peter-Pan-ic continues. The initial reaction was weaker Nikkei and stronger JPY.

USDJPY algos were utterly confused by every headline before the release:

 

And then the chaos erupted:

• *BOJ MAINTAINS MONETARY BASE TARGET AT 80T YEN
• *BOJ MAINTAINS POLICY BALANCE RATE AT MINUS 0.100%
• *BOJ:FROM APRIL, ETFS TO INCREASE AT 3.3T YEN ANUALLY AS PLANNED
• *BOJ SAYS IT NEEDS TO BE MINDFUL OF RISK TO PRICE TREND
• *BOJ'S BOARD VOTES 7-2 TO KEEP NEGATIVE RATE UNCHANGED
• *BOJ CITES RISKS TO DELAY IN CHANGING DEFLATIONARY MINDSET

So nothing for now – more is always possible – and the board is split. Of course while expectations were for no change (from economists) the market seems disappointed…

 

Since Kuroda unleashed NIRP, things have been mixed…

Stocks are 'just' unchanged, JPY is stronger…

 

But the good news is yields have collapsed…

 

Bear in mind, this is the central bank that conjured the concept of Peter Pan to represent its efforts:

I trust that many of you are familiar with the story of Peter Pan, in which it says, "the moment you doubt whether you can fly, you cease forever to be able to do it." Yes, what we need is a positive attitude and conviction.

In other words – you have to believe to receive – or the entire ponzi collapses.

Perhaps alternative forms of stimulation are required:

 

Charts: Bloomberg

via Zero Hedge http://ift.tt/1UuOlWy Tyler Durden

In September last year, Chinese regulators stepped on the throat of a 'fair' market in equity futures trading and for all intent and purpose killed the Chinese equity market. Tonight – after 2 days of Yuan weakness – having warned everyon from Soros to Kyle Bass that "betting against the Yuan can't possibly work," The PBOC just unleashed plans for so-called "Tobin Tax" on FX transactions (which implicitly taxes each transaction, reducing liquidity, raising margins and reducing leverage).

Deputy central bank governor Yi Gang raised the possibility of implementing a Tobin tax late last year in an article written for China Finance magazine, and now, as Bloomberg reports, it is on!

China’s central bank has drafted rules for a Tobin tax on currency trading, according to people with knowledge of the matter.

 

Rules are aimed at curbing speculative trading, say the people, who asked not to be identified as the discussions are private

 

An initial tax rate may be set at zero so as to allow authorities time to set up rules without immediately implementing the levy, people say

 

Tax is not designed to disrupt hedging and other FX transactions undertaken by companies, people say

 

Rules still need final approval by central government and it’s not clear how quickly they may be implemented, people say

 

People’s Bank of China doesn’t immediately respond to faxed request seeking comment

What happens next? Well that's easy… This!~

NOTE: Yes that is real… and Yes there is 'some' volume there

Good luck unwinding those levered shorts… and even if the hedgies are profitable, we suspect the tax will be tiered to enable the maximum pain to be extracted from so-called speculators.

 

Charts: Bloomberg

via Zero Hedge http://ift.tt/22heA5g Tyler Durden