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For the 19th month in a row, US Factory Orders decline YoY (-1.2% for May) with a 1% drop MoM. Simply put, in 60 years of historical data, the US economy has never, ever suffered a 19 month stretch of consecutive annual declines…
And yet we are supposed to believe there is no recession?
What happens next?
Charts: Bloomberg
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Rumor has it that the Drug Enforcement Administration (DEA) plans to legalize marijuana any day now. Rumor also has it that Barack Obama is secretly a foreign-born Muslim and that the CIA had a hand in the attack that brought down the World Trade Center. Unfortunately, that first claim is about as likely to be true as the other two, Jacob Sullum explains.
It is true that the DEA has not responded yet to a pair of petitions asking it to reclassify marijuana, which since 1970 has sat in Schedule I of the Controlled Substances Act (CSA), the law’s most restrictive category. Schedule I supposedly is reserved for drugs with “a high potential for abuse” and “no currently accepted medical use,” drugs that cannot be used safely even under a doctor’s supervision. It is doubtful that marijuana meets any of those criteria, let alone all three. But the DEA, which has wide discretion to interpret and apply the CSA criteria, has always insisted that marijuana must stay in Schedule I until its medical utility is proven by the sort of large, expensive, randomized clinical trials the Food and Drug Administration (FDA) demands before approving a new pharmaceutical.
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The last 48 hours in precious metals markets – more specifically silver – has been chaotic to say the least with a massive spike Sunday night above $21 and a sudden flash crash overnight to $19.50 before rallying back above $20 this morning. Silver's recent rise mirrors a similar surge in steel rebar and iron ore futures in April
But as Saxo's Ole Hanson warns, the biggest two-day surge in silver since 2011 has raised a few questions about the sustainability of the current rally and what is driving it.
Macro economic developments which have been highlighted on several occasions during the past few months continue to attract demand for precious metals from retail, real money and hedge funds.
Speculative positions held by hedge funds in both gold and silver have reached record levels while demand for exchange-traded products especially those in gold have continued to rise on an almost daily basis.
The 13% bottom-to-top rally from Friday to Monday in silver could represent a short-term top in the market, not least considering the 44% year-to-date rally seen already. During the rally in Asia Monday, several major stop levels got hit on Comex silver which could indicate that many short positions have now been flushed out.
Silver looking to consolidate the post-Brexit strong gains. Key area of support between $19.14 and $18.67.
A major move in SHF silver may attract the opposite interest from investors using other silver instruments from COMEX silver futures to spot and exchange-traded products.
On that basis, continued demand for precious metals should see silver continue to outperform but at a much slower pace with the relative value increasingly coming back into line with longer-term averages.
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As previously reported, over the weekend the FBI interviewed former Secretary of State Hillary Clinton, one of the final steps in the ongoing criminal investigation into alleged mishandling of classified information. While it is unclear if related to that interview or not, in just over one hour, at 11 am Eastern time, FBI Director James Comey will make a statement from headquarters in Washington D.C.
He will also take questions from reporters.
FBI Director James Comey
So will the FBI endorse Hillary? Stay tuned for the answer.
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The rally last week was likely end of the quarter performance gaming and little else.
Fund managers have to report their returns every quarter. With the markets gyrating throughout 2Q16, fund managers were highly incentivized to gun the markets higher in order to redeem the quarter.
However, bonds (the smart money) weren’t buying it at all. Indeed, bonds really haven’t been buying any of this rally since March.
Neither was the USD/JPY pair, which has lead the markets for over a year now.
More and more this mess is beginning to feel like late 2007/ early 2008: major warning signs abound, but investors continue to move into stocks believing that Central Banks will be able to maintain the bubble.
Smart investors are preparing now for what’s coming.
On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.
In it, we outline the coming crash will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.
We are giving away just 1,000 copies of this report for FREE to the public.
To pick up yours, swing by:
Best Regards
Graham Summers
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While as previously reported the biggest political threat facing Europe in the coming months is Italy’s October referendum on Matteo Renzi’s overhaul of the political system aimed at ending Italy’s unstable governments (which as of this moment is not looking to good, with the latest Euromedia Research polls showing that 34% of Italians would vote against Renzi’s plan, with 28.9% in favor and 19.4% still undecided), a referendum which may cost the prime minister his job as Renzi has promised to resign if he does not get the needed support, another referendum has emerged overnight when as Reuters reports Hungary will hold a referendum on Oct. 2 on whether to accept any future European Union quota system for resettling migrants as Prime Minister Viktor Orban’s government steps up its fight against the EU’s migration policies.
Emboldened by Britain’s shock vote to quit the European Union, Orban – another nemesis of the Brussels establishment who was once called the “dictator” by none other than Jean-Claude Juncker – is forging ahead with his own referendum which he hopes will give him a mandate to challenge Brussels. A massive pre-referendum campaign has already been underway. Orban took an anti-immigration stance during the migrant influx to Europe last year. Hungary was the main entry point into the EU’s border-free Schengen zone for migrants traveling by land until Orban shut the Croatian and Serbian frontier.
According to Reuters, President Janes Ader said in a statement posted on his office’s website on Tuesday that the vote will be about the following question: “Do you want the European Union to be entitled to prescribe the mandatory settlement of non-Hungarian citizens in Hungary without the consent of parliament?”
Hungary is already fighting an EU relocation scheme established during the height of the crisis last year, which will set quotas for each EU country to host a share of the migrants over two years. Along with Slovakia, Budapest has launched a court challenge against the plan. But the EU is also discussing a change to asylum rules that would require member states to accept a quota of refugees or pay a penalty for them to be housed elsewhere.
Antal Rogan, Orban’s cabinet chief, said on Tuesday the flow of migrants had to be stopped. “The Hungarian government asks Hungarian citizens to say no to mandatory resettlement and to say no to the immigration policy of Brussels,” Rogan told reporters. “Only Hungarians can decide with whom we want to live in Hungary.”
Rogan also said Hungary has doubled troops patrolling its southern border with Serbia, where 6,000 to 10,000 policemen and soldiers will be deployed from now on. More than 17,000 migrants have crossed into Hungary illegally from Serbia so far this year, according to the government.
Rogan said human traffickers had begun to use drones to monitor the movement of Hungarian border patrols, adding Hungary would inform Serbian authorities about this. Orban’s anti-immigration measures have been popular at home but criticized by rights groups. As of this month, a new law has taken effect which allows police to send back to Serbia illegal migrants detained within eight kilometers (five miles) of the border, drawing criticism from the U.N. refugee agency.
The Hungarian referendum, largely expected to halt migrant flow, will be merely the latest slap in the face of European cohesion and unity, and its passage is certain to impose even further limitations on the “free flow” of individuals across the customs union which with every passing day is becoming increasingly less that and more a loose cohesion of states unbound by any overarching federalism or ideology.
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With the short-end of the Swiss yield curve yielding below -100bps, it was only a matter of time before things went entirely mad at the long-end and today for the first time in history Swiss 50Y yields have tumbled below zero (trading as low as -2.7bps) as US Treasury yields tumble to fresh record lows.
As Bloomberg notes, rising concern about the outlook for economic growth and inflation effectively means that investors are paying the Swiss government for the privilege of lending to them out to 50 years.
Britain's vote to leave the European Union has darkened the economic outlook beyond Britain's shores and increased investor demand for safe-haven government bonds, even when the yield is below zero.
That's because investors expect further interest rate cuts and monetary easing from central banks around the world in response to the increased uncertainty.
"It's a reflection on the very bad prospects for the European and global economy," said Ciaran O'Hagan, senior rates strategist at Societe Generale in Paris.
"Bond yields are driven by inflation and growth, but there's no inflation and there's no growth. The economy is built on confidence, and if there's no confidence there's no economy," he said.
Which – obviously -means the entire Swiss government bond curve is now below zero…
This won't end well.
Charts: Bloomberg
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Just when you thought it was safe to buy sterling, Carney sparks another currency dump, sending cable to a 1.30 handle for the first time since September 1985…
Cable is now 400 pips below its post-Brexit bounce highs
BoE Governor Carney’s 3rd appearance in 12 days sparked today’s carnage…
“There is the prospect of a material slowing of the economy,” the Bank of England governor said at a press briefing in London on Tuesday, after the central bank published its semi-annual Financial Stability Report. “The number of vulnerable households could increase due to a tougher economic outlook.”
Not helped by the beginning of investor panic over UK property fund redemptions.
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In a stark flashback to the catalytic event that ultimately brought down Bear Stearns in 2008, and subsequently unleashed the greatest financial crisis in history, last night we reported that Standard Life, has been forced to stop retail investors selling out of one of the UK’s largest property funds for at least 28 days after rapid cash outflows were sparked by fears over falling real estate values.
As we further noted, citing an analyst, “given the outflows the sector seems to be experiencing, this could well put downward pressure on commercial property prices,” said Laith Khalaf, senior analyst at Hargreaves Lansdown. “The risk is this creates a vicious circle, and prompts more investors to dump property, until such time as sentiment stabilises.”
As we concluded, whie Brexit is not a Humpty Dumpty event, where all the Fed’s horses and all the Fed’s men can’t glue the eggshell back together, it is an event that forces investors to wake up and prepare their portfolios for the very real systemic risks ahead. And, indeed, if Standard Life was the first domino, moments ago the second domino also tumbled when as Bloomberg reported that Aviva Investors Property Trust is as of this moment “frozen” citing “extraordinary” market conditions.
What is notable is that the drop in the fund is not even that bad: as such it merely shows what happens when everyone decides to pull their money out at once from a financial system built on ponzi assumptions, and how one should always panic first.
Cited by Bloomberg, Aviva said in an email that “market circumstances, which are impacting the wider industry, have resulted in a lack of immediate liquidity” adding that “we have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect”
As Laith Khalaf, a senior analyst at Hargreaves Lansdown cited above, put it, “the dominoes are starting to fall in the U.K. commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote. It’s probably only a matter of time before we see other funds follow suit.”
We could not have said it better ourselves.
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