One day after the biggest jump in stocks in two months on what has still been an undetermined catalyst, overnight global equities did a U-turn with European stocks falling toward a one-month low and U.S. stock index futures declining, as crude oil dropped toward $44 a barrel. A driver the move lower was a sharp reversal in the USDJPY which dropped 100 pips from yesterday’s highs which took places just as Goldman predicted the USDJPY has finally bottomed, facilitated by a weaker dollar (also following a Goldman report yesterday forecasting the USD was about to surge).

S&P 500 futures fell 0.2% after Walt Disney Co. tumbled 5.5% in premarket New York trading after posting second-quarter results that missed analysts’ estimates. Macy’s Inc. is among companies releasing earnings Wednesday. In Europe, the Stoxx 600 lost 0.7%. A gauge of lenders fell the most on the index, with Raiffeisen Bank International AG tumbling 8.6 percent after saying it’s considering merging with its parent company to ease the pressure of regulatory requirements. ABN Amro lost 2.4 percent. Total SA and Eni SpA dragged energy producers down as oil prices retreated.

Commodities were once again at the forefront of the action, with industrial metals from aluminum to zinc climbing as Glencore Plc forecast demand to exceed supply. Soybeans, silver and gold also gained, while crude fell before U.S. inventories data. As the chart below shows, however, the main driver of market action remains the dollar, which impacts both commodities, and risk as the two continue to move broadly in line all year.

 

In an amusing twist, China’s Economic Information Daily publication wrote a front page article saying China should avoid short-term A-Share intervention, adding that state-backed funds such as the China Securities Finance Corp. should be long-term investors in the A-share market and avoid short-term intervention, adding that CSFC traded stocks frequently during 1Q, which artificially distorted the market: report.

Aside from central bank intervention in various markets, skepticism still remained: “earnings so far have been OK but not strong enough to deliver a real upside for stock prices,” said Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany. “What is still really missing from this environment is a notable rally in the banking stocks, which is an important driver for any stock market rally. With oil moving down, it’s negative for oil producers.”

Elsewhere, the Lyxor ETF Brazil rose 1.3 percent before a Senate vote that would force Rousseff out of office and into an impeachment trial. The Philippine Stock Exchange Index surged 3.1 percent, extending Tuesday’s 2.6 percent rally, as Rodrigo Duterte, a tough-talking mayor of Davao city, won Monday’s presidential vote. The peso gained 0.4 percent on Wednesday.

Market Wrap

• S&P 500 futures down 0.2% to 2073
• Stoxx 600 down 0.7% to 333.8
• Eurostoxx 50 -1.1%
• FTSE 100 -0.3%
• CAC 40 -1.1%
• DAX -0.8%
• IBEX -1.2%
• FTSEMIB -2.1%
• SMI -0.4%
• MSCI Asia Pacific up 0% to 127.6
• Nikkei 225 up 0.1%
• Hang Seng down 0.9%
• Kospi down 0.1%
• Shanghai Composite up 0.2%
• ASX up 0.6%
• US 10Yr yield down 2bps to 1.75%
• Italian 10Yr yield down 3bps to 1.48%
• Spanish 10Yr yield down 3bps to 1.61%
• German 10Yr yield down 1bps to 0.11%
• Gold spot up 0.5% to $1272.2/oz
• Brent Futures down 0.6% to $45.3/bbl

Top Global Headlines

• IMF Might Not Join Greek Bailout at Current Review: Kathimerini: newspaper cites three unidentified European officials
• Norway Increases Oil Wealth Spending to Ward Off Recession: fiscal stimulus impulse rises to 1.1ppt From 0.7ppt
• The Fog of Brexit: Investor complacency over Brexit may not last, Macro View column says
• Glencore CEO Lists Mining’s Mistakes After $1 Trillion Spree: Glasenberg outlines a ‘recipe for better returns’ from mining
• Staples-Office Depot Merger Collapses After Block by Judge: shares of both companies plunge in after-market trading

Looking at regional markets, Asia stocks traded mixed with most of the major bourses taking the impetus from a firm Wall St. close. ASX 200 (+0.6%) traded higher after yesterday’s energy advances which saw WTI regain the USD 44/bbl level, while a recovery in basic materials also benefited large cap miners with BHP Billiton surging nearly 4%. Nikkei 225 (+0.1%) was positive, although the index pulled off its best levels as JPY strength pared some exporter gains, while participants also digested a slew of earnings. Chinese markets were mixed with the Shanghai Comp (+0.2%) higher after the PBoC upped its liquidity injection. 10yr JGBs saw subdued trade as a mildly positive risk-tone in Japan dampens demand for government paper, while the BoJ’s presence in the market for JPY 1.24tr1 in JGBs stemmed any significant downside.

Japan PM Abe adviser Hamada said that Japan retains right for FX intervention and Japan should intervene if JPY strengthens rapidly to 100.00 against USD. However, Hamada also further stated that he does not think JPY will appreciate much from between 105.00-110.00 levels.

Asian Top News

• China’s Africa Push Reaches Currencies in Deal Investors Decry: Naira-yuan swap may delay, not prevent devaluation, Citi says
• A Young Tokyo Stock Picker Rubs His Hands as Japan Gets Old: Kuzuhara’s fund gains as Topix tumbles, winning several awards
• Japan’s Biggest Traders See No Commodities Recovery in Sight:
• India Acts to Stop Investors Using Mauritius as Tax Shelter: Capital gains on investments from April 1, 2017 to be taxed
• Toyota Forecasts 35% Decline in Net Income on Stronger Yen: Plans to buy back up to 3.42% of its shares
• Hong Kong Exchange Net Declines on Lower Trading Volume: 1Q net HK$1.43b vs HK$1.58b y/y
• Takata Forecasts Profit Despite Looming Air-Bag Recall Costs: restructuring panel expected to make proposals by October

European equities have suffered this morning, with Euro Stoxx lower by around 1.0% and DAX slipping back below the psychological 10,000 level. Leading the way lower this morning has been financials, with the FTSE MIB underperforming after a number of Italian banks reported their earnings and with Banco Popolare among the worst performers in Europe. Similarly, high profile Credit Suisse and Deutsche Bank are also softer this morning as the latter retraces much of its post-earnings upside. On the other hand, the FTSE outperforms this morning, granted a reprieve by modest strength in the material sector. Despite the upside in equities, Bunds have traded flat throughout the session ahead of supply today from Germany and Portugal. As has been the case throughout the week, today has seen a large quantity of corporate issuance, including deals from the likes of J&J.

European Top News

• ABN Amro 1Q Profit Falls on Lower Fee Income: regulatory charges jump to EU98m from none in 2015
• EON Profit Beats Estimates With 30% Jump on Gazprom Accord: gas supply accord boosts earnings by about EU400m
• Bilfinger Quarterly Loss Widens as Two Directors Step Down: Thomas Blades named chairman of executive board from 3Q
• Raiffeisen Eyes Merger With Parent to Ease Regulatory Burden: six-month review started, decision for deal due this year
• TUI to Sell Adventure-Holidays Arm to Focus on Mass Tourism: to sell about 50 adventure travel brands
• Carlsberg Sales Rise Slightly as Profit Forecast Maintained: to move 300 back-office jobs to India to shed costs
• Premier Oil Says It Will Meet or Exceed 2016 Production Forecast: co. comments in statement
• Altice First-Quarter Earnings Stall as French Unit Struggles: Numericable-SFR facing stiff competition
• Statoil Could Pump More Oil at Giant Sverdrup Field, Lundin Says: output rate from phase 1 seen almost 27% above earlier target

In FX,the all important yen climbed 0.6 percent to 108.62 per dollar, after sliding more than 2 percent over the last two days. This happens the day after Goldman said that USDJPY has bottomed and the USD is – once again – set to soar. The currency has gained more than 10 percent this year, making it harder for the Bank of Japan to achieve its inflation goal, and Finance Minister Taro Aso reiterated Tuesday that the government can intervene to stabilize the exchange rate if necessary. The pound weakened for the first time in three days versus the euro as a report showed U.K. industrial production grew less in March than analysts forecast, adding to signs that Britain’s economy is suffering as it heads toward a referendum on its membership of the European Union. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, fell for a second day following on Goldman’s forecast that the USD is set to jump. The gauge had its strongest rally in almost a year in the five days through Monday.

In commodities, all eyes were on WTI crude which fell 0.9% to $44.28 a barrel, after climbing 2.8 percent in the last session. Concern over supply disruptions in Nigeria and Libya, holders of Africa’s largest oil reserves, was countered by speculation that U.S. data on Wednesday will show American stockpiles expanded from the highest level since 1929. Zinc and lead rose by more than 1.7 percent in London, while copper gained 1.2 percent. Commodities are “now close to pre-supercycle levels,” when growth in Asia fueled a surge in prices, Glencore said Tuesday. The London Metal Exchange’s LMEX Index of six industrial metals closed at a one-month low on Tuesday. Gold gained 0.5 percent, buoyed by the dollar’s retreat. Goldman Sachs Group Inc. this week raised its forecasts for bullion prices as it scaled back expectations of U.S. Federal Reserve rate hikes over the next year. Silver climbed as much as 1.3 percent.

On today’s US calendar, algos will be focused on the DOE energy inventory report at 10:30am while the only data of note is the April Monthly Budget Statement. There’s a similar lack of Fedspeak although we will hear from the ECB’s Weidmann and Nowotny today. Keep an eye on Brazil however where the Senate is scheduled to vote on the impeachment process: a simple majority of 41 senators would be enough for the Senate to accept the request, which would force President Rousseff to temporarily step down for as long as 180 days, a period in which Vice President Michel Temer would take over and have full autonomy to appoint a new cabinet and run the government. Results may not be out until sometime late tonight or early next morning, but it looks like one to watch.

Bulletin Headline Summary from RanSquawk and Bloomberg

• European equities trade lower as underperformance in financial names dampens sentiment in the region
• GBP lags FX markets in the wake of further disappointing UK data, this time with industrial and manufacturing production failing to meet expectations
• Looking ahead, highlights Include Industrial Production & Manufacturing Production from the UK, US MBA Mortgage Applications, DOE U.S. Crude Oil Inventories
• Long-end Treasuries higher overnight as European equities drop with crude oil and precious metals rally; auctions continue with $23b 10Y notes, WI 1.735%; last sold at 1.765% in April.
• The most aggressive traders are joining the growing ranks of those betting against the three-month rally in U.S. stocks. Since the end of February, investors have sent $1.3 billion into exchange-traded notes that pay two or three times the inverse of the market’s return
• Today may be the last day in office for President Dilma Rousseff, as Brazil’s Senate gears up for a vote that would force her out and into an impeachment trial she appears unlikely to survive. The Senate debate is scheduled to last 10 hours and end with a vote around 7 p.m. local time
• Norway’s government boosted the amount of oil money it will spend this year to a record, dipping deeper into its sovereign wealth fund to ward off a recession
• Spain is the latest euro-region sovereign to sell 50-year bonds, with an issue via banks that’s likely to price today. It follows half-century deals last month from France and Belgium as countries take advantage of historically low interest rates
• U.K. industrial production grew less than forecast in March as manufacturing barely rose and oil and gas output shrank. Output rose 0.3%, figures from the Office for National Statistics published today show
• Billionaire hedge fund manager Paul Singer said that gold’s best quarter in 30 years is probably just the beginning of a rebound as global investors weigh the ramifications of unprecedented monetary easing on inflation
• Sovereign 10Y yields mostly lower led by Greece (-12bp); European equities lower, Asian markets higher; U.S. equity- index futures drop. WTI crude oil falls, precious metals rally

US Event Calendar

• 7:00am: MBA Mortgage Applications, May 6 (prior -3.4%)
• 10:30am: DOE Energy Inventories
• 1pm: U.S. to sell $23b 10Y notes
• 2pm: Monthly Budget Statement, April, est. $107b

DB’s Jim Reid concludes the overnight wrap

Yesterday broke a recent spell of apathetic to soft risk markets. A big rebound across the commodity complex and in particular for Oil helped to fuel what was a much better day for risk generally. A Q1 loss for Credit Suisse that wasn’t quite as bad as feared also helped financials turn in a decent day and the progress between Greece and its Creditors did little to dampen the tone either. The S&P 500 ended the session with a +1.25% gain which was the biggest single day gain since March 11th. Prior to this we’d seen the Stoxx 600 close +0.91% although it was peripheral bourses which put in the better performance in Europe. Spanish and Italian equities were up +1.32% and +1.41% respectively while Greek equities rallied to the tune of +3.15%. Indeed 10y Greek government bond yields also finished the day nearly 60bps lower.

Across commodities, as highlighted it was energy markets which stood out. WTI wiped out all of the previous day losses by rallying +2.81% (to close at $44.66/bbl) while Brent was up an even more impressive +4.33% to close back above $45/bbl. It’s all about the supply side of the equation for the market at the moment and yesterday’s bounce seemed to be predicated on possible production curtailments in Nigeria. Indeed, concern over increasing rebel violence in the Niger River delta has seen major producers commence evacuation procedures there. Production concerns in Libya were also a factor yesterday as well as the ongoing focus on the wildfires in Canada. Away from energy markets base metals were also generally firmer with the exception of Copper. Iron ore (+0.49%) snapped a two-day 9% loss while Zinc (+0.71%), Nickel (+1.22%) and Lead (+0.95%) also had better days.

Credit markets were not to be left behind with the more energy sensitive US market outperforming. CDX IG ended the session 3.5bps tighter, the second successive daily gain and the best single day move tighter since the end of March. CDX HY rallied 16bps while in Europe we saw Main and Crossover finish 3bps and 8bps tighter respectively. The bigger focus for credit right now though is the huge amounts of primary issuance that we’re seeing this week. €11bn worth of deals priced in the European market yesterday across 13 issuers taking the week to date volume past €17bn. Meanwhile in the US nearly $10bn of deals priced meaning that week to date volumes in the two days so far (currently $36bn) already exceeds the YTD weekly average with expectations still for steady issuance over the remainder of the week. While we’re on the subject of credit, a quick mention that this morning our latest Credit Bites note was released which takes a look at the latest monthly Moody’s default rate release. It should have hit your emails just before this.

Switching our focus now to the latest in markets this morning, bourses in Asia had initially gotten off to a decent start, largely following the US lead from last night, but have since given up the bulk of the gains now with the Yen strengthening and the rally in Oil coming to a halt. Indeed the Nikkei is currently +0.29% but was up as much +1.47% at one stage, with the Yen rallying around half a percent. The Hang Seng (-0.63%) and Kospi (-0.38%) are now in the red after also starting strongly, while the Shanghai Comp (+0.62%) is firmer but has traded in a 1% range. Oil markets are off around half a percent, while credit markets a marginally tighter generally.

Moving on. On Monday we recapped the current state of play with regards to earnings season in the US and today we’re taking a closer look at the same data for European earnings. As it stands we are now 79% of the way through the season and earnings beats are currently standing at 57% based on Bloomberg data. While that is less than what we’ve seen in the US, a similar theme has played out in that earnings are beating on low and downwardly revised guidance. The energy sector is a good example of that with 77% of companies beating earnings guidance despite YoY EPS for the sector being down over 60%. In fact our European equity strategy colleagues highlighted in their report from a couple of days ago that overall EPS for the Stoxx 600 is -21% yoy and excluding the impact of energy and financials is ‘just’ -4% YoY but is still lower nevertheless. Much like the US it’s the downward revision guidance which is helping to somewhat artificially inflate that beat miss ratio. Since the turn of the year our colleagues note that Stoxx 600 consensus EPS growth for 2016 has fallen to 0.3% from around 7% which is a significantly sharper decline than in previous years.

Turning to the macro, there was some contrasting economic data for us to touch on yesterday. Releases out of the US were generally a little better than expected. Wholesale inventories were reported as rising +0.1% mom in March as expected, while trade sales were up a greater than expected +0.7% mom (vs. +0.5% expected). The NFIB small business optimism reading was up 1pt last month relative to April to 93.6 (vs. 93.0 expected) and so rebounding off the recent low. Meanwhile JOLTS job openings printed at 5.76m in March, more than expected (5.45m expected) and up from 5.61m in February. Recent data since May 4th has now seen the Atlanta Fed revise up their Q2 GDP forecast to 2.2% from the prior 1.7% estimate.

In contrast, yesterday’s industrial production reports in Europe were generally disappointing. Indeed reports for Germany (-1.3% mom vs. -0.3% expected), France (-0.3% mom vs. +0.7% expected) and Italy (0.0% mom vs. +0.2% expected) all missed expectations and paint some downside risk to Thursday’s report for the wider Euro area. On the positive side, the March export numbers out of Germany (+1.9% mom vs. 0.0% expected) bettered expectations and helped Germany to further widen its trade surplus. We’ll get the Q1 GDP report for Germany this Friday where currently expectations are running at +0.6%.

Looking at the day ahead, the economic diary is relatively sparse today. This morning in Europe the only release of note comes from the UK where we’ll get the March industrial and manufacturing production reports (industrial production expected to come in at +0.5% mom). Later this evening meanwhile and over in the US the only data of note is the April Monthly Budget Statement. There’s a similar lack of Fedspeak although we will hear from the ECB’s Weidmann and Nowotny this evening. It’s worth keeping an eye on Brazil however where the Senate is scheduled to vote on the impeachment process. Our EM colleagues noted last night that a simple majority of 41 senators would be enough for the Senate to accept the request, which would force President Rousseff to temporarily step down for as long as 180 days, a period in which Vice President Michel Temer would take over and have full autonomy to appoint a new cabinet and run the government. Results may not be out until sometime late tonight or early next morning, but it looks like one to watch.

via http://ift.tt/1scKWlt Tyler Durden

 

 

 

Proof That the Top 0.1% Create Crashes

Written by Jeff Nielson (CLICK FOR ORIGINAL)

 

 

Our markets and economies are marched up and down in “bubbles” and “crashes”, with the duration of these cycles of financial crime now seeming to be fixed at about once every eight years. As the dust settles after each of these eight-year operations, the Fat Cats at the very, very top are found to have gotten much, much wealthier, while almost everyone else ends up significantly poorer.

With this pattern of crime now being obvious, and the pattern of “winners” and “losers” being equally obvious, it doesn’t require a rocket scientist to suspect that the Winners have been orchestrating these bubbles and crashes. It is obviously considerably easier to be on the winning side of your (supposed) gambling, when you know in advance what will transpire in the Game.

Previous suspicion of guilt has focused upon “the Top-1%”, a small sub-set of the wealthy whose wealth has been soaring higher at a rate never before seen in the history of our societies. However, upon closer scrutiny, it has more recently been determined that even this small sliver of our population is too large a demographic upon which to focus our attention (and criminal prosecutions?).

U.S. Wealth Inequality – top 0.1% worth as much as the bottom 90%

It is a headline which denotes an obvious economic crime against humanity. A mere 1/1000^th of our population holds as much wealth as the bottom-90% combined, roughly half of all the wealth of our societies. Did this 1/1000 ^th micro-sliver earn half of all our societies’ wealth? Of course not. They stole it.

Previous commentaries have described and explained various means by which these ultra-wealthy oligarchs have stolen half of all wealth – and now hoard it in their vaults, while our economies literally starve from lack of capital.

1.  The financial crime known as “inflation”.
2.  Bank bail-outs (and now “bail-ins”).
3.  Other corporate “subsidies” (i.e. welfare).
4.  Corrupt taxation policies.

We’ve long suspected that the Ultra-Wealthy have been systematically stealing our wealth. What has previously been lacking is hard evidence of this. Until now. Recent research into the most-recent “crash” of our markets (the Crash of ’08) provides us with a key piece of evidence:

“We find that, starting in September 2008, the share of sales volume attributed to the top 0.1 percent of income recipients and other top income groups rises sharply until the beginning of 2009, and in 2008 and 2009 the sales of these groups are relatively more associated with stock market tumult as measured by the VIX,” they wrote.

Here it must be carefully noted that what is described in this empirical evidence is what is known in statistical terms as “correlation”. We have evidence that the Top 0.1% are associated with “stock market tumult”. What this evidence does not show, by itself, is whether the Top 0.1% were actually guilty of causing that Crash.

To reach that conclusion, we need to look further into the research, and get to the hard numbers that are provided:

Using average selling volumes by the various wealth classes, the authors estimated that the effect might have accounted for roughly $142 million of excess selling by the 0.1 percent group on the day of the Lehman’s collapse alone, and $1.7 billion [of excess selling] in the 10 days after what was then history’s biggest bankruptcy filing. [emphasis mine]

These numbers require additional explanation. At a time when everyone was selling; the Top-1% were engaging in additional “excess” (excessive) selling, which exceeded $100 million per day. This is a market anomaly for which there is no reasonable explanation. We see this demonstrated as the authors of the research attempt their own explanations for this excessive selling.

One explanation for the divergence is that rich people have more at stake per person and are more sensitive to shocks, though it’s only speculation, Reck said. Another is that they believe they’re better market timers. A third possibility is that investors who earn less are reluctant to sell at a loss, a cognitive tendency known as the disposition effect.

Pure nonsense.

By definition, the rich are less sensitive to any/all economic shocks, because their margin for survival is much greater than those with less wealth. Are the Top 0.1% greedier than all other people? Yes. Do they love their money more than all other people? Yes.

Are they “more sensitive” to financial shocks than the Little People? Of course not. What makes people really “sensitive”? Threatening their survival.

Equally, the second attempted explanation is also nonsense. No one epitomizes the market behavior of these oligarchs more than fellow-oligarch Warren Buffett (and the ultra-wealthy clients/unit-holders he represents). The Oracle of Omaha is well-known to be a “long-term, value investor” – the precise opposite of a market-timer.

The last suggestion is simply academic mythology. Investors who “earn less” have a common nickname in our markets: sheep. They acquired their nickname through their propensity to be herded, spooked, and then sheared. If anything, we would have expected the selling by this class of investors to exceed selling by other classes.

Most importantly, the empirical evidence itself doesn’t support any of these attempted explanations. If the Top 0.1% were engaging in their excessive selling out of fear, or to attempt to “time the market”, we would have expected the heaviest selling to have occurred on the day of the Lehman collapse, and then begun to taper off from there. That’s not what we saw.

Selling by the Top 0.1% on the day of the collapse was actually slightly below their average volume of excessive selling during the first ten days after the Lehman event. Furthermore, as indicated earlier in the research, the excessive selling by the Top 0.1% persisted right through until the end of 2008. This is not indicative of either “fear” or “market-timing”. Rather, it is exactly what we would expect to see if some group was deliberately creating a crash: relentlessly pounding the markets with excessive selling day after day, week after week, month after month.

Then we have this additional, important information:

Other investor demographics, from gender to marital status to place of residence, showed no signs of being related to the volatility sensitivity of stock sales, the study showed.

This is definitive. No matter how one sub-divided investors demographically during the Crash of ’08, everybody behaved the same – except for one small-but-significant group: the Top 0.1%. One anomaly. One group of investors, who relentlessly pounded markets with excessive selling, for months. Think of a hammer. Think of a nail. That was the Crash of ’08. This research indicates who was holding the hammer.

Furthermore, this was a “psychological study”. It proceeded on the naïve assumption that no one caused the crash. The intent was purely to study the (supposed) “reactions” to the Crash. What this means is that the research only examined direct selling by the Top 0.1%.

In other words, the data only covers what the Top 0.1% sold out of their own holdings. It doesn’t examine, for example, how much additional short-trading was done by these Predators. Also, large corporations and institutions are significant shareholders in our markets. The Top 0.1% own/control many if not most of these large corporations and institutions. The data does not include how much additional indirect selling was engineered by these oligarchs. The relentless pattern of “excessive selling” that was indicated by the research, while significant, can only be regarded as the tip of the iceberg here.

The Top 0.1% create our “bubbles”, and they create our “crashes”, and they do so solely for their own, personal profit – heedless of the millions of lives which they damage and destroy with each of their cycles-of-crime. We already had proof that they created the bubbles. Their #1 henchman, B.S. Bernanke has spent years boasting of the “wealth effect” produced by his insane monetary policy: the most-extreme money-printing operation ever seen in the history of our species. 

 

 

Amazingly, Bernanke was never required to precisely define this term. What is a “wealth effect”, really? It is (was) pumping up markets with excessive money-printing in order to create the illusion of wealth. One cannot create real “wealth” simply by electronically conjuring more and more funny-money into existence. Then, after inflating these markets to all-time highs, they become ripe for the “crash” portion of the operation.

We now have incontrovertible proof that the Top 0.1% also create the crashes. Means, motive, opportunity, and now evidence. As the Next Crash now looms before us, remember who is holding the Hammer. 

 

Please email with any questions about this article or precious metals HERE

 

 

Proof That the Top 0.1% Create Crashes

Written by Jeff Nielson (CLICK FOR ORIGINAL)

via http://ift.tt/21VMuw1 Sprott Money

Every year, the Cato Institute publishes a list of the world’s most “miserable countries” by using a simple economic formula to calculate the scores. Described as a Misery Index, the tally for each country can be found by adding the unemployment rate, inflation, and lending rate together, and then subtracting the change in real GDP per capita.

 

 

 

Disaster in Venezuela

According to the think tank, countries with misery scores over 20 are “ripe for reform”. If that’s true, then socialist Venezuela is way overdue.

The troubled nation finished with a misery score of 214.9, the highest marker in 2015 by far. Unfortunately, the number is not looking better for this year, as the IMF has projected that hyperinflation will top 720% by the end of 2016. For the average Venezuelan, that means that food staples and other necessities will be doubling in price every four months.

Hyperinflation has taken its toll on citizens already. Three years ago, one US dollar could buy four Venezuelan bolivars. Today, one dollar can buy more than 1,000 bolivars on the black market. If the inflation rate keeps accelerating, the situation could approach a similar trajectory to hyperinflation in Weimar Germany, where rates eventually catapulted to one trillion percent after six years.

While hyperinflation is certainly one of Venezuela’s biggest concerns, the nation has also been short on luck lately. The Zika virus hashit the country hard, and the oil crash has created political, economic, and social tensions in a nation that depends on oil exports to balance the budget. Three in four Venezuelans have fallen into poverty, and the country’s GDP is expected to contract 8% in 2016.

Venezuelans are now facing dire shortages for many necessities, including power. Droughts have caused mayhem on the country’s hydro reservoirs, making blackouts common and widespread. Food, medical supplies, and toilet paper are in short supply, and even beer production has been shut down.

Key Stats:

• Approval Rating of Nicolas Maduro: 26.8%
• People in poverty: 76%
• Oil exports, as a percent of total revenue: 96%
• Homicides per capita: 2nd highest in world
• Good shortages: Power, medical supplies, food, toilet paper, beer
• Fiscal deficit: 20% of GDP

Recent measures taken to dampen the crisis in Venezuela have been bold.

The government has moved entire time zones while reducing the work week of public sector workers to try and work around power deficiencies. Meanwhile, minimum wage earners have been given a 30% raise to keep up with inflation.

However, the crisis may be coming to a head. A recent survey shows that 87% of Venezuelans do not have enough money to purchase enough food to meet their needs, and people are getting restless.

In early May, the opposition party submitted a list 1.85 million signatures to the electoral commission to seek a recall referendum against President Nicolas Maduro. Days after the submission, the leader of an opposition party was found dead after being shot in the head.

Unless the country gets ruled with an iron fist, the level of misery can only reach a certain point before the people take decisive action.

via http://ift.tt/1X0aH3o Tyler Durden

Russia is moving full steam ahead with its plan to kill the petro-dollar, and is burying OPEC’s influence along with it. 

As we reported earlier, Russia has taken its next step toward de-dollarization by launching its own benchmark oil futures contract that will price oil in rubles instead of USD. Now, it appears as though Russia has deemed it is time to start chipping away at OPEC and its power within the oil space.

According to Reuters, Rosneft CEO and close Putin ally Igor Sechin had some harsh words to say about the oil cartel, and effectively announced its demise.

“At the moment a number of objective factors exclude the possibility for any cartels to dictate their will to the market. As for OPEC, it has practically stopped existing as a united organization.”

As a reminder, Russia was seemingly willing to agree to a deal in Doha earlier this year that would have frozen production at certain levels among the participating countries, however last minute changes by Saudi Arabia and other OPEC countries (namely that OPEC wanted Iran to be a part of the deal) blew the deal up and pissed Russia off.

“Some OPEC countries decided to change their terms at the last moment, trying to get concessions from countries that are not here. We were insisting on trying to concentrate on the countries which are. How can Iran be the reason for the talks’ failure, when it wasn’t even here.”

Perhaps that was the final straw for Russia, as it appears that Moscow now will choose to go it alone from here on out. Sechin was quick to remind everyone that Rosneft was skeptical of the Doha deal to begin with, and is now exhibiting a little bit of “I told you so.”

“The company was skeptical from the very beginning about the possibility of reaching any sort of joint agreement with OPEC’s involvement in current conditions. Just to remind you, the only one question with which we responded to those who were interested to know our position: ‘Who should we agree with, and how?’ The development of the situation has clearly shown we were right.“

Sechin indicates that the new normal will be one in which the market – and technology – sets the prices for oil, not OPEC.

“At the moment, key factors which are influencing the market are finance, technology and regulation. We can see this with the example of shale which became a powerful tool of influence on the global market.”

Meanwhile, just in case the Kremlin’s message is not being received clearly enough by everyone, Russia is fully intent to take advantage of what it sees as impotent White House leadership, is doing everything in its power to end US dominance both politically and economically, and is flexing its military muscles, as well as its economic power over the energy market in order to establish a resurgent global leadership position in both arenas.

via http://ift.tt/1ZDQcbX Tyler Durden

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

The City is a semi-offshore state, a bit like the UK’s crown dependencies and overseas territories, tax havens legitimised by the Privy Council. Britain’s financial secrecy undermines the tax base while providing a conduit into the legal economy for gangsters, kleptocrats and drug barons.

 

Even the more orthodox financial institutions deploy a succession of scandalous practices: pension mis-selling, endowment mortgage fraud, the payment protection insurance con, Libor rigging. A former minister in the last government, Lord Green, ran HSBC while it engaged in money laundering for drug gangs, systematic tax evasion and the provision of services to Saudi and Bangladeshi banks linked to the financing of terrorists. Sometimes the UK looks to me like an ever so civilised mafia state.

 

– From last year’s post: Guardian Op-Ed – The City of London Has Turned Britain Into a “Civilized Mafia State”

This is too good not to cover.

Via Yahoo News:

A black bus winds its way through some of London’s most expensive neighbourhoods for a sightseeing tour with a difference — a guided visit around luxury houses bought by shady international tycoons and officials.

 

The “Kleptocracy Tour” was set up by anti-corruption campaigner Roman Borisovich, who aims to expose dirty money fuelling the high-end London property market and the teams of British “enablers” who make it happen.

 

“The idea behind the tour is to attract public attention to the fact of massive money laundering through properties in London,” Borisovich told AFP on the tour this week, ahead of an international anti-corruption summit being hosted by Prime Minister David Cameron.

 

More than 36,000 properties in London are owned through offshore firms, which own a total £122 billion (154 billion euros, $176 billion) worth of property across England and Wales.

 

Buying properties through offshore companies can be a way of hiding the true owners and avoiding taxes.

 

More than £180 million worth of property in Britain was investigated as suspected proceeds of corruption between 2004 and 2014, according to Transparency International, which says this figure is just the “tip of the iceberg”.

 

Luke Harding, a journalist with The Guardian newspaper who helped analyse the Panama Papers, said the shock for him was the realisation of the extent of the enabling role played by British intermediaries.

 

“The UK has become Monaco with fog,” he said, after addressing the bus tour.

Liberty Blitzkrieg readers will be familiar with this theme as I’ve been referring to London real estate as the world’s criminal oligarch money laundering capital of the world for quite some time.

Here are a few previously published articles on the topic:

London Bubble Trouble – Visas Issued to Wealthy Foreigners Plunge 84%

The Luxury Housing Bubble Pops – Overseas Investors Struggle to Sell Overpriced Mansions

Guardian Op-Ed – The City of London Has Turned Britain Into a “Civilized Mafia State”

London’s Mayor Says We Should “Thank the Super Rich” – Calls Them “Tax Heroes” and Compares to the “Homeless and Irish Travelers”

via http://ift.tt/1ZDIn5V Tyler Durden

Submitted by John Whitehead via The Rutherford Institute,

“Of all tyrannies a tyranny sincerely exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”—C.S. Lewis

Fool me once, shame on you.

“You” in this case is the government that keeps violating the sacred trust of its citizenry.

Fool me twice, shame on me.

“Me” in this case is the collective “we the people” who should have learned early on that a government that repeatedly lies, breaks the laws, overreaches its authority and abuses its power can’t be trusted.

Fool me over and over and over again, shame on both of us.

Shame on every politician, bureaucrat and technician who is a shill for the U.S. government’s abuses and lies, and shame on every gullible American who keeps buying into the government’s propaganda, believing that it has our best interests at heart.

Unfortunately, as I point out in my book Battlefield America: The War on the American People, the government has seldom had our best interests at heart.

The government didn’t have our best interests at heart when it propelled us into endless oil-fueled wars and military occupations in the Middle East that wreaked havoc on our economy, stretched thin our military resources and subjected us to horrific blowback.

There is no way the government had our best interests at heart when it passed laws subjecting us to all manner of invasive searches and surveillance, censoring our speech and stifling our expression, rendering us anti-government extremists for daring to disagree with its dictates, locking us up for criticizing government policies on social media, encouraging Americans to spy and snitch on their fellow citizens, and allowing government agents to grope, strip, search, taser, shoot and kill us.

Certainly the government did not have our best interests at heart when it turned America into a battlefield, transforming law enforcement agencies into extensions of the military, conducting military drills on domestic soil, distributing “free” military equipment and weaponry to local police, and desensitizing Americans to the menace of the police state with active shooter drills, color-coded terror alerts, and randomly conducted security checkpoints at “soft” targets such as shopping malls and sports arenas.

It would be a reach to suggest that the government had our best interests at heart when it locked down the schools, installing metal detectors and surveillance cameras, adopting zero tolerance policies that punish childish behavior as harshly as criminal actions, and teaching our young people that they have no rights, that being force-fed facts is education rather than indoctrination, that they are not to question governmental authority, that they must meekly accept a life of censorship, round-the-clock surveillance, roadside blood draws, SWAT team raids and other indignities.

One would also be hard-pressed to suggest that the American government had our best interests at heart when it conducted secret experiments on an unsuspecting populace—citizens and noncitizens alike—making healthy people sick by spraying them with chemicals, injecting them with infectious diseases and exposing them to airborne toxins. The government reasoned that it was legitimate to experiment on people who did not have full rights in society such as prisoners, mental patients, and poor blacks.

The mindset driving these programs has, appropriately, been likened to that of Nazi doctors experimenting on Jews. As the Holocaust Museum recounts, Nazi physicians “conducted painful and often deadly experiments on thousands of concentration camp prisoners without their consent.” These unethical experiments ran the gamut from freezing experiments using prisoners to find an effective treatment for hypothermia, tests to determine the maximum altitude for parachuting out of a plane, injecting prisoners with malaria, typhus, tuberculosis, typhoid fever, yellow fever, and infectious hepatitis, exposing prisoners to phosgene and mustard gas, and mass sterilization experiments.

It’s easy to denounce the full-frontal horrors carried out by the scientific and medical community within a despotic regime such as Nazi Germany, but what do you do with a government that claims to be a champion of human rights all the while allowing its agents to engage in the foulest, bases and most despicable acts of torture, abuse and human experimentation?

In Alabama, for example, 600 black men with syphilis were allowed to suffer without proper medical treatment in order to study the natural progression of untreated syphilis. In California, older prisoners had testicles from livestock and from recently executed convicts implanted in them to test their virility. In Connecticut, mental patients were injected with hepatitis.

In Maryland, sleeping prisoners had a pandemic flu virus sprayed up their noses. In Georgia, two dozen “volunteering” prison inmates had gonorrhea bacteria pumped directly into their urinary tracts through the penis. In Michigan, male patients at an insane asylum were exposed to the flu after first being injected with an experimental flu vaccine. In Minnesota, 11 public service employee “volunteers” were injected with malaria, then starved for five days.

In New York, dying patients had cancer cells introduced into their systems. In Ohio, over 100 inmates were injected with live cancer cells. Also in New York, prisoners at a reformatory prison were also split into two groups to determine how a deadly stomach virus was spread: the first group was made to swallow an unfiltered stool suspension, while the second group merely breathed in germs sprayed into the air. And in Staten Island, children with mental retardation were given hepatitis orally and by injection to see if they could then be cured.

As the Associated Press reports, “The late 1940s and 1950s saw huge growth in the U.S. pharmaceutical and health care industries, accompanied by a boom in prisoner experiments funded by both the government and corporations. By the 1960s, at least half the states allowed prisoners to be used as medical guinea pigs … because they were cheaper than chimpanzees.”

Moreover, “Some of these studies, mostly from the 1940s to the '60s, apparently were never covered by news media. Others were reported at the time, but the focus was on the promise of enduring new cures, while glossing over how test subjects were treated.”

Media blackouts, propaganda, spin. Sound familiar? How many government incursions into our freedoms have been blacked out, buried under “entertainment” news headlines, or spun in such a way as to suggest that anyone voicing a word of caution is paranoid or conspiratorial?

Unfortunately, these incidents are just the tip of the iceberg when it comes to the atrocities the government has inflicted on an unsuspecting populace in the name of secret experimentation.

For instance, there was the U.S. military’s secret race-based testing of mustard gas on more than 60,000 enlisted men. As NPR reports, “All of the World War II experiments with mustard gas were done in secret and weren't recorded on the subjects' official military records. Most do not have proof of what they went through. They received no follow-up health care or monitoring of any kind. And they were sworn to secrecy about the tests under threat of dishonorable discharge and military prison time, leaving some unable to receive adequate medical treatment for their injuries, because they couldn't tell doctors what happened to them.”

And then there was the CIA’s MKULTRA program in which hundreds of unsuspecting American civilians and military personnel were dosed with LSD, some having the hallucinogenic drug slipped into their drinks at the beach, in city bars, at restaurants. As Time reports, “before the documentation and other facts of the program were made public, those who talked of it were frequently dismissed as being psychotic.”

Now one might argue that this is all ancient history and that the government today is different from the government of yesteryear. But has the U.S. government really changed?

Has the government become any more humane, any more respectful of the rights of the citizenry? Has it become any more transparent or willing to abide by the rule of law? Has it become any more truthful about its activities? Has it become any more cognizant of its appointed role as a guardian of our rights?

Or has the government simply hunkered down and hidden its nefarious acts and dastardly experiments under layers of secrecy, legalism and obfuscations? Has it not become wilier, more slippery, more difficult to pin down? Having mastered the Orwellian art of Doublespeak and followed the Huxleyan blueprint for distraction and diversion, are we not dealing with a government that is simply craftier and more conniving that it used to be?

Consider this: after revelations about the government’s experiments spanning the 20^th century spawned outrage, the government began looking for human guinea pigs in other countries, where “clinical trials could be done more cheaply and with fewer rules.”

In Guatemala, prisoners and patients at a mental hospital were infected with syphilis, “apparently to test whether penicillin could prevent some sexually transmitted disease.” More recently, U.S.-funded doctors “failed to give the AIDS drug AZT to all the HIV-infected pregnant women in a study in Uganda even though it would have protected their newborns.” Meanwhile, in Nigeria, children with meningitis were used to test an antibiotic named Trovan. Eleven children died and many others were left disabled.

The more things change, the more they stay the same.

Case in point: it has just been announced that scientists working for the Department of Homeland Security will begin releasing various gases and particles on crowded subway platforms as part of an experiment aimed at testing bioterror airflow in New York subways.

The government insists that these gases being released into the subways by the DHS are nontoxic and do not pose a health risk. It’s in our best interests, they say, to understand how quickly a chemical or biological terrorist attack might spread. And look how cool the technology is—say the government cheerleaders—that scientists can use something called DNATrax to track the movement of microscopic substances in air and food. (Imagine the kinds of surveillance that could be carried out by the government using trackable airborne microscopic substances you breathe in or ingest…)

Mind you, this is the same government agency that has been likened to a “wasteful, growing, fear-mongering beast” by the Washington Post.

This is the same government that in 1949 sprayed bacteria into the Pentagon’s air handling system, then the world’s largest office building. In 1950, special ops forces sprayed bacteria from Navy ships off the coast of Norfolk and San Francisco, in the latter case exposing all of the city’s 800,000 residents. In 1953, government operatives staged “mock” anthrax attacks on St. Louis, Minneapolis, and Winnipeg using generators placed on top of cars. Local governments were reportedly told that “‘invisible smokescreen[s]’ were being deployed to mask the city on enemy radar.” Later experiments covered territory as wide-ranging as Ohio to Texas and Michigan to Kansas. In 1965, the government’s experiments in bioterror took aim at Washington’s National Airport, followed by a 1966 experiment in which army scientists exposed a million subway NYC passengers to airborne bacteria that causes food poisoning.

And this is the same government that has taken every bit of technology sold to us as being in our best interests—GPS devices, surveillance, nonlethal weapons, etc.—and used it against us, to track, control and trap us.

So when so-called conspiracy theorists—including the late rock musician Prince and civil rights activist Dick Gregory—suggest that those streaks crisscrossing the sky are chemtrails laced with behavior-modifying chemicals, you might want to tamp down on that kneejerk reaction that chalks them up as nuts. After all, the government has done it before, lacing the fog over San Francisco with bioweapons (delivered by Navy ships moored nearby). In fact, not that long ago, the Obama administration declared by way of executive order that federal agencies are now authorized to conduct behavioral experiments on U.S. citizens in order to advance government initiatives?

Are you getting my drift yet?

What kind of government perpetrates such horrific acts on human beings, whether or not they are citizens? Is there any difference between a government mindset that justifies experimenting on prisoners because they’re “cheaper than chimpanzees” and a government that sanctions jailhouse strip searches of individuals charged with minor infractions simply because it’s easier on a jail warden’s workload?

And when all is said and done, what kind of people rationalize, write off, or just turn a blind eye to such monstrous acts of inhumanity?

Shame on the government, yes, but shame on us for blindly trusting that the government’s motives and priorities have changed.

Shame on us for believing that the government’s bloody wars on terror are keeping us safe in any way. Shame on us for placing greater value on the government’s phantom promises of security over our own hard-won freedoms. Shame on us for allowing our government, our freedoms and the rule of law to be held hostage at the end of a military-issued gun.

Shame on us for letting ourselves be played for fools by individuals who care nothing for us, our our health, our happiness, our welfare, our livelihood, our property or our freedoms. Shame on us for letting ourselves be bamboozled about the war on terror, deceived about the need to trade our freedoms for greater security, and conned into believing that turning America into a battlefield will actually make us safer. Shame on us for letting ourselves be double-crossed by politicians who promise change and reform and hoodwinked into believing that politics is the answer to what ails the nation. Shame on us for not doing a better job of ensuring that future generations have some hope for a better, freer future.

Most of all, shame on us that even after being repeatedly tricked, deluded, misled, swindled and betrayed by government officials, even after learning about the many ways in which we have been duped and deluded, shame on us for still falling for the government’s trickery, chicanery, hocus-pocus, scams and lies.

Shame on us, yes, but still, the question remains: why? What’s in it for the government?

Perhaps the answer lies in The Third Man, Carol Reed’s influential 1949 film starring Joseph Cotten and Orson Welles. In the film, set in a post-WW II Vienna, rogue war profiteer Harry Lime has come to view human carnage with a callous indifference, unconcerned that the diluted penicillin he’s been trafficking underground has resulted in the tortured deaths of young children.

Challenged by his old friend Holly Martins to consider the consequences of his actions, Lime responds, “In these days, old man, nobody thinks in terms of human beings. Governments don’t, so why should we?”

“Have you ever seen any of your victims?” asks Martins.

“Victims?” responds Limes, as he looks down from the top of a Ferris wheel onto a populace reduced to mere dots on the ground. “Look down there. Tell me. Would you really feel any pity if one of those dots stopped moving forever? If I offered you twenty thousand pounds for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare? Free of income tax, old man. Free of income tax – the only way you can save money nowadays.”

In other words, we are citizens of a government that has dehumanized us and reduced us to little more than faceless numbers, statistics and economic units.

What’s in it for the government? Money and power. Or as John Lennon summed it up, “I think we’re being run by maniacs for maniacal ends and I think I’m liable to be put away as insane for expressing that.”

via http://ift.tt/24MoMaO Tyler Durden

Back on February 15, just as the USD was about to plunge unleashing a global risk-on rally as a result of “Yuan stability”, Goldman triumphantly announcecd its latest trading recommendation: short gold (at $1,205) with a target of $1000 and a 7% stop loss.

 

This being Goldman – the one hedge fund whose prop traders immediately take the other side of all trades pitches to clients – said clients were immediately and brutally taken to the cleaners as the consequence of a tumbling dollar (another trade that Goldman got disastrously wrong) was soaring gold. And that is precisely what happened. After that, unofficially, it took just two and a half months for Goldman to get stopped out of its short gold recommendation, which as we first noted, happened on April 29, when its the price soared above $1,300 breaching Goldman’s stop. Officially, Goldman’s Jeff Currie decided to take his time, although he too finally threw in the towel today admitting Goldman was wrong yet again with one more trading recommendation (recall that Goldman had earlier been stopped out and lost money on 5 of its Top 6 trades for 2016 in just over a month).

But instead of doing the right thing and also admitting it has zero idea how to trade gold, where it will go next or what the catalysts are, Goldman decided to change its price targets, and instead of predicting $1,100/oz in three months, Goldman has generously pushed its price target by $100 higher to $1200 (and $1,050 over 12 months), even as gold traded just shy of $1300 a few days ago and only dropped as a result of the recent USD rally.

In other words, Goldman admits it was wrong, but still remains indirectly short as it is still hoping to skewer even more muppets on the very same trade it has gotten wrong for the past 3 months… and in the process buy their gold if possible.

Here is the “explanation”

Our US economists recently reduced their forecast for Fed funds rate hikes over the next 12 months from 100 bp to 50 bp. Corresponding with this, our global rates team has lowered its forecast profile for 10-year US real rates over the same period. As a result, we reduce the downside to our gold price forecast, raising the 3/6/12 month forecast profile to $1,200/1,180/1,150/oz from $1,100/1,050/1,000/oz. Our new year average price forecasts are $1,202/1,150/1,150/oz from $1,124/1,000/1,050/oz. Though we forecast that gold prices will decline from spot over the next 3-12 months (with c.5%-9% downside), for reasons which we detail below, the changes to our economists’ rates forecasts act to reduce the degree of downside to our modelled gold price profile and thus change the risk-reward of our previously implemented short gold trade recommendation (published February 15), which we close as a result at a c.4.5% loss.

Or, you could have simply remembered that you had a 7% stop and that you were stopped out 2 weeks ago, which any trader would know very well if he actually had the trade on instead of just using it as bait for clients to unload their gold. Perhaps Mr. Currie can also tell us what Goldman’s “flow” trader P&L was on the “short gold” trade. 

On the other hand, since nothing could have been more bearish for gold than Goldman going outright long the metal, we are delighted that Goldman is still buying gold – as it asks its clients to sell it their gold – because it means that the upside for gold remains unlimited. This is also the opposite of what Goldman has tried to – yet again – convince the handful of Kermits who bother to even listen to the taxpayer bailed out hedge fund with the worst trading recommendation record since Tom Stolper (incidentally another former Goldmanite) and of course Dennis Gartman.

For those who care, this is what else Currie said – it is mostly a verbatim copy of what he said in mid-February with the exception that he now admits he was wrong then, and that he is “rising” his target price by $100.

In our view, the gold rally during 1Q16 was driven primarily by concerns about the ability of US policy rates to diverge, corresponding Fed dovishness, and US real rates weakness, as well as a depreciating US dollar (both against the G10 currencies as well as against the EM currencies, the latter on the back of a transitory China credit stimulus). Furthermore, we have seen the largest ever increase in gold net speculative positioning over the past three months, with net speculative length now near its post global financial crisis peak.

Looking ahead, we see limited upside for gold pricing given the limited room for the Fed to surprise to the downside (the market is pricing c.16 bp by end of 2016 and less than one 25 bp Fed Funds rate hike over the next 12 months), limited room for the dollar to depreciate (net speculative positioning is the shortest it has been since early 2013, Exhibit 1, please see Global Markets Daily: The Dollar Bottom, published May 10, for details), and limited room for China to drive EM currency strength to contribute to dollar weakness.

 

While the upside risks to gold pricing appear relatively limited from here, we see a number of catalysts for gold prices to moderate, including a more hawkish Fed and ultimately US policy rate divergence (Exhibit 3), corresponding with gradual dollar appreciation over the next 3-12 months. Indeed, while Friday’s jobs report was a modest disappointment, with a 160k rise in nonfarm payrolls, some downward revisions to prior months, and declines in both household employment and labor force participation that reversed some of the big gains of the prior six months, the bigger picture, in our view, is still one of gradual acceleration as the US labor market moves to full employment and temporary factors such as the weakness in energy, import, and healthcare costs become less important as we move through 2016. As such, we still see the economy on a path that will prompt the FOMC to restart the normalization process before too long—most likely in September but perhaps as early as July. After the soggy numbers of the past two quarters, we expect GDP growth to rebound to a 2¼% pace as the drag from the earlier FCI tightening (Exhibit 5)—which by our estimates has subtracted about one per centage point from growth recently—abates and the fundamentals for domestic demand, especially housing and consumption, remain favorable.

This next sentence is our favorite:

In addition, there are reasons to believe that the risk off environment which contributed to gold’s outperformance at the beginning of this year is less likely to repeat in the near future as confidence in Chinese growth, Chinese currency stability, and the potential for a collapse in oil prices is much reduced.

Why is it our favorite? Because just a few hours earlier another Goldman report warned that in its quest to keep the bond market stable, central banks may unleash “Financial Turbulence” and “Rate Shock.” We can only assume that Currie had no idea. It’s almost as if Goldman doesn’t even bother to pretend to have a coherent story when ripping clients off.

As for Goldman’s vapid, deja vu conclusion…

In terms of risks surrounding our bearish gold view, we view them as broadly balanced. An upside risk to our forecast is that lower-than-expected Chinese growth significantly impacts US equities, consumer confidence, and growth, thereby resulting in lower increases in real rates relative to our forecast profile. A downside risk relative to our base case is a large reduction in the pace of Chinese and Russian central bank buying (since mid last year, buying has been running at a very high rate of c.450 tonnes per annum).

… it is missing just one thing: what is Goldman’s next stop loss, because that is where gold is really headed next.

via http://ift.tt/23Ge4ge Tyler Durden

Submitted by Mark Hanna via AmericanThinker.com,

As a Western revolutionary, Obama has been relentless in his efforts over the last seven years to use all the machinery and influence of government, whether illegally (since 2012, the U.S. Supreme Court has unanimously ruled 13 times that Obama’s actions have been unconstitutional) or legally, to fundamentally transform America into the neo-Marxist democracy he and his father have long dreamed about.

His most recent stunt to this end is to use North Carolina’s “bathroom” law, or House Bill 2, as a springboard for the U.S. Justice Department to issue a sweeping dictate in the name of social fairness and civil rights.  House Bill 2, which requires individuals to use the public bathrooms and showers that correspond to their birth sex, was drafted and passed in order to negate an unconstitutional Charlotte city ordinance that forced different sexes to share public accommodations.

What’s most ominous about Obama’s latest maneuver is that the letter sent by the Justice Department to North Carolina governor Pat McCrory stakes out a position for the federal government that would apply to every business in America, as well as all universities and colleges that receive federal funds, that are subject to Title VII of the Civil Rights Act of 1964.

According to Gov. McCrory, the demand letter (read the letter here) sent to top North Carolina officials should be understood as follows:

One thing the nation has to realize is this is no longer just a North Carolina issue. This order, this letter by the Justice Department, is saying that every company in the United States of America that has more than 15 employees are going to have to abide by the federal government’s regulations on bathrooms.  So now the federal government is going to tell almost every private sector company in the United States who can or cannot come into their bathrooms, restrooms, their shower facilities for their employees. And they’re also telling every university in the United States of America — it’s not just North Carolina — they’re now telling every university that accepts federal funding that boys who may think they’re a girl can go into a locker room or a restroom or shower facility.

Barack Obama and his militant Justice Department don’t care at all about individuals confused or rebellious about their gender.  As with all revolutionary activity, the goal is to seize upon crisis in order to further the aggrandizement of the State, and its control over every competing area of society.

Obama’s response to North Carolina is a classic leftist maneuver of setting up a straw man, or transgender in this case, to ensure and continue to expand federal power over the states.  From a revolutionary perspective, states with their 10th Amendment constitutional sovereignty are antithetical to the long-term objective of an international socialist system.   

It is critical now for states to recognize their pivotal constitutional power and determine to use every available resource to counter, correct, and ultimately crush the left’s war against the Constitution and the 10th Amendment.  Recall the efforts made by the revolutionary left to force a Supreme Court ruling on gay marriage and tear down state marriage laws.  Their attack on North Carolina is not at all different in both tactic and objective.

Gov. McCrory seems to recognize the enormous significance of this fight and has bravely turned the table on Obama and his comrades at Justice by announcing today that North Carolina will sue.  Time will tell if his response will work.  In the interim, however, other governors from states across the country should quickly join McCrory in making this a national fight for the 10th Amendment and state sovereignty.

The bullying left and their fellow-traveling mega-corporations such as Apple, Facebook, PayPal, and Wells Fargo are convinced that the threat of economic warfare against the states will tame them.  But instead of cowering as other Republican governors have before him, Gov. McCrory launched a counterrevolution and pushed back with the support of many other companies and organizations that are not part of Obama’s not so new economic and social policies of revolution.

via http://ift.tt/1qcHk0X Tyler Durden

Despite having Goldman Sachs CEO Lloyd Blankfein as an investor and being Bill and Hillary Clinton’s son-in-law, Marc Mezvinsky (and two former colleagues from Goldman Sachs who manage Eaglevale Partners hedge fund) told investors in a letter last February they had been “incorrect” on Greece, generating staggering losses for the firm’s main Eaglevale Hellenic Opportunity, a/k/a the “Greek recovery” fund during most of its life. By ‘incorrect’ the Clinton heir apparent meant the $25 million Eaglevale Greek fund had lost a stunning 48% in 2014.

Which is not to say the larger fund it was part of was doing any better: as of last February, Eaglevale had spent 27 of its 34 months in operation below its high-water mark. We are confident that 13 months later the numbers are 40 out of 47.

 

As a reminder, 2013, Institutional Investor proclaimed Mezvinsky “a hedge fund rising star“…

In late 2011, Marc Mezvinsky co-founded New York-based, macro-focused hedge fund firm Eaglevale Partners with Bennett Grau and Mark Mallon, two Goldman Sachs Group proprietary traders whom he’d gotten to know when they all worked at the bank. Best known as the husband of Chelsea Clinton, Mezvinsky, 35, who has a BA in religious studies and philosophy from Stanford University and an MA in politics, philosophy and economics from the University of Oxford, has been quietly building his finance career. Before launching his own firm, the longtime Clinton family friend was a partner and global macro portfolio manager at New York- and Rio de Janeiro-based investment house 3G Capital. Eaglevale manages more than $400 million.

Alas, he was anything but, and instead of having a real grasp of macroeconomic events, he decided to dump nearly half a billion dollars in Greece just before the country entered a death spiral that culminated with its third bailout, capital controls, insolvent banks and a paralyzed economy.

Meanwhile, things went from terrible to abysmal for both the clueless hedge fund manager and his LPs, and as the NYT reports, Hillary Clinton’s son-in-law is finally shutting down the Greece-focused fund, after losing nearly 90% of its value.  Investors were told last month that Eaglevale Hellenic Opportunity would finally be put out of its misery and would shutter.

The closure comes as the worst possible time: we are confident that Donald Trump will be quick to work it into his political attack routine.

Mr. Chelsea Clinton and his partners began raising money in 2011 from investors for the firm’s flagship fund. Since then, that portfolio has posted uneven performance. A Stanford University graduate, Mr. Mezvinsky worked at Goldman for eight years before leaving to join a private equity firm. He left that job to form Eaglevale with two longtime Goldman partners, Bennett Grau and Mark Mallon. The hedge fund firm is named after a bridge in Central Park.

As noted above, some of the firm’s earliest investors were Goldman partners, including Lloyd C. Blankfein, Goldman’s chief executive officer, who let Eaglevale use his name in marketing the flagship fund. Ironically this is in addition to the hundreds of thousands of dollars that Goldman paid to Marc’s mother-in-law. One almost wonders who “benefits” Goldman was seeking to get out of this particular relationship.

But on a less sarcastic note, we agree with the NYT that it is not at all clear why Eaglevale waited until this year to close the Hellenic fund, which already had lost about 40% of its value by early last year.

Perhaps it was just hope that the Greek people would simply pick up and rebuild the devastated economy from scratch, ideally without getting paid (the word slavery comes to mind), thereby miraculously rescuing his investment. In letters to investors in 2014, Mezvinsky and his partners expressed confidence that Greece would soon be on the path to a “sustainable recovery.” But by the end of that year, Eaglevale’s leaders began to acknowledge that their perspective on the situation in Greece may have been wrong. The fund had earlier stopped taking in new money.

We will conclude by stealing the NYT’s tongue in cheek humor:

The one silver lining for the fund’s investors from all of this is that they will have a somewhat larger tax loss on investments to claim next year.

True: it’s all funny if one assumes that none of the people who were invested in Mezvinsky’s pet fund actually needed the cash (we doubt Blankfein will lose sleep over a few million). For all those others who actually did, the joke’s on them.

via http://ift.tt/1WoxZS3 Tyler Durden

By EconMatters

 

The EIA Report is tomorrow, but under any interpretation of the API numbers the Bulls will still be waiting for their big Drawdown EIA Report. It looks like we just keep replacing US Production with OPEC Production, namely Saudi Arabia, Iraq and Iran excess production.

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