Tag: finance

On October 16, 2015, I warned that the banking industry was entering a strong cyclical AND structural downturn. See the full explanation below…

This is a chart showing the how well that warning has panned out thus far…

Now, of course, the banks have a different perspective, as reported by FT.com: Credit Suisse chief says bank sector sell-off ‘not justified’. As investors “lose faith” in banks that I’ve warned about several times over the last few years, even the insiders are agreeing with me. 

Here’s the rub, it’s worse than many percieve. The concept of Pathogenic Finance will take the financial industry by storm.

Here’s the full research report for those who want to know exactly how this will take place (click the graphic to download)…

 

 

For those of you who’d rather look at pretty pictures than read the reason behind this paradigm/macro/fundamenal shift, this chart of the music industry infected by MP3 and P2P technology will be replicated by the financial industry once P2P technology sinks in. When will that be? Very soon!

Even if the banks succeed in incorporating blockchain tech into thier respective back ends, what happens when their clients realize the P2P tech works? Well, P2P of course!

Feel free to reach out to me at reggie AT veritaseum DOT com to discuss this and more. I love to chat.

via Zero Hedge http://ift.tt/1QYr908 Reggie Middleton

This is the best quarterly performance for Gold in 30 years…

 

And as Mike Krieger of Liberty Blitzkrieg blog details, physical demand is soaring…

First, let’s look at the improved fundamentals. Gold bugs will exasperatingly proclaim that fundamentals have been great for the past four years yet the price plunged anyway, so who cares about fundamentals? To this I would respond with two observations. First, large institutional investors and sovereign wealth funds have been anticipating a rate hike cycle for a very long time now. They didn’t know when, but they expected it. The fact that the gold bugs never believed this is irrelevant; what matters is that big money believed it, and it was perceived to be very gold negative. In their minds, this anticipated rate hike cycle would confirm that things were getting back to normal, and if things are normal you don’t need to own gold, right?

 

The problem is that this assumption is quickly being called into question. Sure the Fed hiked rates once, but it is starting to look more and more like a policy error. Meanwhile, other major central banks around the world are going in the opposite direction, toward negative rates. I am a huge believer in market psychology, and the psychology dominating the minds of most institutional investors over the past few years has been that things were slowly getting back to normal. This has weighed on institutional demand for gold in a big way, and been a meaningful factor in the bear market (manipulation aside). If this psychology shifts, the shift back into gold could be very meaningful.

 

While that backdrop is interesting in its own right, what may make the move into gold that much more explosive is the lack of alternative investments…

 

– From the February 3, 2016 post: GOLD – It’s Time to Pay Attention

What a difference a couple of weeks can make. The Telegraph is reporting the following:

BullionByPost, Britain’s biggest online gold dealer, said it has already taken record-day sales of £5.6m as traders pile into gold following fears the world is on the brink of another financial crisis.

 

Rob Halliday-Stein, founder and managing director of the Birmingham-based company, said takings today had already surpassed the firm’s previous one-day record of £4.4m in October 2014.

 

BullionByPost, which takes orders of up to £25,000 on the website but takes higher amounts over the phone, explained it had received a few hundred orders overnight and frantic numbers of phone calls this morning.

 

“The bullion market has been building with interest since the end of last year but this morning things have gone bananas,” said Mr Halliday-Stein. “Some London banks are placing unusually large orders for physical gold.”

 

London-based ATS Bullion added it had been inundated with orders for the past week. The firm has sold 4,000 gold bars and coins since February 1, a 40pc rise on the same period a year ago when it sold 1,500.

 

“It’s been crazy – it’s been the best week since 2012. We’ve had people queuing round the block,” said Michael Cooper of ATS Bullion, a family run firm that trades online and also from an outlet in the West End.

But that’s just part of the story. As reported by the World Gold Council, the buying really started to pick up in the fourth quarter, courtesy of the Chinese and central banks. Reuters notes:

Buying by central banks as well as Chinese investors seeking protection from a weakening currency helped lift demand for gold in the final quarter of last year and the trend looks set to continue, the World Gold Council said on Thursday.

 

Chinese demand for gold coins surged 25 percent in the fourth quarter from a year earlier as consumers sought to protect their wealth after Beijing devalued the yuan currency. But stock market turmoil and a slowing economy knocked consumer sentiment and Chinese demand for gold for jewelry fell 3 percent from a year earlier, WGC said.

 

Central banks have been buying gold to diversify their reserves away from the U.S. dollar and their purchases edged up to 588.4 tonnes last year, second only to a record high 625.5 tonnes in 2013, the report showed.

 

Central bank buying accelerated sharply in the second half of last year and jumped 25 percent in the fourth quarter, from a year earlier, as the need to diversify was reinforced by falling oil prices and reduced confidence in the global economy, WGC said.

 

Chinese demand for gold totaled 985 tonnes last year, followed by India on 849 tonnes. They accounted for nearly 45 percent of total global demand, with consumer demand up 2 percent and 1 percent respectively in those countries.

Think about the lack of gold buying from the U.S. relative to its global wealth and it becomes quite easy to see where the fuel for the next bull market will come from.

Meanwhile, on the supply side…

Global supply of gold fell 4 percent last year to 4,258 tonnes, partly because of slower mine production.

 

Mining companies have scaled back since 2013 in a bid to slash costs and mine production shrank in the fourth quarter of 2015, the first quarterly contraction since 2008, WGC said.

For related articles, see:

GOLD – It’s Time to Pay Attention

4 Mainstream Media Articles Mocking Gold That Should Make You Think

via Zero Hedge http://ift.tt/1KdZXv9 Tyler Durden

The global Central Banks have declared War on Cash.

 

Historically, one of the safest things to do when the markets begin to collapse is to move a significant portion of your holdings to cash. As the old adage says, during times of deflation, “cash is king.”

 

The notion here is that cash is a safe haven. And while earning 1-2% in interest doesn’t do much in terms of growing your wealth, it sure beats losing 20%+ by holding on to stocks or bonds during their respective bear markets

 

However, in today’s world of fiat-based Central Planning, cash represents a REAL problem for the Central Banks.

 

The reason for this concerns the actual structure of the financial system. As I’ve outlined previously, that structure is as follows:

 

1)   The total currency (actual cash in the form of bills and coins) in the US financial system is a little over $1.36 trillion.

 

2)   When you include digital money sitting in short-term accounts and long-term accounts then you’re talking about roughly $10 trillion in “money” in the financial system.

3)   In contrast, the money in the US stock market (equity shares in publicly traded companies) is over $20 trillion in size.

 

4)   The US bond market  (money that has been lent to corporations, municipal Governments, State Governments, and the Federal Government) is almost twice this at $38 trillion.

 

5)   Total Credit Market Instruments (mortgages, collateralized debt obligations, junk bonds, commercial paper and other digitally-based “money” that is based on debt) is even larger $58.7 trillion.

 

6)   Unregulated over the counter derivatives traded between the big banks and corporations is north of $220 trillion.

 

When looking over these data points, the first thing that jumps out at the viewer is that the vast bulk of “money” in the system is in the form of digital loans or credit (non-physical debt).

 

Put another way, actual physical money or cash (as in bills or coins you can hold in your hand) comprises less than 1% of the “money” in the financial system.

 

Here is the financial system in picture form. I’m not including hard assets such as gold, real estate, or the like. We’re only talking about relatively liquid financial assets items that can be sold (turned into cash) quickly.

 

 

 

Of course, Wall Street will argue that the derivatives market is notional in value (meaning very little of this is actually “at risk”). However, even if we remove derivatives from the mix, the system is still very clearly based on credit, with only a small sliver of actual physical cash outstanding:

 

 

Put simply, the vast majority of wealth in the US is in fact digital wealth that moves from bank to bank without ever being converted into actual physical cash.

 

As far as the Central Banks are concerned, this is a good thing because if investors/depositors were ever to try and convert even a small portion of this “wealth” into actual physical bills, the system would implode (there simply is not enough actual cash).

 

Remember, the current financial system is based on debt. The benchmark for “risk free” money in this system is not actual cash but US Treasuries.

 

In this scenario, when the 2008 Crisis hit, one of the biggest problems for the Central Banks was to stop investors from fleeing digital wealth for the comfort of physical cash. Indeed, the actual “thing” that almost caused the financial system to collapse was when depositors attempted to pull $500 billion out of money market funds.

 

A money market fund takes investors’ cash and plunks it into short-term highly liquid debt and credit securities. These funds are meant to offer investors a return on their cash, while being extremely liquid (meaning investors can pull their money at any time).

 

This works great in theory… but when $500 billion in money was being pulled (roughly 24% of the entire market) in the span of four weeks, the truth of the financial system was quickly laid bare: that digital money is not in fact safe.

 

To use a metaphor, when the money market fund and commercial paper markets collapsed, the oil that kept the financial system working dried up. Almost immediately, the gears of the system began to grind to a halt.

 

When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode.

 

As a result of this, virtually every monetary action taken by the Fed since this time has been devoted to forcing investors away from cash and into risk assets. The most obvious move was to cut interest rates to 0.25%, rendering the return on cash to almost nothing.

 

However, in their own ways, the various QE programs and Operation Twist have all had similar aims: to force investors away from cash, particularly physical cash.

 

After all, if cash returns next to nothing, anyone who doesn’t want to lose their purchasing power is forced to seek higher yields in bonds or stocks.

 

The Fed’s economic models predicted that by doing this, the US economy would come roaring back. The only problem is that it hasn’t. In fact, by most metrics, the US economy has flat-lined for several years now, despite the Fed having held ZIRP for 5-6 years and engaged in three rounds of QE.

 

Let me put this very bluntly. The Fed and other Central Banks literally took the nuclear option in dealing with the 2008 bust. They have done everything they can to trash cash and force investors/ depositors into risk assets. But these polices have failed to generate growth.

 

Rather than admit they are completely wrong, Central Banks are reverting to more and more extreme measures to destroy cash and force investors to move into risk against their will.

 

Over 20% of global GDP is currently sporting NEGATIVE yields on their bonds.

 

This is just the start of a much larger strategy of declaring War on Cash.

 

Indeed, we've uncovered a secret document outlining how the Fed plans to incinerate savings to force investors away from cash and into riskier assets.

 

We’re talking cash bans, NIRP, even a carry tax on PHYSICAL CASH (meaning the longer the bill is out of the system the less it is worth).

 

We detail this paper and outline three investment strategies you can implement right now to protect your capital from the Fed's sinister plan in our Special Report Survive the Fed's War on Cash.

 

We are making 100 copies available for FREE the general public.

 

To lock in one of the few remaining…

 

Click Here Now!

 

Best Regards

Phoenix Capital Research

 

 

 

 

 

 

 

 

 

 

 

 

via Zero Hedge http://ift.tt/1KdZXv4 Phoenix Capital Research

It was just last week when we said that Cushing may be about to overflow in the face of an acute crude oil supply glut.

“Even the highly adaptive US storage system appears to be reaching its limits,” we wrote, before plotting Cushing capacity versus inventory levels. We also took a look at the EIA’s latest take on the subject and showed you the following chart which depicts how much higher inventory levels are today versus their five-year averages.

 

 

And now with major US refiners dumping crude, as we detailed overnight, those fears are surging.

U.S. Energy Information Administration data on Wednesday showed inventories at the Cushing, Oklahoma delivery hub hit a record 64.7 million barrels last week – just 8 million barrels shy of its theoretical limit – stoking concerns that tanks may overflow in coming weeks.

 

 

 

And now, given the "super-contango" in 3-month it is extremely clear that storage concerns are at their highest in 5 years…

 

Simply put, as one trader noted, speculators are now "making the leap to Cushing storage never being more full… will actually overfill, or even stop taking crude oil deliveries outright."

via Zero Hedge http://ift.tt/20OrmLo Tyler Durden

Via Dana Lyons' Tumblr,

The stock markets of the so-called PIIGS are breaking down on an absolute and relative basis – not a positive development for global markets.

The PIIGS are starting to squeal again in Europe. No, not the kind that produces pancetta or linquica or bangers. We are talking about the continent’s debt-laden, economically-challenged countries known by the acronym PIIGS, namely, Portugal, Ireland, Italy, Greece and Spain. These nations are essentially economic dead weight for Europe considering their plight. That said, all financial markets are cyclical – nothing straight-lines. And indeed, despite the apparent inevitable downfall that awaits the Eurozone as a result of the PIIGS, the associated equity markets have actually been quite buoyant for the better part of the last 4 years. Not so anymore.

We have posted before a composite that we constructed consisting of equally-weighted portions of each of the PIIGS’ stock markets. We call it…the PIIGS Composite. The composite starts in 2006 and hit an all-time low in June 2012, amid the Europe/PIIGS near-meltdown. Following Mr. Draghi’s “whatever it takes” moment, the PIIGS Composite shot up off the mat, rallying nearly 75% in 3 years before peaking in May of last year. Since then, the composite has gradually leaked lower. Around the start of the year, the leak turned into a gusher. As of this week, the PIIGS Composite is at near 3-year lows, approaching levels last seen in 2012.

 

 

The Composite weakness is not just significant on an absolute basis. As the chart shows, it is also breaking down on a relative basis versus the DJ Euro STOXX 50, a proxy for the more established, “blue chip” stocks in Europe. Like all higher-beta sectors, stock market bulls want to see the PIIGS outperforming the lower-beta blue chips. That can be an indication of a willingness of investors to take on risk, a healthy condition for a bull market. In other words, when the PIIGS are outperforming, it is symptomatic of a “risk-on” environment. Conversely, when they are lagging, it is a sign of “risk-off”.

As the chart indicates, risk-off is decidedly the case at present as the PIIGS:STOXX 50 Ratio just broke sharply lower, through a shallow year-long uptrend. Looking at prior trend breaks in the ratio, e.g., mid-2008, late-2009, and mid-2014, we see that substantial bouts of weakness ensued throughout European markets, particularly in the PIIGS. These also led to scares among some or all of the PIIGS pertaining to their economic viability.

On an individual basis, the PIIGS markets are each sucking wind to varying degrees, from hyperventilation to suffocation.

By far, the winner has been Irish stocks. The Irish ISEQ Index was at a 52-week high as recently as early December. It then ran into, and bounced precisely off, the 61.8% Fibonacci Retracement of the 2007-2009 decline. It has fallen since, recently accelerating to the downside to near 52-week lows. Should the global equity selloff get worse, this market is in danger of playing “catch-down” as investors sell what they can instead of what they want.

 

 

Since breaking its post-2012 Up trendline, Italy’s FTSE MIB Index has dropped to almost a 3-year low now, recently breaking the key 61.8% Fibonacci Retracement of the 2012-2015 rally.

 

 

Spain’s IBEX 35 is telling a similar story.

 

 

In the suffocation category, Portugal’s PSI 20 Index is within spitting distance of a 20-year low.

 

 

And the biggest loser among the PIIGS? It’s Greece, whose Athex General Index is at a 25-year low.

 

 

This is not a pretty situation shaping up for the Eurozone once again. Whatever benefit that accrued as a result of “whatever it takes” may have largely run its course. Again, it will not be a straight line lower. However, the absolute and relative breakdowns in the PIIGS Composite suggests that the post-2012 run-up is over. Thus, while the PIIGS rally of the past several years may have tasted like Jamon Iberico and Prosciutto di Parma to investors, they may have to settle for scrapple and spam from any rallies in the near future.

*  *  *

More from Dana Lyons, JLFMI and My401kPro.

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

Back in 2012, BNP Paribas exited the North American reserve-based lending market, when it sold its RBL unit to Wells in an effort to shore up its balance sheet amid the turmoil generated by the eurozone debt crisis.

A little over two years later, in the fall of 2014, BNP got back into the RBL game in the US. That probably wasn’t a good idea.

Just a few months after the bank jumped back in, the Saudis moved to bankrupt the US shale complex and it’s been all downhill from there with crude plunging and America’s cash flow negative producers careening towards insolvency.

We’ve been warning since early last year that it was just a matter of time before banks start to shrink the borrowing bases of uneconomic producers’ credit facilities. In other words, with the door to the HY market now slammed shut as spreads blow out and investors panic, the last lifeline for many in the O&G space is about to be cut, as no bank wants to be caught flat-footed if things get as bad as many people think they will.

On Thursday, we learn that BNP is now set to exit the RBL market for the second time in five years.

“BNP Paribas is reining back lending to the US energy sector, potentially tightening a squeeze for cash-strapped producers struggling with the collapse in oil prices,” FT reports. “The Paris-based bank is pulling out of the business of reserve-based lending, a vital source of liquidity for many oil and gas companies with big capital needs and irregular cash flows.”

“Given the current environment in the oil and gas market and the poor outlook for future fundamentals in the short to medium term, BNP Paribas has had to make adjustments to some of its businesses and has decided to stop the redevelopment of its reserve-based lending business,” the bank said, in a statement.

BNP will continue to service existing clients, but its exit from new business is a rather inauspicious move. Indeed, it suggests that when credit lines are reassessed again in April, we’re likely to see further cuts. “During the previous round of ‘redeterminations’ last autumn, banks cut limits for most customers between 10 and 20 per cent,” FT continues. That’s likely to be the case again in two months, Wells CFO John Shrewsberry said this week at an industry conference in Florida.

As a reminder, virtually the entire sector is cash flow negative. Without access to credit lines, everyone goes belly up. Of course with crude at $27, no one wants the assets the companies have pledged as collateral. As we outlined three weeks ago, some oil and gas drillers’ assets are only fetching a fraction of what they owe at auction.

Amusingly, banks are cutting their own throats by shrinking the credit facilities. That is, you don’t necessarily want to bankrupt someone who owes you a lot of money, especially when you won’t be able to recover much by selling off the collateral. 

But alas, there’s really no choice at this juncture. There’s no end in sight to the oil market malaise with Iran ramping up production and a recalcitrant Saudi Arabia dug in for a long war of attrition. 

We anxiously await the next bank to pull the RBL plug and we’re even more anxious to find out just how much the banks have provisioned for the losses that are sure to pile up rapidly once the entire sector loses access to its revolvers. 

As a reminder, America’s long list of cash flow negative producers are sitting on $325 billion in debt. 

via Zero Hedge http://ift.tt/1PFusH6 Tyler Durden

While broad-based contagion from Deustche Bank’s disintegration is clear in European, US, and Asian bank risk, there is another major financial institution whose counterparty risk concerns just went vertical…

Credit Suisse…

With the stock at 27-year lows, it appears investors are seriously questioning Chief Executive Officer Tidjane Thiam’s restructuring plans.

via Zero Hedge http://ift.tt/20OoCO0 Tyler Durden

First it was Goldman confirming that when it comes to penning “investment theses”, all Wall Street knows how to do is jump on a momentum bandwagon, when it said overnight that  there’s scope for gold prices to “extend much higher over time.” Now it’s Bank of America’s turn.

Here is the latest chart magic from BofA’s technical strategist Paul Ciana:

Staying long gold

 

Gold prices are breaking above triple resistance forming a technical bottom and channel breakout. This projects gold higher to 1,315 and 1,375. The gap in the distribution on the left shows 1,550 is a possibility, though we are not making that our target at this point.

 

We remain long gold on a technical basis.

 

 

Normally, these recommendations would be enough to send gold plunging; however with gold soaring over $50 on the day, its biggest move since September 2013…

… despite bullish calls by not only Goldman and BofA but even Dennis Gartman, perhaps this time it’s different?

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

Gold Surges 3.2% To $1,241/oz As Deutsche Bank And Other Stocks Fall Sharply

Gold has surged over 3% today on increased safe haven demand as stocks and in particular bank stocks see sharp falls. German shares have nose dived again and German colossus Deutsche Bank has fallen over 8%.

Futures – 1 Day Relative Performance – Finviz.com

A host of negative factors sent investors fleeing riskier assets. Oil prices slid on inventory data and on concerns about slowing global growth as Federal Reserve Chair Janet Yellen warned of several risks facing the U.S. and Chinese economies, and the global economy.

 

Gold and Silver News and Commentary

Central banks and Chinese buyers helping to spur gold demand – Reuters

Flight to safety sends gold surging above $1,200 to 8-1/2 month highs after Yellen – Reuters

Indian gold demand to climb in 2016 as buyers seek safe haven – Reuters

Gold demand jumps as fear grips markets – Telegraph

Banks drag European shares down as investors seek safety in gold – Independent

VIDEO: JP MORGAN – Gold Rally Breaks the Bullion Downtrend – Bloomberg

VIDEO: I’ve never liked gold-but I do now: Trader – CNBC

Why Gold Has Been on a Tear in 2016 – Fortune

“It’s Probably Something” – Gold Surges Above $1200; USDJPY, Oil, Stocks Plunge – Zero Hedge

China is on a massive gold buying spree – CNN Money

Click here

 

LBMA Gold Prices

11 Feb: USD 1,223.25, EUR 1,080.80 and GBP 847.33 per ounce
10 Feb: USD 1,183.40, EUR 1,052.29 and GBP 816.56 per ounce
9 Feb: USD 1,188.90, EUR 1,061.90 and GBP 822.31 per ounce
8 Feb: USD 1,173.40, EUR 1,050.16 and GBP 810.44 per ounce
5 Feb: USD 1,158.50, EUR 1,035.58 and GBP 797.40 per ounce

 

GoldCore Note: Banks, economists, brokers, financial advisers and other experts did not see the first crisis coming in 2008 and they are not seeing it now.

A handful of people are warning about the risks and again they are largely being ignored. Investors and savers will again bear the brunt for the inability to look at the reality of the financial and economic challenges confronting us today.

Diversification remains the key to weathering the second global financial crisis.

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