Month: January 2019

Authored by Sven Henrich via NorthmanTrader.com,

As with many terminal patients the initial hope is that aggressive treatment would work and cure the patient. But when the one time emergency round of drugs didn’t cure the patient additional drugs were needed and turned the patient into a hopeless junkie. After multiple injections a sense of dread was making the rounds. QE1 did not cure the patient, QE 2 and 3 were required with a little twist here and there thrown in. But the Fed doctors kept promising all would be well and the addiction could be stopped and the patient returned to normal.

And so it looks promising for a while. There was that scary flare up in 2016 when the patient regressed and the normalization had to be put on hold, but then a miracle drug came along called Tax Cut and suddenly it seemed as if the removal of drugs from the system could be accelerated.

So jubilant and optimistic were the Fed doctors that they promised further rounds of withdrawal and kept pointing to their dot plot of normalization.

Yet here we are, a mere 3 months later and the Fed doctors are at a loss again. Unable and unwilling to admit to the patient the true nature of the disease the Fed doctors once again decided to stop all withdrawal of the drugs, worse, they indicated they may have to administer new drugs to come. The patient begged for more drugs and the Fed doctors absolved themselves of their hippocratic oath and capitulated once again to the patient’s scream for another high, a scream only drowned out by the dying sigh of the Fed’s credibility, the initial casualty in this war on monetary drug dependency.

For it is true, the Fed doctors failed to wean off the patient:

The greatest economy ever just couldn’t handle an effective Fed funds rate above 2.27% pic.twitter.com/Wo9G7Vdx07

— Sven Henrich (@NorthmanTrader) January 30, 2019

Because deep down everybody knows, the Fed is the market’s bitch:

Fed went from 4 rate hikes to zero and from balance sheet reduction on autopilot to flexible. All in the course of 1 quarter.
Just pitiful.
The Fed is the market’s bitch.

— Sven Henrich (@NorthmanTrader) January 30, 2019

It’s not a secret, everybody knew all along:

But now Jay Powell has made it official and killed off the Fed’s credibility in the process.

It’s probably just as well. It’s been painful to watch as everybody knew the probability of survival was low. It was a slow death. And nobody wants to see suffering longer than needed and everybody knew it anyways.

As to the patient? Well, he’s back on the drip, smiling at the prospect of his final fix. The 10 year addiction never ended and the patient remains uncured. Yet the patient can’t get a new high without new drugs and so the current satisfaction at seeing the drip may turn into a great disappointment first before the new drugs finally arrive. See the Fed doctors have been withholding a vital piece of information from the patient: We can’t cure you, we can only get you hooked on drugs to make you feel better. In medical terms that’s called malpractice, which typically kills off the credibility of any medical professional. It shouldn’t be any different for a central bank. And it isn’t.

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via ZeroHedge News http://bit.ly/2CW2CbM Tyler Durden

After two months of dramatic volatility in its stock, which saw the share price of Amazon first tumble to close 2018 then soar by in the past month, Jeff Bezos’ online retailing titan was expected to report blow out earnings after what the company said was a record holiday period (while news of Bezos’ divorce from his wife came and went without affecting the stock), and moments ago Amazon did not disappoint, when it reported both EPS and revenues which handily beat expectations, even as it reported guidance guidance for the current quarter that came in well below Wall Street estimates.

In kneejerk response, the stock rose over 2% but has since trimmed its gains and was down slightly which perhaps is to be expected after the torrid gains the company enjoyed in the past month.

Here are the details from Amazon’s just concluded Q4:

• EPS of $6.04, beating estimates of $5.56
• Revenue of $72.4BN, beating estimates of $71.92BN
• Operating income of $3.79 billion, also beating consensus estimates of  $3.65 billion

A somewhat troubling trend to some, Amazon’s revenue growth has been slowing in recent quarters, and in Q4 came in at 19.7%, the slowest since Q1 2015.

While Q4 revenue growth was nearly 20% year over year, a strong if slowing number, it came amid a friendly backdrop of high consumer confidence, which was mirrored by robust chain-store sales. Moreover, it was the lowest year-over-year revenue growth for the company since mid-2015 as Bloomberg notes.

Slowing revenue was offset by growing profit margins, and it will be up to the market to determine whether profits are increasing enough to offset the slowdown in overall growth.

Offsetting the strong historical numbers, however, Amazon guided Q1 net sales to be between $56 billion and $60 billion, which however was below the consensus est. of $60.99B. Meanwhile, operating income is expected to come in between $2.3 and $3.3 billion, compared with $1.9 billion in Q4 2017, and also roughly in line with consensus estimate of $2.99 billion.

Also it is worth noting that the midpoint of the first-quarter revenue guidance – $58 billion – would represent year-over-year growth of just 13%. That would be the lowest for Amazon since the recession of 2001.

Another potential red mark this quarter: Amazon’s subscription services, mostly Amazon Prime, saw a sharp slowdown, growing by 26% from a year ago, down from 50%+ growth rates in recent quarters. This may be the result of Amazon raising the price of Prime and its quick-delivery perks in the U.S. to $119 annually last year.

Expect analysts to ask management on the conference call later how the price hike is impacting retention and new memberships.

Going back to the historical data, the all-important Amazon Web Services unit, or AWS, posted sales of $7.4 billion, versus the $7.3 billion analyst outlook.

Amid worries about whether business technology spending might be wavering, AWS’s sales growth rate dipped fractionally to 45% from 46%.

Despite the modest decline in annual revenue growth, a year ago consensus seemed to be that competition from Microsoft and Google would cut into AWS’s growth, but that has yet to happen. The division remains the leader in the rapidly growing cloud computing space, and a perhaps a leading candidate to secure the Department of Defense’s lucrative $10 billion Jedi contract.

On the bottom line, AWS was responsible for operating income of $2.2 billion, a 29.3%profit margin, down from 31.1% last quarter but up from the 26.4% a year ago. In other words, for yet another quarter, AWS was responsible for more than half, or 62% of Amazon’s total operating income.

In addition to AWS, another bright star was Amazon’s advertising business, which as Bloomberg notes, “continued to be a star” with sales in the company’s “other” category, which is mostly advertising, nearly doubled from a year ago, to $3.38 billion. Like cloud computing sales, advertising is more profitable for Amazon than its core retail unit.

Now the not so good news: perhaps as a result of the recent price cut at Amazon’s Whole Foods chain, revenue declined 3% year-over-year in its “physical stores” – a category that mostly includes Whole Foods and also Amazon’s chain of bookstores. The revenue figure was worse than analysts had expected.

As Bloomberg’s Shira Ovide notes, one other spot of growth worry: paid unit sales, which counts individual items sold on Amazon websites, saw year-over-year growth figure slow again to 14%.

That could be a sign that total revenue growth is slowing not only because of a shift by Amazon from selling its own merchandise to being a conduit for merchandise sold by outside companies.

In his remarks in the press release, CEO Jeff Bezos pivoted from focusing on Amazon Business last quarter, and this time it was all about Alexa:

“Alexa was very busy during her holiday season. Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year.

“The number of research scientists working on Alexa has more than doubled in the past year, and the results of the team’s hard work are clear. In 2018, we improved Alexa’s ability to understand requests and answer questions by more than 20% through advances in machine learning, we added billions of facts making Alexa more knowledgeable than ever, developers doubled the number of Alexa skills to over 80,000, and customers spoke to Alexa tens of billions more times in 2018 compared to 2017.

“We’re energized by and grateful for the response, and you can count on us to keep working hard to bring even more invention to customers.”

As noted above, the kneejerk reaction was initially positive, but investors may have been spooked by the company’s poor Q1 guidance, and as a result the stock has slipped modestly after hours.

Developing

via ZeroHedge News http://bit.ly/2Sg40j8 Tyler Durden

As trade wars reached new levels of anger in November, China dumped $17.5 billion of US Treasuries (and was the biggest seller that month). This is the 6th monthly drop in China’s Treasury holdings and they are now at their lowest level since May 2017…

Norway, Ireland, and Taiwan was also among the biggest dumpers of US Treasuries in November.

On the flip-side, France (+$22bn) and Japan (+18.1bn) added the most US Treasuries in November…

This is the biggest monthly addition by France ever to its highest exposure ever…

However, China remains the US largest debtholder and a little context to France is worth considering…

In aggregate, only agency debt was net bought in November with Treasuries, stocks, and corporates all sold…

• Foreign net selling of Treasuries at $9.3b

• Foreign net selling of equities at $5.6b

• Foreign net selling of corporate debt at $3.4b

• Foreign net buying of agency debt at $19.6b

Still, it appears “great friend” Xi is not the same as “great friend” Macron…

via ZeroHedge News http://bit.ly/2HJwwWt Tyler Durden

The Fed capitulation appears to have been seen early by gold and the market is now implying a 13.5bps rate-cut in 2019… as stocks soar…

After the worst December in 100 years, the S&P just experienced its best January since 1987…

 

Is this really what you wanted Mr.Powell? This is how it ends…

 

Chinese stocks were very mixed in January with tech-heavy indices hit hardest (CHINEXT red) and the major industrials outperforming on stimulus, trade-talk optimism…

 

German retail sales collapse and Italy enters recession and Italian stocks soar to its best January since 2011!!

US markets and non-US markets are joined at the Central-bank-driven hip…

 

US equity markets were also exuberant in January (especially the last few days). Small Caps led the majors, soaring over 10% – the best month since Oct 2011 and the best January since 1987…

 

All on the heels of the biggest monthly short-squeeze since September 2010…

 

FANG Stocks soared over 31% off the lows…

 

A big January for banks also…

 

On the week, thanks to Powell’s fold and Lighthizer’s trade comments, we are back in the green…

 

GE was today’s big winner…

 

Credit spreads and VIX collapsed in January… (with credit dramatically outperforming in the last week or so…

 

The last few days have seen Treasury yields tumble – accelerating after Powell – leaving all yields lower in January…

 

30 TSY yields tumbled back below 3.00%…

Financials Conditions have eased dramatically – erasing the last hike’s tightening…

 

The Dollar dropped for the 3rd month in a row (biggest monthly drop in a year) slammed to 4-month lows after The Fed yesterday…

 

Yuan surged in January as the dollar slipped…

 

Despite dollar weakness, cryptos slipped again in January…

 

All major commodities made good gains in January, led by WTI…

 

WTI Crude soared over 18% in January (its best month since April 2016)…

This was WTI’s best January ever…

 

Gold had a great month too…

Ending the sixth straight January with gains…

While gold soared against the dollar, it barely broke-even in January against the Yuan…

Silver also had a solid January (the 7th year of the last 8 with a positive January)

In other commodity news, Nickel just posted its best January in more than two decades.

As Bloomberg notes, the metal, used in stainless steel and electric vehicles, surged 17 percent in the month amid bets that demand will rise as a production deficit deepens. Prices extended gains this week after Vale SA’s dam disaster fueled speculation that shutdowns at some of the company’s iron ore sites could extend to its nickel operations, tightening supplies further.

Finally, amid all the exuberance in January, the month saw the biggest drop in forward earnings expectation in three years…

 

But all stocks care about is how easy Powell can be…

 

“You Are Here”…

*  *  *

“You have meddled with the primary forces of nature, Mr Powell, and we won’t have it! Is that clear? … And you will atone.”

 

via ZeroHedge News http://bit.ly/2Rwzb5a Tyler Durden

Forget PIK: China’s financial innovation has taken the concept of pay-in-kind bonds to a whole new level: PIG.

Regular readers of Zero Hedge are familiar with money-for-oil loans. But, as we reported last November, one liquidity-challenged pork producer implemented an absurd twist on that concept that has helped to expose the financial dysfunction at many small- and medium-sized Chinese companies.

Instead of receiving cash, holders of local-currency bonds issued by Zhengzhou-based pork producer Chuying Agro-Pastoral Group – which had 1.3 billion yuan in cash against a short-term debt load of 8.4 billion yuan – would be paid with the company’s ham, thanks to an agreement reached between the company and its creditors. The agreement was struck after the company failed to repay a 500 million yuan bond that was due last Nov 5. The spread of African swine fever caused pork demand in China to plummet, creating a cash-on-hand crisis for pork producers.

Well, if you thought that was absurd, you will love what happened next, because according to an announcement on the Shenzhen Stock Exchange, the aptly misnamed Agro-Pastoral Group has run into a new problem: after running low on cash, it is now running low on pigs.

The cash crunch that initially left the pork producer unable to service its debt has now intensified to the point that it’s unable to buy enough feed, which has contributed to the company’s pigs’ death rate being higher than expected.

This, as Bloomberg notes, was the latest twist for the small-cap company that’s been challenged on multiple fronts, from the spread of African swine fever – which has seen more than 900,000 hogs culled across the country – to an economic slowdown to a deleveraging drive by policy makers that’s tightened credit flows to weaker borrowers.

As a result of the latest liquidity – and pork – shock, the central China-based company revised its 2018 performance forecast to an even greater net loss of 3.3 billion yuan, up from 2.9 billion yuan.

However, missing loss expectations may be the least of the company’s worries, which has 2.3 billion yuan of bonds it needs to repay this year, according to data compiled by Bloomberg. It is known the company does not have the cash to make this payment; now it may not even have the pigs to pay “in kind.”

Agro-Pastoral is hardly the first company to propose innovative terms to its creditors: last year, a financing platform under troubled conglomerate HNA Group offered investors air tickets rather than cash for debt repayment. It also won’t be the last: as we reported last year, in 2018 China was hit by a record wave of onshore bond defaults. These defaults have shaken the faith of the country’s bondholders, created anxieties among international investors, who have only recently gained entree to the Chinese bond market, and forced the PBOC to reverse some of its tight-money policies aimed at facilitating a deleveraging in China’s heavily indebted corporate sector.

It has also prompted such arrangement as “Payment In Ham.“

As one fixed-income analyst who spoke with the SCMP recently pointed out, so-called “payment in kind” typically isn’t acceptable to bond holders, although when there is no other value they will take anything, even pigs. And while the “payment in ham” only added to concerns surrounding the solvency of small and medium-sized Chinese businesses, investors shouldn’t worry. Because the Communist Party is coming to rescue them.

“Payment in kind is generally not seen as acceptable for debt repayment,” said Judy Kwok-Cheung, director of fixed income research at Bank of Singapore. This implies increasing liquidity concerns for for small and medium-sized enterprises in China, she said.

“Liquidity injection from the government directed at helping SMEs has eased concerns somewhat, but the market potentially needs more,” according to Kwok-Cheung.

Incidentally, for those wondering, one gift package of Chuying Agro-Pastoral’s ham costs 8,999 yuan or about $1,300. Assuming it takes one pig to make one such package, the company will have to remit just over 255,000 pigs to its creditors in lieu of the upcoming bond maturity, assuming of course that the credit hedge funds who are invested in the pig farmer have space in their office of a few hundred thousand pigs.

via ZeroHedge News http://bit.ly/2S33dmr Tyler Durden

Authored by Mark Orsley, Head of Macro Strategy at PrismFP,

• Fed confirming all the economic and market signals that we are in late, late cycle close to “R”

• Equities continue to shrug off poor earnings/guidance and breakout from the Trump Megaphone – equities tend not to rally at the end of the cycle

• Trade War (TW) resolution can extend the cycle but there are signs that TW has gone on too long – now bleeding into domestic demand

• Bias towards end of cycle trades like 5s30sn steepeners and Dollar shorts – use equity breakout to lighten up on longs

I am sure by now you have read enough “Fed was dovish” pieces so will spare you the recap.

For clients that I have had a chance to meet with since I started at Prism a little over a month ago, my thesis has been entirely about the end of the cycle. Readers may recall this list I provided back on Jan 10th as simple evidence:

Late cycle indicators:

• Growth moderates (you could argue we are more than moderating, but check)

• Credit tightens (for sure have seen that)

• Earnings peak and start to decline (yes and being guided down now – see Apple, MSM, Samsung, LG, Delta, Skyworks, Macy’s, Kohl’s, American Airlines, Constellation Brands, Lindt, Goodyear, Ford, Stanley Black & Decker, Intel, and Nvidia for example )

• Interest rates rise accelerates (had that in Sept– the decline in rates now is actually a recession indicator)

• Confidence peaks (both business and consumer surveys have rolled over)

• Inflation rises (also already had that – the recent easing of inflation expectations is another recession indicator)

As you can see from that Econ 101 list of late cycle indictors, every box is checked, and rates and inflation are basically pointing to the dreaded “R” word that nobody wants to talk about or use (so I will only use “R” to keep everyone calm). Yesterday the Fed essentially verified the late cycle possibly entering an “R” by confirming that rate hikes have been shelved and the balance sheet unwind could be slowed. Classic late cycle central bank behavior that typically leads to an “R.”

If you don’t believe that fundamental analysis (not sure how you can argue different and don’t bring up NFP because that is THE most lagging indicator), let’s see what the markets are telling us. After all, clearly the markets are driving Fed policy which drives the economic cycle. The two indicators I have been watching for further confirmation of this late cycle into “R” is (1) the 5s30s curve and (2) the US Dollar. It is therefore not surprising to me that 5s30s steepened a perky 5.5bps and the broad Dollar index depreciated 50bps (vs. EM like ZAR and BRL, the USD was 1% to 2% weaker) yesterday. Both charts speak to a continuation of those moves.

US 5s30s has an insanely bullish (steeper) narrative. First there is a descending wedge which typically gets resolved to the upside. Secondly, the pattern forming at this base is either a bullish “cup and handle” or “head and shoulder.” Call it what you want but if/when we get the weekly close above 56bps, the target will be 100bps…

As I showed in Monday’s note, the DXY setup was ripe for a depreciation. I projected an Elliott Wave count lower and that is now in full motion. Notice the DXY chart was an ascending wedge breakdown. Doesn’t that look eerily similar to the inverse of 5s30s?? Basically this Dollar move is foreshadowing the coming move in the curve…

Equities celebrated the lower Dollar and lower rates due to a friendlier Powell than he was in December with a strong rally. NASDAQ broke out and negated the ”Trump Megaphone” we have been watching. As I warned on Monday, the market was shrugging off earnings misses/lower guidance and that was not to be dismissed. That indicates that investors de-risked in December and were champing at the bit to re-risk. A dovish Fed was vital and they delivered.

I just have one question: can someone name a time when equities sustained a rally in the late cycle entering “R” period??? I haven’t found one and I can show you all the analogs that say no if you care to see.

Now there is one thing that can extend the late cycle and avoid the “R” and that is trade war reconciliation. Clearly trade wars have dragged down global growth and thus a resolution would reverse much of that. However, it will not take growth back to the good ole days as QT continues (note Powell didn’t end BS unwind yesterday) and the fiscal impulse continue to fade to zero by mid-year.

Thus a TW resolution simply puts the cycle back to early late cycle, and away from late cycle entering “R.” If there is no resolution, we are talking not only “R” but serious repercussions to the credit markets (recall my note on Jan. 23rd showing the Corp bond maturity tsunami). I am trying not to be dramatic, but it would be a DISASTER. Through conversations with clients, the most underappreciated risk is the amount of debt (both Corp and Sov) that needs to be rolled this year. Any wobbles in the economy/markets would make that extremely difficult and cause a credit crunch which would add to the economic problems.

There is actually risk that trade wars are going on too long. Much of the data weakness around the world is export and manufacturing led (a good indication it’s due to TW). We need to watch if domestic demand is starting to suffer. Anyone see German retail sales this morning?? Anyone?? I will save you from hitting ECO; the German consumer hit a brick wall. We can thus surmise, along with other EU consumer data points, that TW have taken Europe into the abyss.

So far there are no clear signals that TW has bled into US domestic demand but there are some signs developing. Take a look at the Consumer Confidence data on Tuesday, the amount of people saying there are “fewer jobs,” and rising loan delinquencies as examples. These all point to the percolating risks that the US consumer is starting to feel the TW. Thus markets will surely celebrate a TW deal, but it may very well be the case that it is too late. That is the largest risk in my mind.

Bottom line: I continue to like end of cycle trades like 5s30s steepener and Dollar shorts. I am not wildly bullish equities even given this breakout and would use rallies to lighten up on longs. If TW get resolved, use that rally to get completely flat to short. No matter what, the economic cycle is ending, it is just a matter of how long the TW resolution euphoria extends it. Furthermore, it can be entirely possible that TW have dragged on too long and the global economy is too far gone for a deal to save it.

Sorry if that comes across too doom and gloom for you on this frigid day, but the above narrative is entirely supported
by economic facts not conjecture.

via ZeroHedge News http://bit.ly/2GbQeYp Tyler Durden

In the latest salvo to emerge from the escalating fight between the Trump administration and Venezuela’s ruling Maduro regime over control of the South American country’s state-owned energy assets, the WSJ reports that in order to protect its operations, Venezuela’s Citgo Petroleum is considering various options, including filing for bankruptcy.

Citgo, which is among the largest refiners in the U.S., is weighing its options while the White House attempts to shift control of Venezuela’s assets from President Nicolás Maduro to opposition leader Juan Guaidó, whom the U.S. has recognized as the legitimate head of state prompting accusations by the Maduro regime that the US is fomenting a presidential coup.

In addition to control over the military, control of Venezuela’s state-owned assets is seen as key to the country’s political fate, and the tussle is forcing Citgo to consider U.S. bankruptcy proceedings as one of several plans drafted by some executives and advisers, the WSJ reports citing people familiar.

Reached for comment, a Citgo spokesman said Thursday the company is “profitable, solvent and has contingency plans to successfully manage the recent events.” Meanwhile, the US responded that the US goal is for Citgo to remain viable, but not under Maduro control.

While Citgo’s financial pressures aren’t pressing as of this moment, a bankruptcy filing could stabilize operations while providing an organized forum for restructuring its debt, dealing with a looming governance crisis and sorting out competing creditor claims on the company’s assets, with the WSJ reporting that Citgo, which is owned by defaulted state oil giant Petróleos de Venezuela SA, or PdVSA which was hit by US sanctions this week in an attempt to cripple the Maduro regime, has retained law firm Willkie Farr & Gallagher LLP for legal advice on several contingency plans.

And while a bankruptcy could provide a period of calm during the ongoing political duel, a potential problem emerges as the list of creditors circling Citgo as a source of repayment includes PdVSA bondholders, several North American companies that had their operations in Venezuela seized and nationalized, but most importantly Russian state oil company OAO Rosneft.

The issue is that should Citgo file for bankruptcy, Russia’s Rosneft could become an owner of 49.9% of the company’s equity, unleashing yet another diplomatic crisis as Moscow becomes the defacto minority owner of one of the largest refiners on US soil.

Speaking of which, Citgo runs three refineries along the U.S. Gulf Coast that support more than 3,000 U.S. jobs and supply thousands of Citgo-branded gasoline stations. Of these, the largest is the Lake Charles facility, which has a daily refining capacity of 425,000 bpd.

As such any prolonged impairment of operations would likely result in a drop in gasoline output and potentially a spike in US gasoline prices.

Which also explains why US officials said they are working to ensure Citgo, which represents around 5% of U.S. refining capacity, stays operational as they try to transfer control of the company and the country’s other assets to Mr. Guaidó. It was not immediately clear how the US can prevent Citgo from filing in the US if its Venezuela owners decide that is the only way to preserve ownership of the assets.

via ZeroHedge News http://bit.ly/2DMsfNS Tyler Durden

Gold is poised to close out January with a fourth straight monthly gain after the Fed’s uber-dovish flip-flop seemed to signal that it’s done raising interest rates (reportedly for a while but that’s never happened before)…

The Fed have never, ever “paused” a full hiking cycle. The always end up cutting. Each cutting cycle has led to a recession except mid 1990’s and 1987. Odds are in favour of the Fed having gone too far already and the stock market figuring it out in due course…

— Raoul Pal (@RaoulGMI) January 30, 2019

Which has hurt the dollar, helping gold to its sixth January gains in a row as investors sought a haven against slowing growth and U.S.-China trade disputes.

While short interest in GLD (Gold ETF) has soared along with price…

Bloomberg survey results show a decidedly positive bias on the precious metal (Bullish: 13 Bearish: 2 Neutral: 2)

If the Fed’s rate-hike cycle really has come to an end for now, the sooner-than-expected dollar weakness may help gold to “rise more quickly and more sharply,” Commerzbank said in a note.

“Both the tone and language of the Fed statement and presser appeared more accommodative versus consensus expectations,” Citigroup Inc. analysts including Aakash Doshi wrote in a note. “To take advantage of an ongoing gold market rally, investors might consider positioning for upside.”

“Gold is benefiting from a lower dollar in general, as well as safe-haven buyers hedging against the outcome of the U.S.-China trade talks,” Jeffrey Halley, senior market analyst at Oanda Corp. in Singapore, said in a note.

Still, there’s no guarantee gold will keep appreciating at the same pace.

Ole Hansen, head of commodity strategy at Saxo Bank, said by email. While the bank maintains a bullish view on gold, “some caution may now be warranted,” he said.

“With stocks rallying and emerging market assets receiving a boost, the buy-gold story has faded, at least for now,” Hansen said.

And as BCS Global Markets said in a note, the big range in analysts’ outlook for gold this year shows “that there is actually no consensus.”

However, there is one group of global ‘investors’ who are waving in those bullion trucks with both hands and feet – The world’s central banks…

Central banks bought last year the most gold in 47 years, with 651.5 tonnes (74% higher YoY). This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971…

Additionally, Bloomberg’s Javier Blas notes that the 2018 gold buying spree by central banks isn’t just the biggest in 47 years, but also the second highest annual total on record (only surpassed by 1967, when central bank gold reserves increased by 1,404 tonnes).

“Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets,” said the World Gold Council report released on Thursday.

Strong central bank and consumer demand offset ETF outflows…

More central banks look to gold. 

Russia, Kazakhstan and Turkey again accounted for a large portion of demand in 2018. But their share fell to 58 % – from 94 % in 2017 – as other central banks chose to significantly increase their gold reserves, reinforcing the importance of gold as a reserve asset.

Notably, European central banks also bought gold last year. Hungary made one of the largest purchases, increasing its gold reserves ten-fold in October, to 31.5t. This is the highest level for nearly 30 years. The central bank cited gold’s role as a hedge against future structural changes in the international financial system, as well as its lack of counterparty or credit risk, as reasons for the purchase. Similarly, Poland was another European central bank which bought last year. Gold reserves rose by 25.7t during 2018, +25% y-o-y. 

Indian net purchases were another notable component of central bank demand in 2018. Monthly purchases began in March and picked up in the second half of the year. In total, gold reserves rose by 40.5t, the highest annual growth since the purchase of 200t from the International Monetary Fund In 2009.5 In its Annual Report 2017-2018 the bank stated: “Diversification of India’s Foreign Currency Assets (FCA) continued during the year with attention being ascribed to risk management, including cyber security risk. The gold portfolio has also been activated.” 

Mongolia announced that it had bought 22t of gold in 2018, in line with its stated target.  This represented a 10% increase on 2017 purchases. One of the drivers of this growth was a five-month “National Gold to the Fund of Treasures” campaign, which encouraged miners and individuals to sell their gold to the central bank.6

In September, the Central Bank of Iraq stated that it had taken advantage of lower gold prices to buy 6.5t. This was the first annual increase since 2014 and took total gold reserves to 96.3t, accounting for 6.7% of total reserves. 

The State Oil Fund of Azerbaijan (SOFAZ) also re-entered the market last year. Gold reserves grew by 14.3t by the end Q3, an increase of nearly 50% from end-2017.7 Having been on the side-lines of the gold market since the end of 2013, this marked a change in policy for the fund. In December 2018, President Ilham Aliyev approved updated investment guidelines that would allow SOFAZ to invest up to 10% of its portfolio in gold. Currently, gold accounts for 4.3% of SOFAZ’s portfolio. 

So, what do the central banks know that mom-and-pop FAANG-buyer don’t?

via ZeroHedge News http://bit.ly/2HLy7Lg Tyler Durden

Authored by Caitlin Johnstone via Medium.com,

The other day Hawaii congresswoman and Democratic presidential candidate Tulsi Gabbard came out with what remains the strongest rejection of the Trump administration’s regime change interventionism in Venezuela out of anyone likely to run for the presidency in 2020.

“The United States needs to stay out of Venezuela,” Gabbard tweeted.

“Let the Venezuelan people determine their future. We don’t want other countries to choose our leaders  –  so we have to stop trying to choose theirs.”

Boom. Unambiguous, unequivocal, and without any of the “Yeah Maduro is an evil monster, but” modifiers that other officials (including Bernie Sanders) have been prefacing their feeble objections to Trump’s campaign to topple the Venezuelan government with. Which of course outraged all the usual war pundits, including the Washington Post’s most reliable military-industrial complex fluffer Josh Rogin.

“Again, @TulsiGabbard shares the same foreign policy position as Russia and the Assad regime,” Rogin tweeted in response to Gabbard’s statement. “It’s probably just a coincidence. #TusiAssad2020”

Again, @TulsiGabbard shares the same foreign policy position as Russia and the Assad regime. It’s probably just a coincidence. #TulsiAssad2020 https://t.co/nJB59hAyPJ

— Josh Rogin (@joshrogin) January 28, 2019

This man calls himself a journalist. He works for one of the most respected and influential news outlets in America.

Rogin’s post is obnoxious and idiotic for a whole host of reasons, among them the fact that Trump is consistently painted as a Kremlin stooge by pundits like Rogin, yet opposing Trump is somehow being depicted as Kremlin servitude. But the reason his tweet deserves an article of its own today is because the argument he is using is one you see recurring over and over again in the psychotic, pants-on-head, screaming-at-traffic stupid salad that is collectively referred to as Russiagate.

Another way to write Rogin’s tweet would be as follows:

“Hmmm, you think the US should refrain from destroying countries all around the world? You know who else thinks that? The Kremlin! Hmmm, it’s very interesting that you and the Kremlin share that same view all the time, hmmmm, hmmmmmmm, hmmmmmmmmmmm probably just a coincidence though!”

You see this obnoxious McCarthyite talking point regurgitated over and over and over again by people eager to paint anyone who objects to US interventionism and the political establishment responsible for it as Russian agents, and it’s about as moronic an argument as any you’ll ever see.

Last year I had a brief interaction with a popular Twitter account calling itself Conspirador Norteño, an anonymous user who spends their time promulgating conspiracy theories about Russian bots and Kremlin trolls using those weird “who’s tweeting about subject X” graphs that Russiagaters like to use as imaginary evidence. The account is often cited by the Atlantic Council’s NATO propaganda firm DFR Lab, and by its allied narrative control firms Bellingcat and PropOrNot, as well as mainstream media outlets like the BBCand Mother Jones.

If a Twitter account a) consistently parrots the views of the Kremlin over a period of several years and b) uses Russian state media as major primary sources, as @Ian56789 does, then it is reasonable to classify that account as propaganda. Opinion doesn’t enter into it.

— Conspirador Norteño (@conspirator0) April 25, 2018

Conspirador Norteño and his goon squad of counterintelligence-LARPing followers spent the entirety of our interaction attempting to argue that because a private British citizen named Ian Shilling sometimes shared Russian state media and often found himself in agreement with Russia on foreign policy, he could fairly be labeled a propagandist for the Russian Federation.

“If a Twitter account a) consistently parrots the views of the Kremlin over a period of several years and b) uses Russian state media as major primary sources, as @Ian56789 does, then it is reasonable to classify that account as propaganda,” the account insisted.

“You’re also ignoring the fact that his positions are in lockstep with the Kremlin’s; pushing the viewpoint and agenda of a government is propaganda, regardless of which government it is,” the account claimed.

The reason this popular McCarthyite argument is so face-meltingly stupid is simple: there are many, many reasons for someone to oppose the interventionism and foreign aggression of the US and its allies besides having loyalty to the Russian Federation. Russia opposes the interventionism of the US-centralized empire because it is a nation with its own allies and agendas, and because it is a longtime target for subversion and undermining by imperial government agencies since it refuses to be absorbed into the blob of the western power alliance. This does not mean that Russia’s reasons for opposing western interventionism are the only reasons to oppose western interventionism, and anyone who believes that it is is a slobbering idiot.

This is a non-satirical version of the “Hitler drank water” meme, which mocks this style of argumentation by pointing out the fact that both Adolf Hitler and Donald Trump drank water, implying they must therefore be aligned.

The argument that is advanced by all the Josh Rogins and Conspirador Norteños of the gibbering McCarthyite mad house holds that the only possible reason anyone could possibly oppose an establishment which is in an endless state of regime change interventionism, which is pushing us ever closer to the likelihood of nuclear armageddon by escalating tensions between nuclear superpowers, and which is shoving us toward extinction via climate chaos with a policy of unchecked ecocidal corporatism, is some form of Kremlin servitude. They claim there’s no acceptable reason anyone could be “in lockstep with the Kremlin” on foreign policy, despite the fact that a worldview which opposes western interventionism necessarily will be the same as the position of the Kremlin’s because Russia, like so many other sovereign nations, opposes western interventionism.

US-led interventionism is literally always disastrous and literally never helpful in modern times, and you don’t need to be aligned with Moscow or Damascus to see that. The power establishment which crushes any nation that refuses to bow to its demands is responsible for the deaths of untold millions of human beings, and wanting that power establishment to crumble is a very legitimate and reasonable thing. Every good and decent person in the world should want the same

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