Tag: news

The last 2 days have seen something ‘odd’ happen in gold markets. As the China commodity finance deals are unwound and massive futures positions squeezed, Gold ETFs have seen the biggest inflows since September 2012 (and are their highest in 2 months). Whether this is the start of trend is unclear (as perhaps the conspiracy ‘fact’ proof of manipulation and rigging in the gold markets stalled the hollowing out of the gold complex). Ironic that this considerable rise should occur shortly after rumors of Germany’s end to repatriation calls. Gold (and silver) has broken out once again this morning after the early dump on ADP ‘good’ news is well bid to 3-month highs.

 

 

Bloomberg has some color from analysts…

“Gold got its initial pop because of Russia, and then Iraq happened,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Also, the dovish outlook from the Fed is increasing interest in gold, and we are seeing some investors return.”

 

…

 

“Although the overall macroeconomic backdrop remains unfriendly towards gold, with ongoing QE tapering, looming rate hikes and stocks at record highs, prices have generally been quite resilient,” UBS AG analysts wrote in a report yesterday. “That the aggressive ETF selling of 2013 has not made a comeback has provided ongoing support.”

 

Just days after the rumors of Germany ending its repatriation call, gold ETF inflows surge..

Charts: Bloomberg

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Two weeks ago, we reported of the latest “explosive” central bank scandal to sweep yet another “developed world” country, Poland, whose central banker, Marek Belka, was recorded promising to “boost the economy” if the finance minister was fired, not only making an immediate mockery of any naive assumptions about central bank “independence”, but showcasing that in the New Normal it is central banks (and by extension, the private banking system) who dictate terms and conditions to democratically-elected governments.

To be sure, as Reuters reported at the time, Belka denied he had done anything serious, which as we summarized, “the central bank after all is the supreme governing institution in the New Normal, a world which is run not by government but by banks. As such, it only makes sense that the unelected central bankers are convinced they are above everyone, and certainly the law.”

The central bank’s denials continued, by suggesting that the tape, was “manipulated to try to present the remarks as exceeding the powers of the bank’s governor, “which never happened.”

Our explainer:

“Of course not, but not for the bullshit reason given: simply, the power of the bank’s governor has no limits: after all they are the source of all the prosperity and wealth effect, without them government would crash and burn: they are above the law) and thus can not be exceeded.”

The one key phrase that repeats above seems to be “above the law.”

And sure enough, earlier today, the Polish central banker promptly admitted as much, when he revealed that not only do economic central planners exist in some parallel universe in which logic and laws do not exist, but that in the prevailing universe, they are all essentially untouchable when it comes to being held accountable for their actions. Headlines from Bloomberg:

• BELKA `REJECTS’ NOTION TAPED COMMENTS SHOW HIM CUTTING ANY DEAL

Which they clearly do.

• BELKA SAYS POLISH CENTRAL BANK ISN’T COZY WITH GOVT

Which it clearly is for him to offer more stimulus on a quid pro quo basis.

• BELKA REITERATES HE DOESN’T PLAN TO RESIGN

Because, well… see “above the law” above. And last but not least.

• BELKA: RESIGNATION FROM C.BANK WOULD CREATE DANGEROUS PRECEDENT

The precedent being that central bankers also have to be held accountable to their endless lies and are subject to the same laws and regulations as the rest of the mere mortals.

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

The battle for favoritism among the ‘apparent’ leaders in Iraq continues. Russia just delivered the second batch of Sukhoi fighter jets (which will be flown by Iraqi pilots and “are ready to provide air support to the armed forces”), and the US unloaded 4,000 additional Hellfire missiles to support Iraq’s fight against the Islamist insurgents. While this morning the intelligentsia of mainstream media proclaimed “the situation in Iraq is calming down” predicated on the fact that oil prices were lower and stocks at record highs, we suspect the additional war material  to Iraq will do nothing but increase the determination of the “Islamic State” to increase its Caliphate.

As Bloomberg reports, the proxy war favoritism continues in Iraq…

The U.S. readied to sell Iraq thousands of missiles and a second batch of Russian Sukhoi combat jets arrived in Baghdad as foreign powers moved to help Iraqi forces battle an al-Qaeda offshoot.

 

The U.S. State Department has told lawmakers informally that the Obama administration wants to sell Iraq more than 4,000 additional Hellfire missiles to support its fight against the Islamist insurgents, according to people familiar with the plan.

 

Sale of the laser-guided missiles made by Lockheed Martin would be in addition to 500 previously purchased.

 

…

 

Russia began sending used fighter jets and military advisers to Iraq over the weekend in response to an appeal from the government of Prime Minister Nouri al-Maliki. Today’s arrivals bring the number of planes shipped to 10.

But Iraq is ready to use the new war materials…

The jets will be flown by Iraqi pilots and “are ready to provide air support to the armed forces,” the Defense Ministry said in a statement.

 

“The lack of a serious aerial threat has allowed Sunni militants to use lightning raids in quickly assembled convoys of pickup trucks equipped with medium- or heavy-weapons systems,” Texas-based consulting firm Stratfor said in a report e-mailed last night.

 

Iraq can use the Russian jets to “interdict massed Islamic State and Sunni rebel convoys,” it added.

But the US-Russia pissing match continues…

Iraq’s Shiite-led government said it turned to Russia to bolster its aerial capabilities because U.S. F-16 jets were taking too long to be delivered. U.S. President Barack Obama has also refrained from ordering air strikes against the Sunni militants, putting the onus on Iraqi leaders to first form an inclusive government that could work to end the marginalization of minority Sunnis.

 

Pressure from the U.S. and Iraq’s top Shiite cleric wasn’t enough to prod lawmakers yesterday to end an impasse over picking a prime minister and fill key posts. An hour after convening in Baghdad for the first time since April elections, parliament adjourned until July 8, citing a lack of quorum and disagreements among leading political blocs.

 

Marie Harf, a U.S. State Department spokeswoman, said while it was important parliament convened, “we do hope that Iraq’s leaders will move forward with the extreme urgency that the current situation deserves.”

 

“Time is not on Iraq’s side here,” she added, according to an e-mail of her daily briefing. “They need to do this as quickly as possible.”

*  *  *
While some may believe because the mainstream media is focus on record high stocks that Iraq must be a strom in a teacup, the violence and deaths are worsening day by day – this is far from over.

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Submitted by Simon Black of Sovereign Man blog,

If you want to gather honey, don’t kick over the beehive.

This was how Dale Carnegie titled the first chapter of his 1936 personal development masterpiece—How to Win Friends and Influence People.

Carnegie had sensible advice: if you want to keep people on your team, first and foremost don’t piss them off. Duh. Seems pretty obvious.

I think the US government could use a little Dale Carnegie right about now (I actually just ordered a copy and had it sent to the President. You’re welcome, BO.)

Because based on the way they’re acting, you’d think they were test-driving an entirely different manuscript—How to Lose Friends and Alienate People.

Exhibit A: FATCA.

Four years ago, the US government passed this absurd law requiring every bank in the world to enter into an information-sharing agreement with the IRS.

Those who don’t will be subject to a 30% withholding tax on certain funds that get routed through the United States banking system.

What’s more, every bank on the planet is somehow supposed to simultaneously keep track of every other bank in the world and know precisely who is / is not in compliance with the law.

Banks that are in compliance are supposed to withhold the 30% tax on any funds transferred with banks that are not in compliance… otherwise they risk the withholding tax penalty themselves.

The whole thing is enough to make your head spin. Needless to say, the mere thought of complying with this law is enough to drive banks crazy.

This isn’t a way to treat friends. And today’s the day it comes into force.

Exhibit B: BNP Paribas.

Uncle Sam just slammed this French bank with a massive fee and threats of criminal penalties for doing business with a country they don’t like.

In doing so, the US has given BNP… and France… nine billion reasons to abandon America.  Again, this isn’t the way you treat friends.

I think politicians fail to realize how important the US banking system is to holding together the US economy.

Right now, the entire world uses the US banking system.

If a merchant in Angola wants to do business with a merchant in India, for example, that transaction is cleared through banks in New York.

This, by default, creates demand for people to hold dollars, giving the US billions of people to splay their inflation onto.

It’s the only reason why the Federal Reserve has been able to print $3.5 trillion over the last five years; nearly any other country does that and you get hyperinflation.

You’d think they would guard this dearly. You’d think the US government would treat their friends… their customers… respectfully.

But no. Instead they’ve dropped a steaming hunk of dung on the entire system, and everyone in it.

With law and behavior this dumb, they’ve gone and kicked over the beehive. No bankers want the hassle of dealing with America anymore, and everyone is looking for a better option.

It’s happening.

Chinese renminbi trade settlement is growing like a weed, constantly posting record levels. Everywhere you look there are countries and big companies looking to hold and conduct trade in renminbi.

Even Canada and the UK are now angling to become major centers of renminbi settlement. Everyone else seems to get it… everyone but the US.

With all of its debt and all of its money printing, the US banking system was one of America’s last economic competitive advantages.

But now we are going to see more and more foreigners curtailing their use of the US banking system… and by extension… the dollar.

Without that mass of people to export dollars to, inflation will really kick in back home.

It’s not going to happen overnight. But as yet another insane law comes into force today, it represents one of the final nails in the coffin for the US, and the end to one of its last remaining advantages.

via Zero Hedge http://ift.tt/1pX2quB Tyler Durden

Goldman Sachs listened (and read) Janet Yellen’s remarks at The IMF and see them “generally in line.” Despite waffling on for minutes about risk management and monitoring, no one at The Fed has mentioned the total carnage in the repo market, spike in fails-to-deliver, and record reverse repo window-dressing that just occurred. The use of the term “reach for yield” twice and “bubble” 5 times, and admission that the Fed should never have popped the housing bubble, leaves us less sanguine than Goldman and wondering if this was Janet’s subtle and nervous ‘irrational exuberance” moment.

 

 

Goldman thinks…

BOTTOM LINE: Fed Chair Janet Yellen spoke this morning on the role of financial stability concerns in monetary policy. Her remarks were mostly in line with her previous commentary on the issue.

 

MAIN POINTS:

 

1. Chair Yellen’s speech today focused on the role of financial stability concerns in monetary policy. Yellen argued that regulatory and supervisory measures are better suited to address financial stability concerns, and that monetary policy has limitations as a tool for promoting financial stability. As a result, Yellen concluded, she does not “presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment, in order to address financial stability concerns.”

 

2. Overall, Yellen argued, household debt growth has been moderate in recent years and leverage in the financial system has declined. However, she cautioned that she does see pockets of increased risk taking, such as in the leveraged loan market, which require continued monitoring. She also said that the Fed could consider other tools for promoting financial stability—“including adjustments to the stance of monetary policy”—as conditions change in the future.

 

3. Yellen also addressed the argument that the housing bubble could have been prevented by tighter monetary policy in the mid-2000s. She argued that monetary policy would have been an insufficient response and a “very blunt tool” for addressing rising house prices and leverage, while macroprudential policies would have been more direct and effective.

And we note Jante said…

terms and conditions in the leveraged-loan market, which provides credit to lower-rated companies, have eased significantly, reportedly as a result of a “reach for yield” in the face of persistently low interest rates.

…

Policymakers failed to anticipate that the reversal of the house price bubble would trigger the most significant financial crisis in the United States since the Great Depression because that reversal interacted with critical vulnerabilities in the financial system and in government regulation

…

efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment

*  *  *

So Goldman loves it – but she warned of more vol and potential bubbles?

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Wolf Richter   http://ift.tt/NCxwUy   http://ift.tt/Wz5XCn

Private equity firms are the ultimate smart money on Wall Street; they know how to wring out the last dime from their own clients, such as pension funds and rich individuals, through hidden fees, obscure expenses, elaborate expense shifting, lackadaisical disclosure, and “zombie advisers,” to the point where SEC Inspection Chief Andrew Bowden singled them out in a speech in May. Now the lawyers are circling.

And these PE firms invented a whole new business: buying vacant homes out of foreclosure and from banks and renting them out. Flush with the Fed’s nearly free money, Blackstone Group ended up spending $8.6 billion in two years on 45,000 homes, spread helter-skelter across 14 cities. Another PE product, American Homes 4 Rent, which went public last summer as a highly leveraged REIT, bought 25,000 homes. Firms sprouted like mushrooms, spending $50 billion to acquire 386,000 homes.

And home prices soared. Year-over-year increases of over 20% suddenly appeared in the data. Housing Bubble 2 was born. That’s how the Fed “healed” the housing market. Yet numerous economists claimed that buying 386,000 homes over two years in a market where about 5 million existing homes change owners every year could not possibly have had much impact on price. Turns out, that meme is awfully close to propaganda.

The smart money on Wall Street had a goal.

And a system – aided and abetted by the banks. Homebuyers today are, literally, paying the price. The goal was to progressively drive up home prices to book near-instant paper profits on the units they had already bought. According to a source at one of the GSEs (Government Sponsored Enterprise), whose work is focused on residential real estate, they did it by constantly laddering their purchases. And in some markets, like Las Vegas, they achieved price increases of 100%. The multiplier effect. He explains:

A multiplier of roughly 60 times is placed on one sale in a market. In other words, one sale affects the value of 60 homes. So the 386,000 homes adjusted the price on roughly 23 million homes. There are 78 million homes in America with 35 million first-lien mortgages. This happened in about 8-12 markets nationwide. The West Coast was leading the charge back up.

Last fall, two investment houses announced they were going to sell out of their inventory and today three others announced the same. Reason: prices have more than met their goal. Since real estate is a commodity, the rule of price elasticity applies. A very small number of sales can have extreme consequences in price for the rest.

The problem with that strategy? It drove up prices so far and so fast that the business model of buying these homes, fixing them up, and renting them out at a profit has hit a wall. So the dynamics of the market are changing. From gobbling up and finding renters to…

Selling, securitizing, and consolidating.

But selling them to first-time buyers at these prices – well, forget it. So Waypoint Real Estate Group is trying to “quietly” unload half its inventory of 4,000 homes in California to another company. It also manages another 7,000 homes that an affiliated REIT owns. Och-Ziff Capital Management Group and Oaktree Capital Management have already started selling their homes. Other firms, including Blackstone Group and American Homes 4 Rent have pulled back from buying homes as prices have soared.

Instead of trying to sell their tens of thousands of homes, Blackstone and American Homes are selling synthetic structured securities that are backed, not by mortgages like the toxic waste that contributed to the financial crisis, but by something even worse: rental payments, based on the flimsy hope that these homes will stay rented out. The already sold $3 billion of this stuff. Wall Street is jubilating. The fees are going to be huge: the market for this type of synthetic concoction is estimated to be $1.5 trillion.

Now that they have to focus on making the business model work with what they’ve got, they have to do the grunt work of fixing up tens of thousands of far-flung homes and renting them out one at a time, and keep them rented out, and they have to come to grips with American mobility where strung-out renters wander in and out and are late paying their rent if they can pay at all, and it’s hard, tedious work.

With buying more homes in overheated markets no longer a priority, or even an option, American Homes is embarking on the next step: buying competitors. It just announced that it would acquire Beazer Pre-Owned Rental Homes, a REIT backed by Beazer Homes, PE firm KKR, and others. It now owns 1,300 homes. Everyone had jumped into this Fed-sponsored game, even home builders like Beazer. American Homes CEO David Singelyn put it this way during the earnings call in May: “We will be one of the players in the consolidation of this sector.”

The goal: manipulate the market to their liking. Through consolidation, the biggest players will try to raise valuations – or at least keep them from collapsing – and control the smaller players that are desperate to take their profits by dumping homes on the market and thereby opening the floodgates. All heck would re-break loose in the housing market. It would reverse the flow, and all the paper profits PE firms have already bragged about to their clients would suddenly evaporate. And that must not be allowed to happen.

Housing Bubble 2 has been accompanied by other bubbles. “Asset prices have reached stunning levels, obviously out of line with ‘fundamentals.’ But the “most dangerous” are housing bubbles; when they burst, they “wreck whole economies.” Read…. UBS: The Secret Reason The Fed Is ‘Tolerating’ Bubbles

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