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The U.S. monthly international trade deficit increased in October 2016 according to the U.S. Census Bureau, rising from $36.2 billion in September (revised lower from $36.4 billion) to $42.6 billion in October, higher than the $41.8BN consensus estimate, as exports decreased and imports increased which was to be expected following the recent surge in the US Dollar. The goods deficit increased $6.3 billion in October to $63.4 billion. The services surplus decreased $0.1 billion in October to $20.8 billion.

Breaking down the main trade categories, exports of goods and services decreased $3.4 billion, or 1.8 percent, in October to $186.4 billion. Exports of goods decreased $3.5 billion and exports of services increased $0.1 billion.

• The decrease in exports of goods reflected decreases in foods, feeds, and beverages ($1.4 billion), in industrial supplies and materials ($1.0 billion), and in consumer goods ($0.9 billion).
• The increase in exports of services mostly reflected an increase in transport ($0.1 billion), which includes freight and port services and passenger fares.

At the same time, imports of goods and services increased $3.0 billion, or 1.3 percent, in October to $229.0 billion. Imports of goods increased $2.8 billion and imports of services increased $0.2 billion.

• The increase in imports of goods mostly reflected increases in consumer goods ($2.4 billion) and in capital goods ($1.1 billion). A decrease in automotive vehicles, parts, and engines ($0.7 billion) partly offset the increases.
• The increase in imports of services reflected an increase in transport ($0.2 billion).

Broken down by country, the October figures show surpluses, in billions of dollars, with Hong Kong ($2.6), South and Central America ($1.8), Singapore ($1.3), and Brazil ($0.1). Deficits were recorded, in billions of dollars, with China ($28.9), European Union ($12.9), Mexico ($5.8), Japan ($5.8), Germany ($4.7), India ($2.4), Italy ($2.2), OPEC ($2.1), Canada ($1.7), France ($1.6), South Korea ($1.4), Taiwan ($1.0), United Kingdom ($0.7), and Saudi Arabia ($0.2).

• The deficit with China increased $2.0 billion to $28.9 billion in October. Exports increased $0.5 billion to $10.6 billion and imports increased $2.4 billion to $39.5 billion.
• The balance with Canada shifted from a surplus of $0.2 billion in September to a deficit of $1.7 billion in October. Exports decreased $0.9 billion to $22.0 billion and imports increased $1.0 billion to $23.6 billion.
• The balance with the United Kingdom shifted from a surplus of $0.9 billion in September to a deficit of $0.7 billion in October. Exports decreased $1.0 billion to $4.3 billion and imports increased $0.6 billion to $5.0 billion.

While not a big surprise, we expect that Q4 GDP estimates will see some modest downward revisions as a result of the weaker trade report. The biggest question is how it will translate at the micro level, and how soon before the ongoing dollar strength forces companies, especially those with global sales exposure, to begin trimming their 2017 earnings and revenue forecasts.

via http://ift.tt/2g5gpnL Tyler Durden

US Productivity rose a disappointing 3.1% in Q3 (missing expectations of a 3.3% rise). However, on a year-over-year basis, Q3 saw a second consecutive decline – the first two-quarter decline in US productivity since 1993. Unit labor cost growth slowed in Q3 to 3.00% (with QoQ growth tumbling from 6.2% in Q2 to just 0.7% in Q3).

Actually if one looks at the official table US productivity has notr risen YoY since Q4 2015 – (Q1 0.0%, Q2 -0.3%, Q3 -0.05%)

 

But, as Fed-induced investment in buybacks crowds out capex, real-worker productivity is collapsing (but buy back productivity is soaring!!).

*  *  *

How can this be?? The mainstream media 'economists' are stunned. As we explained previously, there are a few reasons… Even Alan Greenspan has warned that America is "in trouble basically because productivity is dead in the water…" There are numerous reasons for this plunge in worker-productivity, from perverted inventives not to work to unintended consequences of monetary policy enabling zombies, but perhaps the most critical driver is exposed in the following dismal chart…

51% of total time spent on the Internet is on mobile devices – in 2015, first time ever mobile is #1 – to make a total of 5.6 hours per day snapchatting, face-booking, and selfying…

Source: @kpcb

So, while every effort can be made by Ivory Tower academics to solve the problem of American worker productivity, perhaps it can be summed up simply as "Put The Smart-Phone Down!"

As we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

In addition, the last 15 years also saw an outsized contribution to GDP from finance. If we look at the US GDP by contribution from value added by industry we clearly see how finance stands out in what would otherwise have been an impressively diversified economy.

With hindsight we know that finance did more harm than good so we can conservatively deduct finance from the GDP calculations and by doing so we essentially end up with no growth per capita at all over a timespan of more than 15 years! US real GDP per capita less contribution from finance increased by an annual average of 0.3 per cent from 2000 to 2015. From 2008 the annual average has been negative 0.5 per cent!

In other words, we have seen a progressive (pun intended) weakening of the US economy from the 1970s and the reason is simple enough when we know that monetary policy broken down to its most basic is a transaction of nothing (fiat money) for something (real production of goods and services). Modern monetary policy thereby violates the most sacred principle in a market based economy; namely that production creates its own demand. Only through previous production, either your own or borrowed, can one express true purchasing power on the market place.

The central bank does not need to worry about such trivial things. They can manufacture the medium of exchange at zero cost and express purchasing power on the same level as the producer. However, consumption of real goods and services paid for with zero cost money must by definition be pure capital consumption.

Do this on a grand scale, over a long period of time, even a capital rich economy as the US will eventually be depleted. Capital per worker falls relative to competitors abroad, cost goes up and competitiveness falls (think rust-belt). Productive structures cannot be properly funded and the economy must regress to align funding with its level of specialization.

In its final stage, investment give way for speculation, and suddenly finance is the most important industry, pulling the best and brightest away from every corner of the globe, just to find more ingenious ways to maximise capital consumption.

As the slave economy got perverted by incentives not to work, so does the speculative fiat based economy, which consequently create debt serfs on a grand scale.

via http://ift.tt/2g5fIuO Tyler Durden

Submitted by Michael Shedlock via MishTalk.com,

The Dallas Police and Fire Pension plan is severely underfunded. Not even a $1.1 billion taxpayer bailout the plan officials request will make the plan whole.

Discussion of a possible freeze in lump sum payments led to a run on withdrawals. The board still has not suspended lump sum payouts.

On Saturday, Dallas Mayor Mike Rawlings proposed targeting those who got rich from the system. This is sure to accelerate the run on assets via lump sum withdrawals.

As background to this story, please consider my October 16 article: Dallas Police Retiring in Droves, Taking Lump Sum Pensions, Fearing the Money Isn’t There (And It Isn’t).

Today, DallasNews reports City’s plan to save Dallas Police and Fire Pension Fund will target those who got rich from the system.

A City Council briefing posted online late Friday night provided the first glimpse into the city’s plan to save the Dallas Police and Fire Pension System from insolvency within the next decade or so. Rawlings and the City Council will discuss the plan Wednesday.

 

While the presentation is short on details, Rawlings said he can be clear about a few aspects. The city won’t pay the $1.1 billion bailout that pension officials want. Taxpayers will chip in, but he doesn’t want to issue debt to pay for it. Base benefits will be protected. And the city’s general philosophy is that those who profited from the overly generous benefits will have to take part in the banquet of consequences.

Mish Comment: The stance that Dallas will not pony up $1.1 billion is a good one but does not go far enough. Taxpayers should not pay an extra dime.

Pension Board Chairman Sam Friar said he was happy to work with the city but called the proposal a “non-starter.” And although he and Rawlings both say they want to work together, the city’s stance will almost certainly lead to a showdown at the state Legislature next year. Pension officials hope active police and firefighters will vote to support a package of benefit cuts that they believe will pass legal muster.

 

Friar believes it’s illegal to penalize members for benefits they’ve already received and accrued.

 

“This is the one issue that we’re just not going there,” Friar said. “We will not do it. The pension board — we will just not go there. … You cannot put toothpaste back into the tube.”

Mish Comment: You either put toothpaste back into the tube, or those standing in line to brush their teeth will discover there is no toothpaste. At the very least, stop squeezing the tube via lump sum payments.

Ultimately, the Legislature is the biggest unknown. The pension system is governed by state law, not city ordinance. The City Council has four of 12 seats on the board but otherwise has no real power over the fund even though taxpayers have been paying more than $110 million into the pension system each year.

Mish Comment: City taxpayers have paid enough, too much actually. Benefit cuts drastically needed.

City officials want the pension system to allow inflation to catch up to the unusually high 4 percent automatic annual cost-of-living increases that the system has awarded since 1989. That means many retirees wouldn’t see another cost-of-living increase for years.

 

The Deferred Retirement Option Plan, known as DROP, is the city’s biggest target. DROP gave officers and firefighters the right to essentially retire in the eyes of the system while they continued working. Meanwhile, their pension benefit checks were sent to a separate account, which guaranteed them at least 8 percent annual interest for years.

 

DROP also had few limits on withdrawals. Retirees were also allowed to remain in DROP and continue to accrue interest.

 

The result was that hundreds of police officers and firefighters became millionaires while insulated from the whims and risks of the markets. Currently, 517 DROP accounts total in excess of $1 million, according to the city’s presentation.

The pension plan guaranteed 8% returns plus a 4% annual inflation benefit. It’s no wonder the system is broke.

The lack of withdrawal restrictions led to a run on the bank once retirees caught wind of the pension system’s proposed benefit cuts, which include new limits on DROP. Since Aug. 11, the fund paid out nearly $500 million in lump sums.

A liquidity crisis remains a risk. If money continues to flow out at that pace, the pension system will have to sell its assets to pay out the withdrawals. That will mean the fund goes insolvent even sooner.

Mish Comment: This is not a liquidity crisis. This is a solvency crisis that one could have easily foreseen more than a decade ago. Some people did see it of course, me included. But nothing ever happens until a crisis hits. Guess what? The crisis hit.

The city’s plan would essentially negate those guaranteed-interest gains by stopping or reducing payments on future monthly benefit checks for DROP recipients for a while.

Rawlings said he knows the plan will face political and legal hurdles. Some officers and firefighters sued the pension system after members voted in 2014 to gradually lower DROP’s guaranteed interest rate.

Mish Comment: The idea that reducing DROP payments or lowering interest for “a while” will fix anything is pie-in-the-sky hope.

Bankruptcy the Only Solution

Unions would be wise to come up with a plan that preserves the most benefits for the most people. But they won’t.

A fair restructuring would cut the most at the top. Million dollar payouts are beyond affordable.

The city of Central Falls, Rhode Island shows what can happen if things end up inside bankruptcy court: “The city’s 133 retirees had their pensions cut by up to 55 percent, with pensioners now getting an average of $16,626 a year. The state allocated $2.6 million to soften the blow for the next five years.”

Having a pension cut from $200,000 to $100,000 is quite different than a cut from $25,000 to $12,500.

However, steep across-the-board cuts are where things are headed because unions never negotiate cuts.

Related Articles

• November 22, 2016: Dallas on Verge of Bankruptcy Due to Pensions; Just a Matter of Time (For Dallas, Houston, LA, Oakland, Chicago, etc)
• May 25, 2016: Detroit, Fresh Out of Bankruptcy, Discovers $195M Pension Shortfall
• May 20, 2016: Rejected: Central States Fund Proposes 60% Pension Cuts, Treasury Dept Says “Not Enough”; 407,000 Affected
• May 19, 2016: Chicago Pension Liabilities Jump 168%, Understated by $11.5 Billion
• January 22, 2016: Former Hasbro CEO Says “Providence Should Consider Bankruptcy”; An Option Chicago Needs

Dallas is headed for bankruptcy court. The sooner it gets there the better off the city will be.

via http://ift.tt/2h2gfgH Tyler Durden

This punk never had a chance. He entered the lion’s den of a soft spoken man who systematically destroys his opponents in verbal combat — tearing them limb by limb until nothing is left. In this episode of ‘You Can’t Cuck the Tuck’, Tucker Carlson took on a meek, sub 100 IQ, college student who wants to ‘fire’ Gary Cohn from the Board of Trustees at American University — for meeting with Donald Trump. It’s worth noting, trustees aren’t hired, since, by definition, they’re big donors and subsidize student tuitions.

The tolerant and progressive students at American U have taken to campus to call for Cohn to step down, saying “We, the students of AU, will not let a man who endorses Donald Trump’s hateful agenda remain in a position of leadership at our University.”

One senior, Moira Nolan, said in an interview published by The Eagle “Cohn’s meeting with Trump is in complete conflict of interest with the University’s mission to promote a more inclusive campus.”

THIS IS YOUR FUTURE.

 

Content originally generated at iBankCoin.com

via http://ift.tt/2h2cXKn The_Real_Fly

With last Friday’s phone call between Donald Trump and Taiwan’s president Tsai Ing-wen which broke decades of US protocol, still creating ripples among diplomatic circles and the political punditry, not to mention continue to fascinate the media which leads today with such speculative headlines as Wooed by Trump, Taiwan Trembles, China urges U.S. to block transit by Taiwan president, U.S. seeks to reassure Beijing after Trump call with Taiwan leader, Dispensing With Tip-Toeing, Trump Puts Taiwan in Play, and many more, one question that still remains largely unanswered: why did Trump do it? Was it a carefully calculated move? Was Trump unaware of the geopolitical consequences of speaking to the Taiwan president? Was there any thought at all in accepting the Taiwanese phone call, or was it merely just an ego boost?

Well, as it turns out, the call may not have been Trump’s idea at all but, as the WSJ reports, Donald Trump’s call with Taiwan President Tsai Ing-wen was instead organized by former Republican senator and one-time presidential nominee, Bob Dole.

Dole told the Journal that the law firm he is affiliated with does work with the Taipei Economic and Cultural Representative Office in the U.S.  “It’s fair to say that we may have had some influence,” he said. 

Chinese officials late Friday and early Saturday played down Mr. Trump’s precedent-breaking phone call with Taiwan President Tsai Ing-wen, which a transition official said had been arranged by Bob Dole, the former Republican senator and presidential nominee. The call went beyond pleasantries and included a discussion about China and stability in the Asia-Pacific, according to a person familiar with the call. The Chinese directed their ire at Taiwan and not at Mr. Trump.

 

Mr. Dole, in an interview, said the law firm he is affiliated with does work with the Taipei Economic and Cultural Representative Office in the U.S., and that the firm played a role in arranging the phone call. “It’s fair to say that we may have had some influence,” Mr. Dole said.

In other words, there may not have been much more “strategy” to the call than merely the former presidential candidate trying to pull some strings for his own personal interests and getting Trump to go with it. It may also explain why Trump is set to meet with Henry Kissinger (more on that shortly) – the man who indirectly opened up China to the US – later today, perhaps to glean some insight into just what the current state of relationship between China, the US and Taiwan is and to get some diplomatic tips on how to approach Beijing in the future… that, and maybe to offer him a slot in the Trump administration.

via http://ift.tt/2gYr7Jx Tyler Durden

• Trump heads back out on road for ‘thank you’ tour (AP)
• For Europe’s Unity, 2017 Will Be a Year of Reckoning (WSJ)
• Oil dips as OPEC, Russian output rises ahead of production cut (Reuters)
• The Pessimist’s Guide to 2017 (BBG)
• Donald Trump’s Message Sparks Anger in China (WSJ)
• Brazil’s Reform Plan in Disarray After Senate Chief Removed (BBG)
• China urges U.S. to block transit by Taiwan president (Reuters)
• Wooed by Trump, Taiwan Trembles (WSJ)
• SoftBank’s Son Said to Plan Meeting With Trump in New York (BBG)
• Syrian government, ally Russia warn rebels in city of Aleppo (AP)
• Blackstone Going Public on $10 Billion Foreclosures Bet (WSJ)
• A Cheat Sheet on the Deglobalization of the Financial World (BBG)
• One Historic Lens Says Trump Stock Market Lovefest Just Starting (BBG)
• U.S. ‘Disappointed’ by Japan’s Plan to Cut Drug Costs (WSJ)
• Family’s $29 Billion Fortune Claim Denied Amid India’s Tax Hunt (BBG)
• Orban allies tighten media grip ahead of Hungary election (Reuters)
• U.S. seeks to reassure Beijing after Trump call with Taiwan leader (Reuters)
• Theranos Foresaw Huge Growth in Revenue and Profits (WSJ)
• Rouhani says Iran will not let Trump rip up nuclear deal (Reuters)
• Danish police arrest suspect after policeman shot in head (Reuters)

 

Overnight Media Digest

WSJ

– The verbal confrontation between President-elect Donald Trump and the Chinese government escalated on Monday, as China responded harshly to attacks by Trump on its economic and security positions. http://on.wsj.com/2ge4jXO

– Amazon.com Inc unveiled Monday its first small-format grocery store, Amazon Go, one of at least three brick-and-mortar formats the online retail giant is exploring as it makes a play for an area of shopping that remains stubbornly in-store. http://on.wsj.com/2haHTIQ

– The euro rallied from early losses following Italian voters’ rejection of government-backed constitutional changes, but the volatile day raises concerns about how the currency survives an era of populist politicians and diverging economies. http://on.wsj.com/2h1qv8W

– A day after the Obama administration put the brakes on a Midwest oil pipeline by denying a permit needed to finish the route, a spokesman for President-elect Donald Trump said the incoming administration supports completing the project. http://on.wsj.com/2gZxrRe

– President-elect Donald Trump said he will nominate retired neurosurgeon Ben Carson as secretary of the U.S. Department of Housing and Urban Development, a move that would place a former political adversary with little housing-policy expertise in a key administration post. http://on.wsj.com/2h9PXt5

– Investor materials show Theranos projected revenue of nearly $2 billion and net income of about $505 million this year. http://on.wsj.com/2h1bCmU

– Euroskeptic parties vary in their prescriptions but are putting pressure on mainstream politicians to address perceived flaws in the EU and common currency. Elections next year in several European nations will go far to determine the fate of continental integration. http://on.wsj.com/2h9SPSS

– New Zealand is facing a leadership contest following the surprise resignation of Prime Minister John Key that will pit his deputy, a former party leader, against at least two other prominent members. http://on.wsj.com/2gXlCe2

– The U.S. Senate Monday cleared the final hurdle to passage of broad legislation aimed at boosting federal funds for biomedical research and speeding up government approval of drug and medical-devices, a goal pursued by the pharmaceutical industry over the objections of some consumer advocates. http://on.wsj.com/2gXkjMl

 

FT

Britain’s government is listening closely to the financial services sector’s Brexit concerns, said finance minister Philip Hammond and the minister in charge of the process for the country’s exit from the European Union, David Davis.

British Transport Minister Chris Grayling will say in a speech on Tuesday that he wants Network Rail to share responsibility for running railway tracks with other operators.

Euro zone finance ministers agreed on Monday on some debt relief for Greece, but were divided on reforms it must undertake to reach fiscal targets, leaving it unclear if the International Monetary Fund will join the Greek bailout programme.

Britain is beginning to prepare its new World Trade Organisation membership terms ahead of its exit from the European Union and will seek to closely replicate the existing EU ones, Trade Minister Liam Fox said on Monday.

Web giants YouTube, Facebook, Twitter and Microsoft will step up efforts to remove extremist content from their websites by creating a common database.

 

NYT

– Amazon has created a small grocery store in Seattle that will allow customers to take drinks, prepared meals and other items off shelves and walk out without having to wait in a checkout line. It planned to open the store to the public early next year and that it would offer chef-made meal kits with ingredients for quickly preparing dinners at home. http://nyti.ms/2gx5Wxx

– Facebook, Google, Twitter and Microsoft said they have teamed up to fight the spread of terrorist content over the web by sharing technology and information to reduce the flow of terrorist propaganda across their services. The group plans to create a kind of shared digital database, “fingerprinting” all of the terrorist content that is flagged. By collectively tracking that information, the companies said they could make sure a video posted on Twitter, for instance, did not appear later on Facebook. http://nyti.ms/2gxbzvv

– The international oil industry agreed to pay billions of dollars to the Mexican government for rights to drill in the country’s portions of the Gulf of Mexico. The companies made a big bet that oil and natural gas prices would eventually rebound enough to make additional exploration and drilling profitable. The sale was a validation of Mexico’s decision to open its former government-monopoly energy business to foreign investment and expertise. http://nyti.ms/2gxajIO

– Uber acquired artificial intelligence start-up Geometric Intelligence. The new research arm will be called Uber’s A.I. Labs and all 15 people from the start-up will be absorbed by Uber. Uber said it hoped that through the acquisition, the new team could harness the wealth of data it collects from the millions of daily Uber rides. http://nyti.ms/2gxdTTf

 

Britain

The Times

Tata Steel Ltd says it has made significant commitments to more than 4,000 workers at the Port Talbot steelworks in south Wales, which has spent the past eight months under threat of closure. Rather than close one of the two blast furnaces at the steelworks, which many believe Tata has been considering as part of a merger of its European operations with ThyssenKrupp, of Germany, it is believed that the Indian-owned industrial group plans to keep staff employed into the next decade. http://bit.ly/2gZTM14

Shareholders at Independent News & Media Plc have voted overwhelmingly in support of restructuring measures despite protests from current and former staff whose pensions will be cut as a result. http://bit.ly/2gZSAL6

The Guardian

Amazon.com Inc has opened a corner store where customers can pick up their groceries and just walk out without having to queue up and pay at the checkout. The company said shoppers at its Amazon Go store will have the cost of their purchases automatically billed to their Amazon Prime account. Sensors will track customers as they go about the store and record items they pick up. http://bit.ly/2gvgI7u

A top U.S. investment bank resigned as a key adviser to Mike Ashley’s Sports Direct International Plc because of concerns that the retail company had manipulated its share price, according to claims made in a high court document. Bank of America Merrill Lynch had concerns about Sport Direct’s corporate governance and the “propriety” of share transactions in 2012 around its employee bonus scheme, according to allegations in legal filings by Jeff Blue, previously one of Ashley’s key allies. http://bit.ly/2gJPRaC

The Telegraph

GW Pharmaceuticals Plc plans to expand manufacturing in the United Kingdom and boost cultivation of the cannabis plants it uses to make a treatment for severe epilepsy, its chief executive has said. http://bit.ly/2hbxM6u

Blackcurrant drinks should be exempt from the government’s sugar tax, drinks makers including Ribena have suggested, as Treasury documents reveal a number have asked for special treatment by the Treasury. http://bit.ly/2gWyy46

Sky News

An executive who left BG Group months before a takeover approach from Royal Dutch Shell is being lined up to take the helm of Genel Energy Plc , the oil company founded by former BP boss Tony Hayward. Chris Finlayson is the leading candidate to replace Hayward as Genel’s chairman. http://bit.ly/2g3mkEU

A planned 24-hour strike by London Underground drivers has been suspended, the RMT union has said. Drivers on the Piccadilly and Hammersmith and City lines were due to walk out from 9.30 pm on Tuesday, amid claims of a breakdown in industrial relations, breaches of procedures and bullying and harassment of staff. http://bit.ly/2gvyuaD

 

via http://ift.tt/2hbx8lq Tyler Durden

Shariah Gold Standard Approved for $2 Trillion Islamic Finance Market

by Jan Skoyles, Editor Mark O’Byrne

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the World Gold Council have made an important decision which was announced yesterday at the World Islamic Banking Conference in Bahrain.

This decision is about one of the most important markets in the world: the gold market, an invest-able market worth an estimated $2.4 trillion and is also of significance for the world of Islamic finance.

The AAOIFI, in collaboration with the World Gold Council (WGC) and Amanie Advisors, has approved what will become known as the Shariah Gold Standard. This is a set of guidelines that will expand the variety and use of gold-based products in Islamic Finance.

As many as 1.6 billion Muslims in the world, 25 per cent of the population, will have far greater access to the gold market than they have since the birth of modern finance, which has been primarily structured towards Western ideals.

More details were announced at the World Islamic Banking Conference including details of the gold products that are likely to be permissible.

The sharia gold standard announced yesterday allows the over 110 million investors in the Islamic world to invest in

a) vaulted gold

b) gold savings plans (such as GoldCore’s GoldSaver)

c) gold certificates

d) physical gold ETFs including “probably” the SPDR Gold Trust, the biggest exchange-traded gold (GLD)

e) gold mining shares (within certain Shari’ah parameters)

We know three things that the new Shariah gold-standard will achieve:

a) Increase diversity in the number of available Shariah gold compliant investment products

b) Greater emphasis on the role of physical gold in gold transactions

c) Islamic finance will have greater say in the setting of the gold price

To some, this may appear to be an unnecessary formality taken by the body whose guidelines are followed by Islamic finance institutions across the world. After all, physical gold is Shariah-compliant and holds a unique status for Muslims.

AAIOFI states, “From the perspective of Islamic Fiqh and the Islamic economic system, gold has its specific significance. This significance arises from the specific principles provided for gold and silver as Thaman in Shari’ah.”

According to Islamic texts, gold is a ribawi item, which means that it must be sold on weight and measure, and cannot be traded for future value or for speculation. In order for a gold instrument to be Shariah-compliant, the precious metal must be the underlying asset in related transactions.

However there has been a need for clarification for how gold bullion can be used for investment purposes by Muslims, for a long time.

This uncertainty has kept Shariah-compliant offerings at a minimum and many investors restricted by the type of gold bullion transactions they are able to partake in, with most focused on jewellery and coin offerings. Daud Bakar, chairman of Amanie Advisors, agrees, “.the existing Islamic standards for gold are fragmented, hampering product development and market demand.”

Currently in the gold market, the majority of activity regarding gold financial instruments is based almost entirely on speculation. This is due to the overwhelming size of both the London and COMEX (Chicago Mercantile Exchange) gold markets, which together have the greatest influence on the spot price of gold.

Whilst Islamic investors have always had access to the gold market through jewellery and coins, this guidance will vastly increase the number and diversity of investment products available. There are very few Shari’ah-compliant gold offerings today. Using its deep sector knowledge, GoldCore, and its Islamic partners, have been working on a comprehensive solution for two years and will provide the solution to qualifying Islamic financial institutions in early 2017.

With gold investment platforms such as GoldCore able to offer segregated, allocated gold bullion accounts with the option of physical delivery, Muslims are now able to invest in gold bars and coins.

The new ‘gold standard’ will affect the gold market globally as 1.6 billion people will be able for the first time to use gold bullion products and platforms that offer physical delivery, allocated and segregated gold ownership.

“For a number of years we have been working on an institutional gold platform and indeed a Sharia compliant gold bullion solution for the institutional market. As a market leader in precious metal storage, we have been consulting with major institutions and our strong partners to deliver allocated and segregated gold storage services to investors throughout the world”, said GoldCore CEO, Stephen Flood.

If Islamic Finance institutions were to allocate just one per cent of assets into new gold products then we would expect to see demand climb by about 500-1000 tonnes, per annum. Given that recent demand and supply figures showed a surplus of just 172 tonnes of gold in the market, we could begin to see some tightening with the increase of Shariah-compliant gold instruments, which will have a positive impact on the price.

It is not unreasonable to expect a minimum one per cent move of Islamic finance assets into gold, especially when you look at how it has performed. WGC data shows that in the last eight years the major Islamic asset classes (including REITs, the Takaful index, the Dow Jones Islamic Equities Index and the Dow Jones Sukuk Index) have all underperformed compared to gold, as have the major currencies used in the Islamic world.

Few appreciate that the launch of a Shari’ah gold or Islamic gold standard signals a changing dynamic in the gold market. Gold bullion  will be additionally appealing to Islamic banks due to Basel III rules that require banks own high liquidity and quality, low counter party risk assets such as physical gold in allocated and segregated storage.

Until now, no group as influential as the AAOIFI has issued guidelines stating that gold must be the underlying asset in all gold transactions as we suspect they will do shortly.

Whilst the likes of the COMEX gold market are able to grow to multiple times the size of the underlying physical market, with little impact on physical demand or price, this will no longer be case.

Jan Skoyles is a research executive at GoldCore, a gold investment platform and this is a version of an article that first appeared in the Khaleej Times, the UAE’s best selling English newspaper and highest circulated English language newspaper in the Gulf

Gold Prices (LBMA AM)

06 Dec: USD 1,171.15, GBP 918.18 & EUR 1,086.94 per ounce
05 Dec: USD 1,164.90, GBP 915.84 & EUR 1,095.36 per ounce
02 Dec: USD 1,171.65, GBP 929.00 & EUR 1,100.88 per ounce
01 Dec: USD 1,168.75, GBP 930.09 & EUR 1,099.68 per ounce
30 Nov: USD 1,187.40, GBP 952.06 & EUR 1,115.44 per ounce
29 Nov: USD 1,187.30, GBP 952.45 & EUR 1,119.98 per ounce
28 Nov: USD 1,189.10, GBP 956.51 & EUR 1,117.99 per ounce

Silver Prices (LBMA)

06 Dec: USD 16.79, GBP 13.17 & EUR 15.63 per ounce
05 Dec: USD 16.62, GBP 13.05 & EUR 15.54 per ounce
02 Dec: USD 16.35, GBP 12.95 & EUR 15.36 per ounce
01 Dec: USD 16.30, GBP 12.91 & EUR 15.35 per ounce
30 Nov: USD 16.67, GBP 13.39 & EUR 15.66 per ounce
29 Nov: USD 16.54, GBP 13.26 & EUR 15.61 per ounce
28 Nov: USD 16.68, GBP 13.45 & EUR 15.73 per ounce

Recent Market Updates

– Potential “Systemic Crisis In Eurozone” After Italy Votes No, Renzi Resigns
– Gold and Silver Will Protect From Coming Financial Crash – Rickards
– RBS Fail Bank of England Stress Test
– Peak Silver – Supply Deficits Mean Higher Prices
– Bail In Risk – €4 Trillion Banking System In Italy Poses Contagion Risk as Referendum Looms
– Gold Down 13.5% In 13 Days – Trump Bearish For Gold?
– War On Cash Just Got Real – India and Citibank In Australia
– Russia Gold Buying In October Is Biggest Monthly Allocation Since 1998
– Stocks, Bonds, Pension Funds “Will Be Wiped Out…” – Rickards
– Physical Gold Is A “Long-Term Position” as “Hedge Against Governments”
– Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold”
– Islamic Gold – Vital New Dynamic In Physical Gold Market
– Peak Gold Globally – “Bullish For Gold”

via http://ift.tt/2hby3SV GoldCore

Update: it appears that early elections are indeed coming to Italy, which could be another major calendar event for Italy, and one which would have far more significant consequences for the political make up of the country should M5S win as many expect. From Reuters:

ITALY INTERIOR MINISTER, SPEAKING AFTER CONVERSATION WITH RENZI, SEES NEW ELECTIONS LIKELY IN FEBRUARY – CORRIERE DELLA SERA 

* * *

The Euro has been hit this morning, losing some 50 pips following reports in both La Repubblica and Corriere, that Matteo Renzi may stay in power for several weeks before potential early elections in January-February of 2017. According to La Repubblica, Renzi may ask that early elections are held in near future in return for staying in power until then. As previously reported, the next Italian general election must be held no later than 23rd May 2018. 

The move has pressured other Italian assets, with BTP futures retreating from highs and the Italian bank index paring gains as investors focus on potential for Italian elections to be held early next year.

However, there has been some confusion about the date of the snap elections, because President Mattarella reportedly doesn’t see elections in February technically feasible because changes are needed to the country’s election law known as Italicum.

There is another consideration: should snap elections be hald soon, they would likely lead to a victory for Italy’s anti-establishment Five Star Movement, which as noted on Sunday has already called for immediate elections after the outgoing prime minister Matteo Renzi’s defeat in a constitutional referendum, saying it was prepared to put forward a new government that could immediately assume power.

While it appears unlikely that Beppe Grillo, a former comedian and co-founder of the populist party, will get his general election wish, the bold demand showed his Movimento Cinque Stelle (M5S) now has its sights on an even greater electoral victory: one that would eventually land it in the prime minster’s residence in Palazzo Chigi.

As the Guardian reported, many analysts pointed out that M5S still faces considerable obstacles, including probable reforms of electoral law that will make it difficult for the party to get a majority. “But even if such manoeuvres keep it at bay temporarily, one thing is clear: the party is now the second most powerful force in Italy behind Renzi’s diminished Democratic party.”

Vincenzo Scarpetta, a senior policy analyst at the thinktank Open Europe, said M5S would have a fair chance of winning the next general election under current electoral rules, but those rules are likely to change in coming months under the current Democratic-controlled parliament, which may be the impetus behind delaying elections as much as possible, and why today’s report of early snap elections has led to Euro weakness.

The decision to call immediate elections ultimately falls with Italy’s president, Sergio Mattarella.

via http://ift.tt/2gLki0p Tyler Durden