Category: zerohedge

Today’s AM fix was USD 1,297.50, EUR 958.13 and GBP 757.40 per ounce.
Yesterday’s AM fix was USD 1,312.00, EUR 965.20 and GBP 765.51 per ounce.

Gold fell $12.60 or 0.96% yesterday to $1,294.10/oz and silver slipped $0.21 or 1% to $20.71/oz.

Gold In U.S. Dollars and Global ETF Holdings – 6 Months (Thomson Reuters)

Gold’s sell off yesterday was again due to concentrated selling on the COMEX. The sale of over 17,000 contracts or over $2.3 billion worth of gold futures contracts in minutes led to gold falling again. Support is likely to be found at previous resistance at $1,280/oz.

The sell off has led to increased demand for physical gold by buyers globally. In China, the world’s largest importer of gold, the sell off was greeted by Chinese buyers as local premiums edged up to just over $1 an ounce on the Shanghai Gold Exchange (SGE) from a small discount in the previous session.

Gold imports into India surged in June where there was a 65% annual rise in gold bullion imports.

Bullion is India’s second-biggest import item after oil and was one of the principal factors in putting it on the brink of a full-scale balance of payments crisis last year.

In a desperate bid to trim a gaping current account deficit, India last year increased import duties on gold and imposed a rule that required a fifth of all bullion imports be re-exported.

Those measures had crimped official supply and pushed up premiums in the domestic market, sparking a huge rise in smuggling. However, a strong rebound in gold imports will likely mean the curbs stay in place for some time.

Finance Minister Arun Jaitley surprised bullion markets by keeping the import duty on gold and silver unchanged at 10% in his maiden budget last week.

India’s huge appetite for gold is due to still very high levels of inflation which are still over 7% – retail inflation in June hit 7.31%, and the continuing depreciation of the rupee.

Gold holdings in exchange-traded products rose 9.7 metric tons yesterday to 1,736.9 tons, the most since October 2012.

Gold price drops this year have led to a marked increase in demand for gold as seen in very large increases in ETF holdings (See chart – Orange is Gold, Purple is absolute change in gold ETF holdings). The smart money in Asia, the West and globally continues to use price dips as an opportunity to allocate to gold.

Leaders of the BRICS emerging market nations launched a $100 billion development bank and a currency reserve pool on Tuesday in their first concrete step toward reshaping the Western-dominated international financial system.

The bank aimed at funding infrastructure projects in developing nations will be based in Shanghai, and India will preside over its operations for the first five years, followed by Brazil and then Russia, leaders of the five-country group announced at a summit.

The new global bank is another sign that the dollar’s days as reserve currency of the world are coming to a close.

We Are Now Offering A Price Match Guarantee And Will Match Prices Offered By Bullion Dealers Internationally >> Bullion Coin And Bar Price Match Guarantee

IMPORTANT NEWS
Gold Trades Below $1,300 As U.S. Dollar Strength Hurts Demand
(Reuters) Gold traded near the lowest price in more than three weeks in London as investors weighed a stronger dollar against tension in the Middle East. The dollar rose to a three-week high against a basket of 10 major currencies after Federal Reserve Chair Janet Yellen said benchmark rates could increase sooner than expected if inflation and the job market pick up faster than anticipated, even as stimulus is still needed. Bullion slid 3.3 percent in the previous two days, the biggest two-day drop this year.
Read more

Gold Plunges Back Below $1300 As “Someone” Dumps $2.3 Billion In Futures
(Zero Hedge) With The Fed proclaiming bubbles in some of the most-loved segments of the stock market and explaining that the economy is doing “ok” but they must remain dovish for longer for feasr of “false dawns”… what better time than now to dump $2.3 Billion notional in futures… of course the dump in gold’s anti-status quo price coincided with an odd v-shaped recovery in stocks… Gold remains above its pre-June FOMC levels still. The break was precipitated by the sale of over 17,000 contracts (or over $2.3 Billion notional)…
Read more

Buy-to-Let Inflating Real Estate Seen Perilous
(Bloomberg) Shahram Kordestani, who owns seven U.K. rental homes, has advice for investors eager to join the swelling ranks of landlords: Do so at your peril.
Kordestani, who has been renting homes in London and southeast England for about 12 years, said when interest rates rise, the jump in mortgage payments will hammer buy-to-let investors who have helped push up property values.
Read more

LinkedIn Co-Founder: Bitcoin is in My Five-Year Investment Plan
(Coindesk) LinkedIn co-founder, early Facebook investor and Greylock Partners partner Reid Hoffman has declared his enthusiasm for bitcoin in a new interview with CNBC’s ‘Squawk Alley’.
The interview aimed to assess Hoffman’s current opinion of opportunities in the market given his experience and success in early social media.
Read more

Germany Busts Price Fixing Cartel – Sausages
(CNN) Germany’s sausage makers have been ripping off retailers and consumers for years by operating a cartel to raise prices.  Antitrust officials said Tuesday they would fine 21 companies 338 million euros ($460 million) after discovering evidence of collusion dating back decades.
Known as the “Atlantic Circle” after the luxury Hotel Atlantic in Hamburg where it first met, the cartel included small scale producers as well as big international groups such as Herta, owned by Switzerland’s Nestle (NSRGF).
Read more

IMPORTANT ANALYSIS 
Bank Of England Governor Warns Of A Bubble As Uk House Prices Rise 10.5%
(The Guardian) Rising house prices and high levels of household debt could tip the UK back into recession if left unchecked, the Bank of England governor has warned.
Mark Carney told MPs on the Treasury select committee that the threat of a property bubble was the “biggest risk” to economic recovery over the medium term, as official figures showed house prices rose by 10.5% in the year to May – and more than 20% in London.
Read more

London’s Turning: Sales Collapse By A Quarter
(Property Industry Eye) The London market looks to be unravelling dramatically – and not just in its prime central postcodes – as it appears that buyers are staying away while sellers belatedly attempt to cash in.

Sales across the whole of London are sharply down, while supply is up – by 32% according, yesterday,  to the property website Home. It described the surge in new instructions as “startling”.
Read more

Gold Sell Off “Smells Of A Scheme To Push Gold To Or Below $1,300 For Expiration” 
(GATA) With the only news today that seemed to have any bearing on the gold price being bullish — Federal Reserve Chairwoman Janet Yellen’s testimony to a Senate committee that interest rates will remain low long after the current round of “quantitative easing” ends —- how could gold futures prices be smashed for $25 out of the blue?
Read more

Sinclair: Last Take Down Of Gold – Will ‘Make New Highs’
(GoldSeek) If the gold market was a horse race then after yesterday’s sudden fall for no apparent reason observers would be calling for a stewards’ enquiry. Certainly those looking at a replacement for the London gold fix ought to be paying attention.
Just days after Goldman Sachs renewed its propaganda onslaught against the precious metal in a long article on Bloomberg the price dropped by 2.3 per cent, its biggest one day drop this year. Did it fall or was it pushed?
Read more

BRICS Announce $100 Billion Reserve To Bypass Fed, Developed World Central Banks
(Zero Hedge) As we suggested last night, the anti-dollar alliance among the BRICS has successfully created a so-called “mini-IMF” since the BRICS are clearly furious with the IMF as it stands currently: this is what the world’s developing nations just said on this topic “We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness.”

As Putin explains, this is part of “a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies.” Initial capital for the BRICS Bank will be $50 Billion – paid in equal share among the 5 members (with a contingent reserve up to $100 Billion) and will see India as the first President. The BRICS Bank will be based in Shanghai and chaired by Russia. Simply put, as Sovereign Man’s Simon Black warns, “when you see this happen, you’ll know it’s game over for the dollar…. I give it 2-3 years.”
Read more

 

Essential Guide to Storing Gold In Singapore

 This guide examines the backdrop to, and the rise of Singapore as an emerging precious metals hub. What is clear is that Singapore is on track to becoming a key player in the global bullion market; it has built an impressive infrastructure to cater for the logistics, refining, storage and brokering of precious metals.

Against the very uncertain global macroeconomic and geopolitical backdrop, both private and institutional GoldCore clients are beginning to demand that their physical bullion be stored in a neutral and safe location.

The following guide is a must read for investors looking at global asset diversification:

Why Singapore?

• Asia’s Emerging Precious Metals Hub
• Asia’s Global Financial Hub
• Singapore, A Global Transportation Hub
• Key Benefits of Storing Bullion in Singapore
• Steps To Owning Gold in Singapore

You can read the comprehensive guide here

via Zero Hedge http://ift.tt/1naWKiV GoldCore

One can’t help but wonder just how concerned the powers that be are becoming when such an esteemed mainstream media outlet as Bloomberg News would deem fit to defend the almighty US Dollar. “There are always people who say the dollar is going to be replaced, but it hasn’t happened,” chides one strategist (clearly forgetting that nothing lasts forever). As growing concerns of “exorbitant privilege” spread from the usual anti-imperialist foes (Russia and China’s de-dollarization) to close allies like France and now to the world’s growth engine – BRICS, it seems defending what was previously unquestionable itself should be grounds for alarm…

As Bloomberg reports,

The dollar hasn’t budged from its top spot for the past three decades, withstanding repeated efforts to unseat it. Almost 90 percent of the $5.3 trillion a day in foreign-exchange transactions last year involved the dollar, the same share as in 1989, data from the Bank for International Settlements show. More than 80 percent of trade finance was done in dollars in 2013, according to Swift, a global financial-messaging network.

 

…

 

A week after the BNP Paribas plea, French Finance Minister Michel Sapin urged European governments to promote the euro more in international transactions. While he said he wasn’t fighting “dollar imperialism,” his comments echoed those of predecessor Valery Giscard D’Estaing, who coined the term “exorbitant privilege” in 1965, referring to the benefits the U.S. received for the dollar’s status.

 

…

 

“The Fed is the central bank of the world,” said Joseph Quinlan, chief market strategist at Bank of America Corp.’s U.S. Trust, which oversees about $380 billion. “The rest of the world benefits from the dollar standard as well.”

 

…

 

“The U.S. dollar remains dominant in traditional trade finance, and we don’t see a replacement any time soon,” said Astrid Thorsen, the head of business-intelligence solutions at Swift in Brussels. “The yuan is gaining traction, and it has dethroned the euro from second place. But the competition has been between currencies other than the dollar.”

 

…

 

Companies, consumers and central banks around the world prefer the dollar to other currencies, including the euro and yen, because they trust the Federal Reserve and the U.S. government to back it, according to Marc Chandler, the chief currency strategist at Brown Brothers Harriman & Co.

 

“There are always people who say the dollar is going to be replaced, but it hasn’t happened,” said Chandler, who’s based in New York. “The biggest threat to the dollar’s dominance is the U.S. deciding to abdicate one day, not others complaining about it for this reason or that.”

But not everyone is so exuberant…

“The dollar’s role will decline gradually and modestly over time, but it will still remain as the dominant currency,” said Bergsten, founder of the Peterson Institute for International Economics in Washington and a former Treasury Department official. “The euro has already claimed a central role, and the yuan keeps getting more important. Neither will likely replace the dollar, though.”

*  *  *

Remember, nothing lasts forever…

 

via Zero Hedge http://ift.tt/1p8P51I Tyler Durden

Submitted by F.F.Wiley of Cyniconomics blog,

[O]f all the economic bubbles that have been pricked, few have burst more spectacularly than the reputation of economics itself.
– From The Economist, July 16, 2009.

It’s been five years since the The Economist magazine published the critical commentary  excerpted above. In hindsight, the noted reputational damage was neither lasting nor spectacular. As of today, we’d say it’s almost non-existent.

Mainstream economists continue to dominate their profession and wield huge influence on public policies. They merely needed to close ranks after the financial crisis and wait for people to forget that their key theories and models were wholly discredited.

Meanwhile, heterodox economists who stress credit market risks and financial fragilities – the Austrians, the Minskyites – remain stuck on the fringes of the field. It doesn’t much matter that the crisis validated their thinking.

There may be no better example of mainstream economists’ Machiavellian preservation of position than in the cadre of left-wing, Keynesian bloggers led by Paul Krugman. We say “led by Krugman” because he seems to set the tone and tactics that many of his cohorts mimic. If you happen to read a blog post that attacks ideological foes through a combination of ridicule, name-calling and false narratives – such as the absurd claim that all conservatives (alternatively, all Austrians) predicted rising inflation in recent years – it was probably inspired by Krugman.

Readers of this blog know that we would welcome a genuine shake-up in the field. Wouldn’t it be nice to have a Colonel Jessup moment – when the code of silence breaks and everyone finally knows the truth?

Lt. Kaffee: “Did you order the Code Red?”
Col. Jessup: “I did the job I…”
Lt. Kaffee: “DID YOU ORDER THE CODE RED?”
Col. Jessup: “YOU’RE GODDAMN RIGHT I DID!”

In other words: we want the impossible. Hollywood endings only happen in Hollywood studios. The real life Jessup would have denied the Code Red, smirked through his acquittal and caught the first flight back to Gitmo. He may have even felt the need to send a message to his troops by ordering another Code Red at the first opportunity. That’s pretty much what we’ve witnessed in the economics profession.

“Mythbusting” the theories of mainstream economists

Nonetheless, we’ll continue to explain why we think a shake-up is overdue. In prior posts, we demonstrated the risks of Keynesian fiscal policies using 200 years of government budget balances and 63 high debt episodes, and by working through the implausible arithmetic in Krugman’s debt reduction formula. More recently, we argued the Austrian/Minskyite position that bank lending is riskier than lending funded by prior savings, and also discussed many economists’ ignorance of the way that bank lending works.

We’ll tie the last two points together here, by taking a closer look at what happens when credit growth disconnects from naturally occurring (not through bank money creation) or “prior” savings.

This time, though, we look further back than the inception dates of the BEA’s National Income and Product Accounts (NIPA) and the Fed’s “flow of funds.” For debt, we include older Census Bureau data recorded in the Historical Statistics of the United States. With adjustments, we can show that the Census Bureau series tracks a similar “flow of funds” series fairly closely during the overlap:

We also look at pre-NIPA savings rates, calculated from data on disposable personal income and consumption:

The earlier savings rates don’t match NIPA exactly because: 1) they’re calculated from different surveys, and 2) they ignore personal interest and transfer payments, skewing the figures higher than they should be. In any case, true savings rates were surely low during the late 1920s – when both consumer credit and durable goods purchases were in bubble mode – and quite possibly even lower than the data in the chart.

Which brings us back to our reason for looking at history – to consider what happens when savings and credit run in opposite directions.  Here’s our answer:

Although there are only two episodes combining low savings with rapid credit growth, the outcomes couldn’t be clearer.

What’s more, quarterly data available from 1952 tells a similar story. With this more complete data set, we can cleanly separate total credit growth into two components:

1. “Risky lending” financed by bank money creation or foreigners (as discussed in “3 Underappreciated Indicators to Guide You through a Debt-Saturated Economy.”)
2. Lending from domestic, “non-money” savings (essentially prior savings).

Here’s the chart:

Risky lending tends to peak before lending from domestic, non-money savings, and also before recessions. In other words, once risky lending maxes out, the ensuing weakness feeds into the broader economy.

Moreover, the earlier chart running from the Great Depression to the global financial crisis adds a giant exclamation point to the post-WW2 results. It seems clear that risky lending is a key driver of the business cycle, while extreme differences between lending and savings lead to fully-fledged busts.

Needless to say, our conclusions aren’t exactly mainstream when it comes to economic theory. There’s no place in mainstream models for the idea that money-creating bank lending is any different to lending from prior savings. Nor is there a place for other fundamental features of credit booms, such as the malinvestment that deepens recessions or balance sheets that are unsustainably swollen with debt. Mainstream models don’t include balance sheets, after effects of malinvestment or even the very existence of banks!

To take the most basic steps towards understanding booms and busts, you need to venture outside the mainstream. The Austrian school, in particular, stresses key differences between money creation and lending from prior savings, matching the real world results in the charts above.

About the title

If you happen to show this post to your favorite Austrian economist, we wouldn’t be surprised if you’re told it’s too empirical. The Austrian school’s distrust of empirical research is well-defended by our friend Detlev Schlichter here, and we don’t completely disagree with him. But we do believe that many ideas in economics are reasonably refuted by observing real world happenings, while others are reasonably validated (though never proven). At least that’s how we see it, as you may have guessed from our content.

Think of the show Mythbusters, where all kinds of theories, rumors, adages, movie scenes and more are tested through experiments. While the experiments are often inconclusive, they’re informative enough for the presenters to make a judgment call – is the myth “busted” or not? We take essentially the same approach. Our experiments can’t be controlled, for obvious reasons, and this is the greatest limitation to empirical research in economics. Nonetheless, it shouldn’t prevent us from gleaning whatever information we can from history, and then considering what it tells us about the accuracy of economic theory.

Even Murray Rothbard, we might add in closing, made the occasional empirical argument.

Data sources and Q&A

See “Technical Notes for ‘Never Mind Their Distrust of Data and Forecasts…’.”

More from A Few Good Men

via Zero Hedge http://ift.tt/1wv0Ylc Tyler Durden

Presented with little comment, aside to observe the deal’s ridiculous 12.6x EBITDA multiple, even higher than the recent record median LBO multiple we noted recently.

 

 

h/t UBS Art Cashin via Financial Insyghts LLC

via Zero Hedge http://ift.tt/1yrmtq3 Tyler Durden

The reason why “one-time, non-recurring” charges are traditionally excluded from a company’s adjusted bottom line calculation is because they are, at least in theory, one-time and non-recurring. So, after looking at the chart below which breaks out Bank of America’s quarterly litigation charges alongside its net income, can someone please explain to us why anyone is still showing the bank’s pro forma EPS excluding litigation charges?

Just to put it in context, in the past 2 years, Bank of America has incurred $20 billion in litigation charges. Its net income during this period: $11.9 billion.

And adding insult to injury, just as we were going to press, this hit:

• BOFA SAID TO OFFER $13B TO SETTLE MORTGAGE SECURITIES PROBE:WSJ

Which means before the end of 2014, litigation charges for Bank of America since 2012 will rise to over $30 billion! And we thought JPMorgan was bad…

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

NAHB Sentiment surged 4 points to 53 – its first time above the crucial ‘recovery’ 50-level since January. All sub-indices were higher but the biggest gain was in “Future sales expectations” which soared to its highest since September (and consider for a moment just how ‘wrong’ builders were from that point). All regions rose with The West rising most (and South least). Given the massive divergence between Builder sentiment and the reality of sales and mortgage apps, it is no surprise that “hope” is what they have left.

HANB jumps to best since January… led by future hope…

 

which – given the following chart – is all they have…

 

Especially if US and China clamp down on hot money flows…

via Zero Hedge http://ift.tt/1nwjYu5 Tyler Durden

Having sent shockwaves through the “Don’t fight the Fed” apologists yesterday by stating that small caps (etc.) have stretched valuations, we suspect today’s hearing (assuming the politicians have now read her statement and report) will focus on what the market’s gurus is rapidly trying to paper over. Expect more ‘uber-dovish if we need to’, expect more ‘vigilant’ of bubbles (but there are none now)… expect more ‘rates will rise – so sell your bonds (and patriotically help with the collateral shortage). Presenting Janet Yellen’s Humphrey Hawkins part two…

 

Live Feed

Just glimpse at the report…

Fed

via Zero Hedge http://ift.tt/1jxBR0I Tyler Durden

via Zero Hedge http://ift.tt/1jxBT8F williambanzai7

What does Yellen know? Nothing apparently (if she says ‘sell’) US equity markets, juiced by China’s GDP data (but missing China’s retail sales and home price slump) and helped by Portugal ‘reassurances’ that have yet to materialize, are soaring this morning… VIX is back at a 10-handle as Dow hits record highs, the S&P nears record highs and even small-cap, social media, momo, tech fantasy stocks are ripping… you can’t keep a good market down… It seems “fight the Fed” is the new “Don’t fight the Fed”

 

Dow record highs…

 

as VIX is slammed to a 10-handle again…

 

But don’t look now as Russell 2000 is dumping off the spike open…

via Zero Hedge http://ift.tt/1jxBSS8 Tyler Durden

Call it yet another unintended consequence of pervasive government intervention.

On one hand, the US has the highest corporate tax rate in the world:

On the other, the US tax code is such that it not only allows but encourages firms, who have sufficient resources, to find global loopholes such as the “Double Irish With A Dutch Sandwich.”

On the third hand, as a result of QE and ZIRP, stock prices have never been higher, which means it has never been a more opportune time for companies to use their record high stock price to acquire targets, which coupled with record cheap debt has led to an M&A bubble unlike any seen previously, with total M&A pace in 2014 set to surpass previous records and with deal consideration paid in stock, at 23%, the highest in, well, ever.

With all these permissive conditions for US corporations to take advantage of the raging M&A bubble, is there any surprise that not a day passes without some US company announcing a “tax-inversion” deal meant to bypass US taxes entirely? Apparently, if you are the government, there is a lot of surprise.

So much so in fact that as WSJ reported last night, the Obama administration itself joined the growing cries over U.S. companies reincorporating overseas for tax purposes, urging lawmakers to pass legislation to limit the moves.

In a letter to leaders of the congressional tax-writing committees, Treasury Secretary Jacob Lew said lawmakers “should enact legislation immediately…to shut down this abuse of our tax system.” The letter was reviewed by The Wall Street Journal on Tuesday night.

Just this week, two U.S.-based drug firms— AbbVie Inc. ABBV +0.11% and Mylan Inc. MYL +1.81% —moved ahead with plans for foreign mergers that would allow them to move overseas and reduce their tax rates. They would join a growing list of about 50 U.S. firms that have reincorporated overseas through inversion in the last 10 years, most of them since 2008.

 

The trend appears to have accelerated in recent months, as Congress has come up short in an effort to pass a comprehensive tax-code rewrite that would address corporate concerns and make the U.S. system more business-friendly.

In the meantime, while Congressmen have been calling for a halt to the kind of activity that corporations clearly believe is in their best interest, not all are convinced that the government should meddle yet again in what would clearly be yet another forced capital misallocation:

As more firms are moving to reincorporate in countries with tax advantages, lawmakers remain divided over Washington’s response. So far, Republicans as well as some influential Democrats in Congress have favored limiting inversions through a comprehensive overhaul. Some of those lawmakers believe a quick fix could worsen U.S. companies’ position.

 

“I don’t want to be part of legislation that ramps up the competitive disadvantage of being a U.S.-based company or makes U.S.-based companies more attractive targets for foreign takeovers,” Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said in a recent statement.

 

Finance Committee Chairman Ron Wyden (D., Ore.) also hasn’t pushed for a quick fix. In a Wall Street Journal op-ed in May, he said that “this loophole must be plugged.” But he indicated that he is still hopeful for a comprehensive tax rewrite that would limit inversions on a retroactive basis.

Which brings us to today’s topic: this is how the US Treasury Secretary has decided to approach the issue: with a heartfelt appeal to US coroprations to do not what is right for their shareholders but to be, drumroll, be “economically patriotic.”

In the Treasury letter, Mr. Lew criticized corporations that move overseas to avoid the relatively high U.S. corporate tax rate, while continuing to operate from U.S. soil and benefiting from U.S. legal protections, infrastructure and basic research.

 

“What we need as a nation is a new sense of economic patriotism, where we all rise or fall together,” Mr. Lew wrote. “We should not be providing support for corporations that seek to shift their profits overseas to avoid paying their fair share of taxes.”

To summarize: the US government first allows corporations (or “people” per SCOTUS) to not only inflate their stock to record highs (via a debt funded, stock buyback scramble facilitated by the Fed’s ZIRP bubble), the same companies then engage in the only logical activity that makes sense for the bottom line, one which leaves no tax payments for the US whatsoever, and then the US hopes corporations will show some “economic patriotism.” In other words, shame them into adding even more capital misallocation on top what is already the worst case of central-planning since the fall of the USSR. Add this to the “less cynicism, more hope” recent appeal by Obama, and at this rate US GDP will explode courtesy of soaring healthcare fees as everyone ends up in psychotherapy from the resulting cognitive bias of doing the one thing the US government allows, permits and encourages, the very same thing that the same government subsequently shames everyone into having done in the first place!

via Zero Hedge http://ift.tt/U9PAyF Tyler Durden