Month: May 2016

We had a feeling there would be a squeeze into today’s 3Y auction after this morning reports of that the OTD was trading tight, and quite “special” at -0.5% in repo, traditionally indicative of a notable lack of deliverable and underlying on the day of the auction.

The repo market is also why just before the auction we wondered if there would be another tradtional repo-driven squeeze into today’s auction:

3Y was -0.50% in repo today. Squeeze?

— zerohedge (@zerohedge) May 10, 2016

And, sure enough, just moments later we got confirmation of precisely such a squeeze because the $24 billion in 3Y paper which according to the When Issued was supposed to price at 0.89%, instead printed at 0.875%, stopping through the WI by a whopping, for this tenor, 1.5 bps.

The internals were, in the words of Stone McCarthy, “stellar”, with the Bid to Cover rising to 2.933, the highest since January, but it was once again the take down where the surprise was because as the chart below shows, the Indirects took down a whopping 61.5%, the highest also sicne January, and with Directs taking down 10.2%, it left only 28.3% for the Dealers, the second lower allottment to the group since 2009.

The market reaction upon the news was to be expected: a sharp pull back in yields especially on the short end.

Amd so, once again, we find that it remains all about positioning and investors being left wrongfooted heading into auctions that have a substantial short overhang.

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In response to allegations from former Facebook staff that they censored right-wing 'just not liberal enough' news stories in the social network's feed, the man who is responsible for Facebook's "Trending Topics" has issued a statement directly refuting the claims of biases.

As TechCrunch noted, an earlier statement by Facebook that…

“Facebook does not allow or advise our reviewers to systematically discriminate against sources of any ideological origin and we’ve designed our tools to make that technically not feasible. At the same time, our reviewers’ actions are logged and reviewed, and violating our guidelines is a fireable offense.”

…left it unclear whether any contractors hired to curate the trend had potentially violated those rules.

However, VP of Search Ton Stocky's statement bluntly calls into question the allegations by Gizmodo’s sources.

Here’s Stocky’s full statement:

“My team is responsible for Trending Topics, and I want to address today’s reports alleging that Facebook contractors manipulated Trending Topics to suppress stories of interest to conservatives. We take these reports extremely seriously, and have found no evidence that the anonymous allegations are true.

 

Facebook is a platform for people and perspectives from across the political spectrum. There are rigorous guidelines in place for the review team to ensure consistency and neutrality. These guidelines do not permit the suppression of political perspectives. Nor do they permit the prioritization of one viewpoint over another or one news outlet over another. These guidelines do not prohibit any news outlet from appearing in Trending Topics.

 

Trending Topics is designed to showcase the current conversation happening on Facebook. Popular topics are first surfaced by an algorithm, then audited by review team members to confirm that the topics are in fact trending news in the real world and not, for example, similar-sounding topics or misnomers.

 

We are proud that, in 2015, the US election was the most talked-about subject on Facebook, and we want to encourage that robust political discussion from all sides. We have in place strict guidelines for our trending topic reviewers as they audit topics surfaced algorithmically: reviewers are required to accept topics that reflect real world events, and are instructed to disregard junk or duplicate topics, hoaxes, or subjects with insufficient sources. Facebook does not allow or advise our reviewers to systematically discriminate against sources of any ideological origin and we’ve designed our tools to make that technically not feasible. At the same time, our reviewers’ actions are logged and reviewed, and violating our guidelines is a fireable offense.

 

There have been other anonymous allegations — for instance that we artificially forced ?#‎BlackLivesMatter? to trend. We looked into that charge and found that it is untrue. We do not insert stories artificially into trending topics, and do not instruct our reviewers to do so. Our guidelines do permit reviewers to take steps to make topics more coherent, such as combining related topics into a single event (such as ?#‎starwars? and?#‎maythefourthbewithyou?), to deliver a more integrated experience.

 

Our review guidelines for Trending Topics are under constant review, and we will continue to look for improvements. We will also keep looking into any questions about Trending Topics to ensure that people are matched with the stories that are predicted to be the most interesting to them, and to be sure that our methods are as neutral and effective as possible.”

As TechCrunch concludes, Stocky’s explanation suggests that Gizmodo’s sources may have exaggerated the claims… It’s possible that what was perceived as suppression may have been shortcomings of the algorithm or hesitation to display Trends based on news outlets not deemed to be credible.

So to be clear – another entity accused of wrongdoing has undertaken an internal review and found no evidence of wrongdoing.

However, the report has already done significant damage to Facebook’s reputation with conservatives, and increased fears that it manipulates the world. Even if its records show no evidence of tampering with Trends, the perception of bias could haunt the company through the election season.

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Submitted by John Rubino via DollarCollapse.com,

Something interesting has happened. China earlier this year responded to falling stock prices by borrowing a trillion dollars and spending it on commodities, boosting the prices of iron ore, oil, copper, etc., and giving the global economy a patina of recovery.

Nothing unusual so far. China did the same thing in response to 2008’s Great Recession, and the world breathed an appreciative sigh of relief, ignoring the massive new leverage that the policy required.

Which is why the past month has been so interesting. Instead of just accepting China’s largess and blithely assuming that all was once again well, the global financial media have chosen (for perhaps the first time ever outside of a full-on crisis) to focus on the negative aspects of rising leverage. They’re now anticipating trouble for China, with titles like:

China’s debt problem is bigger than you think

 

Chinese banks grappling with ‘crisis level’ bad debts

 

CLSA Sees China Bad-Loan Epidemic With $1 Trillion of Losses

 

The $571 Billion Debt Wall That Points to More Defaults in China

To call this unusual is a huge understatement. And it seems to have made a difference. Yesterday China announced a fairly radical course change:

Even China’s Party Mouthpiece Is Warning About Debt

 

(Bloomberg) – China’s leading Communist Party mouthpiece acknowledged the risks of a build-up of debt that is worrying the world and said the nation needed to face up to its nonperforming loans.

 

High leverage is the “original sin” that leads to risks in the foreign-exchange market, stocks, bonds, real estate and bank credit, the People’s Daily said in a full-page interview with an unnamed “authoritative person” starting on page one and filling the second page on Monday.

 

China should put deleveraging ahead of short-term growth and drop the “fantasy” of stimulating the economy through monetary easing, the person was cited as saying. The nation needs to be proactive in dealing with rising bad loans, rather than delaying or hiding them, the report said.

 

“Overall, the report suggests to us that future policy easing may be more cautious and that the government may try to hasten the pace of reform,” said Zhao Yang, chief China economist at Nomura Holdings Inc. in Hong Kong. Similar commentaries have had a “large impact” in the past, the analyst said in a note.

 

The pace of China’s accumulation of debt and dwindling economic returns on each unit of credit have fueled concern that the nation is set for either a financial crisis or a Japanese-style growth slump. Strong growth in mortgage lending means that banks could be exposed to significant losses should property prices drop sharply, Fitch Ratings said in a statement dated Sunday.

 

“A tree cannot grow up to the sky — high leverage will definitely lead to high risks,” the person was cited as saying. “Any mishandling will lead to systemic financial risks, negative economic growth, or even have households’ savings evaporate. That’s deadly.”

 

China’s accumulation of debt has been the fastest of Group of 20 members over the past decade, according to Tom Orlik, an economist for Bloomberg Intelligence. Debt has climbed to 247 percent of gross domestic product, Bloomberg Intelligence estimates.

 

Volatility in stocks and the foreign-exchange market early this year had partly reflected the vulnerability of the financial system, the article said.

 

The newspaper piece touched on the topic raised by Premier Li Keqiang of banks swapping debt for equity to cut excess borrowing by Chinese firms.

 

While bankruptcies should generally be avoided, “zombie” companies beyond salvage should be allowed to fail because debt-to-equity swaps would be costly and self-deceiving, the commentary said.

 

Supply-side reform will remain the focus of economic policies for the near future, the article said. While the economy can grow sufficiently without stimulus, its performance will be “L-shaped,” not a “U” or a “V,” for quite some time, rather than just a year or two, the commentary said.

Traders responded to this sudden honesty by selling pretty much everything:

Metals, Mining Stocks Sink as Chinese Data Signal Weak Demand

 

(Bloomberg) – Industrial metals fell while mining stocks dropped the most in six weeks as a slump in Chinese copper purchases and an increase in steel exports signaled weak demand in the top user.

 

The decline in commodities deepened on Monday after China copper imports fell from a record while exports of steel in the first four months rose 7.6 percent from a year earlier. Iron-ore futures in Asia plummeted after port stockpiles in China expanded to the highest in more than a year.

 

“A morning of widespread price retreats along with iron ore as Chinese demand appears to stumble again,” Michael Turek, the head of base metals at BGC Partners Inc. in New York, said in an e-mail. “April’s lower copper imports raises questions about the March spike.”

 

Copper futures for July delivery dropped 2 percent to $2.111 a pound at 10:42 a.m. on the Comex in New York, after earlier touching $2.1025 a pound, the lowest in almost a month.

 

The Bloomberg Americas Mining Index slumped as much as 4.8 percent in New York, the steepest intraday decline since March 23.

Some Thoughts
China is the latest in a growing line of “command and control” economies that have risen to prominence, captured the imagination of people who find free markets too messy for comfort, and then blown up when it turns out that dictators have no idea how to allocate capital.

First it was the Soviet Union, which looked during its initial decades like a viable alternative to market-based systems. From journalist Lincoln Steffens’ famous 1919 observation “I have seen the future and it works” to the 1957 launch of Sputnik, an amazingly-large number of people assumed that it was possible for a handful of men sitting around a conference table to efficiently organize a modern economy. It eventually became clear that they were wrong.

Then came Japan, which emerged from the rubble of WWII to become a global economic power, largely by grafting its semi-feudal samurai tradition onto factory life — under the direction of its Ministry of International Trade and Industry (MITI). That is, guys sitting around a table deciding what gets built where. This resulted in an epic debt and mal-investment binge from which Japan may never recover.

And now comes China’s hybrid Japanese/Soviet model, with various Communist Party organs and shadow banking system entities directing investment from the top down, borrowing immense amounts of money and plucking growth figures out of thin air, which Western media accept at face value. It too seems to be failing, which should come as no surprise but — given the numbers involved — should scare the hell out of anyone with a sense of history.

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“We will all be flying commercial… At least we did not buy Puerto Rican debt like those fools at Perry… Have you never heard of a high water mark? I should fire every single on of you and use a f##king dartboard…“

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The gold and silver bullion “super bull market” has been initiated, according to David Morgan of the Morgan Report who was recently interviewed by Future Money Trends.

“We are finally in the very beginning of the new bull market which will be the most exciting as the third leg up is the one that is the most rewarding. In fact few will believe just how high the precious metals will go. The end date is most likely 2018/2019 at this point.”

Gold and Silver Prices and News
Gold near 1-1/2-week low as dollar keeps strength (Reuters)
Indians shun gold buys during key festival as prices, drought sting (Reuters)
Gold slides with other commodities as dollar and equities rise (Reuters)
Top bullion dealers form a federation (Business Standard)
Perth Mint Gold and Silver Bullion Sales in April (Coin News)

Sprott CEO: I’m a Pragmatic Gold Bug (Bloomberg)
I’m with Stan Druckenmiller — gold has every reason to rise (Marketwatch)
Bitcoin Drama Continues: Craig Wright Disappears and Andresen Says He Was Bamboozled (Max Keiser)
What makes medieval money different from modern money? (JP Koning)
With A Historic -150% Net Short Position, Carl Icahn Is Betting On An Imminent Market Collapse (Zero Hedge)
Read More Here

Buy Silver Coins VAT and CGT Free In UK

Gold Prices (LBMA AM)
10 May: USD 1,264.85, EUR 1,111.04 and GBP 875.90 per ounce
09 May: USD 1,277.75, EUR 1,121.54 and GBP 884.68 per ounce
06 May: USD 1,280.25, EUR 1,121.06 and GBP 883.04 per ounce
05 May: USD 1,275.75, EUR 1,114.95 and GBP 879.23 per ounce
04 May: USD 1,280.30, EUR 1,114.18 and GBP 883.59 per ounce

Silver Prices (LBMA)
10 May: USD 17.04, EUR 15.00 and GBP 11.82 per ounce
09 May: USD 17.33, EUR 15.21 and GBP 11.99 per ounce
06 May: USD 17.31, EUR 15.15 and GBP 11.93 per ounce
05 May: USD 17.38, EUR 15.21 and GBP 12.01 per ounce
04 May: USD 17.18, EUR 14.96 and GBP 11.86 per ounce

www.Goldcore.com  

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Following the latest escalation in South China Sea territorial tensions, which culminated with China refusing to grant the Stennis aircarrier group access to the Hong Kong port, overnight the US decided to provoke some more Chinese anger when it sailed the guided missile destroyer the USS William P. Lawrence within 12 nautical miles of Chinese-occupied Fiery Cross Reef, according to U.S. Defense Department spokesman, Bill Urban said. This was the third warship the US has sent into contested waters in the South China Sea in less than seven months.

Chinese facilities on Fiery Cross Reef include a 3,000-metre (10,000-foot) runway which the United States worries China will use it to press its extensive territorial claims at the expense of weaker rivals.

The USS William P. Lawrence

Urban said that the so-called freedom of navigation operation was undertaken to “challenge excessive maritime claims” by China, Taiwan, and Vietnam which were seeking to restrict navigation rights in the South China Sea. What was not said is that the US once again decided to test the preparedness and eagernss of China to respond to what it perceives maritime territorial aggression.

In an emailed statement, Urban also said that “these excessive maritime claims are inconsistent with international law as reflected in the Law of the Sea Convention in that they purport to restrict the navigation rights that the United States and all states are entitled to exercise.” As has been extensively documented, China and the United States have traded accusations of militarizing the South China Sea as China undertakes large-scale land reclamations and construction on disputed features while the United States has increased its patrols and exercises.

Chinese J-10 fighter jets

Since the entire purpose of this latest provocation was to observe China’s response, it succeeded when China promptly scrambled two fighter jets in proximity to the U.S. navy ship, a patrol China denounced as an illegal threat to peace which only went to show its defense installations in the area were necessary. China’s Defence Ministry said that in addition to the two fighter, an additional three warships shadowed the U.S. ship, telling it to leave.

The U.S. patrol “again proves that China’s construction of defensive facilities on the relevant reefs in the Nansha Islands is completely reasonable and totally necessary”, it said, using China’s name for the Spratly Islands where much of its reclamation work is taking place.

Foreign Ministry spokesman Lu Kang said the U.S. ship illegally entered Chinese waters.

Additionally, China’s foreign ministry expressed anger after a U.S. navy warship carried out a freedom of navigation operation near a disputed reef in the South China Seas. Ministry spokesman Lu Kang told a daily news briefing the ship illegally entered the waters without China’s permission and that the move threatened peace and stability.

“This action by the U.S. side threatened China’s sovereignty and security interests, endangered the staff and facilities on the reef, and damaged regional peace and stability,” he told a daily news briefing.

This will not be the end of it. China claims most of the South China Sea, through which $5 trillion in ship-borne trade passes every year. The Philippines, Vietnam, Malaysia, Taiwan and Brunei have overlapping claims.

As Reuters adds, the Pentagon last month called on China to reaffirm it has no plans to deploy military aircraft in the Spratly Islands after China used a military plane to evacuate sick workers from Fiery Cross. Ironically, the US makes sure China does just that with its recurring “freedom of navigation operations” in what China considers its own territory; the same way Russia reacts to US spy plans flying in close proximity to its borders.

“Fiery Cross is sensitive because it is presumed to be the future hub of Chinese military operations in the South China Sea, given its already extensive infrastructure, including its large and deep port and 3000-metre runway,” said Ian Storey, a South China Sea expert at Singapore’s ISEAS Yusof Ishak Institute. 

“The timing is interesting, too. It is a show of U.S. determination ahead of President Obama’s trip to Vietnam later this month.”

The good news is that while China has reacted with anger to previous U.S. freedom of navigation operations – including the overflight of fighter planes near the disputed Scarborough Shoal last month, and when long-range U.S. bombers flew near Chinese facilities under construction on Cuarteron Reef in the Spratlys last November – so far responses have avoided more dramatic escalation.  

Adding to the potential volatility of the situation, Rodrigo Duterte who looks set to become president of the Philippines after an election on Monday, has proposed multilateral talks on the South China Sea. A Chinese diplomat warned last week that criticism of China over the South China Sea “would rebound like a coiled spring.”

The Chinese navy over the past week carried out combat drills in the South China Sea, led by the Hefei, one of the country’s most advanced missile destroyers, according to official Xinhua News Agency. Five other vessels participated, along with three helicopters and dozens of “special warfare” soldiers.

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Submitted by Pater Tenebrarum via Acting-Man.com,

Political Correctness Comedy

We have recently come across a video that is simply too funny not be shared. It also happens to dovetail nicely with our friend Claudio’s recent essay on political correctness and cultural Marxism. Since this is generally a rather depressing topic, we have concluded that having a good laugh at it might not be the worst idea.

How to most effectively create a “safe space” on campus

Cartoon by Nate Beeler

It is especially funny (or terrifying, depending on one’s perspective – we prefer funny) to what extent political correctness has invaded colleges. Frankly, we actually had no idea just how far this malady has advanced by now.

A recent article in the conservative journal National Review listed the “13 most ridiculously PC moments on college campuses in 2015” – readers can check the details out over there, but below are a few examples from the list. They read like a dispatch from the stand-up comedy universe:

Hating pumpkin-spice lattes was declared sexist.

 

A university language guide stated that the word “American” was “problematic.”

 

A university study declared that we have to accept people who “identify as real vampires.”

 

The word “skinny” was deemed “violent.”

 

A university declared the phrase “politically correct” to be politically incorrect.

 

A room full of white people was determined to represent a “micro-aggression”

 

A Harvard study declared that micro-aggressions can make people die sooner

 

Some students were ‘triggered’ by an anti-micro-aggressions exhibit.

 

A yoga class was canceled on the grounds that yoga is “cultural appropriation.”

Just in case readers are wondering what “micro-aggressions” are, according to Psychology Today, the term refers to “everyday verbal, nonverbal, and environmental slights, snubs, or insults, whether intentional or unintentional, which communicate hostile, derogatory, or negative messages to target persons based solely upon their marginalized group membership.”

A World Scrubbed of Offense

Surely no-one would want to micro-aggress on his fellow human beings lest they “become depressed, develop low self-esteem, eating disorders, body image issues or experience sexual dysfunction” or God forbid, begin to suffer from “invisibility syndrome”, all of which are symptoms that could impact victims according to Wikipedia.

In order to make sure readers are properly prepared to avoid wreaking such havoc, here is an in parts slightly Orwellian-sounding set of guidelines published by UCLA, entitled “Tool: Recognizing Micro-aggressions and the Messages they Send”. Mind, there is no need to be unnecessarily rude to people, we agree with that as a general point (it can be dangerous too: if you’re rude to Hannibal Lecter, he’ll eat your liver). However, these guidelines may be taking things a tad too far.

Apparently, even asking people where they’re from is actually a no-no these days. If one really wants to find out, one will presumably have to knock the person unconscious (“macro-aggression”) and grab their ID. One is also no longer allowed to insist that “the best qualified person be given the job”. We were hitherto unaware of that, but we have a feeling it might actually explain a lot.

Also, if one still thinks that “America is the land of opportunity”, or that hard work is the basis of success, one should better keep such thoughts to oneself. It is no longer permitted to say any of this out loud (let us not forget the danger that someone might contract invisibility syndrome upon hearing such travesties!).

Anyway, let us move on to the hilarious video mentioned above. It shows an interviewer asking students a number of questions on “identity” which veer ever further into the realm of the absurd. Almost regardless of how ludicrous the putative scenarios he offers up for inspection become though, the students are making every effort to avoid offending the good man even hypothetically (we want to take this opportunity to apologize if we have micro-aggressed against women and/or assorted hybrids by identifying him as a “man”):

Whatever you do, don’t tell him that he’s wrong!

We want to point out that we know absolutely nothing about the makers of the video (some Washington-based family policy advocacy group), so this is not meant to be an endorsement of them. We are also not interested in addressing the bathroom law controversy that has apparently triggered this “identity debate” in greater detail – except for pointing out that this particular situation is less clear-cut than many people seem to think.

For instance, women in North Carolina could in future be astonished to find this person entering their rest-rooms – by law; then again, in Seattle this can happen. We happen to believe that what is needed are not laws, but common sense (we have yet to consult the handbook to find out if the application of common sense is still considered politically correct – it may not be).  

Important Message

Anyway, we do have a message for the young people in the video: Yes, reality can often prove to be a tenacious and formidable enemy. But together, ensconced in our hate-free safe zone, we shall be able to over-comb it! Friendship, comrades!

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