Ho-Ho-Holding Mexican Bimbo Can’t Get Paid

Sad but true. Current owner of the Twinkies and Ho-Ho brands, Mexico’s Grupo Bimbo, had planned to take advantage of an exuberant public stock market by bringing a secondary stock offering to reduce its leverage. Everything was good-to-go on Friday, but with the market now down a stunning 1.5% from pre-BABA IPO levels, they have pulled the offering:

  • *MEXICO’S BIMBO SAID TO POSTPONE FOLLOW-ON SHARE OFFER: REUTERS

No comment as yet on the reason, though we assume “market conditions” will be cited as the fickleness of capital markets’ animal spirits is once again exposed for all to see. Perhaps Grupo Bimbo should rename themselves Grupo Bimbaba?

 

As Bloomberg reports, Friday things were all go-go-go…

Sale of 201.3m shares to be managed by BofA, BBVA, Citi, HSBC, JPMorgan and Santander, Bimbo says in e-mailed statement.

 

Offering in Mexico, U.S. and other countries will represent a capital increase of as much as 4.3%: Bimbo

And now…

  • *REUTERS CITES STOCK EXCHANGE SOURCE ON BIMBO OFFERING POSTPONED

What a difference two days make!




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Strong 2 Year Auction Prices At Highest Yield Since April 2011, Highest Bid To Cover Since February

On one hand today’s 2 Year bond auction priced, as expected, at the widest level since April 2011, or 0.589%, on rising concerns that the Fed may, all economic signs to the contrary, raise rates in the coming year.

On the other hand, this was arguably the strongest 2 Year auction at this yield, in all of 2014. First, the auction stopped through a substantial 0.6bps through the 0.595% When Issued. Then, the Bid to Cover was a solid 3.564, the second highest of 2014, only lower than February’s 3.605. Finally, the internals also were very solid, with Directs taking down 16.11% and Indirects holding 40.91%, the most since March 2014, leaving only 42.98% to the Dealers, which was also the lowest since March.

A trend has emerged: the higher that yield, the more the demand, which is what one would expect in a world without endless Fed manipulation and central-planning. Could we be getting some hints of normalization? And how soon until yields resume their downward path as the current rate hike scare blows off yet agaian?




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Blackstone Slams "Broken Bond Market" Despite Record Bond-Issuance Driven Stock Buybacks

Just over a year ago, we warned on the very real concerns about corporate bond liquidity drying up and the potentially huge problems associated with that, if and when the Fed ever pulls the rug out from the one-way street of free-money injections. It appears, as Bloomberg reports, having realized, we suspect, that they can't get out of their positions, the world’s largest money manager, Blackrock, believes the corporate bond market is "broken" and in need of fixes to improve liquidity "before market stress returns." Ironically, as we have also explained in great detail, it is this 'broken' market that has enabled corporations to borrow cheap enough to buyback half a trillion dollars of their stock in 2014.

As we discussed in great detail here, Federal Reserve intervention has had dramatic unintended consequences in the bond markets

First, how does one define liquidity? Here is how the smartest guys in the room (and Matt King truly is one of the smartest guy) do:

 

 

As the chart points out, the biggest falacy constantly perpetuated by market naivists, that liquidity and volume (in this case in fixed income) are one and the same, is absolutely wrong.

 

 

The TBAC's conclusion: the longer central planning goes on, the less the actual large "block" trades, and even those are getting smaller.

 

 

The blue text above is self-explanatory: the slightest gust of wind, or rather volatility, threatens to shut down the secondary corporate bond market, which already is running on fumes.This can be seen in the final chart of this post which confirms that the Fed is succeeding… to its paradoxical chagrin! Because the more pure liquidity moves to the (Fed-backstopped) Treasury market, the more investors are moving away from the most liquid instruments.

 

 

In other words, while the Fed, and the TBAC, both lament the scarcity of quality collateral and liquidity in non-Fed backstopped security markets, it is the Fed's continued presence in the (TSY) market in the first place, that is making a mockery of bond market liquidity and quality collateral procurement.

 

And without faith in a stable credit marketplace, there is no way that a credit-based instrument can ever truly become the much needed "high quality collateral" to displace the Fed's monthly injection of infinitely funigble and repoable reserves (most benefiting foreign banks).

And now – as Blackrock realizes that its massive (and likely levered) positions face a dramatic liquity risk cost if they are ever to 'realize' any gains from the Fed's handouts (by actually selling), they cry foul and proclaim the bond markets "broken" and in need of government fixes…

BlackRock, the world’s biggest money manager, said the marketplace for corporate bonds is “broken” and in need of fixes to improve liquidity.

 

BlackRock, a major competitor in the bond market with $4.3 trillion in client assets, urged changes including unseating banks as the primary middlemen in the market and shifting transactions to electronic markets. Another solution BlackRock proposed: reducing the complexity of the bond market by encouraging corporations to issue debt with more standardized terms.

 

Banks have retained their stranglehold on corporate debt trading despite years of effort by BlackRock and other large investors to eliminate their oligopoly. The top 10 dealers control more than 90 percent of trading, according to a Sept. 15 report from research firm Greenwich Associates. To BlackRock, the dangers of price gaps and scant liquidity have been masked in a benign, low interest-rate environment, and need to be addressed before market stress returns.

 

“These reforms would hasten the evolution from today’s outdated market structure to a modernized, ‘fit for purpose’ corporate bond market,’” according to the research paper by a group of six BlackRock managers,

 

 

Standardization would allow more trading to occur on exchanges and other electronic venues, and would help stabilize markets in periods when investors rush to sell bonds, Gallagher said. The risk posed by investors trying to dump bonds after the Federal Reserve raises interest rates is “percolating right under” the noses of regulators, he said.

*  *  *
So there it is – the truth carefully hidden – Blackrock is in full panic mode knowing that the game-theoretical first-mover advantage does not apply to their selling down their positions since they are simply too large… so we need to "fix" liquidity and standardize markets (to enable easy risk transfer to retail pension funds) or the Mutually-Assured-Destruction card will be played once again.

*  *  *
Of course, while they are correct in terms of liquidity (for a concerted exit of bond positions), we did not hear them complaining as cheap primary borrowing enabled half a trillion dollars of buybacks in 2014…

 

to sustain the mirage of economic growth via the stock 'market'…

*  *  *

This is of course just another canary in the coalmine that confirms trouble ahead in the corporate bond market – as we have discussed at length…

High-Yield Credit Crashes To 6-Month Lows As Outflows Continue

 

High-Yield Bonds "Extremely Overvalued" For Longest Period Ever

 

High Yield Credit Market Flashing Red As Outflows Surge

 

Is This The Chart That Has High-Yield Investors Running For The Hills?

*  *  *

While the 'market' impact of these facts is potentially economically devastating in its reality-endgame of bursting over-inflated buy-back-driven asset-bubbles, the traders and bankers themselves have also been crushed (schadenfreude-istically for many), as Bloomberg reports,

As trading in dollar-denominated bonds declined 22 percent in the past five years to an average daily $809 billion, so have the jobs, leaving even some of the most senior traders and salesmen moving from firm to firm. Dozens of journeymen are populating an industry that used to attract the young in throngs, lured by money and prestige
, according to Michael Maloney, president of fixed-income recruiting firm Michael P. Maloney Inc.

 

“The business model is broken and 50 percent of the people in our world who are in trading are stuck right now,” Maloney said in an interview in his New York office.

 

 

For every 10 of them there’s going to be three or four left,” he said. “What’s the timeframe? Well, everybody I know is looking for a job — not looking for a job, looking for a career.”

 

“It’s surprising how quiet a place could be compared to what I had known,” said Stein, who began trading bonds in 1985.

*  *  *
See what happens, Janet, when you screw with the 'market'?




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Blackstone Slams “Broken Bond Market” Despite Record Bond-Issuance Driven Stock Buybacks

Just over a year ago, we warned on the very real concerns about corporate bond liquidity drying up and the potentially huge problems associated with that, if and when the Fed ever pulls the rug out from the one-way street of free-money injections. It appears, as Bloomberg reports, having realized, we suspect, that they can't get out of their positions, the world’s largest money manager, Blackrock, believes the corporate bond market is "broken" and in need of fixes to improve liquidity "before market stress returns." Ironically, as we have also explained in great detail, it is this 'broken' market that has enabled corporations to borrow cheap enough to buyback half a trillion dollars of their stock in 2014.

As we discussed in great detail here, Federal Reserve intervention has had dramatic unintended consequences in the bond markets

First, how does one define liquidity? Here is how the smartest guys in the room (and Matt King truly is one of the smartest guy) do:

 

 

As the chart points out, the biggest falacy constantly perpetuated by market naivists, that liquidity and volume (in this case in fixed income) are one and the same, is absolutely wrong.

 

 

The TBAC's conclusion: the longer central planning goes on, the less the actual large "block" trades, and even those are getting smaller.

 

 

The blue text above is self-explanatory: the slightest gust of wind, or rather volatility, threatens to shut down the secondary corporate bond market, which already is running on fumes.This can be seen in the final chart of this post which confirms that the Fed is succeeding… to its paradoxical chagrin! Because the more pure liquidity moves to the (Fed-backstopped) Treasury market, the more investors are moving away from the most liquid instruments.

 

 

In other words, while the Fed, and the TBAC, both lament the scarcity of quality collateral and liquidity in non-Fed backstopped security markets, it is the Fed's continued presence in the (TSY) market in the first place, that is making a mockery of bond market liquidity and quality collateral procurement.

 

And without faith in a stable credit marketplace, there is no way that a credit-based instrument can ever truly become the much needed "high quality collateral" to displace the Fed's monthly injection of infinitely funigble and repoable reserves (most benefiting foreign banks).

And now – as Blackrock realizes that its massive (and likely levered) positions face a dramatic liquity risk cost if they are ever to 'realize' any gains from the Fed's handouts (by actually selling), they cry foul and proclaim the bond markets "broken" and in need of government fixes…

BlackRock, the world’s biggest money manager, said the marketplace for corporate bonds is “broken” and in need of fixes to improve liquidity.

 

BlackRock, a major competitor in the bond market with $4.3 trillion in client assets, urged changes including unseating banks as the primary middlemen in the market and shifting transactions to electronic markets. Another solution BlackRock proposed: reducing the complexity of the bond market by encouraging corporations to issue debt with more standardized terms.

 

Banks have retained their stranglehold on corporate debt trading despite years of effort by BlackRock and other large investors to eliminate their oligopoly. The top 10 dealers control more than 90 percent of trading, according to a Sept. 15 report from research firm Greenwich Associates. To BlackRock, the dangers of price gaps and scant liquidity have been masked in a benign, low interest-rate environment, and need to be addressed before market stress returns.

 

“These reforms would hasten the evolution from today’s outdated market structure to a modernized, ‘fit for purpose’ corporate bond market,’” according to the research paper by a group of six BlackRock managers,

 

 

Standardization would allow more trading to occur on exchanges and other electronic venues, and would help stabilize markets in periods when investors rush to sell bonds, Gallagher said. The risk posed by investors trying to dump bonds after the Federal Reserve raises interest rates is “percolating right under” the noses of regulators, he said.

*  *  *
So there it is – the truth carefully hidden – Blackrock is in full panic mode knowing that the game-theoretical first-mover advantage does not apply to their selling down their positions since they are simply too large… so we need to "fix" liquidity and standardize markets (to enable easy risk transfer to retail pension funds) or the Mutually-Assured-Destruction card will be played once again.

*  *  *
Of course, while they are correct in terms of liquidity (for a concerted exit of bond positions), we did not hear them complaining as cheap primary borrowing enabled half a trillion dollars of buybacks in 2014…

 

to sustain the mirage of economic growth via the stock 'market'…

*  *  *

This is of course just another canary in the coalmine that confirms trouble ahead in the corporate bond market – as we have discussed at length…

High-Yield Credit Crashes To 6-Month Lows As Outflows Continue

 

High-Yield Bonds "Extremely Overvalued" For Longest Period Ever

 

High Yield Credit Market Flashing Red As Outflows Surge

 

Is This The Chart That Has High-Yield Investors Running For The Hills?

*  *  *

While the 'market' impact of these facts is potentially economically devastating in its reality-endgame of bursting over-inflated buy-back-driven asset-bubbles, the traders and bankers themselves have also been crushed (schadenfreude-istically for many), as Bloomberg reports,

As trading in dollar-denominated bonds declined 22 percent in the past five years to an average daily $809 billion, so have the jobs, leaving even some of the most senior traders and salesmen moving from firm to firm. Dozens of journeymen are populating an industry that used to attract the young in throngs, lured by money and prestige, according to Michael Maloney, president of fixed-income recruiting firm Michael P. Maloney Inc.

 

“The business model is broken and 50 percent of the people in our world who are in trading are stuck right now,” Maloney said in an interview in his New York office.

 

 

For every 10 of them there’s going to be three or four left,” he said. “What’s the timeframe? Well, everybody I know is looking for a job — not looking for a job, looking for a career.”

 

“It’s surprising how quiet a place could be compared to what I had known,” said Stein, who began trading bonds in 1985.

*  *  *
See what happens, Janet, when you screw with the 'market'?




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Why Institutions Are So Desperate For The Retail Investor To Come Back

As the S&P 500 levitates ever higher on the back of what even JPM and Citigroup now both admit is nothing but a global central-bank reflated bubble which, hardly a spoiler alert here, will burst sooner or later leaving those who are holding the bag with unprecedented losses, one thing is clear: the retail investor is not coming back. Whether it is a complete lack of trust in a market that has been revealed to be more rigged than any casino, or because every risk asset is artificially propped up by a few Princeton economists, or simply because the “retail” investor does not have the disposable income to come back, is irrelevant: retail is done.

There is, however, a problem.

As the exuberant talking-heads proclaim, day after day, that “this is the moment of clarity for retail to come storming back off the sidelines”, the question arises who exactly would retail be buying from?

The answer: the same institutions whose proximity to the Fed has allowed them to lever up at near zero cost of debt rates, and who have bid up risk to unprecedented levels, pushing the S&P over 2000 in recent weeks. Of course, those are all paper gains, as institutions know all too well. Which is why the time to monetize paper profits is now, and why with every day that retail refuses to come back and buy what institutions are increasingly desperate to sell, is one day more in which the day of “paper profits into very real losses” reckoning approaches.

This epic divergence between institutions and retail is shown in the JPM chart below.

Needless to say, it won’t take much is for the rickety game theory equilibrium in which not one institution has dared to sell, over fears what would happen if every other institutions rushes in, finally breaks.

It is also why every media outlet, newspaper, ant TV channel has a simple message for you, dear retail investor: please come back already, and buy, buy, buy… what every bank, prop desk, hedge fund, mutual fund, pension fund, and central bank, is so desperate to sell.




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What Are Corporate Insiders Seeing that Makes them Dump their Shares Like This?

Merger Monday evokes fond memories of 2007 and 2008, of mega deals breathlessly reported on CNBC, when everything was still possible, until it all fell apart. But mega deals have been gracing the headlines again, and deal volume has soared, and Merger Monday is back. With the hoopla of IPOs and other wondrous events that are part of the daily circus on Wall Street, what could CEOs, officers, and directors possibly be fretting about?

And apparently, they are fretting. Only 7,181 insiders bought shares of their own companies so far this year through September 12, down 8% from a year ago, while 23,323 sold shares, according to Bloomberg – approaching the worst buy-sell ratio since 2000.

This insider aversion for their companies’ stock is in sharp contrast to stock buybacks that their companies have undertaken. When it comes to using their own money, insiders have become very bearish, diversifying out of their companies, selling hand over fist. When it comes to using other people’s money, they have no such compunction: corporate share buybacks reached a near record in the first half. And for the trailing 12 months, according to FactSet, buybacks jumped 29% to $539 billion.

But insiders know this pace of buybacks isn’t sustainable: free cash flow declined 0.5% while the ratio of buybacks to free cash flow rose to 82%, the highest since, well, Q3 2008. And so in Q2, buybacks actually plunged 27% from Q1, according to CapitalIQ, via Zero Hedge. Alas, buybacks – that $539 billion over 12 months! – have been one of the most important pillars of the stock market rally.

Nothing good happens to stocks when such large, relentless, price-insensitive buyers walk away from the market. Corporate insiders are the first to see when that happens. They don’t have to wait till others gather up the numbers the hard way to release them months behind reality. Insiders know this in advance!

These insiders are also seeing that sales growth in the US has been averaging a mere 2.6% over the last two years, barely above the rate of inflation. GDP has been growing at a languid 2.1% since the Great Recession, never gaining the escape velocity that economists had promised five years in a row. But stocks soared! And insiders might have been scratching their heads about the valuations of their own stocks.

Frank Calderoni, CFO of buyback queen Cisco – which had announced $15 billion in share repurchases late last year – dumped 120,000 shares in September (excluding options-related and automatic sales), Bloomberg reported, the first sale since his eerily prescient sale in 2008.

The stated reason is always the same corporate speak about following “widespread financial advice to diversify their personal portfolios.” But Calderoni wasn’t the only insider who knew when to sell.

Company officials turned pessimistic on their own stock in October 2010, with about seven insiders selling for every two that bought shares. The ratio exceeded three for five straight months, the longest stretch in a decade. The S&P 500 peaked in April 2011 and slumped 19% through October, the closest the market has come to ending the bull market.

 

Executives became optimistic at the end of the financial crisis six years ago. The number of buyers almost tripled that of sellers in November 2008 and stayed higher in each of the following four months. The S&P 500 bottomed at a 12-year low in March 2009.

So they were early, but they were right.

And what else do Calderoni and his ilk know this time? They know first-hand that the buyback frenzy is supported by a credit bubble of historic proportions, and it includes a bond bubble that has spread across much of the world, with even the most dubious government bonds yielding below the rate of inflation, or zero, or even below zero, and even junk bonds yielding so little as to practically guarantee investors a loss over time.

“Bonds are at ridiculous levels,” explained founder of Tiger Management, Julian Robertson, at the Bloomberg Markets Most Influential Summit on Monday. It was “a worldwide phenomenon that governments are buying bonds to keep their countries moving along economically,” he said. A phenomenon that would end “in a very bad way.”

“Very overvalued” is how Omega Advisors founder Leon Cooperman called bonds at the summit. Howard Marks, chairman of Oaktree Capital Group, mused: “If you participate in that enthusiasm, then you’ll also participate in the correction.”

Even the Fed, after years of denying the existence of bubbles, or their visibility if they did indeed exist, is now trying to see bubbles as part of its job under the doctrine of maintaining “financial stability.” So they have created a “financial stability” panel, led by Vice Chair Stanley Fischer. Even super-dove and passionate bubble-blower, New York Fed President William Dudley, is on board. “I think we do need to try to identify asset bubbles in real time,” he told Bloomberg. “You can’t have an effective monetary policy if you have financial instability.”

And these folks at the Fed are seeing the ballooning credit bubble, which includes the bond bubble and the nearly free cash it produced for corporations, cash that supported the near record share buybacks and dividends, which contributed to the soaring stock market. And the Fed, nervous about that credit bubble, nervous that it might implode and cause financial instability, put its hand on the spigot and started turning.

That’s what corporate insiders are seeing. And they’re seeing what’s going on at their companies, and they’re wondering about the sky-high valuations powered by juice that is getting turned off, and so they’ve been dumping shares in their own companies. Once again, they’re early, but the last few times, they were right.

Obscured by the stock market hoopla, and under the leadership of our fearless Treasury Secretary Jack Lew, the G-20 finance honchos fretted about faltering global growth. Read…. OK, I Get It. Things Are Coming Unglued




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China Moves To Dominate Gold Market With Physical Exchange

Submitted by GoldCore

China Moves To Dominate Gold Market With Physical Exchange

China is slowly moving to dominate the global gold market and it is important to join the dots regarding a few key recent developments in China relating to gold.

When the International Board of the Shanghai Gold Exchange (SGE) was launched last Thursday September 18 during an evening trading session, it was notable that the first transactions were put through by a diverse group comprising HSBC, MKS (Switzerland), and the Chinese banks,  ICBC, Bank of China and Bank of Communications.

MKS is the Geneva headquartered precious metals trading group that also owns the large PAMP refinery company in Switzerland. 

There are reportedly 40 international participants signed up to trade on the SGE International Board (SGEI), but the SGE hasn’t specifically confirmed the identities of all participants. 

Like the domestic SGE which counts precious metals refineries as members, the SGEI will have a diverse group of trading participants including a number of international refineries as well as bullion banks and trading houses. 

Precious metals refineries Metalor Technologies and Heraeus have confirmed that they will be participants and along with MKS, this represents three of the largest gold refineries in the world. 

International bullion banks who have already announced their participation include ANZ, Standard Chartered and HSBC, and its also known that Standard Bank, JP Morgan and the Bank of Nova Scotia were said to be interested. The Perth Mint was also said to be interested. 

The presence of international refineries and possibly international mints as possible direct participants within SGEI trading should improve liquidity and price discovery on the new international exchange and help it become a serious competitor to the existing duopoly of gold price discovery carried on in the London OTC market and the New York gold futures market. 

One encouraging factor about the SGE and the SGE international platform is that there is a lot of physical gold flowing through the Exchange. Therefore, price discovery is not just based on an inverted pyramid of mostly unallocated gold as in London or mostly cash-traded futures paper gold as in New York. 

Like everything in China, the SGE thinks big and it currently employs a network of 58 certified vaults, 55 of which are for storing gold and 3 of which store silver. These 58 vaults are located in 36 Chinese cities that are considered important for gold refining and gold consumption and physical delivery can actually occur between the vaults. 

With the launch of the SGEI, the International Board has its own new vault in which international participants can load gold in and out of. The is vault is being managed by Bank of Communications and is strategically located in the Zhabei district, not too far from the Shanghai International Airport. Brinks in Shanghai will be the official transporters of gold for the SGEI.

Shanghai and Hong Kong Gold Markets To Connect

When the Hong Kong based Chinese Gold and Silver Society (CGSE) announced last week that they plan to build a massive new precious metals vault in Qianhai in Shenzhen, the significance of this announcement was not really appreciated, as of yet.

The vault is not a stand alone project and its real purpose is to support a CGSE gold trading platform in Shenzhen and allow this new Shenzhen gold exchange to link up with the Shanghai Gold Exchange. Shenzhen is less than one hour away from Hong Kong by rail or road. 

The CGSE has 171 members and between 50 and 60 of these will be registered to operate on the new Shenzhen gold exchange by as early as next month. 

At the CGSE announcement ceremony last week, Dr. Haywood Cheung the president of the CGSE confirmed that he has begun negotiations with the Shanghai Gold Exchange with the intention of forming a strategic alliance between the new CGSE exchange in Shenzhen and the Shanghai Gold Exchange. 

The main objective said Cheung “was to enable a mutual access between CGSE and the Shanghai Gold Exchange for market participants in the form of a “Shanghai Hong Kong Precious Metals Connect”, which could help the local gold & silver industry to gain access to the mainland market through the Qianhai project.”

The Chinese and Hong Kong Governments and financial authorities are going to model this ‘Precious Metals Connect’ on the soon to be launched “Shanghai – Hong Kong Stock Connect”, which is an initiative between the Shanghai and Hong Kong stock markets to boost liquidity and access between the two stock markets and access between  Chinese A and H shares.

Chinese A shares are shares of mainland Chinese companies traded in yuan/renminbi. H shares are the Hong Kong listing of the dual-listed mainland stocks training on HK dollars. In the ‘Stock Connect’ there will be northbound and southbound daily flows of liquidity within certain limits between the Hong Kong and Shanghai stock markets. The Shanghai – Hong Kong Stock Connect initiative starts next month on October 13.

The CGSE  therefore is planning that their Shenzhen gold platform will become China’s second gold exchange and offer Hong Kong and the international market another route of access to the mainland Chinese gold market. 

This is important news and a very significant development and is worth watching over the coming months.

PBOC and Gold – China Using Gold To Position Yuan As Reserve Currency

Recent comments by David Marsh, the co-founder of the influential advisory and research group, the Official Monetary and Financial Institutions Forum (OMFIF), illustrate that a paradigm shifts is also occurring within the official Chinese sector as regards gold and the renminbi currency.


Interviewed at this month’s Chinese gold conference in Beijing, Marsh said that “I don’t know if China has been boosting their official gold reserves,” but he added that  “over the past six or seven years the Chinese authorities probably have been adding to their holdings in different ways.”

Marsh’s most recent comments resonate with similar comments he made in January 2013 when he said that “it is likely that the Chinese authorities will carry on purchasing gold in modest amounts and they will do it in a way calculated not to disturb the market.”

Commenting on reserve diversification at the time, Marsh said that “there’s no reason why the Chinese central bank should hold a disproportionate amount of other countries’ reserve  currencies such as the dollar.” 

Just over a week ago, the UK Treasury announced the issuance of its  first ever renminbi sovereign bond, in a move that is seen as a continued boost to the internationalisation of the Chinese currency. The proceeds of HM Treasury’s issue will become part of the UK’s foreign reserves in the Exchange Equalisation Account (EEA). 

Until now the EEA has only held gold, euros, dollars, yen and Canadian dollars. Some other central banks such as the Australian Reserve Bank already hold renminbi as part of their reserves, and others such as the Swiss National Bank are considering adding renminbi as one of their reserve assets.

Last week, to coincide with the British government’s renminbi announcement, David Marsh penned a commentary for the OMFIF on reserve diversification and the Chinese currency titled “A Big Chinese step for Britain: UK moves to forefront of Renminbi internationalisation”.

Marsh high
lights that in 2015, the IMF will review the composition of their Special Drawing Right (SDR) monetary unit, and an important milestone for the Chinese currency will be “the possible inclusion of the renminbi” in the SDR. According to Marsh. “there is a growing belief that the Chinese currency now conforms to a sufficient number of standards for convertibility that it will be become one of the constituent parts along with the dollar, the euro, yen and sterling.”
 
In all aspects of the Chinese gold market, be it the commercial sector or the official sector, the importance of gold as an investment and as a backing to a future currency is being explicitly signalled by the Chinese authorities.

The rest of the world should take note that when the Chinese decide on a plan, they almost invariably see it through. For gold, the Chinese are still planning big and the next phase of this plan is worth watching.

These important developments in the Chinese gold market are bullish for gold in the long term and should reassure jittery investors after recent price falls.




via Zero Hedge http://ift.tt/1CbdrPE Tyler Durden

Secession Cometh to America?

There is much talk about the fragmentation of the international order. The failure of the Doha Round at the WTO, the efforts to make national firewalls are digital information, the decline cross-border movement of capital since 2008, the decline trade, the rise of anti-immigration sentiment all are part of the pessimistic picture painted by some observers.

 

The Scottish referendum also underscored how vulnerable the nation-state itself is to the centrifugal forces that have been unleashed.  Parts of Spain want to leave.  Parts of Italy and Germany have made secessionist noises. Sometimes it appears if it weren’t for Brussels, Belgium might have ceased to be a country.  

 

It turns out the US also may be subject to secessionist sentiment. This Great Graphic is the result of a survey Reuters conducted and Jim Gaines wrote about here.   It was an internet-based survey that included about 9000 people.  It asked a straightforward question:  “Do you support or oppose the idea of your state peacefully withdrawing from the United States of America and the federal government?”

 

 

The results Gaines showed are on a regional basis.   If you click here, you will be able to filter the data by state and numerous demographic categories.  Gaines reports that Republicans favor their state leaving more than Democrats, the right more than the left-leaning independents, younger rather than older, lower income more than higher income and high school educated more than college educated.

 

In aggregate the results showed about a quarter (23.9%) of the respondents answered in the affirmative.    This is greater than the support for most of the anti-EU parties in Europe, like the UKIP and AfD.   Does this mean that next year, the 150th anniversary of the end of the war for Southern independence (Civil War), investors should be concerned about a new secessionist movement?

 

Gaines reports that follow-up conversations with some of the respondents found that the secessionist vote was more a protest vote than a genuine desire to secede.   The sense of aggrievement, Gaines found, was comprehensive, bipartisan, and deeply felt, even if somewhat incoherent.  It is an expression of disapproval of the direction that the country has moved,  or is moving in, rather than a call for independence.  

 

Some surveys in Europe has found, in a similar vein, that many voters of the anti-EU parties were also expressing disapproval and frustration.  In Germany, most recently the AfD won representation in two German state governments on a conservative social agenda, not its anti-EU stance, which it played down, for example.   

 

The political elites in the US and Europe have their work cut out for them.  There may be an economic solution for part of the problem, but it is not just about the pace of growth and historically high level of unemployment in many countries.  The issue of disparity of income and wealth means that aggregate measures of economic activity are no longer sufficient proof that more citizens have access to a better life.  In many high income countries, the crisis is over the social contract, which has fallen into disrepair, and respected primarily in its breach. 




via Zero Hedge http://ift.tt/1CaYqgP Marc To Market

Active Shooter Inside Birmingham UPS Customer Service, Three People Dead – Live Webcast

What until recently was a surge in tragic and deadly “active shooter” cases mostly affecting various US army bases, shools and shopping malls, has now spread to more commercial structures, such as in this case a UPS Customer Center in Birmingham, Alabama. MyFoxAl reports that three people are confirmed dead in a shooting at the UPS Customer Center in the Inglenook community in north Birmingham.

More:

It is not yet clear if the shooter is one of the three victims.

 

One employee in uniform is confirmed dead, as well as two other victims, Birmingham police Lt. Sean Edwards said.

 

Lt Edwards confirmed there was an active shooter inside the facility on Tuesday morning. He said “we believe there are victims.”

 

The UPS Customer Center is in the 4600 block of Inglenook Lane off of East Lake Boulevard near the Birmingham-Shuttlesworth International Airport.

 

Unconfirmed reports say the suspected shooter was wearing a UPS uniform.

 

FOX6 has a crew headed to the scene and will keep you updated on this developing situation.

Live feed below:




via Zero Hedge http://ift.tt/1x7Erj6 Tyler Durden

Syria Is 7th (Muslim) Country Bombed By 2009 Nobel Peace Prize Winner

Authored by Glenn Greenwald, originally posted at The Intercept,

The U.S. today began bombing targets inside Syria, in concert with its lovely and inspiring group of five allied regimes: Saudi Arabia, Bahrain, United Arab Emirates, Qatar, and Jordan.

That means that Syria becomes the 7th predominantly Muslim country bombed by the 2009 Nobel Peace Laureate – after Afghanistan, Pakistan, Yemen, Somalia, Libya and Iraq.

The utter lack of interest in what possible legal authority Obama has to bomb Syria is telling indeed: empires bomb who they want, when they want, for whatever reason (indeed, recall that Obama bombed Libya even after Congress explicitly voted against authorization to use force, and very few people seemed to mind that abject act of lawlessness; constitutional constraints are not for warriors and emperors).

It was just over a year ago that Obama officials were insisting that bombing and attacking Assad was a moral and strategic imperative. Instead, Obama is now bombing Assad’s enemies while politely informing his regime of its targets in advance. It seems irrelevant on whom the U.S. wages war; what matters it that it be at war, always and forever.

Six weeks of bombing hasn’t budged ISIS in Iraq, but it has caused ISIS recruitment to soar. That’s all predictable: the U.S. has known for years that what fuels and strengthens anti-American sentiment (and thus anti-American extremism) is exactly what they keep doing: aggression in that region. If you know that, then they know that. At this point, it’s more rational to say they do all of this not despite triggering those outcomes, but because of it. Continuously creating and strengthening enemies is a feature, not a bug, as it is what then justifies the ongoing greasing of the profitable and power-vesting machine of Endless War.

If there is anyone who actually believes that the point of all of this is a moral crusade to vanquish the evil-doers of ISIS (as the U.S. fights alongside its close Saudi friends), please read Professor As’ad AbuKhalil’s explanation today of how Syria is a multi-tiered proxy war. As the disastrous Libya “intervention” should conclusively and permanently demonstrate, the U.S. does not bomb countries for humanitarian objectives. Humanitarianism is the pretense, not the purpose.




via Zero Hedge http://ift.tt/1v58Uep Tyler Durden