Tag: finance

Caught On Video: This Is All That’s Left Of Sears Canada

On October 11, we reported that the now defunct Sears Canada announced plans to liquidate its remaining 150 stores instead of restructuring, the latest admission of brick and mortar defeat in the war with Amazon, with the result some 12,000 job losses in the coming weeks. The Canadian version of Sears is the latest victim of department-store decline that’s swept North America as shoppers gravitate online. While the retailer has dabbled in pop-up stores and e-commerce, its distribution centers aren’t as automated as Amazon.com Inc. or even Canadian peer Hudson’s Bay Co., which last year opened its own robotic facility to accelerate online orders.

For thousands of soon to be unemployed Sears Canada workers and retirees the future of their pensions remains in limbo: Sears Canada has 18,000 retirees and beneficiaries whose monthly pensions its has to address. A motion was filed in August for a windup of the plan, which would require the company to pay the full C$266.8 million deficit, according to the filing. That motion has been postponed until at least Nov. 30.

There is also the question of what happens to all the local malls that suddenly find themselves without 150 anchor tennants. The Sears bankruptcy comes two years after Target’s liquidation left a hole in many of the country’s malls, which made it tougher for Sears Canada to find buyers for its real estate and leases.

What there is zero confusion about however, is what happens to liquidating stores once their employees – aware their termination is imminent – lose all interest in even pretending to keep up an appearance of normalcy.

The answer is shown in the following video from Vtography, which was taken in the Fairview Mall in Toronto on October 22, 2017, and which captures the chaos from a liquidation sale at, well, liquidating Sears Canada. All that’s missing from the post-apocalyptic scenes are the zombies.

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“Unhinged” Billionaire Steyer Urges Nation To “Impeach Mentally Unstable Trump” In Prime Time World Series Ad

In the commercial break right before the National Anthem was sung at tonight's game 4 of The World Series, embittered billionaire Tom Steyer decided it was time to release his full length ad demanding that President Trump be impeached…

"He's brought us to the brink of nuclear war, obstructed justice at the FBI, and in violation of the constitution, he has taken money from foreign governments and threatened to shut down news organizations who report the truth.

 

If that isn't a case for impeaching and removing a dangerous president then what has our government become?

 

 

…I'm Tom Steyer, and like you, I'm a citizen who knows it's up to us to do something.

 

…this president is a clear and present danger who's mentally unstable and armed with nuclear weapons…

As a reminder, President Trump was not impressed with Mr. Steyer during the week…

We note that not one of the players, coaches, ballboys, crowd, or concession workers 'took a knee' during the singing of the National Anthem.

Here is the full commercial…

As one would imagine, this stunt received some 'feedback' from social media…

But some seemed to appreciate it…

The billionaire environmentalist has also been sharply critical of California Senator Dianne Feinstein, who he considers soft on Trump because she once said he could be “a good President.”

In fact, according to CNN, Steyer is strongly considering a run against Feinstein in California’s primary election next year.

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Mainstream Media Now Claiming That It Is ‘A Crime’ To Investigate Hillary Clinton’s Ties To Russia

Authored by Alex Thomas via SHTFplan.com,

As the public has finally began to realize the extent of the corruption surrounding Hillary Clinton, including the now infamous Russia Uranium One deal, the mainstream media has gone into hyper-drive to discredit and distract from documented facts and are now going as far as to float the idea that Trump may be committing a crime for simply investigation Clinton at all.

That’s right, in the sick world of the establishment media, Trump is committing a criminal act by even considering an investigation into shady Clinton dealings with the Russians. After all, she is above the law right?

Even more disgusting, the so-called reporters spewing this nonsense are using the fact that Mueller is conducting a deep state operation (now discredited) against the president that accuses him of working with Russia to win the election when in reality it is the exact opposite. In other words, Trump is being accused of something he didn’t do but because of this, he can’t investigate real crimes committed by Clinton.

Absolutely unbelievable.

During an appearance on MSNBC’s “AM Joy” legal analyst Paul Butler laughably claimed that it “absolutely is” obstruction of justice for the government to investigate Hillary Clinton because… Russia.

“Would these attempts to distract from the investigation, even attempting to unseal or remove the gag order from an FBI informant in order to further what is essentially a side investigation that they’re pursuing, is that in itself an element of obstruction?” Host Joy Reid stunningly asked, making clear that she believes selling off 20% of the countries uranium supply to Russia is a “side issue”.

 

“It absolutely is. The statute says if you try to impede a federal investigation, then you are guilty of a federal felony. And with Donald Trump, it’s not just that he asked for a pledge of loyalty from his FBI director. It’s not only that he asked the national security intelligence folks if there’s any way they could thwart the investigations, not only that he reaches out to Michael Flynn after he’s been fired and tell him to keep your head up. I’ll see what I can do. It’s this attitude that he has,” Butler declared.

Not only does the above exchange once again show the establishment media’s ridiculous bias, it also shows that they are now running scared about the recent revelations and have since resorted to straight up nonsense as some sort of Orwellian defense.

Amazingly, criticism of even considering investigating Clinton didn’t stop there, as another guest on the show accused the “autocratic” Trump administration of attempting to get Clinton locked up over nothing. Keep in mind, we have literally dozens of reports showing how guilty Clinton actually is.

“Trump’s trying to feed his base. He’s trying to set up prosecution and persecution of people who he dislikes,” Fake news journalist Sarah Kendzior told Reid.

 

“He was not able to deliver. There’s no wall. There is still Obamacare, and so he’s shooting for lock [Clinton] up.”

In other words, Clinton has done nothing wrong at all and the only reason anyone is even talking about the failed presidential candidate is because Trump is failing in other parts of his presidency.

This is pure desperation at its finest folks.

“What I worry about is that this lock her up will extend beyond Clinton to any kind of opponent. He targets private citizens. Last week, he was targeting a grieving widow. So, there’s really no limits to what this administration would do. And so, I think even though it’s become obvious that this propaganda blitz was in part due to draw attention away from what Mueller did, we need to watch it in the weeks to come because his is an autocratic administration and I don’t think that they’re going to stop with these baseless smears and persecutory attempts,” Kendzior continued, adding in a mix of straight up lies and mischaracterizations while claiming with a straight face that Clinton has done nothing.

It doesn’t get any clearer than this. No matter what the Clinton machine is found to have done, the mainstream media, especially the puppets at MSNBC, will go to bat for her and they are now so desperate that they are willing to float the idea that even investigating queen Hillary is a crime.

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As Kurdish President Announces Resignation, Supporters Storm Parliament With Knives And Guns

Iraqi Kurdish leader Masoud Barzani announced his resignation Sunday after the biggest gamble of his 12 years as president of the Kurdistan Regional Government (KRG) not only failed, but utterly backfired as territorial reversals reduced KRG power to its weakest position in decades. Though his push for an independence referendum had overwhelming support among Iraq's Kurds, and with even the encouragement of some external allies, the decisive military response by the Iraqi national government resulted in rapid forced handover of Kurdish-held oil rich areas and a return to pre-2014 borders, prior to the blitz by ISIS which aided Kurdish political expansion. Barzani will step down effective November 1. 

And now the future of the KRG is itself under threat as reports of inter-Kurdish fighting emerged Sunday night. Multiple international reports characterized Barzani's speech as "bitter" and it further appears that violence erupted during or after his televised speech before parliament. During the speech Barzani proclaimed that, "three million votes for Kurdistan independence created history and cannot be erased" while also denouncing rivals who abandoned the fight for Kirkuk as committing "high treason."

His supporters, angry at what is essentially a forced resignation after rival Kurdish factions failed to oppose Iraqi national forces as they advanced in Kirkuk and other areas earlier this month, reportedly stormed parliament brandishing knives sticks, and guns. There are also unverified reports emerging that opposition party members were attacked during the chaos, as well as arson attacks on opposition offices in various parts of Erbil. 

According to a statement described as an "urgent message" to the international community from the Speaker of Kurdistan Parliament, Yousif Mohammed Sadiq, we could be witnessing the start of a broader breakdown in security in Erbil: "We are gravely concerned about the attack on Kurdistan Parliament Building today by a number of rioters with utter disregard for all human values and at the encouragement of a political party without any attempt by the security forces to prevent them." 

Barzani supporters storm Iraqi Kurdish parliament as he announces his resignation. There were reports of wounded among Erbil opposition politicians and some media staff on Sunday. 

 

Barzani supporters blame the recent disastrous KRG territorial losses on the Kurdish opposition party PUK, whose fighters generally allowed the previous advance of Iraqi forces after Baghdad ordered the pacification of Kirkuk city. The PUK has admitted that it reached agreement with the Iraqi military even as fighters representing Barzani's Kuristan Democratic Party (KDP) continued to battle. For this reason the KDP Peshmerga accused PUK factions which refused to fight of “plotting” against the Kurds and committing “a great and historic treason.”

For the Kurds, the non-existent to lukewarm support for the referendum among international powers was the latest (and perhaps greatest) in a long list of historic betrayals. According to Kamal Alam, a Middle East analyst for the Royal United Services Institute the Kurds "overstretched and one cannot help but feel sorry for them" as they were effective fighters against ISIS after the Iraqi army all but disappeared from some parts of the country. 

Alam told BBC World Service radio in an interview late last week, "But they were warned not to do this referendum by both Baghdad and Turkey and they were hoping to capitalize on the disagreements between Ankara and Baghdad, but it seems the referendum brought both the two capitals together to work against Kurdish dominance." And he added "they thought that a hundred year wrong which had been done to them would be corrected and they were perhaps given some assurances in some Western capitals that this time we won't let you down – you saw loads of Western officials say it and write about it… they have been let down again and now they'll have to just stay with what they have."

As the Iraqi Kurdish independence project has now resulted in failure, it will be interesting to see how this impacts developments in Syrian Kurdish areas across the Iraqi and Turkish borders – no doubt the example of Iraq has now provided further incentive for the Syrian Democratic Forces (SDF, whose core component is the Kurdish YPG) to go to the negotiating table with Syria and Russia, in the hope of retaining some kind of autonomous or federalized union with Damascus, as opposed to all-out war, which would result in being squeezed by Turkey from the north and Damascus from the south.

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The “Iron Coffin Lid”: Why The Euphoric Surge In Japanese Stocks Is Coming To An End

Last week, Japan’s Nikkei 225 index enjoyed its longest winning streak in history which eventually ending after 16 consecutive days of gains, only to resume rising after a brief one day hiatus. And, as foreign investors once again flood the Japanese stock market, chasing the momentum which has pushed local stocks to levels not seen since 1996, the question on everyone’s lips is how much longer can this continue?

Offering a decidedly downbeat outlook on Japan’s market exuberance, Shannon McConaghy – portfolio manager at what we have in the past dubbed the world’s most bearish hedge fund, Horseman Capital Management – believes that the euphoria is about to end. The reason: the ominously sounding “Iron Coffin Lid.”

In a note released late last week, McConaghy writes that there has been a lot of excitement over Japanese equities of late, with hyperbole from the sell-side, and others interested in promoting Japanese equities, becoming extreme. However, he cautions that “there is not a lot of discussion around the risks to Japanese equities from current elevated levels” and adds that “one observation I would make is that Japan has risen to these levels on a number of occasions over the last 25 years, only to fail spectacularly each time against what is referred to, by some in the Japan markets, as the “Iron Coffin Lid”. History suggests it is far better to be short Japanese equities from these levels than to be long.”

So what is this Iron Coffin, why does it have a lid, and what happens next?

Below is a visualization of this “Iron Coffin Lid” effect: it shows the key resistance level in the Topix beyond which the index has failed to progress every time in the past quarter century.

There’s more than just a chart however: here is Horseman’s take on why this latest rally in Japanese stocks is also set for disappointment.

For those unwilling to outright short, I would point out that historically Japan has had meaningful underperformance following past bursts of outperformance. In these periods it is particularly appealing to short against longs in higher growth areas. Japan also provides amplified short returns during global down turns. As such it can be a low cost but high return hedge to risk-off impacting long positions elsewhere. One way to identify when Japan is about to provide its greatest periods of underperformance is when its market capitalisation exceeds its Gross Domestic Product (GDP). Again, on this measure history suggests it is far better to get short Japanese equities at current levels than to get long.

 

 

One way to think about Japan’s persistent underperformance is that past market rallies have been quickly frustrated by structurally weaker GDP growth, as opposed to other markets with more sustainable growth. Japan’s GDP only grew +1.7% over the last 10 years, a CAGR of +0.169%. It grew even less in the 10 years prior. It is no mere coincidence that the market has failed to break out during decades of weak economic activity. Once again the market is pricing in significant economic expansion to come in Japan but its demographics, the key reason for past structural weakness, are only getting worse. I expect the euphoric hope held by many in the market, that “this time is different” in Japan, will once again be crushed by the “Iron Coffin Lid” that is Japan’s structurally weak economy. Long positions in Japan will likely be buried alive again while short opportunities thrive. Yes, Japan’s GDP growth rate has been higher since 2012, during what I would consider a recovery phase. But the drivers of growth in the three largest components of GDP growth are unsustainable, exhausted and now showing clear signs of reversing. Our market views to be released over coming days will look into these three major components of recent GDP growth in more detail.

Originating from Horseman Capital, hardly known for its optimistic outlook, here is the fund’s take on why Japan is set for more pain once the current euphoria fades, and how to capitalize on this imminent decline:

As a short preview, Japan faces immense risks to its economic system from;

 

  1. Declining private consumption as the number of households in Japan starts to decline. Nowcast data also shows a marked decline in household consumption in recent months.
  2. A precipitous decline within the financial sector, an often forgotten component of GDP. With the Japan Financial Services Agency now reporting that most regional banks have become loss making in core businesses.
  3. A roll-over in the real estate sector as residential oversupply hits, vacancy rates rise, rents fall, prices decline in some areas and contract ratios indicate more price cuts are coming.
  4. Net export growth, which has been driven by a weak Yen and weak oil prices, faces a risk of the Yen strengthening 22% back to the long run real effective exchange rate, as well as continued oil price rises.

 

Short opportunities in regional banks, real estate developers, Real Estate Investment Trusts (REITs) and mid-size retailers are particularly appealing. The first three of these sectors, about which we have written over the last two years, have been noticeably weak but still offer significant downside. The retail sector, about which we have only recently began to write, has yet to turn down but was a notably weak performer in the last years of the last global  credit cycle. Importantly we believe that shorting these sectors does not require an end to the global credit cycle, but they would likely generate amplified short returns in that environment and hence afford excellent hedges to other longs elsewhere.

Finally, it’s worth recalling that as of one month ago, the BOJ already owned three quarters of all Japanese ETFs: a number which is now certainly higher, and is a non-trivial reason why Japan’s stocks have enjoyed the recent surge. Of course, with ETF supply declining rapidly and the BOJ soon to be locked out of further purchases, the question is what will stoke further “flow” into risk assets (and frontrunning of central bank purchases), and will the BOJ expand its mandate further to buy single name stocks next in the name of “price stability?”

 

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Texans Kneel During Anthem After Owner’s “Inmates” Comments, As NFL Viewership Slides

Most players on the Houston Texans team knelt during the national anthem ahead of the team’s Sunday game with the Seattle Seahawks, following controversial comments made by the team’s owner, Bob McNair.

The protest came after Texans owner Bob McNair apologized for comparing players protesting during the anthem to “inmates running the prison.”

“I am truly sorry to the players for how this has impacted them and the perception that it has created of me, which could not be further from the truth,” McNair said, according to ESPN, which reported on Friday that McNair said “we can’t have the inmates running the prison,” in reference to players protesting police brutality during the national anthem.  McNair also reportedly told Houston players he wasn’t referring to them in his remarks.

The Texans’ protest comes as some players continue to protest during the anthem, more than a month after Trump launched a twitter attack on demonstrating players.

On Sunday, several San Francisco 49ers players knelt during the anthem on Sunday, two Philadelphia Eagles players reportedly raised their fists, according to The Associated Press, while nearly all players on the Minnesota Vikings and Cleveland Browns linked arms during the anthem as well. 

Also on Sunday, Rev. Jesse Jackson called for NFL players to escalate their “kneeling” protests in the face of criticism from President Trump and league owners.

“The players should escalate their nonviolent protests,” the civil rights leader told The Houston Chronicle on Sunday. “Donald Trump called them ‘sons of bitches.’ (Colin) Kaepernick is not degrading the flag. He’s kneeling to pray, which is in our best tradition. If we had not knelt and prayed nonviolently, where would we be today as a society?”

In the interview, Jackson decided to escalate the controversy and said NFL owners have a “plantation mentality” and believes there should be sanctions against McNair for his comments. Jackson reached out to McNair and Dallas Cowboys owner Jerry Jones, but hasn’t heard back from either, he told the Chronicle.

“The players are objectified in a sense,” Jackson said. “Mr. McNair is a product of the South. They act like he’s a victim or misunderstood, but those players have made him a wealthy man.”

Jackson did not elaborate how NFL players should escalate their protests.

Meanwhile, according to Nielsen Ratings, NFL viewership has posted a steep decline in recent weeks since the kneeling scandal erupted, which also led several advertisers to pull their funding from the NFL broadcasts.  NFL games averaged 15.1 million viewers through Week 7, according to Nielsen data obtained by Sporting News. That’s down 5.1% from 15.87 million viewers during the same period last season and off 18.7% from 18.35 million viewers during the same period in 2015.

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Global Macro ‘Reality’ – The Hopium Vs Doomium Model Explained

Authored by Peter Tchir via Academy Securities,

When Reality and Sentiment Diverge

The Hopium versus Doomium Model

We are initiating the Hopium vs. Doomium model today.  I first came across the word Hopium in the aftermath of the financial crisis.  It was typically used by ‘doomers’ who believed markets were far ahead of themselves and were betting on hope rather than reality.

This model attempts to pit what I view as reality versus what view as sentiment.  The scoring system is partly objective (technical indicating overbought or oversold, fund flows, positioning reports, etc.) and partly subjective (largely me trolling the media and social media trying to uncover true sentiment shifts).

What this is meant to do, is to identify opportunities where sentiment and reality diverge.  If sentiment and reality are roughly lined up, then there is no obvious trade to me, but when one is very different than the other, we can identify underweight or overweight opportunities (or even long vs short ideas depending on your mandate).

Macro Hopium/Doomium

VIX

Let’s start with volatility, or more specifically, the VIX index.  It briefly spiked above 13 on Wednesday as global bond selling, concerns about the next Fed Chairperson and even some pre-earnings anxiety swept through the market.  It finished the week at 9.8 which was lower than where it closed the prior Friday.  VXN, a measure of the Nasdaq volatility, also dropped significantly as the Nasdaq composite surged more than 2%.

I do believe that the biggest risk facing the market is a spike in correlation and volatility – but I don’t see that risk as very high right now.  I have VIX showing up as barely in the green – meaning it might be a buy, but it isn’t that compelling.

Reasons VIX can stay low

  • Seasonality.  With fewer trading days as we start the U.S. holiday season can often push VIX lower.  There have been instances, like the fiscal cliff and around elections, that hasn’t been the case, but anyone looking to buy VIX must take seasonality into account.
  • Expectations for Tax Reform in 2017 are low.  Anything short of killing all possibility of tax reform is likely to be largely ignored by the market.  The market does expect Tax Reform, but not until early next year.  So long as it looks like it is grinding towards that conclusion, there is little need for markets to react – keeping VIX low.  Any setback that can be framed as ‘negotiations’ will be muted.  I am not sure what will constitute derailment, but I suspect we will know it if we see it.

Surprisingly Nervous Volatility Sellers

  • No Rush to Sell VIX.  When VIX dropped into the close on Wednesday I expect to see large inflows into the short VIX ETFs and ETNs.  When VIX spiked in August, we saw extremely large inflows into those stocks.  We didn’t see anything like this, which is an indicator that the sellers of volatility are more cautious here, which as a contrarian, means there is less likelihood of a VIX spike.

SVXY Shares Outstanding Aug vs Oct

We did see a significant reduction in shares outstanding in UVXY – an ETF that is double long the VIX short term futures index.  It looks like either profit taking, or more accurately, investors happy to get out with less of a loss than they had, but nothing so dramatic to indicate volatility bulls (market bears) have given up yet.

From a technical standpoint, the VIX futures curve is relatively flat.  The 3rd VIX futures contract (January) closed at 13.35 versus the 1st VIX futures contract (November) which closed at 11.45.   That spread of 1.9 is almost exactly the average for the year between the 3rd and 1st VIX futures contract (UX3 vs UX1 are the tickers on Bloomberg).

Geopolitical Tail Risk

  • VIX has responded most violently to increased geopolitical risk.  More than any other asset class, VIX has responded when geopolitical risk has increased.  Academy Securities hosted a client conference call on October 18th (replays are available) where Major General (retired) Spider Marks analyzed the White House Chief of Staff’s assertion that the North Korea threat is ‘manageable’ and largely agreed with that assessment.  We will update you as our views on current geopolitical risk evolve, but in the meantime, for those concerned about it, the best hedges are either VIX call options of long dated European Sovereign Debt – which leads us to our next asset classes.

Bunds and Treasuries

As of the initial writing of this report, I do not know who President Trump will name as next Fed Chairperson, but like everyone else, I await that decision as it should provide some clarity.  I view that while there will be an initial price reaction to any decision, the market will quickly rule out the possibility of a major change in policy.  The reality is that the head of the Fed is virtually forced to be dovish.  If they are dovish and the economy does well – they are lauded.  If they are dovish and the economy does poorly – they can just get even more dovish.  The only thing that really hurts them, is being hawkish and the economy slowing.  Why risk that?  Draghi didn’t risk that this week!

I continue to view Treasuries as a good candidate to be underweight as my ongoing target for the 10-year treasury is 2.60% with a chance of briefly spiking above that.  The fundamentals for treasury investors are poor – improving economic data, D.C. trudging its way towards a near term deficit increasing tax plan, etc.  There seems to be more denial in the bond market than the equity market on the potential for sustained economic growth. 

I struggle with the positioning of the bond market as many surveys indicate extreme bearish positioning, yet I find relatively few bears and a disproportionate number of bulls – who are bulls because everyone else is bearish – despite my inability to find that overwhelming bearish community.

Draghi does it again – crafting every action to be as dovish as possible.

German 10 Year Bund Yields

Bunds bounced right at the 0.49% yield level again.  That is the 4th time this year that bunds have failed to rally though that level.

While it is hard to like European yields here, they are universally hated.  That puts them into the ‘yellow’ or neutral area – at least until some more of the short positions are closed post Draghi.

It is difficult to disentangle emotions from true market impact regarding what is occurring in Spain and Catalonia.  The headlines and images are awful, but it is difficult to form a direct and near-term path that impact all European markets, let alone global markets.  It needs to be watched and while the market’s muted reaction may ‘feel’ wrong, it seems correct from a trading viewpoint.

Bunds (and other high credit quality EU Sovereign Debt) can provide excellent protection from North Korean Geopolitical risk.  Any risk-off trading emanating from Korea should help sovereign debt yields, but should also strengthen the Euro versus the Yen and versus the Dollar – adding an extra kicker to those bonds.

Dollar Weakness

DXY, a dollar index has rebounded sharply since threatening to break through multi-year lows in early September.  While there is nothing that changes my view that this administration wants a weaker dollar and is capable of jawboning it down, the clear diversion between a Fed that seems intent on hiking and an ECB that figured out how to renew its dovish bias, could support the dollar.  

DXY Bounce on Support & Retakes Moving Averages

DXY broke the 100-day moving average last week as it closed at 94.9.  That puts the 200-day moving average of 96.9 as a possible target.  The model is biased towards weaker dollar, but with very limited conviction.

Domestic Stocks

After last week’s surge, both U.S. Large Cap and U.S. Small Cap stocks looked stretched.  Sentiment is clearly high for both groups by virtually any measure, but the fundamentals seem to warrant the valuations here.  If something occurs to really disrupt the Tax Reform than look for significant pullbacks as that would dramatically shift the fundamental outlook.

Credit

Boring.  Not sure that I can put a better description than boring on the overall credit market.  Individual companies and sectors are exhibiting some idiosyncratic risk, but overall, risks and rewards seem balanced.  Credit spreads are tight, but with the global economy marching along and volatility suppressed – there is little need for credit spreads to widen.  In fact, while equities are hitting all-time highs, credit spreads are still above their pre-crisis lows.

Tax Reform can create some winners and losers – especially once Washington decides what to do, if anything, about the deductibility of interest expenses.  

I will run a full Fixed Income Hopium/Doomium Report on Tuesday where we will delve deeper into the fixed income markets while drilling down into high yield, investment grade, bonds versus loans, structured credit, etc.

Oil

For much of the year, I had a range on oil of $40 to $55, but I think we could support higher oil prices here.  Sentiment does seem bullish, but may be behind the bullish case.  I have a bias towards domestic energy companies – equities and high yield bonds – as there is still an undercurrent in Washington that wants to focus on energy selfsufficiency.  Tax Reform and Decreased Regulations should help these companies, especially if it releases any pent-up demand for M&A activity (high yield bonds tend to do better than IG bonds during periods of M&A and the high yield energy bonds could do very well if we get that combination of higher prices and reduced regulation.

Gold and Bitcoin

I always have trouble with sentiment for gold and that is even more true with Bitcoin (or cryptocurrencies in general).  How do you create a sentiment when one portion of the world sits on ‘fraud’ and another portion of the world sits on ‘greatest thing ever.’  For gold, I find I have to sort through the barbaric relic crowd and the evangelists to derive a reasonable market view of sentiment – and Bitcoin forces me to do that exercise on steroids.

I think gold is losing its luster as a hedge.  Yes, it is something many talk about and own.  In fact, there are people that I know well and respect that advocate for a 5% to 10% holding of gold – ideally in physical form.  That may make sense, but lately gold does seem to be responding less dramatically than cryptocurrencies.  Whether it is lack of portability or that it just isn’t the new kid on the block – it really doesn’t seem to perform like you would expect – it lagged both VIX and Bitcoin when the situation in Korea became more concerning back in August.

I think at some level Bitcoin is syphoning demand from Gold.  Some portion of money that used to at the margin, buy gold on geopolitical concern, now buys cryptocurrencies (the vast majority just buys long dated sovereign debt as their geopolitical risk hedge because not only has it worked lately, you get paid to hold it – part of my ongoing theme of the popularity of Risk Parity Lite).

Bitcoin is slowing attracting new users as the price attracts attention, as it demonstrated its ability to navigate China’s crackdown and it is becoming easier to own (Coinbase, I have been told by several knowledgeable people, has made it much easier to transact).  If any ETF is eventually launched, that should create yet another wave of demand as it is easier to purchase.  The purists will scream that owning it in ETF form misses the point, but the gold purists scream about physical too, and it hasn’t stopped GLD from being highly successful.

Longer term, I have no idea where Bitcoin and cryptocurrencies will head – I do believe there will be more attempts from government authorities to crack down on it, but near term, I think it is gaining traction and is something that comes up in virtually every conversation I have that last more than a few minutes.
As a caveat, I want to highlight that I do live by my 3 Rules of Bitcoin and I don’t find it paradoxical that rule number 2 is that there are no rules – it just makes analyzing it more difficult.

Bottom Line

Relatively few obvious trades out there, at least as generated by this model.  I really want to see outliers and as much as I stare at this, it is currently difficult to identify outliers.

Short treasuries and short USD might be an interesting pair.

Long oil versus short gold would need some additional work, but is another possibility. 

Own some VIX calls – it hasn’t worked, and I would wait to see sentiment get a bit more extreme on the ‘volatility is dead’ side of things before entering.

As mentioned earlier, I will do full update on the fixed income and credit side of things for Tuesday and will add some additional Macro Asset classes in the coming weeks as I rebuild my models.

Short

 

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Norwegian Mining Company Launches First Asset-Backed Initial Coin Offering

While the world debates whether blockchain-based Initial Coin Offerings are a fraudulent pyramid scheme, meant to take advantage of gullible investors who are desperate to get rich quick, or a revolutionary “post-equity” way of raising capital, a Norwegian mining company, Intex Resources ASA, has taken the next step in the latter, and last week announced it was issuing the world’s first asset-backed Initial Coin Offering, with the resulting tokens being exchangeable for the physical collateral.

Although Intex is not the first corporation to approach ICOs as a means of raising capital, with Overstock revealing last week that it will launch an ICO on Nov. 1 using its proprietary tZERO platform, a strategy that will allow Overstock to raise capital without diluting its common equity float, Intex approach is somewhat different: the Company intends to issue asset-backed tokens which are backed by the Company’s metal reserves; currently Iron Ore  and Nickel Ore.

Where Intex’ approach is unique, is that the newly issued Tokens will be based on blockchain technology and will be exchangeable into the physical product, i.e. Iron Ore, Nickel or products derived  thereof. As a result, the company’s Tokens are being pitched as an alternative tool for investors who are looking for Iron Ore or Nickel exposure/hedging or investors who simply want exposure in digital Tokens which have the security of underlying value assets (as opposed to Bitcoin and other unsecured and un-asset backed crypto currencies).

Commenting on the new capital raise, Lars Beitnes, Chairman of the Company, said the “the new world of secure digital currencies and tokens opens up a whole new way for listed companies to raise capital. We believe our ICO would be the first of many to come from other companies in Norway and internationally.”

While it remains to be seen how accepted it is, by effectively pledging collateral behind the ICO, the company eliminates of the biggest concerns the rightfully skeptical investing public has regarding ICOs: the fact that they have no “fair value.”  However, once pegged to an underlying asset, that argument loses much of its potency.

What exactly is the collateral behind the new ICO? The answer, according to the press release, are the iron ore assets in the company’s Ambershaw mine in Canada:

As the Iron Ore asset owned by Ambershaw Metallics Inc. (AMI) is the closest to production the parties anticipate initial development of a Token with Iron Ore (or products derived thereof) as the underlying asset, in cooperation with AMI. The Company has 5% direct ownership and an option to acquire majority control in AMI. AMI expects to start concentrate production in Q2 2018. AMI estimates that in the initial mining phase it can produce approx. 330,000 tonnes of concentrate annually. The current sales price for 65% Fe concentrate is estimated to approximately USD 93 per tonne, with production cost of USD 35 and estimated freight cost of USD 15-20 per tonne.

Beitnes pointed out what Overstock CEO Patryck Burne noted last week, namely that “one of the great benefits with raising capital through an ICO is that there is no dilution for the shareholders, in addition to the benefits of transparency, the asset backing and it being attractive compared to traditional capital funding.”

Beitnes then notes the interest in digital currencies by other international companies – such as BP, BNY Mellon, Credit Suisse, Deloitte, Intel, J.P. Morgan, MasterCard, Microsoft and UBS, among others – and notes that “seeing these great companies taking interest in this new world of financing, gives us comfort that this is the future for corporate capital raising. They are all members of the Enterprise Ethereum Alliance, where we also plan on becoming a member.”

As for the chief reason for the company’s decision to use an ICO to raise capital – besides euporic investors who are more than eager to allocate capital to the new platform despite repeat warnings by regulators that these may be fraudulent – Beitnes writes that the Tokens could offer “interest-free financing to the Company and its mining subsidiaries by selling future production in advance” and adds that “for the Company the most obvious potential of issuing Tokens is the possibility of bridging the gap between current reserve-value and equity value, in addition to providing a possibility  for non-dilutive financing for our shareholders.”

Going one step further, Intex’ partner in the launch, Harmonychain, said that it is already preparing a market for the ICOs as a surrogate for trading the underlying iron ore and nickel assets that collaterlize the ICO:

“We have already registered IRON and NICKEL on the EC20 blockchain”  said Bjorn Zachrisson, CEO of Harmonychain AS, “and we are looking into ways to distribute the tokens and have them tradable on reputable token exchanges”. 

Needless to say, it is still far too early to know if this proposed asset-backed ICO will be a success, although the concept of an asset-backed ICO is certainly novel and may eliminate many of the fears of ICOs blowing up worthless in the future, in the process opening up the pathway to another capital raising process, one which gives ICO investors at least some implicit collateral protection behind their investment.

One thing that’s clear: the market’s euphoric response to the announcement, with Intex stock soared on the Oslo Stock Exchange, nearly doubling on huge volume.

Meanwhile, as we wait to see if the Intex experiment is successful, a more ominous development is the unchecked proliferation of older, shadier ICOs, many of which are certainly frauds. Here, the problem as laid out by The Business Blockchain author William Mougayar is that the world continues to be flooded with legacy ICOs, which may end up imploding in the not too distant future, crushing investor interest in the asset class, and killing off ICOs as a potentially credible, regulated way of raising capital.

 

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How The Elite Dominate The World – Part 5: The Endgame Is Complete And Utter Global Domination

Authored by Michael Snyder via The Economic Collapse blog,

Do you want your children and grandchildren to grow up in a global socialist “utopia” in which everything about their lives is micromanaged by bureaucrats working for a worldwide system of government instituted by the elite?  To many of you this may sound like something out of a futuristic science fiction novel, but the truth is that this is exactly where the elite want to take us.  This is their endgame.

Their agenda has been quietly moving forward for decades, and if we don’t take a stand now, future generations of Americans could very well end up living in a dystopian nightmare with none of the liberties or freedoms that we enjoy today.

Bill Clinton’s mentor at Georgetown University, Dr. Carroll Quigley, wrote about this network of elitists in a book entitled Tragedy and Hope…

In fact, this network, which we may identify as the Round Table Groups, has no aversion to cooperating with the Communists, or any other groups, and frequently does so. I know of the operations of this network because I have studied it for twenty years and was permitted for two years, in the early 1960’s, to examine its papers and secret records. I have no aversion to it or to most of its aims and have, for much of my life, been close to it and to many of its instruments…my chief difference of opinion is that it wishes to remain unknown, and I believe its role in history is significant enough to be known…because the American branch of this organisation (sometimes called the “Eastern Establishment”) has played a very significant role in the history of the United States in the last generation.

In other parts in this series, I have discussed the tools that the elite are using to achieve their goals.  In part I, I talked about how debt is used as a tool of enslavement, and in part II I explained how central banking is a system of financial control that literally dominates the entire planet (Part III and Part IV here)  Professor Quigley also mentioned this system of financial control in his book…

“The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.”

Today, a system of interlocking global treaties is slowly but surely merging us into a global economic system.  The World Trade Organization was formed on January 1, 1995, and 164 nations now belong to it.  And every time you hear of a new “free trade agreement” being signed, that is another step toward a one world economy.

Of course economics is just one element of their overall plan.  Ultimately the goal is to erode national sovereignty almost completely and to merge the nations of the world into a single unified system of global governance.

The United Nations is the apex of this planned structure, and the globalists are always looking for ways to transfer more power to this institution.  For example, that is what the Paris Climate Accord was all about.  Since the climate affects everyone, it gives the globalists a perfect excuse to argue that the world needs to “work together”.  The following comes from the official UN website…

To address climate change, countries adopted the Paris Agreement at the COP21 in Paris on 12 December 2015. The Agreement entered into force less than a year later. In the agreement, all countries agreed to work to limit global temperature rise to well below 2 degrees Celsius, and given the grave risks, to strive for 1.5 degrees Celsius.

Implementation of the Paris Agreement is essential for the achievement of the Sustainable Development Goals, and provides a roadmap for climate actions that will reduce emissions and build climate resilience.

“Protecting the environment” sounds like a reasonable goal, right?

Well, when you click on the link for the “Sustainable Development Goals”, it sends you to a website where you can read about the 17 pillars of the plan to “end poverty, protect the planet, and ensure prosperity for all” that were agreed to by all of the members of the UN in September 2015.

This plan is also known as “Agenda 2030”, and when you dig into the details of this plan you quickly realize that it is literally a blueprint for global government.

Sadly, most Americans don’t realize this, and neither do they understand that this has been the goal of the elite for a very long time.  For instance, during an address to the General Assembly of the United Nations in 1992, President George H.W. Bush made the following statement…

It is the sacred principles enshrined in the United Nations charter to which the American people will henceforth pledge their allegiance.

Say what?

Once you start looking into these things, you will see that the elite are very openly telling us what they intend to do.

One of my favorite examples of this phenomenon is a quote from David Rockefeller’s book entitled Memoirs…

Some even believe we are a part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure – one world, if you will. If that’s the charge, I stand guilty and I am proud of it.

As David Rockefeller openly admitted, they are “internationalists” that are intent on establishing a one world system.

Candidates for Congress are not supposed to talk about this stuff, but if I am elected I am promising to fight the globalists on every front.

We are literally in a battle for the future of our children and our grandchildren.  If the globalists have their way, American sovereignty will continue to erode and the United States will slowly but surely be merged into a one world system.

But that isn’t going to happen on our watch.  Those of us that love liberty and freedom are going to take this country back, and we will never stop fighting the insidious agenda of the globalists.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

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FX Weekly Preview: All Eyes On Yellen, Trump And The Yield Curve

Submitted by Shant Movsesian and Rajan Dhall MSTA from fxdaily.co.uk

Looking to the week ahead, we have the FOMC meeting midweek, and for all the expectations that there will no change this time around, the market will be sensitive – to the downside – on any rhetoric in the statement which puts Dec in doubt.  This looks unlikely as the Fed are keen to press on with normalisation, and with the market now well prepped for a move, it would be a pretty dovish sign if Yellen and Co did not 'take advantage'.  From 2018 on however, we can see that there is scepticism over whether 3 more rate hikes can be accommodated, the base-line case for up to 2 hikes of 25bps reflected in the 5-10yr Treasuries.  For some reason, there was key resistance at 2.40% in the 10yr, but we saw the psychological draw of 2.50% more likely, and this latter level has held firm, and we expect to do so into the Fed announcement, if not longer. 

Policy reform in the US has clearly stuttered – badly – and even if this is revived, questions over how the Trump administration plan to fund tax cuts in particular are not going to go away, and this will also rein in USD strength from here.  Looking over the past 12 months, the Trump reflated trade saw Treasuries topping out at 2.65% in the 10yr – twice – and this was when long run rates were assumed to be closer to 3.0%.  The Fed themselves have marked this down to 2.75-2.80%, so this adds further substance to 2.50% as a key top.  

For Trump himself, Robert Mueller's US/Russian election probe has now led to the first charges being filed by the special counsel, and according to some of the leading news wires, anyone charged could be taken into custody as soon as Monday.  He is also set to name the new Fed chair, which looks increasingly like Jerome Powell who errs on the side of Yellen in the gradual approach to normalisation.

USD/JPY resistance in the 114.25-50 area aligns with the above rates scenario but may see a gap lower on the Russian probe news, but on the weekly charts, a push above 114.50 would run into more (tech-based) selling in the 115.00-50 area, so we attach a high probability to this pair having reached some notable limits unless the US data continues to outperform – recall, Q3 hit 3.0% on Friday.  At the end of the week we have the Oct employment report which is expected to show a rebound in headline jobs after the hurricane hit south hit jobs growth to the tune of (only) 33k.  The headline number is expect to show in excess of 200k this time, with wage growth again in focus.  

At the start of the week we also have personal spending and income and the core PCE, while accompanying Wednesday's usual ADP survey, we also have ISM manufacturing PMIs for Oct and construction spending leading up to the FOMC climax that evening.  ISM services come out after the jobs report on Friday, so it will be busy week for the spot rates, with policy intentions and economic data all crowded into one week.  

Early Tuesday sees the BoJ deliver their latest musings on the economy, and followed up by a widely anticipated continuation of their stimulus measures which will remain in place until inflation picks up.  Abe's win underpins the current fiscal and monetary stance, but the domestic data is showing gradual recovery.  Pre election divestment from Japanese fund managers are not going to give JPY shorts any further momentum on the downside, and in the case of the likes of EUR/JPY in particular, ECB policy and political unrest across the region could reinforce a down side bias here in the short term.  

Thursday's ECB meeting was met with disappointment, but it is not as if this was not foreseen. The governing council have been hinting at gradual adjustment, if only to curb the EUR effect. Traders continued to support EUR/USD and the rest of the crosses into the announcement, but with the reduced APP effectively open ended, buyers had to throw the towel in, and the lead spot rate dropped under 1.1660 and later 1.1600.  

Looking to the stand off between Spain and Catalonia, we have seen limited concerns in the price action, and given the weekend rally in support of unity, this relaxed approach looks to have been justified for now.  Overall unrest in most member states – France, under Le Pen, the AfD in Germany and Kurz and his courting of the far right Freedom Party – does anything but paint a picture of stability.  It will not be long before Italy is in the spotlight, and we have already seen Lombardy and Veneto seeking greater autonomy.  

Suddenly the EUR bulls are not so confident, and calls for fair value at 1.2500 in EUR/USD have also gone quiet.  Circa 1.1500 looks set to be tested, but we would not be surprised to see the coming weeks and months producing levels back in the 1.1100-1.1300 range, especially after such aggressive buying over the summer.  EUR/CHF will likely follow lower to some degree, with the SNB open about their intentions to 'smooth out' CHF strength.  

Date focus will be on Tuesday preliminary inflation reading for Oct, where the headline rate is expected to slip from 1.5% to 1.4% while the core rate sticks at 1.1%.  Q3 GDP is released at the same time with median forecasts looking for another 0.6% rise. 

A big week for the BoE, who have been hinting at a 25bp rate hike and the market taking this to heart despite the obvious concerns over EU negotiations. As we see it, the MPC's hands are tied, and if they do not move this month, governor Carney in particular will come under fire given many believe his conviction is lacking, turning swiftly from dove to hawk over late summer.  The gov has also admitted that there is a trade off between growth and inflation, so he looks to have been swayed by the consensus moving in favour of a hike. Others at the BoE including McCafferty, Saunders and Broadbent seem to think the economy is on the cusp of a tightening cycle, but the data is already showing cracks.  

Last week's Q3 GDP print of 0.4% (beating 0.3% expected) was little to get excited about, but Cable went on another surge higher, only to be snuffed out again, but sub 1.3100 is proving resilient and looks set to contain the downside until the decision on Thursday.  Probability lies with a one off hike at best at the present time, and in this instance, any post move reaction is likely to be faded – 1.3250-60 again to slow gains, coming in ahead of the 1.3300 level, 1.3340-50 is strong, but the higher we go the more intense the selling will get.  We just cannot see where the momentum on the upside will come from unless the UK government buckle in the negotiations and given in to EU demands to commit to the exit payment before trade talks.  Even then, single market access isn't going to come cheap. For us, the only soft Brexit is no Brexit, and the hard liners in parliament will not allow that to happen! 

In Canada, the BoC's gov Poloz and his deputy Wilkins again put the market straight on rate policy going forward.  In another example of overstretching, or reading more into forward guidance, the central bank has clearly been unnerved by the rapid pace of appreciation in the currency, as well as long end rates, but we have seen a decent moderation in USD/CAD tipping 1.2900 on Friday from the mid 1.2000's seen in early Sep.  Data dependency is not something which is heeded in a market hell-bent of volatility and/or momentum, but this week, we get the employment stats alongside that of the US, but closer in, the GDP figures for Aug are also released. Gov Poloz is again speaking this week, and his comments may reflect on the growth numbers from Tuesday's session.  

1.2900-1.3000 is a strong area of resistance which we anticipated would hold in the near term at least, and Friday's price action saw just that with the strong US data only able to push this USD pair as far as 1.2915-20 – we finished the session just above 1.2800. 

In Australia, it was the inflation miss which saw the AUD under-perform, losing ground against the NZD which is plagued by the prospects of a less business friendly approach to governance by the new Labour led coalition.  At 1.8%, both the headline and trimmed mean rates are slipping away from the RBA's 2-3% target range, but if tightening labour markets in the other major economies are to augur well for a pick in asset prices, then I don't see why Australia should be excluded. Support seen ahead of 0.7600 in the spot rate was largely USD based, so with AUD/NZD in particular ending the week near the lows, we expect rate hike expectations have been pushed out a little, so there may be some further weakness to suffer here.  Retail sales and trade are the stand out releases ahead. 

Labour stats for Q3 are the key focus in NZ, and with the new PM reforming the RBNZ mandate to incorporate targeting full employment, their are dovish implications going forward, and these could be emphasised by any weakness in the numbers.  Unemployment currently stands at 4.8% at however, which compares favourably with Australia at 5.5%.  Employment in NZ is expected to have risen around 0.7% over the quarter.  In the meantime, NZD/USD based out at 0.6815-20, matching levels seen in May this year, and this may form a near term base for now – 0.6680-0.6700 next if we haven't.  

Looking at the SEK and NOK vs the USD and EUR respectively, we continue to see near identical patterns, and there looks to be little interest to differentiate here with Norwegian data dipping a little but the Riksbank refusing to let go of their cautious stance.  We are still keeping half any eye in the NOK/SEK rate which has moved back into the mid 1.0200's again, and there is little key data ahead which could jolt the cross rate to any material degree.  

Manufacturing PMIs in both countries out on Wednesday.  

In Switzerland, the KoF Leading indicators are on Monday, but all data here has lost its relevance with the SNB sticking to task and watching the CHF like a hawk.  USD/CHF through parity again suits their cause.  

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